Talibs Weekly Email - #77
🎙️ Spotify's podcasting Bet 💻Ending questionable stock trading by politicians 🧑🏭 Google workers forming a union
Good Morning
Hope everyone had a great weekend and thanks again for the great podcast reocomendations for the new year. For those of you on Spotify podcasts in Canada - they’ve recently added all the NPR Podcasts on the app. Looking forward to reading more fiction this year and hoping to share some fun experiments that I plan on running this year in the world of #side-hustle.
Cheers
Talib
What I’m listening to as I write this weeks email
Tweet that got me thinking
🎙️Bloomberg: Spotify’s bet on Podcasting
🤝Deal book: A Simple Way to End Questionable Stock Trading by Lawmakers
🔥The Journal: Why google workers formed a union?
🎙️Bloomberg: Spotify betting big on Podcasts
Issue: Profitability has long been an issue for Spotify; Spotify has not been profitable since it was founded in 2006. For every $5 Revenue, $3.75 goes right out back to the creators.
🎤Initial Plan: Three record label groups control the majority of the new music releases giving them power of Spotify in $ negotiations. Spotify wanted to give artists the ability to democratize their talent with growing social media to promote their own work.
🎵Allowing artists to upload their music: Shortly after going Public, Spotify unveiled a feature that allowed artists to upload directly to its app. This allowed artists to get a larger share of royalties also resulting in higher margins for Spotify (eliminating the middleman) Spotify tested the feature out with a handful of artists but most artists weren’t ready to forgo the help they get from the labels to promote their work especially since millions of people listen to music elsewhere as well.
🖖Next Idea: The number of people in the U.S listening to podcasts monthly had grown from 32 million in 2010 to 73 million in 2018. Most listeners used the iOS Podcasts app and Apple had never converted it into a revenue stream. Outside the U.S; there was no dominant player as android users used a variety of different podcasting apps.
🎼First Step: Spotify decided to build out a home in the app for podcasting, creating a landing page and copying services from the music services such as customized playlists. Spotify also started buying exclusive rights with Comedian Amy Schumer and talk show host/rapper Joe Budden. See Joe Budden - Pump it up.
⏫How did that exclusive experiment go? Spotify executives realized that they needed assistance and couldn’t provide the production and infrastructure services to advise their exclusive artists on content & promotion. The artists were able to bring their audiences on to the platform further increasing their reach however they needed assistance in providing help to these artists.
This is when the in-depth investment happened
💸First Purchase: In Feb 2019, Spotify acquired Gimlet Media and Anchor for about $340 million. Further along with the studio expertise; Spotify was purchasing successful series such as Reply All & Resistance.
🤝Second Purchase: The next month, Spotify announced a deal for another studio, Parcast valued at $100 Million which produces content such as Serial Killers & Political Scandals. The number of podcasts on the service climbed from 185K and end of 2018 to 700K at the end of 2019 with over 40 million users listening (TURP was one of them ;) )
The experience with Budden and Schumer taught Spotify execs that it’s easier to buy an audience than build one.
🎧Joe Rogan: Rogan had never uploaded his podcast on Spotify but in May 2020, the company agreed to pay him $100 million for the show and the exclusive rights. The Joe Rogan Experience is Spotify’s most popular podcast globally, topping the charts in more than 15 markets.
😃Exclusive: This is viewed as the Netflix Strategy, where Spotify pursued podcasts from well established artists and podcasters such as life coach Brene Brown who has a Netflix inspirational show as well and commissioned shows based on DC Comics Characters. They purchased The Ringer in Feb 2020 for $100 million which provided them with content loaded in sports and pop culture.
The Hard part: Monetizing
💹Why has it been hard? Marketers are hesitant to dole out the big bucks consistently because historically they’ve been unable to get metrics on if a show has been played or what time. They know when a show has been downloaded but not when its played.
🙉The Innovation in Advertising: Spotify tackled this problem with a technology called Streaming Ad Insertion. It lets Spotify serve an ad when a listener gets to a certain point in an episode so marketers pay only for an ad thats been heard or played. The feature is available on select shows, with a wider rollout in progress. Since Spotify sells the ad, it can provide data about when and how someone is listening—on a phone, say, or a tablet. This type of data allowed advertisers to customize their ads to the user.
📓What about Competition: Apple which has the second-most popular streaming service with Apple Music. Apple is currently funding original series and plans a large overhaul of its podcasting operations. Amazon has been buying shows for its music app and for audible. They recently acquired Wondery (See Business Wars) for its music service. They’ve all followed suit to in the investment in Podcasting.
📈More Revenue Streams? Listeners are loyal to their favorite hosts often attending live taping in the pre-Covid era and buying merchandise. Podcasting has turned into this "theatrical” production where loyal fans spend $$ on their favorite show and hosts. This loyalty could let Spotify charge consumers added fees for podcast free advertising; premium episodes and merchandise.
🎲The Next Gambles:
🌎International
Spotify needs to find the next Joe Rogan, they are targeting new audiences by making shows in multiple languages and experimenting with formats. Currently, Spotify operates studios in 17 countries, where it’s adapting popular shows from the U.S. into local languages and developing regional hits. Spotify has hit shows in Brazil, Argentina and Chile.
📻Innovation
In 2020, Spotify introduced a feature that allowed its creators combine song and talkshow into 1 program sort of a Breakfast FM show.
The latest innovation is a new popular podcast on Spotify called “The Get Up” - a daily morning talk show with mixes songs with pretaped talk segments on subjects as self-care, comedy and music. This is currently only available in the US.
These morning shows are now coming after the bread & butter of FM Radio - where most popular shows still reign high in popularity. Unlike radio- which offers the same music - Get Up serves tailored playlists based on what your algorithm taking customization to another level.
This is only available in US - :(
My Thoughts: I love the innovation here in the next few years; being able to quickly replicate content into multiple languages is a big lever but the music/podcast integration is where I see mass distribution + excitement. This has the potential to eliminate FM radio and allow users to listen to morning/live talk shows with customized music and no more having to listen to same billboard top 50 songs.
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🇺🇸Deal book: A Simple Way to End Questionable Stock Trading by Lawmakers
🇺🇸What is the STOCK Act: The STOCK act was approved in 2012 by Congress, it was a legislative achievement that forbid elected officials profiting off the same committees /roles they were involved in. The act mandated an online disclosure system so that compliance to the law can be monitored.
Note - this requires an online disclosure and compliance can be monitored . Here is a comprehensive document outlining the faults of the Stock Act here
Not a single member of congress has been prosecuted under the STOCK Act
The problem, for starters, is that legislators are so inundated with information it can be difficult to separate out what is private information and what is public
The Constitution’s “speech and debate” clause confers a certain degree of immunity for anything a lawmaker does in the course of their legislative duties. Receiving a private pandemic briefing certainly qualifies as a legislative duty.
In essence, you can see a senator making trades on a company that he /she is on an industry committee but you cannot prove that it was the committee information that caused them to make that trade.
🙈How this became an issue: Kelly Loeffler, the Republican Candidate who was running for the senate seat in Georgia was investigated over insider trading claims last spring. She recently announced that she would not be trading individual stocks and moving her funds into mutual funds.
🚫The start: Early in the Pandemic, various senators were involved in key meetings and few of them sold some stocks just before they lost significant value. Ms. Loeffler denied the wrongdoing and the investigation ended without any prosecution.
🗒️New Proposition: Instead of asking Congress to pass a law to regulate themselves, the next head of the S.E.C could seek to put in place a new rule for broker-dealers. The rule would require the broker-dealers to set up a special compliance program for clients known as “politically exposed persons,” a term that financial institutions know well as part of anti-money-laundering and bribery laws.
The S.E.C compliance program would require broker-dealers to ask those specific clients (elected officials + family) to personally answer a questionnaire every time a trade is executed.
↗️Type of Questions: The form would include questions like: “Have you attended any meetings in the past 28 days that could be perceived as being related to or possibly influencing your decision to make this trade?”
🙅♂️Next step: The broker-dealer would be required to submit details about each trade and questionnaires within 24 hours to the S.E.C and both information/questionnaire would be published online to be viewed by Investors and the public.
😕Congress could still trade and disclose? Yes - but along with the questionnaires that would create liabilities for elected officials if they didn’t tell the truth - this would likely stop the trading of the individual stock
⛔️Passing the rule: An effort by the S.E.C to introduce such a plan for members of Congress would require a vote of its 5 commissioners. The President appoints the Chairman of the SEC while the other 4 members are appointed on a term basis (5 years). They are all staggered so on term ends on June 5 every year.
💁♂️Why hasn’t the S.E.C tried the stricter approach? Congress approves the S.E.C’s budget….so why would the S.E.C have any incentive do so such.
My Thoughts: Learning that prior to 2012; elected politicians could trade stocks in companies they were on panels for was quite ridiculous. Imagine seeing a senator on a panel for defense contracts buying and selling lockheed martin. The fact that that this still goes on should be mandated and monitored. I do not believe Politicans should be allowed to trade at all and all investments should be relegated in a trust handled by 3rd party mutual funds. This type of rule proposed by Andrew Ross Sorkin is sort of a “hack” to get congress to abide by the rules set in place.
🧑🏭The Journal: Why google workers formed a union?
🚫What happened? Certain google workers recently published an op-ed in the NY Times announcing their plans to unionize. The group had 226 employees but has grown to 700 employees by the end of the week (after the publication). However, this still less than 0.5% of Alphabets 140,000 employees.
💲Google employees are paid well though? Yes! Google employees are actually compensated very well; median pay in 2019 was $259K. This was on the high end of the S&P Companies.
🧑🏭Why unionize? The need to unionize has to come to protect workers rights to voice their opinion on Googles actions; take a stringent stance on sexual conduct cases and have a say in the direction in googles future. They feel the urge to have a united voice with multiple “ethical” lapses in the past years. The push instead reflects a need for employees to be able to speak out about the company without facing career repercussions.
What examples?
🔫 Project Maven: This was a program that was designed to help the government target drone locations using AI. There was a significant amount of outcry internally opposing working on this technology for the government. In the end; the executives did not sign the contract.
💸Harassment: In 2018, there was an executive (Andy Rubin - “Father of Android”) who was accused of harassing women and got an exit package of $90m; this resulted in a 20K employee walkout to protest a workplace culture that they said promotes and protects perpetrators of sexual harassment. An in-depth article is here
🔥 Firings: Recently there was the firing of an AI Researcher by the name of Timnit Gebru last year; Gebru was fired for sharing sensitive data externally but union workers claimed that she was fired after refusing to retract a research paper that raised ethical concerns of AI & race. Google later did say they would review the firing and regretted the decision. (A really good read of this issue is here)
Unions have been on the decline and Software developers have usually had a very low unionization rate.
🤔Its important to note that the AWU is a Minority Union; which means they can’t force Google Management to come to the table to negotiate but they can pressure executives by rallying members to a cause. Official unionization requires at least 50% of membership to be considered a majority union.
💭My Thoughts: This is the new era where companies have to abide by moral & ethical standards (both subjective) and the growth of unions are no longer about pay but more about equity, fairness and ethics. I think this type of unions will only work with certain type of professions where money isn’t an issue and competition between talent is fierce. In software engineering - competition is fierce for talent and talent has more power/control than other professions. I see this as a rising voice but do not expect this trend to get picked up elsewhere.
📚Books of 2021
Here are my books to read/finish for the next while
Completed
Educated by Tara Westover (9/10)
Loonshots by Safia Bahchall (8/10)
Range - David Epstein (8/10)
American Dirt by Jeannine Cummings (9/10) [fiction]
We The North - Doug Smith (8/10) - Nice history from a Raptors beat writer
Promised Land - Barack Obama (8/10) - Great perspective; audio book recommended
Tanking to the Top - Yaron Weltzman (7/10) (Philadelphia 76ers “The Process”)
The Color of Money: Black Banks and the Racial Wealth Gap (8/10)
If you’re looking for books to get, I would suggest checking out bookdepository.com or thriftbooks.com (both are cheaper than amazon at time)