Pod Insights Equity Podcast Spotify throws its hat in the edtech ring About this episode Today on the show we had a lot of ground to cover: Stocks around the world are in retreat to start the week, while crypto prices have themselves given back some recent gains. The biggest news item that we covered this morning was the exit of Stability AI’s CEO, the company’s revenue growth and burn rate have come into question before, making the move all the more newsy.
Over in the EU, a number of U. S.-based tech companies are under inquiry thanks to the new Digital Markets Act. At some point you have to wonder if tech giants are going to find a better working relationship with the bloc.
And speaking of Europe, Spotify’s next push is another non-musical effort, which I had a few thoughts about. None of which were incredibly excited, I have to admit. The news from China, including it getting the Vision Pro next, and a push to get Intel and AMD chips out of state computers. And we closed with this beverage startup report!
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Credits: Equity is produced by Theresa Loconsolo with editing by Kell. Bryce Durbin is our Illustrator. We'd also like to thank the audience development team and Henry Pickavet, who manages TechCrunch audio products.
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Transcript 0:10 Speaker 00 Hello and welcome back to Equity, the TechCrunch podcast about the business of startups, where we unpack the numbers and the nuance behind the headlines. This is Alex. Good morning. Today is March 25, 2024, which means this is the very last Equity Monday of Q1. I am in awe of how fast this quarter went, but no time to look backwards. Let's talk about what happened this weekend and what is coming up on this week. So on the show today for you, I have stocks and crypto, more AI personnel moves, because apparently we are never going to get away from that theme, new regulatory issues for Apple and Alphabet, Spotify getting into e-learning of all things,
0:53 Speaker 00 China wanting to get away from US chips and why liquid death is super cool. It's going to be a packed show. Let's go. Let's start with a look at the world of money and you know it, that means the stock market. Shares are largely lower in Asia today, the same over in Europe and are set to open once again, lower here in the US. Now do keep in mind that US trading days are shorter this week due to a religious holiday, so just four trading days here in the States. On the earnings front, my gosh, my friends, we are at the very end of Q1, so I only have six names for you. On Tuesday, we'll hear from Encino, which is built on the Salesforce platform. Then
1:34 Speaker 00 Wednesday brings us Braze, Sprinkler and Rumble and then Friday is SK Telecom. So very few names, some of which are SaaS and then there's Rumble, which is online video and hosting, which should have a very interesting upcoming report. The stock market is cooling down and we're seeing the same thing over in the world of crypto. Yes, crypto prices took a breather in the last week with some rapid gains coming back down to earth. Bitcoin is off just over 2% in the last week to around $67,000 per. Ethereum is off just under 5% To about $3,400 and Solana's token, which recently ripped higher, is off about 9% in the last week to $188.
2:19 Speaker 00 Don't worry, though, my friends, Dogecoin is up 15% in the last week, and spot trading volume is coming down modestly from recent peaks, but remains massively up from the prior norms we've seen in the last year. So a little bit of profit taking, as we would say in the world of stocks, but nothing to worry about.
2:40 Speaker 00 All right, let's talk big news that matters and personnel shakeups in AI, I think, are the biggest news. As we got started with the weekend, Stability AI founder and chief executive Iman Mustak stepped down from his role atop the unicorn startup and its board. Now, Stability AI has been backed by a number of investors, including Lightspeed Venture Partners and Co2 Management, and does appear to have been taken by surprise by the news. How do we know that? Well, it didn't have an immediate, permanent replacement for the CEO role. So the startup did what it could and made its COO and CTO its interim co-CEOs. Now, Stability AI has lost quite a lot of talent in recent quarters,
3:25 Speaker 00 and Mustak stepping down is more bad news for it. So why would the CEO leave? Well, he told us his argument on Twitter. I'm going to quote here with some very, very light changes for the sake of readability. Quote, "We should have more transparent and distributed governance in AI as it becomes more and more important. It's a hard problem, but I think we can fix it." He also went on to say, quote, "The concentration of power in AI is bad for us all. I decided to step down and fix this at Stability and elsewhere." Okay, very altruistic, but at the same time, Stability is reported to be burning lots of cash and not driving enough revenue to allow it to raise more capital.
4:09 Speaker 00 For example, Semaphore reported last April that, quote, "Name recognition and early traction have not translated into enough revenue to counter sky-high server costs and the rapid recruitment of employees around the world," at the company, to pick one example. So is this the case of a CEO going rogue to save the world? Or more of a self-led shakeup of management at a company that is struggling to raise more capital? Well, we'll find out in time. Next up, what is our regulatory news today? Why? It comes from the EU. And on top of that shocking news, it involves the Digital Markets Act, or DMA. Now, the FT reports that the EU is probing both Apple and Alphabet,
4:53 Speaker 00 and also Meta. There are two different beefs here. On the side of Apple and Alphabet, the inquiries deal with app stores, and whether or not the two American tech giants are favoring their own application marketplaces. Here's a pro tip: they certainly want to. The only question is if they are doing so in a manner that breaks European law. And Meta is in trouble, of course, for advertising data. What else? The FT puts this all into good perspective, and I quote, "The probes fall under the Digital Markets Act, which is designed to tackle the dominance of so-called digital gatekeepers, or the biggest online platforms." This is the push and pull of massive platform companies in the tech sphere,
5:38 Speaker 00 and a massive governing bloc of wealthy nations, trying to keep those same platforms as open as possible. Now, from the American perspective, this may seem like too much meddling. TechCrunch has, after all, covered the EU versus domestic tech companies battle for what feels like 17 decades now. However, flip it around, from the European perspective, when the two major mobile platforms are both American companies, well, you can imagine why the EU might want to ensure that those same companies are not taking undue advantage of their citizenry.
6:11 Speaker 00 Moving right along, Spotify is getting into learning, and my first take on this was, oh, god, why? Here's what TechCrunch has to say. Spotify has carved out a business for itself in the world of music streaming, sure, but more recently, it has spent time and money building out its podcast and audiobook business. By now, this should be no surprise. However, the company has something new up its sleeve as part of its ongoing efforts to get its 600 million-plus users to spend more time and money on its platform. So, the company is going to spin up a new line of content: e-learning. This means that starting with a rollout in the UK, Spotify is going to test the waters for an online education offering of freemium video
6:56 Speaker 00 courses. Now, these are produced in partnership with third parties like the BBC and Skillshare. The first two lessons are free, but the total cost for a course will range between £20 and £80 on average. And if you are a premium subscriber, you don't get a discount. Why is it doing this? Well, Spotify, for example, works with music companies and makes a lot of money streaming music to users. However, when it does that, it pays most of its revenue back to rights holders. That means that Spotify's overall revenue mix is not that impressive on a gross margin basis. So what does it do? Well, it tries to have more stuff on its platform to give it
7:37 Speaker 00 pricing leverage so it can have stronger margin revenue. This means podcasts spend a lot of money on that. Audiobooks, they're trying that. And now e-learning, anything to get you to spend more inside of Spotify. That way it can keep more of those dollars. It has to grow and it needs better margins. Now, I don't know if digital learning via freemium courses is the way to go, but I think we're going to see more experiments from Spotify until investors are happy.
8:08 Speaker 00 Now let's go across the sea the other direction and talk about China. Chinese state media reports that Apple CEO Tim Cook said that his company will bring its Vision Pro headset to the country this year. Reuters is the one that brought us the news from Chinese state media, and this should make China the second country to get the Apple headset. Given that China is going to be just the second nation, this is in fact very big news. Now elsewhere in China, the FT reports that the country has, quote, "new guidelines that will boot Intel and AMD silicon from government computers." The context here is that the US and China are decoupling from one another in chips, with the US looking to ensure that Chinese tech doesn't find its way into core
8:53 Speaker 00 infra and also limiting the export of high-end silicon to the rival nation. At the very same time, China wants to build more of its own chips and get US tech out of its digital life. And to close this out, a little startup news for your palate. TechCrunch's Rebecca Scootack and Christine Hall, two names and voices that regular equity listeners have heard on this very show, report that the beverage startup world is getting fizzy indeed, but with some real results to back up the hype. For example, Liquid Death reached $263 million in sales last year. And don't worry, only half of that came from me. Still, with the margins I anticipate that water has,
9:37 Speaker 00 that's a lot of revenue for a company that isn't that old and has only raised so much. But Liquid Death is not alone in trying to take on the world of drinkables. There's also Poppy and Ollie Pop, amongst other names like Odyssey. Many companies out there with venture dollars are trying to take on the growing non-alcoholic beverage sector. And well, as a recovery imboosser, I'm totally in favor of it. But more importantly, for startups, it's fun to see a return of CPG and perhaps even DTC amidst all the AI hype that we can't stop talking about. Who would have thought that the most basic of goods, drinks, is venture backable? But here we are. Liquid Death is proving the haters wrong.
10:19 Speaker 00 That's our show for this ever so lovely Monday morning. And we are Equity Pod over on X and Threads. If you want even more from the podcast crew, I am Alex over on X. And Equity comes out three times a week, Mondays, Wednesdays and Fridays, except for weeks when we have an extra interview. And this is one of those weeks. Look for a special episode in your podcast feeds sometime in the next seven days. In the meantime, of course, we have two sister shows, Chain Reaction and Found. We'll talk to you soon. Hugs. Happy Monday.
10:50 Speaker 00 Equity is hosted by myself, Alex Wilhelm, and TechCrunch Senior Reporter, Mary Ann Azvedo. We are produced by Teresa Loconsolo with editing by Kel. Bryce Durbin is our illustrator. And a big thank you to the audience development team and Henry Pickavet, who manages TechCrunch Audio Products. Thank you so much for listening and we'll talk to you next time.
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