(Preview) Google and Apple Avert Disaster, More on Kpop Demon Hunters and Hollywood, Mail on Microsoft, Adobe and ASML

Talking through Google’s big win in court this week, including the confounding opinion from Judge Amit Mehta, a strategy that paid off for Google, anti-monopolists and the Chrome crusade, and the hidden cost of Apple’s Google money. From there: Mail on ChatGPT’s follow-up questions, a KPop Demon Hunters digression, what really killed Hollywood’s creativity, Microsoft’s future in the AI era, Adobe and Salesforce vs. disruption concerns, trailing edge chips, ASML, and Nvidia comes to DC.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Andrew Sharp?

  Hello and welcome to a free preview of Sharp Tech.

• 0:08Andrew Sharp?

  Hello and welcome back to another episode of Sharp Tech. I'm Andrew Sharp and on the other line, Ben Thompson. Ben, how you doing?

• 0:19Ben Thompson?

  I'm doing okay, Andrew. Doing okay, not as good as Apple's doing right now, but um, but doing okay.

• 0:25Andrew Sharp?

  Yes, breathing the biggest sigh of relief in the entire world earlier this week. Happy for the folks out at Cupertino. That's where we're going to begin, Ben. We're going to be hitting a lot of mail with the second half of this episode. The news has been too busy the past few weeks, so we've been slacking on the mailbag. We're going to try to remedy that today. But speaking of remedies, Ben, we're going to start.

• 0:51Ben Thompson?

  What a segue. Wow, look at you.

• 0:54Andrew Sharp?

  Indeed, indeed. Here we are, the resolution of what many were calling the most significant tech antitrust case of the 21st century. On August 5th of last year, Judge Amit Mehta ruled, quote, "Google is a monopolist and it has acted as one to maintain its monopoly." And then on September 2nd of this year, after the wheels of justice spent 12 long months churning away, Mehta issued the remedies holding in that case. We have a lot to go through with this opinion. I'm going to put on my anti-monopolist pants, though, and just skip to the question that has been bothering me for the last several days.

• 1:39Andrew Sharp?

  How in the world did Judge Mehta avoid enjoining the revenue sharing agreements with Apple? What do you think of that aspect of the ruling? Because I'm still pretty amazed that that's where we netted out.

• 1:53Ben Thompson?

  Well, I, uh, there's a really excellent website, um, that has written about some of these topics. Um, and a year ago, this site had a really good post, uh, in my estimation, um, talking about Google and their overall strategy of kind of like overt generosity, sort of building, uh, what I think the site recently for Google patronage network, where everyone just sort of gets money from Google all the time, which always sort of confused the anti-monopolist. They held this up as evidence that the fact that Google is paying for this placement

• 2:33Ben Thompson?

  shows that they obtained their power via payments for placement because if someone like Ben Thompson was right and they would just most of the time win naturally anyway, because customers prefer them, then why would they pay?

• 2:47Andrew Sharp?

  Right. Why would they give Apple 36% of their search revenue in that scenario? Yes, it's a fair question.

• 2:53Ben Thompson?

  Right. And the reason why they would pay is because of this ruling. Uh, I mean, the first reason, first and foremost, is it just locks out any potential competition. But number two is you get to a ruling like this where Google is held to be a monopolist. And generally speaking, the court has leeway in its remedy to not just stop the bad behavior, but to undo the gains from the illegal behavior. And the most obvious way to do that is to end these payments. And is that unfair to Google? Because other companies can pay? Yeah, but that's sort of the punishment that you get.

• 3:31Andrew Sharp?

  The price of being a monopolist and enjoying like massive market share.

• 3:35Ben Thompson?

  No, no, no, no, no. There's no crime in being a monopolist. There is a crime in acting illegally to maintain your monopoly. That is what sort of can be undone. No, it's an important distinction, but...

• 3:46Andrew Sharp?

  No, but I say because you enjoy monopoly market share, there's a limit on certain deals that you can enter into that companies that are smaller, the third, fourth place, they can enter into freely, but because of Google's dominance, the law imposes some limitations on what they can do. That's the price of being a monopolist. And it's not illegal per se to be a monopolist.

• 4:08Ben Thompson?

  Right. And Judge Meda basically said it would cause too much downstream harm to end the payments. That was basically his reasoning, which is...

• 4:19Ben Thompson?

  The strongest possible affirmation of Google's quote unquote generous strategy. And the strongest possible affirmation of that brilliant websites sort of analysis from a year ago. Oh, that was me. I wrote that on Chitchekary. This is like, it's, it actually turned out even better than I expected. Like, like in two respects, number one, I love it when I write something that ended up being perfectly correct. And then number two, I love it when like the, I forgot what else I love. I'm just stuck on being perfectly correct.

• 4:55Andrew Sharp?

  Well, did the court exceed your expectations in terms of the sorts of behavior that they might prescribe?

• 5:00Ben Thompson?

  No, like the, the degree to which the reasoning was basically boiled down to, okay, I'm going to do everything I can without touching the payments, which is basically what this case is. Well, actually that's even not true. The data sharing was not as aggressive as sort of it could be. But we're not going to touch the payments because too many companies are dependent on it. He might as well have just taken my friendly Google article from a year ago and just paste it into his opinion. That's, that's basically the long and short of it. Google has paid off everyone, pays off everyone. And the judge is like, everyone is too dependent on this money. So we can't take it away. That, that's, that's his reasoning. That's what it is.

• 5:37Andrew Sharp?

  Yeah. Well, and I don't want to put words in your mouth from a year ago because I don't recall verbatim what that article said. But I believe you were saying, look, this ruling here and whatever the remedies turn out to be, could be more disruptive than people realize and may create problems in addition to the proposed solution from the court here. So I reluctantly agree that they should ban payments. I mean, I think where you netted out was agreeing that the court should ban the Apple distribution agreements. Is that right?

• 6:10Ben Thompson?

  Yeah, no, the, the payments are, it's, it's one of those things where. Yeah, the payments would be disruptive. Like it would kill Firefox, for example. It would be, it would like basically the, the profits of a lot of Android handset makers basically just come from Google. They make the handsets basically at cost or maybe even lose money. Apple obviously has a huge profit stream. And the, the, what was so brilliant slash devious about Google paying everyone off. Apple is the most clear example, which is what they're foreclosing. It's, the, the issue is not that they're stopping Bing from competing or DuckDuckGo from competing. It's they're removing any incentive from Apple to compete.

• 6:54Ben Thompson?

  In that article, I went back to the Google Maps, Apple Maps, which is sort of a disaster for both sides in many respects, where Google got a little too eager to see Android quote unquote win. And I was very critical of that. That was a big issue when I first started to check. I was very critical of that because I'm like, they're being stupid. They, the nature of their business is they need to serve iPhone customers in addition to Android customers and they're laying the tail wag the dog. Like the goal here, sure, Android is great, but it's not great to the extent of losing access to iOS customers. And the, the most obvious example of that was the whole Maps issue. They were being a big pain about negotiating for that. They wanted all this data.

• 7:39Ben Thompson?

  They wanted the right to put ads in, in like all these various bits of pieces that Apple ultimately just walked away and said, fine, we'll build our own Maps product. And what happened was Google lost a extremely valuable signal from the most affluent customers. Apple meanwhile, had this embarrassment of a Maps product that was terrible for ages and ages. And you know, it's still not as, now that I'm, you know, I, I go back and use it every now and then, it's still not as good in my estimations.

• 8:08Andrew Sharp?

  It's not as good, but I mean, guess what? I'm an Apple Maps user and always have been because Apple created a Maps app. And in, in an alternate timeline, I could have been on Google Maps for the last 15 years.

• 8:20Ben Thompson?

  Yep. And so, so you could, but at the end of the day, what we do have is We have competition in mapping products, at least to some extent, because Apple put in the money, put in the investment to build a Maps product. Google, by virtue of paying for the search placement, the number one most important anti-competitive outcome of that was Apple not investing in building a competing search product. And that's the, so this fact that the reason not to undo it is because of all these downstream effects. And the most absurd part of this decision, by far, is

• 9:03Ben Thompson?

  Apple will not have enough money to innovate if we cut off this revenue stream.

• 9:09Andrew Sharp?

  Product innovation from Apple, in the court's words, was a concern if they disrupted these agreements. I still can't believe this really happened.

• 9:18Ben Thompson?

  It's unbelievable. And look, I think I have, like, no one cares about you criticizing the guy who's, uh, you know, ruling for the monopolist here. I have the bona fides here. And I'm sorry, that paragraph, that statement is so ridiculous. Apple has so much money, number one. Number two, are you listening to yourself? Apple, like, it's, it's amazing the judge is concerned about downstream effects and is willfully obtuse and blind to the biggest downstream effect, which is that Apple doesn't compete. All they do is just pocket the money.

• 10:00Ben Thompson?

  And the funny thing is, and I think I'm gonna write about this next week. I always hate giving away some of my takes here. But Apple is obviously the biggest winner here. They continue to get $20 billion plus a year of pure profit from Google for doing nothing.

• 10:20Ben Thompson?

  And it probably behooves Apple now, now that this is okay.

• 10:26Ben Thompson?

  Gemini be a great partner, great way to build up Siri. There's lots of rumors in that regard. And the biggest reason to not do it was legal uncertainty. And if they can just sort of partner with Google endlessly to do so, just makes a lot of sense. The companies get along, they do, they ironed out their Android differences from ages ago. They happily are a duopoly, sort of governing the world via smartphones. Google has the scale, they have the, you know, the, it's just, it's a very natural fit. I, I've talked about Apple partnering with, with Google and Gemini ages ago. The OpenAI AI thing will maybe end up being a diversion. That didn't make much sense because OpenAI is coming for Apple's throat in the long run.

• 11:03Andrew Sharp?

  Yeah.

• 11:04Ben Thompson?

  In a way that Google, you know, just, just sort of kind of isn't. And so Apple, number one, doesn't need to invest in search. And now I think the argument is even more compelling that they don't need to invest in AI. And the question is, is that good for Apple in the long run?

• 11:19Andrew Sharp?

  Hmm.

• 11:20Ben Thompson?

  Like the, the, the, Apple is a short-term winner. And innovation at Apple at a minimum is a long-term loser.

• 11:31Andrew Sharp?

  Hmm, that is a fascinating secondary consequence here. They now have even more incentive to just kick the can down the road and avoid worrying about the long-term and investing in the sort of AI capabilities that might be required to succeed 10 years from now in the hardware market. I hadn't considered that. Yeah, I mean, I, again, putting on my Annie Monopolus pants, it's just, I spent my morning rereading this opinion and also the opinion from last August. And I, I'm not mad per se, like, don't put it in the newspaper that I'm mad. But just what a gutless ruling this was.

• 12:14Andrew Sharp?

  I mean, the meanest thing I could say about this ruling is that it's something Adam Silver would have tried to do. It's the sort of- Overly cute solution. I mean, I have quotes from last summer's ruling in our outline. I'm not going to bore the listeners with reading everything. But essentially, Google's argument over the last couple of years was that because its deal with Apple was not an exclusive agreement and users had the ability to change their default search engine. It was perfectly legal. The judge rejected that argument and found that users don't, in practice, change their defaults. So a default agreement between two of the three biggest companies on earth

• 12:59Andrew Sharp?

  does, in fact, foreclose competition in the search market. And then after holding these agreements were restraints of trade, he just didn't do anything about it. Like, it's unbelievable. And, I mean, I don't know. I think there was also the aspect of the opinion that he cites the emergence of AI and AI companies like OpenAI and Anthropic as justification for showing restraint and caution in this moment in 2025. But he reserves the right to revisit it a couple of years from now. He said, "So for now, I'm going to leave these agreements in place and allow Google to

• 13:43Andrew Sharp?

  transact with companies like Firefox, or Mozilla that is, and Apple." But perhaps he'll revisit it down the line. What did you think of that aspect of the holding?

• 13:54Ben Thompson?

  Well, I think that's probably the most irritating part of this holding. And there's two, there's two parts of this. So let's say, let's just grant that, okay, Google funds huge aspects of tech via these agreements. And yeah, that's not great. It's killing innovation, but at the end of the day, it's sort of like the Facebook acquired Instagram thing. It's like, it's been a long time. There's a lot of structure around this. It is very damaging to undo, and I'm amenable to that argument. That like, look, the Apple part's ridiculous. Apple can afford to go without $20 billion in pure profit, given they still make a lot of profit elsewhere.

• 14:38Ben Thompson?

  The sort of like Firefox angle, the Opera angle, all these sorts of things. Like, it's... Okay, fine, whatever. Wait, wait, we'll just grant it.

• 14:46Andrew Sharp?

  And I agree with that. If, if he had just enjoined the deal with Apple and allowed Google to continue paying Firefox so that Mozilla remains a going concern. I'm a Firefox user. I know I'm in the minority, but I love Firefox. I mean, any tech that was cool in 2011 is still cool to me, so I'm pro Firefox. But it's the absurdity of the Apple deal that really rankles me.

• 15:11Ben Thompson?

  Well, but even if we grant this, then the humility that's lacking is it's as if every other part of the opinion is disconnected from this one point. So, for example, he says everyone gets competitors, which he takes care to include AI companies, so that's good. They get access to the Google search index. But they don't get access to the data Google's collected, just sort of a list of basically every webpage and, and what they all are. And they get the access one time. And the idea is they don't get a benefit from Google's, you know, investment in web crawling and all those sorts of things. They like, so they can get, they can get a head start in sort of building the index.

• 15:56Ben Thompson?

  They get access to the long tail, but they have to actually build their own crawlers. They have to go find these sites and make sure they're updated and all those sorts of things. And I, again, in isolation, I get the idea. It's not like other companies have a right to Google's sort of capabilities and what Google has spent to build all these sorts of things. The problem is when you take the opinion as a whole, the implication of allowing Google to continue to do these payments is they're going to continue to dominate this space because they can afford to pay more than anybody else, because they have the largest apparatus, largest engine, like, and so just competing on an even playing field, given where we're at, means Google is going to win and dominate, which means they are going

• 16:38Ben Thompson?

  to have sort of more ongoing funding and capabilities to do the web crawling and all those bits and pieces. So like the, on one hand,

• 16:48Ben Thompson?

  Yes, I get the people can get a start using what the work Google has done, but they don't get a benefit from Google on an ongoing basis. But that is in tension with Google basically gets to maintain its position on an ongoing basis. So if you're going to let these payments go on, I think the judge should have been much more generous in terms of, okay, other people get to quote unquote free ride off of Google's capabilities and whatever it might be. Like, whereas if you're cutting off the payments, it's like, oh hey, we're cutting it off. Google like has to be on a easy playing field. Everyone else gets to jump ahead to all the Google search index and all these bits and pieces

• 17:30Ben Thompson?

  that you can plug into. And now, okay, we're starting fresh. And by the way, Google is limited in payments because that's like punishment for like what they did. That is cogent and it's also cogent to say it's a free market for payments, Google can pay, but we recognize they have this massive advantage. So you get to get some free riding on them like on an ongoing basis. Instead of choosing like, because he chose from column A and column B, it's not going to accomplish anything.

• 18:03Andrew Sharp?

  That's the thing. This is not going to accomplish anything. And on the AI front, Meta wrote, "The court thinks allowing Google to continue making payments is more palatable now than when the liability phase concluded. Then venture funding in internet search was considered Silicon Valley's biggest no-fly zone", he puts in quotes. "Today, established technology companies are making and startups are receiving hundreds of billions of dollars in capital to develop gen AI products that pose a threat to the primacy of traditional internet search." So basically, the emergence of AI at least gave Judge Meta some justification here to side with Google

• 18:46Andrew Sharp?

  or I guess to offer Google a reprieve and Apple a reprieve. But I mean, the hundreds of billions of dollars that are being poured into AI, it's not as if they're being poured into AI. To directly compete with Google, I think that's sort of a misunderstanding of the ecosystem.

• 19:02Ben Thompson?

  Uh, I disagree. I think.

• 19:04Andrew Sharp?

  People see.

• 19:04Ben Thompson?

  I think this is valid. Like, like, the reality is, is that, like, we, we, we can't have it both ways. We've on this podcast talked plenty about the threat that L M's and OpenAI and ChatGPT poses to Google.

• 19:15Andrew Sharp?

  We'll talk about it later in the show, for sure.

• 19:17Ben Thompson?

  So I, I think this part is valid, but it gets to my second point with the judge's decision where I do think it's really important, and which the judge talks about, to not let Google or any other monopoly. I, I, I'm skeptical in general, like, even if Google could cut the payments, is Google still, like, basically, you are really just hurting downstream. Most people are probably still going to use Google. Apple's probably still gonna make Google the default, just because people would, might riot if they put Bing or something else. It's really hard to displace an aggregator. Like, that's obviously a core thesis of Surtachary. But I don't want the aggregator being able to leverage that into a new area.

• 19:56Ben Thompson?

  And there is a capability Google has, which is basically to ground Gemini, where Gemini gets access to the Google search index in a very sort of optimized and streamlined way. And the judge is like, well, this service is available on Vertex, Google's AI platform, and people can build on there and get access to it, blah, blah, blah, blah, blah. And why not force Google to have an API to that service that anyone can access? So they can ground their search results on the Google index going forward. That prevents Google from leveraging search into a dominant position in AI.

• 20:36Andrew Sharp?

  All right, and that is the end of the free preview. If you'd like to hear more from Ben and I, there are links to subscribe in the show notes, or you can also go to sharp tech.fm. Either option will get you access to a personalized feed that has all the shows we do every week, plus lots more great content from Surtachary and the Surtachary Plus bundle. Check it out, and if you've got feedback, please email us at email at sharp tech.fm.