(Preview) How America Lost Rare Earths, Netflix Partners with Spotify and Bill Simmons, What Comes Next in the Robotaxi Wars

Andrew and Ben begin by examining the various structural forces and business decisions that led the U. S. and the West to cede rare earth mining and refining to China, including reduced friction at the expense of resilience n a variety of areas, predatory pricing that pays extra dividends in the commodities business, and why Ben is keeping an eye on the Middle East in the months to come. From there: Reactions to the news that Spotify and Netflix are partnering and pulling podcasts off of YouTube, with thoughts on the limits of that strategy and the difference between YouTube's cut of creator ad revenue and Apple's developer fees. At the end: Uber, Tesla, and Waymo and the shape of the future autonomous vehicle marketplace, Ben's thoughts on Tesla's Full Self-Driving, OpenAI's corporate structure, and ChatGPT embraces AI erotica.

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.

• 0:09Andrew Sharp?

  But I think there is still that capacity. So I'm optimistic that the US will be able to respond, but we'll have to wait and see. At this point, it's all speculative.

• 0:18Ben Thompson?

  I love your optimism. We are also 48 minutes in and I think we got one email. So we are failing at our task right now.

• 0:23Andrew Sharp?

  That's right. It's time to move. It's time to move. Jeremy says-

• 0:27Ben Thompson?

  Will Sharp Tech answer emails before Ben sort of filibusters the entire episode? Another competition worth keeping track of.

• 0:34Andrew Sharp?

  There you go. Jeremy says, "Why would Spotify and The Ringer do that deal with Netflix for the podcasts? Is the answer that this is the beginning of an anti YouTube alliance?" So I gotta read from the New York Times.

• 0:49Ben Thompson?

  When did Jeremy send this email? I do have to wonder because that was my take is the anti YouTube alliance. And I want to either compliment him on great minds think alike or, um, you know, great people out here.

• 1:00Andrew Sharp?

  He did get it in. He got it in before your Thursday update on this news. So, congrats to Jeremy. The news from the New York Times, for everybody who hasn't seen it, "After months of speculation, Netflix is taking its first step into the world of video podcasting. The streaming giant announced a partnership with the audio company Spotify on Tuesday that would bring numerous video podcasts on sports, culture, entertainment, and true crime to Netflix early next year. The deal prevents those shows from airing in their entirety on YouTube, Netflix's biggest competitor. The 16 shows in the deal are produced by Spotify Studios and The Ringer, the website and podcasting network that Bill Simmons started and that Spotify acquired in 2020.

• 1:44Andrew Sharp?

  The shows include two popular true crime podcasts, Conspiracy Theories and Serial Killers, the Bill Simmons Podcast, and Rewatchables, which features Mr. Simmons and a roundtable of movie lovers discussing their favorite films. I am a big Rewatchables fan, probably my favorite podcast out there, uh, other than all the podcasts that I myself host. Ben, what do you think of what's happening here? Uh, there's a chance we may eventually get to watch you on Netflix if The Simmons Show is gonna be on Netflix every week.

• 2:16Ben Thompson?

  That is true. Um- Well, first off, I think the overarching all this is YouTube is a threat to everyone. They're the biggest problem for Netflix and they're the biggest problem for Spotify. And so there is an aspect here of these are natural allies. Sort of in the way, sort of all the e-commerce ecosystem was sort of natural allies and taking on Amazon, right? And, and so, yeah, Jeremy is spot on. Anti YouTube alliance for sure. I think the civic dynamics of this deal are really interesting and problematic, I would say, for Netflix. So I put myself in the position of, like, let's say tomorrow Netflix comes to us and says, we would like to put Sharp Tech

• 3:00Ben Thompson?

  on Netflix and the requirement is you can't be on YouTube.

• 3:05Andrew Sharp?

  Fine.

• 3:06Ben Thompson?

  I would be like, sign me up, no problem. Why? Because I have a completely, all the revenue, we don't make any of it from YouTube, even though we have like segments on there. My whole business is separate from YouTube. So from my perspective, YouTube would be nice, but if Netflix wants to give me guaranteed money? Absolutely. Well, I'll take it, I'll put, I'll put it on there. So if you're listening, Netflix or Spotify, there you go. Put Sharp Tech on, on your, on your network. Invest a lot in nice cameras, equipment, you see this background I have?

• 3:39Andrew Sharp?

  I've got a lush basement, ready for Netflix, absolutely, let's do it.

• 3:43Ben Thompson?

  Now, why do we have some clips on YouTube? Well, because at least in theory, YouTube is a way to grow. If you get in the algorithm, people are introduced to you, X, Y, Z. It's hard to grow podcasts. It's something we want to experiment with. We've talked about doing more video. I think sort of the immersive podcast is probably a bad idea, but like you sort of like, there's something there that could be done, but it's not critical to our business. We are a podcast, we're audio first and that's just the way it is. And we see video as a route to growth, but we don't see video as a baseline requirement.

• 4:20Andrew Sharp?

  And we're also relying on, we're relying on subscriptions as opposed to the ad market. So growing in the YouTube area. Is less of an existential.

• 4:30Ben Thompson?

  We see YouTube as a top of the funnel way to get people in and potentially subscribe. We don't need YouTube ad money. Um, that's the case with Bill Simmons. Like, like Bill's one of the earliest podcasters. First with ESPN, then sort of his own podcast. He has a huge built in audience. He sells lots of ads to that audience, makes millions of dollars a year doing it. Sufficient enough that Spotify bought the whole thing for 270 million or whatever it was. Maybe a time and place sort of thing, but good for Bill, happy for him. It's great. He's set. If Netflix adds more and wants to pay him for the stuff he's already doing. Although hopefully with better camera equipment, because it drives me up the wall how bad Bill's camera is.

• 5:10Andrew Sharp?

  The camera has improved. I believe the camera has improved. Yeah.

• 5:18Ben Thompson?

  So, uh, the, it makes total sense for him to do that.

• 5:24Ben Thompson?

  Unfortunately, all the new podcasts, which means not just big podcasts today. But basically every podcast from here until the indefinite future. Is YouTube first.

• 5:37Andrew Sharp?

  YouTube native.

• 5:38Ben Thompson?

  They start with video. They start on there. That's where they get their audience. Their audience in YouTube is the aggregator. They, they have the audience. They deliver them via the algorithm. People click and subscribe and remind, hit the reminder bell or whatever it's called. And then, and then they make money from YouTube via YouTube ads. Suddenly they're like, why would I go anywhere else? I'll lose my listeners who I don't have as tight a hold on because YouTube doesn't let me have a direct connection with listeners. So it's harder to take them with me. And also I make money on YouTube. So pulling viewers away from YouTube is difficult. I don't see why any Netflix is going to have to pay so much to get a YouTube podcaster off of YouTube.

• 6:19Andrew Sharp?

  Yeah.

• 6:20Ben Thompson?

  And for that podcaster, it's probably going to be a bad idea. There's a reason Joe Rogan got pulled off YouTube and then was back on as part of his most recent deal. It, it just cost him too much in terms of like relevancy and probably money and all sorts of things.

• 6:35Andrew Sharp?

  Acquisition, yeah.

• 6:37Ben Thompson?

  That's right. And, and so the, the. So on one hand, this deal makes sense for Netflix. Let's try to get in the space. But they're actually in a pretty bad position because they have a very limited pond of people they can use to do this. They are the network TV in this case, sort of stuck in their lane. Hoping to ride on established names, established SARS. Let's do Law and Order version 57 for the five gazillionth time because it's a brand people know. Sorry, Bill Simmons, you're Law and Order number 57, right? You're, you're, people know you, so that might help to get this off the ground. But they have a long path to go to actually develop the sort of business where they're going to get the podcasters of the future.

• 7:22Ben Thompson?

  YouTube owns the future and that's a big problem for both Netflix and Spotify.

• 7:27Andrew Sharp?

  Yeah, it's interesting. I understand why Spotify would go this direction, or not Spotify, Netflix. I understand why Netflix would go this direction. It's a worthwhile experiment, maybe, but you look at the bifurcated entertainment landscape that we talk about all the time. You've got premium products on one end and then you've got the long tail on the other. This seems like Netflix, which is a premium product, trying to compete with the long tail. And it just strikes me as an idea that won't get very far. In part because YouTube has 10 times as many podcasters and people are used to watching podcasts on YouTube.

• 8:08Ben Thompson?

  People go to YouTube for podcasts, right?

• 8:10Andrew Sharp?

  Right. Nobody's going to Netflix to watch podcasts. And I understand trying to create new user habits, but you're trying to create new user habits with like 1% of the content. And so it's just hard for me to imagine this idea getting very far. But it is kind of an interesting window into Netflix's psychology where-

• 8:31Ben Thompson?

  It's a window into how threatened both companies are by YouTube.

• 8:33Andrew Sharp?

  Exactly. They see YouTube as a long-term threat and they're exploring different ways to counter what people are going to for YouTube on a regular basis. But-

• 8:43Ben Thompson?

  Yeah, Netflix was the scruffy upstart that had like a random selection of movies and you would watch stuff on there just because it was on Netflix. Versus the much more structured, constrained network TV alternative. What we're seeing is Netflix now being the old stuffy structured. You go to Netflix for Netflix-type shows. If you want the random stuff of the world, that's on YouTube and it's, it's, it's hard to go down market. You see this in tech companies, right? Everyone ends up like enterprise companies, they go for the big companies because it's easier sales and more predictable, but as you go up market, you can't go back down market. Like, like it's a one way road and that's the what Netflix is on the one way road. And I think from a Spotify perspective, they, they're pushing video.

• 9:26Ben Thompson?

  No one doesn't think about Spotify for video. Spotify is an audio product. Uh, there's a lot about this that makes sense for these companies to band together generally, but it is a banding together under assault. It's not, that's right. Yeah.

• 9:41Andrew Sharp?

  Yeah. Good luck to all of them. I will, I'll check out a rewatchables episode on Netflix because I'm washed. I'm the type of person that will actually check this out, but I'm in the minority because most people consume podcasts on YouTube. Okay.

• 9:56Ben Thompson?

  Uh, I thought you were going to make some sort of comment about AI generated video. I'm the one that's washed, totally missing the boat on it. But the best AI Sora user I know is, I mentioned last time is this retired, retired guy in my cigar group chat. Uh, he has a new workflow that he shared where he goes to vibes and watches videos and finds one that he's interested in, that he copies the prompt and puts himself into it. And so then, so he gets the vibes is the inspiration for the video and then he could add himself into the video and he dropped some bangers. Like it was, it was amazing. It was such a good idea.

• 10:33Andrew Sharp?

  Uh, how old is this person?

• 10:35Ben Thompson?

  Like 65 or something like that. Just running circles around us. It's embarrassing.

• 10:39Andrew Sharp?

  Well, cause what I've found with AI video is the people in my life who love AI video are either 65 plus or like six years old and it's really big with toddlers and senior citizens. Uh, so we'll see whether the middle of that graph ever catches on. Uh, but.

• 11:02Andrew Sharp?

  For now, one other question on video. Craig says, "In a recent episode, Ben mentioned that YouTube gives around 50% of ad revenue to creators. That got me thinking about how often the Apple 30% fee is framed as problematic, yet I don't often hear it discussed how YouTube takes 45%. Both those look very similar to me. It's the creators or developers that are making YouTube and iPhone, respectively, valuable platforms that keep people coming back, yet YouTube takes a much bigger cut. What am I missing? Why does the Apple 30% fee get talked about so much, but not the YouTube 45%?"

• 11:45Andrew Sharp?

  Ben, can I hazard a guess at the answer to this question?

• 11:48Ben Thompson?

  You can. I have a very clear answer that, uh, so you're gonna have to be spot on, but we'll see how you do.

• 11:54Andrew Sharp?

  Okay, alright, you can grade the answer. YouTube is the company that's actually selling the ads and creating that additional value. So giving 50% of that money to creators is actually a pretty good deal for those creators. Whereas in Apple's case, the apps are doing all the work to generate sales independent of Apple, and then Apple comes in after the fact and takes 30%, basically as a toll for those businesses existing on iOS and having access to Apple users. That's the difference. That's why there's more outrage at Apple than there is at YouTube. Grade me, what do you think?

• 12:34Ben Thompson?

  A solid A, not an A+, but a solid A. Very well done. No, you're exactly right. YouTube is creating, enabling this entire thing, which, you know, from, so, eh, maybe an A-. Actually, I'm gonna reduce to A-. I'd say you missed two things. It's not just that they're selling the ads, they're delivering the audience. They're like, they're actually bringing people to you in a way that Meta's the one delivering the audience to app makers, not Apple. To the extent Apple makes money on ads, it's the skim, they're skimming off of search, making you buy your own name, so you show up at the top of the list. Like, it's just a tax up and down.

• 13:16Ben Thompson?

  You can trivially, this is the other bit, so you have two sort of small misses that have me lower it. The other one is, uh- It's not possible to recreate what YouTube did for any individual. An advertising mechanism like that has to be done at scale. Now, the biggest YouTube creators actually make more money off of YouTube. They have sponsorship deals that are within their own episodes and YouTube doesn't take anything of that.

• 13:42Andrew Sharp?

  They could do like independent product placement deals, right?

• 13:45Ben Thompson?

  That's right. And that's like your MKBHD, he makes way more money from that than he does YouTube ads. So if you're big enough, you can do that. And by the way, Apple would probably take it, try to take a cut of that if they were in charge, right? So YouTube's not touching that, number one. And number two, what they do provide with AdSense and the entire advertising thing, you can't build that. No individual can build that. That has to be done at scale. You don't need Apple to collect payments for your app. You can use Stripe, you can use lots of other things. Apple's involvement is unnecessary. So you touched on this, but I would have emphasized the necessity of YouTube's infrastructure. I think the YouTube deal is actually amazing.

• 14:29Ben Thompson?

  That they share as much with creators as they do. Because this entire ecosystem would not exist without YouTube. Its maintenance would not be possible with YouTube. This revenue is all because of them. They deliver the audience, they build this entire ad ecosystem and they share a large amount. And it speaks to the overall thesis I've developed with Google recently. Their generosity is one of their biggest competing strengths. Like they, like, we talk about it in the case of Apple, the search deal. They're giving Apple $20 billion of profits a year and it seems dumb and people, like their minds explode. Like, how can this be like, you know, how can you say they have aggregation advantages if they're paying for this? It's like, no, it's this, it's what we want from all these companies.

• 15:13Ben Thompson?

  It's like, make these big expenditures in the current day to build resilience and a dominant position over time.

• 15:22Andrew Sharp?

  And it's not a theoretical thing. Five minutes ago, we were talking about YouTube podcasters won't want to go to Netflix because they're making a ton of money on YouTube.

• 15:31Ben Thompson?

  And the thing you have to grapple with is you and your antitrust friends want to be upset about it.

• 15:38Andrew Sharp?

  One day, I'm gonna take off my wired ear pods and just quit the fucking podcast at some point. Oh, boy. But Google does it right, man. YouTube does it right.

• 15:49Ben Thompson?

  If Google was in mining, we would be in a better position than we are because they would have, they wouldn't have optimized every single dollar. Google's lack of optimization and generosity is one of their biggest long-term competitive advantages.

• 16:03Andrew Sharp?

  Yeah, well, and the 50% number, I don't know if it's exactly 50% that's shared with creators. But I don't want to quote.

• 16:09Ben Thompson?

  No, it's 50. I believe it's 55. I think 55 goes to creators and 40, YouTube keeps 45.

• 16:15Andrew Sharp?

  It's a crazy large number. When I saw that, I was shocked. So in any event, we will keep it moving and shift.

• 16:22Ben Thompson?

  You know how much most creators would make from ads if YouTube didn't have this deal?

• 16:26Andrew Sharp?

  Zero.

• 16:26Ben Thompson?

  Zero. If you're the very largest.

• 16:29Andrew Sharp?

  Or if you're a creator, I mean, it's a, it's a substantial burden to go out and interface with advertisers and take on that responsibility.

• 16:37Ben Thompson?

  Right. And this is what YouTube would say, because YouTube's trying to get into like the product placement sponsorship business, which all these big creators make money on. Their argument for why, no, we're not stepping into your space. We just want to make this more broadly available to creators generally. So if you're not big enough to do brand deals, we will do brand deals on behalf of YouTube creators, which again, I can understand a little, like why the biggest YouTube creators are a little wary of this. Because you could see, maybe they had a deal with Samsung. And then Samsung's like, no, we're just doing with YouTube. So just sign up for that program. And that's how you, and then now YouTube's taking a cut, right? So that, yeah, there is a bit here where I can see them being wary of this.

• 17:19Ben Thompson?

  Because if you're big, you have privileges, like being able to interface with a Samsung that most people don't. But there is a real payoff in the number of creators that could potentially do brand deals because YouTube is operating as the interface. This is the key to being an aggregator that people love, is you do stuff with scale that people can't do on their own. And by the way, the number one thing that you can do at scale that people can't do on their own is run an ad business. It's why ads are good. It's why we get sort of entities like a YouTube that like, again, they go to that YouTube event and seeing like big creators.

• 17:58Ben Thompson?

  Doing the presentation on YouTube's behalf was kind of mind blowing. They're up there shilling for this company because they love it. It's made their life, it's made their career and it actually is possible to aspire to be a YouTube creator.

• 18:14Andrew Sharp?

  YouTube's ads engine has made their career. Let's be more specific. Advertising is good and makes all those careers possible.

• 18:21Ben Thompson?

  Right, and that's why if YouTube wants to take 45%, God bless them, you deserve it.

• 18:26Andrew Sharp?

  Yeah.

• 18:26Ben Thompson?

  30% from Apple, who doesn't do crap for you? Like, it's a payment processor, a very good payment processor, it's very convenient for customers. There's lots of benefits to it, but, and I think that Apple will retain a lot of usage, even if they allow competition because the seamlessness of the user experience is so great.

• 18:47Andrew Sharp?

  Mm hmm.

• 18:48Ben Thompson?

  But they don't give a choice and you can roll an alternative.

• 18:53Andrew Sharp?

  All right, well, to keep it moving, we have Matthew. He says, Ben and Andrew, big fan of the show, but I think the robo taxi wars aren't getting enough attention. This should be Ben's sweet spot at the intersection of tech and strategy, hardware and software. Ben talked about his experience riding in a Waymo a few months ago. Waymo has since launched in several more cities, some with Uber and some without Uber, clearly experimenting with different business models. Tesla recently launched their own robo taxi service in Austin, Texas, and is preparing to launch in several more cities exclusively on its own robo taxi app. And Uber is partnering with every AV player possible to make sure they have a path to autonomy.

• 19:35Andrew Sharp?

  How does Ben see the very different strategies and competitive positions between Waymo, Tesla, and Uber playing out over the next five to 10 years? Love to hear your thoughts. So Ben, this question came in a while ago. We're now an hour into the podcast. There's a lot of meat on this particular bone. I think we probably should have an extended conversation about the robo taxi wars at some point. I'll be honest, though, I was teeing it up for you today because I know you've been using Tesla full self-driving recently. So I wanted to give you a platform to discuss that experience.

• 20:11Andrew 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 sharptech.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 Strategery and the Strategery Plus bundle. Check it out, and if you've got feedback, please email us at [email protected].