Big Tech wants a piece of everything. Who’s going to stop them?

Sascha: [00:00:02] From Equity Mates media. This is the dive. I'm your host, Sascha Kelly. Big tech gets big by finding a market and absolutely dominating it. Apple's iOS has a 25% market share. Microsoft Office enjoys 50%, but wait for it. The market share of Google search is above 90%. But these big tech companies, they don't stop there. They have an insatiable appetite for growth. Over the past few years, regulators and politicians have tried to kerb their appetites. 

Audio clip: [00:00:36] Now to the blockbuster antitrust lawsuit against Google tonight that Apple has been handed an antitrust charge by the European Union. The U.S. Federal Trade Commission and multiple states are actually investigating the company's virtual reality unit, Oculus, over potential anti-competitive practises. 

Sascha: [00:00:53] They've raised antitrust and anti-competitive concerns. They've taken these companies to court. They've passed laws and still big tech. It keeps growing. It's Friday, the 29th of July. And today, I want to know what is big tech eyeing off next and what is the state of efforts by regulators and politicians to stop them? To do this, I'm joined by my colleague here at Equity Mates. It's Darcy Cordell. Darcy, welcome.

Darcy: [00:01:20] Thanks, Sascha. Talking about some companies that have massive impacts in our lives. But today we're going to find out just how big they are. 

Sascha: [00:01:27] I know, Darcy. We all know and use these companies. I mean, where would the dive be without Google? But it's so easy to lose perspective of their size. And we chose to focus on this story today because Amazon recently acquired one medical. [00:01:42][15.1]

Audio clip: [00:01:43] It is a membership based concierge medical clinic. And this latest acquisition is just Amazon's latest effort to expand and diversify its reach. [00:01:51][8.0]

Sascha: [00:01:51] Their first major acquisition under new CEO Andy Jassy and Amazon's expansion story. Well, in case you missed it, they started with online retail and then they moved to Amazon Web Services. But their reach now extends far beyond that from everything from health care to satellite. [00:02:08][17.0]

Audio clip: [00:02:09] One area that Amazon has been investing a ton of money, $10 billion is a project called Project Kuyper. [00:02:15][5.8]

Darcy: [00:02:15] Okay. So you mentioned those satellites. They're launching satellites that will orbit Earth and provide people with Internet. But we're not going to go too much into that today. [00:02:23][8.4]

Sascha: [00:02:24] Sounds like a topic for another episode, though. Can I hold you to that? [00:02:27][2.8]

Darcy: [00:02:27] You can hold me to that. But the reason we're not going into it is because the industry Amazon is going after the hardest, I would say, is health care. You mentioned last week Amazon acquiring one medical that was for about 4 billion USD and it follows them buying an online pharmacy called Pillpack for $750 million back in 2018. And they've also internally launched a service called Amazon Care, which is pretty much a telehealth service. So those three things together, Sascha, you can see what's happening here. Amazon Care, Telehealth. Pillpack sends you your medicine. And that's all underpinned by one medical, which is a health care organisation that already has millions of members in hundreds of locations. [00:03:08][40.3]

Sascha: [00:03:08] I could totally. [00:03:09][0.4]

Audio clip: [00:03:09] See a time in which you could be sitting at home with your Amazon Alexa speaker device and you could say, Alexa, refill my prescription, and 3 hours later someone arrives to your door, does your medication. You don't even have to leave the home. [00:03:23][13.9]

Darcy: [00:03:23] The reason they're doing all this is because in America, health care spending is nearly one fifth of the economy. Amazon wants to get in on that. [00:03:31][7.4]

Sascha: [00:03:31] Are we talking about size and scale today? One fifth of the economy. That's a huge opportunity right there. And it's not just Amazon who are looking to get into health care. There's other great examples of big tech looking to get into new and surprising parts of the economy. So let's turn to the biggest of all of the big tech, which is Apple. [00:03:51][20.1]

Audio clip: [00:03:52] Curious what your read is on Apple, digging even deeper into the financial services world and what this means for other fintech players. [00:04:00][7.8]

Sascha: [00:04:00] So for years, Apple have been playing around on the edges of finance with Apple Pay. I'd suddenly use it on my friend. I don't know about you, Darcy. I sure do. They've always done it with a finance industry partner, and that's Goldman Sachs. But this year, all that changed. They're pushing harder into this space all on their own. [00:04:17][16.7]

Darcy: [00:04:17] That's right, Sascha. Goldman Sachs is a big name and a big partner to walk away from that. Apple is just so big it often doesn't really need a partner. A stat to get you started. Apple itself. It's bigger than every single company listed on the Australian Stock Exchange combined. [00:04:32][15.2]

Sascha: [00:04:33] That's a massive. [00:04:34][0.5]

Darcy: [00:04:35] It's it's really mind boggling. I couldn't believe it when I first came across that. But we know Apple is most famous for their phones and their computers, but they have found a way to dominate other industries, too. Here are some examples and I'm sure you use or know many of them. Apple Music, now the second largest music subscription service in the world behind Spotify. And Apple has just recently become the world's biggest watch maker, less than eight years. Since the Apple Watch was released. We've also got Apple headphone Sasser, of course, AirPods, which I use all the time. They're the world's largest headphone maker, too, with about 35% share of the global market. [00:05:10][35.3]

Sascha: [00:05:11] But Daisy, how many of those headphones do you think is because someone accidentally puts them through the wash or lose their headphones? It's so easy to lose. [00:05:19][8.0]

Darcy: [00:05:20] I know. I know. I've gone through a few pairs going for a swim with the pods, but basically Apple is not scared of diversifying, although this new push into finance is an interesting one. If you thought klarna Afterpay our firm had buy now pay later Covid. Apple has just created their very own apple pay. [00:05:37][17.1]

Audio clip: [00:05:37] Later Apple announced their own buy. Now pay later method is being received quite well for Apple at least well, at least flat to the upside. But for some of the other payment apps, not so good. [00:05:47][9.9]

Darcy: [00:05:48] And the key point here is that it's their own. When they launch the Apple card, which is a credit card in the US, they launched it with Goldman Sachs, as we've talked about, and also MasterCard. But for this Apple Pay later product, they're underwriting it and funding all the loans themselves. [00:06:02][13.9]

Audio clip: [00:06:02] Tech firms are offering services that are usually associated with banks, but they're doing it differently. [00:06:06][4.2]

Darcy: [00:06:07] Apple is going to be their own bank. [00:06:09][1.5]

Sascha: [00:06:09] That's huge. [00:06:10][0.4]

Darcy: [00:06:10] It's a big step. And it's meant that the finance industry is pretty nervous and regulators are watching. The director of the Consumer Financial Protection Bureau said he would have to have a very careful look at this move and whether it might actually reduce competition in the market. Basically, is Apple going to be able to come into this industry and dominate it? [00:06:29][18.2]

Sascha: [00:06:29] I was assuming that was a rhetorical question, Darcy, because the answer is clearly yes, it's Apple. Of course they can. So we have Amazon getting into health care and Apple getting into finance. Are there any other strange industries we're seeing big tech off? [00:06:46][16.9]

Darcy: [00:06:46] One that I've been keeping tabs on recently is lives for and for years, these tech companies have been building Netflix like streaming services. We've got Amazon Prime Video, Apple TV, Google's YouTube. But now those three companies are going a step further and going after live sports streaming. So recently, Apple and Amazon, they've put themselves in negotiations for media rights held by the National Football League, Major League Baseball, and your favourite, the Formula One. And why are they going after live sports? Well, last year, sport accounted for 95 of the 100 most viewed programmes on TV. These tech companies, they've all got streaming services, but they say live sport as a way to get more subscribers. [00:07:26][40.0]

Audio clip: [00:07:27] All right. An absolute game changer in the streaming wars is Apple looks like the likely destination for NFL Sunday ticket at an eye popping price. [00:07:36][8.3]

Darcy: [00:07:36] We'll look at the NFL as an example. At the moment, DirecTV has the streaming rights and they pay one and a half billion dollars a year for them. But reports are Google, Apple and Amazon are all now competing for those rights and throwing in bids of around two and a half billion dollars. They're upping it by $1,000,000,000. So that means that DirecTV have chosen not to bid this year. They're paying that one and a half billion dollars a year, but they're actually losing $500 million on that every year, even with 2 million subscribers. [00:08:04][28.2]

Sascha: [00:08:05] So these tech companies are prepared to step into the ring and lose even more money just for the chance to have these rights. [00:08:13][7.4]

Darcy: [00:08:13] That's exactly right. They've got such an unfair advantage. They can afford to lose money on streaming and they can make it up elsewhere with their Apple headphones or Amazon health care. Whereas DirecTV, they can't afford to lose that much money every year. So it's looking like big tech is going to start winning these big sporting rights deals. [00:08:32][18.1]

Audio clip: [00:08:32] And it seems like Apple's in the winner's circle at close to $3 billion, Dave. [00:08:36][4.1]

Darcy: [00:08:36] Apple is considered the front runner for the NFL rights, according to The New York Times. And reports are that their CEO, Tim Cook, has made it a priority. He's actually doing the rounds and shaking hands with sport team executives and owners. [00:08:48][11.7]

Sascha: [00:08:49] All right, Darcy. Amazon into health apples and into finance. Everyone into sports, broadcasting, big tech. I mean, we're going to have to come up with a new word for big because it just keeps getting bigger. Humongous tech. So this brings me to the fact that this seems to come into conflict with a lot of the rhetoric we've heard out of politicians and regulators over the past few years. There's been huge concern about just how big these companies are becoming and talk of breaking them up or reining them in somehow. So after the break, let's talk about how these expansion moves from big tech can happen when there's all this scrutiny focussed on them. [00:09:25][36.5]

Audio clip: [00:09:29] Tech giants dominate American markets Microsoft, Facebook, Apple, Amazon and Alphabet. Google's parent company account for almost a quarter of the value of the S&P 500. [00:09:40][11.6]

Sascha: [00:09:41] Welcome back to The Dive. I'm your host, Sascha Kelley. I'm joined by my colleague Darcy Codell. And today we're talking about the ambitions of the big tech companies and all of the industries they're extending into, which begs the question, why aren't regulators and politicians trying to stop this? It was definitely a key talking point in Joe Biden's presidential campaign, and it did seem like the one thing Republicans and Democrats could agree on. So, Darcy, what happened? [00:10:07][26.2]

Darcy: [00:10:08] You're right. It's a pretty divided political environment. But Republicans and Democrats can agree on the need to kerb the power of big tech. We even saw Republicans like Senator Ted Cruz and Josh Hawley. They joined with Democrats like Congresswoman Alexandria Ocasio-Cortez. [00:10:23][14.3]

Sascha: [00:10:24] And for those unfamiliar with American politics, we should say that that is truly an eclectic group of people working together on anything. It's the definition of a bipartisan collaboration, which is nice to see in this divisive political climate. [00:10:37][13.6]

Audio clip: [00:10:38] Republicans and Democrats, conservatives and liberals, are looking at some of the excesses of social media and thinking about how do they protect consumers. And I do think, again, there is a high likelihood we will see some regulation in the year ahead. [00:10:52][13.9]

Darcy: [00:10:52] And you can add to that strong support from President Joe Biden. One of his early actions as president was appointing Lina Khan to head up the Federal Trade Commission. [00:11:00][8.0]

Audio clip: [00:11:01] Facebook is seeking the recusal of FTC Chair Lina Khan as the agency determines whether to file a new antitrust case against the social giant after a judge rejected the FTC's previous complaint. [00:11:12][11.5]

Darcy: [00:11:13] She was a Yale law professor, and she rose to prominence writing about how antitrust laws needed to change to recognise the harms from big tech monopolies. In particular, Amazon and Khan got straight to work. She sued Facebook twice. [00:11:26][13.1]

Sascha: [00:11:27] So this feels like a big set up for a little payoff in America when many of these companies are located. We have political consensus on this issue and a willing president. Where is the regulatory action. [00:11:39][12.2]

Darcy: [00:11:40] At the moment? There's a lot of words, but not a whole lot of action. Regulators are looking closely at this space, as we touched on earlier, the Consumer Financial Protection Bureau. They are looking closely at Apple offering buy now, pay later the Federal Trade Commission. They're looking to rewrite merger rules. And the Federal Communications Commissions are now looking at how big tech compete with traditional broadcasters. [00:12:03][22.9]

Sascha: [00:12:04] A lot of the word looking there, Darcy, but not a lot of doing. [00:12:07][3.5]

Darcy: [00:12:08] A lot of looking. And I'm struggling to get those words out of my mouth. But there have been some court cases. [00:12:13][5.3]

Audio clip: [00:12:14] So the first thing I want to just address is this morning, the Department of Justice and 11 states filed an antitrust civil lawsuit against Google. [00:12:22][8.4]

Darcy: [00:12:23] The Department of Justice is suing Google and the Federal Trade Commission is suing Facebook. But really the focus is on US Congress. There's an antitrust bill that is very slowly making its way through the House and the Senate, emphasis on very slowly. But if this antitrust bill gets through, it's a big one. To quote Axios, it will kneecap big tech. [00:12:43][19.8]

Sascha: [00:12:43] Okay. So a big bill is on the horizon, but so is Christmas. And so while America is slow, let's journey to other parts of the globe and look at Europe where there seems to be quite a bit of action. The European Commission has been particularly active in regulating and fining big tech. One that I noticed last month is that they've just regulated that all smartphone chargers have to have the same charger. They're legislating that all of them have to use usb-c ports. And that has to happen by 2024, which I think is a small but significant victory for the consumer. [00:13:17][34.1]

Darcy: [00:13:18] Absolutely. Sascha, it's so annoying when you buy a new product and they just say, oh, no, you're going to need to buy a new charger with it, too. [00:13:25][6.4]

Sascha: [00:13:25] I know. [00:13:25][0.2]

Darcy: [00:13:26] So the EU is leading the way here and Big Tech has a bit of a nemesis in Europe, Margrethe Vestager. She's the European commissioner for competition. She gained international recognition for investigating, fining or bringing lawsuits against major multinationals like Google, Apple, Amazon and Facebook. The saga has been described as, quote, the rich world's most powerful trust buster and the world's most famous regulator. [00:13:50][24.4]

Sascha: [00:13:51] It's always great when you get a catchphrase named after you, isn't it? [00:13:54][2.9]

Darcy: [00:13:54] I'd be pretty happy with those nicknames. But the real focus in Europe is on the recently passed Digital Markets Act and the Digital Services Act. [00:14:02][8.1]

Audio clip: [00:14:03] The Digital Services Act will not do it alone. I also think that we need to say to some of the gatekeepers there's there are a number of things that you simply cannot do. So to basically regulate from the outset, to say this A C, don't do it. [00:14:18][15.7]

Darcy: [00:14:19] So, for example, Apple might have to make iMessage work with Facebook Messenger. [00:14:23][4.0]

Sascha: [00:14:24] That makes sense. So what about elsewhere in the world? What's happening there? [00:14:27][3.0]

Darcy: [00:14:27] Well, we'll go to Japan. And and there's some interesting things happening there. Courts may be asking big tech companies to reveal the inner workings of their secret algorithms. Oh, this is kind of exciting to me. So it comes after a Japanese court ruled that a local restaurant could see how website catacombs algorithm works. I've always wanted to see how Tiktok's algorithm works. [00:14:49][21.6]

Sascha: [00:14:50] So you're hoping that this is going to lead to bigger and better unveilings in the future? [00:14:54][3.6]

Darcy: [00:14:55] Absolutely. I think it'll help Equity Mates and the dive business use Instagram too. [00:14:59][3.9]

Sascha: [00:14:59] So what about here at home? [00:15:00][0.9]

Audio clip: [00:15:00] Facebook is blocking all news in Australia to send a warning message to the world. [00:15:06][5.2]

Darcy: [00:15:06] In Australia, regulators have held enquiries into the major platforms and taken many of them, especially Facebook and Google, to court with varying levels of success at this stage. [00:15:16][9.4]

Sascha: [00:15:16] But ultimately, Dorsey, these companies are headquartered in America and the majority of their customers are based in America. And the biggest source of their revenue is America. And the reality is that the U.S. is just going to need to act. Isn't that right? [00:15:31][14.5]

Darcy: [00:15:31] You're right, Sascha. Europe, Australia, Japan, other places around the world, they can all influence the excesses of big tech. But if these corporate giants are going to get broken up, it's going to have to be driven by the US regulators. There's political will, as we've talked about, but things are moving slowly in Congress at the moment. It's a watch this space. And in the meantime, we watch big tech keep expanding. [00:15:53][21.9]

Sascha: [00:15:54] Ah, yes, we will. Well, I think I've already got one promise of a future episode out of you today, Darcy. So let's just watch this space. And thank you for joining us for today's edition of The Dive. Remember to follow us on Instagram at the Dive DOT. Business news is our handle. And if you've enjoyed this episode, then please tell a friend about it. Recommendations. Word of mouth truly is the best way for us to go. A reminder, if you're in the UK, we're testing with our own attic. Head to the link in the show notes to learn more. You could find yourself on a plane heading to Australia. Thank you so much for joining me today, Darcy. What a big one. [00:16:31][36.6]

Darcy: [00:16:31] Thanks, Sascha. I think it'll be a humungous Tech soon. [00:16:33][1.8]

Sascha: [00:16:34] Until next time. [00:16:34][0.0]

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