 Coming up on DTNs, what's next for Big Tech after the big hearings on the hill? Qualcomm, tips and iPhone delay, and the weekend heads to TikTok for a virtual concert. This is the Daily Tech News for Thursday, July 30th, 2020 in Los Angeles. I'm Tom Merritt. And from Studio Redwood, I'm Sarah Lane. From the shores of Lake Merritt, I'm Justin Robert Young. And I'm the show's producer, Roger Chang. Thank you for joining us. We were just experiencing the live rollout of all four big earnings. We'll have a few of those numbers for you in a second. That was on Good Day Internet. Become a member, get that show at patreon.com. Let's start with a few tech things you should know. The messaging app Telegram filed an antitrust complaint against Apple to the EU, stating that revenue generated from Apple's 30% commission on in-app purchases greatly exceeds its cost to host and review apps. The complaint also alleges that Apple's App Store policies halt innovation with Telegram's plans to launch a gaming platform in 2016 scrapped after it was told it violated Apple's policies. Spotify and Rakuten have also recently filed antitrust complaints against Apple with the EU. Microsoft announced its new flight simulator will come to Steam on August 18th and will also support the HP Reverb G2VR headset when it's released this fall. Steam pre-orders for the standard deluxe and premium deluxe editions of Microsoft Flight Simulator are open now. Verizon announced its 4G LTE wireless network is now available in Savannah, Georgia, Springfield, Missouri and the Tri-Cities by Tennessee, Virginia and Kentucky. These are almost all St. Louis Cardinals minor league affiliates. Download speeds of up to 50 megabits per second for $60 per month or $40 if the customer is a Verizon wireless subscriber. Razer released the Black Shark V2 gaming headset for $100 and the Black Shark V2X gaming headset for $60. The V2X includes Razer's Triforce 50mm drivers and 7.1 surround sound, has a 3.5mm jack, Razer's hyper clear cardioid mic and advanced passive noise cancellation. The souped up V2 has a titanium coated 50mm driver, THX spatial audio and a removable mic. It also connects to a USB sound card if you want more advanced controls. Razer will also release THX game profiles through Razer Synapse on August 6th. That's only compatible with the Black Shark V2 for now. Twitch announced its partnering with Community, that is Community with an X instead of the O, an organization that supports minorities in eSports and the video game industry to create a historically black colleges and universities eSports League. The HBCU students will receive educational and scholarship support from Twitch students to expand their eSports programs along with other objectives. Google posted a page in its online store promoting a phone coming August 3rd. The expectation of course is that's the Pixel 4A. The 4A is expected to be a more affordable version of the Pixel 4 as the A versions usually are. For the first time ever, Apple, Amazon, Alphabet and Facebook all reporting earnings on the same day which is today and they all happen about two seconds before the show started. So we'll have a lot more details on all of them in our show tomorrow but we'll break down what we know so far. Amazon's Q2 net sales increased 40% to $88.9 billion in the second quarter compared to $63.4 billion in the second quarter of 2019. And after CEO Jeff Bezos warned three months ago that COVID might lead to a $1.5 billion loss in this quarter, net income instead increased to $5.2 billion in the second quarter compared with net income of $2.6 billion in Q2 of 2019. Now Apple's announcement is still kind of rolling out so I'm just going to go ahead and read a tweet from Mark Gurman that says Apple smashes Q3 earnings estimates reporting $59.7 billion in revenue, that's up 11%, $26.4 billion for the iPhone, $13.2 billion for services, $6.5 billion for other products, $6.6 billion for iPad and $7.1 billion for Mac. Alphabet reports its first decline in revenue of $38.30 billion in revenue but yet beat estimates. There was gradual improvement in ads and strong growth in Google Cloud, first decline in revenue. Facebook also reported its slowest revenue growth since 2012 at 11%. However, still beat estimates by a lot. But the earnings are done. Let's talk Qualcomm. During its earnings report, Qualcomm announced it has reached a licensing settlement with Huawei. The Chinese phone maker will pay Qualcomm a ketchup payment of $1.8 billion. Huawei is barred by U.S. trade restrictions from buying Qualcomm chips but it pays Qualcomm licensing fees for wireless technology. I know some people may be confused by that because there is also a U.S. restriction on using chip designs to make parts for Huawei. That's something let's say a TSMC is under but you can still license a patent to Huawei for them to do something else with and that's what's going on here. You remember Apple and Qualcomm had fights over patents. This is Huawei and Qualcomm settling one of their fights. Yeah. I think that a lot of the restrictions here are put in place not only to hamper Huawei but also to ensure that the American companies remain competitive. The loophole here at least compared to all the things that you just talked about in terms of the restrictions are, look, if Huawei is using your technology and you would otherwise just be catching a check from them, then the U.S. government isn't going to step in. Look, this seems to be an increasingly part of Qualcomm's business considering how many of their patents just necessarily have to be used to create the line of technology that we're using these days. That's a huge part of their business. Qualcomm also forecast its next quarter revenue would be slightly lower than it previously expected due to, quote, a partial impact from the delay of a global 5G flagship phone launch. Qualcomm told Reuters it is a slight delay that pushes some of the units out from the quarter that ends in September to the next quarter, which begins in October. Now, coincidentally, rumors are circulating that Apple might release its 5G iPhone in October instead of September because of some production slowdowns and also totally separately Qualcomm supplies 5G modems to Apple. Huh? Yeah, it's probably the phone that they're talking about. The delay doesn't sound super dramatic. I don't suppose you could be one of the lucky few who has, if there is a delay of some units, but not all units, I don't know, it could be kind of fun, a frenzy to get some of the first 5G iPhones. But yeah, Qualcomm supplying chips to Apple, I think that that's probably the phone we're talking about. What usually happens here is Qualcomm makes the chips a couple months in advance of them getting sold. What Qualcomm is saying is, well, the release date is going to be in October, so we'll make some of the chips in September, but some of them will fall in the next quarter because those are the ones leading right up to it. Isn't it funny that this story would have been so much more massive like a five or six, I mean, like 10 years ago. The phones are delayed. Yeah. And now it's like, oh, yeah. Well, I mean, add that to the list of things that are kind of weird about this year. I might be able to go outside by then. Who knows? Who knows? Who knows? Well, speaking of numbers, Cantalus estimates that Huawei shipped the most smartphones worldwide in Q2, the first time in nine years that neither Samsung nor Apple led that market. Huawei shipments were down 5% on the year to 55.8 million devices, but down less than Samsung, which dropped 30% on the year. Huawei shipped 70% of its devices in mainland China, so that's its big market, up 8% on the year, while overseas shipments declined 27%. Yeah. Clever move Samsung figured this little judo trick out. Yeah, yeah. And for Huawei, look, this is home cooking, right? They are going to be protected by the Chinese government, especially in times of economic turmoil like we've seen that the world has experienced. And I'm glad that this plucky little upstart can really show its might. In the end, this is not a win for Huawei. This is a, oh, we don't yet know the full effect of all of this on Huawei because they benefited from China coming out of lockdown faster than the rest of the world, and they benefited from a continuing surge in patriotic buying of Huawei phones within China. But it's showing a decline overseas, which that's bad news. That's the real bad news for Huawei. Yeah, 27% is, I mean, it's, who knows? It could recover, but with Huawei being in such gray areas right now in many large global markets, I wonder what the next quarter is going to look like because if shipments declined too much more, I mean, you can only lean on mainland China so long. Yeah, and Huawei's fate will rise and fall with the opinion of China. And right now, not only is Huawei in the news quite a lot for political reasons, not only in the United States, but also in the United Kingdom, but also feeling about China globally is in kind of a dour place compared to where it was before. And even in emerging European markets, if people aren't really in love with it, there's more low-cost phone, a rich feature of smartphone options these days than there used to be. You can't just totally dine out on the fact that you are a good low-cost option. And many of them coming out of China. OnePlus is tearing it up. Folks love OnePlus phones. And don't forget, we haven't mentioned it here, so maybe some of you have lost this in like, oh, right, people don't like Huawei because China. It's also because the US trade restrictions prevent the Google Play Store from appearing on Huawei phones. So when you're walking in to a store in Europe and looking at a Huawei phone, they're going to be like, well, it doesn't have the Google Play Store, but it does have Huawei's own store. And a lot of people are going to go, oh, yeah, no, I definitely want the Google Play Store. What's that OnePlus phone got on it? And that's how that decision is going to go a lot of times. Meanwhile, Samsung posted a better-than-expected earning, all the same. Operating profit was up 23% on the year despite a 6% fall in revenue. Samsung put it down to optimizing expenditures. Smartphone sales were down from last year. Display sales fell, but the earnings were boosted by a 924 million compensatory patent from Apple, which ordered fewer iPhone displays than expected. Samsung's chip business is mixed with its DRAM and SSD demand for its PCs and data centers but down for mobile devices. The chip division still accounted for two thirds of Samsung's operating profit. Take it back, Samsung. Look at you. I mean, I would have thought they would have done better on chips, to be honest, but because they sell so many chips into phones and because, as we know, other than Huawei, most phones were declining in sales this past quarter, it sort of ended up being a wash, still made up the majority of their revenue, but they didn't. They just balanced out the fallen phone chips with the Ryzen data center and PC chips. So I'm still trying to figure out exactly how they did this, but it seems like the managing of expenditures was being able to save money on the parts of your operation that had to shut down and doing that so wisely that you ended up navigating this period of uncertainty pretty brilliantly. You know, the one... one of the very rare benefits of this global pandemic and the havoc it has wrecked on the economy is that if you are interested in how these companies really make money, we basically got a cross-section of how these... how things function, locally and globally, from your local pizza place to your neighbor to Samsung, major multinational corporations like Samsung. And so when you look at what they normally sell and now understand that, oops, there's not going to be the demand, the fact that they were able to move this around and so effectively still feed markets that are growing this year really is a testament to a smart company. Yeah, I look at this and I realize after you're saying that that it is another great example of the fact that Samsung isn't really a phone company. I always jokingly call it a chip company, but it really is. It is a chip company, and that shows in these numbers where it can suffer a sustained drop in selling handsets, but the chip business and some smart managerial moves have it navigate the quarter just fine. So yeah, you tear up the floorboards and look what you find. And look what you find, right? And for them, whenever you look at a Samsung phone and you're like, or any Samsung product that just has a bunch of random features, it's like, oh, wait, when you actually just think of them as, you know, a subsidized demo models of what you can do with their chips, then it's like, oh, that makes a lot of sense. Look at that. Good job, Samsung. Nice chip wrapping you've got there. All right, everybody, mark your calendars because August 7th at 8 30 p.m. Eastern Time, the weekend, you know, the artist without that third E will perform a virtual concert of tracks from his latest album, After Hours. Not on Fortnite though. I know that's what you thought. It's gonna be in TikTok. The weekend will be represented by a digital avatar that viewers can interact with as he performs. A company called Wave is handling the technology behind this. They previously put John Legend and Lindsay Sterling in mocap suits for similar virtual performances. The show will raise money for the Equal Justice Initiative. And if you're interested, if you're a fan of the weekend, you can RSVP at wave.watch slash the weekend on TikTok. This is all the rage. Yeah, I already can't feel my face. Yeah. But I love it. Yeah, this is interesting technology. In the past, when Wave has done this, they also give you little sneak peeks of seeing Legend or Sterling in their suit covered with green ping pong balls dancing around while they sing so you can kind of see what's behind the scenes. I don't know if they'll do that. They're saying you'll be able to see from the perspective of the weekend. Yeah, I mean, that's the... And that's weird, right? Because it's like, well, it's TikTok. So you know that everybody's holding a mobile phone or something. What is he gonna see? But TikTok does that sort of, when you do the dual videos or somebody does a response video really well. So I think seeing from his perspective, looking at you perhaps, and you get to see yourself watching, that'd be kind of fun. Or perhaps he sees a variety of comments that people are posting. I mean, it must be featuring people who are involved so that people get hyped and want to join in hopes that they see themselves. I mean, that's... Yeah, if literally he's just looking above or below the camera that's recording him of people that are watching. And when he's watching you, you see him watching you. Like, that's the thing. Whenever you go to a concert, you're always like, oh, I think they looked at me. Right, yeah. That's a huge part of it. I think this is smart. And really, all this wave of concerts, I think it's gonna be looked back and studied as kind of a moment in time where these things became more of a really realistic way to connect with fans. Did you mean to say wave of concerts? I didn't. But now I do. I retroactively. That's it, folks. To get all the tech headlines each day in about five minutes, be sure to subscribe to DailyTechHeadlines.com. Let's talk about yesterday. As we mentioned on yesterday's show, we were in the middle of the hearing when we did yesterday's show. The CEOs of Amazon, Apple, Alphabet, and Facebook sat for, in the end, more than five hours answering, or in many cases, not answering questions from the US House Subcommittee on Antitrust about anti-competitive practice and anti-conservative bias. Yesterday, we talked about how what they said didn't seem to have much material impact, but we pointed out that the investigation was already underway, and while the hearing itself might not change much, the investigation wasn't going to stop. So today, let's talk about what happens next. And I've got a few examples of some of the emails that have come out of this investigation and how they are examples of possible antitrust violations. The Committee from the US House has gathered more than 1.3 million documents on all four companies. This was in advance of the hearing. They did 385 hours of calls and meetings and briefs. There's some headline grabbers in there. There's a great analysis from this on the Verge happening. One of the ones they reported on was Apple internally fighting about their response to write to repair lawsuits. If you think of these companies as monoliths who have one opinion and they stick to it and they walk, go read the Verge's article and write to repair. It shows you how even a company as tight as Apple can have multiple people thinking multiple different interpretations of the same thing at the same time. But let's get some examples of how this applies to antitrust law. And I'm going to pick on Amazon and Facebook and these examples. There are plenty of examples for Google and Apple too. I just thought that these were good examples to use here. The first one is buying a competitor. You heard a lot about that yesterday. It is not illegal to buy a competitor. HP Bot Compact, Sprint Bot T-Mobile. The law is violated only if the company tries to maintain or acquire a monopoly through unreasonable methods and that's something for courts to determine. For the courts, a key factor in determining what is unreasonable is whether the practice has a legitimate business justification. So that's what they were after when they were talking to Facebook about acquiring Instagram. Were you buying it for a reasonable business reason or were you just buying it to increase a monopoly? And these are the emails between Zuckerberg and CFO David Ebersman that came out that pertain to this. And I'm curious, what do you think? If you were the judge, what would you think when Ebersman said, I would ask you, Mark Zuckerberg, to find a compelling elucidation of what you are trying to accomplish. Let's CFO speak for why you want Instagram. Zuckerberg says, one way of looking at this is that what we're really buying is time. Even if some new competitor springs up, buying Instagram, Path, Foursquare, et cetera now will give us a year or more to integrate their dynamics before anyone can get close to their scale again. Within that time, if we incorporate the social mechanics they were using, those new products won't get much traction since we'll already have their mechanics deployed at scale. And 45 minutes later, Zuckerberg wrote, I didn't mean to apply that we'd be buying them to prevent them from competing with us in any way. Also, in an email to an employee congratulating Facebook after acquiring Instagram, Zuckerberg wrote, one reason people underestimate the importance of watching Google is that we can likely just always buy any competitive startups, but it'll be a while before we can buy Google. Now, just there's other things to consider here, but does this sound like buying Instagram had a legitimate business justification? You know, yes. I mean, I think that there are elements here that I think are unassailable in our business specific. You know, when you look at the shifting world of social media that Facebook knows from its DNA can shift, the sands can shift on that faster than you might think they can. And while Facebook has done a lot to maintain their dominance, there is no guarantee that they will always maintain their dominance. And they need to keep a walled garden if they are going to sell ads, which is really how they make money. So there is an element here that I can understand, but the way that Zuckerberg talks about it and the negative feeling that people have toward Facebook, I think makes this a little bit of a second-clancer. You know, back when Facebook did buy Instagram, I would not have called the two networks competitors. Instagram was hot, you know, growing rapidly. Everybody wanted to, you know, be on Instagram and participate. But it was apples and oranges, really. The price tag of Instagram that Facebook bought it for was like, wow, you know, they bought Instagram for a billion dollars and it hasn't really been around that long and that's kind of crazy. Wasn't it two? Two billion? No, it was a billion. It actually ended up being like $715 million because Facebook's IPO tanks, but yeah. I think, yeah, but it was, you know, the sticker was $1 billion at the time. Yeah, it was just a lot, you know, for an app. And, you know, since then it's so, the two companies are, you know, the lines are very blurred and they get more blurred all the time because everything's now a Facebook property. But yeah, I don't know. I mean, I understand. I don't know. I just, listen, I'm not siding with anybody on this and some of the emails are very silly. Like, yeah, sending an email to like have on the record. Don't, you know, we're not. Also legally. You can't accuse me. Yeah, we're not trying to compete with anybody. We're not doing that. But at the same time, it was a lot smarter to do that than try to compete with Instagram because, like, no one wanted to use Facebook for that. I think that you can definitely make a case that buying Instagram had a legitimate business reason. I don't think you get them on antitrust on that. I think, though, these emails show that they didn't mind that the wider effect might be to drive out competition. In other words, buying Instagram didn't stop competition, but the ability to buy an Instagram might have chilled the marketplace. We got two others here that I want to throw out here. Last thing on Facebook. Zuck's a killer. And that he is a cold-blooded killer, and that's to me when I read those emails. Predatory pricing. Okay, here's the setup. Consumers are harmed only if below-cost pricing allows a dominant competitor to knock its rivals out of the market and then, not only does that, but then raises prices to above-market levels for a substantial time. So you not only have to undercut their pricing until they go out of business, then you have to raise prices for a long time. Although the FTC examines claims of predatory pricing carefully, courts, including the Supreme Court, have been skeptical of such claims. They don't usually prevail. Amazon emails saying they needed to match pricing on Quidzie's diapers and soap stores, no matter what the cost, are being used as an example of predatory pricing. Amazon later bought Quidzie and shut it down seven years after it was acquired. Amazon's also accused of, and in fact admitted yesterday, that yeah, we do sell Echo below-market value. It's kind of a lost leader. Neither one of those is illegal unless they're doing it to be able to raise the prices on diapers later or to raise prices on the Echo later for a significant amount of time. Yeah, this is where I think we, for Amazon, we have long said that this was the place where they were going to eventually face a reckoning. And this and the next part. And look, whenever you are both running the mall and selling your own products and you know the transaction on all of these products and exactly what they sell for and in the volume that they sell for, that's part of what's going to make the case here. But I don't know, without the other side, like you mentioned, Tom, of that raising the prices, I don't know if they're going to... I'm going to guess they didn't really significantly raise the prices enough to meet this claim, especially since courts are skeptical. Then there's also refusal to deal if a monopolist has done business. Remember, being a monopolist isn't illegal. It's abusing the position. If the monopolist has done business with the competitor and then stops, the monopolist needs a legitimate business reason for that policy. Courts will continue to develop its law in this area. It's not settled. Anecdotes abound of sellers who rack up big sales on Amazon only to have Amazon introduce a competing product and then see their sales fall to zero. There was an example in the hearings yesterday of a woman who was just kicked off the platform and she didn't know why. That would be a clear violation of refusal to deal if there was no real legitimate business reason for kicking her off. Remember, Bezos said, I've never heard of this case. I'd like to find out more because that doesn't sound right. All right, what next? The Department of Justice is looking into Apple and Google and the FTC is looking into Amazon and Facebook and a group of state's attorney generals are all investigating all four companies and they can use any of this public information from the committee's investigation to build their cases as well. Although there's reports of infighting between the DOJ and the FTC, apparently the DOJ is also investigating Facebook and the FTC and DOJ aren't getting along on this, but in addition to that, 47 state attorney generals are bringing a case against Facebook, 50 state attorney generals against Google, Attorney General William Barr, head of the Department of Justice, expects a case against Google this summer over search and advertising. The FTC can issue fines and in limited cases order structural changes. In other words, they can say, you have to sell off Instagram. They can say, you have to provide platform access or you have to limit your acquisitions in the future. The Congressional Committee is going to issue a report later this year laying out its findings. Some expected as soon as August, so it might be coming soon. That will likely then be used to suggest new legislation. So we've got all these court cases pending, either before the election or after, and then there's going to be a push for new laws. New laws would focus on the idea that none of the stuff they did was illegal, but it should have been because the idea of data and attention is being manipulated here and our current antitrust laws only talk about price as the harm to consumer. And so the new laws are going to push to define data and attention to also be considered when evaluating harm to the consumer. That's something that's not contemplated in existing antitrust laws. Before we wrap this up, Justin, what do you think the political future of all this looks like? Chaotic. Look, we have in some cases, and we didn't even go over the Apple email where Eddie Q emailed Jeff Bezos and offered a 50% off deal to bring Amazon stuff onto the platform, which could factor into what we saw in the earlier story about the EU investigation even. Right now, there are some clear-cut issues for which I think Silicon Valley understands they're going to have to move on. In fact, I think you could make arguments that they have already put themselves in position to do it. Whether or not this Department of Justice and this Congress, which is fairly dysfunctional, will be able to make them do it or make them do it before the election or after remains to be seen. Well, thanks to everybody who participates in our subreddit. You can submit your own story. You can vote on stories that you see in the list at DailyTechNewShow.Reddit.com. Ah, we've got mail. We do. And this one comes from Dan. I'll tell you. We talk about sports and you get a lot of feedback. Dan had more thoughts on our conversation with Andy and Nautco that we had on Monday show. And Dan says, the entire vibe I'm getting from the production of MLB, Major League Baseball, thus far this season, and sports in general in a post-COVID world, is making the best of a bad situation. Baseball without fans is just weird. And I imagine that the crowd noise, which I actually don't mind, and fake fans, which in the form of cardboard cutouts are just attempts to make baseball feel more normal. As far as whether owners will continue to do this after the crisis, I'm not sure I see what the incentive would be. Fan attendance seems to be driven primarily by the performance of the team on the field. If your team is terrible, fans won't pay to show up, and they won't even watch on TV. So long story short, seeing a large crowd at the park isn't enough to get people to show up in my opinion. So I don't know that we're going to see this once the crisis is over. Yeah, and it's trouble and expense, so he may be right. It's interesting to think about that. It'll just be one more thing where we go remember 2020. Yeah. Like cardboard people at the baseball games is crazy. Hey, shout out to patrons at our master and grandmaster levels, including Martin James, Bjorn Andre, and Tim Ashman. Also thanks to the one, the only Justin Robert Young. Justin, you know, it's slow news day. But what else is going on with you? Well, we are going to talk more about the political fallout of these tech hearings on politics, politics, politics tomorrow, the Friday episode, and I'm scheduled to speak with the one and only Molly Wood this afternoon. So if you do not hear Molly Wood on the PX3 show tomorrow, then know that it's her fault and not mine. Wow. That is the goal. The goal is to have the one and only Molly Wood make her PX3 debut on the show tomorrow to talk a lot more about the political side of what we went over here on DTNS. I'm sure it's going to be fine. I can't wait to hear that actually. A little bit of a Molly rant would be just what Dr. Wood. Folks, if you want more of this show, keep it coming at Patreon. That is where we fund the show, dailytechnewshow.com slash Patreon. And thank you for giving us value back for the value we give to you. We throw in a few extras. I did an editor's desk this morning where I was talking about putting this whole show together while in the middle of putting it together. So go check that out at the associate producer level. There's a few other perks in there as well. You might like them. Go check them out, dailytechnewshow.com slash Patreon. We love email. You can send yours to feedback at dailytechnewshow.com. If you have something on your mind, got a question or anything else. We're also live Monday through Friday. Join us if you can. 4.30 p.m. Eastern is when we kick it off. That's 2030 UTC. And you can find out more at dailytechnewshow.com slash live. Back tomorrow with Lamar Wilson. Nolan Peralta tomorrow though. Talk to you then.