Acquired - Acquired Episode 38- SoundJam (iTunes)

0:00And iTunes sucks. iTunes does suck. Well, yeah. It's flooded. Yeah. Or I won't take a position. I'll say people seem to hate iTunes. Welcome to episode 38 of Acquired, the podcast about technology, acquisitions, and IPOs. I'm Ben Gilbert. David Rosenthal. And we are your hosts. Today, we are covering Apple's 2000 acquisition of Sound Jam, which would go on to become iTunes. So speaking of iTunes, we love iTunes. Well, actually now Apple podcast reviews. So this is the part of the show where before we dive into things, I ask you, our listeners, be it a brand new one or someone who's been listening to the show for a while. If you've got some extra time, we would love a review on iTunes. It is how we grow the show and make it better. We've also got a Slack. If you're new to the show, there's over 600 of us that are in the Slack channel talking about

1:06Technology news, M&A, IPOs, all kinds of stuff. So if you head over to acquire.fm and you'd like to join us, there's a little widget on the sidebar to join us there. And then lastly, I see what you did there. I like that. Yeah, well, you know, most of this show is kind of unscripted. Like we have notes, but we don't actually type them out. And then like you try and get to clever when you are typing out the exact words that you're going to say and Listen, we're just getting more professional. Yes, that is one thing. Listeners who've been listening to this show for a long time. It's funny how with these things, when you decide to up level a little bit, that becomes the new bar. And then that's just the bar that you have to hit every episode after that. So if anybody's starting a podcast or a creative project, keep that in mind for the future. All these new listeners now are like, wait a minute, this doesn't sound very professional. You guys talk about this.

1:59Hopefully we've started as Ben and me drinking beer and reporting ourselves. That's true. We've come a long way. That's true. Since we started doing these morning recordings, and we're in different time zones, we're either a lot more coherent because we're not drinking anymore, or we're a lot less coherent because we're groggy. It's not clear. We will see. Yeah. All right, listeners. Now is a great time to talk about a new partner of ours here on Acquired.

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4:19Plenty of things demo well, but the question is whether a busy associate actually reaches for it during crunch time, or whether a partner trusts it before going into a conversation with a major client. If your legal team wants to check it out, whether you're a law firm or you're in-house at a company, you can learn more at logora.com slash acquired and just tell them that Ben and David sent you. David, you ready to take us into the acquisition history and facts of sound jams? Let's do it. We are entering the time machine here required.

4:49Maybe it's a hot tub time machine. Hopefully not. We're going we're going back to all professionalism is out the window today. We are going back to the late 90s and the early days of the MP3 and digital audio revolution and there were a couple apps or quote.

5:13programs, as they were called back then, that ruled the day. And if you were a teenager in America as I was, you definitely had these on your PC. Winamp and Napster. Yep. And oh man, just to describe what my music listening setup was at this point in my life, it was Napster to get the music. I had this was on, I think, I think is a...

5:39Power PC 8500. So it's like a gray Macintosh tower. So I had the Napster Mac client and you get music through that and then. Okay, so that was after 2000 then. There was no Napster Mac client until 2000. Oh, all right. Well, I'm reshuffling my history here a bit, but I guess what I'm getting to here is my hard drive on my computer, I think was like four megabytes or no, that's wrong. But anyway, yeah.

6:09I can't remember what it was, but the hard drive of my computer, with all the programs and the system extensions and stuff, I had littered around on it, did not have room for MP3s. I needed at least 100 megabytes for my favorite songs at the moment. I had a zip drive plugged into my computer and then a series of 100 megabyte zip discs that I could load my MP3s onto and put them in. I didn't have wind amp because I had a Mac.

6:36I can't remember exactly how I played the files pre-itunes, but it was a disaster. Like you're just working directly off the file system. Oh, man. Well, you and every other teenager in America who had a Mac and not a PC had this exact problem and, uh, and luckily for you and for everyone else and for acquired Jeff Robin and Bill King Cade step into the fray and Emerge as the Savior's for Teenager's Pirating Music in America. This is going to be a fun one. Ben and I were chatting before the episode. We're really excited to dive in here and I want to give a quick shout out to my buddy Eric over at IAC who actually we've been planning to do this episode for probably as long as the show has been in existence at this point. But Eric shot me an email a couple weeks ago and he said, Hey, I don't know if you explored the company Sound Jam as a topic.

7:30But it stands out to me as an interesting one, because this is the app that not only became iTunes, but may have also influenced the, quote, metal finish of Apple software design over the next several years. And oh boy, did it ever. What a beautiful brushed metal. It was brushed metal. And Eric says I remember buying it. And yes, it came in a box when I was in college because I was looking for an MP3 player from my Mac. Wow.

7:56Yeah, I mean, so fast forward from me playing the MP3s off my zip disk and actually playing them through an application sound jam was awesome like I remember before Apple acquired them and we found out there was gonna be an iTunes playing with sound jam and the coolest thing about it was the skins there was some really really Not tasteful, but like insane skins that would make this thing transform from like a brushed metal rectangle into like the most insane glob of like psychedelic. Yeah. Yeah. And of course it had the visualizer too, which we'll get into all this. But yeah, so 90s. So Jeff Robin and Bill Kincaid worked.

8:41at Apple in the mid-90s, and they were engineers, and they were working on the Copeland operating system, which listeners, if you go back to our next episode, that we did live at the key choir summit last year. There's a key part of the history of what ended up becoming when Apple acquired next and became OS X. Copeland was what Apple was working on before that internally, and it completely failed. It was a total disaster. Never shipped.

9:10But Jeff and Bill were really good engineers and Apple really highly regarded. And when it never shipped and Apple acquired next, they ended up leaving the company. And so Robin left and he became an indie software dev on his own.

9:22became really highly regarded, wrote this program called Conflict Catcher, which back in the old pre-OS 10 Mac days, you had all these extensions for different files on your computer and different programs and it could become a really mess, the operating system didn't manage it itself. And so he hacked this software together to basically just manage it for everybody. Okay, so Conflict Catcher was amazing because there were some incredibly interesting architecture choices made in Mac OS 9.

9:51When you would load a system extension, they would load in a certain order as you booted your computer up and that order was alphabetical. And not only that, the system extensions all shared, I think this is right, the same addressable memory space. I believe with the operating system. So there were extensions that could accidentally load in an area of memory that another one was trying to directly write to and they could totally screw with each other and make your computer unbutable.

10:20So the only way to do this was like a kind of safe mode thing where you'd go and you try and manually figure out how to turn these things on and off. And conflict catcher made it so that you could actually change the order that these things booted and, you know, figure out like, oh, this one conflicts with that one and see it in an interesting way and toggle them on and off so that you don't have to like manually figured out how you just horked your computer. Per usual, gonna do a quick jump ahead to tech themes. One thing I love doing these episodes on old software, it's such a reminder of like how far the world has come.

10:48how much in software you're standing on the shoulders of giants and work that has been done before you so that you don't have to deal as a user and as a software developer, don't have to deal with this stuff anymore. So that was what Robin did after he left Apple.

11:03King Cade, he goes to a startup, and he's working at the startup, but he also has this hobby on the side, which is that he really likes to race formula cars, and one day he's driving up to a race track in northern California, and he's listening to NPR on the radio as he's driving up there. He blogs about this much later.

11:24And he hears on MPR this discussion of MP3s and this is the late 90s and they're talking about Napster and they're talking about this company called Rio and this player that just came out this new piece of hardware called the Diamond that they make that allows you to take MP3s that you have on your computer that you've downloaded from Napster, the internet loaded on to it and then listen to them like a walkman on the go and he's like, oh wow that's really cool.

11:52And then on the show, they say don't get excited though, Mac users because it doesn't work with Max and he has this thought and he's like, well, I bet I can make it work with Max. So he's still working at the startup, but he immediately on the side sort of takes this challenge. And the next day he starts researching MP3, even people don't know about MP3s at this point. He'd never heard of it. And he actually calls up Diamond, the company that makes the Rio. And we should say, two for listeners who weren't alive back then. I mean, these things were everywhere. You walk into a Best Buy or a Comp USA back in the day. There was that one particular model that looks sort of like a limo bean and on one side. And then it was like kind of convex curved on the other side and it like fit in the palm of your hand and had this like blue and black swoosh that ran there when I first went to college.

12:47I think that's the one that finally had enough megabytes of storage where it could really build up. So, so Kinke calls up Diamond. They're really excited. They're like, yeah, we would love to get this working with Max. We'll help you out. We'll give you access to our engineering team. And he starts working on it but he quickly realizes he's not a good enough engineer. Well, he's great at the back end and he can handle the back end, but he's not, they also are going to need kind of a front end and an MP3 management software. And that's not his strength.

13:16So he calls up Robin and says, Hey, let's get band back together and work on this. Yeah. Pretty cool. And it's interesting how it started first with necessity is the mother of invention. Somebody needs to figure out a way to make an MP3 codec that works with the max. So you can decode this MP3 file format and play it. But that's not enough. Like what are you just going to click on every file individually and finder and make it play? Yeah. And you need, you know, you need a way to manage your, your MP3 library.

13:44Otherwise, these are just going to be random file names sitting on your finder as he said. Yep. It's funny how we take MP3 for granted today, but it was not a widely known thing. People were distributing MP3s. They had to become world experts on like reading the ISO spec for what is the MP3 file format and how would you go about decoding it? Yeah, amazing. I mean, there are no APIs for this stuff. It's not like, it's not handled natively in the Mac OS.

14:12Nor I think in Windows, which I think is why Winamp took off. Oh, interesting. Yeah, that makes sense. So they team up and they quickly bring on a first employee, a third developer to work on it, Dave Heller, who actually I don't think they worked with him in Apple. I think they knew him separately and they get cranking and they build a first version of the product. They decided to call it sound jam and they need to get it out to users, sell these Mac users who want to get in on the MP3 revolution.

14:42But first, they need a publisher because in those days, if you wanted to distribute software, you needed a publisher to do it because you needed to get it on a CDE and shrink wrapped in a box and delivered to Best Buy and Comp USA and all these computer stores where people bought software. Unbelievable. I forgot that this notion existed of like, oh, you need a publisher to distribute your software. I was doing the research and saw, like, Cassidy and Greene would like distributed the salt and I'm like, yep, wait, so they go with who had distributed a conflict center for Robin before Yeah, and I'm like, what like wait, so who's getting inquired by Apple? Why are there two companies involved here? Oh publishers were amazing. It's amazing how much things have changed since then But what's this is so awesome what you're not gonna get these days with software and the lack and when you don't need a publisher, so

15:39Cassidy and Green, the publisher that they go with, had an employee who wrote the manuals for the software that they published, whose name was David Pogue, who is the David Pogue who would soon thereafter go to work for the New York Times and become, you know, the Walt Mossberg of the New York Times. And so he actually wrote...

15:58the manual for sound jam which is pretty awesome amazing and David is what now the editor of Yahoo Tech I believe that publication yep I believe that's right I think he's left the left the New York Times now pretty pretty amazing I had it's a great little Easter egg that I found to do in the research so they on the strength of the pogue written manual the sound jam comes out in I believe late 1998 and it totally you know huge reception everybody uh like we've been saying who wants to get into uh wants to participate in the digital music revolution on a mac this is by far the best software when it comes out uh to do it and mac world the magazine writes a review of it and says of all the mp3 software available for the mac cast the ingredients new sound jam mp which i think mp stands for music player i believe so yeah um

16:52is the most complete. It's the only MAC MP3 tool capable of not only playing back MP3 files, but also encoding tracks from audio CDs, all with a comfortable customizable user interface. And it has the most baller logo. Like we will link to this in the show notes, but like this, I remember, like this, I used to use this extension called mouth on macOS 9. And I remember like loving having the sound jam logos sit in mouth.

17:20It was my little pre-doc launcher to launch this thing. It's like this bald dude with this amazing kind of like. He's got his grin on his face, but his eyebrows make him look like he's up to no good. And he's wearing these real cartoony headphones with lightning bolts coming out of him. It's great. It's awesome. Yeah, the kind of thing that once sound down becomes IT and Steve Jobs quickly gets rid of that. Yep. Yep.

17:49But the UI is, well, it's not even of itself groundbreaking, but it is the stock UI, as we were saying, you could download skins for it and customize it, which were skins for software. It was all the rage at this time, but the default UI is brushed metal, and Apple had actually pioneered and invented the brushed metal UI look when they released QuickTime 4.0 and Sound Jam.

18:17adopted it. And this is the first application that really sort of popularizes it's the world. And then we go through like a five or six year period where everything Mac is brushed metal. And so heavy. The finder is made out of like lead dipped in hot molten steel. It was, yeah, it's amazing to watch the evolution of Mac UI after that, right? You go into aqua and then you can start to get into many steps along the way. But now we're in this sort of like There was intense translucency and now we've taken a step back and we're like moderate translucency and it's it really is You see this over and over and over again with Apple where they come out with a new UI like iOS 7 they go way too far They go hard on something and then they need to ease off and head back towards center But this is continually the pattern that they do is go all in on some new crazy paradigm and then get back towards something something model. Yeah, I wonder

19:10This is total speculation here, but I wonder Scott Forstill must have been an apple at this point. I think so because Phil Schiller was. Yeah, and I wonder how involved he was in the brushed metal UI because he was famously or infamously the skew amorphism champion with the angel of skew amorphism within Apple before he got ousted and then it was excised from iOS from it was iOS 7 right on.

19:40I believe it was even buff. So it was after the maps debacle on either five or six but he left right after six and then seven was a very clear Johnny I've taken over software and hardware responsibility and doing I think it's like this crazy seven month scramble to do a complete UI redesign and get that out the door and I think that's sort of why we saw so much shock and surprise as it had less big time than usual.

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21:58The other main famous and now in hindsight infamous UI element of sound jam was the visualizer and Apple included this when they when they launched it in iTunes But this was been looking at this took me back Took me back 15 plus years at this point, you know all the MPs I think when amp I think pioneered this But when you would listen to digital music on a digital music player on your computer You could have the option to have a visualizer where it would take the sound waves from the MP3 you were listening to and then put it through all these transformations and make it into this psychedelic landscape that you were watching in time to the music and Steve Jobs loved this. In fact, how it reminded him of doing LSD and his youth. And he talked about it when we announced it. We'll get here when they announced iTunes at Macworld 2001.

22:57Talked about it like they invented it like wouldn't it be cool if you could visualize your music Well, we've done it and like announcing it on stage and you know the folks familiar with sound jam or or Here's an early hint what we're gonna talk about a company called Audion or a product called Audion here at a minute just like sitting there with their head in their hands like we did that we've seen that well, you know reality distortion feel it and all yeah, yep so Pretty quickly Apple takes an interest in Steve Jobs and Apple realizes that, hey, digital music is here to stay, and there is now a big wave and big opportunity for computer companies and technology companies to invade the music business. And this coincides actually right at the time where Jobs, so Apple had acquired next. Steve had come back to Apple in

23:531997 right into 96 early 97 but it wasn't until early 2000 when Steve took the permanent CEO job he had been interim CEO for a few years and they finally make it permanent in early 2000 and the first thing that he does After this has happened is he starts to initiate the grand master strategy that would be really what sets Apple on the path to being relevant again and becoming the largest company in the world which is music and First iTunes and then shortly thereafter the iPod the digital hub strategy this was a major major key ingredient I mean when you talk about ecosystem business models apples like the

24:37perfect case study of the behemoth that they've become today. All being bootstrapped off this idea of iTunes was the software hub for everything. The iPod was an incredibly successful consumer product even before the iPhone was the most successful technology consumer product of all time. And the whole thing was predicated on this idea that you can take your music with you. You've got this iPod. It's all managed there on your computer on iTunes. It syncs, quote unquote seamlessly. And then you can take it with you, bring it back to your Mac and For a long time, especially when iTunes was Mac only, this was a reason to get a Mac. You buy the iPod showed you in the door and then you became a Mac user. They really, really grew a user base with this iPod as lead generation strategy. I remember all this happening in my first couple of years in college and so many of my friends switching from PCs and Windows to Macs just so that they could get an iPod. Pretty crazy. That is like a...

25:36That is using incredible, an incredible product as a really, really high leverage position. Yeah. So going back to early 2000, this is all just a dream and Steve job, a very, very prescient dream in Steve Jobs's head, but he knows he needs to move fast. And he decides that Apple, rather than they're going to start developing what will become iTunes, you know, of course, I'm sure they started working on it in house, but they really wanted to buy.

26:04One of the existing players in the market and accelerate development. Apple actually released something in June of 2000 called Music Player. That was six months before iTunes came out. And it's like the most basic sort of the finder. When you look at it, you're like, that's a separate app. It's a pretty bare bones thing. Yep. So there's Sound Jam, obviously. And then there's also has been alluded to another product at this point in the market called Audion.

26:33And Audion was made by an indie dev shop in Portland, shout out to the Northwest called Panic. Yeah, and Panic was run by cable sassar and Stephen Frank. And there is so much fun stuff to come from this in the interplay between these two companies in Apple. Yep. And Panic has just an incredibly rich history for anybody who's a Mac OS developer out there. They've done, it was called Transit. And I believe now it's Transmit. Coda, Coda 2.

27:01if anybody's played Firewatch, they had a hand in building the game Firewatch, and they're truly like a gem of the Northwest, of Indie Mac and iOS development, just an awesome software shop, and they have this, they're just quirky people, like it's an interesting little aside, but cable releases this whole area's blog post every year that's like the most amazing fireworks packaging he's found for the 4th of July, and he's like a connoisseur of ridiculous fireworks packaging.

27:29They have all kinds of just like crazy company traditions. There's this incredible blog post that they've put up about how they created the super unique sign that's on their building now as they've grown and they have a shop in downtown Portland. I remember I've been following Panic for years and we're about to dive in a little bit to the story of how Audion was competing with Soundjam and the different fates that they ended up taking.

27:50There's this incredible blog post anybody that's interested in the story should go and read the long story by cable sassar of audience sort of history and story all the way through to its resting place that they have on their website. Yeah, and we're gonna quote liberally from it in a minute, but it's so funny to think about it. If all of this we're playing out today, you know, Apple's going looking to buy a company to get into what's clearly a big technology wave which is digital music and digital audio.

28:19and their two options are two indie dev software shops, you know, today, there would be 15 VC funded companies all pursuing the same thing, you know, all having raised 50 million plus. Yeah, David, why weren't there? Like there was venture around at this time, we were, you know, we were pretty, what was it all going into internet companies and an MP3 decoder with a desktop UI, just not splashy enough? Well, yeah, I mean, There certainly was venture at the time. I mean, this was the middle of the tech bubble. Yeah. But I think a couple things, like, one, we're talking about Mac only. And that was just a tiny, tiny portion of the market at that point, at least from a VC perspective. And two, I mean, I think we're also just really early in the consumerization of the internet. I mean, you know, Amazon is around and e-commerce is a thing. Pets.com is a thing and Cosmo and Webband and all those.

29:16But the idea like there's no Facebook. There's no MySpace. The idea of consumers doing things, you know, sort of for free and quasi legally. Napster, of course, is around and AOL has bought windamp at this point, which we'll get into. But for whatever reason, it wasn't a huge focus area for VCs. Yeah. One way that you can operate as a VC is put on your hat of what's going to be, what's the world going to look like in five years? What's the world going to look like in 10 years? What's the world going to look like in 20 years? And like, People believed in the digital music revolution, which now seems obvious in hindsight. But what's not clear to me is did people besides Steve Jobs, who has always had this passion for music and say it's part of Apple's DNA and part of who they are as a company is loving music, did other people, including technology investors also believe that the digital music revolution was coming? Or did this catch just everyone completely by surprise? And that's why you see no funded companies in the space.

30:13Yeah, I don't know. It's a great question. I'd love to go back and have been a VC back then and thought about it. I mean, but the reality is too. I mean, none of these companies were big exits. I mean, not even Napster and Windamp. Nope. Really interesting. Just how much the infrastructure around these companies, the platforms that enable them to build big businesses.

30:35Maybe not in music today as we'll get into later in the show, but certainly, you know, you think about Facebook, you think about Instagram, you think about Snapchat, you know, just how much that's changed over, you know, what is a long time in technology, but not that long, you know, relative to other businesses, right? So Apple tries to meet with both Sound Jam and Audion. They're obviously successful in meeting with Sound Jam and they know the folks there well since they were all former Apple employees, but Audion and Panic.

31:04They've separately been negotiating with AOL, which owned Winamp and was considering also acquiring Audion and having it bringing it into the fold and having it power, you know, sort of the Winamp version for Max. And they, when Apple reached out to them, they didn't realize what Apple wanted, that they wanted to buy them. And so they asked, they thought that they needed, even though they hadn't yet been acquired by AOL, they thought they, it was only right to, Ask AOL to be part of the meeting too. Yep, you think about the panic guys. These are not like business tycoons like the stories that we've talked about where you have incredibly savvy sort of investment-minded CEOs running these empires like this is a couple of guys sort of working on this thing out of a passion project and just a burning desire to ship the best software for this use case that they possibly could and so

31:56you know for them they didn't think about like do we have a no shop clause or anything like that it was much more like well you know we've already started talking with these guys a well so you know even though it's a well and they're not the they're not the most benevolent people in the world and we're not even sure we want to go work for them probably a good idea to like you know see what they think first yeah yeah yeah and it's so funny at the same time of course there's also it's a corporate bureaucracy at a well and executives are changing and they can't make the meeting happen Uh, so it just doesn't happen. They audio and panic never meet with Apple. Well, they meet later, but at this point in time, they don't meet with them. And then the deal with AOL ends up falling through too. So they don't get acquired by AOL either. And it's unclear that they actually would have wanted to. Right. Right. Especially given all the corporate bureaucracy that was going on there at the time. But instead, Apple needs to move forward. And so they acquire sound jam. At some point during kind of mid 2000 and Kincaid and Robin and Heller.

32:55I'll come back to Apple, joined and they start basically ASAP turning it into iTunes because they find out that Steve Jobs wants to launch iTunes at Macworld in January 2001, six months later. And they're doing this very quietly. Sound Jam users got no notification. There was no public announcement that nobody really knew that Apple owned Sound Jam and it wouldn't be around for the foreseeable future at this point.

33:18Yep, and there's some rumors in the industry that start leaking but nobody really knows what's going on and the panic guys definitely don't know what's going on so. They come January go to Mac world like every. There is there is one absolutely amazing little tidbit in here and that's when cable got cable sass or panic got word that something may be going on with sound jam and it wasn't totally clear what he called the tech support line.

33:46for, uh, for sound jam for the publisher. Yeah. Yeah. Yeah. Hey, uh, is it like a good idea for me to buy the next version of sound jam, like implying like, is it going to continue to maintain and got this like shaky, like, uh, yeah, I don't see why not. So they're, they're worried, um, super funny. This, this blog post is great in it. It's so kind of kind of.

34:13cable to history and to the community to write with such candor about everything that happened. And he's such a great writer too. And you really get the sense that, you know, he and Steve and panic were, you know, they were doing this because they love making great software and still do. Yeah. So they go to Macworld in 2001. And the rumor is that Apple's going to do something big in music. And they're sitting in the audience and jobs comes on stage and announces iTunes. And they're like, Well, that looks a lot like sound jam and it has visualizers. It's you know much more full featured like and

34:51We should really harp on this point because it's easy to lose that point today with the bloated behemoth that iTunes has become, but it was beautiful. It was revolutionary. It was so revolutionary for the time. Yeah, define new user interface paradigms that would come back into the Mac and finder and standard APIs later. It was always the bleeding edge by a year or two on what we would see in the OS in the future. And it was so well thought through, but with all of the great cool features that existed in Sound Jam. And a lot of them, I mean, Sound Jam and Audion had this war back and forth of releasing a new feature, trying to make mine better than the other guys, trying to make mine more beautiful and more well thought through. And suddenly, then, you know, iTunes comes and it's like the messianic incarnation of what both of them had been striving for. Yeah, and not to mention free. So included in Mac OS.

35:45and completely free for download, whereas both Sound Jam and Audion were box software that you had to go to Best Buy and pay $40 or $50 for. Both free and bundled with the platform, shipping with the OS. Yeah, huge, huge announcement. But cable and Steve at Panic, they're undeterred. And after this is all in the blog post, which we'll again link to in the show notes, After the keynote, they're walking around on the floor at Macworld and they see Steve Jobs. Now they actually have a meeting. Jobs had reached out to them and Apple, well, I don't know if it was Jobs. Apple had reached out to them. This is amazing how this happened. Cable emailed Phil Schiller. That's right. To get a meeting, or I think I can't remember exactly why emailed Phil, but...

36:33didn't really get a response back. And then emailed Steve, just like I think they always email Steve whenever they release new software hoping that like maybe he'll take a look. Oh, they'd emailed Phil because he was an Audion user and they had him in the system. That's right. He was a registered user. Yeah. Yeah. Yeah. So then they email Steve and they're like, Hey, Steve, you know, just as usual, we ship some new software. We think you really like it before the iTunes announcement. Yes. Yes. And they get a response back that ended up setting this meeting from Steve Jobs.

37:03And one of the fascinating things is, it's the male client that is encoded in the headers is still the next email client. He's not, he's like Mac OS 9. Yeah. And it's not from Steve at Apple. It's from Steve at Pixar. Yeah. And it's just like a little one liner email that's basically like, hey, are you interested in throwing in with us at Apple? Yeah. And like, what is that? Is that an acquisition offer? Does he want to hire them?

37:31It's just so. Yeah. It's such a only Steve Jobs. He's been CEO of Apple on an interim basis for four years at this point. He's not using a Mac. He's emailing from his Pixar email address. And he makes an acquisition offer with one line in a response. Only Steve. Yep. So now they've got this second meeting set. So the first one sort of fell through in. So they get a second meeting set up for a couple days after Macworld, but they were there, and in the audience, they see Steve on the floor afterwards, so they go up to him, and they say, hey, Steve, it's us, we're the Audion guys, and Cable transcribes this in the blog post, and Steve says to Cable's recollection, something like, oh, hey, Steve, nice to meet you. So tell me, what do you think of iTunes? And Cable says, well, I think it looks great. You guys have done a great job, but I still feel that we'll do all right with Audion.

38:30and then Steve says, oh really? Well, that's interesting because honestly, I don't think you guys have a chance. Steve Jobs. And then Gable says, well, Steve, I really think it'll still find an audience. We've got a lot of higher end features that you guys probably won't ever add. Steve says, yeah, like what? And then Gable's like, well, you can keep count of how many times you've played a song.

38:56And you can even rate your songs by popularity and Steve's response. Why the hell would anybody want to do that? And sure enough, they ship that in iTunes in the near future. Yeah, iTunes 2.0 in the near future. So then a couple of days later, they have the formal meeting at Apple headquarters at Infinite Loop and Steve's there. Actually before Steve walks in, Phil Schiller's there.

39:20and Phil says to them, you guys remember the last time we tried to meet with you, it was actually because we wanted you guys to make iTunes, not the sound jam guys, and they're kind of stupified by this. And then right after that Steve Jobs walks in and supposedly throws his feet up on the table and gets right to the heart of things. He asks him a bunch of questions. He wants to know how big they are, how long they've been doing this, why they're doing it. And he says, Do you have any other ideas for apps you want to work on? And cable replies, well, we've got an idea for a digital photo management platform. And Steve replies, yeah, don't do that one. And then everybody laughs. And there's just like team of Apple people in the room that all laugh. And the panic guys will get at each other like, okay, they all know something we don't. And then I think either Phil or Steve at that point is like, we're building that it's going to be called I photo.

40:16And so the paddock guys at this point are probably literally an panic. And so Steve continues and he says, Hey, so, so here's how I kind of see this playing out. Oh, if you stay independent and try to compete with us, it's like you guys are a little push cart going down the railroad tracks. And we're a giant steam engine about to run you down. And then he follows up with, but We want you guys to work with us. You guys have shown us that you can do a lot with a little you guys kick ass your software totally kicks ass cable your marketing kicks ass. We think you do incredible work and we want you to join us. So. And that yeah, I mean, imagine getting that offer. They have complete autonomy now. They have no idea what it looks like if they join Apple. It's hard to know like to really have an negotiation about what those details could look like. And so then their face with this like.

41:12And I think Kable goes into this in the post that basically it should have been a hard decision but they both already sort of knew that the answer was no and that they were independent by It was kind of their nature and that's what they were gonna go and keep doing and so I think this was largely before the term aquahire had been coined But you know that tempted aquahire. Yep, so they end up turning Apple down and Cable doesn't talk about it in the blog post, but I wonder if Steve repeatedly telling them that he's going to basically insulting their chances and telling them he's going to steamroll them, which he was totally right. Right. Had something to do with it too. Wait, Steve Jobs was kind of a jerk, but completely right about something. I've never heard that narrative before. Never. I mean, that's all these love going back and covering these Steve Jobs stories because, you know, both of those things are true. He was a jerk and he was right.

42:04you know, really for all his personality foibles, he really was a visionary. Yep. And so, you know, it's interesting that there's not much of what would have happened otherwise in the story that we haven't really covered. I guess what would have happened otherwise, there's one fork where maybe they acquire Audion instead of Soundjam and then sort of the same thing happens where the two parties are switched. You could imagine the Audion guys instead of shutting down the software a few years later end up quote unquote throwing in with Apple and joining. And you know, maybe those guys go on to VP positions at Apple. But really like Apple was going to make iTunes. They had some expertise in house that they'd already started with music player, but really wanted to build on top of product that already had some market validation and some of the hard work done and a lot of the MP3 decoding and file management. And you know, there were two companies doing it. They wanted to grab one. They could have grabbed both. And here we are where we are today. Yeah. But they did grab sound jam and

43:00As best as we can tell, all the sound jam guys are still 15, 17 years later, all at Apple. And Jeff Robin is actually his VP of consumer applications. He remains the lead software designer for iTunes. He worked with Tony Fidel on the iPod. Supposedly, he actually led the TV project that kind of never came into being that Steve was his bet project right before he died, but ended up an Apple.

43:29TV and the new Apple TV did come out but I don't think that's the sort of full vision of what they were working on and another fun little Steve Jobs aside Robin was so important that in 2005 Time magazine wrote an article I think about probably about iTunes and the iPod and referred to Robbins but Steve wouldn't let them Refer to him by name, only describe him because he was worried about competitors quote, poaching his talent. It became a famous one of the many famous Steve isms. That couldn't be a more a say perfect segue into what I believe the acquisition category is. And for me, I was debating between whether this is a people or a technology acquisition. Yeah. And I think when you hear comments like that and you sort of take a step back and look at what was going on here.

44:23Yes, they forked the sound jam code base to ship iTunes. It's based on a lot of sound jam code, but this was a people acquisition Apple was gonna do this regardless Yeah, and it's not like some insane new piece of technology that needs to be developed in a research lab where they're actually acquiring the technology itself It's really the people that have played around with this new ish mp3 software, right and really understand that file format and really understand how people want to interact with music. And they really acquired the expertise of the sound jam folks. Yeah. I mean, and really it was as we were talking about in the beginning of the episode, both the sound jam and the panic folks. I mean, they'd spent years in the guts of the MP3 codec audio.

45:12technology and you know, all of the guts of making this work. I mean, this was not something that was baked into operating system. So they're really in terms of people who knew how to do this and make great music software for the Mac operating system. I mean, you were looking at five people in the world and three of them were at one company and two of them were at the other. Yeah, it's funny. The timing of this episode is interesting for a couple of reasons.

45:37Listen, there's a lot of the time we'll try and do an episode specifically timed with a news event or a tech trend that's going on. I thought when we picked this episode that we weren't doing that at all, I was like, you know what, it's about freaking time that we do sound jam. And when I was doing a little bit of research for this, I found, this is a good blog post on MarcoR immense website, Marco.org, that the MP3 file format patents actually expired last month.

46:04On the 16th of April the MP3 technology as referenced originally in US patent number 6 million 9,399 and administered and held by Technicolor expired. So MP3 for the first time is a patent free file format and it's funny how I don't think it was ever really a big issue before like I didn't really look into if there were major lawsuits or if Apple had to license the MP3 technology.

46:30But it's interesting that now, you know, you can build an MP3 app and feel completely, legally on solid ground to do so. Interesting. Yeah, I never would have thought about that. I mean, we just take it for granted at this point. Oh, it's a standard. Yeah. I mean, when we started doing this show is the first time I actually thought about and had to deal with MP3 file formats and different types of digital audio formats, you know, for the first time in years. Yeah, I can get hairy. By the way, if you're ever producing a podcast, There's so many file format things that can make it go wrong. It is so freaking touchy. Oh, yeah. Fortunately, consumers don't have to deal with this anymore. All right, listeners. Now is a great time to thank our longtime friend of the show, ServiceNow. If you are running a large enterprise, AI agents are likely spread across every team and deploying them is no longer the hard part.

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48:48So if you're trying to turn AI ambition into real business outcomes and make it work safely, securely at scale, go check out servicenow.com slash acquired and tell them that Ben and David sent you. So we move into tech themes. Yeah, let's do it. So one big, obvious one for me is comparing the world of 2000 to 2005 to the world today. I went from being the music on a zip drive person to music on an external drive person to having every single one of my files on my computer itself. And I remember buying CDs and buying CDs and downloading music and just having this incredible, huge music library and being so proud of it. I would go over to a friend's house and we would hang out together and show off cool songs that we had and I had the entire Beatles CD collection imported into my computer.

49:43This was the version of your album collection, you know, when our parents' generation growing up, you know, so important to us, such a stamp of who you were or your cassette tape or a track collection in the 70s. And today, yeah, I mean, today I have a very loyal Spotify user, and it really exemplifies how much of ownership and much of...

50:05products that I would buy have shifted to subscription in my life. Like, I don't have a car. I use Uber. I don't buy movies. I subscribe to Netflix. I don't have a music library, which was a part of my identity for a while because I subscribe to Spotify and it's all available on demand and I can stream it and I can get it anywhere on any device. And it's really this world that we live in of everything as a service and everything as a subscription. And I think, yeah, you don't have collections anymore. Totally. And I think that's only going to continue to happen. And I think, Honestly, that's when we at Pioneer Square Labs, when we think a lot about like new businesses to start, it's like, where's their additional white space and things that people buy now that they could subscribe to? Yeah, well, I think a super interesting question for you is, and for all of us, is as those signifiers of identity have disappeared with the transition from ownership to renting, to subscription of content, what are the new signifiers of identity?

51:01Yes. Is it the filters you use on Snapchat? I mean, but those are available to everyone at any time too. You're essentially subscribing to those. Right. How can people be creative in a way that defines themselves and express their individuality? Yeah. In a world of so much wide availability. I mean, I think this is, I mean, I think this is a consequence both as you were saying of the shift to Everything on demand and subscription versus ownership, but also of the massive, massive broadening of reach of social networks, you know, of Instagram, of Facebook and end of Snapchat in its own way too. I mean, I think a lot of while it opens up communication and the possibility to be seen and heard to so many people, to so much wider of an audience, it also at the same time has a

51:59you know, homogenizing effect. Yeah, totally. I mean, it's interesting to start thinking more about like things that haven't been homogenized yet that could be. Like you see signs, you know, right now, like everyone gets the same opportunity to post an Instagram shot. And you just get to pick like what pixels are you lighting up? What colors in that square that make you an individual. And there's all these people doing food photography. And then on the other side of the coin, there's people drinking soil.

52:26and deciding that what that guy eats is, I don't need to differentiate myself on what I eat and I don't actually take that much joy in it, so whatever, I'll just drink Soilin and it is quote unquote nutritious and everything that I need. And it's interesting to start thinking about there's people that pride themselves on taking the photos of food and there's other people that have written that off. They're like, nope, that's the way that I'm going to be the same as everyone. And it's almost like, You know, when you think about a business like where are we going to differentiate and where are we going to be world class and where are we going to just try and outsource our non core competencies or be table stakes in these areas that are not core competencies. As you port that to people do you think that we're getting less and less opportunities to be different and define our own core competencies because there is an ease of availability to be table stakes and everything else because there is everything as a service or you sort of can outsource everything. Yeah, I mean.

53:21I really think so. The really interesting question is like, are we at the crest of the wave here or the the nature of the wave in terms of his individuality and individual expression, especially in physical things and collections? Is it going to continue to decline? Or is there going to be a reaction and a pushback to this homogenization to the extent that people are feeling it and people are going to want to go back? I think this might be why you're seeing physical album sales and LP's vinyl is coming back. Final continues to grow 50% euro per year. Yeah. Yeah. I think it's why you're seeing a really vibrant, you know, pen and pencil paper notebook, you know, mullskins and other, you know, mullskins corporate now, you know, boutique notebooks, you know, all sorts of things. You're seeing it in clothes and fashion. You know, I wonder if there is something similar.

54:20digital and tech enabled sort of route to more honest and individual expression that can start to emerge. Yeah, that's really interesting. I've got a couple more that are not nearly as ethereal. Yeah, yeah, we've waxed philosophical on that too. Go ahead. You want to do you want to do yours quickly and then I'll jump in with a couple? Yeah, so it's interesting. The company is acquiring former employees theme. When we started acquired as long time listeners know we do this to try and find common threads between successful acquisitions to really understand what makes successful acquisition and IPO. So that as we build companies in the earliest stages, how can we build with those things in mind that you need a very successful integration or a very successful IPO and you don't want to build something that's great early and then sucks when it's acquired or something. So one thing that I totally thought was going to be a theme that we have only seen once besides this episode is companies acquiring people that used to work for them.

55:19And that previous one is Steve Jobs. And we talked about that it could happen in the jet episode where like potentially Mark Laurie could end up back at Amazon. And there's a bit of war with Walmart because Walmart really wanted to keep jet out of the hands of Amazon. But like we really haven't seen it. And if you would have asked me a couple of years ago, like is that a common thread of someone leaving the company starting a thing and it getting bought and bringing them back in? It seemed like it was a common thing, but it has not been the predominant story of these very successful IPOs that we've been talking about. Are these very successful acquisitions? If anything, it's kind of the opposite. I wonder if I think a lot of big tech companies are buying companies that are started by people from their rivals. Like I think about Facebook buying Instagram and obviously that is our benchmark here required.

56:14Even as Instagram just continues to crush it. I mean, that is going to go down as one of the best purchases of all time in any industry technology or otherwise. But you know, Kevin Sestrim came from Google and there's so much Google DNA that has come into Facebook through acquisitions and similarly, you know, Apple DNA into into Google or Facebook and Amazon or, you know, what have you? Yep. All right. I've got one more and that one is this Rising tide lifts all ships concept where if any of the listeners are familiar with like the indie Mac ecosystem There's this concept of getting Sherlock where Apple introduced search sort of Sherlock the feature And that was a third party utility before and when it got built into the platform You know that we're very sorry. Thank you for the idea. Thank you for building on our platform. We've destroyed you and There are times where that is terrible and there are other times where

57:12They do a bare bone supplementation on the platform level and it gets better for everyone and an example of that I mentioned Mark Arment before but he built Insta paper before doing overcast and with Insta paper Apple came out with Safari reading list that was baked into the operating system and into the into the browser and That actually raised awareness of the category of the concept that you could save things to read later and was good for Insta paper and It's interesting to think about how sometimes that's the case, but sometimes it kills you And in this case, Audion guys were hoping, well, maybe Apple did sort of a bare bones thing here and for pro sophisticated users, they can find out about music management through Apple and then come and buy our software. And that totally didn't happen. iTunes was two full featured number one. It was free and it was bundled into the platform. And it's something where it's, I've always thought before, well, maybe it's

58:06people freak out too much when a platform launches a thing and they should think more about the InstaPaper strategy of how can you create something that the platform by their nature by needing to serve a wide variety of people aren't going to serve the narrow band like how can you thrive in that narrow band but you really need some serious pro features and serious narrow band differentiation in order to make your thing worth paying for when it's competing with free and big into the platform. Yeah, oh man, this is such a great leading into my biggest tech theme I wanted to discuss, but I'm wondering thinking about this. How much this has to do with Steve Jobs? Like, when you think about, I mean, Sherlocking was like, you know, happening in the Steve Jobs era and certainly, you know, iTunes-ing, which absolutely killed Audion as they wrote about in the blog post. Steve was right and he told them to their face that, you know, when he was launching iTunes, he was like, yep, we're gonna steamroll you guys. Like, you should throw you a lot in with us.

59:04And he was right. And then it's later kind of in the tail end of Steve's tenure and then after Steve with stuff like podcasts, you know, talking about Marco and, you know, and the Apple, you know, default native podcast app. But I use overcast now that Marco makes and so do so many other people. And it's the indie software that's so much better or like with maps, you know, and Apple launched maps and it was like, oh, you know, are they going to kick Google out and like, no, the best thing that ever happened to Google maps on iOS was Apple launching maps. I wonder if it's really that both the focus that Steve had on really, well on A, doing individual apps right and having a ton of focus on them. B, having them be key parts of his overall vision. I mean his vision for the digital music revolution and

59:52making Apple relevant again, wasn't just iTunes. It was fitting into a whole piece of an ecosystem that he was building. And Apple's really not done well on that since Steve. Yeah, that's interesting. iTunes is relatively deep. Like they're not taking a broad shallow approach. They took a full featured approach and that full featured approach resonated with like everyone. Like they did this amazing job of making it.

1:00:21deep without being complex. And part of that is the praise of the UI design. But another part of that is the fact that maybe Steve kind of was the every man in his interests where when he decided this is a passion of mine and music as a passion of mine and we're going to go deep into music and be a music company, that actually it was something that just did resonate with tons and tons and tons of people and that he was kind of like a symbol for the every man. Yeah, this is the tech theme I wanted to Discuss and bring up is one we've talked about so many times on this show which is you know when you're making a product and I think this just illustrates it so well You know you need to make something that people want and the best way to do that is and to know you're making something people want is to make what you want And especially if what you want is is aligned well with mass market

1:01:14Right, that was the key. That was the math market and the timing of waves and technology. Yeah. Of which digital music at this point in time was a huge one. Yeah. You know, I was thinking as doing the research and prepping for the show and like we just talked about, you know, Steve, say whatever you want about his personality, some people love him, some people hated him. But he was someone who was very often right about things and right about things in a big way like this.

1:01:40And I think this is a key component of why he was so right was he had an experience in his mind that he had a vision of that was so clear to him and that he wanted and then he was so exacting in managing the products to really, really solve that need and bring delight to what he wanted and that aligned with technology trends and with what lots of people wanted.

1:02:10And I think there's a real danger in if you take the opposite approach and you manage a product just to either feeds and speeds and specs or to just try and time a wave without thinking about solving the problem. That's when you can run into a lot of trouble. Yep. Agreed. Okay. That's my philosophical waxing for tech. The other two ones I wanted to hit real quick.

1:02:36I mentioned earlier in the show, every time I love doing these throwback episodes, because it just reminds us how far technology has come. And I cannot imagine having to muck around in the depths of MP3 codex. And we are standing on the shoulders of giants here. We are. And we'll continue to. And 5, 10 years from now, people will be like, gosh, I can't believe actually, you know, you had to write like, you know, in swifter in an objective sea. It's this self.

1:03:05Reinforcing and improving cycle and technology that makes magic happen yeah layers of abstraction that you know you step to write assembly language and or even before that you know the hex or the binary and then you get the avenue machine language and then ever since you just keep building more abstraction layers on top of the stack and and then it's uh you get hypercard and you get these visual forms of programming languages and you get playgrounds where you can see your iOS code sort of move around in real time. And we have yet to, there have been many times where people have envisioned the way that we will program visually and easily in the future. And you don't actually have to know about the guts, but often to do the specialized thing or to do the best thing, you really do need to know a lot about the guts. And I'm very curious to watch and see like,

1:03:56I think to do the easy thing we're going to have platforms, but to do the hard thing, no one who built the platform envisioned the really hard differentiated thing that you want to do. So I think there's always space if you want to be different at the difficult product level. There's always a space to know what's under your layers of abstraction. Again, Steve Jobs is back to his favorite Alan Kay quote, you know, if you really care about software, you should really care about hardware. Yeah.

1:04:24Okay, last one I wanted to make real quick is just this whole idea that again, we've talked about on this show and this episode and others is it's really hard to compete with free in technology. And if you have a utility app and it's just a utility, somebody, if there is a big enough market for that, somebody is going to come along and make it free. And you are not going to be able to capture long-term value just from utility. But what does capture long-term value is either an ecosystem like iTunes and the iPod and the Mac and the digital hub, you know, and sort of bundling. There's two ways to make money in business, bundling and unbundling as we talked about on the last show, or taking an approach of creating a network around it like Instagram did. I mean, Instagram was heapsdomatic. It was a photo filter utility, but they created a network around it, not just a utility. And I think there's a big lesson there. Utilities can be a great wedge of an entry.

1:05:22as a product into building a customer base, but you can't stop just there if you want to build a sustainable business. You have to create either an ecosystem or a network around it. Yep. Yep. Love that point. All right. Should we go into grading? Let's do it. Okay. So the financials are silly on this one. We don't even have numbers to run. Like the purchase price of this thing was so small. For all we know, we might not even, they might not have even really followed it. They might have just hired the company. Yeah. Totally.

1:05:52Totally. And getting an opportunity, if you're those guys and they say, hey, we'll pay you a little bit more than you're making on your own right now, you'll get a stable wage. And we're going to distribute it to way more people and give you some team members. It's like, all right, done. Deal. Sounds great. And you get to be the key architect on, you know, what became grew into the most powerful and best product ecosystem and business in the history of technology. Yep. Yep. And so just for fun, like I went and looked at last quarter's financials.

1:06:20they break out services revenue. So Apple has like the Mac, iPod, no, Mac iPhone, they break out a few different product lines. And one of them is services. And that's basically recurring revenue that comes from iTunes related things. So it's, you know, Apple Pay, it's Apple Music, iCloud, those sorts of things. And that alone last quarter was $7 billion. So just on those sort of services, you know, those things that were born out of iTunes.

1:06:50But really, I think the fair way to assess this is like, it kind of allowed, you know, along with Mac OS 10, an ex-generation operating system, iPod, an amazing piece of consumer hardware, the iPhone, the most revolutionary consumer technology product of all time. Like, it kind of enabled the way that they were gonna do the digital music revolution and the digital hub. And like when you... No, I mean, let's be clear. No iTunes, no iPhone. Right. Right. And like...

1:07:17last quarter, they did 52 billion in revenue last quarter across all their product lines. And we talked about this that like the numbers are almost silly when you look at the next acquisition. And it's like, well, you know, I think Apple had done like a trillion dollars of revenue since buying next almost all of it in some way attributable to the next. It's sort of that same ridiculous thinking. So I was like, okay, duh, a plus. But I'm going to walk it down to an A for this reason. Apple was going to do this.

1:07:47with or without either of these. They were going to do this anyway. They would have figured it out. They would have found a way to hire the right people. This is square in their core competency. It's not like they needed Instagram that came with a whole network effect. It's not like they needed Pixar that came with IP. It's not like they needed some core.

1:08:08research based technology, like they were going to do this. So A plus on the foresight and the vision and the plan to create iTunes and have this strategy. Also, freaking brilliant acquisition. Like, great. It was sort of the obvious thing. And it was, you know, good on him for doing it. Give me an A because of the outcome of what that small investment has really become. But I don't think all of that value is attributable to the acquisition in the same way that it was for next. Yeah. I mean, I think this is Everything you would want and an A plus in an aqua higher which is what it was and In terms of our, you know, sort of grading benchmarks on this show Yeah, I mean, I think I I give it a name minus just like great super great execution probably had very little impact on the internet trajectory here, but it did accelerate things You know if Apple had had to build iTunes from scratch then

1:09:04would have taken longer, maybe it would have given time for somebody else to really emerge and whether it was Rio or Microsoft or somebody else with digital hub strategy. There's something to be said for acceleration, yeah. Yeah, definitely something to be said for acceleration, but on the balance, you know, this is in and of itself, no Instagram, but is a component of, as we've said many times on this show, what has become the best business and business model of all time. Yep.

1:09:34Okay, follow ups, real quick. So Amazon, the contender for the throne of business and business model of all time, so much going on over there, so much innovation and the latest being the Echo Show. We talked about the Echo Look on the last episode. First camera now is green and shout out to other friend of ours and friend of the show, Rob Katz over at Amazon for.

1:10:00B&A one of the key pms on the echo show. Yeah, and it's interesting as more of this Alexa hardware starts to roll out it's interesting thinking about what's a clear core evolution of what Alexa is for the mass market and what these echoes are for the mass market and what is like a side project like when you when the echo look came out I was thinking okay narrow use case but this Alexa voice service is something that is cloud-based and you can put on a variety of hardware so why not put it on some specialized things especially if you can manufacture them cheaply and ship it with economies of scale. The echo look to me, I'm sorry the echo show to me feels like hey we released the echo and now this is echo version two and this one has a screen because like there are so many freaking use cases when I'm yelling at Alexa that I'm like boy do I wish

1:10:49I could see the product that she's trying to describe to me before I commit to paying money for it. Or there's a variety of things. See the song that's playing. See the timer count down. The device needs a screen. Yeah. So great timing in this episode too, and talk about the power of a digital hub strategy. And you can see the potential here for something like the show and future versions of Alexa and Echoes to become the hub of Amazon, the hub of e-commerce. I mean, what is Amazon? It's an e-commerce company. When you're buying things and buying things through the echo, gosh, it's really helpful to be able to see it. Yeah, even the hub of messaging, crazy. They're their Trojan Horse communication platform now. Next follow up, relevant to right on the heels of our last episode on Bam Tech. Facebook announced yesterday that starting today.

1:11:47they have done a deal with Major League Baseball to stream live 20 games, 20 Major League Baseball games on Facebook this season. Very interesting. And I think, well, I'm not sure. Details are scarce. I guess we'll find out later today when the first one happens. But I would assume it will be done on Facebook's infrastructure, not BAMTEX, which is interesting, given BAMTEX is now an independent company outside of BAMTEX. Yeah, it's interesting. Now, as soon as they split, like there's competing business interests, and MLB should do what's an MLB's best interest, which is make their content available on the most places to generate the most revenue for them. And so suddenly, BamTech is an interesting thing for them. It's a great utility. It's an asset that they own a lot of and can the majority of and can guide what it does. But when it's in their own best interest for their core business, suddenly it's Facebook's infrastructure, which let's continue to harp on the fact that

1:12:43The horizontal versus vertical problem that we touched on last episode that so many people fail at. Majorly baseball is doing a great job at knowing, hey, our main priority is our main priority. And this BAM tech thing helps us when it helps us, but otherwise go be your own business. Yep. And this is, you know, a great, we talked about on the show. You know, why would, why is it an MLB's interest to spin this off? Can see why it's in BAM tech's interest. But this is a great example of why It was an MLB interest to do this. Now they can focus on the main thing and serve their customers where they are. Yep. Yep. One more piece of follow-up. Yep. So we, yeah, Snap had their first earnings call where they in a single day dropped from 2229 down to 1805. After being up even higher before that, they announced they had a $2.2 billion loss, $2 billion of which could be attributed to stock-based compensation related to restricted stock units.

1:13:38with a performance condition. So everyone's freaking out. It's back up to over $20 now. Everyone's freaking out about this loss. And like, yes, they're losing a lot of money. Yes, that's true. I'm much more concerned about the potential slowing of user growth from the Instagram. All the Instagram features really cutting them out before they have a chance to grow to a large audience. But I think that The $2.2 billion loss was very overhyped. It's a one-time event with a lot of these RSUs. Much of it, the public already knew about that was the $7,800 million CEO bonus that is a very weird thing that go listen to the snap episode if you're interested in that. But basically, all that should have been priced in and expected. I think it vested a little bit earlier than people thought, which is why it came as more of a surprise. Interesting. It's a lot of hype. There's still a long game here.

1:14:31Let's see what the next, you know, eight earnings calls look like. Yeah, I mean, to me, the snap earnings calls, like, I guess, unsurprising. I mean, these things take time, but it's like, okay, well, that didn't really answer the question. We got to wait until the next one. You know, and the question is user growth. And can they reignite it? And it ticked up a little bit from the last couple quarters, but not enough that it was snap has not yet and will need to in the next six to 12 months. Maybe slightly longer, but I don't think they have that much time. They're going to need to definitively answer, yes, or no, and how they are going to reignite user growth. And this is like we talked about on the episode. I mean, just the exact same situation that the Facebook was in right after their IPO with totally missing mobile. And it'll be

1:15:25very interesting to watch. And of course, that was when Facebook acquired Instagram. And as of yet, you know, Snap has not made any major either internal product announcements or acquisitions along those lines. But, you know, I think these next six to 12 months are really when the next few years of Snap are going to be going to be forged. Maybe they'll ship free ARVR spectacles to everyone, get everyone on their platform. And then I don't know. Well, that's one way to use your idea of cash. That's right. All right. Should we move on to carve outs? Let's do it. So mine is accidentally very aligned. I was looking through the way that I generally do carve outs as I look through my Insta paper and say, what I read this week and I'll flip through my overcast and say, what podcast I listen to this week. And the one that stood out to me is the most interesting thing I consumed was the internet history podcast. Shout out to Brian McCullough, friend of the pod.

1:16:21and the Napster story with Jordan Ritter. Oh, yes. So great. I'm so glad that episode came together. Both of them friends of us and friends of the show and it was that was a great episode. I highly recommend everyone go check it out and Jordan. It's very relevant to this episode talking about early days of the digital music revolution and Napster and MP3s and Jordan is just a fantastic guest. He's very honest and open about.

1:16:48the dynamics at the company and in the industry and how Napster played out very worth listening to. Yeah, especially if you if you are listening to acquired because you like narratives and you like hearing the back stories of this stuff and you know the details and what went down and inside baseball it's all there. Also thank you David for doing my.

1:17:06carve out explanation for me. I'm going to send mine. Sorry about that. I just totally. I'm going to send mine to you. I jacked your carve out. I'll send you my carve outs beforehand now and that way you can prepare a little something. I couldn't help myself. I'm sorry. For myself like glass and just listen. Do you want to do mine? Well, I don't know what it is. Mine is actually, well, I don't know if you could do mine.

1:17:34Fun, totally unrelated. As we've talked about on this show, my wife Jenny and I have been on a bit of a travel expedition over the last few months and we wrapped it up. We just got back to the States yesterday, which again, it's probably why, if we're less professional on this episode, we can blame it on the jet lag. But one of our last stops before we came home was Israel and neither of us had ever been before and was just such an amazing I opened an experience in so many ways and so glad we went and just really would recommend to everybody. If you have a chance, if you live in America, or you live in Europe, or elsewhere in Asia, or Africa, and you haven't been to Israel, you haven't been to the Middle East. So basically if you don't live in South America. Well, if you don't live in the Middle East, let's put it that way. Highly, there's so much going on and I feel like I understand

1:18:31So, little still about that place, but I understand so much more about the world and about our own country, having actually been and seen what's going on there, and even though Israel is just a small part of the Middle East, makes me want to go back, see more felt completely safe the whole time, as safer, safer than any major American city.

1:18:55just can't recommend enough to go see it with your own eyes. It's an amazing place if you haven't. I felt very very similar after my trip a few years ago. It's something to understand there for everyone. Yeah, regardless of what religion or lack of religion you are or political persuasion. I mean, literally it is the cradle of Western civilization and it is worth seeing with your own eyes. Yep.

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1:20:20All right, listeners, I think that'll do it for today. We appreciate you listening as usual. If you are not subscribed and you want to hear more, you can subscribe from your favorite podcast client. And if you feel so inclined, we would love a review on iTunes. You can find us at acquired.fm, at acquired FM on Twitter. We're on Facebook. Search for acquired podcast or acquired. Thanks for joining us. We'll see you next time.