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Anybody want a Quibi?

Image: Quibi
Quite

Good morning! This Tuesday, Microsoft made a big bet on video games, another twist in the TikTok tale, Quibi needs a home, Tesla Battery Day is here, and it's all making me feel very :face in clouds:.

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The Big Story

Microsoft is all in on gaming

Shakeel Hashim writes: Microsoft announced that it bought video game giant ZeniMax on Monday for $7.5 billion. It's a lot of money, and it cements what we already knew: Microsoft is out to win the gaming industry.

  • ZeniMax is one of the most storied companies in gaming, counting some of the world's most beloved properties among its portfolio: Doom, Quake, The Elder Scrolls, Fallout, Dishonored and more. It's a slate of very dark-sounding and very popular games.
  • In other words, Microsoft gets an awful lot of prestige by buying ZeniMax, helping to boost its roster of first-party franchises. Those have languished somewhat in recent years, most notably with delays to the upcoming Halo title.

Heading into the next generation of consoles, Sony undoubtedly has the more attractive game lineup. While Microsoft could make all ZeniMax games Xbox-exclusives in future to try to catch up, it seems to have bigger ambitions.

  • It has said it will offer the Xbox and PC versions as part of its Game Pass subscription. Microsoft is increasingly pushing the all-you-can-play subscription as the future of gaming, and one of the biggest struggles with that business model is licensing enough high-quality titles to keep users engaged. Buying ZeniMax provides an easy solution and is a clear shot at Sony — albeit one with huge upfront expense.

This is Microsoft's biggest gaming acquisition to date, dwarfing the $2.5 billion it paid for Minecraft developer Mojang back in 2014. (Which has worked out awfully well for Microsoft.)

  • And after Microsoft's failed TikTok bid, it can be viewed as a huge statement of intent: Though the company might have found its feet in enterprise, it hasn't forgotten about consumers, and it seems very happy to use its cash reserves to win at gaming.

In related news: Microsoft's Phil Spencer said the company was determined to bring game streaming to iOS. "We will get there. We remain committed," he said.

Social

Trump changes his TikTok tune

Joke's on me! TikTok is still chaos, nothing makes sense, and it feels like this whole story is designed to make everyone look stupid and to never ever end. A day after it looked like the deal was headed toward a relatively swift end — albeit one that looked nothing like what President Trump said he wanted — things are getting very complicated all over again.

  • After ByteDance said that it would retain 80% of TikTok Global even after the deal was completed, Oracle said that ByteDance would lose its ownership stake as soon as the deal was completed.
  • Then Trump suddenly turned on ByteDance and the deal he'd recently approved. "They will have nothing to do with it," he said. "And if they do, we just won't make the deal."
  • Trump seemed to believe Oracle and Walmart would control TikTok Global. "They are going to own the controlling interest," he said. "And then I guess they are going public, and they are buying out the rest of it, they are buying out a lot." Which is ... nothing like the deal that's been discussed or the one that he blessed.

Here's where the confusion lies, best I can tell, and how two things can sort of be true — and deeply confusing for both sides — at the same time. Let's say TikTok Global is finally spun out. 20% goes to Walmart and Oracle, and the rest not to ByteDance but to all the investors who own part of ByteDance, about half of which are American. Four of the TikTok Global's five board seats would also reportedly be occupied by Americans. That means enough control goes to American investors for the Trump administration to sort of construe it as majority American-owned, while also allowing ByteDance to think that most of the shares are in its orbit.

  • One thing that seems clear: China will not allow ByteDance to sign TikTok's algorithm over to an American company, which means there's effectively no way for TikTok to ever be entirely American-owned. So somebody's going to have to give.
  • ByteDance said it'll allow Oracle to review source code for security purposes, but made clear that "the current plan does not involve the transfer of any algorithms or technology."
  • So it's still not very clear how any of this addresses U.S. national security concerns.

To summarize: TikTok Global might be a thing, owned by … the people and companies who own it. Get it? Me neither. But the good news is, there's another potential ban lingering for this Sunday, so there's plenty more of this to come in the next few days. Sorry in advance.

Streaming

Anybody want a Quibi?

Quibi is on the market, The Wall Street Journal reported. It's considering all options: an acquisition, a SPAC-enabled public listing, maybe even raising more money. Either way, Quibi's clearly in trouble. It's fighting a patent lawsuit, hasn't had a show that's really permeated culture, and sure isn't helped by a pandemic that undermined its business model by keeping everybody at home for the first six months of its existence.

Quibi has raised $1.8 billion, but is surely preparing for a firesale. So we looked around and tried to find the company a few potential good homes:

  • Snap. It has more experience in short-form video than most, and could both make use of — and help promote — a library of big-budget shows and movies. Quibi would also give Snap a way to get its own Originals and shows onto TV screens and other devices.
  • Disney. If Disney wants to capture the next generation of fans, it's going to need to get deep into mobile, vertical video. Quibi could be a shortcut into that market, with the kind of content quality Disney likes. And it'd be a nice full-circle moment for Jeffrey Katzenberg to head back to the House of Mouse.
  • Instagram. IGTV didn't work. Quibi didn't work. Maybe together they would work?
  • Oracle. Because, you know, why not? Quibi could become the internal production company for TikTok — and mercifully rebrand to something like TikTok Originals, which actually … doesn't sound all that crazy, now I think about it.
  • Verizon. Nobody loves a big-name, flailing company more than Verizon!
  • A SPAC, any SPAC. Biz Carson suggested Bill Ackman's SPAC might be interested, and Janko Roettgers pointed out a new one called Falcon Capital Acquisition Corp., but really anybody with a bunch of money to spend could be interested in seeing what becomes of Quibi.

There's (at least) one significant downside to buying Quibi: It doesn't own its content. It has seven-year licenses on all its shows and movies, but after two years creators can "reassemble" them and run them elsewhere. So Disney could buy Quibi, or instead it could just buy its best few shows, build its own app and bet that hardly anyone has seen them yet. Which they haven't.

Anybody who buys Quibi is buying a technology, a brand and most of all a team. Remember, a huge part of Quibi's initial buzz was "never bet against Jeffrey Katzenberg," and it's hard to hold the company's rough debut entirely against him. The name "Quibi" I will continue to hold against him, however.

A MESSAGE FROM PHILIPS

Philips

Stronger care … from more efficient operations

In a defining moment for healthcare, it's even more crucial to deliver patient-centered care efficiently. At Philips, we are committed to providing intelligent, automated workflows that seek to improve patient care. More efficient healthcare means stronger, more resilient healthcare.

Learn more.

People Are Talking

Douglas Rushkoff thinks it's too late to save civilization, and that it's all the internet's fault:

  • "If we hadn't weaponized this stuff against humanity in the name of increasing the NASDAQ stock exchange, what may have we gotten? Would we have saved – now it's too late – civilization? That was the last moment at which we had the potential to change the world. But we decided it was more important to build up our 401(k)s."

Tesla's on the verge of a huge quarter, Elon Musk told employees in an email:

  • "We have a shot at a record quarter for vehicle deliveries, but will have to rally hard to achieve it. This is the most [sic] number of vehicles per day that we've ever had to deliver."

Don't bet on 5G iPhones to change the telecoms world forever, Jeff McElfresh said:

  • "I do believe that you will see many of the iPhone subscribers move to upgrade to the device, but I wouldn't forecast that it's going to be a massive event."

Running a $2 trillion company isn't what gets Tim Cook up in the morning:

  • "It is not a fixation of ours. It's not a fixation at all. We don't follow the market cap of the company, it's not why we do what we do."
  • "The first thing I do in the morning," he also said, "is wake up and read customer emails."

When Sony wanted to get into the electric-car business with its image sensors, CEO Kenichiro Yoshida said there was only one way:

  • "We didn't know a thing about cars. We figured if you want to learn, the easiest way is to try making one yourself. So we made one."

Making Moves

PagerDuty bought Rundeck for about $100 million, in an attempt to automate more of the incident response processes that it's already focused on.

Craig Wright is heading to court, as he tries to prove that he created Bitcoin and is thus the rightful owner of more than $11 billion of the currency. That'll kick off next year.

In Other News

  • The DOJ will likely brief state AGs about its Google antitrust lawsuit this week, The Washington Post reports. The case could be filed as soon as next week.
  • Trump is meeting Republican state AGs to discuss Section 230 tomorrow. "State attorneys general are on the front lines of this issue and President Trump wants to hear their perspectives," a White House spokesman said.
  • Lawmakers paid a surprise visit to an Amazon warehouse, and they weren't impressed. "Employee screening is poorly executed, cleaning is insufficient, social distancing is often difficult or impossible," Rep. Rashida Tlaib said. Also, someone called the police on the representatives, in what Amazon called "an unfortunate misunderstanding."
  • China is debating what to do with its U.S. tech firm blacklist, The Wall Street Journal reports. It's sped up putting the list together, but some officials think it shouldn't be released until after the U.S. election.
  • Intel got a U.S. licence to supply Huawei. It only applies to certain products, but it's good news for both companies. Reuters also reports that SK Hynix has not gained approval, and that non-American companies might struggle to get licences in general.
  • On Protocol: Zoom might be the next platform. A bunch of startups are building on top of the video chat — and raising funding at a fast clip, too.
  • Tesla's Battery Day is today, and The New York Times has a good catch-up on the state of the electric car biz. The next phase is … kind of all about batteries.
  • SoftBank and Benchmark want Uber to sort out self-driving, Bloomberg reports. The investors are apparently encouraging the company to raise investment, and one plan under consideration is making the project open-source.
  • Palantir's founders may maintain less control than they wanted. An amended version of its S-1 gave Alex Karp, Stephen Cohen and Peter Thiel the power to "unilaterally adjust their total voting power," but after TechCrunch reported on the change the language was removed. Meanwhile, immigrant rights activists have begun a week-long protest against the company.
  • Amazon added Echo and Tile devices to Sidewalk, its project to build a neighborhood-wide mesh network. It said the network should launch later this year.
  • The DOD could allow hybrid military-commercial cellular networks, if a request for information last week is anything to go by. That could provide easier access to 5G networks for some industries, while the Pentagon would maintain ultimate control.
  • The CIA launched CIA Labs, a new skunkworks that will let CIA officers file patents on IP they develop, and collect some of the profits. It hopes that will help it recruit technical talent.

One More Thing

Feeling very :face in clouds: today

I can't imagine an emoji better suited to 2020 than "face in clouds," one of the new emoji recently approved by the Unicode Consortium. And clearly it's not just me: The application said that "usage is expected to be high" for an emoji that could denote confusion, forgetfulness, overwhelm and more. Add "the world is covered in wildfire smoke" to that list and you have an emoji that pretty much describes the feeling of being alive right now! Though another new one, "face with spiral eyes," is probably a close second.

A MESSAGE FROM PHILIPS

Philips

Stronger care … from more efficient operations

In a defining moment for healthcare, it's even more crucial to deliver patient-centered care efficiently. At Philips, we are committed to providing intelligent, automated workflows that seek to improve patient care. More efficient healthcare means stronger, more resilient healthcare.

Learn more.

Today's Source Code was written by David Pierce, with help from Shakeel Hashim. Thoughts, questions, tips? Send them to david@protocol.com, or our tips line, tips@protocol.com. Enjoy your day, see you tomorrow.

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