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Microsoft and Google, a love story

Image: Linseed Studio / Roman / Protocol
Google loves Microsoft

Good morning! This Wednesday, Apple strikes back at Epic (again), how Microsoft and Google teamed up to change the phone game, and Tesla's week got off to a rough start.

Also, don't forget to subscribe to Janko Roettgers' new newsletter, Next Up, on all things tech and entertainment. The first issue hits inboxes tomorrow, and you won't want to miss it.

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The Big Story

'A basic disagreement over money'

Friends, I won't lie to you: I am loving the increasingly public, increasingly testy spat between Apple and Epic. It kicked up yet another notch Tuesday, with a filing from Apple asking for damages from Epic.

  • "Although Epic portrays itself as a modern corporate Robin Hood," the filing says, "in reality it is a multibillion-dollar enterprise that simply wants to pay nothing for the tremendous value it derives from the App Store." ("Corporate Robin Hood" sounds like a very boring Quibi show by the way, but I digress.)
  • Apple even accused Epic of being all the bad things it accuses Apple of being, "as it rakes in billions by taking commissions on game developers' sales and charging consumers up to $99.99 for bundles of 'V-Bucks.'"
  • According to Apple's filing, Epic's demands basically amounted to: We want to do everything we want, we don't want to pay you a dime, and we want to do it on your platform.
  • Then the filing goes paragraph by paragraph through Epic's filings and pretty much denies them all.

Apple uses Epic's own moves against it in its counterclaim. "In 2018, Fortnite announced that Android versions of the game would be available on the web, and immediately sites appeared that not only advertised Android Fortnite but also distributed malware in the game."

  • That's the shot, here's the chaser: "Epic in particular had demonstrated that it could not be entrusted with this type of responsibility."

Apple may not be picking a fight with just one developer here: It may risk inadvertently picking a fight with all of them. Marco Arment put it well, writing that "dev relations are at an all-time low as [Apple] continue[s] to make statements to the effect of 'Developers' only value to our platform is IAP commissions.'" Apple shouldn't forget, he said, that great third-party apps are a heck of a good reason to buy an iPhone.

This is why this Epic-Apple case is so interesting to me. Partly because, come on, the drama, but also because this is a whole reckoning on the software ecosystem in one fell swoop. Apple and Epic can yell until they're blue in the face and their lawyers are billionaires, but at some point something's going to give. And an awful lot of developers are waiting to know where they stand.

Mark your calendars: The full hearing for this case is Sept. 28, and it's going to be something.

Mobile

How Google and Microsoft became best of frenemies

Microsoft's new not-quite-a-phone, the Surface Duo, comes out tomorrow. But more interesting than the device is the way Microsoft and Google spent the last couple of years working together to build it. It started with two people: Panos Panay, the chief product officer at Microsoft, and Hiroshi Lockheimer, Google's head of Android, Chrome OS, Chrome and a bunch of other things.

I wrote about Lockheimer and Panay's relationship on Protocol and what they learned from building the Surface Duo. The most important thing, they said, was to always think about the finished product.

  • Panay first reached out to Lockheimer because he wanted to build a dual-screen mobile device, and he knew Windows wouldn't cut it. "We want to meet customers where they are, give them what they need. What are they using in mobile solutions? Android was obvious."
  • During the sometimes-tricky development process, "there was a product we put in the middle of the table," Panay told me, "that we believed in on both sides." That made everything easier for them, because it helped ground everything in how to make that device better, not how to handle internal politics and competition.
  • The biggest challenge, Lockheimer said, was selling the project to their respective teams. "As we expanded the circle, if you will, people had questions, and they were kind of surprised initially," he said. "But then you explain everything and you can get them caught up."

It's fascinating to see this kind of collaboration in the current Big Tech era, where a small number of companies seem to dominate everything. One source told me that Microsoft in particular has worked hard to repair relationships with Google and Apple, a good example of which is its increasing presence in their app stores.

But whether it's Google and Apple working together on COVID tech or Microsoft and Google building smartphones, we're in what you might call a Frenemy Phase of technology. The opportunities are so big — and the stakes are so high — that even the largest companies are willing to partner up. At least a little. Sometimes.

Transportation

Tesla's tough day

The tech industry as a whole seems to be in the midst of a serious stock-market reset after the crazy rise of the last few weeks. But Tesla's having it worse than most: Its stock had its worst day ever yesterday, down more than 21%. It seemed to be the result of two bits of bad news:

  • A lot of people expected Tesla to join the S&P 500 this month, after four consecutive quarters of profitability finally made it eligible, but it wound up being left off the list on Friday.
  • Maybe scarier in the long run: GM took an 11% stake in Nikola, the would-be Tesla competitor that hasn't done much yet. GM's going to be producing Nikola-powered electric pickups by 2022. Together, those two companies could ramp up a serious electric-vehicle company faster than most.

Don't forget, Tesla's stock is still up almost 4x this year. But with Lucid Motors set to reveal a car at 4 p.m. PT Wednesday, with longer range than any Tesla, and Tesla's Battery Day scheduled for Sept. 22, this month looks set to be an interesting test of whether Tesla can stay ahead in the electric-car game.

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Cloud

Join us tomorrow at 9 a.m. PT for a deep-dive conversation on the state of the cloud. Tom Krazit will explore how best practices for cloud computing are evolving during an unprecedented economic period, featuring PagerDuty CEO Jennifer Tejada, Okta CIO Alvina Antar and Novant Health CDTO Angela Yochem. This event is presented by Pure Storage.

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People Are Talking

Ashok Chandwaney quit Facebook on Tuesday and said it's because the company no longer lives its values:

  • "In all my roles across the company, at the end of the day, the decisions have actually come down to business value. What I wish I saw were a serious prioritization of social good even when there isn't an immediately obvious business value to it, or when there may be business harm that comes from it — for instance, removing the sitting president's incitement to violence, which could lead to regulatory action."

The FBI (and everyone else) underestimated how important social media was until it was too late, Peter Strzok said:

  • "[Russia was] always really good with propaganda and disinformation, but it's this boutique-type intel activity. It was a lot of effort for not much reward. My failure, the FBI's failure, the whole U.S. government's failure is we didn't understand how social media was a game changer for this disinformation work."

Want your boardroom to be more diverse? Change what you're looking for, said former Xerox CEO Ursula Burns:

  • "It's a fallacy and a structural form of racism and exclusion to say that the only people who can actually participate are people that have this very narrow set of skills."

So far, there's no evidence that anyone's hacked American vote-counting systems, said CISA director Chris Krebs:

  • "The technical stuff on networks, we're not seeing. It gives me a little bit of confidence."

Making Moves

Chad Fentress is leaving SoftBank. He was the company's chief compliance officer. He's also leaving WeWork's board, where he will be replaced by former Sprint CEO Michel Combes. No word yet on who will replace him at SoftBank to take over the truly great job title of "SoftBank chief compliance officer."

Bela Barajia is Netflix's new vice president of global TV. She had been overseeing the company's local-language originals around the world and now moves up as Cindy Holland leaves the company.

Mayur Gupta is Gannett's new chief marketing and strategy officer. He joins from Spotify, and is tasked with attracting digital subscribers to the huge and struggling newspaper chain.

In Other News

  • Don't expect iPhones at Apple's Sept. 15 event, apparently. That might be because production on the 5G phones is still delayed by a few weeks, according to Nikkei, which says Apple may miss its 80 million unit production target for the year. Still, better than the monthslong delay initially forecast, right?
  • You Won't Believe How Badly This Merger Went: Clickbait giants Taboola and Outbrain called off their deal, after Taboola tried to renegotiate terms in light of COVID disruption.
  • Slack didn't get a WFH-boost after all. It reported revenue growth in line with the last two quarters and slower-than-expected billing growth, disappointing investors who sent its stock down as much as 20% in after-hours trading.
  • Ikea did get a COVID bump, but its ecommerce crumbled in the process. Right when everyone should have been buying new home office furniture, its infrastructure totally collapsed, fuelling complaints.
  • On Protocol: Microsoft announced the Xbox Series S, which will retail for just $299. Combined with a zero-interest financing offer, it's a big play to remake the gaming industry.
  • Android 11 rolled out Tuesday, which means approximately 17 people got access to it because Android is still mired in fragmentation hell. But there are some interesting privacy-focused features, including "auto-resets" that will revoke permissions from apps you haven't used in a while.
  • PC Mag's annual mobile network speed tests are out, crowning Verizon as the fastest in the U.S. The most surprising finding: AT&T's 5G speeds are actually slower than their 4G ones.
  • Silver Lake's on an Indian investment spree. It led a $500 million round in online education platform Byju, valuing the company at a reported $10.8 billion and invested just over $1 billion in Reliance Retail. KKR is reportedly planning a Reliance Retail investment, too, because you can never invest too much in Reliance.
  • PUBG said Tencent would no longer publish the game in India, a week after the Indian government banned the app. But as Rishi Alwani pointed out on Twitter, Tencent does a lot for PUBG in the country — and it's unclear if the game can survive without it.
  • Don't miss this story on how video chat affects U.S. immigration from The Verge. It highlights some of the very serious problems the technology raises when immigrants attempt to argue their case before a judge remotely.
  • Spotted: U.K. Prime Minister Boris Johnson in Lime's London warehouse, giving us a glorious photo of him on a scooter. The scooters still aren't legal in the city, but trials are underway.

One More Thing

Get on your new bike and ride!

You know what's cooler than owning a Peloton? Owning a new Peloton! The company's new model has a bigger, rotating screen for glare-haters and non-bikers, and has better speakers so your Broadway Hits ride can get its full due. Best of all, it doesn't launch until next year, so now I have a perfect excuse to not work out again until 2021.

JOIN US TOMORROW

Cloud

Join us tomorrow at 9 a.m. PT for a deep-dive conversation on the state of the cloud. Tom Krazit will explore how best practices for cloud computing are evolving during an unprecedented economic period, featuring PagerDuty CEO Jennifer Tejada, Okta CIO Alvina Antar and Novant Health CDTO Angela Yochem. This event is presented by Pure Storage.

RSVP today

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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