On this edition of the Futurum Tech Podcast, we dive into the future of tech-enabled retail and how it might threaten Amazon. Plus, will Costco step into the streaming video market? We take a look at IBM and Vodafone’s new partnership for Cloud and 5G. Huawei’s new AI-infused cloud engine data center switch, Google’s Go Green solar power strategy, and Microsoft’s strategy to help cure the country’s affordable housing crisis. Plus, in Tech Bites, it’s another data dump and lots of passwords, and we take a look at the question, what’s the real impact of Netflix’s price increases for those of us that like to binge on the fringe? All this, and Olivier’s new microphone setup on this edition of the Futurum Tech Podcast.
Our Main Dive
What does the future hold for tech-enabled retail, and can competitors like Microsoft and Kroger effectively partner in the store and in the cloud to take on Amazon?
Our Fast Five
We dig into this week’s interesting and noteworthy news:
- IBM partners with Vodafone for cloud, 5G and AI
- Should Costco take a cut at streaming video
- Microsoft leans into affordable housing
- Huawei announces its bigger, cheaper, smarter AI-enabled switch
- Google’s go-green solar power strategy
Tech Bites
It’s another mega-data-dump of hacked passwords, and we know who to blame.
Crystal Ball: Future-um Predictions and Guesses
What is the real impact of Netflix’ price increases, and does anybody even care any more?
Transcript:
Daniel Newman: Welcome back to this week’s edition of FTP, the Futurum Tech Podcast. I’m Daniel Newman, and I’m your host today, joined by my esteemed co-host Fred McClimans and Olivier Blanchard. Gentlemen, welcome back to another week of Futurum Tech Podcast.
Olivier Blanchard: It’s good to be back.
Fred McClimans: I kind of feel like I never left.
Daniel Newman: Well we haven’t left, because all week long this is what we do, we live, we breathe technology, and occasionally Olivier lives, breathes technology plus a little political rant and rave every now and again.
Olivier Blanchard: Every now and again.
Daniel Newman: Unless you have the luxury of following him on Facebook, you don’t get to see that. Anyhow, progressing forward, we have a really interesting show this week. We are on the heels of another big show, a mega show for the industry, and that’s the National Retail Federation show that goes on in New York. Beginning of the year, always kicks off with these shows both NRF and previously CES, which have been main topics of the last few of our shows. Once again, today will be related to our main topic.
Now, before I dive into our big topic for the show, I must say and remind everybody out there, that while we will talk about companies that are publicly traded on the various exchanges around the world, this show by no means is intended to give financial advice. We are not recommending you purchase or invest in any stocks. However, we do hope you find our insights and ideas around all of these tech companies around the world interesting, and that you on your own continue to follow them and make your own decisions on what you may or may not invest in. Yes, that is a disclosure that I made up on the spot, but the point is, now you know.
All right, National Retail Federation this week had a big show, and one of the big topics, by the way they call it The Big Show, has been how technology is going to bring retail back. Over the last year, undoubtedly, Amazon Go has been the most covered topic as it relates to what will retail look like in the future. For those of you unfamiliar with Amazon Go, this is the Amazon concept store that has become a reality, where essentially you can walk in, grab a basket, run an application on your phone. Fill up that basket, walk out of the store, and everything just happens, no interaction, no check out. It’s literally called just walk out technology and this technology has been the hype as it pertains to what retail could look like in the future.
Then of course last year, Amazon bought Whole Foods, and everybody said, “I wonder if Whole Foods are all going to be filled with this just walk out technology?” Well, it’s not that easy. As we’ve seen with Amazon, these concept stores that they’ve put out into the marketplace are fairly small and fairly limited, because it does take an immense amount of technology to pull off what Amazon’s trying to pull off with their Amazon Go concept. However, it has certainly shaped what retail may look like in the future.
Now, forward to this year’s show, you read across the internet, a couple of press clippings I heard was one, Alibaba was without question the show stealer of this year’s National Retail Federation. With some of the coolest technology and demonstrations out of any booth in the entire event. Other key topics came down to partnerships, and this is something I want to spend a little time focusing on. Partnerships earlier last year, one of them that was announced was a Walmart and Microsoft partnership. The Walmart, Microsoft partnership got a lot of attention as the possible competition for Amazon in the United States. The whole idea was, Microsoft’s Azure cloud in partnership with Walmart’s robust logistics operations and supply chain technologies to increase the potential of how technology could drive the future of a store through the incorporation of Walmart and Microsoft and Azure.
At this show in particular, one of the really hot topics was the IOT enabled, AI enabled Azure cloud enabled, did I say enabled? Partnerships between Microsoft and Kroger. Microsoft has been all in on partnering with these retailers to offer an alternative to those who feel like they maybe had to use AWS, had to give their business to Amazon when the last thing a retail company should want to do right now is give business to the same company that’s kind of trying to put them out of business. Now Gentlemen, I’ve rambled on a little bit here because I think it was important to put a little color around everything that’s happening. Here’s where I want to start today. Olivier, I want you to jump in on this question, but let’s go with the big topic. Can anybody compete successfully around the world with Alibaba and Amazon?
Olivier Blanchard: Yes. I think yeah, but you kind of have to look at it as not just competition in the sense that there’s only one area, or one field where companies can compete against Amazon and Alibaba. Amazon and Alibaba are dominants in the digital space. You get on your phone, you get on your computer, you browse some stuff, you order it, it shows up on your door. With the case of Alibaba, unless you’re dealing with AliExpress, where you can buy small quantities of stuff, I’m pretty sure that Alibaba typically sells products in bulk, so that’s also kind of limiting.
It doesn’t really address that fact that a lot of transactions still happen face to face. You still have to go to a store to get stuff or a store has to deliver things to you. There’s still a lot of local retail going on that Amazon is obviously trying to break into with its Go stores and with the acquisition of Whole Foods. That Alibaba doesn’t necessarily have a foothold in, at least not in the United States. It’s a really big field, and I think that companies like Walmart, companies like Kroger by combining their brick and mortar footprints with digital tools and the internet, can definitely try to create a more hybrid and varied retail environment or ecosystem for themselves and for their customers, that Amazon and Alibaba will have a much harder time actually achieving without buying a lot of property.
Daniel Newman: Yeah, I think that’s definitely right, but I think the bigger premise is, are we going to actually see this migration? Are partners going to come together and successfully provide even meaningful competition, which Fred, leads me to kind of, I mentioned Microsoft a few times. They seem to be the company looking to capitalize on companies that sort of feel vulnerable because of AWS. They feel they don’t necessarily want to hand their revenues over to the same company who’s aggressively putting them out of business day in and day out.
You heard about Microsoft, Walmart, I mean, Walmart’s partnership with Microsoft follows their acquisition of Jet and a whole bunch of other eCommerce efforts that have kind of fallen flat to be completely honest, and this is how I see it. Others that are in this space, IBMs been doing it, they’re kind of trying to create these partnerships with maybe bigger retail players, and saying, “Hey, we can give you some technological ways to compete.” Are these partnerships enough? Are they close enough to create meaningful competition?
Also, just to put these retailers on a level playing field, where both through their digital and in-store experiences, they’re going to have the chance to meaningfully create competition, especially before Amazons migration towards brick and mortar gets bigger.
Fred McClimans: Right, well, I think there are probably three ways to approach this. There’s the digital experience, there’s the in-store retail experience, and then there’s sort of that combined digital, in-store experience. That’s where we’re seeing a lot of these partnerships and a lot of the technologies really coming into the forefront right now. I mean, Microsoft has a great tactic here, a split tactic similar to what Amazon does. I mean, Amazon, they have their AWS division that is providing the majority of their earnings, and is just pervasive throughout the world. Then they have their retail, whether it’s online or the brick and mortar retail operations that are competing there as well. Microsoft has approached this with both weapons here in their hands. Microsoft Azure partnerships that are targeting customers that, as you put it, they don’t want to lose to Amazon twice. Using Microsoft’s cloud resources is a great way to kind of poke back at Amazon. Then Microsoft also has the technology that they’re working with people like Kroger to embed in the store, to actually sort of improve that in store digital experience.
The interesting thing in all of this is, Olivier, you mentioned Alibaba and the fact that their primarily a B2B bulk kind of shop. Their Fresh Hippo, I’m not sure if it’s Fresh Hippo, Fresh Hippo, however they’re going to pronounce is there, but their whole new retail technology experience that they premiered here at the show this week, it’s really impressive stuff. It’s targeting sort of a new approach to retail regardless of what country you are, what cloud service you use or anything like that. It’s all about highly personalized, immersive consumption in-store, so that every experience of every shopper, whether you’re going into a department store, whether you’re going into a grocery store, it is unique. It’s personalized, and it gives you the ability to kind of blend a lot of these things together, so that your shopping experience is now an experience that involves shopping. That’s sort of a different twist on this.
I think if you go back to just, quickly, Amazon Go, what it was doing, in my mind Amazon Go was less a model that Amazon would acquire 20,000 stores and implement. More a model where Amazon was trying to prove technology that they could then use to get to the Krogers and to the Safeways and the Giants and the Harris Teeters, and the Wegmans of the world. Alibaba, they’re coming at it from their approach. Microsoft is coming at it from theirs. I think right now it’s pretty much a wide open playing field.
Daniel Newman: Do you guys think that retailers will partner with Amazon at this point? Obviously they have their fairly significant eCommerce channels, where they sort of have your shops within Amazon. Do you think bigger retailers who have really kind of felt the squeeze primarily at the expense of Amazon’s ability to drive costs in pricing and logistics and basically the whole supply chain downwards margin wise? Are they going to buy in? If Amazon says, “Hey, we can put this Go technology in Nordstrom.” Or, “Hey we can make Go technology, just walk out technology run in Dick’s sporting goods.” Are these guys going to buy in? Or are the IBMs and the Microsofts and even Rackspaces, other companies that have the technologies, the cloud, the infrastructure, are they sitting a really golden opportunity to be the catalysts for these companies? Is there enough animosity, or do you think the retailers are just going say, “You know what? Whoever’s got the best, we’ll go with it, even if it is Amazon, who happens to be a very, very strong competitor to us,”?
Olivier Blanchard: I think so, yeah. I mean, if I were a retailer right now, if I were J. Crew, whatever, especially a mall-type retailer, not necessarily a grocery store retailer, I would probably look at this, yeah. If you can free up your human staff to kind of be shopping concierges for you, and enhance the experience that way in the store, and make the checkouts even smoother and pain free than it already is, I think there’s an advantage to that. The real question is whether the price of having access to that technology and implementing it is worth it for those retailers.
There’s one thing that you mentioned earlier, you kept repeating enablement, enablement, enablement, and that’s the key, right? These companies can come up with, whether it’s Amazon or anybody else, can come up with the best software solutions, the best end to end solutions. At the end of the day, it’s really hard to integrate that into a complex brick and mortar system that’s been around for decades.
From a cultural and logistic standpoint, even from a management standpoint, it’s kind of like reinventing the wheel from the start. What you’re dealing with and why we’re seeing so much friction in the retail space with the integration of these technologies, is basically an old dog new tricks problem. Where it’s really hard to get the leaders of the space in those companies to really buy into it, and not be afraid of it. They’re institutionally adverse to change and suspicious of it. To add another layer to that, what we’re talking about and what Fred was alluding to earlier with the difference between the digital space experiences and the digital enhanced retail experiences is, we’re really talking about an omni-channel experience. Which is the hardest level of integration between digital and brick and mortar that you can possible achieve. It’s the holy grail for retailers. I think it’s something that you’ve written about recently Dan, and I can’t remember if it was for Forbes or somebody, you mentioned omni-channel. That at the end of the day is what they have to achieve.
I think it’s much easier for companies that started out in digital, basically virtual retail to take their logistics, their automation, all of their systems and create retail environments out of the blue basically by using already the tools that they have. Than it is for existing retail outlets to integrate digital technology into their system.
Daniel Newman: Yeah, I think you make a great point. I’d love to linger and carry on, on this topic a little bit more, but I’ve got to move onto our fast five. Fred, I’ll give you the final word on this one.
Fred McClimans: Thanks, Dan. In this space here, I think we have to take a step back and when we’re trying to evaluate the tech players that are moving in here, ask what’s the problem they’re trying to solve? With Amazon, it’s that smaller convenience store, somebody walking in, grabbing a couple of items in their hand, and walking straight back out again. When you try and apply that to something like a larger department store or a grocery store, it doesn’t work quite so well because you have the whole packaging process. How do I then take the things that the person is getting off the shelf? Hundreds of things in a grocery store perhaps, and put those into a form factor and give that shopper the ability to kind of package and pack as they go so then they can leave? It’s a different kind of issue.
With Microsoft and Kroger, this seems to be more about the ability to actually adjust pricing, and better inventory control. In the fashion space, it’s AI technologies and how you can show somebody what something actually looks like on them, or better inform the sales associates here. As we move forward, there will be different solutions. I’m not sure anyone fits all at this point, but I think it’s actually a very exciting time for retail. I think retail can leverage a lot of this tech, regardless of the partner they choose here to actually reinvent, rethink, and bring some of that experience and operational excellence to their stores. With that, I’m done, it’s fast five time.
Daniel Newman: Yeah, I’m a true believer that there will be a retail renaissance. I do believe what I said about enablement, it really does come to those companies that choose to embrace the technologies and how it can change your business for companies that might partner with Amazon. It’s really I think, going to come down to them being a turnkey provider. All right, so let’s jump in to our fast five. Fred, why don’t you kick us off today, you’ve got a story coming out of Costco.
Fred McClimans: Yes, so Costco, interesting company. I mean, a lot of us shop at Costco. We’re members there, it’s sort of a growth out of the old price club bulk retail consumption process. Costco, they’ve moved well beyond that to the point where they are very competitive in many ways against some of the big box stores, and some of the grocery stores. Well, word comes out now that Costco is taking a look at potentially building, following a bit of the Amazon vein here, their own Costco video streaming service. We know that Amazon Prime Video has been very successful for Amazon, very successful for Netflix. There are discussions going on being led by and individual, Mark Greenburg, who reportedly did the same type of approach to Walmart last year. He tried to convince Walmart to target that middle America, or that lost consumer that’s not being addressed by Netflix or Amazon Prime Video.
It’s an interesting approach. Walmart decided not to do it at that point. They had already purchased a video streaming service way back, about seven or eight years ago that they’re going to focus on. For Costco, it’s interesting, because Costco has that membership model baked into the mindset of their consumers. I think they could actually pull something like this off if the decided to move into that particular direction. Highly tailored, highly customized, and in fact, I wouldn’t be surprised if Costco starts to think a little bit more like an Amazon in terms of retail. Really upping their online retail presence and perhaps offering additional services. Right now you can get everything from cruises to insurance through Costco. Video services might be an interesting mix for them, if they can find the right partnership to do it.
Daniel Newman: Yeah, if the chords keep getting cut, there’s going to be a big opportunity to continue to sell those services. We’ll come back to maybe another topic around Netflix that could make this even more appreciable for a cost savings focused consumer, who might use Costco as a way to buy in bulk to save for their household. Olivier, why don’t you jump in and tell me, now we talked a little bit about Microsoft already. Microsoft had a pretty good week for their corporate social responsibility, what’s going on there?
Olivier Blanchard: Well yeah, so Microsoft is kind of making all the scores and all the wins recently, from a business standpoint to a PR standpoint as well. The latest and really cool idea from Microsoft, is they realized that there’s crisis, especially on the West Coast, and especially around areas that host very big tech companies. That crisis is a home ownership crisis and to a certain extent, a homelessness crisis.
Microsoft has pledged $500 million dollars in an effort to tackle affordable housing. It breaks down into a little over $200 million dollars in grants that will go towards really affordable home loans for mid-range priced homes. There’s also a chunk of that amount that’s going to go into other grants that will be used to combat homelessness, and perhaps build low income housing for homeless people in the greater Seattle area. It’s a really cool move, I think it shows a very high degree of corporate responsibility, and of an awareness that very large companies need to give back to their communities and try to solve problems in their communities, as opposed to just kind of squeezing profits out of them.
In a way it’s a little bit of a dig at Amazon, since we’ve talked on the show recently about the new HQs at Amazon. Where essentially it’s very possible that these HQs will raise rents and home ownership prices in their respective areas. Those companies are also getting huge tax incentives from the cities that they’re placing these headquarters in. I think Microsoft, in a way kind of taking the lead and showing, “Look, this is the other way that we could do this, this is the way that we’re choosing to go as opposed to some of our competitors.” It’s clever, it’s good, it’s positive, and I’m all thumbs up for it.
Daniel Newman: Yeah, it sounds really solid, and I actually pointed out, I tweeted out about it. I’m like, “These are just the things that someone needs to be tackling.” Unfortunately, I wish I would be done at the government level, we can’t even seem to turn day to day operations on, let alone focus on solving bigger problems. It is good to see these highly profitable, successful companies say, “Hey, we might have a solution for that.” I’m going to keep an eye on that, and let’s keep our fingers crossed just in case I ever want to move out to the Bay Area. That way I don’t have to live in a one bedroom shanty with all five of us, for a million dollars of course.
My fast five is about an announcement of a new partnership, so kind of following my theme and topic today of partnerships. This is with IBM and Vodafone, and this is primarily a European focused partnership that has a value of nearly half a billion dollars. The two companies are basically coming together with a focus on being able to deliver around the potential of multi-cloud. You have this challenge, IBM doesn’t really offer integration services anymore. Companies like Vodafone, that are primarily known for their cellular services actually have a fairly comprehensive set of services across Europe related to IT, cloud, 5G, AI.
In that classic sense of two companies coming together and announcing something in a press release, the real question that came to my mind is, “Is there a real synergy here?” The bottom line for me is, I think these partnerships are exactly the types of investments that need to be made between It services providers, and industry leaders like IBM who have a lot of solutions, but tend to sometimes get stuck in figuring out how to get them to the market. With them being less focused on ThinkPads and X86, and having products that are much more difficult to package and sell, a partnership with a company like Vodafone, I think is a successful one. At least it has the potential to be, and like all other joint ventures, the thing to watch here is going to be how invested did the two companies become in truly carrying out this partnership, and what are some of the big early wins? Typically, in a JV when there’s early wins and early successes, both companies start to throw more weight behind these partnerships, and the long term successes become greater.
I want to kick it back over to you Fred, for your second fast five. I believe on this one you are going to talk about a new switch. You did some little press junket talking to our friends at TechTarget about this new Huawei switch with AI built in. You came away somewhat impressed over a controversial company with a very cool product.
Fred McClimans: Yeah. When it comes to network switches, the model of bigger, better, faster, cheaper, however you want to put that, that has always been important in this particular industry. Huawei has recently launched, which will actually be shipping in the second quarter of 2019, their cloud engine 16800. Which is just about biggest, baddest data center switch that has ever been built so far. The interesting thing about it here is, not that they’ve been able to cut power consumption in half or that they are aggressively pursuing a lower price point, or even the sheer size of 400 gigabyte ethernet ports in the single chasse here. It comes down to the software and the AI inside.
Now, when it comes to switches, we know it’s all about data. It’s all about machine learning off the data that everything that flows through those switches. That’s very important, and every switch vendor out there, from Cisco to HP to Dell to Juniper, take your pick, they all have machine learning and data crunching systems that they use. In this case, Huawei has done this with their own AI chip, their own ascend technology. Baked it directly into the system so that from the very get go using models that they’ve accumulated or built off their existing implementations, you can actually get a smart data center switch that, not only has the ability to intelligently, now I’ll use the phrase here, at the edge of the switch itself crunch the data and adapt. Also, is a system that inherently should become better performing overtime. The more it learns about the network, the more it learns about where the faults are. The more it learns about devices that maybe getting ready to fail and sort of predictive maintenance situation. It can address those a little bit faster here.
The other thing is that they’re also baking the AI into the control of the switch itself. Again, I mentioned the edge, similar to edge computing. What we’re talking about here is really bringing AI and machine learning capabilities, and the ability to generate insights on a switch much faster and closer to where the data is actually being generated. It’s a really cool product. I’m looking forward to seeing how it performs. The biggest challenge is that Cisco dominates the switch market over 50% of the market share. Huawei’s probably in 8-9% global market share and I don’t see them moving much beyond that, because they simply can’t sell into most of the major markets. They’ve got China and parts of Asia, and increasingly that’s all they’ve got. Interesting switch, interesting challenges ahead, but definitely worth noting. Like I said, we’re expecting every other vendor to follow suit with this at some point in the next 12 to 18 months.
Daniel Newman: Well, if they are indeed spying on other countries, they should probably stop that, and then they could sell their stuff.
Fred McClimans: Yeah, you know there’s an interesting component here on that Dan on the spy side. One of the challenges with AI is that it becomes a black box of sorts. We don’t know exactly what the AI engines are doing because they haven’t been programmed to do explicit things. I’m sure at some point somebody will bring this up and say, “Well, the fact that they’re using their own AI chips inside, and not a Google TensorFlow switch or an envidia, potentially causes additional risk. Who knows, but it’s a really cool product.
Daniel Newman: I don’t think any additional risk, I don’t think there’s any appetite whatsoever for additional risk. We’ll have to make this a topic and a headline for another day Fred, because this is just the tip of the iceberg. Olivier, speaking of tips of iceberg, whether climate and sunnier days, Google is doing something on solar power. Talk a little bit about that.
Olivier Blanchard: Yes, and it’s not just Google. One of the big stories that caught my eye this week is that Google, in case our listeners don’t know, has a plan to purchase 100% carbon free energy for a lot of its data centers. Actually all of its data centers ultimately, and so Google is pledging to run its US data centers, let’s start with that, with 1.6 million solar panels. That will probably increase at some point. I just have to applaud Google for committing to actually what is it, a smart investment I think in solar and renewable energy to power its large amounts of data centers.
They’re not the only ones. I did a quick little bit of research. There’s also another group right now of retailers by the way that are doing something similar. It’s called the corporate renewable energy aggregation group. Doesn’t exactly roll off the tongue, but then it’s doing something similar. Among the group are the Gap, Coke center price, Salesforce, Workday and Bloomberg. It was interesting to see that the Gap is investing in renewable energy as well.
This could become a trend, we’ll see, we’ll see what the other companies do. Whether or not it does, I think it will be, it’s still a big, big step in the right direction and I think it’s great.
Fred McClimans: Olivier, do we know where they’re sourcing the solar panels from?
Olivier Blanchard: Yeah, the sun. Oh no the panels themselves, right, I don’t know. You know I didn’t look into that, I have no idea. Hopefully it will be US companies, right?
Daniel Newman: All right, so let’s move on to the Tech Bite section and my God does Tech Bite sometime, my gosh are there a lot of things to talk about. In over the last few months, we’ve seen us talk quite a bit about well Facebook, Apple, government. Today I want to talk about something a little bigger that’s going on. It was the collection of data breaches that was announced that came somewhere in the range of what was it, almost three quarters of a billion records on the dark web that were discovered by some security researchers this week.
Fred, I know this stuff fascinates you because I’ve seen you go down the wormholes. What is going on here? This wasn’t a new breach, and it wasn’t necessarily a single incident like with Mary odd and some of the others a target where it’s like, “Oh this company got breached, look out, what’s going to happen?” My take on this is, this is basically a some type of organized effort among a black hat group of hackers who put together the compilation of all the data that has been hacked in these major breaches over the past few years and just posted out there on the dark web.
Is that kind of what you’re seeing? Or what are you seeing that is happening? Why was this so much newsworthy other than the fact that it’s just a huge number of records?
Fred McClimans: This is kind of unique and something that I think actually has a learnable lesson here at the end. In essence somebody dumped a load of data out there called collection number one, posted on the mega cloud service. In this data dump it has 773 roughly million email addresses and 21 million passwords. The interesting thing here is that for all those email addresses, there were only just over 21 million unique passwords. Highlighting the fact that everybody tends to reuse passwords all over the place. Most importantly here, this data looks like it was accumulated over a period of about 10 years. Literally somebody has been scanning and throwing through the dark web and just accumulating all of these password breaches that had been disclosed or shared in some way on the dark web.
What we have now is a situation where 10 years of passwords, 10 years’ worth of data on what passwords people use and how and why is now available for people to crunch into. It boggles the mind when you think about the sheer numbers here, and the fact that this was [inaudible] collection number one. There is a site out there that you can take a look at. I think it’s have I been pwned, P-W-N-E-D, where you can actually go and you can actually key in your email address to see if you are in this list. There’s also a really useful service that allows you to type in a password and see if it is one of the 21 million passwords that has been previously used by somebody in this shared list.
As you’re looking forward the learnable lesson or maybe the value here is, check online to make sure your particular password has not been taken by somebody or is not still associated with your account. By all means people, change your email passwords. Change your website passwords. Change your application, your banking password, everything. Those have got to be changed on a regular basis or go with some type of password management tool, because this is just getting absurd at this point.
Daniel Newman: Yeah, I’ve used both Onepass and PassPack with a certain amount of success. I will also say that I think we’ve all been guilty at times of being a little bit too liberal with our passwords. Maybe not being vigilant enough at keeping tabs when hacks take place. Has our data been breached, what’s been breached? Frankly at this point there’s too many of them to keep up with. There’s just too many of these hacks and it’s like, if you ever sat down and thought about how many things do I have that have a password that I go to online, I wouldn’t doubt if I have 500,000 different passwords out there on the web.
I stopped using admin, I stopped using password, I stopped using God. Now I typically use Fred McClimans exclamation point, exclamation point. If anybody wants to try that, if you’ve got any of my usernames, it’s Fred McClimans exclamation point, exclamation point.
Fred McClimans: I’ve got to try that as well, because I use Dan Newman exclamation, exclamation point.
Daniel Newman: You’ve got to be more creative.
Fred McClimans: Yeah exactly. The good people at Avast.com they also have a password checker. They claim to have compiled an archive of nine and a half billion stolen passwords. I’m not sure what over period of time that is, but they have those. They have what they say is an anonymous service that allows you to check to see if your password is floating out there somewhere in the web.
Daniel Newman: Here’s a question for you Olivier and just from your experience. When you are asked to go to a site to check to see if your email has been part of a data breach, especially a site that like maybe a security researcher, ‘hacker’, white hat maybe hacker, but still a hacker to some extent that’s doing research. Is there any risk do you think or what do you think that whole process? It kind of reminds me of when that adult affair of Ashley Madison’s site got hacked and they created that page for everybody to go in and check. It’s like what kind of a list really just create, like this is a list of guys that know they might be bleep, pardon my language.
Fred McClimans: Now I’ve got to flag our podcast as including adult content.
Daniel Newman: No, someone is going to bleep that out later. Olivier what do you think? Should people run over in your take and flag their email in to see if they’ve been pwned or what’s your take on that whole process?
Olivier Blanchard: You know feel free to disregard my professional advice here, but I think that whenever an unknown site sends you a link that you don’t recognize. Even when you’re browser pings you and tells you that there might be a security risk with that, and particularly if it’s in Russian or if the email originated from a string of emails from a Nigerian prince, I think that you should totally click on unknown links. Especially when the site asks you for your email and your password to see if they were part of the database, I think that you should definitely go ahead and share that information.
No, I don’t. All of that was sarcasm in case that wasn’t clear.
Daniel Newman: This is now a public service announcement of what not to do. Thank you very much Olivier Blanchard.
Olivier Blanchard: Just change your password regularly that’s all.
Daniel Newman: Change them regularly or create really hard ones by the way. The one thing that is true, and I’ve done a unofficial statistically irrelevant study on breaches, but passwords are usually encrypted. In most hacks when you actually read into the depths of what was hacked, it is pretty rare that full passwords were part of any data dumps. Not never, it’s just more rare. A lot of times it’s going to be more demographic, it’s going to be addresses. I’ve seen more credit card information than actual unencrypted passwords. It does happen, but if you have good passwords, part of the reason they don’t get hacked as PassPack and pass because they’ve very complicated passwords.
Anyways, let’s move on wrap up the show here. I’ve got a crystal ball. Fred earlier you were talking about Costco and you were talking about video services. This week Netflix announced a huge jump in their prices. If you all remember there’s only a few years ago they announced their first big price increase and people went ballistic, they went crazy.
First of all there was a huge, their stock crushed momentarily after that announcement. People thought there was going to be an exodus of subscriptions and they raised their price. Actually was with little incidence and then ultimately the growth curve, so they had a little plateau and then the growth actually went up. Everyone charged more, then more people subscribed. What were they doing? Well that was kind of that peak of them increasing their organic and their in-house content, improving their shows and content qualities and people paid more, more content available.
Netflix has come a long way, the content has come a really long way. Of course they have more competition than before. Amazon Prime along with several others that do have fairly comprehensive Hulu, libraries of content. Seems like everybody these days has a streaming or dedicated streaming offering. Your take gentlemen? Is this next bump in price, is there elasticity here? Is there any risk that if pricing goes up again that Netflix will see any attrition of customers? Or is this like basically Netflix just isn’t charging enough and they can raise prices as much as they want and everything will stay the same? Olivier I’ll let you take this one.
Olivier Blanchard: Yeah, no, I don’t think that the prices can keep going up, unless Apple buys Netflix and then they can try. No, I think that right now that the value of Netflix is much higher than it was last time there was a price increase scandal. No, I think you get a good value for it. I don’t think people are really going to complain that much. It’s a nonissue I think that Netflix could continue to raise their prices every two to three years, as long as it’s within the acceptable ranges of price increases and people will be happy with it. As long as they keep also providing really, really good entertainment, which they still do.
Fred McClimans: Yeah. They’re spending billions of dollars on content creation out there. They’re definitely demonstrating value. Dan, in terms of this particular price increase, I don’t think this has any appreciable impact on their service. It may have some, but more importantly it’s going to have a positive impact on their bottom line and on their earnings. I think that’s what has the investment community a little bit more excited. Everybody is watching, not just Netflix, but no pun intended with watching here. Concerned people are watching how this increase in the monthly minimum subscription fee for everything that is now accumulating, how that is adding up.
To a certain point in time, we do get to a situation where people do need to decide. Are they going to subscribe to cable? Are they going to subscribe to a YouTube OTT cable or a TV situation? Are they going to keep both an Amazon Prime subscription and a Netflix and maybe a Hulu subscription? All these subscription costs they’re adding up are mobile subscription, the web services subscriptions, even people who are paying yearly for Costco subscriptions, it’s adding up. At a certain point in time, we simply price ourselves out and people need to start choosing one over the other. Right now a lot of households it’s Amazon Prime Video, it’s Netflix and it’s Hulu and maybe one or two others out there. That has to end. I think we’re getting to that point where maybe that realignment starts to occur in the next 12 to 18 months here, especially if the economy globally starts to slow down and continues to slow down. Maybe we see a little bit of recession indicators out there as well.
Good move for Netflix right here, but I think it pertains some bad results further down the line.
Daniel Newman: I think you guys both make great points. I will say I did do a little digging and I did find a CNN business article that did come out. They actually had some researchers, a company called MAGED that did the research. What they showed is that people are willing to subscribe to six different streaming services and spend about $38 a month for them. Which based upon Netflix raising their rates from about eight to nine or 13 to 15 I think on their two main service offerings. What their research actually found was that people are more likely to unsubscribe to something else and keep Netflix. Of course that’s the ‘polling’ on this price hike, and we’ll have to see what the actual results are.
Now, again we’re not a stock show, we’re not recommending, but interestingly enough I did do a quick poll up of Netflix as we were talking. The stocks down 4% right now for the day. It is taking a real beating right now, the company is burning through cash and struggling to generate the profits that people are looking for them on the streets. I guess if the elasticity is strong and people don’t leave, then that one to $2 per head is going to drive a ton of extra cashflow and profit into the company that can either be reinvested or just applied to the bottom line or a dividend.
My prediction, my crystal ball is I think people will be unsubscribing from some extra FOX sports special that gives them access to one game or something a week for $4.99 a month before they’re going to ditch Netflix over a dollar or two. That wraps up this week, that wraps up this show, Futurum Tech Podcast, another week in the books. Great conversation, covered a lot of ground. Gentlemen, appreciate it.
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Author Information
Daniel is the CEO of The Futurum Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise.
From the leading edge of AI to global technology policy, Daniel makes the connections between business, people and tech that are required for companies to benefit most from their technology investments. Daniel is a top 5 globally ranked industry analyst and his ideas are regularly cited or shared in television appearances by CNBC, Bloomberg, Wall Street Journal and hundreds of other sites around the world.
A 7x Best-Selling Author including his most recent book “Human/Machine.” Daniel is also a Forbes and MarketWatch (Dow Jones) contributor.
An MBA and Former Graduate Adjunct Faculty, Daniel is an Austin Texas transplant after 40 years in Chicago. His speaking takes him around the world each year as he shares his vision of the role technology will play in our future.
