🎥 How Netflix launched Roku

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The Hustle

McDonald’s was founded in 1955. But somehow, it is only now launching a loyalty program.

The fast-food chain is doing so in an attempt to lock in all the digital users it gained during the pandemic. No word yet if they will retroactively include all the Big Macs you’ve ever eaten.

The big idea
Roku gif

Roku was spun out of Netflix and is now pursuing the streaming giant’s playbook

Back in 2008, a tech exec named Anthony Wood convinced Netflix CEO Reed Hastings to create a streaming video box called Roku.

After less than a year, Netflix spun the product out, keeping a ~15% stake.

According to CNBC, the company — which manufactures streaming dongles and partners on smart TVs — now serves 50m+ Americans.

In recent years, Roku has been well-placed…

… to serve the plethora of streaming services: Netflix, Amazon, Disney+, Apple, etc. It guaranteed distribution for these competitors as a neutral 3rd party.

Roku isn’t in the hardware business, though.

The company uses its privileged position to make money from selling channel subscriptions and advertising. In 2020, these “platform services” made $1.3B vs. hardware revenue of $510m, per CNBC.

The next big revenue stream: content

Netflix famously changed its fortunes when it started making its own original content, starting with “House of Cards” in 2013. By owning the IP, the streamer became less beholden to the (now rival) studios.

Similarly, Roku has launched The Roku Channel and recently bought the content library of now-defunct startup Quibi to fill it.

The content itself is not meant to be competitive with the Netflixes of the world…

… because Roku wants to sell ads, not subscriptions

This means the quality bar can be a lot lower. As a point of comparison, Roku will spend $1B+ on content this year while Netflix will drop $17B.

Either way, the current playbook is working like a charm. The stock is up ~5x since pandemic lows and the company is worth $50B+.

Don’t tell Netflix, though: It sold its Roku position for $7.7m in 2009… that stake would be worth $7B today.

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SNIPPETS

Peloton Tread+ users are threatening to sue after the company started charging $39/month to “Just Run.” The treadmill itself is $4k. #ecommerce-retail

Here’s The Hustle’s Adam Hayes with 12 best practices for running Twitter ads. #hustle-picks

How much do you trust AI? That’s what The National Institute of Standards and Technology wants to know. #emerging-tech

Twitter will soon get paid audio events via Ticketed Spaces. And Super Follows, which allow access to paywalled tweets. #big-tech

The FTC is on deck to conduct the antitrust review of Amazon’s plan to buy MGM. #big-tech

Gen Z and young millennials are ditching traditional investments for crypto and meme stocks. CNBC explores why. #fintech-cryptocurrency

A group of legal experts is updating a NATO-sponsored manual that provides guidance on international hacks. #privacy

Sustainability bull’s-eye? Target vows to create zero waste and have net-zero emissions by 2040. #clean-energy

Making Music
piano and headphones

Songtradr raised $50m to help it become the leading B2B music marketplace

A good sync placement can become iconic. “Don’t Stop Believin’” is forever linked to The Sopranos. Dirty Vegas’ “Days Go By” blew up after it was featured in a Mitsubishi commercial.

And now, LA-based Songtradr, founded in 2014, is positioning itself as one of the biggest B2B music marketplaces. It licenses tracks from its library of 600k+ artists and owners to media and brands, including Netflix, Volkswagen, and Google.

The startup announced a $50m funding round…

… bringing its value to $300m+. The new funding will go toward new staff and products, per TechCrunch. It will also go toward more M&As, of which there have been many in 2021:

  • MassiveMusic, a creative music agency that helps brands figure out their sound
  • Cuesongs, a UK-based music licensing company
  • Washington-based Pretzel, a licensing company for livestreamers
  • Tunefind, a database for finding songs used in movies, TV, and games

How it works: artists sign up for an account…

… and upload their music, which brands can pick and choose from.

Musician Chasing Jonah told The Los Angeles Times she licensed a song to the show Lucifer for $3k (newer artists typically make $0-$5k for TV syncs). After that, she found it easier to book gigs and find producers.

On the other side, Songtradr offers help finding the right song, but anyone can use its platform to browse tracks in a variety of categories.

Which is kinda fun — even if you’re not a music supervisor.

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New Tech Alert
Stripe x Identity logos

Stripe rolls out a super-fast ID verification tool

Stripe is on a roll.

The payment platform that recently became Silicon Valley’s most valuable private company at a $95B valuation has a new product: Stripe Identity, which lets businesses verify users’ IDs in ~15 seconds.

But it’s not exactly new

Rob Daly, head of engineering for Stripe Identity, said via a release that “businesses have been asking us for an easy and fast way to verify identities online.”

Stripe Identity is essentially the same tool Stripe built to verify its own users.

Only now, businesses of any size can use it too: Stripe tested it with partners — including Discord and venue rental site Peerspace — and the tool has launched more widely in 30+ countries.

This rollout comes on the heels of Stripe Tax, a product to simplify global tax compliance that dropped earlier this month.

How it works

Businesses can incorporate Stripe Identity into an existing flow or send out a verification link:

  • Customers take a photo of their government ID and a live selfie, which Stripe matches via machine learning.
  • Businesses can also ask for other info, which Stripe checks against 3rd-party records.
  • Customer info is encrypted and sent to Stripe, so businesses don’t have to store or manage it themselves.

But even businesses that don’t take payments need to verify user IDs, such as to prevent spammy bots… which means the real benefit of Stripe Identity is that you don’t have to “select all the squares with crosswalks in them.”

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Podcast

MFM is having unintended consequences…

“I have like this chip in my brain now that has to get to the root source of every product.” — Shaan Puuri

Sam and Shaan continue to deep dive the businesses and industries that are low-key winning big time. They can’t help it.

The bites of episode 192:

  • The bulletproof business of greeting cards
  • Why expecting mothers crave the Bump Boxes subscription
  • Chick-fil-A’s tech stack changing to keep up with 3x the expected demand
  • A rant from Shaan that Sam calls one his most valuable takes on money

And a helluva lot more.

🎧 Listen here →
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Chart of the day
Electronics system as a part of car cost over time

“Why software is eating the world” is the title of the widely referenced 2011 article by venture capitalist Marc Andreessen.

One industry where that is most certainly true is automotives. Per IEEE Spectrum, a Ford F-150 has 150m lines of code controlling everything from cruise control to emergency braking.

This is why the shortage of semiconductors is greatly impacting car deliveries.

By 2030, semiconductor-based electronic systems are projected to make up ~50% of a car’s cost.

Let’s hope there aren’t any semiconductor shortages by then.

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