Mark Gurman Says Apple “don’t even know for sure” What Project Titan Is Building

The following is a transcription of a bonus episode of the Techmeme Ride Home podcast. Listen below, or subscribe here: (Apple Podcasts | Google Podcasts | Spotify |RSS)

Brian McCullough: [00:01:15] Before I go into some of the things that you did this week, let’s talk about the services event. We’re pretty sure at this point it’s going to be both the TV service and the news service as well, like both are going to be probably demoed?

Mark Gurman: [00:01:35] That would make a lot of sense to me — to have one event to announce their two big services launches for this year. And it’s important to note these are the first two major services that Apple is going to be launching since 2014 and 2015 when they did Apple Pay and Apple Music for the first time. So this is quite the undertaking for them. This is them saying, Hey, we can do big services too, just like Netflix, Amazon, Google, et al. And so they want to make a big deal out of it. And that’s why you’re going to see this splashy launch event.

Brian McCullough: [00:02:07] What are you hearing about this whole floated 50 percent revenue share thing? Like do we know exactly what Apple is saying to these publishers to justify that percentage?

Mark Gurman: [00:02:21] Apple’s pitch from their perspective is pretty simple. It’s the same pitch they’ve been making all along. From their perspective it doesn’t really matter what the cut they’re taking [is], but what their pitch is, is the amount of volume that the news publishers and the magazine publishers will be getting long term because of this initiative. It’s very similar to the pitch they had to the music industry two decades ago about the royalties they were going to take. It’s basically, you can take your percentage and our big distribution model to all our customers, or you can let your stuff get pirated. That was basically their pitch back then. They’ve tried this with the TV folks in the video industry for many years and trying to build an over-the-top bundle type of TV service. Obviously it didn’t work out there. They’re betting that it’s going to work out with the news publisher industry. And I guess the benefit they have there is that there is an app called Texture that Apple bought at the beginning of 2018 and that already had a bunch of magazine deals in place. So this would be Apple sort of continuing that and basically the magazine publishers would be asked, Hey, do you want to be part of it, now that this is going to be the service built into Apple? Or do you want to pull out from that? And so their pitch — it does make sense from their perspective, but obviously from a news publisher perspective, 50 percent is a lot.

Brian McCullough: [00:03:47] Well, what’s your take on… Some people think that they’re floating this 50 percent figure as a negotiation tactic so that like it really in the end it’ll end up being 60/40 or 70/30 or something like that. Like I have heard too that there are already people that have signed up for the 50 percent thing. But is it a possibility that this is sort of like a PR thing floated to try to get the New York Times and everybody else onboard as well?

Mark Gurman: [00:04:14] I don’t think from Apple’s perspective, no. I think more so from the news publisher perspective that it’s possible that someone floated that 50 percent number to show the audacity or how outrageous it was, in hopes that making it public would would push Apple to reconsider. Taking something public makes the clock start ticking. The Apple event date being out there has the clock start ticking. They have a deadline for when they need to get this thing done on both sides, right? The news publishers want to be part of the initial launch. And Apple obviously wants that initial launch to happen with as many partners as possible.

Brian McCullough: [00:04:49] On the TV side, the TV service, how serious do you think Apple is — how committed to the original programming part of this equation? Because obviously that’s the other thing, is maybe certain TV subscription partners won’t be involved in the launch of that. So how much in your opinion is it: Well, no, just come to this one app for all of your TV needs, versus, How much of it is Apple being like, No, you’re going to come for the great content that we’re going to give to you as well?

Mark Gurman: [00:05:25] Right. It’s a long time coming. I think this is something that they’ve really [put] their money where their mouth is. [00:05:30] I know they’ve spent between maybe one and three billion dollars purchasing original movies and TV shows that they want to make part of it. [7.2] And basically it’s a three-fold initiative. And it’s all — I’ll just explain a little bit about how how it’s going to work. So you have the TV app, you have that on your Apple TV, you have it on the iPhone, the iPad, and the iPod Touch. Eventually I bet they’ll probably bring it to the Mac as well. And it’s basically three fold.

Mark Gurman: [00:05:57] One, you have the integration with applications’ existing programming. So you have your ESPN app. You have your NBA app. You have various other apps that you would watch TV content through where you’re logged in through your TV provider, whether that’s Dish, DirecTV, Spectrum, Time Warner, et cetera, et cetera, or whatever the other providers are across the world. That launched at the end of 2016. They expanded it with sports and other things in 2017. They did a little bit more across 2018. So that’s phase one, that’s already been out there, that’s already in use. I use it. That’s the app integration.

Mark Gurman: [00:06:33] Part two is the integration with subscription bundles. So we’ve talked about HBO, we’ve talked about Starz, some of those other programs, paying a flat fee, a bundle, to get all of that content inside of the application. That’s part two. That’s what we’re going to see this year.

Mark Gurman: [00:06:50] Also there was part three and we’re going to start seeing the little bits and pieces of that into the summer, perhaps in May, throughout the course of the year. And I think this is going to be a rolling type of thing that we’re going to see probably on a weekly or monthly basis, sort of like Netflix. That’s going to be Apple’s original programming. [00:07:09] They have probably fewer than 10 original movies locked and loaded. In development, they have TV shows, dozens of them, I believe between two to three dozen, on the docket. They have a few of them where they already have one season finished. [14.6] So the original content is going to be strong too.

Mark Gurman: [00:07:26] So it’s three things: it’s integration with existing TV channels and apps, you have the subscription bundle with Starz and some of those other providers, and then you have Apple’s original content. And that’s what the TV app is. Basically all forms of video and movie content all wrapped into one place. On top of that you have your iTunes movie library in there as well. So maybe you can consider it a four-part initiative.

Brian McCullough: [00:07:51] Real quick, before I move on to specific scoops you had this week, what the heck is going on with the Apple certification program story? Because, they’re so usually fastidious about things like this. Locking down what can and can’t be done on their stuff. How is this weirdly some little angle of it that they were just so lax on? Do you have any do you have any insight on that at all?

Mark Gurman: [00:08:18] Yeah, so this is something that’s been going on for several years where developers have been using Enterprise Distribution. for Those unfamiliar, there’s basically two ways for developers to distribute apps. One is via the App Store, two is via the Enterprise Program. The point of the Enterprise Program is to be able to distribute apps for employees at your company. So not selling them on a wide basis but just giving them for phones in your company. So for example, Google uses it for certain applications like their employee cafe menu, or the bus app, the other companies use those as well. Apple has several internal apps. Every company you could think of has those internal apps. So that’s what it’s for. But some developers — or people — have been using it as a way to distribute applications to the outside world. There’s plenty of companies, Sonos has done this, where they’ve used [Enterprise Distribution] as a beta app. And this really blew up when Facebook was found to be using this program in order to distribute that research app. And then you see the pile-on of other people finding — .

Brian McCullough: [00:09:20] Oh now it’s porn and fake Spotify apps and things like that. But my question is, how come they’re usually so locked down on everything and fastidious, and in this particular case they apparently weren’t minding the store at all?

Mark Gurman: [00:09:38] You know, I don’t know if it was a big deal to them. I mean obviously they knew about this. People who’ve been following this closely knew this was a thing and there was really nothing wrong with it until it was found to be used for nefarious purposes. Right? So I’m sure they knew about it but until it was being used for nefarious purposes there really wasn’t a reason to shut it down.

Brian McCullough: [00:09:57] That’s really odd to me. Out out of character, I guess. The —

Mark Gurman: [00:10:02] — Because they’re not losing money on this, right? [00:10:03] These are free apps. It didn’t seem like people were selling those apps or building their own app stores, right? I’m sure if you developed your own App Store, you know, the Techmeme App Store where you sold bunch of different apps to be an app of your own. [13.1] You know, Apple would be losing out on a percentage here. But it really wasn’t impacting them from a financial perspective. But when they saw that it started to create — that people were using it for nefarious purposes, like you mentioned the spyware applications, the Facebook research app, et cetera, et cetera, Google had one too for some time. That’s when they had to take action.

Brian McCullough: [00:10:37] Okay. So I actually did not mention this or didn’t get a chance to mention this this week. But you had a scoop about Apple self-driving car initiative, what are called disengagements. The leader, Waymo, the human has to take over only every 11,000 miles or so, versus Apple’s cars apparently — because they have to report this to the California DMV — and the driver has to take over every mile or so. I don’t want to ask you about that specifically. More generally I still can’t wrap my head around Project Titan at all? Like it’s this giant gargantuan R&D suck for Apple. And sometimes it’s like they’re serious about it and we might actually get a real like Apple Car someday, and then other times it just seems like a almost like a money suck, black hole. So how do you think about Project Titan and what Apple is really doing there?

Mark Gurman: [00:11:37] I think they don’t even know for sure. I think they’re not certain what the end game is, but I think they’re giving themselves multiple opportunities to choose from different directions. [9.8] One direction they could use is taking that autonomous technology, applying it to something else like a drone or some other device down the road. They can take it and go back to building a Tesla competitor or a car itself, or they could license that technology to a company like Uber. There’s many different directions they can take this, and I think they’re not really sure what they’re going to do with it yet. But I feel like as a major technology company in 2018, 2019, it would be sort of irresponsible for them to not have something ready if they indeed need to enter the self-driving car space.

Brian McCullough: [00:12:25] Well similarly with AR, again another huge R&D suck. You had the scoop this weekend that the big iPhone marketing honcho is moving over to market for AR products. Which would make people think, ah, we’re going to get a hardware product, a hardware AR product maybe someday. We’re going to get some sort of Apple Glasses or Goggles or something. But this is another project that seems sort of opaque and hasn’t produced anything yet. So what’s your take? Is this again, they’re just feeling around in the dark to see where this technology goes, or do you expect there to be some sort of actual hardware product for AR?

Mark Gurman: [00:13:04] No I think [with] AR, what they’re doing there is pretty much the exact opposite of what they’re doing with Titan and their work on autonomous vehicles. I think they have a very crisp, clear plan about what they want to do. And they seem to be executing it well. I mean, phase one was promoting the heck out of AR. You saw Tim Cook talking about Augmented Reality as much as possible, sort of putting that technology on the map instead of VR. Then you ARKit in 2017. The ability for developers to more easily write AR apps, ARKit 2 in 2018. [00:13:36] We’ll get ARKit 3 at WWDC — some cool stuff they’re working on there. [4.7] That’s the software side, that’s on the iPhone and the iPad.

[00:13:45] Phase two of that, you saw the Animojis, Memojis, some AR hardware in the latest iPhones. Then next year in 2020, they’re going to have a new iPad around probably spring WWDC, it’s gonna get pushed back to the fall of 2020 with the 3D AR camera. Likewise the next iPhone for 2020 with a 3D AR camera. [00:14:08] And then probably the year after that, or two years after that, you’ll see the AR Apple headset, which I believe is going to be sort of a blend of AR/VR, more like the HoloLens and Magic Leap. That’s going to be when they have their dedicated AR hardware product. [14.3] And there’s a history of them appointing important marketing people to new categories when they’re about to take a leap in that section. For example Michael Tchao who runs marketing for the iPad. He worked on the Newton way back in the day in the 80s and 90s. They brought them back right before the iPad launched to oversee iPad marketing. Before the Apple Watch came out, they reassigned a marketing executive named Stan Ng who did marketing for the iPod for a very long time, transitioned into the Apple Watch and you see all the Apple Watch ads and the marketing happening there. So in terms of marketing products and assigning people to it, and in terms of when they’re going to make those assignments, they seem to have a pretty clear pattern for when they’re doing it and they seem to know what they’re doing in that regard.

Brian McCullough: [00:15:09] This will help me if you’ll indulge me a little bit — ask you a couple questions about your process, because what you just described — you know you’ve almost been covering Apple for so long that you’ve got a really deep sense of the long arc of history of this company. So when you hear little bits of chatter and things like that, have you been doing it so long that you have a sense now, well this rings true, and that doesn’t ring true based on everything I’ve ever known about Apple — I don’t think they’re going to do this but they would do that. Do you have like a deep nose for that sort of thing right now?

Mark Gurman: [00:15:40] You have to be able to anticipate what they’re going to do before they do it in order to figure out what they’re going to do…if that makes sense? Sort of have a hunch, and know what to look into based on past history and based on what you think they’re going to do.

Brian McCullough: [00:15:55] Without being too specific, is there a general method that you have for cultivating sources, getting them to trust you, is that like a long wooing process? I guess it is for any journalist, but especially for a company like Apple that’s so secretive.

Mark Gurman: [00:16:12] I go on their podcasts.

Brian McCullough: [00:16:13] Ha ha ha, yes, well, don’t tell anybody next time I call you. But the sources, do they come to you now because you’re so prominent?

Mark Gurman: [00:16:26] You know I’m not going to — .

Brian McCullough: [00:16:27] Okay, okay, okay.

Mark Gurman: [00:16:29] You understand.

Brian McCullough: [00:16:32] What’s your relationship with Apple officially? I read that at times in the past, you kind of felt like they kept you at arm’s length. Do you feel like you have some sort of like a detente or somewhat neutral relationship with them right now?

Mark Gurman: [00:16:53] You know, I think Apple’s a great company. I respect them. Some amazing businesses use their products. Everyone I know uses their products. It’s great to be able to cover their launches from their events, get hands on with the products. But I don’t think being there or not being there really detracts from coverage. Since I’ve been at Bloomberg I’ve been at most of their events and that’s been great. And you know I respect their company. They have a large PR and communications arm and they clearly know what they’re doing and if they didn’t, they wouldn’t be as successful as they are today. So definitely respect them as someone covering them and as a consumer.

Brian McCullough: [00:17:39] Final process question. How often do you report on a feature or something, some detail, and you know you’re right about it but then when whatever it is sees the light of day it’s changed and you think to yourself, I bet they changed that because I reported on it or it got out?

Mark Gurman: [00:18:03] [Laughs] That’s a good one. You know I think they do what they want. I don’t know if media necessarily shifts some of their product plans. Many of these things are in place months and years before they actually happen. So I mean I guess it’s possible. You known, for some software things they may have chosen 10 or 15 different designs for something, and if it leaks really early maybe that inspires them to not pick the one that leaked. I mean I guess that’s a possibility. Those are things that have been discussed in the past for sure.

Brian McCullough: [00:18:40] Final-final question, and this is just a general taking the temperature. Has the mood inside of Apple changed recently with the earnings restatement, the sudden need… Lowering prices, selling phones overseas, like just the temperature and mood inside the company or with your sources, has that changed in any meaningful way that you can detect?

Mark Gurman: [00:19:06] I think it depends on who you ask, right? Some people, “You know, I don’t know what you’re talking about. I hadn’t heard that.” Other people are, you know, stressed about it, I would say. And I think this is how it is at any compan. Depending on who you ask you’re going to get a different opinion. You can ask 100 people and get 90 different opinions on the situation inside Apple.