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May 14, 2019

Situational awareness: Comcast agreed to sell its 33% stake in Hulu to Disney, giving Disney full control over the streaming service, Axios' Sara Fischer reports.

D.C. readers: You're invited to an Axios program, Easing America's Pain, tomorrow morning at 8am.  

  • Join Axios' Mike Allen for a series of conversations on health care's biggest challenges, including the opioid crisis, and how to tackle them. 
  • We'll hear from Sens. Bill Cassidy (R-La.) and Joe Manchin (D-W.Va.), as well as HHS chief medical officer Vanila Singh and Mayor Steve Williams of Huntington, West Virginia. RSVP here

1 big thing: Critics target iPhone App Store

Illustration of an App Store App icon about to be deleted
Illustration: Rebecca Zisser/Axios

Apple’s very successful iPhone App Store is under attack from multiple directions, with users and developers criticizing its business model, Axios' David McCabe reports.

Why it matters: If the burgeoning criticism leads to concrete legal results, it could undermine an Apple ecosystem that's already under threat from other tech giants like Google and Facebook.

Driving the news: Some customers and developers take issue with the portion of some App Store transactions that Apple takes for itself.

  • Users can sue Apple for allegedly exercising monopoly power over the market for third-party apps and driving up prices, the U.S. Supreme Court ruled 5-4 on Monday.
  • Developers have signaled concerns in recent years with Apple’s 30% cut of new in-app subscriptions. Spotify has escalated those worries into a full-blown antitrust complaint against Apple in Europe, on the grounds that the fee hurts its ability to compete with Apple Music.
  • Apple has said that after "using the App Store for years to dramatically grow their business, Spotify seeks to keep all the benefits of the App Store ecosystem — including the substantial revenue that they draw from the App Store’s customers — without making any contributions to that marketplace."

App creators also have no choice but to use Apple's store to get to its customers — unlike on Google's Android, where they can pursue alternate means of access.

  • Epic Games, the manufacturer of the popular Fortnite video game, for example, has expressed frustration with Apple's terms. On Android, Fortnite is distributed directly so its developer doesn't have to give a cut of revenue to Google, an option not possible with iOS.

Flashback: Steve Jobs was opposed to third-party apps for the iPhone when it launched in 2007 — believing that web-based applications would suffice — before changing course.

  • It was a fateful choice. In 2017, according to a legal filing submitted by Apple, the store passed over $26 billion along to developers.

Between the lines: The issues over Apple's cut comes as the company is looking to offer more of its own services, many of which compete with options available via the App Store.

  • Plus, Axios’ Joe Uchill says, the App Store's software curation is an effective cybersecurity tool, since Apple checks for backdoors, surveillance, and privacy flaws, keeping the iOS software pool relatively safe.
  • Any change that reduces Apple's control over app curation could also make using the iPhone a little more dangerous, Joe notes.

What’s next:

  • The Supreme Court didn’t rule on the actual monopoly question — so that may play out in the lower courts. Yesterday's ruling was simply affirming the consumers had the right to sue.
  • "We’re confident we will prevail when the facts are presented and that the App Store is not a monopoly by any metric," an Apple spokesperson said.
  • The European Commission is expected to start an investigation into the Spotify case, per the Financial Times.

2. GOP senator's bill would crack down on China tech trade

Sen. Josh Hawley (R-Mo.) this morning announced a bill, seen first by Axios, that would make it harder for American companies to export major emerging technologies to China, David reports.

Why it matters: Technology, from AI to 5G wireless, has become a major bargaining chip in the broader tensions between the U.S. and China.

Details: The bill would require the president to restrict exports to China of any technology covered by the law, including tech and intellectual property that...

  1. "[W]ould make a significant contribution to the military potential" of China.
  2. Is required to guard the U.S. economy from "the excessive drain of scarce materials and to reduce the serious inflationary impact of demand from the People's Republic of China."
  3. Is being used by the Chinese government to violate human rights, per the secretary of state.
  4. Has its development supported by the Chinese government or that falls under a broad list of covered industries that include artificial intelligence, semiconductors, quantum computing and robotics.

Our thought bubble: A broad range of products could be affected, though the restrictions it envisions, such as licensing, wouldn't necessarily ban the exports outright. If the bill picks up legislative steam and passes, the details of its implementation would be key.

3. Bay Area tech's mini-manufacturer thrives

Tempo Automation's San Francisco manufacturing facility
Photo: Tempo Automation

Last year we told you about Tempo Automation, a startup doing high-tech contract manufacturing in San Francisco.

Flashback: It was formed with the idea that the ability to generate small runs and prototypes close to Silicon Valley can be worth the added cost of doing work in one of the priciest rents and highest labor costs around.

So far the bet appears to be paying off.

  • Last August, Tempo opened a 42,000-square-foot factory in San Francisco's Design District, doubling its manufacturing capacity.
  • It has doubled its employee base in the last 12 months and expects to do so again in the coming year.
  • Tempo says its customers include 4 of the top 10 largest medical device companies in the world, 2 leading aerospace/aviation/defense firms, and 2 of the top 10 satellite manufacturers.

The latest: Tempo has raised a fresh $45 million in a Series C round led by existing investor, Point72 Ventures.

  • The round includes Lockheed Martin as a strategic investor, along with existing investors, Lux Capital, Uncork Capital, Cendana and Golden Seeds.
  • It says it will use the new money to expand further and grow its software expertise.

Go deeper: A surprising factory in downtown San Francisco

4. Adobe helps Amazon sellers set up digital shops

Adobe today is announcing a new set of tools to help third party merchants who sell through Amazon.

Details: The new service, from Adobe's Magento unit, helps businesses set up their own e-commerce storefronts, while continuing to sell through Amazon.

Why it matters: A growing number of stores find that they have to both be on Amazon and maintain their own direct stores.

  • Adobe says the new tools help them do both, while also offering improved performance and the ability to scale to meet demand on key shopping days.

5. Wireless insiders charged in phone-access scam

The Department of Justice filed charges against a Verizon employee and 2 employees of stores selling AT&T service for using their access to hijack customer accounts, Joe reports.

Why it matters: Especially in the AT&T case where the accused were employees of a contractor and not AT&T itself, the cases raise questions about companies' ability to control employee behavior when the workers are able to steal data or funds from a customer.

Background: The scam, known as SIM-swapping, involves hackers breaking into victim's cellphone accounts to reset passwords on other accounts.

  • From there, the hijackers can reset passwords on email, bank and other accounts that allow a phone number to serve as a form of identification.

Details: The 3 employees charged join 6 people who were indicted last week, all connected to a SIM-swapping ring.

  • Those charges came a day before bitcoin investor Michael Terpin won $75 million in a lawsuit against a SIM-swapping criminal who stole millions from his cryptocurrency wallets.
  • Axios Codebook profiled Terpin in September as he launched lawsuits against AT&T for allowing employees and contractors to transfer accounts without following security procedures advertised to customers.

6. Take Note

On Tap

  • U.S. CTO Michael Kratsios lands in Paris today to head the American delegation at a G7 gathering focused on digital issues including AI and security. He'll also host a roundtable at the U.S. embassy with Big Tech operating in France, including Facebook, Google, Microsoft, Amazon, Cisco, Salesforce and eBay.
  • Techonomy is holding a conference in New York today and tomorrow,
  • J.P. Morgan is holding a tech, media and communications conference today through Thursday in Boston.
  • The Webit Festival takes place in Sofia, Bulgaria, through tomorrow.

Trading Places

  • As Axios' Kia Kokalitcheva first reported yesterday, Airbnb hired former FBI deputy director Sean Joyce as its first chief trust officer. Joyce spent the last 5 years at PricewaterhouseCoopers.


  • WhatsApp confirmed a bug in its code allowed hackers to inject spyware onto some customers' devices. (Axios)
  • Twitter revealed that it had been inadvertently sharing some users' location information with a partner even where users had not permitted the company to do so. (Twitter)
  • Facebook said it will increase pay and provide additional support to the content moderators it contracts with. (Bloomberg)
  • Uber lost another $7 billion in market value Monday, as shares fell 10% on its second day of trading. (Axios)
  • Lenovo showed off a prototype laptop that uses a foldable display. (Wired)
  • Fighting back against Amazon, Walmart says it will begin offering free next-day shipping on some orders. (CNBC)

7. After you Login

Burger King is considering whether to bring to Los Angeles a program it tested in Mexico that delivers meals to drivers stuck in traffic.