The US Needs an Artificial Intelligence Strategy—Just Like France, China, and the EU

French President Emmanuel Macron’s recent visit to Washington highlighted how differently our two nations are thinking about the future. In March, the French government unveiled a national strategy for artificial intelligence technology that has a clear goal: make France a global leader in AI. In the last year, China and the European Union have taken similar steps. If we’re serious about having a prosperous economy for decades to come, the United States should do the same.

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US Representative John K. Delaney (D-MD) (@RepJohnDelaney) is the founder of the AI Caucus and is the only former CEO of a publicly traded company in the House of Representatives.

The French strategy—ambitiously titled “For a Meaningful Artificial Intelligence”—was outlined in a comprehensive 147-page document authored by world-renowned mathematician and a member of French Parliament Cédric Villani. Importantly, the report shows the French government anticipating AI’s impact on the job market and attempting to get ahead of change so that their citizens can benefit. As President Macron recently told WIRED, “I think artificial intelligence will disrupt all the different business models and it’s the next disruption to come. So I want to be part of it. Otherwise I will just be subjected to this disruption without creating jobs in this country.”

France’s national strategy also reveals that Macron’s government is wrestling with how to ensure that AI supports inclusivity and diversity, and to make certain that its implementation is transparent. The French aren’t just theorizing; they’re taking action. France plans to invest 1.5 billion euros (almost $1.8 billion dollars) in the next five years in artificial intelligence research. The French are looking to create their own AI ecosystem, train the next generation of scientists and engineers, and make sure that their workforce is prepared for an automated future.

France isn’t alone. Last month, the European Union’s executive branch recommended its member states increase their public and private sector investment in AI. It also pledged billions in direct research spending. Meanwhile, China laid out its AI plan for global dominance last year, a plan that has also been backed up with massive investment. China’s goal is to lead the world in AI technology by 2030. Around the world, our global economic competitors are taking action on artificial intelligence.

It’s therefore striking that the United States doesn’t have a national artificial intelligence plan. Despite the recent private meeting with tech executives at the White House, the administration has taken little action in this area.

That’s why last year I joined with a bipartisan group of lawmakers in the House and Senate in introducing the Future of AI Act, the first bill of its kind to be introduced in Congress. The bill looks at some of the same key questions that the French have examined, because when you zoom out it is clear that these concerns are universal: How can we make sure that workers and society will benefit? How can we encourage and support economy-boosting and job-creating research? And how can we ensure that AI will be implemented ethically and without bias, while also protecting user privacy?

The legislation creates an advisory committee at the Department of Commerce composed of scientists, engineers, ethicists, and civil liberties experts, as well as representatives from labor groups, technology companies, and federal officials. The committee will have 18 months to issue recommendations on how to ensure that artificial intelligence is a positive for the country.

The United States needs a full assessment of the state of American research and technology, and what the short and long-term problems and opportunities are. The Future of AI Act, along with the work of the AI Caucus—a bipartisan group I founded—are all about starting the conversation. Right now, in the United States there’s an incredible discussion taking place about AI, automation, the future of work, and privacy—but all of that is taking place in the private sector, academia, and think tanks. Government is woefully behind. There’s no focus on the future.

The strength of the United States’ private sector makes us the envy of the world, but without a national strategy and increased public investment, we risk having a few companies control the most elemental science of the future. A healthy marketplace needs competition and innovation.

Elected officials need to look at the facts and work to find common ground. Whether you are a conservative or a progressive, this future is coming. As I look at where the world is headed, I believe that we need to expand public investment in research, encourage collaboration between the public and private sector, and make sure that AI is deployed in a way that is wholly consistent with our values and with existing laws.

Policymakers must understand that machine learning and automation’s impact on the economy and job market will mirror that of globalization. The US needs a plan to prepare the workforce to not only survive this change but thrive. The US also needs a much more prominent public debate over the policies around artificial intelligence, since this will be a massively influential technology. Today, we’re not even having the discussion. There’s no plan for where we want to go. China and France already have a plan. If the US doesn’t act, we’re in danger of falling behind.

WIRED Opinion publishes pieces written by outside contributors and represents a wide range of viewpoints. Read more opinions here.


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Tesla: Tsunami Of Sales And Profits In Q3

Bullish expectations for Q3

This article explores the bullish projection that Tesla (NASDAQ:TSLA) is about to become profitable in Q3.

Among the expectations discussed below are that Tesla Model 3 sales in Q2 will be 20,000 cars fewer than production due to federal tax credit rules. This will appear to be poor sales, but in reality will be due to stockpiling cars for sale in Q3 due to the way the tax rules are written.

While this means Q2 revenue will be reduced, it also means Q3 revenue will be increased. As a result, Model 3 should become a top 20 selling vehicle in the US in Q3 with a potential of 80,000 units sold into the US.

This is an average per month sales of about 27,000 Model 3 cars, making it the 12th best selling vehicle in the US ahead of the Nissan Altima (see list below).

Tesla Q3 sales will match the total number of cars sold by Tesla in all of 2017.

Elon Musk has adopted “profits” as his current goal. This replaces his previous goal of fast expansion of the product lineup. The former goal required capital input to fund rapid expansion. The new goal will flip the losses upside down and generate profits now that the bottlenecks are being eliminated one after another.

Most authors write that Tesla is shutting the production line down to “fix problems”. I suggest that Tesla is shutting the production line down to install new machinery that will increase the production speed. Increased production speed means increased gross margin, and if the increase is large enough, net profits.

Showing profits will potentially increase stock price and eliminate the potential for bankruptcy. This in turn will eliminate the bear thesis that Tesla is about to go under and is therefore a good stock to short.

With the short thesis proven wrong, I expect the stock to increase to a new plateau above $400 per share. This was my expectation a year ago, but the bottlenecks delayed the realization until now.

However, sales will likely remain low for May and June. I don’t expect this share price increase to be realized until after a barrage of sales in July make what I’m suggesting here obvious.

Let’s now explore why I’ve come to the above conclusions.

Model 3 may enter top 20 selling US cars in Q3

This week, Tesla has reached 500 cars per day, or, 3,500 cars per week. Bloomberg just increased their production estimate to 3,523/wk.

According to Electrek, Tesla is well on its way to reaching 5,000 cars per week by the start of Q3 in July.

If Tesla reaches this target for next quarter, the Model 3 will enter the top 20 list of US vehicles sold. A rate of 5,000 cars per week means an annual rate of 250,000 cars and a monthly rate around 20,000 cars. I expect Tesla will sell 80,000 Model 3 cars in Q3 so look for 27,000 or so cars per month on the list below.

That rate is between the Jeep Grand Cherokee and the Toyota Tacoma. If realized, the Model 3 will become a top 20 selling car in the US, next quarter.

This data was published by Focus2move here:

Today, the Model 3 is the best selling EV, but it isn’t on the top 100 list. Neither is any other EV. Every one of the top 100 selling cars in the US have an internal combustion engine. And while Tesla is now projected to be building more than 3,000 cars per week, which is to say over 12,000 cars per month (which would place the Model 3 around the #40 position of vehicles sold in the US), I expect this will not happen in May or June.

The reason? The federal tax credit.

It is beneficial for any company to cross the 200,000th car sold into the US threshold, early in a new quarter. Doing so wins that company an extra quarter of sales where customers receive the full tax credit.

Tesla would likely cross that mark this quarter if it sold all the cars it builds, as soon as they are built. To avoid this, Tesla is likely already stockpiling vehicles for a blow out delivery rush starting in July.

Several authors have noticed that the production figures are higher than reported sales figures. Tesla should have built over 6,500 cars in April, but sold fewer than 4,000. That’s a 2,500 or so discrepancy.

There are articles projecting that the discrepancy results from poor build quality and cars piling up for re-work and being stored in parking lots until Tesla can get around to fixing them.

I contend that thesis is wrong, and instead, Tesla is piling up a tsunami of cars for sale in Q3. Here’s why.

How the Federal Tax Credit works

The federal tax credit phases out over a 4-quarter (1-year) period beginning the second quarter after a company sells their 200,000th car.

If Tesla actually sold the cars produced, I expect the company would cross the threshold this quarter. By delaying the 200,000th US sale until after July 1, Tesla adds nearly an entire extra quarter of sales to the program, benefiting their customers. Tesla will sell nearly 60,000 more cars under full tax credit.

For this reason, I think one should expect sales to be flat this month and next (in Q2), while a 20,000 car stockpile ready for Q3 sales is accumulated.

Musk’s Increased Confidence

Elon Musk has stated several times that Tesla will not need to raise money this year. During the recent earnings call, he explicitly stated Tesla will not raise money this year.

Much was written about Musk’s behavior on that call. Most articles in one fashion or another, assert that Musk is cracking under the pressure. If so, Tesla may be headed for a crash near term.

So many people bought into that notion that 400,000 new shares sold short overnight after the earnings call. The stock price dropped 10% in one day.

Since then, however, the stock price has fully recovered and the divide between the bullish and bearish theses has widened.

Listening to the call, it made perfect sense to me that Elon was annoyed by the callers who had read the release and yet asked questions about things specifically stated in that paper. It was as if the callers were saying they knew the paper said they would be profitable, but they don’t believe it and so are trying to figure out what Elon is lying about. Feeling like he was being called a liar, I believe, is why he lost his cool.

But that isn’t what’s interesting. What’s interesting is that he is so confident that he will not need to raise funds that he didn’t bite his tongue.

What this means is that for the first time, Musk is placing profits ahead of expansion and rapid growth. And what’s more, he fully expects to reach profitability.

Bloomberg’s Model 3 Tracker diverging from reality

Bloomberg’s Model 3 Tracker website has been excellent at following the ramp up in Model 3, until April. The analysis has a flaw that doesn’t account for the federal tax credit deviation from business as usual.

The Tracker assumes that when a car is built and ready for sale, that Tesla will sell it as quickly as possible. This has been true, until this past month. Now, and until the end of June, Tesla can benefit its customers best by holding back about 20,000 (total) cars built in Q2 and then selling them in Q3.

Here’s the VIN data from the wild, plotted as yellow dots. Notice the gap in the numbers from about 23,000 to 25,500 representing about 2,500 cars that are absent from the public. Where did they go? Were they built?

Tesla should have built around 6,500 Model 3 cars in April. This is based on Tesla statements that they built 2,000+ cars per week for 3 weeks in a row (2 in April), and then shut down the line to add improvements and further speed the line production. April production should have been ~6,500 cars.

Instead of 6,500 Model 3 cars sold in April, Tesla only sold 3,875 M3 cars according to InsideEVs here.

We know Tesla built over 4,000 Model 3 cars in the first 2 weeks of April and would have needed to shut the line down for the rest of the month if cars produced were the same as cars sold. That makes no sense.

One logical explanation is that Tesla “sold” fewer cars than it “produced” by around 2,500. If these cars are being stockpiled, then in May and June this discrepancy should get much worse.

Tesla should build around 10,000 Model 3 cars in May and around 18,000 cars in June. But Tesla will likely sell just 5,000 per month for those two months to remain below 200,000 cars sold into the US. That means Tesla may accumulate 2,500 + 5,000 + 13,000 = 20,500 cars more than it sells in Q2.

Bloomberg’s model averages the estimates of cars produced with cars sold. But that’s averaging apples and oranges, it doesn’t work.

Last week the production estimate was 1,752 and this week it is 3,523.


Bloomberg needs to separate the sales and production projections into two different values. Otherwise they are trying to average apples and oranges. This would be fine any other time except now, where unusual strategy makes sense to benefit customers who desire to receive the federal tax credit.

Potential Q3 Sales

This brings us to estimate potential Q3 sales based on these optimistic expectations.

First, if Tesla succeeds at ramping to 5k/wk by the beginning of Q3, then it should have produced about 30,000 M3 cars in May and June. If it sells 10k of those to hold #1 BEV position for those months, there would remain 20,000 cars in stock.

Second, Tesla should pass 5k/wk build rate and increase to higher than that during the middle of Q3. That means Tesla should build more than 60,000 cars in Q3. VIN filings must significantly increase to meet that pace, and those filings will be public information.

For the past month, VIN filings are about 3,800 cars per week. This is well on its way to 5,000 per week by the end of the quarter. Tesla should also build about 25,000 of Models S and X in Q3.

Tesla will be coming out with the dual motor and possibly also ludicrous mode variants of the Model 3 in Q3. Tesla is taking orders for the higher cost variants of Model 3 first, so I expect the average price to remain high and will use $50k for these estimates.

The total M3 cars sold in Q2 should be around (20k + 60k) * $50k = $4B.

The total MS and MX sold should be around 25k * $100k = $2.5B.

The total revenue from cars should be in the range of $6.5B with a gross profit of $1.3B if they make the 20% margin figure claimed. I’ll ignore the energy side for this treatise as small by comparison.

Given that Musk has firmly asserted the company will not need cash, and also that it will be profitable and cash flow positive, I suspect that Musk is thinking Tesla will manage something like the above.

Model 3 is about to enter the US Top 20 list

The Model 3 is about to climb the ranks of other vehicles, and if the above figures are met, it will pass Toyota Corolla and Honda Accord, landing in a tie with the Jeep Grand Cherokee for top selling vehicles in the US for Q3.

I admit that this comparison is, and isn’t, fair. The Model 3 is an EV whereas all of the top 100 cars sold in the US today have internal combustion engines, ICE.

The Model 3 is the best selling EV and the only mass produced EV. In this regard, the comparison is NOT fair since it is different from all of the rest of the cars on that top 100 list.

However, any other car company could have launched an EV instead of their ICE models. And, they could have built their own equivalent of the Supercharger Network instead of relying on other businesses to do so for them. So in this regard, the comparison IS fair and demonstrates that people want electric cars with good range and a fast charging system that is already deployed.

That this is so is confirmed by a recent Consumer Reports article about a AAA survey showing that 20% of Americans expect their next vehicle purchase to be an EV. US car sales dropped by 2% in 2017 according to JDPowers. That marked the end of a 7-year run of steady sales growth. Given the AAA survey of intentions combined with blooming sales of Model 3, I expect we will see US sales of internal combustion engine cars drop by a larger figure in 2018.

There are not enough good EVs to replace the drop in ICE vehicle sales.

Jaguar I-Pace, for example, claims 350kW charging capability. But the claim is a farce. Today, no 350kW chargers exist out on the open road and it will likely be several years (if ever) before a network of charging stations is built. It isn’t clear yet that the 350kW charging standard will even work.

Upon introduction this summer, anyone that purchases an I-Pace will be forced to use the only chargers actually deployed… the same ones used by the Bolt and Leaf that only charge at 50kW instead of Tesla’s 120kW. Charging an I-Pace will take more than double the time to charge a Tesla.

What this means is that counter to claims that Tesla is about to face a swarm of new contenders, the fact is that none of them can hold a candle to the charging speed of the Supercharger Network. Ironically, all of the contenders should increase Tesla sales, as once anyone reviews charging infrastructure, Tesla is the only logical brand choice.

Introduction of the competition should further increase Model 3 sales until such time as a new charging infrastructure is actually in place, and, assuming Tesla is unable to use that new infrastructure. If Tesla CAN use that new infrastructure, then Tesla remains the best EV choice bar none, simply for its enhanced number of charging stations.

Conclusions

Tesla is building more cars than it is selling. This may indicate that Tesla is accumulating cars to be sold in Q3 due to tax phase out rules.

If Tesla makes the production targets it has disclosed, it would generate approximately $6.5B in Q3 gross sales with around $1.3B in gross margin. Even without cutting back on spending, that much extra gross margin should yield net profits.

The Model 3 may rise from below rank #100 for sales into the US now, to above position #20 next quarter. That is, the Model 3 appears poised to jump 80 positions in the US top 100 vehicle sales list, beginning in July.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.

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Spotlight On Gambling Reset And Banking Bill

Welcome to Seeking Alpha’s Stocks to Watch – a preview of key events scheduled for the next week. Follow this account and turn the e-mail alert on to receive this article in your inbox every Saturday morning.

While investors will surely have their eyes on trade talks, developments in the oil market and rising interest rates in the week ahead — a sideline show will continue to be the complete reset in the gambling industry following the Supreme Court decision that opens up legalized sports betting. Notable movers since the SCOTUS decision came down include Dover Downs (NYSE:DDE) +46%, Scientific Games (NASDAQ:SGMS) +13%, Churchill Downs (NASDAQ:CHDN) +11%, Penn National Gaming (NASDAQ:PENN) +8%, The Stars Group (NASDAQ:TSG) +8% and Caesars Entertainment (NASDAQ:CZR) +8%. Across the pond, bookmaker stocks William Hill (OTCPK:WIMHY), Paddy Power (OTC:PDYPF), GVC Holdings (OTCPK:GMVHF) and 888 Holdings (OTCPK:EIHDF) also jetted higher. Expect even more price swings with new names as the ramifications become clearer. Nomura Instinet analyst Harry Curtis reminds that the upside potential from the Supreme Court decision down the road includes higher traffic and customer engagement at land-based casinos, as well as digital offerings and tech/financial partnership opportunities. On that last point, there’s a sense major players such as Facebook (NASDAQ:FB), Apple (NASDAQ:AAPL), Visa (NYSE:V), Mastercard (NYSE:MA) and Google (GOOG, [GOOGL]]) aren’t going to completely ignore the developments. On the economic calendar this week, data on new and existing home sales will capture some attention.


Notable earnings reports: Monro (NASDAQ:MNRO) on May 21; Ctrip.com International (NASDAQ:CTRP), Urban Outfitters (NASDAQ:URBN), The Container Store (NYSE:TCS) and TJX Companies (NYSE:TJX) on May 22; Target (NYSE:TGT), Hewlett-Packard Enterprise (NYSE:HPE), Lowe’s (NYSE:LOW) and Lion’s Gate (NYSE:LGF.A) on May 23; GameStop (NYSE:GME), Best Buy (NYSE:BBY), Gap (NYSE:GPS) and Splunk (NASDAQ:SPLK) on May 24; Foot Locker (NYSE:FL) on May 25. See Seeking Alpha’s Earnings Calendar for the complete list.

IPOs expected to price: Evo Payments (EVOP) on May 22; CLPS (CLPS), Kiniksa Pharmaceuticals (KNSA), Scholar Rock (SRRK) and GreenSky (GSKY) on May 23; Iterum Therapeutics (ITRM) on May 24.

Analyst quiet period expirations: Ceridian HCM (NYSE:CDAY) and Nlight (NASDAQ:LASR) on May 21; DocuSign (NASDAQ:DOCU), Goosehead Insurance (NASDAQ:GSHD) and Smartsheet (NYSE:SMAR) on May 22.

Upcoming stock splits: DDR (NYSE:DDR) 1-for-2 on May 21, China Lodging (NASDAQ:HTHT) ADS-to-ordinary share ratio to change on May 24 from one ADS per four ordinary shares to one ADS per one ordinary.

Banking bill: The House of Representatives is expected to vote on a banking reform bill next week. The bill would raise the threshold at which banks are considered risks to the system to $250B from $50B. The legislation also exempts banks with less than $10B in assets from some proprietary trading rules. Zions Bank (NASDAQ:ZION), BB&T (NYSE:BBT), Bank of New York (NYSE:BK), State Street (NYSE:STT) and SunTrust (NYSE:STI) are just a few of the banks to keep an eye on with the new rules. On a broader scale, John Hancock Regional Bank Fund’s Lisa Welch observed that the S&P 500 bank index trades at 11.34X earnings estimates for the next 12 months compared with the historical mean of 12.56X. “It’s a sector that benefits from rising rates, a growing economy and a more favorable regulatory environment that’s trading at attractive valuations,” she noted.

Projected dividend hike announcements: Donaldson (NYSE:DCI) to $0.185 from $0.180, DXC Technology (NYSE:DXC) to $0.21 from $0.18, Flower Foods (NYSE:FLO) to $0.18 from $0.17, National Storage to $0.30 from $0.28, Tiffany (NYSE:TIF) to $0.55 from $0.50.

Notable Analyst/investor meetings: Micron (NASDAQ:MU), Monro (MNRO) and (NASDAQ:GLAD) on May 21; Walgreen Boots Alliance (NASDAQ:WBA), Brooks Automation (NASDAQ:BRKS), National Instruments (NASDAQ:NATI), Sanmina (NASDAQ:SANM), Xilinx (NASDAQ:XLNX), Atlas Financial (NASDAQ:AFH) on May 22; Align Technology (NASDAQ:ALGN), Thermo Fisher Scientific (NYSE:TMO), Phototronics (NASDAQ:PLAB), Pure Storage (NYSE:PSTG), Qorvo (NASDAQ:QRVO) and Huntsman (NYSE:HUN) on May 23; Cabot (NYSE:CBT) on May 24.

FDA watch: Loxo Oncology (NASDAQ:LOXO) and Bayer (OTCPK:BAYRY) are expected to hear on a FDA review for larotrectinib NDA, while Lexicon Pharmaceuticals (NASDAQ:LXRX) and Sanofi (NYSE:SNY) should find out whether sotagliflozin NDA for type 1 diabetes has been accepted for FDA review.

Wolfe Research 11th Annual Global Transportation Conference: Companies due to talk at the transportation industry get-together include Genesee & Wyoming (NYSE:GWR), American Airlines (NASDAQ:AAL), Delta Air Lines (NYSE:DAL), United Continental (NYSE:UAL), Alaska Air (NYSE:ALK), USA Truck (NASDAQ:USAK), J.B. Hunt Transport (NASDAQ:JBHT), Werner Enterprises (NASDAQ:WERN), ArcBest (NASDAQ:ARCB) and Daimler Trucks (OTCPK:DDAIF). The high cost of freight transportation has been a common topic on the Q1 earnings conference calls of retailers.

Crypto watch: The big blockchain event in New York last week didn’t light a fire under cryptocurrencies as regulatory concerns still linger. Over the last seven days, Bitcoin (BTC-USD) is down 2.3%, Ethereum (ETH-USD) is up 4.6%, Litecoin (LTC-USD) fell 2.5% and Ripple (XRP-USD) dropped 1%. ZCash (ZEC-USD) was one of the cryptos that did break significantly higher, with a 50% pop during the week,

Eyes on crude oil: Saudi Energy Ministry Khalid al-Falih will meet with Russian Minister of Energy Alexander Novak at a St. Petersburg economic summit next week. An election in Venezuela on Sunday could also impact oil prices if President Nicolas Maduro is re-elected to a six-year term. WTI crude oil trades at $71.28 per barrel, while Brent crude is at $78.51.

M&A watch: Shareholders with Bravo Brio Restaurant Group (NASDAQ:BBRG) will hold a special shareholder meeting on May 22 to approve the merger transaction with Spice Private Equity. The deadline for the start of the tender offer by Lilly (NYSE:LLY) for Armo BioSciences (NASDAQ:ARMO) hits on May 23. The go-shop period on the acquisition of VeriFone Systems (NYSE:PAY) by Francisco Partners expires on May 24.

60 Minutes: Alphabet will be featured in a story on the Sunday night news show. Critics are expected to take aim at the tech company over some of its anti-competitive practices.

Box Office: Fox’s (NASDAQ:FOXA) Deadpool 2 is expected to dominate the weekend box office. The Marvel comic book mashup is expected to take in $138M in a wide release of 4,439 theaters. Disney’s (NYSE:DIS) Avengers: Infinity War is predicted to come in second place with $29M to add to its eye-popping $1.69B global box haul through this week. Next Friday, Disney’s Solo: A Star Wars Story opens in a highly-anticipated holiday weekend debut. The U.S. box office is up 4.4% YTD.

Barron’s mentions: Procter & Gamble (NYSE:PG), Coca-Cola (NYSE:KO) and PepsiCo (NYSE:PEP) are lined up as attractive high-dividend stocks at knockdown prices. All three trade with a forward price-to-earnings ratio of lower than 20 and below their historic norms. Chinasoft International (OTC:CFTLF) and Baozun (NASDAQ:BZUN) are mentioned as two other ways for investors to play the digital explosion in China beyond first-movers Alibaba (NYSE:BABA), Baidu (NASDAQ:BIDU) and Tencent (OTCPK:TCEHY). Lowe’s is seen as having limited downside into its earnings report.

Sources: EDGAR, Bloomberg, CNBC and Reuters.

Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.

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Fed Up With Apple's Policies, App Developers Form a 'Union' Ahead of WWDC

Nearly two years ago, Apple revealed its plans for a revamped App Store. It introduced ads within search results in the iOS portion of the store, rolled out more ways for developers to offer subscriptions, and sweetened the revenue deal for app makers who did offer subscriptions. The changes marked the most significant update to the App Store since it had opened for business, and it was part of an effort by Apple to show that the company was attuned to developers’ needs, even as the company raked in billions of dollars from their apps each year.

But as the iOS App Store approaches its tenth anniversary, some app developers are still arguing for better App Store policies, ones that they say will allow them to make a better living as independent app makers. Now a small group of developers, including one who recently made a feature-length film about the App Store and app culture, are forming a union to lobby for just that.

In an open letter to Apple that published this morning, a group identifying themselves as The Developers Union wrote that “it’s been difficult for developers to earn a living by writing software” built on Apple’s existing values. The group then asked Apple to allow free trials for apps, which would give customers “the chance to experience our work for themselves, before they have to commit to making a purchase.”

The grassroots effort is being lead by Jake Schumacher, the director of App: The Human Story; software developer Roger Ogden and product designer Loren Morris, who both worked for a timesheet app that was acquired last year; and Brent Simmons, a veteran developer who has made apps like NetNewsWire, MarsEdit, and Vesper, which he co-created with respected Apple blogger John Gruber. (“Brent’s been developing for Apple products since before any of us were born,” Schumacher quipped.)

The union, so far, is loosely-formed. There’s no official strategy in place for collective bargaining and no membership requirements (like dues). The union has goals of reaching a thousand members this week and hitting a mass of 20,000 signees by early June, when Apple will host its annual Worldwide Developers Conference in San Jose, California. But at launch, the four representatives will be the only names attached to the letter. Non-developers are welcome to join as well, they said.

“It’s a non-union union in a way,” Morris, the product designer, said when reached by phone. “I’m not super interested in creating a traditional union; I’m more interested in bringing the voice of indies back into the spotlight and this is a step in that direction.”

“We might eventually incorporate voting on certain things, but right now it’s really about the unification of developers,” Ogden added.

Free app trials have been a sticking point over the past several years for some iOS app developers, who believe that mobile apps–especially premium ones that cost more than a few bucks and aren’t games–should mimic the experience that people have had for years with desktop apps. It’s a particularly thorny issue for app makers who don’t make subscription apps, but who still want to give potential customers a free trial of their apps.

Apple has given developers some ability to offer free app trials, for time periods ranging from three days up to a whole year. But a free trial can only accompany a subscription app. This means that when opting to get the free trial, the customer has to authorize Apple to automatically charge them when a trial ends, developers say. The ideal situation, they say, would allow them to offer free trials for all apps, at lengths they determine, and without barriers that might make people shy away from trying their apps.

Apple has not responded to a request for comment on this story.

Another topic The Developers Union says it will attempt to tackle is revenue sharing. Apple’s longstanding policy gives App Store developers 70 percent of the money made from most apps, while Apple takes 30 percent. Back in 2016, Apple changed this split to 85/15 percent for developers who are able to maintain long-term subscription customers. Google soon followed suit, offering the same revenue split for subscription apps sold through the Google Play Store. But Microsoft is taking it a step further: later this year it will give 85 percent of any non-gaming app revenue to Windows developers if the app was purchased through the Microsoft Store; while 95 percent of the money will go to developers if the customer discovers the app through an external web page or app.

While the open letter says that the union plans to “advocate for a more reasonable revenue cut,” the members have not yet shared specifics beyond that.

Slice of the Pie

Making a living off of making apps is something that’s felt increasingly out of reach for independent developers. Some have described a kind of divergence that’s happening: Apple’s services business is booming, while some developers’ own businesses are floundering.

Apple, in recent years, has started sharing how much it pays out to developers. In January, it said that iOS developers were paid a total of $26.5 billion in 2017, a 30 percent jump from the year before. Since the inception of the App Store, developers have earned more than $86 billion dollars.

But that revenue is credited largely to in-app purchases and currencies–essentially, games. Ben Thompson, who writes the Stratechery blog and who has extensively analyzed the business of app stores, has identified these as “games with repetitive mechanics that can monetize existing users through in-app purchases,” and wrote back in 2013 that other apps, like premium productivity apps, are “a terrible match for app store economics.” Schumacher, Ogden, and Morris call the biggest money-making apps “the guys with the angry faces”–referring to the app icons for games that feature, well, men with angry faces.

Not all developers are thrilled by the union. Schumacher told me that one notable developer he reached out to said that, while he hopes the grassroots effort makes progress, he wasn’t inclined to join. “He said, ‘I make all my income from Apple. I don’t know if I should be throwing rocks,'” Schumacher told me.

And despite the issues they have with the App Store, even the union organizers themselves–with the exception of Simmons, who wasn’t available for an interview–acknowledged that developing for the App Store carries a kind of cache that other software stores don’t.

“Apple is getting a lot right, especially around security,” Schumacher said. This new group is just looking for a few more breadcrumbs, he said. And not the kind you buy in mobile games.


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