The following update was sent to members on August 30th.

Hello everyone.

One quick clarification and then a programming alert.

Clarification. Regarding yesterday’s discussion, Apple offers three months of TV+ with qualifying Apple hardware purchase. That is a promotion with specific language tied to availability and qualifications. Apple does not offer a blanket promotion in which Apple TV+ is given to free to all Apple device owners.

Programming Alert. Over at my other website, Inside Orchard, this week’s essay (Roku's Bad Bet) was focused on why I think Roku is experiencing fallout from one bad bet that it placed regarding its place in streaming. Inside Orchard is home to my perspective and ideas on the tech industry that don’t quite fit with Above Avalon. You can think of them as sibling sites. As a reminder, Above Avalon members can bundle an Inside Orchard subscription with their membership and receive a 50% discount in the process. Judging from the increasing percentage of members who have the bundle, it’s a pretty compelling offer.

In today’s update, we will begin with Roku. My focus is on the company’s most recent earnings report and a read-through to Apple.

Roku Losing Flexibility

Here’s Roku founder and CEO Anthony Wood in the company’s 2Q22 shareholder letter released at the end of July:

“In Q2, there was a significant slowdown in TV advertising spend due to the macro-economic environment, which pressured our platform revenue growth. Consumers began to moderate discretionary spend, and advertisers significantly curtailed spend in the ad scatter market (TV ads bought during the quarter). We expect these challenges to continue in the near term as economic concerns pressure markets worldwide. In response, we took steps in Q2 to significantly slow both operating expense and headcount growth.”

The macro environment is serving as a cover for what is likely underlying deterioration in Roku’s business model due to changing industry dynamics. Instead of going over various numbers and percentages tied to 2Q22, here are three key takeaways from Roku's earnings release that jumped out at me:

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