The tech trials keep coming

25:04Like that is borderline un-American. That's how we have to do this. And I feel like, again, I think you're right. We're going to get away from a lot of the technicalities and like being in the courtroom for us v. Google. It is all about technicalities like all they talk about is deal structure and revenue sharing and the like tiny little mechanical economic details of how this stuff works. I would assume and it's totally possible I end up being wrong that this ends up being a much less technical trial because what they have to do like you were saying is essentially tell a story to a jury that is going to have to then apply it to 100 year old precedent that arguably doesn't make any sense in the current context.

25:41And I assume whatever way this goes, it is going to be absolutely ripe for appeal and everything's going to get weird, even more so than most of these cases because it's a jury trial. But it just seems like we're going to get much more feelings and sort of grand storytelling as opposed to like a parade of expert witnesses telling you how contracts work. Right. I mean, it makes the most sense. If I was Epic's attorney right now, that would be my approach, is focus more on storytelling than overwhelming people with these ridiculous numbers and economic data and everything. Yeah, it's going to be really interesting to see.

26:18I'm sort of sad we're not going to get as much access to this one as we did Epic v. Apple, which you could, because it was COVID, it was ironically more publicly available. This one, we're back to much more closed down. But Sean Hollister is going to be in the courtroom. So we're going to see a bunch of stuff. What are you looking for in this one? Are we looking to see if Epic can get another version of kind of the small wins it got in Apple? Is this going to be a much bigger win or lose? How would you sort of handicap the odds here? Yeah, I'd want to first hear the arguments on, like you were bringing up earlier, about the Samsung store.

26:52The ability to load apps and stuff on outside of the Play Store. I'm curious how those arguments are made, what we hear from the judge, you know, and the, you know, the mind reading of the jury on that of reporters in the room. And I think that will really color what we can expect, because if we're right here and we're talking about, you know, something that is focused more on storytelling than, you know, this like granular evidence, I think that is where we are going to get the best idea of what, you know, this end result will look like. All right. Sean Hollister is going to be in the courtroom.

27:25So we'll grab him on this show at some point in the next, I think this is supposed to be five weeks is the plan for this one. Yeah, it's supposed to end right before Christmas. Okay. Well, God help us all for the next five weeks. But yeah, we'll check back in and keep it locked on the site. Sean's going to be covering it for us. McKenna, thank you as always. Yeah, no problem. All right. We got to take a break and then we will be back to talk Sam Bankman-Fried. We'll be right back.

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30:17All right, we're back. Last week, after a truly wild trial that lasted more than a month, and a saga in general that lasted almost exactly to the day a year, FTX founder Sam Bankman-Fried was found guilty on seven counts, which included wire fraud, conspiracy to commit wire fraud, and conspiracy to commit money laundering. The short version of a really long story is that SBF was accused and convicted of using FTX's customer deposits to shore up his crypto trading firm called Alameda Research. Throughout the whole trial, his former colleagues testified that FTX falsified numbers, gave Alameda special privileges, including to lose billions of dollars, and that he lied to the public and users about where their money was.

31:00Prosecutors said FTX was a fraud from the start, and a jury agreed. In a certain sense, the SBF story is now over. or at least almost over, given that he's set to be sentenced in March. And The Verge's Liz Lopato has watched it all go down. She was in the courtroom for the entire trial, watching the whole thing unravel. So I brought her in to see what she saw, how it felt, and what happens next. Liz, hello. Hi, David. How's it going? You survived. I'm so proud of you. I made it. How is your headspace after, what, six weeks of sitting in a courtroom? Oh, man. Well, I'm very ready to do something else.

31:37Fair. But it was intense. I mean, it was like a, you know, I wasn't just sitting in the courtroom. I was also standing outside the courtroom at the wee hours of the morning, many mornings. Yeah. So I'm excited to have a life again, because this was like sort of an aesthetic experience for about a month. Yeah, I do actually want to talk about the sort of spectacle of this, because I remember one of the things we talked about, I think on the show before it started, was how much kind of outside interest there was going to be. like we it was obviously going to be a very high profile trial but the question of like are there going to be crypto fanboys outside the courtroom every morning or like are there going to be there there were like the elizabeth holmes cosplayers at the theranos trial are we going to get some of that the only bit of story that i heard was that we literally had to hire a line sitter for you at one point because the line for the sam bits of testimony was so early that it was like untenable for you to be there early enough to get in line.

32:34So like, was it like that the whole trial? How crazy did it get? So the Sam testimony was the peak, especially the Sam cross. And the way that line sitter thing worked was like, I got in line on Sunday night for Monday. Like I got in line at like, I don't know, 1145 on Sunday night. Good Lord. Because I knew there was going to be a lot of interest. And I was, to be clear, like fourth. Wow. Yeah. So the first person who had gotten there had gotten there around 1030. And, you know, the day ended, I was like so tired, I felt drunk. And I still had a story to write. And I remember going in to like, nobody's up yet.

33:14Like we're going into the building. It's 730. The editors haven't logged on. And I was just texting them like, I can't do this Tuesday. Like Tuesday, you know, I'm going to I'm going to write. And then I don't have enough time to like have dinner and sleep. Because you would literally have to walk out of the courtroom, file your story and then walk back to the courtroom. That's right. So that's how we ended up with a line sitter on Tuesday. I got like six hours of sleep and it was like the best six hours of sleep I've ever had in my life. It was so rewarding. It felt amazing. That's very good.

33:42So it wasn't like that the whole time. That was just the Sam bits. Oh, yeah. I mean, like, you know, Caroline Ellison was the other sort of big draw. And that was like that was a much more reasonable 4 a.m. time to get in line. chill. There were a lot of people there. It was, especially for the sand testimony, there were a lot of people who were, you know, they worked in tech or they worked in finance, or they like had an interest in crypto, a lot of reporters, obviously. So there was just a, it was a pretty big draw from the general public. And there were like a couple of people who were in town from London or from Ireland who had stopped by the trial.

34:19And so that was like pretty remarkable to me. Like a tourist attraction. Yeah. So there was absolutely, there was a certain amount of like spectacle. There weren't any cosplayers like there were at the Holmes trial. We didn't see like, you know, the art students who were setting up like Theranos themed like gift shops or anything like that. But there was some very, very intense interest from a lot of people who had been following this. That's just nuts. So, and I'm particularly curious, we've obviously, we know how the trial ended, which we're going to get to in a minute. But I'm super curious about the vibes in the courtroom, which I feel like is one of the things you wrote a lot about was you spent a lot of time watching one person's testimony while watching somebody else just sort of be in the courtroom.

35:03That's right. And especially Sam and Caroline for a chunk of it and Sam's parents, I feel like we're kind of your main characters for obvious reasons throughout the whole trial. And I'm really curious how the kind of vibes shifted from the beginning of the trial to the end of the trial, just as like a person in the room in the courtroom. So this is why I wanted to be in the courtroom is that there are things that play really differently in the courtroom than they do even in the overflow rooms or in the transcript or on Twitter. And I was really struck by that throughout this trial. You know, we had moments of levity that like people didn't think were funny outside of the courtroom, for instance.

35:38So like the best example was when Sam was testifying and his lawyer successfully objected to a question and Sam responded anyway that he thought, you know, embezzling money was not protecting customer assets. And his lawyer was kind of like, Sam, you've been here for a couple of weeks. You know, you don't have to answer that. And so I was like, yeah, but I felt like it was important. And that was like a big laugh line in the courtroom. And the way that it seemed to play elsewhere was that he was getting scolded, which like it was like a little bit of a scolding, but it was it was playful, you know.

36:08So there were these moments that I that's part of the reason why I was getting up at those kind of insane hours was I wanted to really sort of describe what was happening in the room, because the text only version of that doesn't give you how people are feeling. And part of it was that I wanted to keep an eye on the jury. And by the end of the prosecution's case, the jury was really fed up with Sam Bankman-Fried. And this was before he took the stand. I want to be clear. Like, you know, we have we have Caroline testifying to, you know, the sort of arc of her her time at Alameda and ending with this all hands meeting where she essentially confesses to her staff what has happened.

36:47And then immediately afterwards, we have Christian Drappy getting up on the stand. He's a former employee. He's got the recording of her, you know, doing it. And the jury was really wrapped for that. I know that it played a little differently, again, for other people who like was like, oh, she's like giggling, you know, but the jury was absolutely locked in. You know, this was something that they took very seriously. And part of the reason he had been called was to talk about the way that she was speaking on the tape. He noted that she has a habit of giggling nervously. Like when there are times of tension, she tends to laugh uncomfortably.

37:22And like, so that was part of the reason I think that he was giving that testimony was to say, like, she's not laughing like out of joy or anything. Like, this is a very uncomfortable moment for her. As that tape was playing, I was watching members of the jury, like, shaking their heads. Like, no. And, like, I saw them shake their heads again at the sort of towards the end of the prosecution's case where Can Sun, who is one of the FTX lawyers, was testifying that Sam Beckman-Fried had come to him and talked about wanting to find an excuse to give Apollo, the private equity group he was trying to raise money from, an explanation legally for how all of this money had gone missing.

38:02And Can Sun ran through three explanations and was like, none of them do it. And then he quit. And this is sort of a recurring theme. We immediately saw Sam Beckman-Fried in a December interview with George Stephanopoulos running through one of these explanations and saying, oh, it was the margin lending program, which Can Sun had been very clear with him. It was so much more money than was in the margin lending program. There's no good explanation for this. And again, during this video clip, you could see members of the jury like shaking their heads like, no, like this, this is, this is ridiculous.

38:37So there was sort of, you know, this sense of almost absurdity by the end of the prosecution's case, because every day I would come in and then there would be like a new crime. And like, at one point, I remember turning to another reporter, like when we were standing in line and be like, look, I knew he was guilty, but I didn't know he was like guilty, guilty. He's like guiltier than I thought. The prosecution easily could have rested their case after the second week. And we had two more weeks. So it was it was a lot of evidence. It was really like an overwhelming amount of evidence. And, you know, by the end, we had a pretty good idea of what had happened.

39:13And then I guess the idea behind Sam testifying is sort of something that you get in these white collar cases where intent really matters. You may remember that Elizabeth Holmes testified in her own trial, too. And who can speak to the intent better than the person who is there? And the defense, just to button on that, the defense in that case basically is either I didn't know or I didn't mean to, essentially, right? Because it kind of boils down to, like, did you do this on purpose or not? And if you can convincingly say you didn't do it on purpose, you might get away with it. That's right. Good intentions are a complete defense.

39:47Like it's not illegal to be an idiot, which is lucky for me. The lying is the illegal part. It's not that he lost all this money is that he lied to people. That's the fraud piece of it. So if he had believed what he was saying, if he hadn't known that it was untrue, that would be a complete defense. That would be enough. And the problem with putting your defendant on the stand in that way is you open them up to cross-examination. And that can be really gnarly. And that was really gnarly. Like that was I've seen a lot of cross-examinations and that was probably the nastiest I think I've ever seen.

40:20Wow. Danielle Sassoon, who was the prosecutor, she clearly knew just backwards and forwards everything Sam Begman-Fried had ever said in public. Just like all indexed in her brain. Which is a lot, by the way. That man has talked in public so much. So much. Yeah. So we had like a long section of her saying, did you say this? And him being like, I don't recall. And then her playing it. And then her saying, did you say this? And him saying, I don't recall. And her playing it. Oh, boy. You know, it was like a couple hours of this. And it really established him as like an unreliable narrator, particularly because he wasn't saying something like, I don't remember saying that specifically, but it sounds like something I would have said.

41:00It was just like, I don't recall. I don't recall. I don't recall. And like after a certain point, again, you see like the jury starting to make like prolonged eye contact with each other. Like, you know, when somebody is misbehaving on the subway and you make eye contact with a stranger, like, do you see the shit? Like it was very that. So that was not great. And it's not what you want. It's not. Well, and it also seems like that specific thing is part of the shift. I think that you covered in a lot of your stories is like at the beginning of the trial, Sam thought and a big part of his whole shtick had been that you can get an awfully long way with this kind of moppy haired, slightly spacey genius weirdo.

41:40And that that affectation, ironically, like you and I have been covering this space a long time, like there's no better way to be a billionaire than to have that specific deal. People will just throw money at you if you seem like you don't care how you dress or what you look like or whatever. But then at some point over the course of that trial, that went from being like his greatest asset, or at least what he thought was his asset, to like the thing that destroyed him in a lot of ways. So I want to put a little button on that. It's not people that will give you a lot of money. It's specifically VCs that will give you a lot of money.

42:10That's a very good distinction. Yes. VCs have like a specific model of what they think a genius looks like. And he played very much into that. The problem is, if you are marketing yourself as a genius, if you're saying you're brilliant, if you, you know, are putting yourself forth as like someone who is really, really smart, you have a harder time showing yourself to be stupid. Like, I mean, that's like part of what's going on here, right? Like he doesn't have a CFO at this company, even though it's a financial company. And that's like very important. He doesn't have any risk management, which you're running a futures exchange.

42:45Risk is what you do. Yeah. And trying to hold those two things together in your mind that this guy's a genius and that there's no risk management, there's no CFO, there are no adults in the room. That starts to look damning. That starts to look like you did something on purpose. It starts to look like you don't want risk management because you think risk management won't approve of what you did. And so that's sort of, I think, one of the specific ways where this backfired. Like, I think that there could have been a lot more understanding if he had been an ordinary person, ironically, you know, where it's like, oh, yeah, ordinary people like misplace things like they sometimes do dumb stuff.

43:24But, you know, if you're presenting yourself as like this genius, and he was, you know, he was leaning very heavily on like having gone to MIT, having worked at Jane Street, which is a pretty exclusive firm on Wall Street, having been this like startup founder, having done this incredible like arbitrage trade to get his money. Like if your whole story is that you're brilliant and then$8 billion goes missing, people are not going to think you lost it. Yeah. And then a bunch of people get up on the stand and testify how you did it. In fact, you did not lose it. That's right. Yeah. And I think so much of what it seems that he thought, and I am curious, like I generally am not interested in trying to like psychoanalyze people in his position, but like my guy just like got up on the stand for three days and did it.

44:14So we're going to do it to him. You got the sense he felt like through this whole process, he could sort of smart guy his way out of everything. And like, again, not to keep coming back to the Theranos thing, but I think it's like, there was this sense of if we can just get away with it long enough, we'll eventually get where we're going and everything will be fine and it'll be worth it. And like, that's not even to bring in all of the effective altruism. I'm going to save the world stuff, which like, I'm just I'm done with that. Like, I don't think I don't care anymore that he was an effective altruist.

44:39I'm no longer interested in that fact about him. But I do think he thought he could just like smart guy his way through these troubles. And he was so smart that everything was going to be fine. And that just, it just doesn't work. And I think even in this trial, you get the sense that he thought he could just get up there and smart guy his way through it and that he would win in the end. And that was so spectacularly the wrong call in this trial, it seems. I mean, watching his parents during the cross-examination was sad. I'm sure. And they left for the end of it. And I don't blame them because it was really nasty.

45:16It was obvious what was happening. It was obvious what the outcome was going to be. And I wouldn't want to watch that happen to my child either. But it felt like throughout the course of the trial, there was like a delusion almost on at least Sam's part and maybe the part of his parents as well, that, you know, everything was going to be okay because Sam was a really good guy and he never would have done anything wrong. And that was, as far as I could tell, the entire defense was like, you know, Sam talked about how he didn't drink when he was in college. And he, you know, liked to play board games.

45:52And he was very wholesome. And like, you know, he's a good boy. And I think there was an understanding that Bankman Freed has of himself and that his parents have of him that ran pretty much headlong into the rest of the world and the way the rest of the world understood him to be working. And certainly by the time of the closing statements, I think everybody understood what was going to happen. I was just about to ask that. Like, at what point did the whole room sort of realize, oh, he's going to be convicted? Was it closing arguments? I kind of felt like reading your stories, it felt like it might have happened before that.

46:29It definitely happened before that for me. I think it happened before that for several members of the jury. They weren't out very long. They were out for four and a half hours. That's not a long time. No, that's long enough to like have a coffee, look around the room and be like, we good? And then go back in. Like, that's not a group of people who had a lot to talk about for four hours. I mean, they did send in for like a couple of questions. They had some questions around the investor testimony. They wanted portions of that sent in. But that was fast. You know, something like this, a complicated trial like this.

47:00I actually wasn't expecting a verdict until the next week. I was expecting a verdict the following like Monday or Tuesday. And we just went right through and that was it. So 8 p.m. like we had a verdict. But the reason I come back to the closing statements was that I was really struck by Sam who had turned towards the jury. And so I could see the side of his face. And he looked like he either had been crying or was about to cry. You know, his nose was red. He looked devastated, basically. And so I think that's why I think he knew there was this very emotional moment from him of his attorney reading this closing statement and him just looking terrified and perhaps crying, you know, and his parents throughout seemed really horrified by the testimony.

47:48at times, you know, I could see his mother with her head in her hands. It was rough. And, you know, one of the sort of recurring themes throughout my coverage is I just couldn't figure out why we were there. Like, I don't know why you wouldn't just plead. Like, that's the part that's wild to me, right? Like, okay, maybe you're not going to get a deal. But if you plead guilty and you throw yourself on the mercy of the judge and you say, I'm very, very sorry. I hurt a lot of people. I did wrong. I want to be punished. Maybe you get a shorter sentence that way. And And even if you don't, you haven't dragged everybody you love through this spectacle of a trial.

48:23Because if you think about it, like the scale of destruction here is unusual. I mean, there's obviously all of these customers who've lost money and many of whom maybe don't want to go public about how much money they've lost because they feel silly about it. But like those people, you know, they deserve our sympathy, I think. the investors who've lost money, the lenders who lost money, like one of them, BlockFi, ended up going bankrupt. And this wasn't the only thing that pushed them into bankruptcy, but it sure didn't help. And then on top of sort of all of that destruction, a lot of the FTX employees kept their money on the exchange.

49:02So they're the people who are also wrapped up in this bankruptcy. They had no idea, most of them, that anything was going wrong. You think about Adam Yadidia's testimony. And like, there was this horrible sort of moment towards the end of it, where one of the text messages he had read was read aloud, you know, he was telling Sam he loved him, he would stand by him, he would try to like fix FTX. And then he found out what had actually happened and he immediately quit. Wow. I want you to think about this. This is like one of Sam's best friends from college. They were like frat boys together. They shared, they were roommates in college.

49:36They were roommates in the Bahamas. Like this is like one of his closest friends. I want you to just hold that in your mind for a minute. Think about your closest friend and how pissed off they would have to be at you, how betrayed they would have to feel to testify against you at trial. Yeah. And there was so much of that. I mean, I think the extent to which and you wrote about this at one point that like I think you called it like summer camp syndrome. That is just a group of friends who all essentially turned all at once on Sam at the end of this. I think you're right. It is sort of unusual that everybody told the exact same story, which I think in the end made it really easy in a lot of ways.

50:17Like the prosecutor story was so simple and so straightforward and so corroborated by so many people. And then Sam's story was like the same story, but he just said he didn't know about any of it. Right. He clearly deserved to be convicted because all the evidence said so. But it also just seemed like the weight of the evidence against him was so sort of uniquely pointed and strong in that sense. Well, and even assuming there hadn't been testimony from his conspirators, his co-conspirators, all of whom were like, yeah, we work together with Sam on this. Just looking at where the money went and who benefited from that money, Sam benefited more than anyone.

51:02You know, these were investments that he wanted to make. His parents got a home in the Bahamas and that was traced back to FTX investor money. He got a bunch of Robin Hood shares and a personally owned vehicle. Like just looking at, you know, who benefits, like not even thinking about like the blow by blow of how it happened. It's kind of open and shut. And so to me, you know, there were all of these moments where I kept being like, why are we here? Like, literally, why are we here? You know, like, plead guilty and spare, you know, your family and friends this humiliation, and maybe they'll come visit you in jail.

51:38So speaking of the ramifications of all of this, I feel like I've seen two narratives over the last few days start to come out. One is that Silicon Valley, as it does, will just move on. The VC class is not going to do the self-introspection that everybody always wants them to do in moments like this. They didn't do it with Theranos. They're not going to do it now. You just move on to the next thing. They're all pouring money into AI stuff. And then on the flip side, there is this sense that this is kind of a broader crypto reckoning. One of the things we talked about at the beginning of the trial was how much crypto industry dirt was going to come out of this one way or the other about how kind of unwatched and unmanaged a lot of this space is.

52:17I have a hard time figuring out kind of what the macro legacy of this trial is going to be. Do you have a sense even just a few days out? I think I do. And part of it is because there were crypto industry people who were coming to the trial. And so during Gary Wong's testimony about the faked insurance fund, because this was just like Russian nesting dolls of crime. But there was a random number generator that they had that was their insurance fund. There was no insurance fund. Alameda was paying stuff out. One of the people who I was talking to who was a crypto investor was like, oh, Binance has an insurance fund.

52:56I wonder if that's real, too. Some things that are different, right? Like, for instance, there are exchanges where you know which ones are the omnibus wallets. You can watch them. You can sort of see on chain what's going on. But there are going to be, I think, larger questions of who's telling the truth, because Sam said all the right things in terms of wanting regulation, in terms of trying to be safe and trustworthy for customers. And there is going to be, because the scale of this fraud was so enormous, I think there is going to be a question for regulators, for customers, for everyone. The next time someone says something like, oh, yeah, we want regulation.

53:34Like, is that true? Sam said that. Is that real? And so I think that that's sort of going to be one of the lingering things from this trial more so than anything else is this this question of like, how trustworthy is the crypto industry? And, you know, this is an industry that is like very, I think, proudly full of pirates. These are people who have been operating in sort of legal gray areas, many of whom were excited about that. And that was like part of the joy almost of the industry for a long time. And now it's cutting the other way where it's like, OK, but like, do you want to give your money to pirates?

54:10So I think that that's certainly going to be a long-term ramification. As for the VCs, I don't know. I would like to say that I think it might be different. And part of the reason I might say that is that interest rates have been going up. And that means that there's less money sloshing into VC than there used to be. There was this whole period where they had so much money, they had to figure out how to invest it somehow. And so like you had mattress companies that were suddenly tech companies because they were selling stuff online. Right. You had WeWork, which to Adam Newman's credit, like that was not a fraud.

54:44He told everybody that he was planning to benefit disproportionately from WeWork like that. And they funded it anyway. So there was this period where like the balance of power had really shifted to founders. There was a real sense of FOMO in the investing community. Then you could sort of pressure them into doing deals without due diligence. And so I think as the money is receding, which it has been, and as the valuations are getting cut and as like the tide is kind of going out, I think that as well as the sort of profound embarrassments of these major fraud trials may contribute to more careful evaluation.

55:21Do I think that that's a guarantee? No, I don't. You know, I certainly have heard a lot of wild VC talk about like how Elizabeth Holmes wasn't really a product of Silicon Valley and they didn't really do anything wrong. And FTX is a standalone fraud. And like, you know, I think there's a lot of denial. But I certainly think that among the people who are using VC as an investment vehicle, you know, whether those are family offices, retirement funds, endowments, whatever, if they provide enough pressure, that will change things. And so the question is sort of, you know, who's upstream from the VCs and how much pressure are they putting on, especially now that we are out of this low interest rate environment and there are less risky places for you to make money?

56:07Yeah, my only worry about that outcome would be that we've been through this in smaller ways a bunch of times now, right? Like, I think if you're still a crypto believer, your tolerance for chaos and risk and fraud is so high at this point, that I wonder what would possibly turn you off. If you're a person who like earnestly believes that crypto is the future of everything, what on earth is left to convince you? This one's a pretty big one. And I think what it might do to your point is it might instill worry in a lot of people like two concentric circles out from the believers. There are kinds of people who were like setting up Coinbase accounts two years ago, right?

56:49Who were like, what's this? I'm not like a diamond hands crypto maniac, but I'm just like a person who wants to invest my money. And I think you're definitely right that those people are going to remember FTX in a pretty real and pretty damning way for the crypto industry. Yeah, I think the true believers, I mean, the true believers are the true believers. They're still going to be there. This is an Internet subculture that I think we're going to continue to see for a long time. You know, they're already talking about the next cycle. Yeah, this is just crypto winter. That's right. So, you know, I don't I don't know that crypto is gone forever.

57:20I certainly don't think that's true. And I also think the approval of a Bitcoin ETF, which is something that the crypto community has really been keeping an eye on, that might potentially be a help to them. Like that might be something that gets institutional investors involved, you know, your BlackRocks and so on. Is that a guarantee? I don't know. Again, we're in a different investing environment now where there are easier ways, less risky ways to make money. Because part of what really fueled the last boom was that VCs were able to cash out much more quickly in crypto than they were in a lot of other investments.

57:56And so that gave them a pretty quick return and that gave them an incentive to work with a lot of crypto companies. And I think that's less true now. So we'll see. You know, and I don't necessarily mind weird internet subcultures. Those are your people. Yeah, I love the crypto true believers. They're a lot of fun to hang out with. I don't necessarily agree with them, but they're a great time. You know, these people, they're not stupid. They're not. They're smart and thoughtful, and they don't like the current financial system. Totally. All right. We have to go, and you have to go on vacation. But thank you for coming on.

58:31You did truly ridiculous work over the last several weeks. So thank you for all of that and for coming on the show. And I have a feeling we're going to be doing this again. What is it in March when sentencing happens? March is when sentencing happens. That's right. We are not done with this story just yet. So we'll do this again. But thanks, Liz. All right. Thank you, David. All right. We got to take one more break and then we'll get to the hotline.

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1:01:17All right, we're back. Let's get to the Vergecast hotline. As always, the number is 866-VERGE-11. Call and ask us all of your weirdest, deepest, darkest secrets. and questions about technology. I don't know how to ask us a secret, but you can do it if you want to. This week, we have a question about sports. Sir Richard Lawler is here to help me answer. Hi, Richard. I always love to talk to sports. Yeah, man, we don't get to do it that often. So when it's just us, we get to talk about sports. This is going to be a six hour long segment. It's going to be great. All right, let me just play the question, which I think is a very fun one, and then we're going to get into it.

1:01:48Hey, David, this is Jeff from North Carolina. I recently listened to your Friday episode where you're talking about the Hulu deal with Disney and Comcast. And I'm wondering, you mentioned that you think Disney wants to sell ESPN. And I'm curious if you think that Disney would potentially not sell ESPN and instead look for a strategic partnership like Apple to run ESPN with them. Or do you think ESPN would ever get sold to Apple altogether? Thanks so much. Love the show. Bye. Okay. I love this question because A, it's about ESPN, which I very much enjoy talking about. But B, it brings up, I think, a thing you and I have talked a bunch about, which is why ESPN is kind of a harbinger of the whole streaming universe.

1:02:34We talked about Disney and Hulu last week. Disney is going to be required to pay somewhere north of eight and a half billion dollars to buy the rest of Hulu. That's very expensive. Disney is not a company that is full of cash right now. But I'm curious, hearing this question, what if Disney doesn't sell ESPN? Could it sell to Apple? Could it partner with Apple? What do you think? Apple is the always, oh, they could buy it for every question you ever have. They just have all the money. Because they have all of the money. Every bit of money that there is belongs to Apple. Tim Cook is just sitting on it, presumably in a cave like small, I assume.

1:03:07Will they buy it? The answer is almost always no. And I think for ESPN, the answer is probably no. You can never rule it out. But it's an interesting question. OK, so like, what is Disney going to do? But I don't think they have an answer. That's why we got these weird rumors about they want to partner with different sports leagues, maybe, because I don't know how that works with the sports leagues owning part of the broadcaster that they sell broadcasts to. That seems strange. And I don't know where the money comes from. But Apple buying them is just one of those things where, yes, it could technically happen.

1:03:39And yes, it would open up all of these things with Apple TV that they would love to do. And it would give them something that everyone needs to have. But they don't actually do those things. It's just generally not the way that Apple operates. for Disney, it would narrow the availability of ESPN if it were suddenly somehow exclusive. Maybe even if they could still sell it to cable operators, it would be weird. And I think that what we've seen, like we saw with their deal with, I think, Cablevision, they kind of worked it out so that you have streaming and you have cable. It seems like that's the way that they're going, at least for the future.

1:04:09Because the other thing that we know now is exactly how profitable ESPN is. And the answer to that is a lot. It makes a ton of money. So profitable. I think that's the thing that actually gets lost in a lot of this because Disney has made fairly clear that it would like to find some more money for ESPN, which people make out to be because ESPN is not a good business. That's not true. ESPN is such an unbelievably good business. They just started breaking out how much money ESPN makes because it is so much money that like Disney is trying to make the point. And that's now, that's now after everyone has cut the cord, after everyone you know has stopped subscribing to cable, ESPN is still making just absolute billions and billions and billions of dollars.

1:04:48Yeah. And I do think it's true that if you cast out far enough, you can see where ESPN gets harder because the rights deals that ESPN is fighting for are getting more and more expensive. The number of cable subscribers who are essentially paying for ESPN twice are going down. So like you cast out another, what, 10, 15 years and ESPN is maybe a less good business. Right now is still an unbelievably great business. I'm with you. I don't think it would be Apple because like I was thinking a lot about the deal that Apple made with the MLS and the deal that Apple didn't make to get Sunday ticket. And it seems like what Apple is all about, and this makes sense given what Apple is, is control, right?

1:05:29Apple wants a thing it can do itself. So the idea of having a thing that is fundamentally about making a million different partnerships with a million different people or being like a minority owner in a thing it doesn't actually control all of feels very un-Apply to me. but like amazon i can absolutely imagine making roughly that exact deal where amazon is like we're going to put all the sports on prime you can subscribe to espn through prime you get espn if you're a prime subscriber we're going to make prime eight dollars a month more expensive there's your cable difference right there like i can totally imagine a world in which that happens i don't think it would be apple i agree with you i think apple is much more likely to like buy a sports league than it is to buy espn yeah something where they actually can control and i think that's the number one most important word for what Apple likes is control.

1:06:14And the other part of ESPN is their deals with the different leagues means that Apple would have no control because all of these arrangements are old and have been made in different ways and have a lot of compromises and all the leagues have different things. Like people talk about Apple will buy Formula One rights. It's one of those things that people say, but I think is unlikely. Formula One broadcast itself. It does all of it through its own broadcast center and sends it around the world. Apple doesn't really want to deal with Formula One telling it what to do. And I think as you go down the line, that's just really what you run into.

1:06:45And that's what makes it less and less and less likely. But yes, like a company like Amazon, what if Microsoft is like, you know what? We should combine ESPN and Game Pass. Let's do it. ESPN, Game Pass, Bing, bundle. Done. The weirdest way to spend$20 a month that you've ever encountered. I love it. The reason I continue to think ESPN is so interesting is because it is right smack in the middle of this thing where what ESPN wants is to be everywhere, right? Because the crazy part about this is ESPN isn't going to get the right seals that it wants if it doesn't have the distribution that you get through cable.

1:07:19This is why CBS and Fox keep getting deals because they're everywhere. Like no one but old people watches CBS anymore, but CBS keeps getting football deals because it's free over the air television that absolutely everybody can get, which means you can charge more for ads, which means you get more reach, like everybody wins. So ESPN needs that, but it also needs to figure out what a streaming only world looks like because it's coming. But if ESPN in 10 years, that world comes and ESPN doesn't have any rights deals, ESPN is dead anyway. So it's caught in this transition that we're in. Nobody has a harder time of navigating it than ESPN, even as it continues to just throw off billions and billions of dollars for Disney.

1:07:59Yeah, being in the lead means that making a decision about changing something is so much more difficult. Totally. So, okay, real quick before we go, 12 months from now, you have to answer, does Disney still own ESPN? Yes, majority. See, that's good. That's good. I think I'm with you. I think if I put the number at like five years, I think I'd have a hard time answering the question. I think 12 months, it's just too big a thing to change in that period of time. And I think people really underrate how messy sports deals are. and just like the paperwork involved in selling ESPN will, I think, just like blow people's minds.

1:08:37And I think the money that it brings in simply makes a lot of things that Disney wants to do a lot easier. It is something that we know now that we always suspected, but we know now, like all those Marvel movies are like, ESPN paid for those. You're welcome. In like a very real way, ESPN paid for all of that stuff. And now the question is going to be, can disney find another way to pay for all that stuff without espn and is it going to have to and all of that is so unknown which is why it's very weird to be disney right now because it's it's dealing in like a thousand concurrent hypotheticals that none of which are true like right now disney's fine wall street doesn't think so because they're terrified about like some future streaming universe that doesn't actually exist yet but like right now as a business disney's doing great bringing in just tons of money it's just hosed in so many ways it doesn't yet understand.

1:09:26It makes it very complicated. What that future looks like is something that, you know, if you have an answer, I'm sure Bob Iger will take your call. Yeah, yeah, hit him up. Bob at Disney.com, I'm sure. He'll take your email. All right, Richard, thank you as always. Appreciate it, bud. All right, that's it for the Vergecast today. Thanks to everybody who was on the show. And thank you as always for listening. There's lots more from everything we talked about. All of Liz's SPF coverage is amazing. You should go back and read it all. Everything Sean is doing from the courtroom for Epic v. Google has been great so far.

1:09:57We'll put some links in the show notes, but also keep an eye on the website. There's all kinds of stuff still going down. And as always, if you have thoughts, questions, feelings, or curiosities about the jury in these trials, let us know. You can always email us at vergecast at theverge.com or keep calling the hotline 866-VERGE11. Like I said before, I love hearing from you. It is one of my favorite things we get to do on The Verge Cast. This show is produced by Andrew Marino and Liam James. The Vergecast is a Verge production and part of the Vox Media Podcast Network. Neelai, Alex, and I will be back on Friday to talk about everything happening at OpenAI, the new MacBook, the PS5 Slim, and a whole bunch more.

1:10:32We'll see you then. Rock and roll.

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