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The DL - Satya's 2020 Bonus, How Microsoft is Playing Games, The (Not Failing) Media Company, and Life (and Death) Advice

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October 26 · Issue #71 · View online
The DL
Welcome to The DL, a weekly newsletter about tech, startups, and investing in the Pacific Northwest.

This week’s issue covers Microsoft’s 2020 executive compensation numbers, Microsoft’s gaming strategy, a media company that is definitely not failing, and some life and death advice.

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Satya's 2020 Bonus
We’re in Q4, which means a lot of people are getting year end bonuses, including the execs at Microsoft! Last week, Microsoft released their FY20 compensation report that describes how they set targets, evaluate performance, and ultimately determine executive compensation.

I thought the most interesting part was the metrics that executives are measured against, and the importance of each metric. Some highlights:
  • Cloud has been Microsoft’s core focus for the last few years, and its weight/importance is continuing to increase in FY20
  • Windows devices is no longer a core metric, and it’s been replaced by Teams active users (and they REALLY exceeded on this goal)
  • Gaming is making an appearance as a top level performance metric (more on this below)
  • They’ve met or exceeded every goal!

So the executive team is doing very well. How much are they all going to make this year?
  • Satya Nadella (CEO) - $44.3M
  • Amy Hood (CFO) - $19.6M
  • Jean-Philippe Courtois (EVP, Global Sales) - $13.9M
  • Margaret Johnson (EVP, Business Development) - $9.6M
  • Bradford Smith (President, Chief Legal Officer) - $16.7M

Since Satya was appointed CEO in 2014, Microsoft’s market cap has increased by literally a trillion dollars ($1.3T to be more accurate). Seems like shareholders are getting a good deal!

How Microsoft Plays Games
For years we’ve thought about how gaming can help Microsoft and I want to turn that around and actually think about how Microsoft can help us succeed in gaming. -Satya Nadella to Phil Spencer

Speaking of Microsoft, Phil Spencer, Microsoft’s EVP of Gaming, did an interview with Stratechery last week, and it was a great look into why Microsoft is winning in gaming, while Amazon and Google are still trying to figure out why gamers aren’t excited about Luna and Stadia.

Here are my takeaways from the article:
  • Microsoft made the decision to make gaming a top level function 3.5 years ago, rather than a group that reported into Windows
  • The original goal of Xbox was “winning the living room” rather than creating the best product for gamers; today, the gaming strategy is built around players rather than what’s good for Microsoft
  • One of the most important meta trends right now is that players want to play their games on any screen they want, regardless of where they purchased the game
  • The three key areas where they are investing today are: (1) Content, (2) Community, and (3) Cloud for Gaming
  • Microsoft is selling the next generation of Xbox consoles with a $25/month “Xbox All Access” plan. They view this as a Game Pass subscription that just happens to come with hardware (but maybe it’s just because the execs get comped on Game Pass subs 😉)

The (Not Failing) Media Company
There were a lot of hot takes on Quibi last week, but this ~170 slide deck on “The (Not Failing) New York Times” is much more interesting.

While most people are paying attention to video, podcasts, and newsletters, this is a fantastic analysis on why The New York Times is a more exciting business than Spotify, Netflix, Substack, etc. You should flip through to learn how the NYT has invested in technology, built multiple subscription businesses, and is exceeding their growth targets.

Some of the highlights:
  • In 2014, The New York Times wrote a memo titled “The Innovation Report” which laid out the failings of their digital strategy and what they needed to do to move forward
  • Here are the four key things they did to reinvent their business:
  1. Cleaned up the balance sheet: Sold off all non-core assets like local newspapers, TV stations, and its headquarters building
  2. Invested in content: NYT pays reporters 2.5x industry average, and sites like BuzzFeed have become “farm teams” for the NYT
  3. Invested in tech: Made tech hires from FB, Google, Spotify, etc. Added new board members. Invested in data, website, and app
  4. Launched new revenue streams: The Daily is the most popular podcast in the world. NYT Cooking and Crossword have 1.3M subscribers

  • Result: Now, The NYT has 4x more subscribers than they did at their print-era peak. Revenue is flat, but this reflects a shift from 2/3 ads + 1/3 subs -> 2/3 subs + 1/3 ads
  • Going forward, their business model is stronger than ever because (1) they have better unit economics than in a print world, (2) they spend less on content than companies like Spotify and Netflix, and (3) they have less competition than other media companies

Very exciting to read about a successful corporate / digital transformation!

Other stuff Dan's talking about
👪 Life and death - I love Scott Galloway’s hot takes on tech, but apparently he also gets a lot of questions on how to take care of sick parents. Here are his learnings and advice on providing sick parents with a good death
🏡 Ellen’s house - For Sale: Ellen DeGeneres’s $39.9M Santa Barbara compound. The infinity pool looks pretty amazing, but it’s only 3 bedrooms, so probably not big enough for me, Sarah, and new baby 😝
📡 Microwave attacks - I love real world spy stories (highly recommend The Spy and the Traitor and Red Notice). This is an article about microwave weapons that scramble your brain. Can’t believe this stuff is real
🎥 $99 theater - Pretty sweet COVID deal! AMC is renting out movie theaters for private movie showings, and it only costs $99. They let you bring up to 20 people and have lots of kids movies. Sounds like fun!

Please hit reply! (Or subscribe or forward!)
About me: I work as an investor at Madrona Venture Group, a Seattle-based venture capital firm that has been early partners with companies like Amazon, Smartsheet, Apptio, and Redfin.
If you have thoughts, questions, or comments, hit reply! If you’re new, check out some of the DL’s top articles from the last few months:

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