Please enjoy ARK Disrupt Issue 73. This blog series is based on ARK Brainstorming, a weekly discussion between our CEO, Director of Research, thematic analysts, ARK’s theme developers, thought leaders, and investors. It is designed to present you with the most recent innovation takeaways and to keep you engaged in an ongoing discussion on investing in disruptive innovation. To read the previous issue, click here.
1. Internet TV Is Here…But Few Seem Interested
The US now has five internet TV “skinny bundle” services. Based on our tally of company reports to date, however, fewer than three million people have signed up.
This week, Hulu launched its version of a skinny TV bundle which, at $40/month, combines its classic on-demand service with a range of broadcast and cable channels streamed live over the internet. While the base price appears to offer significant value versus traditional cable, the price can double, as shown in Recode’s chart below, once it includes other desirable channels and features.
Apparently, the magic price point for internet-based media subscriptions is ~$10/month. At that price, NetflixNFLX has signed up 100 million subscribers, Spotify 50 million, and Apple MusicAAPL 20 million. In our view, consumers have been conditioned to pay little more than $10 for streaming services, so “skinny bundles” do not seem to have much of a future.
2. Are Tesla Analysts “Missing The Forest For The Trees”
During its earnings call this week, analysts didn’t ask TeslaTSLA about its opportunity in the autonomous taxi market, otherwise known as Mobility-as-a-Service (MaaS). Based on ARK’s research, MaaS will be a $2 trillion revenue opportunity for the few companies that will capitalize on the natural geographic monopolies. An hour and ten minutes into the call, Elon Musk hinted at Tesla’s strategy in answer to a question about the potential for autonomous buses. Is Musk looking at the forest (MaaS), while analysts are focusing too much on the trees (auto sales)?
3. Smartphone Users Average Two Hours Per Day on 9-10 Apps, Though Finance Apps Lag
Smartphone users are spending more time on apps than ever. During the past year, the time spent on apps increased by 25%, totaling 1.7 trillion hours worldwide. Users are downloading more than 30 apps a month, and engaging with nine apps on average per day.
In the US, the average user spends 730 hours on apps per year, or roughly two hours per day. According to App Annie, which measures Android usage, dating and navigation top the list at six minutes on average per day, as shown below.
US: Sessions and Times per Day on Different App Categories
Source: App Annie, Android Data Only
Engagement with finance apps, however, lags that of the most popular apps significantly, averaging only one minute per session each day. Clearly, financial brands have an opportunity to capitalize on the potential for customer engagement by innovating around both app interfaces and content. Popular finance apps, like Paypal’sPYPL Venmo and Tencent’sTCEHY WeChat, are integrating financial updates and social interaction and thriving as engagement becomes a key differentiator.
4. Did Tesla Just Start a Recycling Company?
This week CB Insights surfaced an SEC filing by Redwood Materials, a company focused on recycling batteries. Among its executives are JB Straubel, Tesla’s Chief Technology Officer, and Andrew Stevenson, Tesla’s Head of Special Projects.
Why are TeslaTSLA executives starting a recycling company? At a recent Gigafactory tour, Straubel noted that it rejects 1-10% of battery cells during its manufacturing process, so Tesla is planning to recycle them to recover and reuse raw material.
Extrapolating the possibilities, while the average age of electric vehicles (EVs) on the road is less than five years old today, the ultimate residual value of their battery packs could improve the benefits of EV ownership meaningfully. Additionally, with an efficient recycling process, battery production costs could decline significantly.
ARK has observed that most battery price forecasts do not incorporate any of the economies associated with recycling. Consequently, EV battery costs could decline faster than most analysts anticipate.
5. Can CRISPR Technology Create a Revolutionary Diagnostic Tool?
CRISPR, molecular scissors for genome editing that could cure diseases like cancer, has energized the scientific community like few other breakthroughs. While most discussions have centered on CRISPR’s potential to disrupt traditional therapeutics, two groups of researchers have focused on its potential as an affordable point-of-care diagnostic tool for infectious diseases in emerging markets.
While typically associated with an enzyme known as Cas9, CRISPR works with a host of enzymes. One in particular, Cas13a (formerly known as C2c2), binds to RNA rather than DNA.
Two weeks ago, researchers at the Broad Institute announced binding ability to detect viruses or bacteria in the blood, urine, or saliva of patients who have been exposed to a pathogen. At an estimated $0.61 per diagnostic test, this breakthrough could transform the practice of medicine during an infectious disease breakout in the developing world.
This week, UC Berkeley researchers reported a proof of concept of their ability to use CRISPR-Cas13a to diagnose not just one, but many diseases. When the CRISPR sequence cleaves to RNA using the Cas13a enzyme, it triggers the release of a fluorescence protein, the color of which indicates whether someone has Zika, Dengue, or malaria. No glow means no virus.
The pace at which innovation is occurring within the CRISPR field is profound. Recent publications by the Broad Institute and UC Berkeley scientists also highlight the fierce competition between the two rivals, each vying for their share of the market for CRISPR’s remarkable technology.
6. The Market Cap of Bitcoin and All Cryptoassets Nears $45 Billion, a Tenth of Amazon’s
This week bitcoin crossed the $1,500 mark with a market capitalization of $25 billion. Meanwhile, cryptoassets sans-bitcoin crossed an aggregated market cap of $20 billion, with ether alone nearing a $10 billion market cap. While the markets are hot, we are not surprised given the explosion of innovation from cryptoasset developers.
When bitcoin was at $280 per coin in 2015 we wrote that if it were to take 1% share of the global financial gold market that it would be worth $1,700 a coin.
If you’d like a video summary of the week, Bloomberg Canada interviewed our Blockchain Products Lead, Chris Burniske, to learn why the prices of bitcoin, ether, and other cryptoassets are soaring.
ARK's statements are not an endorsement of any company or a recommendation to buy, sell or hold any security. For a list of all purchases and sales made by ARK for client accounts during the past year that could be considered by the SEC as recommendations, click here. It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities in this list. For full disclosures, click here.