The Six Five team discusses the EU investigation of the Adobe-Figma Deal.
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Daniel Newman: Is it a Six Five anymore if we don’t talk a little antitrust?
Patrick Moorhead: It’s not Dan, it’s not at all.
Daniel Newman: Let’s talk some antitrust.
Patrick Moorhead: Let’s talk some antitrust. So, in the background of Microsoft, Activision, VMware, Broadcom, FTC chasing Meta for buying a small XR company, Amazon trying to buy a vacuum cleaner company, Roomba, that’s my favorite, by the way. Oh my gosh. Anti-
Daniel Newman: What would we ever do if we can’t all have a robotic vacuum?
Patrick Moorhead: I know. You can imagine what Amazon could do with that. It could possibly make the vacuum walk down or fly to the distribution center, get my stuff and fly back and stick it in my refrigerator and in my drawers. By the way, that’d be cool.
Daniel Newman: What if they cured some diseases by purifying, getting dirt and dust and grime? I mean, it could be the virus killer.
Patrick Moorhead: Anyways, that is the backdrop of the craziness that we’re looking into. By the way, Apple having a monopoly over its app store, I get, amongst others. But hey, on the heels of the UK saying it’s going to investigate the Adobe Figma deal, the EU has kicked off its investigation, which again, not surprised, and I can see based on confusion of what Adobe does with Figma. There’s this notion, a couple odd notions out there, Dan, that I kind of want to peel apart, and that is that Adobe and Figma are in the same business. So, how many people are editing their videos and photos with Figma? Hmm, absolutely zero. Okay. Adobe had a very unsuccessful cloud-based sharing tool that it’s already said, hey, it would get rid of if this deal went through. But, they’re not even the same products.
Are they used by creators? Yes. Are they the same products? Absolutely, freaking not. There’s this other argument that says, well, if Adobe tried hard enough, it would be able to create what Figma does. Well, guess what? They tried and it failed, and their CEO is on the record saying exactly that, this did not work. We could not do this. There’s this other argument that Figma could do what Adobe does. Folks, I mean creative professionals out there, could you not use Adobe and just use Figma to do what you do or vice versa? Absolutely not. After 20 plus years of Adobe creating their products, Figma is not going to magically replace that.
So again, I don’t understand it. I think we’re into a kind of crazy land here, with regulation. I believe that it’s primarily A, based on regulators who don’t understand business and how they operate. B, people who view success with being a bad guy, that’s the other one, and the third one is, “Hey, we don’t have tech companies in my region, so I’m going to come after you and basically make penalties attacks for you, so I at least see some of the money.” China loves to do that, by the way, and there are some people who speculate that the EU issues these fines as a revenue generator. That’s it. That’s all I got, buddy.
Daniel Newman: Yeah. Can I just say no, this is a speed bump hurdle tax? So, the UK is probably just following the lead after a less than successful breakup from the EU. The UK is now going to need to find a new revenue generation stream, which is going to be what? Competitive taxation on deal flow? Not sure if that’ll be the case, but what I can say somewhat confidently is, software that enables people to collaborate on design and stuff seems to me like a fairly general category that can be done in many different ways, and you could argue that there’s many different tools, whether that’s using Teams and sharing AutoCAD in Teams. Yes, I do understand the ability to do some very specific kinds of design work inside of Figma, but my point is, it just doesn’t feel to me like there’s enough of a market and there’s enough risk and enough price power control and experience damage, that can be done, through a deal like this.
I think it’s just the size, Pat. I think it’s just the size. I think anytime it gets over, what about $10 billion in any sort of deal, there’s just a demand and an interest. Competition committees need to exist. They need to justify and validate their existence, which means they need to investigate things. Pat, you and I both shared something this week about the Amazon breakup. It just feels to me like it’s a hammer and a nail, and the nail is any deal over 10 billion, and the hammer is every competition authority on the planet right now. Look, I, and you know, am as much for regulatory when it’s something that truly limits competition or creates pricing monopolies, but I just don’t see how A, you couldn’t, even with just a few concessions, some sort of pricing concessions for a short period of time. I mean, there’s just a lot of ways to solve this, without trying to kill it.
Patrick Moorhead:Yeah, it’s Broadcom, we saw the concessions that were made for Marvell and Intel and NVIDIA, and stuff like that, and it gets made. I think that there was some talk, I think it was in Bloomberg, about the concessions were rejected, and from an Adobe point of view, it’s like that would just be dumb, right? Why concede to something that makes absolute sense, that could limit your growth, for years to come?
Daniel Newman: Yeah, absolutely. So anyways, I feel like this is going to happen, and there probably will be something in the US, as well. While I genuinely believe this deal should go through, and this is not one that a lot of time should be spent on, there’ll be some time spent on it.