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Twitter/Apple: dangerous spat should prompt erratic billionaire to cut debt

Perhaps Tesla electric vehicles just sell themselves. In a month of owning Twitter, the Tesla chief has demonstrated that persuasion is not his strong suit.

Even when Twitter was generating $5bn annually in advertising revenue, the company felt like an economic disappointment. Billions in advertising revenue would now be a godsend.

Elon Musk’s managerial flourishes have included erratic tweets, reinstating controversial user accounts and firing swaths of staff responsible for customer relationships and content moderation. This has scared off dozens of high-profile advertisers.

At the same time, Musk’s vision of a subscription-heavy Twitter has won few converts. An initial re-boot of “Twitter Blue” was suspended. The company could find no way to exclude impersonation accounts that signed up by paying $8 per month.

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A new subscription plan is coming soon. Meanwhile, Musk has perplexingly decided to go after Apple and its boss Tim Cook. The iPhone app store is the gatekeeper to Twitter. All the while, Twitter’s $13bn debt balance continues to charge interest.

Apple had been a large Twitter advertiser, paying the company $40mn so far this year. It has paused that relationship, prompting others to do the same.

Musk has a bigger problem with Apple. The erosion of content moderation on the site could eventually violate Apple’s terms of service. Twitter customers would then be unable to download or update the app on 1bn iPhones in worldwide circulation.

If Twitter stays in Apple’s app store, the devices giant will continue to take a cut of as much as 30 per cent of any subscription revenue. Musk is complaining loudly about this structure. He has a fair amount of support. Spotify and other app developers claim such fees are anti-competitive, given Apple’s dominance in smartphones. A fifth of Apple’s $300bn in annual revenue comes in service fees, smoothing the bumpiness of hardware sales.

The world’s wealthiest man is an unlikely champion of the marginalised. At some point Musk needs to acknowledge that even he sometimes has to play nice in the sandbox. While he works on that, it may be time for him to reduce financial strains in case the rupture with Apple is terminal.

Musk has already sold nearly $20bn of Tesla shares to fund the equity component of the Twitter buyout. It may be wise for him to consider selling another $10bn or so, to extinguish the company’s debt balance. The fewer people that have leverage over Musk right now, the easier it will be for him.

The Lex team is interested in hearing more from readers. Please tell us what you think of the disagreement between Musk and Apple in the comments section below.


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