Why is there a "Tech, Media, Telecom" sector? | Hacker News Reader

Why is there a "Tech, Media, Telecom" sector?

capitalgains.thediff.co

40 pointsgumby32 comments

Much simpler answer: it's because of NAICS 51.

https://www.bls.gov/iag/tgs/iag51.htm

Which the BLS calls the "information sector", and does not mention "tech" anywhere. This seems like the most appropriate label, because there's no reason that people inventing femtosecond lasers, fusion power, hydrogen catalysts, bipedal robots, rare-earth-free magnets, self-driving cars, and any other manner of novel technology belong in the same category as media licensing. But internet service providers and people writing video-compression algorithms probably do.

> there's no reason that people inventing ... novel technology belong in the same category as media licensing

Well, sure they are. Patents are information: R&D insights distilled into a useable implementation. Insofar as the final output of your company is a patent for other companies to license, your company is, in an economic sense, an information creation company — regardless of what happens "inside" the company on a day-to-day basis.

Boston Dynamics, for one example, isn't a robot company; it's a robotics R&D lab — which is to say, it's an "information about how to build robots" company. Information about how to build robots is what they create, and what they sell (or rather license); other companies (and governments/militaries) then buy that information / license to use that information — and supporting informational materials like trained data models, designs for FPGA programs to execute those models on, and robotic sensor- and motor-complex designs that those models were trained to use — and put it together themselves, or have some other subcontractor put it together, into actual robots.

We can include oil and gas exploration in the infotech-entertainment-telecom economy too! After all, all those geological surveys are just information about where the oil and gas is located!

And quantitative finance too, etc...

Other things that are information: romance novels, interior design layouts, daily of routines of possibly cheating husbands. Are you going to contend that authors and decorators and private detectives are also information workers? I'd respect the commitment to consistency if so, but it seems to stretch the definition past the point of usefulness.

I long wondered why businesses that don't develop technology are called "tech" businesses. The TL;DR is that it's all in the economics of being an analyst. Consolidation hits them too.

I would say that tech companies sell technology. If you develop tech to sell, you are a tech company. If you buy and resell tech, you are still a tech company. But if you develop tech to use internally, you aren't a tech company.

Unrelated, when did you post this comment? The display text says "1 hour ago", but the tooltip says "2023-10-10T15:00:00" which was much more than an hour ago in any timezone that makes sense for HN to be using.

This post was submitted yesterday, didn't make the frontpage, and came in via the second-chance pool (https://news.ycombinator.com/pool) that promotes high-quality posts to the frontpage temporarily to give them a second shot at visibility.

When that is done, the timestamp of the article and the existing comments are temporarily shown as happening around the time the article got re-surfaced, not the original submission.

Based on your definition, Netflix is not a tech company, it is a media distribution company.

Amazon’s AWS makes it a tech company, otherwise it would just be a retailer.

Sounds about right.

Even outside my definition, Netflix should be considered a media company first. They spend a lot more money licensing and creating media than they do on developing tech.

Of course both media and tech are in the TMT sector, so either way Netflix belongs there.

I struggle to think of any manner in which Netflix can, today, be considered a 'tech' company. They originally were a DVD rental service, then they developed in-house a media-streaming service which briefly gave them a lead but soon became a commodity across the media industry, and now they compete with other media companies on the basis of their content library.

I'm sure they employ lots of software programmers, but so does Disney.

They pay tech company salaries? That's about it for why it's in FAANG.

"Tech company salaries" is itself kind of begging the question -- if a technology or software company pays a low salary, is it not a tech company? For that matter, I hear the salaries are pretty high at Goldman Sachs too.

When the term FAANG was coined, those 5 companies were paying engineers around double what they could ask for anywhere else. I believe that's when software engineers started grouping them together. It became a goal for many young engineers to join because of the fantastic salaries/benefits.

Things have changed since then but the point remains, FAANG generally means "large company that pays above market for software developers."

Netflix is a FAANG company because it's the 'N' in FAANG. It's just not a tech company.

It says it in the article: it's what their business model is like. Netflix pays a bunch of money in R&D and then has a low marginal cost for each additional customer, who are on a subscription (like so many SaaS businesses). Disney, if it was just Disney+, would probably be thought of as a tech company, but Disney is also all about their intellectual property and the ways to monetize that: movies, parks, and merch.

Disney's interesting because it's not just another media company, so what category does it fit in? Perhaps it's big enough that folks are just "Disney" analysts. Speaking of hydra, how do you analyze the stock prices for companies like Sony? They make movies, music, TVs, video games/consoles, cameras (high-end for professionals), phones, CMOS camera sensors, and probably others I'm not even aware of.

> Based on your definition, Netflix is not a tech company, it is a media distribution company.

Sounds about right. NBC was once owned by GE, and had a formidable internal engineering team of their own. Would anyone say NBC is a tech company?

Hell, their name even contains the distribution medium they had to master (National Broadcasting Company), just like netflix.

> I think what this means to be a “tech company” often. Benedict Evans recently wrote about Netflix, and how it not really a tech company [https://www.ben-evans.com/benedictevans/2019/7/31/Netflix]. Evans says Netflix is a media company that uses technology “as a crowbar” to enter. He writes that the main drivers of the business Netflix is in content. While the technical aspects are impressive, they are quickly getting commoditized, lowering Netflix’s competitive advantage.

I wholeheartedly agree.

In fact, I am somewhat relieved that relatively influential (if not a bit controversial) figures like Evans can comfortable call a company like Netflix “a media company that uses” versus a “tech company”. This seems like a new development. Netflix is located right in Silicon Valley in Los Gatos. It has tons of engineers. It’s the N of the FAANG.

This does not mean that the technologists over at the company are not doing innovative, technically challenging work. But it means whatever work they do, the company will live and die mainly by its ability to create as much original content a possible. The rest, as they as, are on the margins.

https://www.readmargins.com/p/everything-is-a-tech-company-n...

>It’s the N of the FAANG

Which was 1.) Basically a stock market thing when the term was coined by Jim Cramer and 2.) Netflix was doing a bunch of cutting edge things with tech to enable its streaming platform at one point. Now, a streaming platform isn't something you just buy off-the-shelf but it's not a particular differentiator, relative to content, either.

>Amazon’s AWS makes it a tech company, otherwise it would just be a retailer.

Sounds right to me. If you removed AWS from Amazon, what would be the biggest difference between Amazon and Walmart? Walmart has physical locations vs Amazon being online only. They both run logistics empires and websites that carry third party products.

>Amazon being online only

Except for Whole Foods, lockers, admittedly small-scale experimentation in other retail, a fleet of logistics vehicles and partnerships...

Yes it's much more online than Walmart but it absolutely interacts a lot with the physical world.

They simply meant their primary retail business was online. Of course they still operate in the physical world.

For a time, Netflix had the only competently executed streaming service and no original content. Over time, good-enough video streaming became commoditized and Netflix's competitive advantage shifted into its original content.

That doesn't seem controversial. They also develop IoT devices now, of course, but aside from AWS, Amazon is fundamentally a retailer and logistics company. Back when they first came out, this kind of thing was called e-commerce and nobody called them a tech company. That terminology didn't really arise until later. Netflix, of course, was mail order video rental before they entered streaming, and sure, they eventually became known largely for their engineering and how well they scaled the ability to stream enormous amounts of data to huge numbers of consumers, but I don't see what they're doing right now that is any different from Disney and Warners now that those companies also run their own streaming services.

The reason they're a "FAANG" that people seem confused about is the acronym was created to describe enormous market cap companies that traded at large multiples of earnings way above what is typical for a blue chip stock. All of these companies had a large ratio of customers to employees as a common attribute, which can in some cases be attributed to the product largely being software-as-a-service that efficiently scales to large numbers of customers, but it was also the case that, other than Apple, they were all fairly young companies. Disney and Warners can't grow like that because they're already huge and have been for a century. That's what distinguishes the growth rate and market cap being out of line with current earnings, not the fact that one makes technology and the other doesn't.

Calling yourself a "tech" company eventually became a method of trying to justify multiples like that for your own company. On the successful side, you've got companies like Uber and AirBNB, fundamentally a taxi provider and property rental broker. On the less successful side, WeWork, which was just a basic landlord like that Simons company that owns all the malls or something, and didn't even make software at all, but wanted "tech" company valuations, so they branded that way.

Netflix didn't exactly invent streaming, either. Porn studios had video-on-demand served via websites 30 years ago. Netflix certainly did it bigger, but a lot of that is down to it being a lot easier to attract elite engineers and large investors when you're not a porn company.

The answer to "why businesses that don't develop technology are called 'tech' businesses" is: Valuation.

If DTC pet supplies wasn't "tech" it would never get funded.

A good example of how cynicism can sometimes simply be accuracy.

> Most of what we think of innovation is really business model innovation, rather than technology innovation. We are more easily amused and excited by the latter, but what changes our lives more often is the former.

> Yet, many technology innovations fail to make it past the showroom stage. Often, it's because they are neat tricks, but they don't solve real problems. Or they are useful, but not just as helpful, or for enough for people, so they find new lives. Those innovations can, for example, become niche players. Segway is a good example. We did not end up rebuilding cities around "Ginger" as it was previously known, but they did become the vehicle of choice for mall cops everywhere.

https://www.readmargins.com/p/jokes-you-invented-bad-jokes

Segway is a big player in the blossoming e-scooter industry today. It comes around!

The article doesn't disagree - "That's more success than most companies could ever hope for, but still a bit of a shorter throw than an urban renaissance."

During the digitization stage of the economy every company can be a tech company. That's the thesis.

Someone else in this thread answered that it's because of NAICS standards, which is an interesting hypothesis, but I think the real reason is, "because investment banks organize their coverage groups that way". And the reason that investment banks do this is primarily because the core of the value in these businesses is driven by intellectual property and/or exclusive licenses to deliver content. In other words, assset value across these three verticals is driven by legal rights to exclude other people from creating a similar asset, whether that asset is a piece of code, monopoly-protected land-line phone service (not really a thing anymore but very much so in the 80s/90s when the TMT category came into being), or episodes of a TV show.

TLDR: because dealmakers think it makes sense that way.

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