Morning Brew Daily - Apple Wants Google's AI & America's Hottest Housing Market Cools Off

Episode Date: March 19, 2024

Episode 282: Neal and Toby dive into the potential mega deal between Apple and Google where Gemini could supercharge future iPhones. Then, can the federal government crackdown on social media companies to protect its users? The Supreme Court’s decision could impact the 1st Amendment. Next, Austin, the once hot housing market from the pandemic-era boom, is cooling off. Also, the 81-year old fabrics company, Joann, is filing bankruptcy while Sports Illustrated may have found a second life. Meanwhile, MrBeast wants to giveaway the largest game show prize in history in his new show with Amazon Prime Video. Lastly, tense from all the talk of AI taking over human jobs? Perhaps AI-powered robot arms could take care of those knots. This company just got $80 million to expand its AI masseuse across America. Use code MORNINGBREW50 to get 50% OFF your first Factor box at https://bit.ly/3UUZGG0 Get your Morning Brew Daily Merch HERE: https://shop.morningbrew.com/products/morning-brew-daily-sweatshirt?utm_medium=multimedia&utm_source=podcast&utm_campaign=mbd&utm_content=shownotes Listen to Morning Brew Daily Here: https://link.chtbl.com/MBD Watch Morning Brew Daily Here: https://www.youtube.com/@MorningBrewDailyShow Learn more about your ad choices. Visit megaphone.fm/adchoices

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Good morning, Brew, Daily Show. Phil Freyman. And I'm Toby Howell. Today, Mr. Beast is taking his talents to streaming, but can he replicate the magic that made him YouTube's biggest personality? Then Google and Apple might be teaming up on AI. And if I was Sam Altman, I'd definitely be a little bit worried. It's Tuesday, March 19th. Let's ride. Okay, here is a hypothetical question that's been making its way across the internet. I am a genie and I show you three doors. Through one door, you can travel 50 years into the past. Through the second door, you get $100 million.

And opening the third door will allow you to travel 50 years into the future. Toby, which door are you going through? This is interesting, and I hate to be this guy, but I need to get into the semantics here. Return to the past is only good if you can then come back to the future with, or no, if you remain there, because then you can use your future knowledge and kind of build yourself a nice portfolio because you know Nvidia is going to the future though is only good if you can return to the present with the knowledge you gain there so those two doors are confusing to me so i think i just end up on the hundred million because that's like the only sure thing here where do you land right well if you go

into the past i think you don't have to come back to the future and you could do everything from invent facebook before zuck does and you'll be worth 200 billion dollars you could bet on every sports game because you know every single outcome the past is good because you stay there but so but if you came back, that's what I don't know. Does the door return you to the present moment? I'm a genie with not that information. But let's take Door 2 out of it. Are you more interested in traveling to the past or the future? Just that binary? I think the past a little bit, because I mean, I've never seen 50 years in the past and also the future. It could be a little dicey in 50 years. So I'm taking the sure thing of the past. This all reminds me for some reason of Twilight and being

like the ageless vampires in some way. Wow, we've really gotten off topic here. Let's hear a quick word from our friends over at Factor. Neil, you know that I get a little antsy about varying up what I eat. I know. I've seen the order from five different breakfast places in five consecutive days. Hey, I like to switch it up, which is what factor, why Factor and I get along so well. It has a new menu of 35 dietitian designed options every week. Well, I'm happy eating leftovers every day. But I will say, opening that Factor box to see some delicious meals, fresh, never frozen,

does get me fired up. See, variety is the spice of life. If you are stuck in a food rut, Factor is full of healthy and delicious options to help you break free. To break free of your food rut, head to Factor Meals.com slash Morning Brew 50, then use code morning brew 50 to get 50 off. That's FactorMeals.com slash morning brew 50 with code morning brew 50 to snag a tasty 50% discount. Apple and Google are teaming up Power Ranger style to try and establish a,

better foothold in the AI space. According to a Bloomberg report yesterday, Apple is in talks to license Google's Gemini AI to put it on iPhones and other Apple devices. This is a match made in synergistic corporate heaven. Apple would finally gain a foothold in the generative AI space after being suspiciously quiet throughout the latest AI hype cycle. And Google would not only gain a massive scale in the AI arms race, but also help patch up its image within the industry after a series.

of embarrassing missteps. Plus, the two are pretty cozy already. Google has been paying Apple for years to serve as a default search engine on iPhones, a relationship that has been fruitful for both, but has drawn regulatory heat as well. Neil, we're still in the talking stage here of this arrangement, but do you ship these two? Do I ship these two? What does that mean? That means do you put them in a relationship?

It's like, it's like, my term. All right, well, I'm clearly showing my age. It does make sense. I think it is also interesting that it is an admission by Apple that they are so far behind. You think that Apple would be creating its own software, power its next iOS. This could be a part of iOS 18, Google's Gemini, but it is an admission that Apple's like, wow, we're so far behind that we need Google's help. They have had a big partnership for years, as you mentioned.

Google pays Apple $18 billion every single year so that Google search is the default search option on Apple's iPhones. It's worked out for them well, except for the fact that we can get into this. There's been a lot of regulatory scrutiny on that partnership. So you have to expect there will be even more eyes from DC looking at this if it were to happen. Yeah, investors reacted favorably to this deal. Google shares closed up 4.4%. Yesterday, Apple jumped over 3% before finishing up just under 1%.

And I think the delta between those two investor reactions does reveal something deeper. as you kind of mentioned, this partnership gives Gemini a huge lake up in the AI race, because, again, if you can get on literally the billions of Apple devices out there, it just gives you an immense scale that other platforms cannot offer you. But on the Apple side of things, it does reveal that its AI efforts are just not going very well. It has been working on something. It's codenamed Ajax. It hasn't released so much as a chatbot yet.

There does seem to be potentially a future, though, where Apple creates an AI that helps you do stuff on the devices itself, but it doesn't actually pull in anything from the cloud versus it uses Gemini AI to do those things that we typically associate with generative AI, like text-to-image generation or something like that. So I think that even though investors reacted positively on the whole, it does show the difference between the fortunes of these two companies. Right. And Apple stock, I mean, it's just been kind of in the dumps recently. It's underperforming the NASDAQ by about 16 percentage points this year, which is,

the biggest underperformance it's had since 2013. And you have investors calling Apple stock more like a value stock like Coca-Cola or Walmart, which is just crazy to people who have been following the stock market for the past 20 years because Apple has been the quintessential growth stock up and to the right. And now without so much innovation, without a ton of growth potential in certain areas, it's late to the AI game, that it's more of just this reliable profit-making machine that's not necessarily going to rise exponentially over the next few years. You know who I bet is really mad right now, though, is Samsung?

Because Samsung just rolled out a new smartphone that has AI features powered by Gemini, and now here Google's and talks to put Gemini on its biggest competitor, Apple. But also, this is not just a one-horse race. Again, we keep saying they're in the talking stage. It's a situation. I'm throwing a lot of relationship terms at you right now, Neil. But this is not a one-horse race because Apple has also held this. discussions with Open AI and considered using its model. So this is anything but a sure deal. But

it does, again, the synergies are there for both these companies. So I could see it happening. All right. Moving on. To understand the context for this next story, you need to go back to peak COVID. The Biden administration and social media companies like Facebook exchanged tense emails in which the government urged the platforms to remove misleading posts related to vaccines and the pandemic. The question of whether that government pressure constitutes illegal censorship went before the Supreme Court yesterday in a closely watched case that could set standards for free speech in our digital era. How'd we end up here? Well, in 2022, two Republican-led states and individual social media users sued the Biden administration, accusing it of illegally

suppressing views it didn't agree with, and creating a vast censorship enterprise that bullies platforms to remove offending posts. And appeals court sided with the challengers and severely limited the amount of contact government officials can have with social media platforms. And after more legal jocke, it ended up at the highest court in the land. Yeah, there is a lot of different kind of interpretations of what bullying means in this case. Like, how much pressure can the government exert on these social media companies and still have it not violate like the First Amendment, right? So there was a lot of the justices had very differing opinions on this.

Some people, like Alana Kagan, for instance, was saying that these same communications, happen with journalists every single day. She literally said this happens literally thousands of times a day in the federal government. It's not bullying. It's just you work with these people on like almost a daily basis in some cases. So I think that the justices are looking to draw a line in the sand here. And it's a little bit murky. It does seem like they were skeptical of the arguments being made by the states, though. Right. It did seem like the justices were going to rule against the states. Obviously, we don't know. But their line of questioning made it seem like they favored the Biden administration's position that this was amounted to just that if anyone who's

seen the West Wing knows that the administration like the government officials are on the call are on the phone with reporters and editors all the time trying to get them to publish more favorable things or complaining about particular coverage and that sort of communication that line of communication is healthy it happens and the Biden administration is arguing that it's basically the same thing that they were doing with social media platforms Facebook and Twitter telling them that, you know, a lot of the stuff on your platform is dangerous right now. It's going to kill people. You should probably take it down. But on the other side, the Republican-led states, that it was Louisiana and one other one,

are saying, no, this absolutely crossed the line. Like, there was retribution involved, although the Biden administration is saying we didn't take any sort of steps to punish social media platforms for not doing our bidding. Yeah, and I think that's the key differentiation here. It's the difference between maybe like the FBI saying we want data on someone or something versus if they say, if you don't give us data, then like something, quote, bad will happen to you or anything like that. So it does come down to the coercion aspect of this using the word bully pulpit was

thrown around a lot. Like, is the government using its position as the government to bully these social media platforms into doing something that violates their First Amendment right? So it was interesting to see a lot of the justices, though, were saying, I don't really know about this. It doesn't seem like there's enough here to show that they were being coerced. All right. What goes up must come down. Yes, even Austin's housing market.

The Texas capital that symbolized the COVID housing boom is seeing the greatest fall in home prices and apartment rents of anywhere in the country, according to the Wall Street Journal. Since peaking in 2022, home prices in Austin have fallen a lot. 11% the biggest drop of any metro area in the U.S. And at the same time, rents have fallen 7% also the most of any U.S. city. One factor driving prices down, more apartments. All those cranes dotting Austin Skyline have cranked out more apartments since 2021 than in any other American city, leading to a glut that has helped soften the red hot rental market. And what would be unthinkable just a few years ago,

Austin landlords are offering tenants weeks of free rent and other perks to fill empty units. Toby, feel like you could look at this in one of two ways. The first, this is a clear case that building more housing actually helps lower rents. The other, Austin's once bright start is fading in this post-COVID world. I'm going to look at it in both ways. Austin had so much going for it. I mean, remember, remote workers with these big tech salaries for moving there. It had the good weather.

It had the low taxes. Tesla and Oracle also moved their offices there. Lower business regulation. And so Austin's economy grew at literally double, nearly double the national rate and became the country's 10th largest city. So again, it had everything going for it. But I think what you did see is a classic boom and bus cycle. You started to overbuild a little bit, which again, isn't necessarily a bad thing because, yeah, housing prices going down, rent's becoming more affordable. Not a bad thing.

But I do think that there is some signs of maybe it was a bit of a bubble that flew a little too close to this on. Yeah. And there was a very interesting debate going on over the Wall Street Journal. framing of this piece because their headline was, once America's hottest housing market, Austin is running in reverse. It's kind of this negative framing. And then you have a bunch of commentators on Twitter being like, why are you framing it like a negative? This is what we should be celebrating. We're building more apartments. Rents are coming down. So that's exactly how you should be framing it. Not in the sense that your growth has been sputtering. But in essence, wow,

the stuff, the policy mechanisms, mechanisms, we've been urging cities to put it in place to lower rents and solve this affordability crisis are working in your city, and we should celebrate that. You should celebrate it, but this is why I think that the Wall Street Journal did frame it in a certain way that Austin Star is falling a little bit, because in Q3 of last year, more people were searching to move away from Austin than they were to move to it, according to Redfin. And that, to me, doesn't necessarily show anything about the policies and the increase in housing. It is literally just showing that people are trying to get out of Austin faster than they are trying to get into Austin. And so I do think that this shows some cracks in kind of that

Austin veneer that this was going to be the next big tech hub, the next big rising star. And I mean, again, it's still doing all right with itself. But I think that shows some cracks in it. I think it's still the fact that Austin is very unaffordable. I mean, prices skyrocketed 60% in two years. So the fact that they're down 7%, 11% is still, you know, still makes it seem like most people cannot afford to live there. It's still very, very, very expensive. But I will tell you, the place that's growing the fastest in the United States, it's not too far from Austin. It's up I-35. It is the Dallas-Fort Worth-Arlington Metroplex area. There was new census data released last week that found that this area is the fastest growing metro area in the entire country. Now is more

than 8.1 million people up in North Texas. So if you're looking for the growth areas, maybe Austin's kind of simmering a little bit. I think it's still growing. I'm still very bullish on Austin. But the Dallas area, holy cow. Texas, though, it's ripping. Up next, pour yourself another cup of coffee because we have a back half of the show

that features Joanne Fadrick's robotic masseuses and Mr. Beast. Study and play. Come together on a Windows 11 PC. And for a limited time, college students get the best of both worlds. Get the Unreal College deal,

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Joanne's fabrics and Sports Illustrated may not seem to have a lot in common on the surface, but dig a little deeper and there is more there than you'd think. Both are staples of a bygone era overtaken by newer, cheaper, and more innovative peers, and both have spent the last few years basically clinging on for dear life. While I have an update on both brands and good news, I hear a pulse. Authentic Brands Group, which owns the IP rights to Sports Illustrated, announced a deal with a new publisher, Minute Media, to carry on the Sports Illustrated brand, which has been on life support after its previous publisher threatened to sunset the print edition. Meanwhile, Joanne's sweet, sweet 81-year-old Joanne's is not doing grand.

It filed for Chapter 11 bankruptcy yesterday and secured $132 million in fresh funding with the goal of helping reduce its monster debt, which had ballooned to $1 billion. But again, its pulse is still beating. Its 850 or so stores will remain open throughout the proceedings in case that crocheting bug ever strikes you again. Neil, two iconic brands hanging on for dear life, but still alive. Still alive. I think let's talk about Sports Illustrated. First, there is a huge size. of relief from anyone who cares about Sports Illustrated that this deal went in place. They were thinking

of shutting the print edition of Sports Illustrated, which yes, still exists. It comes out once a month. It looks like under this deal, that will be revived. Everyone was, all of the staffers were laid off of Sports Illustrated. It looks like this new deal will allow them to come back and start writing for the brand again. And Minute Media, I mean, in a world where media companies are so mismanaged, it looks like Minute Media kind of has this act together. It does $400 million in revenue across publications like the Players Tribune and fan-sighted, and now it's going to be able to publish Sports Illustrated for the next 10 years under this new deal. So it looks like there is signs of life for Sports Illustrated, which I think is welcome news for anyone who cares about this,

you know, really iconic brand. There is one thing that makes me nervous about this new deal, though, is that Minute Media is focused on, quote, short-form sports content creation. And its CEO said that by buying or by licensing Sports Illustrated, they're making an exception to its core strategy. And he said that's not the first time that they've done it. They've kind of gone outside their wheelhouse before. But it does make me nervous because usually, quote, acceptance to the core strategy are the first thing that get the axe if times get tough. So I do think media media is trying to expand a little bit here out of its more social media focused content. But again, Sports Illustrated, it's such a good brand, still right in their

wheelhouse. So I do see that the synergies are there. What happened to the players tribune? Have you read anything about, have you read any Players Tribune pieces recently? It's kind of hit or miss because they are written by players who are still active or recently retired and it gives a first person insight into what's going on. And if I see a piece that I really enjoy, it still is a company that has an innovative approach to media. Let's talk quickly about Joanne's a little bit. Remember, Joanne's was kind of had signs of life during the pandemic because I wasn't joking about the crochet habit. People were stuck at home during COVID and started crafting again.

it did have this, it's been on a long revenue decline, but saw a little bit of a bump during the pandemic. That has kind of long gone, though, and it suffered from the usual rising prices, rising inflation have made consumers a little bit more discretionary about what they're spending their money on. And I guess yarn and the crocheting needles aren't at the top of the list anymore. Okay. What do you get when you've conquered YouTube? If you're Mr. Bees, you go to streaming. Mr. Bees, the biggest YouTuber on the planet, announced a deal with prime. video for a reality competition show with a payout that makes who wants to be a millionaire look like your high school quiz bowl. The winner of the show will take home $5 million,

which is the largest single payout ever in TV history. Called Beast Games, the show will be hosted and produced by Mr. Beast and pit 1,000 contestants against each other for the record prize. For Mr. Beast, who's actually a 25-year-old named Jimmy Donaldson, this series is an opportunity to show he's got the content chops to expand beyond his comfortable home turf of YouTube. And for Amazon, it's a bet that Mr. Beast fans will follow him to their streaming platform, which could really use a hit show. Toby, before we get into the business strategy here, I'm just going to throw it out there. You should apply to be a contestant. I would love to apply to be a contestant. We don't have a ton of details of what's actually going on, but, man,

that'd be good content. I don't know if this will work. I'm just going to be straight up honest with it, because a lot of the reasons why influencers have been able to succeed on their respective platforms is because they have a ton of control over what product goes out. They have this very deep understanding of what their audience wants and they can cater it towards them. But studio executives, traditional film and television producers, they have much different goals than the creators. They have much different audiences than the original creators to attract. So there's just an inherent tension there. And it's why we haven't seen a lot of successful YouTubers actually cross over into the mainstream.

I mean, we were tossing around names like Jake and Logan Paul before the show, maybe Emma Chamberlain, but none of these true YouTubers have really entered into the more traditional film and TV industry and really done well. So I don't know if it's going to work. Well, Mr. Beast said that the reason he went to Amazon and there appeared to be a bidding war over him from at least one other streamer, was that because he'd have full creative control of the enterprise.

I mean, he has a $10 million content studio in North. Carolina. So he's already got all the infrastructure to make a very high production value show, which he already does essentially on his YouTube channel. These things are so highly produced. But, I mean, I can see one reason he's doing it is because Amazon is reportedly paying him $100 million. He got a bad. Yeah. $100 million for this. I think that shows that Amazon is still throwing money at shows to get people to come to watch Amazon Prime video. But for Mr. Bees, it's also interesting because he gets what, like 500 million views on each of his videos that he does? Amazon Prime Video only has 80 million subscribers, so this is going to be like fewer people watching him. Yeah, 500 million is probably at the top end of his range. But yeah, still, he does consistently rip at least 100 to 200 million views per video. Mr. Beas also occupies such a weird place in culture right now because he might be the most

influential person in the world when it comes to that, what I call the youths, just kind of that teenager to like younger 20s range. everyone knows who Mr. Bees is, but then if you go to like maybe the 30, 35 plus year old reigns, some people may not have heard of him at all. So it is so weird how bifurcated his audience is and how young it actually lean. So again, that's how it's going to be interesting to me because most of the people who subscribe to Amazon Prime are going to be on the older end of the spectrum. So again, this could be a beautiful synergistic thing where a new audience is introduced to Mr. Bees and they like him and it's great. Or it could be a thing where you see this YouTube

run TV, you have no idea who he is and you turn the TV off. Okay, let's move on to our final story. I know what you all were thinking. You thought I forgot about Toby's trends this week, but fret not, it's here, and it's all about robot masseuses. As always, Toby's trends is where I, a sprightly young Gen Zier educate my wise millennial co-host, Neil, on a recent trend I've had my eye on. And today's trend comes from a company called Escape, but it's spelled A-E-S-C-A-P-E, so you know it's very trendy. Escape offers AI-powered robot massages. You enter a room, lay down on a table, then use an app to control these two life-sized robotic arms,

complete with nub hands that kind of rub you down. If that doesn't sound very relaxing to you, a lot of reporters who have tried it out so far disagree. They loved it. Some of the main highlights, there's no other human in the room with you so you can fully unwind and relax. You don't have to take your clothes off either. Also, the customability aspect was a hit because you can. change the pressure or the target area of the massage with just the press of a button. Neil, on the surface, kind of sounds awful, but after seeing this thing in action, I'm all in.

I'm all in, too. This sounds like a very cool opportunity to move the massage space in the future and use robots. I mean, people, I can see this being a hit with people who don't want to interact with other people. I feel like that is a large part of the population. And what I think will differentiate this is the control of the customization aspect. You can choose from 20 different massages now of varying things, of varying styles. And then also, I think this is the key. This unlocked dominoes in the future, the pizza tracker.

There is a tracker on the massage to know what's coming next, how far you're on. And that has been also a hit with people who have tried this out saying it's really comforting to know in this kind of weird location that I'm in. I'm a little uncomfortable. But to know how far I am, what's coming next is really comforting to me. And I really like that aspect of it. And I think the intensity adjustment is huge because if anyone's ever had a massage before, there's some areas that need more work, there's some areas that don't need as much work,

but you don't want to be the person that's always saying, could you go a little harder? Could you go a little softer? But one of the reporters said, I adjusted the intensity 50 times during the massage over the course of a 30-minute massage. Because, yeah, again, there are certain hotspots in your body that you want to change. And the pressure that the robot applies does change. So I think that's just a great way to customize the experience as well. If you are interested in getting one of these, they're rolling out at 10 Equinox gyms in New York City. So it makes sense.

They're going for kind of that elevated. Eventually, you'll roll out more than that. Right now, they'll run you $60 for a 30-minute massage, 120 for an hour-long session. But Escape, A-E, S-C-A-E, it's a name to remember. I did reach out to some of the power massage users that I know yesterday and ask them if they would try a robot. massage and they were like, sure, I don't see why not. I didn't know that you had friends that were power massage users. And where was my invite?

I like massages too. Well, I'm talking to you today. I didn't need to know your opinion then. Okay, let's wrap it up there. Have a wonderful Tuesday and a happy first day of spring. Year round ice coffee, people. You're going to stop getting weird look soon. So that's something to look forward to.

The inbox has been buzzing lately, including from NWSL players hyped about the new season. So get in on the action by sending a note to Morning Brew Daily at MorningBrew.com. Let's roll the credits. Emily Milliron is our executive producer. Raymond Lou is our producer. Welcome to New York, Ray. Olivia Graham is our associate producer. Eugenua Ogu is our technical director. Billy Minino is on audio. Hair and makeup wants to keep Austin weird.

Devin Emery is our chief content officer and our show is a production of Morning Brew. Great show today, Neil. Let's run it back tomorrow. Hey, Mama. Thanks for making all my favorite recipes. Hi, Ma. Thanks for your unfiltered advice. Hi, Mom. for always being by the phone. Hey mom, happy Mother's Day. When you ship UPS Air at the UPS store,

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