Morning Brew Daily - AppleTV+ is Losing $1B/Yr & Boeing Banks Big Defense Deal

Episode Date: March 24, 2025

Episode 545: Neal and Toby dive into the latest trend of #RecessionIndicator and whether the US is actually in a recession or not. Then, Apple TV+ is reportedly losing at least $1 billion a year. Also, boxing legend and entrepreneur George Foreman dies at 76, and a look at his successful careers. Meanwhile, Boeing beats out Lockheed Martin to build the next generation of fighter jets. Plus, more companies are filing for IPO which may show signs the IPO market is finally thawing after a couple of slow years. Lastly, a look at what’s coming up in the week ahead.  Subscribe to Morning Brew Daily for more of the news you need to start your day. Share the show with a friend, and leave us a review on your favorite podcast app. Learn more at sophos.com Get your MBD mug here: https://shop.morningbrew.com/products/morning-brew-daily-mug  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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pwc.com slash U.S. slash brew AI. That's pwc.com slash us slash brew AI. Good Morning Brew Daily show. I'm Neil Fryman. And I'm Toby Howell. Today, Apple may want to sever itself from its streaming service

which is losing $1 billion each year. Then, does the BPM of Lady Gaga's new album mean we're on the verge of a recession? We'll dig into the hashtag recession indicator memes sweeping the internet. It's Monday, March 24th. Let's ride. Hope you all had a great weekend, the first weekend of spring.

Odds are you didn't make it to a movie theater. Disney's Snow White Live Action remake pulled in just $43 million in its domestic box office debut. A really disappointing haul for a film. The company spent nearly $300 million to make. In fact, the controversy plague Snow White posted the worst opening weekend of all Disney live action remakes. Surely this will be the end of these remakes, Toby. I mean, I think you're spot on. despite the controversies, people might just be a little over these things.

I mean, how many uncanny Valley CGI resurrections of our childhood favorites can the market stand? Disney is hoping at least one more, though, because we have a live action Lilo and Stitch coming down the pipeline in May. So we'll see if this tepid box office reaction was just a snow white thing, or if it speaks to a broader live action slowdown. Now, a quick word from our sponsor, Sophos. Neil, how good are you at solving problems before they actually become problems? I'm more of a wait until things are on fire kind of guy. Probably not ideal.

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Disney Plus invites you to go behind the scenes with Taylor Swift in an exclusive six-episode docu-series. I wanted to give something to the fans that they didn't expect. The only thing left is to close the book. The End of an Era. And Don't Miss Taylor Swift, The Era's Tour, the Final Show, featuring for the first time the Tortured Poets Department. Now streaming, only on Disney Plus. Getting the internet to agree on anything other than clowning that one dude's morning routine is a tough proposition.

But right now, a lot of terminally online people are convinced of one thing. We are heading towards a recession. Why? It's not that any specific economic data points are flashing warning signs. Instead, the internet's prognosis is based on recession memes. Search for hashtag recession indicators on social media. and you might see people posting about Lady Gaga's new album giving recession pop vibes or pointing to Jason Siddakis redodding his mustache for a fourth season of Ted Lasso

as signs that times are getting tough. While economists may look at yield curves in GDP growth, normal people, half jokingly and half seriously, take their cues from cultural trends, like how many people are spring breaking in Houston versus more exotic locales. At the core of these memes is a divergence in so-called soft data like consumer surveys versus hard data like jobs, numbers, which are painting contrasting images of the economy right now.

City Group's chief U.S. economist told Bloomberg, if you just look at hard data, you're looking at what happened a month ago, sometimes even two months, surveys are telling you what people are thinking about the future. So, Neil, while the internet has surfaced these semi-serious data points that do speak to a wider anxiety people are feeling, hard economic data like employment numbers, manufacturing output, and inflation, suggest the economy is in a relatively healthy spot. all, no shade on Houston. It seems like a perfectly fine place to go on spring break. They just had the world's largest rodeo there this past weekend and a couple weeks ago. There is a long

tradition of economists not just using hard data, but also using behavioral measures to indicate whether the economy is growing or whether the economy is slowing. There's something called the lipstick index, which is suggest that people buy more lipstick when things are in a downturn because it is just that little luxury that you can afford Fed chair. The former Fed chair, Alan Greenspan, also coined the Men's Underwear Index to find out whether how the economy is doing by gauging men's underwear sales. There's also the hemline index theory, which posits that skirt lengths get longer during a downturn. So this is as old as the economics profession and field itself is looking at certain societal and behavioral attitudes.

and consumption trends to see how the economy is going. Music has been often thrown out there. And I guess this Lady Gaga album, people are pointing to that as one reason why they're feeling a little more uncertain about the economy. Yeah, a big one is music because when times get a little tougher, we tend to prefer music that is slower, more introspective, more romantic, has more meaningful lyrics. When times are good, people refer more upbeat songs,

although it's not a perfect system whatsoever, because the top song in 2008 was low by Flo Rida. So maybe people just thought I was talking about the stock market. But you are right that there are some uncommon recession indicators that people do like to look at. A lot of these are actual memes. Like the lipstick index, the hemline index, there is actual economic theories behind those things. But for instance, people saying Will Smith is getting back in the studio to drop a new album saying, ah, times must be tough as if the fresh prince of Bel Air is getting behind the mic again.

And so I do think that there is truth in some of these because it does speak to just broader cultural feelings that people are expressing online. But yeah, obviously when you look at harder data, we can point to a lot of data points showing that the economy is doing just fine right about now. One area where you're actually seeing a significant slowdown in consumer spending is snacks. I don't know. Should we just coin the snacks recession indicator? But to a T, all of these big consumer food companies have come out in the past two weeks saying we're seeing a big snacking slump.

U.S. convenience store sales are down 4.3% over the past year. General Mills has come out and said people are buying less Cheerios and are snacks. J.M. Smuckers as well as sales of their sweet bake snacks fell 7% in the most recent quarter. You go down the line. Campbell's is also forecasting a big snacking slowdown. so maybe you just learn the new indicator right here, which is a snacking slump. Apple TV Plus's severance just wrapped up one of the busiest seasons of television this year, but Buzz isn't translating to profits. A new report from the information revealed that Apple's streaming service is losing more than $1 billion annually six years after it was created.

The report also found that Apple TV Plus has just 45 million subscribers far lower than streaming competitors like Netflix and Disney Plus. For comparison, Netflix has over 300 million paying subscribers, and Disney Plus has 126 million. Now, some context is needed. Apple overall is one of the most profitable companies on Earth, with net income of nearly $100 billion last year alone. A $1 billion loss will hardly make a financial dent. Plus, it's not out of the norm for streaming services to be unprofitable as they ramp up. Netflix, Disney Plus, Peacock, and other others all lost billions of dollars for years until they started to make money. Still, given Apple TV Plus's shockingly bad performance, the entertainment industry is asking,

why does this exist? Why is Apple lighting money on fire when there isn't a clear business case? Even competitors are throwing shade in a recent interview. Netflix co-CEO Ted Serando said, I don't understand it beyond a marketing play, but they're really smart people. Maybe they see something we don't. Yeah, what they're saying right now is just money going up in flames because 45 million subscribers isn't bad. Obviously, it's not Netflix numbers. Obviously, it's not Disney Plus numbers, but the issue is that Apple just spends so much dang money on their content, $5 billion production budget every year. They finally are pulling that back a little bit. They cut off $500

million from that budget, but they just can't do anything except for make the highest quality prestige TV. And I'm just going to go through some of the names that have been associated with Apple shows. Natalie Portman had an Apple show. show. Harrison Ford has an apple short. Austin Butler, Barry Keoggin, Kate Blanchett, Jake Gyllenhaal, Colin Farrow, Bree Larson, these are the A-listers of A-listers. The problem is that if I stopped you and say, you know, you have to answer this question correctly or else, you probably wouldn't be able to tell me what any of those stars, what shows they actually, you know, starred in. So it's just indicative of the entire, it's condemning the entire project if you are having

these great shows coming out and you have 45 million subscribers, but none are really leaving a lasting impact that you would hope, given the monetary output that you are expending here? So there is a theory why Apple has rolled out a streaming service. It's no secret. It's basically the Costco hot dog and soda idea where you get people into your ecosystem so they buy other products. The goal for Apple is obviously to sell as many smartphones and computers as possible. the theory is that if you get people hooked on your streaming service, then they will buy your gadgets as well. The thing is that hasn't necessarily panned out, or actually, we don't know because according to this information report, Apple doesn't have the data to show whether it's

streaming subscribers are buying their products or staying within their ecosystem. So they are living in this foggy situation that no one has much clarity on. The fact that they don't have data on this is quite damning because that is the first thing you'd want to check whether your streaming service loss leader Costco hot dog and soda combo is actually bringing people into your business. It could just be a velocity issue too because if you look at the Netflix top 10 page, that is a very fiercely fought over area of real estate that when you open the Netflix Act, what's new and fun for this week? And that rotates through very frequently because just the sheer amount of output that Netflix is putting on their platform. If you look at it,

Apple TV Plus's top 10 shows. You know what comes in at number one is Severance. Number two is Ted Lasso, though, which hasn't released an episode in almost two years now. So they went the like low volume, very high quality approach and maybe that's just not the correct approach to resonate with consumers. Moving on, George Foreman, the heavyweight boxing champion turned grilling magnet, passed away on Friday at the age of 76, leaving behind a legacy as unlikely as it is impressive. Foreman's exploits in the ring included an Olympic gold medal and an improbable return

to his championship winning ways at the age of 45, but for a generation of home cooks, he was known more for the George Foreman lean, mean, fat-reducing grilling machine than for his right hook. Introduced in the mid-90s, the portable grills, small enough to fit on your kitchen counter, became synonymous with the charismatic boxing star. A generation of infomercialed, seared the catchphrase, it's so good I put my name on it, into the, the minds of many an aspiring Panini maker. Since its introduction, over 100 million units have been sold worldwide. Part of the reason for its success was that it was truly a revolutionary product.

Indoor grilling was not a thing before the Foreman Grill, and its electric power design pioneered the smokeless grill kitchen category. Despite Foreman's passing, the grill's legacy is still alive and well today. It remains a bestseller on Amazon and still bears the boxer's name. Neil, without a doubt, one of the most success. celebrity indoors products of all time. I'm not sure how many grills you find when you walk into the Smithsonian National Museum of American History, but you will find the George Foreman Grill.

That's how iconic and important it was to American culture, especially in the 1990s when it came out. One of its biggest innovations, perhaps its biggest innovation, was that the grooved grilling surface was pitched 20 degrees so that the fat would drain from the meat into this little plastic tray. We just showed a bunch of the infomercials here on the screen. And you can just see all these fat droppings into this tray that you're not eating. And a low-fat diet was so big in the mid-1990s.

And it just hit perfectly, resonated with consumers. And George Foreman was the perfect pitchment for this product. He put his heart and soul into it. My favorite part of the Foreman Grill lore is the fact that the endorsement deal was originally offered to Hulk Hogan. And he technically had a choice between a new. endorsing a blender in a grill, but he didn't pick up the phone altogether. So Salt and Brands went on, which is the parent company of Forman Grills, went and called George Foreman.

He did pick up, and he chose to put his name on the grill. And my question is, have you ever heard of a Hulk Hogan blender? And the answer is no, because this is Hulk Hogan saying, George got the lean mean grilling machine. I got a blender that when you put AA batteries in it, it would fart and then turn off. So it is just, we were one phone call away for that being the Hulk Hogan lean mean. fat-reducing grilling machine. Instead, it's the George Foreman

grilling machine, and it's made it all the way to the Smithsonian Museum. Up next, let's hit you with our winners of the weekend. We're the Hartford, with decades of experience ensuring millions of unique small businesses,

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Now through May 6th, Exclusion supplies to homedipo.com slash price match for details. Welcome to Winners of the Weekend, the segment where Toby and I pick two things whose brackets are actually looking not so bad. I won the pre-show George Foreman Grill-off, so I get to go first. And here's a sentence you haven't heard in a long time. Boeing just scored a huge win.

On Friday, President Trump announced plans for a next-generation fighter jet called the F-47, and Boeing was chosen to make it. We don't know the details of the deal, but estimates put the contract at an initial $20 billion, though experts say it could rise, well above that. It is a much-needed endorsement for the struggling Boeing, which lost nearly $12 billion last year amid a safety and confidence crisis around its commercial planes. Shares rose 3% on the news, while shares of Lockheed Martin, the contractor that lost to Boeing for the deal

fell nearly 6%. So what is the point of this ultra-pricey F-47? It's all about countering China in the skies. The jet is the centerpiece of the Air Force's next-generation air dominance. program, which seeks to replace the F-22 Raptor with a plane that can give the U.S. an aerial edge in a potential war in East Asia. It'll have greater range, enhanced stealth, and better tech than the F-22. All capabilities the Pentagon thinks are table stakes to confront China's increased military prowess. Toby, is Boeing back? I don't know. It's technically, you know, the dojification of the federal government is saying that we want to reduce the size of, reduce the spend of the government. And yet here you are

handing out this pretty large contract to Boeing. But, then also the Pentagon has been pushing to give some new entrance like Andrew L. and Palantir more contracts related to software and drones. And yet here you are giving a very traditional defense contract or in Boeing a very large deal. So Boeing is obviously very happy about it because it's a huge boost for its defense business. That represents about a third of the company's revenues, but has been like everything else in Boeing a pretty money-losing endeavor over the past several years because in classic Boeing fraction, they've had, they've been locked into these money losing contracts. They've run into cost overruns and delays and whatnot. So definitely a win,

though, and you can see it just, I encourage you to go look at the stock prices of Lockheed Martin and Boeing when this deal is announced because they diverged like Ralph Waldo Emerson, two paths diverged in the woods with Lockheed dropping and Boeing going up because obviously $20 billion in upwards of $20 billion is a big deal for Boeing. Robert Frost called. He was, He wants his line back. Oh, my gosh. There is greater scrutiny around whether manned or crude aircraft are even viable or necessary in 2025 in this new age of warfare.

Elon Musk has publicly campaigned against crude aircraft. He called them obsolete in the age of drones. The Russia-Ukraine war has really brought drones to the forefront. Some people in the military apparatus said we should be investing way more in drones, not in crude aircraft. The Air Force, Trump administration is pushing back to Secretary of Defense, Pete Hex, say, no, actually, when we fight China, if we fight China, then crude aircraft like the F-47 will be very critical, very critical for establishing air superiority to penetrate air defenses. So there is an internal debate about whether we should invest more in drones or whether we should

invest more in these very high-tech crude aircraft like the F-47, like the F-35, like the F-22. And there is a lot of scar tissue from the F-35 contract because those things are extremely expensive. They cost taxpayers $1.7 trillion. They cost about $80 million per aircraft. There have been a ton of delays, ton of technical difficulties, tons of cost overruns. And these fighters, the F-47, are expected to be to cost way more than $80 million per aircraft. My winner of the weekend is the IPO market because, like a lean cuisine meal, pockets of it are starting to heat up even while the overall market remains a little chilly.

AI infrastructure provider Corweave is set to debut soon. Buy now, pay later, Giant Klarna finally put in its IPO filing last week, while everyone's favorite concert ticket op stub hub also submitted for its filing last Friday. The flurry of activity breaks a lull for tech IPOs that dates back to late 2021 when rising interest, rates and high inflation scared investors away from riskier assets. Many were hopeful that the incoming administration would usher in a better environment for public debuts, but that hasn't quite been the case so far due to the market roiling trade agenda. Still, promising debuts from Service Titan and Reddit in recent months have inspired some

cautious optimism amongst investors with the trio of Klarna, Corrieve, and Stubhub on deck to test the level of Wall Street's IPO appetite. Yeah, let's start with Stubhub. I mean, interesting company that's been on an absolute roller coaster over the past few years since COVID. It was bought by Viagogo, which is a European ticketing company for $4 billion in early 2020. I wonder what it would have fetched a few months later when no one was going out. No one was buying tickets. And then there was that huge roar back during the Ares Tour era when people were scooping up live tickets, left and right.

there are signs that the ticket and live events industry is moderating a bit. So we'll see whether investors want to hop on the Stubhub roller coaster because it could be a ride. Vivid seats, which is arrival of Stubhub, may give an indication of how what the appetite is for this kind of company. Stock price has fallen more than 45% over the past year. It's reportedly seeking a buyer. So that's go to the StubhubbS1 prospectus that I just gave you right there. I mean, I do think one, step up needs to write a thank you note to Taylor Swift because 10% of the group's annual ticket sales came from 2023's Ares Tour. So truly was one of those driving forces that turned around the prospects for this company.

Another big name that I mentioned was Corweave. Corweave is looked at as this almost bellwether for the AI IPO scene. Basically what they do is that they operate and manage these massive chip farms that instead of outlaying all the money and buying your chips yourself, Corwee will. do it for you. So if you just want to train your data, you can say, hey, Corrieve, help me train my data. I don't want to do all the uptake in all the, you know, buying of these chips myself. And there's been few and far attempts of AI IPOs in this AI age we've entered. Obviously, Invedia has been ripping, but that's been a public company for decades now. So it's really going to be one of the only data points we have to judge how the market feels about new AI companies. So people are going to

be looking very closely at how Corweave does. And they expect it to be the biggest tech IPO of the year. They want to raise around $2.7 billion. So that will be a good proxy with how much, how hashtag back the IPO market really is. Yeah, I mean, Corweave is a massive company. They want a valuation of around $35 billion. They've pretty much grown in lockstep with Nvidia because they've just hoovered up all these Nvidia chips. In Video owns a 5% stake in Correweave. In 2024 sales jumped more than 700% to nearly $2 billion. Those are basically Nvidia numbers. If you want another play similar to Nvidia and you want to ride with this AI roller coaster as well, then Corrieve is the company that can do that. One problem with Corvieve is that it has only two main customers and one of them accounts for 60% of its revenue.

That one customer is Microsoft. It's Monday. So here is your preview of the big events coming this week with the Fed meeting in the rearview. This week's economic calendar is a little lighter. we'll get the monthly reading of the Fed's preferred inflation gauge, an updated look at consumer confidence, and a final reading of Q4 GDP, plus earnings from the likes of Dollar Tree, Lulu Lemon, and GameStop. You can look at the Fed's preferred inflation gauge and updated consumer confidence.

I will be looking at men's underwear sales in Wilson's next album to see how strong the economy is. More reliable data points right there. And good news, the S&P 500 did break its four-week losing streak last week, and futures are up bigly this moment. morning over reports that President Trump's planned tariffs, reciprocal tariffs on April 2nd, which he called Liberation Day, will be more narrow than expected. In culture, speaking of Apple TV Plus, Seth Rogan's new show, the studio premieres on

the service on Wednesday, and it has nearly a perfect rotten tomato score, so that's pretty exciting. Over on Max, Paul American, the new reality series following the lives of Jake and Logan, Paul drops on Thursday. and in music, new albums are out Friday from Lucy Dacus of Boy Genius and Mumford and Sons. Oh, man, our boxers used to launch these very successful infomercials supporting grills, and now they're dropping reality TV shows over on Max, how far we've risen or fallen outside? I don't know. There's something there.

In sports, baseball's opening day is on Thursday, with 28 of the 30 teams playing on the unofficial start of spring. The season's soft launch last week with two games in Tokyo between the Dodgers and the Cucs. which highlighted the booming popularity of baseball in Japan. 25 million people watched the Tokyo series in Japan, bigger than any American baseball audience since Game 7 of the 2017 World Series. Some people were a little upset that MLB, America's pastime, had its opening day in Japan, but you look at these numbers and you see exactly why the league did it,

and it looks like it was completely worth it because those numbers are eye-popping. And Shohei Otani, the hometown boy, put on a show. March Madness is rolling on the men kickoff Sweet 16 games starting on Thursday while the women's begin the Sweet 16 on Friday. Toby, how's your bracket looking? I got seven of my elite eight still alive. My final four is looking good as well,

but I do just want to give a shout out to our executive producer, Emily, for cooking on the women's side of things. She got 31 out of 32 games correct in the first round. I was almost calling up Warren Buffett who has that famous $1 million bet that he actually reduced to if you get the entire first round correct. Emily, you were very close to doing that.

So shout out to Emily. And also, congrats to your Maryland Terrapins for pulling it out yesterday. Let's wrap it up there. Thank you for starting your morning with us and have a wonderful start to the week. For any questions, comments, or feedback, send an email to Morning Brew Daily at morningbrew.com. Let's roll the credits. Emily Milliron is our executive producer. And you can go to her with any college basketball questions.

Raymond Lou is our producer, Olivia Graham, and Olivia Lake are our associate producers. Yuchinawa Ogu is our technical director. Scoops, Dardaris, is on audio. Hair and makeup has decided Derek Queen did not travel. Devin Emery is our chief content officer

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