Morning Brew Daily - Big Tech CEO's Testify on Child Safety & T-Swift Gone from TikTok?

Episode Date: February 1, 2024

Episode 248: Neal and Toby recap yesterday's Congressional testimony where Big Tech CEOs from companies like Snap, Meta and 'X' were asked about child safety on their platforms. Plus, the latest from the Fed meeting and why Universal Music group may be out on TikTok. Neal shares his favorite numbers and there have been some pricey moves in the world of sports the last few days, from baseball team purchases to golf mergers. And finally, Elmo wants to know are you ok? 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

Many employees can't afford a hefty medical bill that pops up out of the blue, but it happens. And employees who are financially stressed are, understandably, more likely to be distracted at work, costing their employers greatly in lost productivity. Luckily, AFLAC plans help with out-of-pocket expenses not covered by health insurance and can be offered at no direct cost to businesses. Learn more at aflac.com slash morning brewdaily. That's aflack.com slash morning brewdaily. Good morning brew daily show. I'm Neil Fryman.

And I'm Toby Howell. Today, why you won't find music from Lady Gaga, YouTube, Bad Bunny, or Taylor Swift on TikTok anymore. Then a highly contentious and emotional hearing just went down between senators and big tech CEOs on Capitol Hill. It's Thursday, February 1st. Ooh, we made it. Let's ride.

Yes, Toby, it is February, but it's not just any February. It's a leap year February. So there's an extra day tacked on at the end. And this isn't just because. we feel bad that February gets shortchanged with 28 days, it's necessary to keep the calendar in sync with the seasons. Because despite what you might have learned in first grade, a year isn't exactly 365 days. It takes about 365 and a quarter days for the Earth to complete its orbit around the sun. And we account for that surplus by making one out of every four years,

366 days. If we didn't have leap years, then the seasons would completely swap every 750 years. and the middle of the summer would be the middle of the winter and vice versa, and the United States would just not be able to handle Thanksgiving pool parties. I did the math even further, though, so yes, Earth orbits the sun every 365 in a quarter days, but it's 0.256 days, but every 1,000 years, the year becomes shorter by around 5.5 seconds, according to this astronomy forum I was on. So that means eventually we won't need a leap year anymore. we can start cutting days again.

So 0.256 days is 22,000 extra seconds. And if we're looking at 5.5 seconds every thousand years, in just over 4 million years, we'll be good. Do not get too comfortable with that 29th day, February. Exactly. We'll just cut it out eventually. Before we jump into the show today, we have a quick word from our sponsor, VIM.

It's February 1st, and Vime is still here supporting the pod. Ride or die, Neil. It's so VIM of them to stick around like this. You know, what do you want in a data security provider? Someone who dips out quietly at the end of the month or someone who sticks around and stands by your side. I want someone like VIM to February and beyond. In celebration of VIM sticking around for another month,

head to VIM.com today. That's VEEAM.com today. Who cares about your poops? Ollie does. That's why Ali's science-backed gut health lineup helps support your family's regularity. From daily probiotics to fiber gummy your kiddos will love. Find it all on Ali.com. That's OLLLY.com. These statements have not been

evaluated by the Food and Drug Administration. This product is not intended to diagnose, treat, cure, or prevent any disease. It has been a minute since we've had a big tech hearing on Capitol Hill. Yesterday, the CEOs of MetaX, TikTok, Snap, and Discord testified before the Senate Judiciary Committee about the issue of child safety on their platforms. This was a out as bipartisan of a hearing that you'll see these days as senators from both sides of the aisle laid into the big tech leaders for their lax measures on protecting kids online. At one point, Mark Zuckerberg stood up, turned around to directly apologize to relatives of online child abuse victims sitting in the crowd.

Some of the parents even brought pictures of their children who had died by suicide as a result of online bullying. Throughout the tense hearing, the key feeling permeating the chamber was one of frustration Senator Amy Klobuchar lamented that no bills have been passed. Quote, I just want to get this stuff done. I'm so tired of this. It's been 28 years, she said, which both shows the power of big tech lobbying and the inability for Congress to figure out how to regulate this sensitive topic.

A lot of reporters covering this hearing said it was unlike anything they'd ever seen due to the presence of the crowd there. It was intense. Very intense. I would say that Zuck and the TikTok CEO took most of the heat, even though they were There were five companies there. That moment of, I encourage everyone to kind of go watch the video. Josh Hawley is grilling, one of the senators, is grilling Mark Zuckerberg and saying,

have you ever apologized to the families and the victims of people who are harmed, of the kids who were harmed on your platform? And they go back and forth a little bit. And Zuckerberg finally just says, okay. And then he turns around and speaks directly to the audience and apologizes. And it was just this remarkable moment that I think speaks to this emotional, this emotional hearing. But when I'm talking about Amy Klobuchar and the other senators, yes, they have wanted to do something for decades, but no meaningful legislation around kid safety on social media has been

passed in 28 years. Obviously, social media wasn't even around then. They keep talking to each other. They keep wanting to do something. But social media platforms are not going to be compelled to make dramatic, significant changes unless Congress compels them to do something. I don't know, you know, this hearing was obviously emotional and intense. And everyone got a little right. up, but I don't know if it'll actually lead to anything. Yeah, it was definitely emotional. I mean, you mentioned Zuckerberg took the brunt of the attacks. He opened, his opening statement was about how the existing body of scientific work has not

shown a causal link between using social media and how young people have worse mental health. When he said that, audience members literally laughed in the crowd because they're saying, how could there not be any link? And yes, even though these studies that have been shown that it's more of a correlation than a causation, still, you have these parents back there who have suffered first. from some of the effects of social media on their children. Met has been under heavy fire of late. It's being sued by dozens of states right now.

There's a separate lawsuit, New Mexico, accusing it of promoting underage accounts to predators. So definitely the brunt of the attacks. One of the big things that the senators tried to get was to have the CEOs commit on the spot to this kids' online safety act, which would require platforms to enable really strong safety settings. only SnapZio Evan Spiegel and then X's Linda Yakorino did so on the spot. The others kind of hedge their bets there. So again, if you're looking for concrete outcomes, they tried to get one on the spot. They only got two out of five or six.

What was interesting to me finally is that there was no YouTube, no Alphabet, which owns YouTube. And we know from surveys that YouTube is by far the number one video video platform for kids. 93% of kids said they went on YouTube in the past month. Meanwhile, the second place by far is TikTok with only 68%. So I thought that was a pretty glaring omission not to have YouTube CEO in there as well. Moving on, the first Federal Reserve meeting of the year happened yesterday. And as Jerome Powell took the podium for his press conference, investors were praying he'd say one thing that an interest rate cut was on the table for the Fed's next meeting in March. He did not bite.

Powell threw cold water on Wall Street's hopes and dreams when he said he doesn't think it's likely that he'd cut rates in March because he's hesitant to hang that mission accomplished banner against inflation. Yes, inflation has come down dramatically since its peak in 2022, but it still remains above the Fed's target of 2%. Powell doesn't want to hit the gas on the economy, which is what lowering interest rates does, until he's 100% confident that inflation isn't coming back for the sequel no one asked for. To give you the big picture about what's going on in Fed world, interest rates are at a 22-year high after the Fed jacked them up over the past two years. But in the past four meetings, dating back to last summer, Powell hasn't changed them at all, including yesterday's.

And that's because really the best case scenario is playing out. The job market has remained strong. Economic growth is better than expected. And inflation has come down. So there's little urgency to begin cutting rates to juice the economy. Yeah, I mean, you said that this meeting kind of through cold water on the market soap. I would say the water is room temperature. It's maybe lukewarm, nice to the feel, because even though that there's no rate cuts coming in March, he did say that we believe that our policy rate is likely at its peak for this tightening cycle, which is just Fed peak for saying, we're going to keep them where they're at, which, again, if we go back a few months ago, like, rates were rising at a rate unlike any that we've seen

in kind of like the last 20 years or so. So I would say that the water isn't freezing cold, because, again, we are kind of at this homeostasis point right now where we're, we're, we're, rates are elevated, but things are chugging on quite nicely. I disagree. This was, the investors were betting that they would start cutting rates in March, and that had really propelled the stock market higher, this so-called Fed pivot where the Fed would start cutting rates. You know, you've looked at all of our brokerages. They've been going through the roof over the past couple of months, and S&P has been hitting all-time highs. When Jerome Powell went up to the podium and said, we're not cutting rates in March, stocks plummeted. Stocks, the S&P had its worst day.

in four months, and the NASDAQ was down 2.2%. It's worst day in three months. So, investors did not react well to this because a lot of them had thrown their chips in the basket saying that we'd probably get a rate cut in March, and now it doesn't look like it's going to happen until at least May. Yeah, we do have the percentages. Financial markets see about a 34% chance the Fed will lower rates in March. That's down from 73% a month ago. So yeah, there's about, you can see the Delta that this meeting kind of created. If we just zoom out, though, I mean, you mentioned it kind of at the top, and it takes stock of how the economy has done under these 22-year high rates. Inflation fell steeply.

It's ending the year right around 2.6 percent, according to the Fed's favored measure. Economy expanded more quickly than we thought. GDP climbed up to 2.5 percent. And the jobs market stayed stronger than anyone thought unemployment rate in December was just at 3.7 percent, which was generally in line with where it was before the Fed started hiking rates. So, again, we've talked, we've said the word soft landing. the word Goldilocks economy, but those figures right there show that we've navigated this rate cycle pretty dang well. And the next big thing on the economic calendar is on Friday, which is tomorrow,

which is the jobs report. And obviously, Jerome Powell and all of us will be very keyed into what that has to say. Let's move on. TikTok is wrapped up in another major spat, not over its ties to China or its relation to child safety online, but over its usage of catalogs of popular music, Universal Music Group, which owns the right to songs from Taylor Swift, Drake, Olivia Rodrigo, et cetera, has begun pulling its music from TikTok, unless the two can come to a last-minute licensing agreement. There's a whole bunch of reasons why UMG and TikTok aren't seeing eye-to-eye, artificial intelligence, copyright infringements,

but the biggest one is that UMG felt TikTok simply wasn't compensating the label and its artists fairly. It's looking like a much bigger loss for TikTok than UMG right now. UMG is the second largest record label in the world and said TikTok only accounts for 1% of its ad revenue, despite its artists representing 8 out of 10 of the most popular singers on the platform last year. However, around 60% of TikTok videos include some sort of music. So if you suddenly lose 8 out of 10 of your biggest stars, that's not very good. No, there's an intense negotiation going on over licensing this music. And UMG on Tuesday night wrote this letter to

a TikTok, a very scalding letter, and basically just pulled the nuclear option in any negotiation, which is just, I'm going to walk away and we'll see how much leverage I actually have. And we'll actually see how much leverage UMG does have on TikTok. I mean, TikTok started as a lip-syncing app, remember musically and then it became TikTok. So music is a part of TikTok's DNA. And while it has expanded into different types of videos, you know, music is still very much at the core of what TikTok does. see if TikTok, you know, kind of makes any concessions, pays up for UMG. But I think one thing that it can't really address or hasn't said it would address is AI. UMG's CEO is so, has sounded

the alarm about AI music for a long time. It went after that AI generated Drake and Weekend song very harshly. And so I think unless TikTok cleans up its act in the, you know, letting AI music proliferate on its platform, UMG might not come back to the table anytime soon. I actually saw some people likening this to the writers and actor strike that we underwent last year. There's going to be a lot of pain felt in the short term because, again, it's going to hurt kind of artist's exposure and maybe hurt their bottom line a little bit. But also UMG's hope is that it will lead to big changes, substantive changes that benefits everyone in the music industry long term. So UMG's kind of putting themselves as kind of like leading this noble fight against TikTok. They want people to get compensated more fairly.

But also, TikTok is a kingmaker. I mean, a lot of these artists rely on TikTok for exposure. And, I mean, if we look at Taylor Swift, he doesn't really need exposure. But Cruel Summer, which was released under UMG, topped the Billboard Hot 100, four years after it was released, partially because TikTok made it a trend once again. I mean, Murder on the Dance 4 from Saltburn is also having a resurgence in a moment, mostly because Saltburn, but also because TikTok. role in it. And so the giant risk here with UMG's gamble is TikTok could fare just fine without

its giant catalog. It eventually would force UMG and other music companies into much worse negotiating positions. So it's a fine line they're walking. I don't think they have as much leverage as as they think. I think a lot of other, you know, under the radar artists are going big on TikTok. I don't think anyone cares so much about those massive songs that are under the UMG publisher label. So I don't know. I really, I really think they are not in the. negotiating position they think they are. And TikTok doesn't need them as much as they think TikTok needs them. They're playing a dangerous game.

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While supplies last, ends June 30th, terms at AKA.m.m.S. College PC. Welcome to Neal's numbers, the Thursday segment where I share three stats from the week's news that will make you spout off like Will Hunting. For my first number, you might be surprised to learn that Russia's economy is doing far better than expected nearly two years after it invaded Ukraine. The IMF said this week that Russia's GDP will rise 2.6. 6% this year, more than double what the organization had projected as recently as October. This must be frustrating to the U.S. and its allies.

Remember, after Russia invaded Ukraine, the West unleashed the mother of all sanctions on Moscow in an attempt to cut it off from global financial markets, squeeze its ability to export oil, and overall hamper its economy to give Ukraine a fighting chance. But Russia appears to be weathering those sanctions just fine, not least because it's spending loads on its military, which is driving economic. growth. Moscow allocated almost a third of its 2024 budget to defense up from 14% in 2021 the year before it invaded Ukraine. I mean, let's go back to when it invaded Ukraine. Consumers were businesses were pulling out of the country left and right. Russian billionaires were getting

their yachts. They're getting their sports team sees. The country couldn't even make bond payments even if they wanted to despite having the money to do it just because they were cut off from the global financial system. But then you look at how Russia kind of structured economy. It's kind of built for this sanction environment. They've been building up their foreign reserves. They've been cutting their debt down. And they've actually developed alternatives to kind of that Western financial system, that swift payment system that governs like the international banking industry. So it is interesting to see this. Russia has clearly seen the writing on the wall and has built their economy in a way that they can weather these sanction-fused storms.

We'll see if it lasts in the long term, though, because this is a very distorted economy. You know, we saw the military industrial complex kind of kick into gear in the United States with World War II. And so when you're spending so much on defense, kind of makes up for shortcomings in other areas of your economy. So economists aren't as bullish long term on Russian. They think these sanctions are going to work their way through the economy at some point. But for now, it is holding up much better than expected, and Putin's probably very happy about it. My second number can be encapsulated in a three-word headline, syphilis is soaring. The STI, once nearly eradicated in the U.S., is surging with a rate of new infections reaching its highest levels since 1950, according to a new report from the CDC.

More than 207,000 cases were diagnosed in 2022, which is an 80% increase from 2018 and a 17% increase from the previous year. What's going on? There are a few theories. First is that syphilis rates have been rising along with substance use, which is tied to risky sexual behavior. Another issue is the lack of sexual health services around the country. Experts say there just isn't enough disease intervention specialists and nurses at the meager number of sexual health clinics in the U.S. Finally, COVID. COVID has been such a public health focus over the past few years that maybe we let our eye off the ball when it came to other types of infections.

Whatever the reasons, officials say skyrocketing syphilis cases is a problem that needs to be addressed. I went down such a rabbit hole with this and started researching how, syphilis ever made it to kind of the widespread disease that it became and then was eventually eradicated. And Christopher Columbus was originally blamed for bringing syphilis back to Europe with him. There was this huge outbreak in the late 15th century when he returned from his voyage to the new world. But then there's all this debate in the scientific community is like actually no, it was way before him. And there was probably, by the time he arrived back in Europe, there was three strains of syphilis present. So it probably wasn't him. And I was like, what am I doing?

This is a business show. I got to research other stuff. You should have been prepping about the FET. I know exactly. But yeah, so if you want to go down a rabbit hole, there is one right there. But yes, this is a number that is definitely alarming public health officials and they want to find out what's going on and spend more resources on trying to tamp down this surge. My final number is a lot more exciting and optimistic. Retail is in a fantastic spot right now.

In fact, the vacancy rate for shopping centers in the U.S. fell to its lowest level since records began in 2007. Turns out the pandemic and the spike in online shopping didn't lead to the retail apocalypse that many had predicted. Americans still like going to physical stores and retailers are taking notice. Yesterday, Walmart said it was opening 150 more large format locations across the country in the next five years, a testament to the enduring popularity of brick and mortar. One important note about this data, one of the main reasons that's the main reasons that

the vacancy rate is at a record low, is that we've slowed down on building more strip malls, allowing retailers to soak up the space that is available. Last year, just 8 million square feet of new retail space was constructed compared to 20 million in 2019, and an average of 41 million between 2008 and 2014. All in all, physical retail is looking really healthy right now. I mean, if we just zoom out for a second and think about what physical retail has been through, there was a bunch of store closings and bankruptcies when kind of. of the e-commerce revolution took out, and that was supposed to be the nail in the coffin of brick and mortar.

And then COVID hit, leading to worries that it would literally never recovery. But as you said, people just really like shopping. They like going into stores still. And then, yeah, combine that with like the depressed rates of construction. You've got this retail renaissance that not a lot of people saw coming. I think retailers are finding that you can have an online presence and a physical presence. And actually, there's symbiosis between the two. Studies have come out showing that when a retailer opens a physical location, it actually boosts their online sales as well because that physical location serves as marketing. Yeah, it's a big brick and mortar advertising billboard right there that you can also shop in. Let's move on.

Even though regulators have been cracking down on big tech mergers and acquisitions left and right, deals are still being done in a different realm, the sporting world. Just yesterday, we saw the PGA announce a deal to raise $1.5 billion from a group. of U.S. investors, as well as a surprise sale of the Baltimore Orioles to private equity giant David Rubinstein. The PGA deal provided a much-needed cash infusion for golf's premier tour in its arms race against the Saudi-backed live tour, while the Orioles are just happy to have a deep-pocketed owner who also happens to be a Baltimore native. Neil, let's start with the PGA deal.

This one-and-a-half billing, which is coming from a group, including Falcons owner Arthur Blank, as well as Fenway Sports Group, is a new. a much needed cash infusion to help reward the players who stayed loyal. Yeah, I mean, this is so confusing, honestly. I mean, we pay attention to the golf world more than most. But back in June, the PGA tour and Lyft announced a shocking merger where there was this massive schism. There was a crazy breakaway league that left the PGA tour.

And then all of a sudden, they shocked the world and said they would come back together. But over the past few months, the rest of 2023, there was a very little. details about what that merger meant. And now they are still kind of working together on coming together, but also at the same time engaging in a arms race against each other as well. Live has poached even more golfers, including John Rom, for estimates of up to $500 million. And so PGA Tor is raising this war chest to be able to pay its own players and keep them from defecting to live, even as these merger negotiations still go on.

Yeah. So those talks are still definitely going on. one of the reasons why those talks may have stalled a little bit was Congress got involved. And we don't really want you taking money from the Saudi investment fund. So this has kind of helped quell those talks a little bit, even while they're still happening in the background. A lot of money is going into the game, and people think they're a good thing because they've always thought that the product could be improved and having maybe a more profit-oriented or just some more business people involved in a organization that used to be a nonprofit is bullish in the long term. according to some people. Let's also talk about the Oriole deal a little bit. Rubenstein is an absolute private equity kind of legend. He was kind of around before the crash started,

said the writing was on the wall, but then also rode the wave out of the crash after 2008. Very well. Loves the Orioles from Baltimore, alumni of Baltimore City College. He's been having his eye on the team for years now, and he finally got like the crown jewel. of the one sports team that he really wanted. Yeah, you can't help but think that this is the new paradigm in sports. The billionaire class is the only one that can afford it now because the Angelo's family, which Rubinstein is buying the Orioles from, and I just want to make sure this to emphasize, this is an agreement.

The sale hasn't gotten through yet, but they've kind of agreed to the major terms. When the Angelos company family bought the Orioles in 1993, they were worth $173 million, and this guy was a union lawyer. You know, he is rich, but he wasn't billionaire, mega billionaire rich. And this comes just from a different era where you didn't have to be one of the richest people in the world to own a sports team. But now, as we've saw, there's a lot of parallels with Steve Cohen, the hedge fund billionaire who bought the Mets with Rubinstein buying the Orioles.

And we're in this era now where you really have to be just one of the richest people on the planet to be able to afford a sports team, the era of, You know, being a local hero and, you know, making a lot of money but not billionaire money and buying a sports team is just over. Yeah, I think our window is shut, Neil, for owning any sports teams. So maybe like a fourth division English soccer team, we could, we could cobble the cash together. That's what all the celebs are doing these days. Finally, when was the last time someone simply checked in and asked how you were doing? For many of you, it seems to have been a long time because hundreds of thousands of people poured out their feelings to Elmo when the Sesame Street character popped the question on X this one.

week. Yes, Elmo became the unwitting therapist of the internet when on Monday his account posted. Elmo is checking in, how is everyone doing? An innocent enough question, but it appears to have hit a nerve because it sparked an avalanche of people replying to Elmo and saying, you know what, Elmo, I am not doing okay. One YouTuber wrote, Elmo, I'm suffering from existential dread over here. Another wrote Elmo, each day the abyss we stare into grows a unique horror, one that was previously unfathomable in nature. Our inevitable. doom, which once accelerated in years or months, now accelerates in hours, even minutes. In all, this post was viewed more than 140 million times, and what some say is a reflection

of the mental health crisis gripping the country. Why do you think this went so viral? I think it's partially because that Elmo has such a unique way of speaking and talking in third person like that, allowed people to kind of co-opt the way he speaks. and this juxtaposition between existential dread and nihilism and like cute little Elmo and using his way of speaking, I thought just made this a very ripe opportunity to kind of have this cathartic moment as a rallying together on the internet. And yeah, I mean, I checked this morning, the post is coming in on 200 million impressions. Wow. It is really ramping up.

Unfortunately, the brands have gotten involved like Chipotle and Sour Patch Kids. So that's when you know it hits kind of a critical mass breaking point. but it was a fun internet moment for sure. It's a fun internet moment, but I think it's a little more poignant and deep. And I realize that maybe I haven't asked someone that question recently. And it's a good reminder that, you know,

every now and again, you should take some time out and ask your friends or anyone. Like, hey, how's it going? How are you doing? Like, don't just give me the good. Give me like the real answer. And I think that's what people really responded to with Elmo. He's a character from their childhood.

I feel like they can kind of open up to him. And there's a lot of nostalgia. involved. But, you know, I think it did remind me to say, ask the question once in a mile. So if you need to get something off your chest, go ahead to X, head to Twitter, quote, tweet it, and just tell Elmo what you're feeling. I just want to know if someone's checking on Elmo. That's tweet it out. All right. That is all the time we have for today. Have a wonderful Thursday, everyone. If you're listening to your first episode after hearing about us in the newsletter, first of all, welcome. We are very glad to have you. Second, we'd love to hear what you thought.

so feel free to send all your feedback to Morning Brew Daily at MorningBrew.com. Let's roll the credits. Emily Milliron is our editor and producer. Raymond Loo is our associate producer. Eugenwa Ogu is our technical director. Billy Minino is on audio. Hair and makeup is doing just fine, Elmo. Thank you for asking.

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. All. Pay off your home. Travel for life. Drive a Ferrari. In celebration of the world premiere of the Monopoly

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