Morning Brew Daily - Disney Hikes Streaming Prices 27% & Why Jeopardy Is Recycling Answers

Episode Date: August 10, 2023

Episode 122: Neal and Toby discuss the writer's strike hitting 100 days and why Jeopardy is recycling answers. Plus, Bob Iger tries to right the Disney ship by increasing streaming prices and hinting at a password crackdown in the company's latest earnings call. Also, what China slipping into deflation could mean for the global economy and Neal shares his favorite numbers from the week. Finally, the first mother and daughter duo are set to launch into space. 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. I'm Neil Fryman. And I'm Toby Howell. On today's pod, we will check in on the writer's strike, which has now reached 101 days. And why does everyone want to work for UPS all of a sudden? Then the vibes in China are off as a world's second largest economy may be slipping into deflation territory. Plus, as Virgin Galactic conducts its second commercial spaceflight today, I have an important question for everyone. Would you go to space with your mom?

It's Thursday, August 10th. Let's ride. All right, before we get into the business news this morning, I do want to mention the wildfires in Maui that we've learned, killed 36 people as of this morning. These fires have devastated the historic town of Lahaina, which I actually visited this past December, and it is just this incredibly charming place with a historic downtown, this beautiful Main Street. And we're just thinking of everyone in Maui and across Hawaii right now. They're resilient people, but this is really tragic. Something I learned that was quite interesting about Hawaiian fires is that fires were not common in Hawaii or other Pacific islands before humans got there. So these ecosystems evolved without knowing fires and having this cycle of destruction and regrowth. So they're even more prone to damage than places in the West that have experienced fires for a much longer time.

Yeah, it's just kind of an untouched place for the most part. I also saw some tweets of people with loved ones over there saying that there's no cell service. So Apple's emergency SOS feature has been the only way a lot of people have gotten in contact with authorities. And so it's kind of been doing extremely well because that is truly the only way if you're stranded from a wildfire fire. So it is interesting to see that emergency service that you always see on your iPhone or Apple Watch actually coming into kick into high gear. All right, let's go to some business news. We're going to kick things off with an update on the Hollywood Writers' Strike, which as of today has lasted for 101 days longer than the writer's strike in 2007 and 2008.

With the actors joining the picket line in July, Hollywood production has frozen over, and both sides, workers and major studios are digging in for a long fight. As a reminder of what's at stake, because we haven't really talked about this in a while, the writers and actors have framed these labor negotiations as a climactic moment for their professions, as new business models and technologies like streaming and AI present an existential threat to their livelihoods. Studios say their offers on those fronts have been more than generous. So where do we stand? Last week, the writers and studios met for the first time in three months to try to move past the stalemate, but there really weren't any signs of movement toward a deal. Meanwhile, shows are

trying to figure out how to somehow get fresh content out, given the work stoppage. This week, Jeopardy made the controversial decision to move forward with its 40th season by recycling both old questions and contestants who lost in their first game a couple of years ago. The executive producer said this was the optimal solution, but the Writers Guild slammed the move, saying that anyone who competed on the show would be crossing the picket line. And then Jeopardy legend James Holzhauer, who also threw some shade on the move. So as these strikes go on, we're starting to see some messiness in terms of how shows are trying to find workarounds to get out new content. Right. I do think that we are going to see the period entering the fall where it starts to get really interesting on how studios are going to navigate going forward.

Because right now, actually, the summer period hasn't been too bad for studios. One, they've had the content banked. But then also most of the top summer shows you see on TV are reality or like competition style shows. So America's got talent, big brother, Master Chef, The Bachelorette. These are things that have in long-running franchises that haven't been affected by the strike so far. But then going into fall, that's where you're supposed to see new comedies, new dramas, and maybe those aren't appearing. There's chatter that studios are going to Canada and the UK to take programs from there that are outside the U.S. to try to fill the slot.

So I do think, like, summer has been relatively okay for these studios, but fall is when it really starts to get down to brass tax. Yeah, it seems like a lot of these studios have contingency plans. I couldn't find out exactly what those were. Maybe it's this international programming, more reality programming. NBC said that it had its full lineup already banked, so a lot of these networks kind of saw the writing on the wall and got in all their scripts and race production down to the finish line

to get for the critical content for the critical fall season. But you're starting to see a lot of messiness around the fact that certain movies are being approved to shoot, whether if they're like an indie production for a studio like A24, that's not associated with the major studios. And there's a little drama going on between the fact that, you know, the union has handed out over 160 waivers in the past three weeks to studios, to indie films to start shooting. Yeah. And you've seen a lot of actors like Viola Davis and Sarah Silverman saying, you know, refusing actually the, waiver because they're saying this is like crossing the picket line. I don't feel comfortable doing

this. There's a lot of controversy because it's supposed to go to, yeah, these indie films that have these really tight budgets. And if you had to disrupt shooting for the strike, it would, tank the whole project. But you're looking at where the waivers are going. There's one going to a Mel Gibson directed Mark Wahlberg film. There's an Anne Hathaway film from A24 that is still getting funded. And then there's even a project funded by Apple TV plus. which because it is filming in Israel, there's the different labor laws. Tehran. And so there is just a lot of controversy that are saying, we're supposed to be picketing,

but here are these major A-less actors, major A-list studio-funded projects that are still getting waivers. So it is a confusing time for a lot of people. But zooming out, I think the actors and the writers are winning the PR war here because they're showing that they, most of them are not millionaires like George Clooney. they don't have estates in Malibu. They are middle class, working class people. They're the electricians. They're the laborers.

They're the set designers. They're middle class writers who are living paycheck to paycheck. So I think they've done a very good job of framing this in terms of like, we're just regular people like you. We work in an industry that may be a little more visible and has, you know, quite a few rich people at the top end of the spectrum. But the actors union has 160,000 people and only, 14% make the 26,000 per year income needed to qualify for health insurance. So when you look at that

number, you're like, okay, these people are just like us. And I think a lot of people didn't realize that beforehand. And so I think they're doing a good job of marketing themselves as kind of every man. I think TikTok has helped too because they can speak directly to an audience, whereas, yeah, back in 2008, for instance, that didn't exist. So yeah, definitely seem to be winning in the court public opinion. Okay, Neil, we got to move on, though. We are nearing the end of earning season, but before we close the book on Q2,

we have a couple of heavy hitters we want to talk about. There are four companies we're going to hit on where Neil and I will dig into the data and bring you the most important and the juiciest nugs from each one. But up first is Disney, and for Disney, we're going to talk about the whole chicken. The big news was that subscriber losses

for its streaming service Disney Plus continue to pile up with the company reporting 146 million subscribers down 7.4% since last quarter. And that is especially concerning for CEO Bob Eiger, who said on the call that he believes three businesses will drive the greatest growth in value creation over the next five years. And those are its film studios, parks business, and streaming. Speaking of parks, the parks experience in products division actually did very well.

It saw a 13% increase in revenue during the quarter, which was a bit of a surprise after reports that attendance. was flagging during these hot summer months. Finally, there wasn't really a mention of Disney's TV networks, which Iger, as hinted, may not be core to its businesses anymore, which surprised me a little bit because, of course, ESPN struck that deal with Penn yesterday to open a sports book. But Neil, what stood out to you from Disney Quarter in particular?

One thing is for everyone who has a Disney account that you are not paying for, I would just say, look out, because Disney appears to be borrowing the Netflix playbook and says it will be cracking down on password sharing quite soon. Iger said, I'm not going to give a specific number of how many people are sharing passwords, but it is significant. So, and unlike Netflix, Disney has three streaming services, ESPN Plus, Disney Plus, and Hulu. So this could be kind of a widespread crackdown. Netflix made waves when they actually mentioned that specific number, which was that 100 million households are sharing an account. And Iger was not really, uh, down to give that number, but it seems like they could squeeze a little bit more juice.

And I do actually just want to provide a little more context around that subscriber loss number because a big portion came from Disney Plus Hot Star, which saw 24% drop in users. And that's actually its Indian division. And they lost out on the rights to Indian Premier League cricket matches. And so everyone just started canceling their subscriptions there because like, well, if I can't watch cricket there. So that's just a little broader context around that subscriber. It's absolutely huge.

And we should mention that Disney is raising its prices on streaming services by as much as 20% across Hulu and Disney Plus ad particular tiers. So, who's more expensive than Netflix now? That's an interesting position, yeah. Or it's going to be eventually. All right. Let's talk about Roblox, the huge video game platform that caught fire during the pandemic, just like everything else on a screen. Well, its stock took a beating yesterday down 21% after reported earnings that showed wide. losses than expected. The problem with Roblox right now seems to be it's spending a lot more money

than it's bringing in, and its CEO said it wouldn't be profitable for the foreseeable future. This company is in hyper-growth mode right now, and investors are a bit wary of all the red they see piling up on its financial statements. If you haven't heard of Roblox, it means you were probably born before the year 2007. This game is, this game platform, I should say, is super popular with kids, and I should stress, it's not a game itself. Toby, maybe you can educate us a little bit more. But it provides tools for developers and users to build games on its platform. And it makes money by selling its own virtual currency called Robux.

In a sense, it's considered one of the first real metaverses in existence, or at least as close to it as we've come. Yeah, it's in that open sandbox genre, like the Minecrafts of the world where users can influence their environment that they play in. But it's also so funny, too, because they have this hyper-engaged, hyperactive user base. but it's all really, really young kids, and that's not exactly the easiest cohort to monetize. So on, I mean, because you kind of have to ask their parents.

They have to ask, right, but you're relying on a eight-year-old kid to ask their mom or dad for the credit card numbers. But they really focused on the 17 through 24 and 25 and up age cohorts trying to tell investors like, hey, these people with actual control over their money are starting to play the game more. and that I think is going to be like the consistent drum beat that Roblox will, oh, Roblox will be trying to show investors going forward because they need to move on from the little tiny youths. It's kind of interesting thought exercise. Like how do you make somebody, you know, older than 17 more interested in the game?

And so they're focusing on allowing some forms of violence, romantic themes, and then some crude humor. You love, you got to love that some crude humor. That's what I tune into Roblox for, for sure. sure. All right, Neil, let's move on to our next earnings nugget where we're talking about Uber's smaller, pinker, little brother, Lyft. To sum up its last quarter in a sentence, Lyft has been cutting the cost of its rides in order to attract new riders, but that strategy is working almost a little too well. It reported an increase in its second quarter riders, but a decrease in revenue per active rider, as CEO David Risher said they decided to try and

price in line with the market, aka charge what Uber was charging. That's a good nugget for anyone who uses ride share, right? Well, the even better nugget is that Lyft is also looking to kill off surge pricing, which is when prices shoot up during especially busy periods of demand. Richer said that surge or primetime pricing, as Lyft calls it, is a bad form of price raising. It's particularly bad because riders hate it with a fiery passion. And so we're trying to get rid of it. and because we've got such a good driver supply, it's going to work for them. Right, because this is going to kill driver's income. Right.

That's why surge pricing existed because when there's periods of these intense demand, they want their drivers to be there to service it, so they give them a little boost. But yeah, basically he's saying we're getting rid of surge pricing because this is one of the only places where they can truly differentiate themselves from Uber. So we'll see if it works. We'll see. It's definitely like a volume over premium. services play, which is one business model you can take. But it also comes at a time when,

you know, a two and a half mile ride in New York City cost $50 in an Uber, surprising the Uber CEO. So we'll see if the strategy works for Lythba. You're right. It's got to differentiate itself somehow because it doesn't offer freight. It doesn't offer food delivery. It hasn't done a lot of the expansion into new areas that Uber has. So it really needs to win the ride hailing race to maintain pace with Uber. finally in our earnings roundup let's head to AMC which is maybe not just a meme stock anymore the theater chain that was pummeled during COVID and became popular with individual investors on Reddit is seeing improvement in its actual business of people going in the movies in the second

quarter it recorded its highest attendance since Q4 in 2019 plus it's making boatload from concessions the average food and beverage revenue per patron came to $7.36 which was much higher than last year, $6.71. Guess people don't realize they can go to CVS beforehand and sneak in Sour Patch Kids. Pro tip. Anywho, just want to call out that these positive results also came before Barbenheimer came out in July, which is Q3. So we'll see probably positive momentum going forward.

The AMC CEO said it was Super Mario Brothers that really carried the weight here in the second quarter. My big question is, obviously, AMC, weather the pandemic, It was a very difficult time, piled up a lot of debt to just survive. And now, here they are finally rebounding. And then, of course, Hollywood shuts down. And the pipeline for movies might try up a little bit. So that's what I will be looking at going forward is, okay, we just weathered, like, the biggest

storm we could possibly weather. Now we have like this other mini storm brewing. So we'll see how they kind of fare going. But how many people have said movie theaters are dead over the last 10 years? Every single time. And this industry has proven a little resilient. when there have been so many calls that, you know, it's going the way. Everyone's going to just sit at home and watch movies.

And apparently not, Barbie just made a billion dollars. Yeah, seriously. All right, Neil, before we jump into the next story, we're going to take a quick break. It's time to refresh your yard during spring backyard days at the Home Depot. Get low prices guaranteed on propane grills starting at $179, like the next grill three-burner gas grill, or get $50 off a select Weber Spirit grill,

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today and we'll give you a better deal on the best network. A better deal. No surprises. That's Verizon. Best network based on root metrics, best overall mobile network performance U.S. second half 2025. All rights reserved. It must provide a recent consumer mobile bill in the name of the person regained me the deal. Additional terms, conditions, and restrictions apply. Neil, for pretty much as long as we've been hosting this show,

the U.S. has been battling inflation. Everything from burritos to nuclear power plants seem to be getting more expensive. But in China, the opposite is true. The second largest economy in the world is grappling with deflation, which can be an even more insidious threat. Consumer prices in China were down 0.3% in July from a year earlier, mostly driven by declining pork prices and falling car prices. But I can hear you thinking now, cheaper cars and extra carnitas in my Chipoli bowl doesn't sound too bad. You're not wrong, but deflation is almost always a sign of an economy in reverse.

if prices are falling, people might hold off on buying stuff until next month because they know it'll be cheaper. But then businesses will often start to constrain supply, hire fewer workers, and pay those workers less, which makes those workers even less likely to spend money since they have their salaries cut and so on and so forth, which creates this ugly cycle. So, Neil, it's making everyone a little nervous that a major economic power is sliding into this dangerous territory. Plus, they're denying it. Chinese officials are being very public and sensitive. saying, we have no deflation here, no, nothing to look at. And the actual economists are saying,

yo, like, you do it, or you may have deflation coming and you should really prepare for it and figure out ways to stimulate the economy so you don't have inflation. But deflation is, is really nasty. Like, you don't want it. That's why the Fed has, the Fed's target is 2% inflation, right? We want a little inflation because it shows a growing economy. The fact that you have deflation is really scary because it means that there is no demand in your economy for goods or services. And like you said, businesses are going to hold off on production. And then in a heavily indebted economy like China, it's really bad if you have borrowed money and are paying it back because your debts are going to become way more expensive. The real value of them is going to way more expensive as prices fall.

So this is just kind of really scary if they don't address this. Right. Because, yeah, prices and wages fall, but the amount you borrowed does not. And so, yeah, yeah, that it's a fixed rate becomes more expensive. A lot of people were kind of looking at China and saying this is kind of like economic long COVID because China just has not been able to kind of bounce back from their really, really intense lockdown measures. So that's been one of the reasons why they're facing deflation. But also they hyper-concentrated their economy into two things, which was investments in exports. And a lot of those money was put into new houses and factories. And so if the housing market isn't rising, if prices in the housing market isn't rising,

that's where you start to see deflation because China just like went all in on building a ton of homes. And that is like the worst performing sector in the economy right now. Chinese real estate is in one of the biggest slumps ever and they can't do anything to kick it. What does this mean for the rest of the world we should quickly touch on? Well, there's maybe some good things in that following prices in China would lead to cheaper goods for us because China makes a lot of the things that we consume. But if we have those low cost Chinese products flooding into our markets, then it could be bad for people who make stuff here

because it won't be as competitive. Yeah. So it's kind of a double-edged sword. We'll see these ripple effects for sure. So that's why we are paying close attention to. It is a really big deal for the global economy. All right, we are back with our, Thursday, is that Thursday? Thursday segment, Neal's numbers,

where I share three numbers from the week's news that will hit you like the Apple on Sir Isaac Newton's head. Our first number comes from UPS, which all of a sudden is flooded with job applications. And that is, of course, because of the worker-friendly contract, The Teamsters unions secured from the company last month and all the media coverage surrounding it. So searches for UPS or United Parcel Service jumped 50% on Indeed in the week after the announcement,

according to Bloomberg, and UPS driver jobs near me has been a top trending search on Google. Thanks to the agreement, it's a really well-paying gig. By the end of the five-year contract, full-time drivers at UPS will make around $170,000, and part-time union employees will earn almost $26 per hour. I kept seeing jokes on X and Instagram that steal his fit, and it was like brown pants, 20 bucks, brown shirt, 30 bucks, diamond gold Rolex, $125,000, brown shoes, $10, just kind of poking fun at the fact that UPS workers are being paid

more than tech workers, more than other high-paying salaries at this point, which all the power to them. I think they deserve it. Should just mention that you can't really waltz in, and become a driver that gets paid $170,000. You kind of have to cut your teeth in the package room first, you know, packaging up boxes, and then only after you kind of go through the ringer to get a little hazed until you can become an actual driver.

All right, for the number number two, I want to reveal the one major city in the U.S. that has lowered its inflation rate to below the Fed's target of 2%. And that is Minneapolis, Minnesota, where inflation was just 1.8% in May. this isn't why you claimed I beat you in Catan. This isn't dumb luck. Minneapolis has been on the forefront of addressing one of the biggest drivers of inflation,

surging housing prices. Starting before the pandemic, Minneapolis eliminated zoning that allowed only single-family houses, built a ton of multifamily apartments and condos, and invested 320 million in rental assistance and subsidies to make housing more affordable. It worked like a charm. Minneapolis shelter prices rose at half of the U.S.'s national pay. and May. So for people, the YIMB community, the yes in my backyard community, they've long supported building more housing to ease the crisis and affordability that we have, and they're

doing a major victory lap right now. Yeah. Finally, we have this great example in America of a city who really took precise action to address rising housing prices. I mean, New York just shot down another big bill that was supposed to add 800,000 housing units. to the greater New York City area. So look at Minneapolis. Like, it can be done. You just have to commit to it. You know what?

I've always pictured myself living in Minneapolis. You are a big Minneapolis. Just because, like, I love outdoor winter sports, you know, get on the pond hockey. They have a great dining scene. They have a pretty good airport where you can get everywhere. Is that where the mall, too? The big... All of America?

All of Americans? Yeah, I mean, I... You're not a lot of. I don't care about that. But it just seems like a good city. A lot of Fortune 500 companies target. So, oh, four sports teams. I could be a Vikings fan.

Let's move this podcast. I could be a Vikings fan. The Midwest. All right, for the final number, I want to introduce you to Torbjorn Peterson, a Danish man who has become perhaps the first person to visit all 195 countries without entering a single airplane. Peterson left his house all the way back in 2013 and says he traveled about 260,000 miles in cars, trains, buses, taxis, boats, and shipping containers to stay in every single country on earth for at least 24 hours. He returned home to Denmark on July 26th. It did not seem particularly

easy. And I know you have this one story that you want to bring up. Well, the particularly easy is understanding it because the man got cerebral malaria back in 2015. It's just ridiculous. He said it was held at gunpoint a few times. Like, it was not an easy trek. He made it into North Korea, which I thought was super impressive. And then my final takeaway from this story, though, is that he was just like humans or humans, no matter where you are. He said everyone was discussing Game of Thrones when it aired in the mid-2010s. People played soccer. People were playing with fidget spinners.

And they shared their opinions on Donald Trump in almost every single country. So what a man. Like, he really did see it all. I think I've had that experience to, like, from 2016 on where I would go to another country and the cab driver immediately, like, you get into a discussion about Trump. You'd be like, so what do you all think about Trump? Yeah. It was quite a global phenomenon.

on and on. It's Game of Thrones, fidget spinners, and Donald Trump. That was the world in the 2010s. All right, Neil, let's move on. There's a fun one to end the show today. The first mother-daughter duo is set to go to space today after Anastasia Mayors and her mom, Keisha, are set to take off from New Mexico later today on a Virgin Galactic fight. The duo won their seats in a sweepstakes, and the story is awesome. So the two are from the Caribbean island of Antigua, but Anastasia decided to study at Aberdeen University in Scotland. She was having some visa issues, so her mom had to fly to London on a Virgin flight from Antigua,

and it was on that flight that she decided on a whim to enter the in-flight sweepstakes for a chance to go to space. A few months later, Richard Branson's coming in their backyard, telling them that they won, and Anastasia is still in shock about it. She told the BBC interview that, had I not randomly chosen Aberdeen University, and had we not had to take a massive detour to get my, visa, we wouldn't be going to space. Makes you kind of believe in fate, right? But also, the most important question, Neil, would you go to space with your mom? I would absolutely go to space with my mom.

She's down to try everything. So, and I think we share that. So I don't know if she would go. I think she would go to space. She would definitely make me get a haircut first. So in all of the pictures that came back from this, you know, there's probably a bunch of photos shoots. I would look good. She's very big on me having a nice haircut. But like all moms want to do is brag about their kids. So you have to do this because for the rest of her life, she's, you know, whenever it comes up in conversation, like, you know, my son went to space and I got to go with him. And like, who, what parent doesn't want to do that for the rest of their life? Very cool. What about you? I mean, I personally would be too scared to go to space. So maybe my mom would convince me. Yeah,

I don't know. I'm just not a big space guy, not a big underwater guy as well. So maybe mom would be like, no, Toby, we have to go to the, to space. But I think I would be the, would she go on her? I don't know. Like, mom surprise you. Like, I think she'd be down for it. Yeah, you can't even handle 5,000 feet of elevation. I know. I'm a big, I'm not a big elevation guy. I'm from Florida. Come on. Big sea level guy. All right, we have to wrap it up there. I hope everyone has a great Thursday. I'm headed straight to JFK, so I will be off tomorrow. I am certain that Toby and not Toby will have a great Friday show for you. If you want to write in and let us know whether you move to Minneapolis with me, our email is Morningbrewdaily at morningbrew.com. Emily Miliron is our editor and producer. Samantha Velas and Raymond Lou are associate producers.

Euchennawa Ogu is our technical director. Billy Minino is on audio. Hair and makeup submitted there two weeks to go drive for UPS. 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. Yamava Resort and Casino at San Manuel is California's number one entertainment destination for today's superstars. Catch the Jonas Brothers return to the Yamava Theater stage on April 13. 30th, the powerful vocals of Demi Lovato on May 17th, and the signature Southern Country Rock of Eric Church

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