Morning Brew Daily - Historic $787M Fox-Dominion Settlement and India's Business Renaissance

Episode Date: April 19, 2023

Episode 42: Neal and Toby discuss the winners and losers of the historic $787.5 million settlement between Fox and Dominion over election fraud claims. Also, Apple opens their first store in India and Netflix reports less than impressive earnings. Linktree takes on Instagram and what EV can you buy to qualify for a tax credit? (Hint: there aren't as many as you think). Plus why a man was arrested after applying for a job on rentahitman.com. Learn more about our sponsor, Fidelity: https://fidelity.com/stocksbytheslice Listen Here: https://link.chtbl.com/MBD Watch Here: https://www.youtube.com/@MorningBrewDailyShow Learn more about your ad choices. Visit megaphone.fm/adchoices

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pwc.com slash US slash brew AI. That's pwc.com slash us slash brewAI. Good morning brew daily show. I am Neil Fryman. And I'm Toby Howell. Today, it's a big day for India. Apple just opened its first retail store there and India passed China to become the world's most populous country

with 1.4 and odd change billion people. For Netflix, also, it's the end of an era. No one knew still existed. Then we'll talk about Instagram's newest feature, which actually has people patting Zuck on the back for one. and finish off the show with a brand new segment. So make sure you stick around until the end. Neil, it's Wednesday, April 19th.

Let's ride. You see this, Toby? There's a new Pew survey out that shows that 87% of Americans who listen to news on podcasts say they expect the information they hear to be mostly accurate. And nearly one third say they trust podcast news more than news they get from other sources.

I think that's good news for us, right? I think so. But I'm not sure if they took the survey before our podcast news. podcast launched and we just knocked it down a few percentage points. No, no, no. I swear, people have been saying that they trust us, except for, I think you said you didn't like John Wick franchise, which I don't think is a very trustworthy take to put out.

I was honest with myself. Okay, there we go. That's all that counts. All right, let's get into it. The first story is about Dominion and Fox trial, the liable trial of the century they were saying. Well, it ended before it could even get started. In Delaware yesterday, Fox News and Dominion voting. systems agreed to settle their case. So Fox News will pay Dominion more than $787 million to make

this problem go away. For a quick recap, Dominion was suing Fox for defaming it after the presidential election. Fox hosts continuously pushed false claims that Dominion rigged its voting machines to tilt the election in favor of Biden, even though their private text showed that they didn't believe this to be true. The trial was just about to hear opening arguments yesterday afternoon when the judge called for a pause, came back a few hours later and said six words, the parties have resolved the case, and all the jurors who thought they could get off work for the next six weeks had to go back.

That's a bummer. Although jury duty kind of sucks, so I think they're okay with it. Neil, you have some winners and losers from this case? Yeah, I don't know if there was anything you wanted to get across before that. Honestly, I think it's funny that we kept calling this the Super Bowl case of the century, and, like, imagine the Super Bowl just never kicked off at all. That's what happens during these things.

I know. It was, it reminds me of a scene in suits, honestly, when, like, Mike goes to settle and the other party was taken aback and said, like, no, we want to proceed to trial. So, I don't know. I've been on the suits algorithm on TikTok for a while now. So this, I was actually excited for this case, but. People, people say I look like a guy from suits. Yeah, Mike. Really? I can see it. Yeah. All right. So, yeah, I have some winners and some losers. Let's kick it off with the winners. I think the first one is Dominion. Okay. So they took on a media giant with a defamation. case and that is really hard to do in the U.S. and win anything, and they got nearly $800 million to show for it. That is so much money for a company that earns less than $100 million in revenue each year. And you could see that on the faces of the CEO and the lawyers as they were coming out of the courtroom yesterday. Yeah, we were playing the photos. They looked like they just won the Super Bowl. They're so happy. They're like high-fiving and everything because, yeah, that's eight-x revenue.

Not bad for a Tuesday. No, not bad. And then another winner, this might seem like, little counterintuitive, but Fox. Fox, obviously, $787 million is a lot of money. It's the largest media defamation settlement by far in this country. But it's not going to make a huge den for its finances. It's equivalent to about one-fifth of its cash on hand so it can afford to pay. More importantly, it avoids a trial that could be super embarrassing for it. They would have to parade Rupert Murdoch, the chairman, Tucker Carlson, Sean Hannity out to the witness stand, and it would have been an absolute media circus. And who knows what they would have said, or had been compelled to say about Fox News's newsroom operations,

which had already been super sketchy. This is why settlements exist, though. It is truly this win-win. I mean, you just said that Dominion 1 and Fox 1, that's why they came to a settlement in this thing because neither one really wanted to go down the rabbit hole of this long protracted trial. I think one of the biggest winners here is just other news organizations in general

because people were saying before this case, First Amendment lawyers were saying, this is one of the strongest libel cases we've ever seen. Like, Dominion has a real shot to win this thing. And even still, it didn't even make it to trial, went to settlement. So other news organizations are probably breathing a huge side of relief and saying, all right, we still are on really solid footing when it comes to libel cases. Like, we're not as vulnerable as they made a thought if this had gone to trial.

My final winner is Smartmatic. And you're probably wondering what Smartmatic is. It is another election tech company that is suing Fox for defamation for an even greater amount than Dominion. Dominion wanted $1.6 billion in damages. This is for $2.7 billion. And it's seeing this settlement and it's absolutely drooling. Licking its chops. I like that they shot higher too.

Like Dominion got around half of what it was asking for. If Smartmatic gets half, and then that's a big chunk of change. Someone was saying whether they might have been in cahoots with one another, Smartmatic and Dominion. And they were like, Dominion, you settle. You set the base floor for us and then, you know, on the back end, we'll maybe exchange a few gaps. Split profits, yeah. And then do you have a loser? I mean, I have a couple losers.

I'm going back to Fox because obviously they are a loser. It's not never number one to, good to be number one in the list of largest media defamation settlements. They already, they didn't have to go to trial, but there was so much dirty laundry that was already aired about the fact that these hosts went on air. and, you know, talked about these election lies when these texts showed that in private, they didn't believe them. And so it just dealt a further reputational blow to this news organization. Right. Even though a lot of the documents were redacted, we still got some juicy tidbits.

And it was funny. The legal strategy that Dominion was pursuing was called, like, inflict pain, basically, which made them in the court of a pub. They were suffering in the court of public opinion because these little details that had come out, which made the settlement more likely. because yeah, you're totally right. Like Fox was a winner in this, but also a loser. Oh, yeah.

Like Tucker Carlson was saying that texted somebody that he hated Trump with a passion. Yeah. And then on air, you know, he's very subservient to him. So it's a little obviously conflicting. And then I also think the public is a loser and especially critics of Fox News. They really wanted this to go to trial and see Tucker Carlson and Rupert Murdoch up there having to defend their decisions what they said on air. And so people were like, this is important for democracy. for Fox to be held accountable by a jury or a judge,

and now it's not happening. They were kind of disappointed in Dominion for taking the settlement, but Dominion's not there to help democracy. They're there to make as much money as they could. I'm bummed because, God, it would have been good entertainment. Just from a pure entertainment and podcasting perspective, we would have gotten some good sound bites. My final loser is Wellington, Delaware, hotel owners,

because this is the second time they've been to press. deprived of a long trial that would have made them a lot of money because all these things happened in Delaware. The last time I'm thinking about is that Elon Musk dropped his challenge that would have forced him to buy Twitter. So that happened last year. Poor Willington. Your time in the spotlight will come again. I know it will. Eventually. Okay, Neil, let's go to India. You actually stole my thunder a little bit at the top of the show because my initial lead into this was that Apple just recently opened a store in the most popular, populous country in the world. But wait a second. Then they already have stores in China. You should have communicated.

I know. And so the news is that Apple has opened their first two stores in India. Tim Cook was over there on Tuesday, smiling, taking pictures, taking selfies. They absolutely love him over there. The big news is that Apple's expanding their footprint in the country because right now it's super small. Android current dominates that market. 95% of the market share in the country are these kind of cheaper Android phones. But India continues to grow in its middle and upper class continuing to expand. And so Apple's kind of making this bet that more people will be interested in iPhones. And Neil, Apple is definitely not alone in thinking that India is the future. Yeah, there are a couple other, many other Fortune 500 and large corporations that are seeing, you know, wanting to get into the India market. You have Dior opening

its first official show there. Air India just made its biggest purchase ever from Boeing for 220, at least 220 aircraft. And then Google and Samsung are also expanding their manufacturing footprint there. So people are looking at India and saying, this is what China was 15 to 20 years ago. And these companies, especially Apple, just want to repeat that playbook that they did with China. And it accounts for a huge amount of their sales. I mean, in greater Apple breaks out their regions into what it's called Greater China, which is Taiwan, Hong Kong, and China. That brought in 74 billion in sales last year, which was 18% of their total revenue. So Apple's like, okay, what do we do over here?

In China, let's now move it to India and see if we can repeat. Yeah, because right now Apple's sales in China are only six billion. India. Or in India are only six billion. So you can see why they're kind of licking their chops here. A crazy fact out of this, too, is that Apple's long-term goal is to produce $40, to 45% of its iPhones in India, which is a massive, massive number because China, like you said, 10 years ago, this was a great place, like cheap manufacturing.

But now China comes with all sorts of risks, these geopolitical risks. Also, just the U.S. is in this huge feud with China. So Apple's kind of trying to diversify its manufacturing footprint. There's a better relationship with India, so they're trying to move their manufacturing hubs there as well. Let's touch on India's growth for a bit. So the UN announced this morning that it passed China to be the world's most populous country. China had been the world's most populous country since at least 1950 when the UN started keeping track. So, you know, there's so much potential for India because it has all these people, but its GDP is not quite there yet.

It actually has a smaller economy than California. So people are saying, like, if India can get its act together, it could have huge economic potential. There are a few things holding it back, like lack of infrastructure. We talk a lot about China's bullet trains. It's amazing infrastructure that supports an amazing business ecosystem there. And another problem is that only one in five women in India are in the formal workforce. So there's a huge barrier to entry for education and work for women and girls. If they can improve that, then they could be an absolute beast coming up.

Yeah. The next decade is the decade of India. It is projected to be the fastest growing large economy this year, year expanding 6.3%. So, yeah, Apple's opening its second location in Delhi tomorrow, and I'm sure it's going to be a party. Yeah. Tim Cook is a god over there.

Yeah, they love them. All right, let's move on. I want to take you back to one year ago exactly today. April 19th, 2022. Netflix reported its earnings. It reported its first subscriber loss in 10 years. I don't know if you remember this. Next day, its stock plummeted 35%.

That is a massive. wipe out $50 billion right there in one day people were saying that Netflix's era of dominance was over that you couldn't couldn't grow a streaming service anymore they basically declared the streaming wars were over and all that was left to do was count the bodies so we're here one year later how are things looking well all the doomsday sayers were wrong Netflix is still here but Netflix is still not looking like the beast it once was it added 1.75 million net subscribers which was 500,000 short of expectation plus it's delaying its high anticipated crackdown on password sharing that was expected to bring in more subscribers by a quarter.

The stock was pretty much flat after the report, so investors basically just shrugged over this. Yeah, I actually think that the stock being flat is the main point here, because initially on reporting earnings, when we saw that they didn't meet subscriber gains expectations, it dropped 10% right off the bat. But then as the call kind of wore on and they said, we're going to roll out this subscriber or this crackdown on password sharing in the next quarter. The market kind of recovered a little bit. And I think that just goes to show how big they think password sharing crackdown is going to be. Because right now the company says they have more than 100 million household sharing accounts or about 43% of the entire global user base. So if they can

convert a small percentage of those people into paying subscribers, which we're kind of rolling our eyes out because, or I'm honestly nervous about because I'll just say it. I'm still on the family Netflix that's why people trust podcasts. Right. Exactly. I'm not going to be honest. I'm not paying for my Netflix right now. And so I think Netflix is kind of saying, listen, everyone, bear with us. Once we get this up in motion, our profitability is going to skyrocket. Yeah, I just, the vibes are off. The vibes are off with Netflix. The love it, they botched this love is blind live reunion on Sunday, which shows that they are not even completely remotely prepared to do live shows at scale, like all, pretty much all of its other competitors are doing.

And that's been a big draw for things like Peacock or Apple TV Plus where you can watch MLB and MLS games. And then it's leaned into these sports docu series like Drive, what it was called, full swing for golf, and there was a tennis one. Those have been, no one's ready to call it, but I'm ready to call it. Those have been complete flops. Not complete flops. They just haven't been as big as Drive to Survive Formula One.

Yeah, but they were banking on these to be as big, and I think the full swing just spent one week in the global top 10. Yeah, it's golf, man. It's not as global as you do. Okay, but they had a choice of all sports to follow, and they got the sexiest season with Liv breaking off on the PJ tour, and it wasn't a huge hit. Listen, they're not going to make golf work. I just want you to be quiet, because if Netflix hears this and they start canceling full swing, I really enjoyed it. So if any Netflix are listening to this, don't take everything we say. As the first time you said, I would just want you to be quiet.

That's good from your podcasting host, right? Let's talk about the most exciting part of their report, though, honestly, which is that Netflix is ending its DVD mailing service that started all 25 years ago. It sent more than 5.2 DVDs in the mail, but now it was like, you know, people are falling in love with AI chatbots. Maybe this is not a great time. 5.2 billion. Did I not say billion?

Didn't say billion. 5.2 billion, which is a crazy big number, by the way. The first one was Beetlejuice in 1998, and the most frequently requested one was the blindsad. That's great. Honestly, that smacks the era of Netflix DVD, and it's just a great film, so it makes a lot of sense. The craziest part is that more than 1 million people were still signed up to DVD mailing service from Netflix, and that brought in $145 million in revenue last year. It's a good business.

I know. Reject modernity, embrace tradition. That's what I always say. Okay, before we jump into our 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

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And for a limited time, college students get the best of both worlds. Get the unreal college deal, everything you need to study and play with select Windows 11 PCs. Eligible students get a year of Microsoft 365 premium and a year of Xbox GamePass Ultimate with a custom color Xbox wireless controller. Learn more at Windows.com slash student offer. While supplies last, ends June 30th, terms at AKA.m.m.m.S. College PC. Neil, Zuck finally did something yesterday that made his customers happy. It has nothing to do with the Metaverse or AI. This was just a good old-fashioned product update to Instagram.

So he announced that creators can now post up to five links in their Instagram bios, something he called probably one of the most requested features we've had. So those of you who aren't knee-deep in social media are probably scratching your head. Like, why is this such an in-demand feature? So before this update, there were a variety of link-in-bio companies that allowed creators to kind of build this ecosystem on their profiles where you could click one link and you'd be taken to different links that they want you to go to. These things could be like a merch store, there are other social media profiles, an affiliate link,

basically anywhere else the creator wanted to send your attention. So now you can do that natively within the Instagram app, no third parties required. This caused some waves. Yeah. So basically Facebook, Instagram, a bunch of other social media companies limit the, I'm just trying to understand this because I'm not a creator influencer on social media. But basically they restricted the amount of links that you could put in your bio. So all these third party companies emerge like link tree. and you can put a LinkTree link,

and that goes to a web page that has your store, everything you want to sell your customers on. Yeah, so you're an influencer, Neil. But so people are saying, okay, these third-party companies have no reason to exist anymore. Yeah, I'm glad you brought up LinkTree.

So LinkTree, obviously, is one of the biggest ones. The latest round of funding was 110 million Series C. They've raised the total of 165 million, and everyone has basically been saying like this is why you don't build your company around a feature. It's kind of the dialogue we had about Clubhouse, that live audio was a feature. And so

everyone was like, oh my God, Link Tree's dead. But this is an ironic part. So Link Tree actually tweeted yesterday a screenshot of Instagram's, Meta's own profile on Instagram has a link tree in its link in bio. So they basically tweeted that out and said like,

okay, you guys are putting us out of business, but you still use us. And I actually do think that it is the death of link tree might be a little overstated because within those five links that you can now attach your profile can still be a link tree. And Instagram's actually been pretty lenient on the links that it's allowing. So if we contrast it to Twitter, who is cracking down on substack, cracking down, for a while they banned like all link sharing because they want to keep you within their ecosystem. Instagram has been pretty vocal about the fact that they still allow you to,

link to wherever you want. So this is not a like an exclusion play. It could be like a rising tide floats all boats type of thing. So I don't actually think that link tree is under as much dress as people are thinking. And this is a play by Instagram to get a little ahead of TikTok, right? Which is kind of the first time that it's taken a step. Right. TikTok hasn't because I think TikTok only limits limits the amount of links as well. So we'll see if TikTok moves. But I'm curious to get your take on this because it feels like there's this delegate balance between keeping users in your ecosystem by kind of throttling the amount of links that you can put to other social media platforms. But also that makes your platform maybe not usable for people because creators want to go

to a platform where they can advertise all the other stuff they're selling. So you might want to strike this delicate balance between gatekeeping and maintaining this free ecosystem. I'm just not sure what the pitfalls are of allowing as many links as possible. You just become like a pass-through social media platform that's just for distribution. Yeah, no, I think it's the second point you made that it's better to cater to creators because creators will come to the platform that benefits them the most and that they can gain the most from. And so as soon as you start throttling or being too selfish and like trying to keep people,

as we saw at Twitter, I think it leads to backlash and is actually not the smart long-term play. So that's my take. It's kind of like cracking down on like house parties in college. Like people are going to do it anyway kind of thing. They're going to find ways around it. So by cracking down on, this happened at the University of Maryland, by like cracking down on tailgates, you're just pushing things to the fringe, and it's still going to happen.

So these social media companies know that people are still going to put links to other. Let the people party. Let the people party. So, yeah, a really interesting thing that I have not thought a lot about before today. But Linktree may be on its last legs. We'll see. All right. Let's go to electric vehicles.

Yesterday, new rules went into effect about which electric vehicles qualify for the 7,500. tax credit the government offers people who buy EVs. There are not that many models on the list. Only six full EVs qualify for the full tax credit and a handful of hybrids do too. In effect, these new rules slash the number of EVs that qualify for the tax credit by about half. So what does this mean? This is a gamble by the Biden administration to have its cake and eat it too. So it wants to spur EV sales to meet its climate goals, but at the same time it wants EV production to happen in the U.S. So through the Inflation Reduction Act, last year, it set these stringent sourcing targets for EV materials.

So to qualify for the full credit, which is only these six cars have, at least 50% of their battery components need to come from the U.S. or a trade partner and 40% of the critical materials do too. This is basically screwing foreign brands pretty hard, like Hyundai, Toyota, Volkswagen, Nissan, because they make most of their cars and most of their supply chain lies outside of the U.S. And so literally they said, we're not happy. That's Jose Munoz, who is the CEO of Hyundai.

And he said, basically, they have the Ionic 6, which is their electric sedan, won the world car of the year at this big car show. And yet it's not eligible for tax credits because it's assembled in Korea. And so Hyundai's getting their ducks in a row. They're building a $10 billion plant in Georgia. But obviously, these things take time. And so they're like, yo, can we have a little break while we're building this plant? Can we obviously we're making steps to be compliant. But the government's like, no.

Like you have to, it has to be an active supply chain. It can't be this future thing you're promising. It's a gamble. It's a total gamble. But you're saying they're building a $10 billion factory in Georgia that they maybe wouldn't have if the inflation reduction act didn't go into effect. So it could pay off in the long run. It could kind of pause EV adoption currently because people are looking at the, options and they're like I want seventy five hundred dollars we showed a graphic on this

that showed that you know average MSRP for these EVs was north of sixty thousand dollars most were eighty thousand dollars so this this tax credit is a big deal you see parallels in how the government is approaching this with the Chips Act which we've talked about and saying that okay you want to build semiconductors here we want to do that but you also have to employ a labor union force you have to halt stop buybacks you have to you know provide child care yeah so the the Biden administration is trying to kill like five birds with one stones with its industrial policy. For sure. Okay, Neil, we touched on this at the beginning of the show, but you know how we love our

segments. We have Toby's trends. We have Neil's number. Today, I want to propose a new segment idea. Weird Story Wednesday. Okay. Has to be alliteration. Yes. We'll let the listeners be the ultimate judge, but for now they can't say no, so here we go. So today's Weird Story Wednesday centers on the website, rent a hitman.com. So, and now, National Guardsman from Tennessee is facing federal charges after sending his resume to the website in order to become a hitman. So I should clarify here, rent a hitman is a parody website. It has fake testimonials from people claiming they've used the services. It has an intake form where people can request services.

And it has an option to apply to be a hired killer. So the guardsman didn't know that. He didn't see the red flags that show that this is a parody website. And he applied saying he's an expert marksman. he was looking into the law enforcement, but wanted to do something more exciting instead. So this prompted the website owner to contact the FBI, at which point an FBI sent an undercover officer to set up a phone call with a guy. He met with the guy at a bar. The guy, the agent actually paid him $2,500 in cash, and then they promptly went and arrested him later that day. So, Neil, this is a weird,

a wacky, a crazy wild Wednesday story indeed. Yeah, rent to hitman.com was, I think it was originally created to as like a web traffic services provider like hit meant a website hit. Yeah. And then this guy bought this domain for $9.20 and just let it ride and then checked his inbox one day. And he, in 2010, a woman was like, can I'm looking for someone to kill three of my relatives because they screwed me out of my father's inheritance in the UK. And he was like, maybe I got something here. And then in an interview with the Guardian last year, he said that he's been referring these people who are applying to the authorities. and he estimates that he saved nearly 150 people's lives as a direct result from referrals to authorities. Crazy.

So, yeah, if you're going to rent to hitman.com, just know that it's a joke. All right, that is all the time we have for today. You can always reach us at Morning Brew Daily at Morningbrew.com. I'd love to hear your thoughts about the show or anything else or how trustworthy we are. Let's roll the credits. The show's producer and editor is Emily Milliron. Our technical director is Yuchinawa Ogoo. our supervising producers, Bryce Belloff.

Macy Gilliam and Raymond Lue are associate producers. Thanks so much for the bagels, Macy. Hair and makeup does not qualify for credit. Devin Emery is our chief content officer. 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

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