Morning Brew Daily - Meta Heading to Antitrust Trial Over IG, Whatsapp & Disney+ Rallies With 4.4M Subs

Episode Date: November 15, 2024

Episode 454: Whoa! It’s Ann and Kyle! They talk about Meta’s antitrust court case where the FTC wants to break up Instagram and WhatsApp from the social media giant. Then, Disney is the Stock of the Week after reporting strong earnings to its streaming business with the help from its parks and studio divisions. Is Bob Iger the GOAT? Meanwhile, electric vehicles are the Dog(s) of the Week after the Trump administration aims to kill Biden’s EV tax credit. Plus, the satirical news publication The Onion wins the bid to buy the controversial InfoWars. Lastly, the biggest headlines to get into your weekend.  Visit https://www.sage.com/morningbrew for more! 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. Hear more business news from Ann on After Earnings, wherever you get your podcasts Hear Kyle's work life debates on Per My Last Email, wherever you get your podcasts Get your Morning Brew Book of Crosswords HERE: shop.morningbrew.com Listen to Morning Brew Daily Here: https://link.chtbl.com/MBD Watch Morning Brew Daily Here: https://www.youtube.com/@MorningBrewDailyShow 00:00 - Welcome Ann Berry!  03:00 - Meta Antitrust Trial  07:45 - Disney Streaming Up  12:30 - EVs Tax Credit Over? 18:30 - The Onion Takes Over Infowars  23:00 - Headlines To Know Learn more about your ad choices. Visit megaphone.fm/adchoices

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Today, Meta is heading to an antitrust trial, what that means for their ownership of Instagram and WhatsApp. And Disney's latest earnings have investors excited. Have they finally gotten their streaming legs under them? It's Friday, November 15. Let's ride.

So it is Friday, and we actually are making Morning Brew Daily history because there's no Neil, there's no Toby, they're slacking off, they're out somewhere, having fun. It's me and Anne Barry locked in the studio. And Anne, the audience might know me a little bit, but they may not know you for Morning Brew Daily show. So tell us a little bit about yourself. Thanks, Carl. First of all, I miss Neil and Toby. So shout out to them, who doesn't.

So I am really involved here in brew markets where we are focusing on the hotter stories coming out of public stocks. And we do a ton of great work. newsletter. We are building on social. Come find us on Instagram. Can find us on X. And there's a lot more to come. So working hard also hosts just like you do, another podcast here at Morning Brew. It's called After Earnings. That's where we have in-depth conversations with public company executives that that retail investors often don't get to have. So we're trying to unpack that for folks. I love it. Well, Anne is probably the smartest person at Morning Brew. So it's going to be a really fun conversation. We actually are talking a lot about earnings today. So you're going to be

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We are about to find out who is stronger, the U.S. Federal Trade Commission, or Mark Zuckerberg in his wife, Guy, era. Now, why is that? It's because meta-must-face trial over claims it overpaid in its purchase of Instagram and WhatsApp to crush emerging competitors. This strategy is often called buyer Barry, no relation to the co-host and Barry, where a company basically says, let me buy you or we will throw our entire weight behind destroying you.

Now, for reference, Metabot Instagram in 2012 for a cool $1 billion. And they bought WhatsApp in 2014 for $19 times that, for $19 billion. Now, the history of the case, the FTC and 48 states' attorneys generals sued META in 2020 during the first Trump administration, and the lawsuit was then refined under the Biden admin, which kind of highlights this seemingly bipartisan effort to curtail META's influence and more broadly, Big Tech's perceived monopolistic power. Meta had urged the judge to dismiss this entire case, saying it depended on an overly narrow view of social media markets. it didn't take into account competition from bite dances TikTok, Google's YouTube, X, and Microsoft's LinkedIn. Trump's returned the White House in January. It might bring some changes to this antitrust approach that the U.S. has had, although it's hard to predict how exactly his admin will act in practice. And do you think we have a serious threat to meta here?

I don't think we do, actually. And for a couple of reasons, first of all, can we just touch on something you said right at the top there? Yes. You said the fact that meta, is now defending its purchase, saying it overpaid. If you could buy Instagram for a billion dollars now, it would be a great deal. Amazing deal. Incredible deal.

Deal of the century. So I thought that was just interesting to show how times have changed, right? So that's your question, which is, is this going to happen? Look, we are looking at with the change administration, a change more likely than not in leadership of the Federal Trade Commission. You've had Lena Khan there. Technically, her term expired in September. And so the question is, is she going to be reappointed?

probably not. So who is it going to be that's going to get appointed by the Senate? We don't know. And until we know, I don't think we know what's going to happen with this case, just one person's view. Yeah, and it's been interesting. I think Facebook or meta at one time had maybe bipartisan zeal to attack it, maybe for different reasons. Now it seems like Zuckerberg and maybe the company are pivoting their PR, they're showing a different side of them. I'm not sure actually if there is still the same bipartisan anger towards meta as there maybe used to be. But also, just against the backdrop, a lot of of the big tech companies are getting sued. I think Amazon is facing an antitrust lawsuit. Apple is facing an antitrust lawsuit. Google is facing two antitrust lawsuits. So until we see what changes

are going to happen in the administration, it might still be hunting season for big tech. It's also interesting to see how with time elapsing the definitions of the markets that these big tech companies are defending changes. So you just said it, right. When this deal was done in the 2012 era, Meta was going after buying social assets, that was before. TikTok exploded, right? It was before X exploded. It was before YouTube exploded. So the argument today about who are we competing against, do we dominate the social market?

Different argument today than then. Same thing, let's take Google, right? Antitrust going after them because of search. I mean, do you use Google for search? Or are you using chat GPUT? I mean, chat GBT is definitely increasing perplexity. Right. And big in the search space.

So I think your point about these markets change or consumer behavior changes. And so maybe we don't even need to break them up. This is just a distraction, allowing a little bit of sunlight in the market. for these new emerging companies to take some share from these big tech companies. I will say, I think Zuck, I mean, I don't think he wants his company to be broken up. But either way, he is loving life right now. He recorded a song with T-Pain to show how much he loved his wife because he met her. And they would play the song, Get Low.

So this guy's having a good time no matter what. Also, how sweet is he with his wife? Didn't he get a sculpture commission? Oh, so sweet. He's in his wife, Guy, I love it. I also T-Pen. I know if somebody wanted to make a sculpture of me and a T-Pain renders, I would find that.

Yeah, listeners, you heard it. Yeah, I know, because I'm going to get flooded now with D-X. I'm going to find a ton of this coming into my inbox. The other thing, Carl, that you touched on, which is how perception has changed. It used to be bipartisan. I don't hear people riffing on Facebook now the same amount that they're riffing on X. Yes. The power of X is what everyone's talking about.

No one's really talking about the power of Facebook. When it comes to public discourse in quite the same way. Agreed. So we'll have to see how this case plays out in the new administration. Now it's time for our Friday segment. stock of the week, dog of the week, where Anne and I tell you about a stock who is full of holiday cheer

and one who is just mumbling bah humbug. Now, as a reminder, we are not financial advisors. I was a philosophy major. Do not take my advice on stocks. And I'll throw it over to you for Stock of the Week. Don't take my advice on stocks either, by the way, just to double down in that. My Stock of the Week is Disney.

And it's not just because the stock popped, went up just under 7% yesterday, Kyle. It's because the story behind Disney, The magician when it comes to storytelling is absolutely fascinating after years of investing heavily in their streaming business seems as though it could finally be paying off. Disney reported on Thursday a profit of $321 million for the third quarter. Actually, it's fourth quarter.

So that's for September. Bouncing back from a loss of roughly the same amount a year ago, big boosts to their financial performance because there have been so many question marks about where's this company going in the age where linear TV is really struggling. So let's look at what happened in their streaming business. A whopping 4.4 million new subscribers joined Disney Plus, crushing expectations of 900,000.

And there was a little bit of Netflix mimicry here, took a page out of the Netflix playbook, hiked up prices, and it pushed some subscribers to their ad tier plan. And there was this really funny moment car. I don't know if you saw this. There seemed to have been a hot mic moment where CEO Bob Iger almost accidentally disclosed about 47% of US subscribers are in that ad tier. Now, don't forget, that ad tier only launched less than a year ago. So it's working, and it's not only working, it's working at real pace, which I thought

was pretty interesting. Let's talk a little bit, too, about what's been going on in the box office. Shining performances from the studio division, including Inside Out 2, brought out one. Did you watch Inside Out 2? Oh, did you? I did. Did you love it? I thought it was good.

I also didn't even see Inside Out 1, so it got me on 2. It got you. Well, it got you and $1.7 billion worth of other. getting people too. Highest grossing animated movie of all time and Marvel's Deadpool and Wolverine rated $1.3 billion setting a new record. I love this for an R-rated movie. So Carl, in all of this, though, decent performance. There has been huge drama in the C-suite at Disney. So have you been following all of the stories about the succession planning issues that I have. I mean, I think this is a really interesting part of the story, which is Bob, you're obviously left.

Disney and then he came back. It's kind of like LeBron James Lee, Cleveland, and then coming back for the second stint. And, you know, Bob might be a little bit more washed up. You talked about the hot mic moment now, but I still think he is one of the best executives probably ever in media. And I would not bet against Disney. I think you've shown the streaming numbers are turning around. They have, I think, one of the premier brands in all of business. You, like, are a bad parent if you don't take your kid to Disney World and how. So they really own that relationship with a young generation. And I think Bob is putting them in a good spot.

But the succession planning, because they've announced that they're trying to find a new CEO in early 2026, that is what I think is going to be kind of the linchpin of this continued success of Disney. Can they find someone to replace Bob Eiger? Because the first time they tried, they put in another Bob and that didn't work. So just pick someone without the name of Bob and maybe you're in a better spot. So, Ann, what do you think of the succession plan? Are they going to find someone to replace Bob Eiger? Well, they're definitely taking it really seriously,

and the pressure's on to do it this time. So we've got James Gorman, who is the former CEO of Morgan Stanley, who is now taking over his chair of the board and running the succession planning committee. Now, James Gorman himself had been CEO of Morgan Stanley for 12 years, did a really good job of handing over the seat. So let's compare that to Bob Eager. He was CEO for about 15 years the first time,

left in 2020, came back two years later when the board ousted his successor, possibly with his own workings in the background. No comment from Bob. And he's meant to be gone by now, but he's still sitting there. And Mary Barrett, who's the CEO of General Motors, is on the same succession planning committee, so is the CEO of Lulu Lemon, right?

So you've got people who are really serious people really focused on this. What I thought was really interesting, Kyle, as a separate but nuanced point around this, Disney very, very unusually put out three-year projections in their earnings cool yesterday. And they said, look, we're good till 2027. We've got challenges. It's tough in TV.

It's been a little tough in the theme parks. But we're good till the end of 2027. And I think that was almost their way of saying, even when Bob Iger's gone by the end of 2026, we're telling you there's life after him. We're going to be okay. Yeah, I think that's a really great call out. And I think that is, right, that is the question. Like, Disney has been very successful.

Bob Iger left. Things started to get rocky. He came back, turning it around. Can Disney exist in a post Bob Iger world? we got James Gorman and company on and we'll see how it goes. Let's move on to the dog of the week. My dog of the week is electric vehicles. Now, this holiday season, I'm hoping Santa can fit an EV down your chimney because come

2025, these vehicles might be getting a little more expensive. Now, the Trump transition team is discussing ending the $7,500 EV subsidy as part of a broader tax reform effort. This EV tax credit was actually established as part of the inflation reduction. Act. Now, the current EV tax credit, if left alone, is set to remain in place for 10 years. And there's actually a big change in 2024 that allowed consumers to use a point of sale discount. Essentially, instead of claiming this as a credit on their tax return, they would get the discount immediately at point of sale. So it pushed a lot of people to feel a lot more comfortable buying EVs. It also allowed electric vehicle companies or companies trying to establish themselves in the EV space to remain profitable on these vehicles because they were getting essentially, $7,500 from the government. This was effective in 2020. In 2023, EV sales in the U.S. reached a record high of nearly 1.2 million units. And this was a substantial increase from 5.9% in 2022 and 3.2% in 2021 in terms of total U.S. vehicle market. Now, zooming out a little bit, Tesla is actually about

half of all of the U.S. EVs in the third quarter. They sold half. So they are a major player in this. However, Tesla's U.S. EV rivals have collectively steadily eroded this market because Tesla used to be about 80% in the first quarter of 2020. So the EV market might be getting a shakeup. We're not sure who the winners are going to be. We're not sure who the losers are going to be. Ann, does this mean I need to add a Tesla to my Christmas list? What should I be doing here? Well, here's what I find so fascinating. Yeah. Right. You've got Elon Musk who's become this incredibly influential and loud voice advising what will be the new administration, sitting right there, founder and CEO of Tesla. At the same time, as this tax credit, which was helped the

whole industry, is potentially going to go away. So my big question around this is why. So should you be adding a Tesla to your Christmas list? I mean, if someone dropped a car in my stocking for Christmas, I'd be absolutely thrilled. But my question is what happens more broadly. So if you go back to some of the things Elon Musk has said, and this is really interesting to me, he said earlier this year that killing the subsidy might slightly hurt Tesla sales, right? And we saw Tesla share price come down a little bit on this news. But he said it would devastate his US competitors in EV, including legacy automakers such as General Motors. So if you get a Tesla, I mean, you might be the last person standing. Maybe everyone else does get decimated along the way. I think that is the most interesting

point here, which is Tesla is kind of far out ahead of the competitors. They've built EV infrastructure. They have the manufacturing process down. GM, Ford, Rivian, all these companies are trying to catch up to Tesla. And in some ways, the subsidy is helping them all, but it's helping these challengers to Tesla a little more. So if they kill the subsidy, exactly to your point, it hurts Tesla a little bit. It hurts these other companies a lot more. What I also think is interesting is on a global scale, China is really ascending in the EV market. They have the company BYD, which is blowing up in China.

it's trying to enter other markets. So far, we've been effective at keeping it out of the U.S. market. I don't see the Trump administration changing that. And so there's also this push of remaining dominant in the EV and battery space for the U.S. as a concern of like national security. And there was this alliance for automotive innovation actually telling Congress, we need to keep these subsidies in place, not just for consumers, but to allow our companies to develop better EV infrastructure to remain competitive from a national security.

perspective as well. So I think this is actually a really interesting story. It has hurt most EV companies. Rivian stock was quite down on the news. We'll see if it goes through. But I do think the most sneaky piece is that it might also help Tesla overall. Amazing to see what Tesla stock price has done in response to this. I mean, it's been on a complete tear since the election. Yeah, I feel like every day I open up and Tesla's up like 20 percent or down 20 percent. They've never had a normal day. Coming up, the story behind how the Onion won the bid for info, In a move that has me more and more convinced we live in a simulation, the onion has purchased Info Wars, the famous conspiracy network by Alex Jones.

Now, the Onion's bid was actually backed by the families of victims of the Sandy Hook School shooting and one first responder. It's also going to have an exclusive advertising deal with gun control group, every town for gun. Alex Jones placed InfoWore's parent company into bankruptcy and later filed for personal bankruptcy in 2022 following years of costly litigations with the families of Sandy Hook victims. He had been ordered to pay over $1 billion in damages for repeatedly claiming on Infowars that the 2012 Sandy Hook School Shooting was a government hoax and involved crisis actors. Hence the maybe irony of the Sandy Hook School Shooting families joining in this bid to take down

Info Wars. Now, Ben Collins, who owns the Onion, said the new plan for InfoWars going forward was, quote, to shine a light on the economy around this that is completely engulfed our current media, which is people getting you really, really upset and then driving you to a page to buy a panacea. Robbie Parker, whose daughter Emily was killed in the Sandy Hook shooting, said, in part, quote, the world needs to see that having a platform does not mean you are above accountability. The dissolution of Alex Jones assets and the death of Info Wars is the justice we have long awaited and fought for. And I was a massive onion fan growing up.

then it kind of faded into irrelevancy. It seems like it's back and back with a vengeance, taking down Info Wars. Is satire back on the menu? I think the Onion's satire is, it never went away. It's coming back into conversation. I find this move, a tricky one, I think, for them to navigate. Because if you look at the motivations here, the family partnering with the Onion, you called that out. I can see them wanting to have a way to make sure that this content is pulled down.

The InfoWords content is pulled down. it's in the control of someone who they trust, and it's going to be either managed away or goes away in a method that they can get behind. Where the onion actually goes from here with it, I think it's a real question mark. They've talked about turning it into a satirical website, turning into a parody.

Parody is a really tough pivot. I mean, this is tough stuff for them to go after, I think. Yeah, I mean, I'm glad the families were involved in this takeover of Infoors because it seems like getting their buy-in is very important, given the nature of InfoWars and that tragedy. So I'm glad they have involvement. I don't know what the onion is going to do with this. I think one of the interesting things is they were doing a fire sale of Info Wars. It wasn't just the domain or the assets.

This included everything from Platform's studio equipment. They had an online dietary supplement store, a Terodyne armored truck, its social media accounts, and even a Winnebago motorhome. So Alex Jones was selling everything to try to get enough money to pay out these fines that he's been ordered to pay to the families. So I also just don't know what they're going to do with the Terodyne armored truck. So we're going to find that out soon. Maybe put the Onion logo and drive it around. I actually went down the rabbit whole little bit to try and figure out who owns the onion. And the owner of the Onion is one of the founders of Twilio, which I found quite interesting.

So tech sort of coming back into a very different kind of media ownership. I don't know if that gives some insight into what the motives of the onion could be here. But figuring out who the players are, unpacking that a little bit more, I think it's going to be a part of how this unfolds. Yes, and Alex Jones, no surprise, was on X saying he's going to stay until the lights turn off. And that there's probably a big conspiracy to take Info Wars away, obviously. So he isn't going away forever. But I think this is a big step in limiting his reach because InfoWars was relatively popular in the media landscape. All right, Carl, before we end our Morning Brew Daily Maiden.

And Voyage Together, let's share some other stories that you should know before we head into the weekend, starting up with media, but a different kind. Tonight is a big night for Netflix because they're getting into live sports. We will see the streaming giant airing a highly anticipated fight between YouTuber term boxer Jake Paul and boxing titan Mike Tyson set to take place this evening at the AT&T Stadium in Dallas, Texas. But it's not just about the spectacle of the match itself. It's not just about the bout because for Netflix, the stakes are even higher. The company's bold move into live sports content could be a game changer for its growing portfolio of sports programming. There's been so much discussion, hasn't there, about traditional sports networks, seeing competition from digital platforms. Netflix, betting big on high profile events like this one.

Do you remember they also went after Raw, so they'll be broadcasting WWE starting from next year? All of this to attract subscribers with the thesis that that's how you get engagement with these live. sports and trying to redefine what live sports can look like in the streaming era. Now, Tyson's got a massive profile. It's not without controversy, by the way. Both he and Jake Paul, slightly polarizing personas. But this fight does have the potential to bring in a new viewership to Netflix to drive real engagement, particularly amongst younger audiences, who may be familiar with Jake Paul from YouTube and bringing them over to perhaps try and tempt them into subscription. But Kyle, what's your take on this? It's a big bet. It's a big intention. Does it work?

I have two takes. The first is Jake Paul fighting Mike Tyson. Just seeing that headline is almost surprised. If I showed that headline to my grandpa, I think his head would explode. Why? Why? It just seems like we're in this new era of like absurdity almost for like spectacle. And I think Jake Paul and the Paul brothers, like, somehow they are always in the news. Like, they just find a way to pierce through this bubble and are always being talked about. The second thing is, I think this is a really smart move from a Netflix perspective. What I kind of think about it is, it's very similar to like pay-per-view boxing, but you actually capture the customer theoretically forever.

So using this as a top of funnel to gain new subscribers, but then they don't just go away. Now they're subscribed to your platform. And I'm sure Netflix is going to pull the data on which of these. these live sports are the best for attention long term, and then double and triple down on those. So I think this is a really powerful move by Netflix as a new funnel to get new subscribers. I think they're going to continue going into live sports because that is the one thing that linear TV has always said, we still have live sports that's going to keep people buying these large cable packages.

Netflix is now moving into that territory. I think it's a great expansion by the company. Let's move on to this coach tapestry merger news. In 2023, we learned that Lena Khan doesn't like luxury. No, I'm not talking about handbags. I'm talking about the companies that own the companies that own the handbags. Now, if you remember in 2023, the FTC sued coach parent company Tapestry and Versace parent company Capri to stop them from merging, citing it would decrease competition in the

marketplace. And now the brands have officially called off the merger. And they're actually pursuing different goals to achieve their desired growth. Tapestry, which owns, again, a number of brands, coach Kate Spade, actually said it was going to do stock buyback. They're doing a $2 billion stock buyback program. Capri, the owner of Versace, Michael Coors, Jimmy Chu, on the other hand, said it was going to focus more on remarketing efforts, changing its retail footprint, and kind of aligning product offerings to new consumer preferences. So very different strategies.

How is the market responding to this news? Tapestry shares soared. Capri shares are down. Personally, I just don't think the companies should emerge because Coach and Versace obviously clash, but what do I know? And what's your take on this luxury merger call-off story? Well, I think Tapestry share price going up is the market saying we didn't think Capri was a good idea anyway. So actually, in this case, maybe Lena Con in the FTC, you did us a favor, which is interesting.

Also the fact that Tapestry is saying we've got a bunch of cash, right? They were going to use that cash to go buy Capri had that happened. Instead, we're going to buy back our shares. There's one cautionary tale in there, I think, Carl, they're sort of saying, without explicitly saying it, we can't think of a better way to spend our money organically. Right? Investing in our own growth doesn't make sense. We're better off sending our cash back to shareholders. Longer term, you do worry about that a little bit. What's the longer term thesis? Ironically, Capri is saying, great, now we're going to invest in ourselves. We're going to take care of ourselves. And the market's saying, well, we don't trust it's going to work. So, you know, I look at this and say, tons going on in luxury right now. Do you see Burberry? It's coming out with a brand new strategy. The market got quite excited about that. But overall for luxury, China is such a big question mark for this whole set. If the Chinese consumer doesn't come back with a plum, where do you make up for that growth? So understanding that more broadly is going to be the thing to keep an eye on from my perspective.

I think they should just send us on Versace. We'll wear it on the show and it'll boom. Next story, Kyle. Let's talk about NBC, which is making a big shake-up on the Today Show. So Craig Melvin, co-anchor of the show's 9am hour, stepping into the seat, big seat being vacated by Hoda Capby, who's leaving the morning show. next year. So Craig's now going to host the seven and ATM hours alongside Savannah Guthrie, changing not only the lineup of that show, but also signaling NBC's broader strategy as it's trying to navigate. What's been a really difficult landscape for network television?

So Carl, tell me, are you a fan? Do you watch the morning network new shows? I'm contractually. I cannot mention any competitors on the show. Craig, I wish you the best of luck, but you're going up against some heavy hitters in the morning we're daily show. So good luck out there, Craig. We drop at the same hour. Bring it on, Craig. Bring it on. I wish them the best. Let's move on to our last story here, which is a story you're going to want to listen to

because it's going to allow you to win the most fun conversation at Happy Hour competition. Four people in Southern California claimed their cars were trashed by a bear. The only problem? The bear was actually just a person in a bear costume, and the four suspects have been arrested and accused of insurance fraud. Now, the so-called bear claimed to have entered and damaged a role. Royce and two Mercedes car. So at least the bear has very good taste in vehicles. And the insurance department said in what I think is probably the greatest statement I've ever heard, upon further

scrutiny of the video, the investigation determined the bear was actually a person in a bear costume. The bear costume with brown fur, a head shaped like a bear, paws, metal hand tools was actually found in one of the suspects home. So I hope they at least used it for Halloween and got two uses out of it. And brilliant plan, stupid plan, or brilliantly stupid plan here? No plan. Terrible. Terrible. This was a very fascinating story. Folks, if you're listening at home, do not dress up as a bear, attack your own car, and try to claim the insurance. Don't do it. Don't do it.

All right. Well, we have made history today. Me and Ann, filling in for Neil and Toby. It was lovely to have you in the studio, Anne, and I really enjoyed doing the show with you. Thanks for having me on. Let's roll the credits. Emily Milliron is our executive producer. Raymond Lou is our producer, Olivia Graham. is our associate producer. Euchenna Waugu is our technical director. Billy Minino is on audio.

Hair and makeup are partying with Neil and Toby. Devin Emery is our chief content officer and our show is a production of Morning Brew.