Morning Brew Daily - Record Labels Sue AI Music Makers & McDonald's $5 Value Meal

Episode Date: June 25, 2024

Episode 351: Neal and Toby discuss a major lawsuit that could shake up the music industry as an alliance among major record labels sue two major AI music generators over copyright infringement. Then, Netflix updates its famous internal culture memo to reflect a new era where streaming is now a hyper-competitive market. Meanwhile, McDonald’s launches their $5 Value Meal to lure back cost-conscious customers trying to navigate high inflation. Plus, a sock debate between Gen Z and millennials that has everyone looking at each other’s feet. Hm. Also, a Florida family is suing NASA for space debris from the ISS that crashed into their home. It opens the question: who should pay for space debris? Lastly, a deep dive into the trendiest baby names dating back to the 1880s. Download the Yahoo Finance App (on the Play and App store) for real-time alerts on news and insights tailored to your portfolio and stock watchlists. 00:00 - Nvidia’s wipeout 3:00 - Record labels sue AI music makers 7:30 - Netflix updates its culture doc 11:30 - McDonald’s $5 value meal 15:30 - Ankle socks or crew socks? 19:00 - Space debris falling to Earth 22:30 - Trendy baby names Get your Morning Brew Daily Mug HERE: https://shop.morningbrew.com/products/morning-brew-daily-mug?utm_medium=youtube&utm_source=mbd&utm_campaign=mug Listen to Morning Brew Daily Here: https://link.chtbl.com/MBD Watch Morning Brew Daily Here: https://www.youtube.com/@MorningBrewDailyShow Learn more about your ad choices. Visit megaphone.fm/adchoices

Marketers, tell us if this sounds familiar. You invest in something that seems incredible like millions of views, but then don't see any revenue. Instead, invest in what looks good to your CFO. LinkedIn Ads generates the highest row ads of all major ad networks. Spend $250 on your first campaign on LinkedIn ads and get a $250 credit. Just go to LinkedIn.com slash MBD. That's LinkedIn.com slash MBD. Terms and conditions apply.

Good morning, Brew, Daily Show. I'm Neil Fryman. And I'm Toby Howe. Today, we ponder the age-old question, when a piece of space junk crashes through your home, who is liable? That Netflix has updated its famous corporate culture memo to make it a little shorter and a little less intense.

It's Tuesday, June 25th. Happy half-Christmas, and let's ride. All right, I have an early candidate for Dog of the Week. Want to hear it? Let's hear it. Invidia. Yeah, it's been pretty ugly since overtaking Microsoft as the world's most valuable company last week.

Nvidia's shares have fallen 13% over three trading days, wiping $430 billion off of its market cap. Now investors are wondering where the bottom could be. Some say this is a classic example of taking profits off the board, like when you're on a heater at the craps table, realize how many chips you have in front of you and put a bunch in your pocket. But it's still a surprise to see the golden child of the stock market

take a beating like this. I think I have an explanation. nation for it. Jim Kramer, the mad money host, tweeted out on June 18th, NVIDIA, own it, don't trade it. And the Kramer curse is so alive and well. I'm convinced you can say, folks, I'm feeling good about the sunrides tomorrow and he would still end up wrong. But we should cut the man some slack. A lot of AI companies are down across the board right now. You're right. Someone, it's a little bit of profit taking, but also maybe the industry got a little out ahead of its skis. But Nvidia seems like it got out a little more than most.

Now, let's hear a word from our sponsor, Yahoo! finance. So I have an embarrassing investing story. I need to get off my chest. Is it about that time you lost a thumb drive with $1 million of Bitcoin on it? No, it's not quite that bad. This one goes back to my senior year of college. I was reading this Yahoo finance article. I remember specifically it was Yahoo Finance because of the purple. It was wintertime, but about to turn into spring. And this article was talking about five companies to look at the tend to do well in springtime. Go on. So at the top of the list is Sherwin Williams, the paint company. People renovate and such as the weather turns, so I say, sure, why not?

The Yahoo Finance article made some good points, so I buy some and go about my day. Until I get an alert from my brokerage account a little bit later, I hadn't just bought some Sherwin-William stock. I bought $42,000 worth of Sherwin-William's stock on margin. I had like a thousand bucks in my account, and I fat-fingered bought my way to wait more shares that I wanted too. Oh no. You got margin called. I got margin called. I panic sold pretty much all of it, but here's a real kicker. Sher Williams is up 100% in the last five years. I accidentally made a fantastic investment. Yahoo Finance was sending you a sign. It was trying to help you, but you didn't listen. Yeah, so I guess the moral of the story is always double-check the amount and never

turned down what is clearly a sign from Yahoo Finance. If you want to check it out yourself, head to Yahoofinance.com or download the mobile app to get it directly on your phone. That is such a great story. I know. It's true. Study and play. Come together on a Windows 11 PC. 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. slash college PC. The epic brawl between publishers and AI companies over the future of art has expanded into a new arena, music. Yesterday, the world's biggest record labels, including Universal Music Group, Warner and Sony, dropped a mega lawsuit against the two most prominent AI music startups, Suno and Udio.

The labels allege that these two companies are illegally training their AI models on massive amounts of copyrighted song recordings. They're seeking damages of as much to $150,000 per work infringed, and given the amount of music out there, this could amount to potentially billions of dollars. Suno and Udio have become very popular over the past year for using generative AI to create songs from a text prompt. I could say, make a reggae song about Toby's bleached hair, and it would do it, and we'd all be rolling on the floor laughing. Problem is, these AI models have to be trained on real music to know how to make robot music. And the record labels are saying this training is being done on songs they own but haven't licensed out. So we've seen these kind of copyright lawsuits filed against AI companies producing text and images and music is the next battlefront. Yeah, right now we're seeing a very similar story play out to those text companies as well because right now, Suno and UdiR are being a little bit evasive at what exactly they did train their models on.

They've been accused of using copyright. It works, but the company says that their training data is confidential business. so they really haven't been forthcoming with what they used for training, which mirrors the pattern we've seen from OpenAI. Remember when they release SORA, their text to video generating? They're like, did you train this on YouTube videos? And their CTO is like, we're not going to really say one way or another on that. So this is definitely something that we're going to see continue to play out in different arenas. And you're right.

Music is the latest one. I mean, so how do you know if you're the record labels, whether these companies are training it on? particular songs that are copyrighted. Well, they had researchers come in and do experiments and try to replicate existing artists and existing songs, and they could do so really well. They asked these AI generators to music generators to create all I want for Christmas is you through text prompts. And they did one that sounded exactly like Moriah Carey.

They repeated that for a bunch of different artists like Lynn Manuel, Miranda, and Bruce Springsteen. And they could ultimately arrive at almost carbon copies of these songs. so they say there's no other way that you could generate these songs that sound exactly like these artists without actually training your models on these specific songs which we own and you definitely didn't pay us for. The example that I thought was very funny, that's included in the suit is that they were able to using a prompt that was 70s pop, they were able to create a song called Prancing Queen

that contained lyrics to obviously Dancing Queen from Abba and sounded remarkably like the brand. So yeah, they've literally been going in and finding specific examples where they can get it to generate songs that sound exactly like existing artists out there. But also one thing that makes this suit especially notable right now is that we have seen a song from Udeo just kind of take over the culture for a little bit here in the last few weeks. The Drake Kendrick Lamar Beef had a song that it's called BVL Drizzi. And that was originally AI generated using Udio.

And that was a song I didn't know was AI generated originally. It was made by a comedian who just thought it would be funny to. put together this very catchy beat, honestly, to weigh in on the Drake, Kendrick Lamar beef. But it really just goes to show how powerful that these tools are, tools are that a literal comedian can create something that enters into one of the bigger rap beefs of the last, you know, 20 years. I mean, if we're talking about ways that people are actually using generative AI in their actual life, I feel like this music generation is one of the ways that I've actually

seen people use it. You know, we were in a car one time, and somebody just made a song about somebody in the car, and it was hilarious. We laughed at it. I've gotten invites to parties that use the AI-generated music to invite someone to a party and sort of explain what's going on. So I've seen these in real life. I mean, Suno raised $125 million in May. It's integrated into Microsoft co-pilot. So if we're looking at all the ways that AI is actually being used in daily life, this AI music, this AI music is,

definitely a big part of it. And let it be known our little sting at the beginning in Morningview Daily, not AI generated. That is from a human. Most people know Netflix for its never-ending stream of Adam Samler rom-coms, Viking period pieces, and Glenn Powell doing his best Tom Cruise impression. But if you're the type of person who loves corporate strategy, Netflix is on your radar for having one of the more interesting corporate cultures in the Fortune 500. For years, Netflix has championed what it calls freedom and responsibility. You want to go on vacation, do it. You want to see sensitive internal documents. Come jump in the Google Doc. It doesn't fear leaks. Now, but now a shift is underway at the company, codified in a new corporate memo that came out this week. Freedom and

responsibility, which used to be the subheading of the document, has now given way to people over process. The general vibe of the new memo is that it softens some of the famous aspects of Netflix's culture, namely the Keeper test, which tells managers to dismiss employees if the answer to, if X wanted to leave, would I fight to keep them is no? And that's been dialed back just a bit. Also, the updated memo is just a little bit shorter, 2,264 words down for more than 3,800 in the previous version. Neil, Netflix co-founder, Hayings, introduced the original 125-page Netflix Culture Slide deck in August 2009. And these memos have been a very big deal. at Netflix ever since. So this change

is notable. They've been a big deal at Netflix, but they've also been very influential across the HR industry. Cheryl Sandberg, the former Facebook CEO, said this original slide deck in 2009 was one of the most important documents to ever come out of Silicon Valley and things that

I think a lot of tech employees take for granted now, which is things like unlimited PTO and the creativity to pursue side projects and have more autonomy than the more traditional hierarchical type of working, which, you know, also is very imbued at Hollywood, which Netflix kind of zigged where everyone else is zagging. It's been very influential across the

HR industry and how people generally think about corporate culture. I'll tell you why, one reason why everyone looks at this Netflix document is because when Reed Hastings originally released it in 2009, Netflix's market cap was $3 billion, and now its market cap is $290 billion. So something's going right over there and how they do their work. work culture. Right. It's clearly worked. Some of the things that stand out from this culture document, too, that you probably have heard of is that the company's vacation policy is two words, which is take vacation. Also, their expense policy is just five words. Act and Netflix's best interest. And over time, Hastings has said, like, of course some people have taken advantage

of it. There was one employee that expensed $30,000 worth of things in one year. So obviously there's going to be some bad actors here, but Netflix in general has run their company, almost like a sports team in the sense that if you're not performing, then they release you. And again, this new document softens that language a little bit because it's very scary to enter a work environment like that. But a lot of people do say that this is not just PR fluffier. This is when you code to work at Netflix, about 80, 90% of this document does reflect the actual working conditions there. So it is very much imbued in their very DNA. Yeah, I mean, so you would probably think, hey, I go to Netflix. This is not for me. Is there a lot of turnover? I would say there is a

decent amount of turnover, 2.1 to 3.1% leave on their own accord every single year, and about 9% are asked to leave annually. And again, that goes back to that keeper test, which they're still having, which is that if somebody asked to leave, would you fight for them? And if a manager says, no, then you're supposed to dismiss them, which I would say this is pretty hardcore. It doesn't reach the level of radical transparency that you see at Ray Dalio's Bridgewater Associates, which is truly like you go in there. And it is. is kind of a cult. Netflix does, I mean, when you read this document, it does kind of verge on culty vibes,

but it definitely has worked out for them. I mean, the best thing you can do to keep employees, though, is to hire only A players for them to work with, and Netflix has just tried to do that over the years. Its official hot discount summer begins today. McDonald's is rolling out its new $5 value meal at U.S. restaurants, as fast food chains try to lure back customers who are balking at high prices. With its value meal, McDonald's joins Burger King, Wendy, Shake Shack, KFC, even Starbucks, in an all-out discount war to reverse falling foot traffic.

But McDonald's is the biggie because it has become the face of food inflation over the past couple years. Ever since an $18 Big Mac meal went viral, the company has been facing accusations that it lost one of its main selling points, that it was cheap. Back in April, CEO Chris Kamsinski admitted as much, saying it was imperative that we continue to keep affordability at the forefront of our customers. He made those remarks after the company posted disappointing sales for Q1 and said that traffic was flat to declining pretty much all of its major markets. So can the $5 value meal bring customers back to the Golden Arches and make McDonald's cheap again? You tell me if this excites you, a McDouble or McChicken sandwich,

small fries, four-piece chicken nuggets, and a small soft drink. It certainly excites me. That seems like a great deal right there. And I do think McDonald's is fine. fighting two battles here. One, they're fighting actual miss sales expectations in the first quarter of the year, but they're also battling a public perception battle right now. We've talked ad nauseum about this viral, a big mac meal that went very viral, $19, and now they're trying to regain their aura of being this very cheap, very approachable

fast food brand. And yeah, remember, it got so bad that the presidents of McDonald's USA put out a press release charting the price rises of the Big Mac through the years. He says it's not 100%. It's nothing crazy like that. The average price of Big Mac in 2019 was $4.39. Now it's $5.29. It's an increase of 21%. So it's not nothing, but he wanted to just set the record straight that this is what has been the reality of operating a fast food company in the current climate. And I just want to stress how much of a U-turn this is for all of these companies. They haven't done any of these discounts or value deals since pre-pandemic.

Over the past few years, they have been raising prices consistently. And they've been saying, yeah, customers are willing to pay. There was a lot of pandemic savings. But now it does seem like consumers are pulling back, especially on the low-income spectrum. And these fast food chains really have to cut prices in order to maintain their market share. But we really haven't seen any of these kind of discounts since 2018, 2019. So it's a striking reversal. I do just want to give a shout out to Coca-Cola here

because they're actually the real MVP of this $5 value meal because last week the McDonald's was trying to bring this proposal forth to his franchisees. And the franchisees actually turned it down and said the economics just don't work. But then Coca-Cola came in and say, hey, we'll eat some of the costs. We'll do some of the co-marketing. We'll subsidize the promotion with a couple million dollars.

And now the calculus added up for franchisees. So without Coca-Cola pitching in to do that co-marketing, I don't think we get this $5 value meal. The most surprising entry into this discount were it has to be Starbucks, though. Starbucks just does not discount at all. And now you can go in and maybe get a half price coffee, a half price for Appuccino. There are these drink and meal deals for $5 as well. And Starbucks forever, for years has just said, we're not doing discount because we want to keep our brand.

We want to keep our aura. And now they are feeling the pinch. I mean, traffic fell 7%. Starbucks is absolutely struggling right now. So they are just very surprising to see Starbucks doing discounts, and that just speaks to the world we're in right now. It's sounding like we need to order all these value materials and do a little social media video, taste testing and ranking each one of them.

Up next, I get to talk about socks with you all. Good sleep is everything. That's why Ali's science back support is made with a blend of melatonin and L-Dienine for both kiddos and grown-ups. So when your mind won't switch off, you've got something that can help. You're racing thoughts and restless nights won't stand a chance. Find Ollie Sleep Solutions for the whole family at Ollie.com. That's OLLLY.com.

If you're not a professional athlete or a very niche tattoo artist, you might not think much about your ankles or the ankles of people around you, but there is actually a sock war raging around you right now, centering around how much ankle you are showing. And it's what I want to talk about on today's edition of Toby's Trends, where I take a deep dive into the deal. into the internet to surface with a trend you should have your eye on. So in the sock war, there are two factions, Gen Z, which supports the crew sock movement for

its generous coverage of the ankle area up to your mid-shin, and millennials who have been rocking the no-show variety of socks for years now, with their ankles out and about in the breeze for the world to see. This conversation first started rumbling all the way back in October when a podcaster, Phoebe Parsons, said in a viral video that sock height was an easy, way to tell how old someone is, and it's evolved even further from there. If people can see your ankles, you're probably uncool, at least according to the youths. It sounds toxic, and it probably is, but tracing a youth culture's relationship to socks throughout history, one thing is clear. They

always want to be cooler than older generations, and in the process, they usually end up recycling something that has already been in fashion years ago. Neil, what kind of socks are you wearing right now? I actually was very self-conscious about what socks I was going to wear this morning. I'm wearing kind of ankle socks. So I guess I'm fulfilling the millennial trend. But no, generally, I do crew socks. And that's because of one person, Roger Federer.

And when I was in high school, you had to have ankle socks because I was a millennial. And we were in high school and, you know, ankle socks were in as per the trend. But I watched Roger Federer and I was playing on the tennis team. And I wanted to look really good and exactly like Roger Fedder. So I would put on those longer crew white Nikes to look exactly like. Roger Petter and I think it may be played so much better. So I've been on the I've been on the Gen Z crew sock train for a while now. You have you do have a young Gen Z era about you. I think what it does though is it really gives you just another point of chance to individualize your

fashion again because if you're wearing no show socks you can't see them so there's no ability to customize them in any way. But if you have those crew socks on then it gives you another point, like you see the cool socks, you see the Nike dry fits. I actually do remember growing up with some of my Gen Z friends who are even younger than me. They used to collect and die and sell Nike elite dry fit socks. And it was big business at the time. Like, that was the richest kid I know. He was trading socks. And it's always just been a very big part of youth culture. And right now, I'm sure the pendulum will swing back to a different direction as a new generation goes up. never want to be like the generation above you or your parents.

So, but right now, the sock were clearly the lines are drawn. And this is just not social media bickering. I mean, companies that sell socks are actually seeing differences in sales. Bombus, which is the sock company started in 2013. Ankle socks were its top sellers, but it's now seen that taller socks styles are booming, which now account for 5% of its total sales. Lulu Lemon ran this marketing campaign, said crew socks are in. and then Under Armour said its mid-length sock sales have increased from about a third of total stock sales in 2019 to half in 2023 in international markets and in North America.

So we're actually seeing change afoot in these various sock companies. Everyone listening to the show is right now looking down at their ankles and going, what the heck are these people talking about? All right. Say you're chilling on your couch and a piece of space debris from the International Space Station comes screaming through the atmosphere, crashes through your roof. and lands in your home. Who should pay for that? Well, that's not a hypothetical for one family in Naples, Florida, which is seeking damages from NASA

after a chunk of space debris falling back to Earth tore a hole in their roof back in March. No one was hurt, even though the teenage son was home when it happened. But the family is asking NASA for more than $80,000 for property damage loss, business interruption damages, and emotional anguish. No one is sure exactly how this works, because it hasn't happened before. Space legal experts said it was truly the first legal claim being submitted for damages

related to space debris. And with it being the first of its kind, how NASA responds to this will set an important precedent. Because with space being more crowded than ever, with satellite and space junk, it may not be the last time an alien material makes an unexpected house visit. Yeah, it is very interesting because who is liable for space debris? there actually is language around what to do if a space to be from a foreign country were to impact your property or yourself, say if a Chinese or Russian rocket were to fall apart and strike a family of the United States, they would be entitled to compensation under this space liability convention, which was agreed to by the big space powers almost half a century ago at this point. But interestingly enough, there's nothing tied to what NASA or any other U.S. government.

agency would have to do if U.S. space debris impacted someone inside the United States. So it's a very interesting legal case. The lawyer representing the family said we intentionally kept it. The damage is relatively low. $80,000 is not nothing, but it's not in the millions of dollars because they wanted to bring this to court so there could be a precedent established. Yeah, I mean, it's also very fascinating to see what this hunk of metal was. It came from a 5,800-pound cargo palette of old nickel-hydride batteries. What they were doing was they had these old batteries on the space station. They wanted to replace them with newer batteries.

So they had to do something with this old palette, which was carrying all of these batteries that formerly powered the space station. And this is basically the problem that is going to come up. You have all these old parts where here on Earth, I guess you can put them in the, you know, go take them to the town dump and throw them there. But you have all of these former materials that are just too old orbiting space. Eventually they have to make a descent back into the Earth. You hope that they burn up in the atmosphere.

But sometimes like this, it was a 1.6 pound metal alloy stanchion about the size of a soda can that somehow did not burn up in the atmosphere. And it came crashing down into a populated area, which really hasn't happened before. They tried to get it over the Gulf of Mexico. And, you know, Naples, Florida is obviously close to the Gulf of Mexico. But it just seems like this problem is only going to get more pressing going. forward. Right. And we really haven't had many instances in the past. I mean, maybe the most famous one was after the space shuttle Columbia came crashing down. A part of that ended up in a

dentist office. That was back in 2003 at this point. So even though that you're right, it probably will start to happen more as there's just more activity going up there. Statistically, it is still pretty unlikely that space junk is going to come down in an area that is going to affect human life. New parents are familiar with the existential angst that comes along with naming your newborn baby. If you don't want to go with a family name, the whole world is your oyster. You want the kid to fit in, but also stand out.

The name should be distinguished, but not old-fashioned. So after weeks and month of research, you probably land on a name that is distinctly them. But that name might not be as distinct or as unique as you think. The Department of Data at the Washington Post did a deep dive into naming trends over the last 30 years or so since the Social Security Administration began maintaining a list of American names. and what they found is that naming trends are very much alive and well, but mostly defined by names with similar suffixes.

The biggest example that the article called out was the stunning rise of babies named Jason when parents first began straying away from family names in earnest. By 1970, suddenly every boy seemed to be named Jason, but Jason eventually faded, replaced instead by names that sound like Jason. Mason, Jackson, Grayson, Carson, and other son names were the dominant trend of the early 21st century for baby boys. So sounds like, so sounds governed names more so than anything else, especially the sound of suffixes. Neil, congrats on not being part of the son family names. What else about this baby name data deep dive stood out to you? Well, in a very similar vein where boys have this S-O-N at the end, a big trend in girl names is the E-I-E-I-E-E-E-E. The E.I.G.H. The Kaly's of the world. The latent Haley, Carly, Braley, Charlie, all instead of the EY or the Y, they go with the EIGH. And again, it's about the sound. It's not really about how it's spelled. And in 2010, 11 different EIGH names were in the top 1,000 female names. And as the decade went on, that got there became even more into the top 100. So I think that's that the sun and maybe the Den, D-E-N, the Kaden Jadens of the world.

At one point, there were 3% of all baby name boys' names in the world, or in the United States, had a D-E-N ending. So you can really start to see these patterns. It's something you didn't realize at all. It's a thing. But now you're like, okay, all of these baby name endings are starting to coalesce about something different as parents want their boys or girls to stand out a little bit more. Right. It is so interesting because you think you're being unique.

You think you're going down a thought process that no one else has gone down. You go, oh, too many babies are named Jason. I'm going to go Mason instead, but millions and thousands of hundreds of thousands of other parents are going through that exact same thought process as well. Here's the big overarching trend, though. In 1950s, the letter N was in a four-way tie with D, Y, and S as the ending of the most common endings of boy, baby names. But starting the mid-1960s, N searched ahead. And by 2010, nearly four in 10 newborn boers had names that ended with N. So if you're not, if you're like Neil or Toby, and you're not part of the end gang, you are truly one in a million.

All right. That is all the time we have for today. Thanks so much for listening and have a wonderful Tuesday. Congrats to the Florida Panthers. I'm winning their first Stanley Cup in history last night. Heard it was a great game, but alas, I was asleep. Me too. Remember, you can always reach out to us with any questions or comments on the show.

Our email address is Morningbrewdaily at morningbrew.com. Let's roll the credits. Emily Milliron is our executive producer. producer, Raymond Lou is our producer, Olivia Graham is our associate producer, Yuchinawa Ogu is our technical director, Billy Menino is on audio, hair and makeup passes the keeper test, 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.