Morning Brew Daily - Tesla Posts Record Q2 Revenue, Goldman Sachs Struggles & Wesleyan Ends Legacy Admissions

Episode Date: July 20, 2023

Episode 107: Neal and Toby discuss the biggest earnings reports from Wednesday, including Tesla's record Q2 revenue, Netflix's major growth in subscribers and Goldman Sachs drop in profits. Also the guys explain why the President of FIFA is asking people in New Zealand to buy tickets to the World Cup. Neal shares his favorite numbers and Wesleyan University has stopped accepting legacy admissions. Finally the latest TikTok trend that is making some creators almost $7,000 a day. 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 am Neil Fryman. And I'm Toby Howell. On today's pod, Netflix shares its first update since it kicked you off your parents' account, and we will reveal the world's most powerful passport. Then we'll talk about the Women's World Cup kicking off today and how it's expected to break all sorts of records before finishing up with one of the we'reder stories we've ever covered on the pod,

The Rise of NPC Live Streamers. It's Thursday, July 20th. Let's ride. All right, Neil, there's not a ton of perks of waiting. waking up at 4 a.m. every day, but this week makes it all worth it because the amount of sports that are going on in the wee hours of the morning. I'm declaring this week the golden age of early sports watching because not only is the Women's World Cup kicking off in Australia and New Zealand where some of the games are starting at 3 a.m. Eastern, but we also have the British Open going on

right now. So if we wanted to, we could watch a full slate of sports before even stepping foot in the studio, which is wild. It's pretty great. You know, I'm actually, no one sees this right now, but I'm actually have all of the games on going on right now, so I may be a bit distracted, but it's pretty cool. Yeah. And then also just a quick programming note at the top of the show. I will be out tomorrow for a wedding in McCall, Idaho, of all places. I'm actually hopping on a Spirit Air flight right after this with a layover in Las Vegas.

So just prayers for me. Are you skip lagging? No, I'm not skip lagging, although I did Google if there was. But there's not a ton of layovers in Boise, Idaho. It's not the skip lagging place. Yeah, absolutely not. But yeah, Kelsey is filling in. She worked for marketing brew, and it's the premiere of Marvin Hyburn tomorrow.

So you guys will go deep on Barbie and all the marketing. Yeah, so I'll be tuning in for sure. And you'll be off the grid, hopefully. We got a bunch of big earnings reports yesterday from Netflix, Tesla, and Goldman Sachs. So let's run through what you need to know about how these three corporate giants are doing, starting with Netflix, which is really beginning to distance itself. from the rest of the streaming pack, the company added 5.9 million new subscribers

in the last quarter, largely thanks to two big projects, the password sharing crackdown, and the launch of a cheaper tier with ads. That boost in subscribers didn't translate to a huge bump in revenue, which is why you saw Netflix's stock price sag after this report.

But still, my takeaway here is there was this big streaming wars in which every media company launched its own service to compete with Netflix. Now that the, dust has kind of settled here. It's pretty clear that all of these pluses, Disney Plus, Paramount Plus, Max, Peacock haven't come close to dethroning Netflix, and we can pretty confidently declare that Netflix has won the streaming wars. Yeah. I think that's what this shows. I think so for sure, too. I also think that it shows that there's a lot of room to run still for Netflix,

because they kind of mentioned that this is not an overnight thing, the password sharing crackdown. Like, it's still rolling out. And some people might take weeks or months or even, even like half a year to eventually convert because they might see a piece of content that comes out and goes like, all right, fine. I'll finally sign up for my own Netflix account. So I do think we're in the early innings, too, have seen the effects of the passwords sharing crackdown. And then another interesting nugget in this earnings call for me where the effects of the strike that's going on right now in Hollywood. And so it actually ended up freeing up cash flow for Netflix because they're not spending as much on content this year.

So, again, they have some scripts stockpiled, and so for the foreseeable future, it'll do all right. So it is a little weird, and it doesn't make you feel great to know that this strike is actually increasing profitability for Netflix. Right. They didn't frame it as a good thing. Right, right. Because they're not investing in the future, but it does seem that as far as all of the

streamers go, Netflix will be affected the least of any of them because they have the most overseas projects going. They have the most backlog of content. So just, you know, another win for Netflix in these streaming wars where all these other companies are cutting spending to become profitable because investors are like, look, you guys have been at this for three to four years. You've had Peacock for a while. You've had Disney Plus for a while. You still can't make money off of it. So what's going on?

And they're all cutting, you know, their investments in these streaming services and Disney's trying to sell off all of its traditional TV properties. So this is like a really bad time for a lot of media companies. they're pushing to streaming has gone a lot bumpier than expected. Meanwhile, Netflix, which pioneered this whole thing 20 years ago, is sitting pretty. They are sitting pretty, and I have a, I got a show downloaded for the, or no, I downloaded extraction too, which is from Chris Hemsworth. It's like the most gratuitous over-the-top action movie, so I'll be watching that on the Spirit Air Flight. Okay, Neil, our next big earnings report yesterday came from Elon's small electric

vehicle side project Tesla. And this was the tale of a few numbers. On the surface, Tesla had a heck of a quarter. It reported record high revenue of 24.9 billion. Revenue from its core auto business rose 46% year over year, and it delivered more cars than analysts expected. So then why did the stock slowly fall 5% after hours while the earnings call wore on? Well, first and foremost, remember how we hyped up the fact that Tesla had finally produced a cyber trek? Well, it turns out. out it isn't fully ready yet, and the stock started to slip when Elon revealed that there wasn't a precise start date for deliveries. Then the other reason for the slip is that it's operating margin, which is basically how much they make on each car they sell, dropped again to 9.6%. And remember,

Tesla has always lapped the field when it comes to operating margin. Its competitors genuinely sit around the 6 to 7% range, while Tesla has at times flirted with 20%. But that number has slowly been declining this year, given all the price slashing Tesla's done. So all in all, a great top line quarter for Tesla with some mildly concerning trends to keep an eye on. Yeah, this is all, investors are really focused on profitability here with Elon Musk chopping prices a bunch in the first quarter. And he said, we could continue chopping prices because we can't control the macro environment and people have less money to spend. And, you know, automakers everywhere are slashing prices. The Ford F-150 Lightning just got a $10,000 price cut. Buyers paid an average of $45,000 on average

for Tesla vehicles in the past quarter, and a year earlier it was $56,000. So these are pretty drastic. Yeah, for sure. The other thing I want to mention is that on the call, Tesla actually mentioned AI. And they said, Elon Musk said that Tesla will spend more than $1 billion on developing dojo, which is their AI. I read that. I was like, what? I know. A billion dollars. And basically, it makes a lot of sense, though, because Dojo is the supercomputer that Tesla's developing that will help with computer vision and just like the camera process of a self-driving car. So even though it sounds like maybe they're jumping on the AI bandwagon, like Tesla does have a use case for AI if they want to get to that full autonomous view. He wants to sell the tech. But here, real talk, how much time is Elon Musk actually spending on Tesla?

When I was reading these articles and he was talking about, you know, these kind of nitty. gritty things with Tesla. I'm like, dude, how do you even, how do you even focus on Tesla? It's a small side project. Is it like one hour a day? Yeah, I truly would love to see what his calendar looks like, because it's a disaster. I am so confused how he's talking about Tesla. All right, our final earnings report to go over, which is at Goldman Sachs. The clock is ticking for CEO David Solomon to fix his own mistakes. The bank's profit plunged 58% in the second quarter to its lowest level in three years, and its position looks worse compared to all the other big banks that just reported their earnings. How did we get here? Well, Goldman wanted to extend

its reach from Wall Street to Main Street with a big push to court consumers, not just companies and the wealthy. The idea behind the consumer bet was to generate more consistent and stable profits rather than riding the boom and bust cycles of investment banking and trading. But that has turned out to be a super costly mistake, and Solomon is still cleaning up from the damage that's caused both financially and to his reputation. There does seem to be some signs of a rebound, but he has to put up results in the next year or he'll probably have to face the music.

The EDM music, because he is a DJ. I get that reference. Yeah, I think one of the big stories here, too, was the commercial real estate portfolio. They wrote down their commercial real estate portfolio, and it ended up hitting their profit for $1.2 billion. And it's just like this is the macro environment, right now of offices are just languishing. They're not at full occupancy. Hybrid work appears

to be here for the long run. So it's just an ugly quarter. And you know what's even crazier is the fact that Goldmanstack's stock price actually jumped 1% when again in this context because people are analysts just expected just a disgusting quarter out of Goldman. And so it is, it's never good when you report a 56% drawn down in profits and then your stock goes up 1%. Just shows where the level of expectation. Yeah. This is still them cleaning up a lot of stuff and putting themselves in a better position going forward.

But I don't know. This guy's had a really bad run at CEO. This is his worst quarter as CEO. I think he replaced Lloyd Blank Fine, who was this legendary character in 2018. And he's just done nothing but kind of make mistakes. Yeah. The Apple Card Partnership, they're trying to back out because they're. they've lost almost $3 billion on it in the past few years.

So that's just another thing that he's done that is just not really worked out at all. He's playing up his own mess, yeah. It's all his own fault, but let's see if you can get out of it. Okay, Neil, this next story actually snuck up on me a bit, but the Women's World Cup starts today. It's hosted by Australia and New Zealand, who actually won their first game of the tournament won nothing against Norway, so shout out the Kiwis.

This World Cup promises to be the biggest one ever for the women's, game, the Guardian pegs total ticket sales at 1.4 million, which is bigger than the 1.1 million sold at the previous World Cup in France. And then early data shows that this year's edition could reach 2 billion viewers, which is nearly double 2019's numbers. And the best part is that the players are finally going to start benefiting a little bit from those eyeballs. FIFA is finally guaranteeing direct payments for the players for the first time, with everyone set to earn a minimum of $30,000 out of a $110 million prize pool. That pool is 300% higher than the French World Cup in 2019,

but still sort of the Men's World Cup pool of $440 million. But, Neil, there's so much to talk about when it comes to this tournament from the sponsors to the injuries to the fact the U.S. is going back to back to back. Oh, yeah. What are you keeping an eye on? Well, let's go. Let's first talk about the U.S. team. Okay.

So they have won two straight World Cups in 2019 and 2015. No other team has won three straight men's or women's has done the three-peat. So this would be awesome. This is history. That's the craziest thing about the World Cup is it requires 12 years dominance to do something like that. So this is a team in flux. Like you have some people from the old guard, Alex Morgan, Megan Rapino, and then you have some people from the new guard, Sophia Smith, Tony Rodman. So it's definitely like this team is very excited to me and I'm nervous.

I'm nervous for them, but I think it's going to be okay. Yeah, and then I guess the other thing I want to talk about first is just that we feel feels like we're at an inflection point with women's sports with so many sponsors and corporations coming on board to help plug the game. And viewership has risen across many different women's sports. I mean, WMBA playoffs was up 22% over 2021 last year. And then the NCAA women's final four semis with Caitlin Clark and Angel Reese going at it was just like. like amazing television. That viewership was up 32% over the previous year. Meanwhile, like all, there's a lot of money coming into the National Women's Soccer League, which is the top tier soccer league in, uh, in the United States. There's this new expansion team in San Francisco.

There's a private equity firm that paid $50 million to, to, to, for the rights to expand, to add to this team. Meanwhile, a few years ago, that expansion fee was just $2 million for a new team in Los Angeles. So you're seeing exponential growth in the amount of money that's being fueled into the sport. Yeah, I read a piece that was titled Women's Sports are the new growth stocks because if you look at men's sports where the valuations are in the billions of dollars, like $5 billion, $6 billion, it's hard for them to 10x, whereas women's sports, if you're paying $2 million for a franchise fee, and then a couple years later, it's $53 million. You can see where the growth trajectory is heading. So yeah, definitely women's sports are the

new growth stocks. also do want to talk a little bit about one of the downers of the tournament so far, and that's been all the injuries. You could feel the team that could arguably win the entire tournament with the amount of people out with specifically ACL injuries. And ACL injuries are kind of like the bogeyman of women's soccer. At one point last year, ACL injuries had sidelined a quarter of the nominees for the Boulogne d'Aor, which is the award for the best player in the world. And the problem is there's not a ton of research kind of dedicated to monitoring ACL injuries. UEFA, which is the governing body of European soccer,

has been running an injury surveillance program on men's soccer for over like 20 years. And on the women's side, it's only been going on for less than five. So you're just not seeing as intensive of focus. And there's things like shoes are designed for men, not for women. Women play more games on turf field than men do. So ACL injuries are like the under... It's a little weird. Yeah, I mean, and women are at a higher likelihood to have an ACL injury, but again, not a ton has been fully dedicated to research figuring out why are so many people tearing their ACLs. And it's just a bummer.

Yeah. And then the final note is that this is going to be played in New Zealand and Australia where it's in the southern hemisphere. So it's going to be winter there. And I saw, you know, if you want, if you're feeling really hot and want to get a little chill, if you watch these games, they're probably gonna have coats on the sidelines. You know, the breath might be coming out of their mouse and looking a little chillier. So if you're sweltering under these times right now, it might be fun to look at what's going on in the Southern Hemisphere. Yeah, live by and the, yes, the times are going to be odd, but I want to point out that Washington, D.C. is allowing bars to serve alcohol 24-7, so you can go watch the U.S. women play really early in the morning at D.C. bars, and then Hoboken, New Jersey. It's also opening its bars at 5 a.m. so people can watch

soccer games. Let's roll through, Neil. Right after the show, straight to Hoboken. All right, 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

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and the practice is sometimes seen as sort of an affirmative action for the rich, as AOC once put it. Neil, this is happening right on the heels of the Supreme Court ending affirmative action, which Wesleyan mentioned as a driver of the decision. But the decision is not a very controversial one when you take into account a Pew Research study that found that at 75% of adults don't think you should consider whether someone's relative attended the school in admissions decisions. Right on the heels of the Supreme Court decision, Neil, it feels like we might hear a lot more

of these announcements going forward. a few small elite colleges that don't do this. I think MIT, Johns Hopkins have kind of sworn it off and now Wesleyan. But there's still kind of an absurd amount of colleges that still do. And when you think about it, it does seem a little toxic and unpopular, even more so to do it after the Supreme Court decision that said you can't, you know, kind of boost people who have been marginalized. Then then you're going to sort of raise the admissions prospects of mostly white kids whose parents went to elite colleges. I think there's a study that showed that 70% of legacy admissions at these colleges are white.

So if I were a college looking at what is going on in the landscape, I would probably make a similar decision and say, like, all right, we're going to, if we can't raise the prospects of marginalized people, then we're not going to do it for. Right. I mean, it's, again, 75% of people say absolutely not. It affects people very deeply that. It feels very unfair that a legacy admitted has a better chance. But it's very hard for universities to actually quit legacy emissions because, according to one 16-year study at an unnamed private Northeastern University, legacy admittances do two things really well.

One, they decide to attend the school, which we call matriculating, and two, they donate. So 74% of legacies accepted in this study ended up. up going to the school that they were accepted to versus 47% of non-legacies admitted. So again, schools like legacies because they can plan their admission cycles a little better because you can probably guess with a high degree of certainty that if admitted, they will attend. And then also, they are way more likely to be big donors. From that same study, 42% of legacy graduates were flagged as potential top donors versus

only 6% of non-legacies. So again, colleges spin this to say, If we get more legacy admissions, then we get a bigger, you know, more donations to use on financial aid for less fortunate students. And that's how they say it works out. It's like a drug for them. It's hard to like wean off the legacy admissions donation cycle. It's also, yeah, it's like reliable subscription revenue that things like, you know, we just talked about with Goldman Sachs. It's like we know these people are going to come.

They're going to pay a lot. And then they'll probably keep paying into the future. So when we plan out our financial reports going decades, we know that there will be, you know, this amount of money on the books. And for Wesleyan, it's a lot of money because first year students pay an average of $85,000 to attend. I know. Like Lynn Manuel Miranda, I don't know, I have friends who went to Wesleyan. Yeah. But basically, I think the point is for Wesleyan, this was not really a huge part of their admissions process to begin with.

So they were just, you know, they're like, all right, let's survey the landscape. and we'll probably end this practice right now. All right, it's Thursday, which means another round of Neal's numbers, the segment where I bring you three stats from the week's news that will make you go, huh, that's pretty interesting. First up, threads.

Meta's attempt to kill Twitter once and for all had a pretty incredible launch, became the fastest growing app in history, notching 150 million downloads, and it's a surprise to pretty much everyone. But, as expected, the honeymoon phase is over. An analysis from similar web showed that daily average users on threads had almost halved in the last 10 days,

and people were spending much less time on the app, six minutes per day, down from an average of 21 minutes. And I feel like this jives with my personal experience of not really going on the app anymore. The only thing I'll say is that my personal experience of being on the app and running the morning brew account is that engagement still feels like it's there and it still feels real. Again, we are a much larger account, like we have 150,000 followers on it. But I have- Are you saying my account small?

Yes, I'm saying your account is small because I think you have less than that. But yeah, again, this is a personal anecdote, but I see these numbers and I hear that these daily active user numbers are falling. But again, when you're on it and you're running a big account, it feels still a little livelier. And again, 22 million daily active users is not nothing. But yeah, it's a concerning trend for sure. Yeah. We're still in the early innings. I'm pretty bullish in the long term.

Moving on, there is something very powerful about holding a passport in your hand. But there's only one country that can hold the title of world's most powerful passport, and that is Singapore. And annual rankings from the Henley Passport Index, Singapore dethroned Japan as the most powerful passport on Earth after Japan held the title for five years. You're probably wondering what the most powerful passport actually means. And the ranking is based on how many countries you can use it to enter without a visa. People with a Singapore passport can enter 192 global destinations visa.

a free while Japan slid to 189, a bunch of European countries, Germany, Italy, Spain, Austria, Finland, rounded out the top spots, and the U.S., which was number one a decade ago, dropped to eighth. Yeah, and it's, I read it's because we just haven't been expanding. Like, we've just kind of kept the number right where it's at. So we have fallen by not growing. So it's interesting to see, yeah, I would not have guessed Singapore. That's a good trivia to have.

It is a good trivia. And overall, people, you know, these. experts who are conducting the ranking say overall there's been a growing trend of loosening border restrictions and allowing people to enter and that's just good for investment in trade and business overall. All right, the final number. This week, the Cincinnati Reds called up Christian incarnation Strand, a corner infielder who's been crushing it in the miners. And the reason I'm mentioning this is because with 27 characters, Christian and Carnacian Strand now has the longest name in MLB history.

That's counting the hyphen between Encarnacion and Strand, which is controversial, but either way, he crushes the player with the second longest name in history. Simeon Woods Richardson,

who has a 22 character name, Toby, where would you rank this among the all-time achievements in sports? I mean, it's tough. Like, I don't think it's going to be broken for a while because a lot of factors

have to come together to make this possible. But I love, like, awesome names in sport. Yeah, all right, give me some of your names that you like. Okay.

For soccer, Bastion Swinesteiger is one of my favorites. Again, a lot of characters. In baseball, Nomar Garcia-Para. Unbelievable. The only reason I know that is because it's Mia Ham's husband. Horse racing, C-Bisket, can't beat C-Visket. And then also in basketball, Drew Holiday, but it's spelled J-R-U-E, which I think is just an awesome, awesome names. I'm all in on hockey names. And if you don't know these hockey names, go and Google them because they're just poetry. They flow off the tongue. It gives you goosebumps. It's some combination of the French-Canadian flair with the Scandinavian flair, got like Yarmier-Yager, Tevotera Vinen, Vincent Le Cabley. I mean, these people could be,

they could be characters and novels. It's so beautiful. They sound like the three musketeers a little bit. All right, Neil, let's move on to our final story, which feels kind of like a Toby trend because of how overall weird and online it is. So stick with me a little bit. There's this new trend going on where creators are going live on TikTok and acting like NPCs. NPC stands for non-playable characters in video games and they're usually characterized

by their mechanical movements and repetitive motions and dialogue. They're kind of that person that you walk up to and press X to get directions or like buy a potion from. So these TikTokers are going live and reacting to gifts sent their way in this very distinct style.

So you get a ton of these repetitive words and phrases. but why are they doing this? So those gifts that people send that the streamer react to, they cost money and that money goes into the creator's pockets. The most famous MPC live streamer right now, who kind of push this trend mainstream, goes by the name Pinky Doll. She apparently makes $7,000 a day

from doing these mindless live streams across all her platforms. I can't think of anything that encapsulates the state of the world better than tens of thousands of people paying money to hear a TikToker named Pinky Doll, react like a video game character. It's crazy. Can you do a little, I know, I'm going to ask you to do a little impression because people don't know what this sounds like. It's these canned phrases

that whenever you see a particular image, they say, and it's weirdly mesmerizing and keeps you engaged, and it gives you a little dopamine hit every time they say it. I know. So it is very robotic, so it'll be like, gang gang, gang, ice cream's so good, ice cream so good.

And so I think you should try it. And so imagine just like hours and hours of saying the same phrases, mindless phases, doing the same facial expressions. It's so bizarre, but like people are kind of cheering around going like, get that bad girl, like do what you better do. 7,000 day. I mean, it does feel like the intersection of a lot of different trends that have been merging online, which is people impersonating video game characters.

There's been online tipping, which has been going on for decades of people tipping to watch you sleep or be in a hot tub or really do anything. and so it is pretty interesting. People say it's mesmerizing. I watched a few, and I was like, yeah, this is weird, but I don't think I am going to watch more of it. Neil, seven grand. Let's do one.

You and me. You sounded good. Thank you. All right, we have to wrap it up there. Hope everyone has a wonderful Thursday. Toby safe travels. Boise, baby. Here we come.

If you want to write in and let us know your favorite athlete name, our email is Morningbrood Daily at morningbrew.com. Emily Milliron is our editor and producer, Samantha Velas, and Raymond Lou are our associate producers. Euchenna Wa Ogu is our technical director. Billy Minino is on audio. Hair and makeup just found out they're probably not getting into Wesleyan anymore.

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. Wireless can feel like a world of traps. But not with visible. It's one-line wireless with unlimited data and hotspot. Powered by Verizon for $25 a month. Taxes and fees included. Plus, for a limited time, new members pay just $20 a month for one year on the Visible plan.

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