Morning Brew Daily - TikTok Sues to Block US Ban & Is the New iPad Worth It?

Episode Date: May 8, 2024

Episode 318: Neal and Toby chat about TikTok’s fight to stay alive by suing the US government for its attempt to ban or force sale the popular social media app. Then, Apple launches its newest iPad, something that hasn’t been done since 2022. Next, a shake-up in the food delivery world with Instacart and Uber Eats teaming up to challenge DoorDash. Also, Nintendo announces its target release date for the successor of its highly successful Nintendo Switch. Meanwhile, an AI startup company hopes to change the narrative of autonomous cars with the backing of $1 billion. Lastly, a study ranks which city has the most millionaires and it's…no surprise – New York City. Visit https://www.wendys.com/morningbrew for more! Per My Last Email: Spotify, Apple, YouTube or wherever you listen to podcasts 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

Many employees can't afford a hefty medical bill that pops up out of the blue, but it happens. And employees who are financially stressed are, understandably, more likely to be distracted at work, costing their employers greatly in lost productivity. Luckily, AFLAQ plans help with out-of-pocket expenses not covered by health insurance and can be offered at no direct cost to businesses. Learn more at aflac.com slash morningbrewerdaily. That's aflac.com slash morning brewdaily. Good morning, Brew Daily Show. I'm Neil Fryman.

And I'm Toby Hal. Today, TikTok fires back at the government in its existential fight to survive. Then Apple dropped an updated iPad for the first time in years, but will be enough to rescue its stuck in the mud tablet business. It's Wednesday, May 8th. Let's ride. The most interesting thing I learned yesterday is that the word brocolini is trademarked. Yes, I can't tell you exactly what broccoli. is, but what is not in doubt is that it is a registered trademark of fresh Del Monte produce.

The company has had the trademark for 25 years, but hasn't done anything to enforce it until last month when it started to run these big social media campaigns to remind the public that Brocolini is not for everyone to use. I am the public in this scenario here because I had no idea that brocolini was not the name of the actual vegetable, but rather it's this trademarked brand name. So you're telling me that Broccoli is like Band-Aid or Kleenex or any of those. What other foods are trademark? My whole world is corn trademarked?

Corn is not trademark. But a few are, I mean, popsicle, jello, the cronut, the double-double burger from in and out. And remember a few months ago, we had this big fight over chili crunch, chili crisp trademark. So this is a thing that brands do want to do to protect their IP. But Brocolini, I did not know was a trademark. It actually is a cross-breed of broccoli and Chinese broccoli, if you want to know. So you did know what the actual food was. Now, this is a perfect transition, by the way.

Let's talk about the goodness that is the Wendy's Cinnabund pull-a part. So obviously, the cinnamon sugar part of the pull-a-part is delicious, but the ooey-gooey goodness comes from the cream cheese icing. Oh, you think the oo-y-gooey goodness comes from the icing? I think that's the dough you're thinking of. Neil, the dough is fluffy and fresh. The icing is ooey and gooey. Wait, wait, wait, we're both wrong.

The ooey-goo-y goodness comes from the cinnamon sugar mixing in with a perfectly melted frosting. One brings the ooey, the other brings the gooey, and together they make ooey-goey-goo-gudness. Neil, you're a gosh-d darn genius. Of course it's all connected. I feel like Russell Crowe's character in a beautiful mind right now. I don't think I've ever said the words, ooh-y-go-y that much in my life, but the Wendy's Cinemad Pull-A-Part makes you do strange things. If you want to experience the, I'm not saying again, the delicious Wendy's Cinebun pull-apart. head to wendies.com slash morning brew to try it.

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Two weeks after Congress passed a law that forces TikTok to be sold or get banned, TikTok left the studio and dropped its reply. A lawsuit against the federal government aimed at stopping the ban. The suit, which did not come as a surprise, argues that Congress is violating the First Amendment rights of TikTok users by blocking their ability to express themselves and gain access to information. TikTok pointed out that this was the first time in U.S. history that a single platform was singled out by name for a permanent nationwide ban. The U.S. government is prepared for this fight. They intentionally crafted the law so they can say, look, this isn't a ban. TikTok can still be

available in the U.S. as long as its Chinese parent bite dance sells it to an American owner. Remember, this law stems from the claim that TikTok's Chinese ownership presents a national security threat because the Chinese government could gain access to American user data or manipulate its algorithm to spread propaganda. And so a historic legal fight has begun. The government will need to prove that TikTok's national security risks justify curbing free speech. While TikTok is literally fighting for its life in the U.S. Hip-hop could never manufacture this kind of drama. They absolutely could. But yes, TikTok's argument essentially boils down to this. The suit alleges that the U.S. ban is an unconstitutional punishment of specifically TikTok. It denies the company

those equal protections under law by naming it specifically. And it also, they say it amounts to an unlawful taking of private property. One of the quotes from the suit is Congress has never before crafted a two-tiered speech regime with one set of rules for one name platform TikTok and another set of rules for everyone else. So TikTok is definitely trying to say, hey, we are being singled out in a way that's never happened before in the United States under the Constitution. So why should it happen now? One thing that came out from the suit that was interesting is that it said selling itself wasn't feasible.

So we have everyone from Mr. Wonderful, Kevin O'Leary to Steve Mnuchin, to all these big wigs in corporate America trying to buy TikTok. It said that doing this within the nine-month span or a 12-month span that the law requires is not feasible from a variety perspectives. First of all, it said it's a global app. So just cutting it off in the United States just doesn't work because all this content crosses borders. And another reason why it said it couldn't sell itself was just technical because it has this algorithm and to transfer the algorithm, the code base to a new ownership group would just not work.

You'd have to train a lot of engineers on this very complex algorithm that wouldn't be feasible. So it said, look, we basically if we fail at this fight at this legal challenge, we're just not going to exist by January 2025. One of my favorite nuggets, too, from the suit is that they're saying that one of the things that undermines the claim that the platform actually poses a threat to Americans is the fact that the Biden campaign continues to use TikTok even after the law was signed. And then there's also the Washington Post reported that Trump's campaign is also discussing on whether to make an account or not. So they are bringing the receipts here and saying, if you really think this is such a big national security concern, why is your literal president of the United States? United States on the platform, even when the platform is banned on government devices. So TikTok is saying, listen, U.S. government, you're speaking out of both sides of your mouth right now, and we're going to take you to court over it. Still, though, the legal experts say that TikTok

has a 30% chance of winning. It is still the underdog here because when you have a bipartisan group of Congress, of lawmakers saying this presents a national security threat and we need a curb free speech, that happens sometimes over the course of the United States history, happens in pretty much every war where Congress says, hey, you can't criticize the government. There's a sedition act passed in Civil War, Revolutionary War, World War I. Like, this happens. And the courts may defer to a bipartisan group of lawmakers where they say, look, you have a, you say there's a national security risk. We're not experts in this, but there's a big group of you who are looking at classified briefings and saying,

this is a big deal. So the courts just might say, look, we don't have enough information here, and we have to defer to Congress. But Congress has said, there's a lot of risks associated with TikTok. They haven't produced anything yet. So over the course of this legal battle, we may see some of that evidence or they would need to produce that evidence to make their argument that much stronger. Right. They need concrete evidence. Apple had one of their famous keynotes yesterday and the product desjor was the much maligned and oft-forgotten iPad. The iPad line has calcified in recent years, so it's in desperate need of a refresh. The title of the event, fiddling, was let loose as it finally let loose. As it finally let loose,

a new model of the iPad Pro for the first time since 2018. And it's definitely changed a few things. The new model is the thinnest Apple product ever. Not just thinnest iPad, the thinnest product with a depth of just 5.1 millimeters. It also weighs a quarter pound less than its predecessor. Under the hood, there is a faster M4 chip that can handle AI tasks. And just anecdotally speaking, this was probably the most that AI has been mentioned in an Apple keynote so far.

So in short, incremental improvements around weight and performance with a dash of AI thrown in for good measure. Last quarter, iPad sales dropped 17% missing analyst estimates, but Apple is predicting a rebound this quarter. Neil, with what you've seen from this new edition, do we believe them? I don't know. If you go back to 2010, Steve Jobs got on the stage and introduced the iPad, and he said it was this third device somewhere between a smartphone and a laptop. and he says, if there's going to be a third category of device, it's going to have to be better at certain tasks like email, photos, video, music, web browsing than a laptop or a smartphone.

Otherwise, it has no reason for being. And in the 14 years out of a lap since, I don't think Apple has proven that there is a real reason for being for the iPad. I mean, it does command 32% of the tablet market. It has created this big tablet market and it currently dominates it. but you rarely ever see iPads in the wild. The one time you do see iPads is if you go to a restaurant and you see a little kid playing on it with headphones

and their parents are in absolute bliss because this is an amazing distraction machine. Right. The question has been for 14 years straight, can this replace my laptop? And the answer has always been almost, and that's part of the issue that plagues the iPad system doesn't quite have the robust enough app ecosystem. It still operates on a mobile first operating system.

So it's more like a job. an iPhone than a smaller, more portable computer, which would be a lot more handy for people. And what's interesting, too, is that Apple almost self-sabotages its iPad business because it wants to protect its MacBook line. It doesn't really want to make a laptop killer because it makes laptops as well. So it's just this very unique butterfly, but it almost clips the wings of that unique butterfly. Are you ready to write off the iPad? I'm not ready to write it off, per se because if it can move from a consumption device, like you said, where you plop your kid down, put Peppa Pig on and just let have a dinner, yeah, let it ride, have a nice date night for the first

time in a while, versus an actual creative device where, I mean, you can do fun things on it, like photo editing, there's some good artistic softwares on there. And if you, if Apple does make a commitment to boosting up those things with that little sprinkle of AI, whatever their plans are around it in that regard are, I think it has a chance. Because, it is portable. It is smaller than our computers. And now it has this, you know, this bigger keyboard that you can attach that will cost like $250. This is a very expensive. Did you get into the prices like $1,300 for the iPad Pro 13 inch? So this is a very expensive device. So it really needs to have the same sort of feature parity with a MacBook, which also costs way over $1,000. So yeah, I don't think we're ready to write off the iPad. It just needs better software. I think that's the main criticism around the iPad is that. it hasn't engendered this robust developer, third-party developer ecosystem through the app store that the iPhone has had. So just when you go on the iPad, there's not that many things to do.

And it's found a niche in certain creative industries, but it has definitely not led to mass market consumption or adoption. The enemy of my enemy is my friend. It applies to rooting for the Giants against the Cowboys. And it applies to the market for delivery apps. Yesterday, rivals Instacart and Uber said they were teaming up to create a delivery partnership of epic proportions to knock Leader DoorDash off its perch. Here's how it'll work. When you log into Instacart to order groceries over the coming weeks, you'll see an option for restaurant delivery powered by Uber Eats.

Everything about this feature is run by Uber Eats, the restaurant listings, the software for the transaction, and the people delivering your food. It's just located on the Instacart app. The unusual deal is intended to be beneficial. to both apps. Uber Eats will get new customers, in particular desirable suburban families, Instacart tends to attract. And Instacart will add a new revenue stream because Uber is going to pay at a fee for every restaurant order. Working together like scheming Katan players, Instacart and Uber hoping to take market share away from DoorDash, which is sitting pretty atop the restaurant

delivery industry. Toby, is this a smart partnership? I think it's definitely a win-win in different ways for each platform. I do think this is an effort for both of these platforms to shake off kind of the post-pandemic growth malaise. Because remember, during the pandemic, these companies ripped at-home food delivery and at-home grocery delivery became this really, really big industry. But now they're looking for ways to accelerate growth now that the markets become a little more saturated. Then I also think that the VC money spigot has turned off a little bit. Remember, these companies, Uber is publicly traded. All of them are.

Yeah, they're all publicly traded at this point. So they have a duty to shareholders to become a little bit more profitable. And so expanding into non-restfront deliveries if you're Uber and then getting the scale that Uber provides if your Instacart is definitely something that I think will shareholders were like. Yeah. And one thing I think this does is get more eyeballs onto both these apps. And the eyeballs translate to impressions, which translates to ad sales.

And for both Instacart and Uber, they are diving into the ad business because it is insanely profitable. And Uber is now expecting to do a billion dollars in ad sales this year. For Instacart, ad sales account for 20% of its entire revenue. So the more people you can draw it to the app, the more ads you can sell against those eyeballs. And this is a huge growth opportunity for both these apps. And that's exactly what they're trying to do with this partnership. Right. And ads are actually a high margin business.

This is a very thin margin business. So any time that you can add on that, like, juicy margin business, which is advertising, of course, you're going to want to do that. If we look ahead a little bit, Uber is reporting first quarter earnings today, actually. And they are expecting gross bookings to slow a little bit. DoorDash actually reported great growth. Gross bookings grew 21% last week. So it is trying to go toe to toe and match the big elephant in the room, which is. DoorDash. Up next,

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But finally, fans have something to look forward to. Nintendo's president officially confirmed that the company will make an announcement about the successor to the Switch within this fiscal year, which ends on March 2025. So Nintendo fans, you'll get a console sometime before then. The nearly eight-year gap between the launch of the Switch and its eventual successor would be historically long for console hardware, which usually gets a new model every five to six years. That said, Nintendo did wait nine years between the Game Boy and the Game Boy Color,

so fans are used to waiting. Neil, the Switch has sold 141 million total units since 2017. 15.7 million of those were sold in the last year. It's only trailing the PS2 and Nintendo DS in terms of total units sold. So before we get into what this new console might look like, it's been one heck of a ride. Yeah, let's play closing time, run the slideshow, and just talk about the switch and this incredible run that it's had. Nintendo Shares have more than quadrupled since Switch's launch.

Its margins have increased more than fivefold. And so maybe you can speak to this better than me. But in 2017, I mean, Nintendo had just come out with the Wii U before that, which was kind of widely panned. And then it comes out with this switch, which is this remarkable, beautiful device where you can play it as a handheld device. And also you can link it up to your TV to play as a traditional console. And it blew people's minds. And it blew away every single sales projection that you could get to sell 141 million units, including 15.7 last quarter. It's still going strong.

Yeah, last year. And it also is just one of those consoles that is buoyed by the wealth of games that has played on it. That's the real thing. because we were talking like, what did make the Nintendo Switch so special? And it is a nifty piece of hardware. You can put it in your home, use it as a console,

or you can bring it on the plane. It can travel. It is a handheld device. But the games just are the thing, the magic dust that makes Nintendo do so well. Remember, Legend of Zelda, Tears of Kingdom is probably the best example of this. Absolutely brought some life

into the tail end of the Switch's career. It's one of the best-selling games of all time. And I do think that part of Nintendo's secret is that they do make low-conclusive. hardware because if you look at the likes of Sony and Microsoft which make the Xbox and PlayStation they actually lose money on the hardware selling of those consoles then make it back over time through selling games Nintendo does not lose money on the switch it is a much less complex device it's smaller they make money on

their hardware and then obviously make a ton of money on the millions and millions of games they sell just has amazing buzz we talked about this around the office yesterday and everyone was like try I get a switch I think I should get a switch you know everyone like kind of wants it. My brother has one at home. He loves to play it. And so it is just this amazing device that's done so well. Third bestselling console of all time. You can't speak about it enough. And then Nintendo in general is also expanding its IP universe. It has these theme parks opening. And last year it had this huge billion dollar movie, the Super Mario Brothers movie.

And it's releasing another Nintendo movie April 2026. So that should be good. And another revenue stream for Nintendo getting into the movie business. Briefly, though, what is this new switch going to look like? We don't know. We don't know that much right now. We do know the screen is going to be bigger, and then it might replace the rails on the side. You can kind of slide the controllers on and off via these rails.

They're changing those to magnets, and those are pretty much the only two leaks that we feel confident reporting on right now. That's all you're going to get so far. So stay tuned until March 2025 when maybe the new and improved switch comes out. Wave, a startup that makes AI systems to power autonomous vehicles, raised a huge $1 billion fundraising round

from powerhouse investors including SoftBank, Microsoft, and Nvidia. But here's the thing. This AI company isn't based in Silicon Valley. It's not based in New York. It's not even from Miami or Austin. No, Wave is actually from London, and its $1 billion round

is the largest known investment in an AI company in Europe ever. So what puts Wave in the Premier League of AI startups? Instead of generative AI, the company focuses on what it calls, embodied AI, which you can think of as the brains for physical objects like cars, robots, or manufacturing systems. It creates software that allows vehicles to see and react to unpredictable driving environments, something that'll be necessary to make autonomous cars viable

on real-life roads. And unlike Tesla, Wave isn't itself-building cars. The plan is to license its self-driving tech to automakers and retailers that want to go autonomous. Toby, the UK hasn't had an innovation win like this since the Apple fell on Isaac Newton's head? It absolutely has not. It is, you see what it means to the UK ecosystem and the AI startup ecosystem, because when you hear the founder say things like, it sends a crucial signal to the market of the strength of the UK's AI ecosystem. You don't necessarily always hear a founder talk about the broader landscape,

but it's clearly almost a promotion for the UK and Britain in a way. Prime Minister Rishi Sunak also said that, deal anchors the UK's position as an AI superpower. So they're holding a wave up as this trophy, this icon in a class of innovation in a country that has been a little bit behind in terms of AI revolution. And a continent. I mean, the other AI startup that you should watch from Europe is Mistral, which is a French generative AI developer. That's co-founded by three guys from meta and Google. And they raised more than $100 million. four weeks into their existence.

So if you're looking at the Europe landscape, it's so far behind the American AI landscape. We have the Magnificent Seven and Silicon Valley in this huge VC ecosystem. But Mistral and Waves seem to be like the two European companies, European startups that are making waves in AI. And I do want to talk about their business model a little bit

because you're right. They are not building any real hardware. They're not, you know, like Waymo, who has those very good. distinct-looking cars with the cameras on top that get a little bit of hate back in the Bay Area. But yeah, they are selling software that wants to integrate into existing cars. And I think that's interesting, too, because they've rebuffed the advances of a lot of car companies who wanted to invest in this latest round because those car companies are licking its

chops and saying, if we could get Wave Software to ourselves, maybe in the same way that GM ended up buying crews. That would be a big leg up. But they said, no, we want to stay independent. We want to license it out to fleet operators and auto manufacturers. And I think it's a good strategy. And it probably benefits the entire ecosystem more than if one company had kind of snapped them up. Yeah, there have been a lot of setbacks in terms of self-driving and driver assistance. The feds are investigating Tesla and GM over these fatal crashes that have gone on.

But the fact that this company is getting a billion dollars and there's tons of investment, Tesla has essentially states its future on. autonomous and self-driving. It does seem like there's a lot of momentum going in that direction, and perhaps these setbacks are just setbacks. Don't give up on autonomous vehicles just yet. The report just dropped ranking the wealthiest cities in the world in the city that came in number one. Well, I can't quite believe it, but it's Cleveland, Ohio. I'm just kidding. It's a New York City. That's harsh. Henley and Partners and Immigration Consultancy firm put together report that found that New York has almost 350,000 millionaires, the most of any of any of the

any city and up 48% from a decade ago. That means an insane one in every 24 of its 8.3 million residents is a millionaire. So yes, if you're in New York City right now, listening to this on your commute, look around the subway or the street. One out of every 24 people is pushing seven figures. Heck, it could be you. As for the rest of the list, San Francisco came in second with 305,000 millionaires. Tokyo came in third, but the number of millionaires actually dropped 5% in the past decade. Singapore was fourth and was also the top destination for migrating millionaires with about 3,400 high net worth individuals moving there last year alone. Neil, any surprises here? I honestly can't quite believe that one in 24 number from New York City.

Yeah, I mean, here's some more stats. New York's millionaire population is now larger than the entire populations of Orlando or Pittsburgh, and New York residents have more than $3 trillion in wealth. That's greater than the GDPs of Brazil, Italy, or Canada. So all this talk about wealth migrating from New York to Florida and other Sun Belt states, it doesn't appear to be happening. And New York really is a playground for the rich, which is reflected in insane housing prices. But the real reason why New York is so rich and the Bay Area is so rich and there's all these millionaires in these big cities is basically ask yourself the question, who is the most exposure to tech stocks? Who has like 0.01% of microsome?

because that is, according to the report, the main driver of millionaire wealth across the world is the rise in financial assets over the past few years. The NASDAQ is up a zillion percent over the past few years since the depths of COVID. So if you are exposed to tech stocks, if you have a portfolio of stock assets, then that has gone up and you are likely sitting pretty. The U.S. is also home to 11 of the top 50 riches cities. And then I do want to talk about that so-called power shift from New York City to Miami. Miami came in at 33rd on this list. It's up 78% over the past 10 years, so it's not slouching, but it's nowhere near close to New York City. Yet, some cities have actually seen their millionaire population reverse. London,

we were speaking of the UK earlier, lost 10% of its millionaire population in the past decade, probably had something to do with Brexit. Russian sanctions have also impacted London and England a little bit. Hong Kong also saw a 4% decline. as well because China's pandemic era crack down. So there are some cities that are reversing their fortunes, and places like Singapore are happily welcoming them in, especially the Chinese millionaires who or Hong Kong millionaires who wanted to expat to Singapore.

Let's end this on a positive note. Which are the cities that are rising, the ones to watch that are adding more than double the amount of millionaires over the past 10 years? Hocheman City, Vietnam, Bangalore, India, and Scottsdale, Arizona. funny to me. That was actually... I'm not surprised, though. I'm not surprised either. Do you remember when Spotify last year came out with their Spotify wrapped listening profiles? Mine was Scottsdale,

Arizona, so I don't know what that says about me. Maybe I have high flutin taste. All right, let's wrap it up there. Thanks for listening and have a wonderful Wednesday. It's going to reach 86 today here in New York. Many ACs will get the call up for the first time this year. For any feedback on the show, send a note to Morningbrewdaily at Morningbrew.com. We also have some Morning Brew Daily mugs left in stock to grab yours, head to shop.morghum.com. They make a great Mother's Day gift. Let's roll the credits. Raymond Liu is our producer. Olivia Graham is our associate producer. Euchenawa Ogu is our technical director. Billy Menino is on audio.

Hair and makeup wants to be a millionaire. So freaking bad. Devin Emery is our chief content officer and our show is a production of Morning Brew. Great show today, Neil. Let's run it back tomorrow. Yamava Resort and Casino at San Manuel is California's number one entertainment destination for today's superstars. Catch the Jonas Brothers return to the Yamava Theater stage on April 30th, the powerful vocals of Demi Lovato on May 17th, and the signature Southern Country Rock of Eric Church on July 19th. Tickets on sale now at Yamavat Theater.com, only at Yamava Resort and Casino,

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