Morning Brew Daily - Yeezy's push Adidas losses, Betting on the WWE?, LA Clippers love toilets

Episode Date: March 9, 2023

Episode 13: Neal and Toby take a look at why Adidas is warning of their first annual loss in over 30 years after their billion dollar fallout with Yeezy. They also discuss why the WWE is looking to legalize gambling on scripted matches. Plus, what's the breakdown of the Fox News and Dominion lawsuit. And Neal shares his favorite numbers - turns out Clippers' owner Steve Ballmer is really excited about toilets. Thousands of them. Learn more about our sponsor, Huel: https://huel.com/dailyshow Listen Here: https://www.mbdailyshow.com/ Watch Here: https://www.youtube.com/@MorningBrewDailyShow Sources: Adidas has to get rid gf $1.3 billion if Yeezy inventory: https://www.morningbrew.com/daily/stories/adidas-floating-ideas-to-part-with-yeezy-inventory WWE pursuing legalized betting: https://www.cnbc.com/2023/03/08/wwe-betting-scripted-match-results.html Fox News and Dominion Lawsuit: https://www.cnn.com/2023/03/07/media/fox-news-dominion-lawsuit/index.html Campbell Soup Revenue Up: https://www.reuters.com/business/retail-consumer/campbell-soup-lifts-annual-sales-forecast-robust-snack-demand-2023-03-08/ Mr. Beast’s Feastables: https://www.nbcnews.com/news/mrbeast-tweet-walmart-feastables-rcna73546 Learn more about your ad choices. Visit megaphone.fm/adchoices

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And Neil, I was scrolling through the Morning Brew Twitter account the other day, and I saw this quote from Mr. Wonderful. This is not going to be good. A.k.a. Kevin O'Leary, aka the guy on Shark Tank. But he said, I call my employees 24-7. That's the deal. If you don't work in the office, I can call you at 2 in the morning if we've got a crisis. He doesn't actually believe this, is my thought. I think he's just riding just a wave of publicity right now by saying the most trolly things ever.

And he knows he can get, you know, on Twitter and spreading on social media. He actually does believe this stuff. And also, Neil, I'm going to call you at 2 a.m. tomorrow if I have a story idea and see if you wake up and take the call. I'll take your call. Oh, there we go. So maybe we should go work for Mr. Wonderful. Something tells me I don't think I would like working for him. But he is extremely entertaining on Shark Tank. He carries the show.

He carries the show. Let's talk about what we're going to talk about on our show. We're both Mr. Wonderful's on our show. WWE wants to allow betting, and we'll talk about why that is a little unique. We'll do Neal's Numbers, which is a great segment. Some upset the world's best podcast segment. And then finally, Mr. Beast is back doing Mr. Beast things. Every week.

Every week, Mr. Beast drama. But it's actually really interesting and ties into larger trends, and we'll talk about what that is. First, I have a question for you. What would you do with $1.3 billion worth of canceled shoes? I'm so glad I don't have to deal with this problem. I can't even imagine what that looks like. Right.

So this has to do with Adidas, is what I'm talking about. And Adidas dropped its partnership with Kanye West, now known as Yeh, five months ago over his anti-Semitic remarks. But Adidas doesn't know what to do with all the Yeezy shoes it has. And in an earnings call yesterday, the CEO, Bjorn Golden, was literally really like thinking out loud and playing possible scenarios in front of analysts and everyone who was listening. And I can run through them, but it was just kind of a remarkable corporate moment where he was like, yo, we have this problem. I really don't know what to do. And I'm just

going to lay it all out there and analyze the pros and cons. Right. It's kind of there, between a rock and like an anti-Semitic hard place in a way. As the Morning Brewing newsletter about this morning. You know what? I didn't even realize I got that joke from the newsletter today. But yeah, it's a tough spot for Adidas, there really is no precedent for this. The only thing that we're thinking about is, you know, when the Super Bowl happens and the league has to print off both the winner and the potential losers' merch? And then what do they do with all the leftover merch from the loser that says Super Bowl champion on them? So there is like a little precedent, but $1.3 billion of merchandise is obviously different than a few Super Bowl has. Yeah, and this merchandise is

obviously laced with a lot more issues than just something. wrong. So I will run, I mentioned the CEO was just wondering out loud, I'm going to run through some of these issues, and then Toby, I want you to tell me what the hell you would do with these if you're in his situation, and I know you're not getting paid as much as him, so it's understandable if you don't have a great answer. But he said that destroying them would raise sustainability issues, so you can't just light them on fire or put them in a landfill. So one option would be restitching them to hide the Easy brand, but it is not very honest, because we all know what these sneakers are. And you would know it's a easy still. You would know, exactly.

He was just going through the scenarios. There were suggestions to give them away in places like Syria or Turkey that just suffered earthquakes, but it would just mean the product would be resold again and put back into the market because they have such high value on the resale market. And then he said a lot of companies were willing to buy them, but that would mean royalties would be going to yay, which they don't want. So there's no real great solution here. It's really tough. Honestly, the one that sounded the best to me is give them away to places.

Yeah, they mentioned Syria. They mentioned Turkey as well. And even if they do resell it, all the power to those people, like, that could be like life-changing money in a disaster scenario. So, yeah, there's no good answer. I'd probably give them away. But I also just want to zoom out a little bit on Adidas is struggling in general. It reported its first loss in 31 years, which is crazy to think about. Sales in China fell 35% last year because China just kept extending the lockdowns. Adidas' biggest market. They also pulled out of Russia, too, when the Russian-Ukraine conflict happened, which cost them another $62 million. And then on top of all that, there are other kind of creator partnerships with Beyonce, which is the Ivy Park line, not doing well. I was reading back when Beyonce and Adidas teamed up, people were saying this could be bigger than Yeezy eventually, and it turns out that it's not, and it's actually losing the company money. So from all directions, Adidas is kind of getting screwed.

Well, yeah, I mean, the Yeezy line was 15% of its profits. So it's a really big deal. But maybe this guy's new from 2022, and it's kind of a funny thing, the new CEO. He is trying to turn it around, and he did something very similar at Puma, which is very funny because business nerds know that Puma and Adidas have a really interesting relationship in the German sportswear industry. Yeah, they were founded by brothers. and they each founded rival.

There was Adi Dossler, and then I actually forget the Puma brother was named. Probably Adolf, honestly. Adi founded Adidas, and then his brother founded Puma across the river from each other, and they've still been competing to this day. So, yeah, you're right. It is kind of a fun little Easter egg

that a Puma exec came in to turn Adidas around. So we'll see. He thinks they can, but obviously they have to figure out what to do with these sneakers, so we'll see what happens. Yep. Okay, let's get into the WWE's,

WWE news. So yesterday, CNBC reported that WWE is in talks with state gambling regulators in Colorado and Michigan to legalize betting on its scripting wrestling matches. Obviously, this news got a lot of people by surprise because betting on something that is scripted doesn't feel right. So there's a couple of safeguards that WWE is kind of like putting in place to maybe make this happen. One is that they're going to work with the accounting firm EY to secure the match results so they don't leak ahead of time.

And then two, WWE creatives, people who write the show, aren't going to tell the wrestlers who wins until like a few hours before the matches happen. So do you think they can pull this off? I was reading some action network analysis because they seem to know what they're talking about in the sports gambling space, and they said that this is a really long shot, considering that there are so many people that actually need to know the results of the match ahead of time from the W.W.E. executives and creatives who are actually planning this to the broadcast. I mean, everyone who is working on our show worked in sports, and they need to know

the results ahead of time to queue up the montage, right? At the end, like, they got to get the graphics going. We tell our team what's happening. So I just can't even, and this is like a little mini podcast, but I can't imagine what happens at scale in a WWE broadcast. So there's no way this is going to happen, in my opinion, but it is kind of funny to think about. The only precedent that shows that maybe it could happen is there is legal betting on the Academy Awards, which are actually coming up, and those outcomes are predetermined. So that's kind of what WWE is looking at and saying, like, hey, the Oscars can pull it off, like, why can't we? And that's why they're working with EY, who actually secures the Oscar results as well. I mean, they've been known for some mess-ups.

Some snafus recently, yeah. And then also, I just want to touch on why it's Michigan and Colorado. because those are two states that allow betting on the Oscars. So it's not actually a widespread thing that sportsbooks allow that. But so that's why they're targeting Michigan and Colorado. And then also, the reason why WWE wants this is they are potentially trying to sell themselves. And if they can layer in a betting angle, they're trying to sell for $9 billion. Their current market cap is $6 billion.

So to try to make up that delta a little bit, they are trying to add in this additional revenue stream. So there's a lot of different threads that go into this. It is kind of funny because if this does get approved, then the CNBC reporter who broke this story kind of mused that potentially we could bet on future events in scripted TV shows. Right. And you can do that in some other countries, actually. Oh, interesting. So I was just like kind of thinking about what I would bet on and just like what the odds

would be and maybe like season three, Brand becoming King of Westeros. At the end of season eight, I mean, plus 10,000. Yeah. You would have been a rich man. It would have been so rich. Not that I would have bet on it, but I'm sure a few people have. And, you know, there's Bitcoin billionaires, and then there's Westrose billionaires from betting on brand. Still hated that.

That was awful. I can't believe I even brought that up. Let's move on to... So, you've been probably seeing a lot of headlines recently about Fox News hosts text messages and things like Tucker Carlson saying that he hates Trump passionately. Yeah. They've been floating around the news. So Toby and I just wanted to do a quick breakdown for everyone of why these things have even been showing up in the headlines recently. You're probably like, why. So these are texts actually from documents that have been released in a massive 1.6 billion defamation lawsuit against Fox News. The lawsuit was brought by Dominion voting systems, which makes election hardware and software. And you can kind of tell where I'm going with this. Dominion is accusing Fox News of purposely airing false information about its software following the 2020 election,

even though claiming that its hosts and the network and executives knew that it was all bogus. So things like these machines were made in Venezuela, and they were used to rig elections elsewhere, and they were completely false. And this is all evidence that shows that they knew it was wrong, and they still kept pushing the narrative. Yeah. Defamation lawsuits are historically very, very, hard to kind of get across the finish line, but Dominion is actually feeling relatively good about their chances because of these internal documents that leaked. A lot of them, producers, stars, executive, like Murdoch himself, were discussing the fact

that they probably knew that these claims were false. But, so Dominion is saying, like, we have a better chance than the normal defamation lawsuits, but then Fox can always fall back on the idea that, hey, we were just reporting what Donald Trump was saying, who was the most. most newsworthy person at the time. We're still just reporting the news, kind of distancing themselves from it and placing the burden on Trump. There is an interesting media business angle here, which is that you see in these text messages and internal documents that the Fox News executives and leadership were worried that Newsmax was cutting them out from the right. And so they had to

tack over to the right to keep that audience that may have been going to Newsmax, which is this you know, really conservative news network. Right. So it was kind of interesting, like, the right battle between, like, the right-wing battle between media over there. Because I remember Fox called Arizona for Biden on election night, and that fact alone, like, alienated a lot of its viewership. Right.

And so people, yeah, they were making the claim, Dominionists saying that Fox tried to swing back further to the right, just like you said, to recapture those viewers. So this is a really interesting lawsuit, has huge ramifications for media business, for freedom of the press, and I think it's going to trial next month, so we will see what happens there. But as you said, there's a really high bar to clear for suing for defamation in the United States, but there is a preponderance of evidence that Fox knowingly act. You have to prove actual malice in the United States that you acted with reckless disregard for the truth, and they might have a case here. so we'll see what happens next month. I'm excited to track it. But 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 starting at $179, like the next grill 3-burner gas grill, or get $50 off a select Weber Spirit grill and bring big flavor to your backyard. Then set the scene with Hampton Bay string lights

that bring it all together. Shop spring backyard days for seven days at the Home Depot. Now through May 6th. Exclusion supplies to homedipo.com slash price match for details. All right, Toby, it is time for the best podcast segment in the whole world, Neil's numbers. Let's go. I look forward to it every day. Neil's numbers is basically where I spit facts about everything, like the three most important numbers or interesting stats that I read in the news all week. Got three of them today, but first, for the first one, I don't want to say it. I want to hand it over to my friend Steve Balmer,

the owner of the LA Clippers for this one. We have a clip. I am just cracking up, actually, with that first love. Toilets. Toilets. Toilets. Okay. So the first Neal's number is Steve Bomber saying that there are 1,160 toilets and urinals in the new Intuit dome, which is where the clippers are going to play.

They're not going to share a court with the Lakers anymore in the 24-25 season. They're going to open up this new arena. And Steve Balmer, the owner, they just had this. event, and he's so hype about the amount of toilets. Toby, three times the NBA average. I can see why he's hype, because there is absolutely nothing worse. And honestly, I just want to say, we have it good as guys because we can usually get in and out of the bathroom pretty quickly.

But so there's nothing worse than leaving your seat for a little bathroom break and missing, like, half the game. So, Steve, I'm all aboard this. I'm all aboard the hype train. I want you to put your toilet manufacturer design cap on. What is the breakdown between toilets and urinals? Yeah, I actually wonder that. It would be really interesting.

I'm sure there is some science behind it. I hope there's more toilets than urinals. I would say, I mean, inevitably, there are probably more dudes going to games than women, so you probably should factor that in for your urinals versus toilets' breakdown. So I would say 60, 40 in favor of urinals. Oh, you think there's more urinals? Yeah, but if there's anyone who designs toilet seats or does arena layout, you know, right in. I'd love to hear what it actually.

My question before we move on in the next number is, if you've ever gone to games over in Europe, most of the urinals are just troughs. Like, there's no real dividers. So I'm wondering if these are individual urinals or they're more like the European-style troughs. Bomber, are you messing with us? I know, yeah. And Fenway has troughs. That's a classic.

Classic. Okay. On to the second, Neal's numbers, but I don't know how anything can beat that first one. The second one is that people really do not like going out in bad weather. A bunch of snowflakes. Bad weather resulted in an additional $13.5 billion in e-commerce spending last year, according to a new report by Adobe. So basically, the cumulative effect of bad weather is a generator of more online sales than Cyber Monday, which brought in $11.3 billion. That's hilarious.

I actually distinctly remember taking a microeconomics class in college and saying that umbrella sales do rise in either the days following a rainstorm or something like that. So there is a real psychological kind of buyer's incentive when bad weather happens. And, yeah, also, it's been bad weather recently in New York, and I have zero desire to go outside when it's... I ordered my new Kixot. Yeah, recently. Online. When it was cold, yeah. Cool.

Let's move on to the third one, Neal's numbers. Don't believe what they tell you, Toby. Money can buy happiness. So there was a new study that showed for most people, larger incomes are associated. with greater happiness, at least up to an annual income of $500,000. And it could go further. They just said they didn't have data. So this is really interesting because it's from the same guy, who's the renowned economist,

Daniel Kahneman, who wrote Thinking Fast and Slow and is one of the most renowned economist. He published a study in 2010. That was a landmark study that said that money bought happiness, money made you happier, up till an annual income of $75,000. After that, it hit a plateau. And then he was like, hmm, maybe that's not right because obviously that's not right. And then revisited it and is like, oh, yeah. So for most people, you get, you know, happier.

This is my not shocked phase. Like, no way. You mean that having $500,000 is a little bit better than having $75,000? It's also funny because it feels like with the way inflation is going, we're going to get a study in like two years that turns out a million dollars is actually where you're most happy. So not a very surprising study, but fun numbers. I'm just happy that I know I can be happier. Oh.

Like, I'm pretty happy. That's a very optimistic way. According to this study, I have a lot of room to run. You got some run. Happiness run rate. I like that. All right, Neil, well, thank you for those numbers. Enjoyable, as always.

Make sure you tell your friends and brag about how many numbers you know and cite Neil. But I'm going to take us to the soup market, the good soup market, in fact. So Campbell's soup has been crushing it recently. They recently reported better than expected earnings that saw sales rise 12% last quarter, and also it's lifted its outlook for the second quarter in the row. So not only did they crush it last quarter, they think that this momentum is going to keep going. And a few reasons why that's happening. One, if we go all the way back to COVID, soup in general has had a lot of momentum,

because in times of economic hardship, soup actually becomes a more popular option for a lot of people. Comfort food. Comfort food, and it's also a little cheaper. And then, two, Campbell's has been going hard on the research. They were on the AI train before Chat. Yeah, before Chat, ChiBT. They've been using AI to kind of research all, like, 300 million data points about consumer trends, like health trends, to create these new soup flavors.

So soup is hot right now. Soup is hot. And it was interesting reading about this AI thing. It looked like they're scraping social media, actually, to see what people are talking about. So, one of these products that they released was an air-fried potato chip line. Oh, that sounds delicious. So maybe they were just, you know, airfriars have boomed right now. I saw some stat that they're in like 60% of all American households.

I have one. I have one, too, actually. I just had an air-friar party last night. Yeah. But, so they're scraping social media, and they're seeing air-friar everywhere. Oh, let's like brand our potato chip as air-fried. It's genius. And then they also are releasing, through this AI innovation, they're releasing a chunky ghost

pepper chicken noodle soup, that's 13% spicier. 13 times. 13 times. Spicier. Then it's spicy chicken noodle soup. Yeah. So maybe it's seeing trends of everyone putting hot sauce on everything and everyone's talking about spicy food, hot ones.

It's in the zeitgeist. So Campbell, it's really interesting. It's a 154-year-old company that's constantly reinventing itself. But we didn't talk about the one growth driver. Talk to me. It's all this AI stuff is, that's spelled. and whistles. There's a meat of potatoes, and that is goldfish. Yeah. Goldfish. Goldfish. It's going to be a billion-dollar brand, right?

Goldfish is literally powering Campbell's right now because it is about to be a billion-dollar brand. It's going to have a billion dollars in annual sales. That's crazy. The little fish that could. The little cheesy fish that could. I eat them a lot as well. One final little wrinkle to this news is that the gross volume of soup sales actually fell last quarter. It fell 2%. But prices jumped 14%, which is reflective of the supply chain being impacted by everything in food costs rising. So Campbell's has, if you've been shopping for Campbell's and notice the price went up, they have. And so they actually made up for that small loss in volume with higher than expected price increases. So that's just like an interesting trend to watch that soup, maybe not be that comfort food, that cheap staple that it's been for a while, just to keep pace with inflation. People are still paying.

Right. That's basically what Campbell's is showing that you can raise that you can raise that. prices and people will still pay. Yeah. I'm kind of hungry. I want to go try. I'm not hungry. I was just thinking about Donovan McNabb's mom. Yeah, I remember that commercial.

I wasn't really listening to you this entire time. I was just thinking about Donovan McNabb's mom. Okay, let's talk about our final news item, which obviously is Mr. Beast, because we teased in the opening. Mr. Beast, the world's most popular YouTuber is back in the news, and he's spurring more existential debate over capitalism, philanthropy, and fandom in today's age. And I know I made that sound deep, but this one man really does. He speaks to a lot of different trends. So I'll tell you what this is about.

He has his chocolate brand called Feastables. Never tried it. Never tried it. I don't, I will never. And he asked his followers on Twitter last week to clean up the feastable aisles in Walmart because they were getting a little messy. Out of sorts. So he was like, please clean up this.

And people did it. And they took pictures. They threw a little, Peaceable's threw a little contest as well and threw a little monetary. But for the most part, people just did this out of absolute love of Mr. Beast. And so this raised a lot of questions about a guy who's worth $500 million, telling, exploiting his fans, basically, and saying, do unpaid labor for me. I know. I cannot believe that there are, it's so ridiculous the headlines that come out of anything Mr. Beast does,

because, one, most of his fans are children. So the headlines are literally like, Mr. Beasts unpaid child labor in order to clean up his. And there is an argument for that. Like, what stage of capitalism is this? Is that now we're having, like, super fans do the bidding of these super YouTubers. So I see that. But I also actually kind of went down a little bit of rabbit hole about the psychology behind, like, grocery store displays. Because I was like, whatever the sales increases from a messy display to a clean display must be.

big. And so there's this whole industry called like planograms, which are what grocery stores use in order to plot out what merchandise should go where. And so one of the biggest indicators and one of the biggest kind of boost in sales you can get as a brand comes from positioning your product at a certain place in the store. Neil, I'm going to put you on the spot here, but where do you think the best selling products usually exist on the shelves? Not being a planogram expert myself, but the thing that makes the most sense is whatever's eye-level, because that's just easier to grab. It's what you're looking at, and I don't have to twist my head to look at anything. Jeez, that is, maybe you are a planogram expert because you are dead on with that.

That makes sense. The saying in the grocery industry goes, eye level is buy-level, so that's where you buy-the-most stuff. And then it's also why some other things about the planogram industry is that that's why you see, ping pong balls next to red solo cups. They try to pair items together. So, Mr. Beasts, interesting conversation, but also thank you for making me go down, like, the grocery psychology aisle. I love supermarket layout stuff.

That is all the time we have today. Yeah, second to last podcast for the week. Make sure to write in and let us know what you think about Mr. Beast or anything else we talked about at Morning Brew Daily at MorningBrew.com. Always want to shout out our amazing crew in the back. Our producer and editor is Emily Milliron. The show's technical director is Elias Alba. Our supervising producer is Bryce Belloff.

The show's audio genius truly is Kelsey Jones. Hair and makeup is at Walmart, cleaning up a feastable shelf. Devin Emery is our chief content officer. Our show is a production of Morning Brew. Great show today, Neil. Let's run it back tomorrow. Yamava Resort and Casino at San Manuel is California's number one entertainment destination for today's superstars.

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