The Best One Yet - “Free Netflix (but not for iPhone users)” — United ends change fees. Netflix’s free option. Lemonade’s non-profit-ness.

Episode Date: September 1, 2020

Cheers of joy spread throughout the land as United ended its change fees — aka 15% of overall US airline sales. Netflix is trying a new “give-our-content-away-for-free” strategy. And renter’s insurance icon Lemonade is giving away 17X more money than the average publicly traded corporation does… but it’s still not profitable (investors not down).$LMND $NFLX $UALWant a shoutout on the pod? We got the form for Snackers to fill out right here:https://forms.gle/KhUAo31xmkSdeynD9Learn more about your ad choices. Visit podcastchoices.com/adchoices Hosted on Acast. See acast.com/privacy for more information.

This is Nick. This is Jack. And this is Snacks Daily. It is Tuesday, September 1st. Goodness gracious, it's already September. First is September, first summer without tan lines for us. Brutal situation, but we're going to open this up with the best one yet. T-B-O-Y, Jack, what do we got for the first story going on over here? Corporate generosity. Tom's gives a pair of shoes for each sale. Warby Parker donates a pair of frames for each sale. Yeah, Lemonade is donating two at a rate of 17 times more than the average public. publicly traded corporation. Very generous. Investors, though, are annoyed since lemonade is unprofitable. Second story, Jack, what do we got? Do you get the Netflix password from a friend, from a parent, or from a sibling? Trick question these days, Netflix just offered up its content for free breaking the freemium

model, but it didn't even have one. I think it's called Netflix.com slash watch free. Sounds too good to be true. Third and final story, Jack, what do we got? United Airlines just eliminated the most hated fee of all time forever. The $200 change fee, aka a pure bread, 100% beautiful you want to hug it, profit puppy. American Kennel Club approved. But before we jump into all that good stuff, Snackers, happy Tea Boy Tuesday to you. And a special happy Tea Boy Tuesday to Warren Buffett, whose 90th birthday, I think was yesterday. Now, we don't know if he's a snacker. But we also don't know he's not a snacker either. We did notice that Bill Gates made Warren Buffett. an Oreo cake for his birthday. Very nice, Bill. And Bill Gates, who's a millennial at heart,

made him an awkwardly well-produced video on how he baked the Oreo cake. If he got the money, you spend it on the production. Now, the real story here is Warren Buffett's investing strategy, which gets all the attention. There's like 20 books written about how Warren Buffett invests. Everyone else talks about fundamental analysis, but Jack and I noticed a different strategy going on with Warren Buffett he doesn't talk about. He literally invests with his gut. Snackers, we're talking about a 90-year-old man who drinks six coax a day and owns 10% of Coca-Cola. The guy bought the entire company that makes Seas Candy because he loves Seas Candy. Splourished half a billion dollars on Dairy Queen back in 1997 because he's got a soft spot for the soft serve. I think his nickname in college was the

Dairy Queen, actually. The right dessert for the right Burger King meal, which he also happened to own. And there's a reason Bill Gates made him a cake out of Oreos because he's a major shareholder in Mandelaez, the company that owns Oreo. Snackers, alternative investing strategy behind Berkshire Hathaway, we've identified it. Don't go with your gut. Literally follow your gut. Let's hit our three stories. You're tuned in the snacks daily.

We spoke to the lawyers and we got to get something legal out the way. The snacks about to hear ain't food. It's air candy. They don't reflect the views of the robber hood family. It's all informational just so. We're not recommending any securities. It's not a research report or investment advice. for or sale of a security.

Snacks is digestible. Business news for you. Robberhood Financial, LLC, member FINRA slash SIPC. For our first story, the most purebred profit puppy of all time just got eliminated. That's right. United Airlines just ended their $200 change fee permanently. Permanently. Now the lawyers, they bust out their favorite here.

They wanted to go with in perpetuity. In perpetuity is how lawyers like to say forever. but they got overruled by the CEO who dropped the F-bomb and said they're gone forever. Forever. Until we change policy against, all terms and conditions. Off or not valid in Puerto Rico. Must be 18 and over. All terms comply. I would not be shocked Snackers if they bring this feedback in like five years. But in the meantime, happy September, summer travel ends with Labor Day. Right. And usually the summer is blockbuster season for airlines. So Jack and I are looking back on this. How are the last three months? Well, air travel was down 70%. And the airlines faced a revenue

triple whammy. Jack, you don't want one whammy. You definitely don't want two. Three is unheard of. Well, first of all, anyone who's been on an airplane recently knows that flights are like 30% full at most. They're not getting people. So then the airlines have to drop the price in those tickets to even get you on the airplane. And they cut the number of flights already by 45% and still can't fill the airplanes. Now we know the airlines have that feeling that we have all felt before. You show up two hours early because they tell you to. Yeah, they did. You're in TSA for an hour. bad. Then the flight gets delayed three hours. Kind of bad. Then you find a Sabaro. The pizza's terrible. No sauce. Then three more hours of delay. And then at 1.30 a.m. the flight's canceled.

Okay. Oh, good luck finding a hotel room. You end up sleeping in a mattress in an Uber. Now, the usual historic response by airlines during an economic downturn like we're facing right now, you create mandatory revenues because you're not getting regular revenues. Mandatory revenues. In other words, fees that travelers have to pay. Checked bag fees, change fees, those are the biggest culprits we've seen out there. And these fees are purebred profit puppies because there's no cost related to those revenues. They become pure profit for the company. We're talking Westminster Blue Metal situation. Now, it's different from like a ticket sale for a flight from JFK to San Francisco. There are costs associated with those revenues like fuel, plane maintenance, pilot salaries,

etc. So you got all that good stuff, but fees have risen by five times in the last decade and now they're 15% of all airline sales. And they are pure. pure profit puppies that go straight to the bottom line. But what Jack and I find fascinating is that during this downturn, United knows that fees aren't actually creating revenue. They're destroying it. Say you're considering a Labor Day weekend trip to Miami. You found an Airbnb that looks super COVID-safe, very sanitized place.

It's cute. It's by the water. They have their own towelettes. But you're thinking to yourself, with COVID so volatile, there could be some new shelter and place law that makes me cancel my weekend. Boom, you get down there and they're saying like New Yorkers have to stay underground in a hut for six weeks before they can emerge. So if you're reluctant to book this trip to Miami,

you're going to be even more reluctant when you see the $200 change fee you'll have to pay if the trip does get canceled. Plus, these change fees at an entirely new health risk because if you book the Miami trip and feel sick, are you going to worry about the change fee? You'll end up going anyway because you hate the change fee so much.

You just don't want to pay it. So United just ended their $200 change fee forever to encourage you to book travel anywhere, anytime. There is fine print, as always with airlines. They will still have change fees on international flights and like the super basic fare that doesn't even give you a bathroom break. So Jack, what's the takeaway for our buddies over at United? Here's the thing about oligoplies. Once one airline drops fees, they all have to drop fees. Snackers, a monopoly, you got one company that dominates. An oligopoly, you got a few companies that dominate kind of like a monopoly. In the

United States, we have four airlines controlling 80% of the flight market. We can, got ourselves an oligopoly. We got an oligopoly. Now notice, though, that most airlines kind of feel similar, similar miles program, similar seat reclining, similar peanut snacks. Now, besides Southwest, which is a little different, Nick, they all feel similar because they all act exactly the same. They even charge the exact same $200 change fee. And in an oligopoly, they can't afford to let one rival snag the advantage over another airline. But they can also maintain an advantage over flyers if they act together in coordination. Now, technically that's collusion,

which is technically illegal and the anti-competitive practice. But the airlines have had a don't ask, don't tell, and none of us will ever lower fees, so we'll all win policy. It's actually kind of charming. So Jack and I were expecting Delta

and American Airlines to begrudgingly, like, make the same move as United just did. We were going to predict it. But then minutes before our recording, like three minutes ago, Delta did drop their fee, just like we expected them to.

And then American did too, Because oligopolis, they fly together. And they drop their change fees together. For our second story, Netflix is making an unprecedented move. It's giving away its top movies and shows for free in order to find its next 100 million users. In a world where you don't have to ask a buddy for a password. It's actually brutal when your buddy whose password you have.

You haven't talked to in like three months. We've been there. And then you need the password real bad. How long do you go into the conversation before mentioning you're about to get a password reset email. Yeah, I can explain. Which brings us to free Netflix. Netflix is offering 10 movies and TV shows,

no subscription, no strings attached, at Netflix.com slash watch dash free. This is like a Costco free sample in IL3, except instead of a cracker, it is a prime rib steak. Yeah, they're not showing you some five-hour Serbian documentary about Serbian documentaries. They're giving you their top shelf content. We're talking stranger things. Grace and Frankie, our planet, the two popes.

Our planet, which is the planet Earth knockoff with the same British guy. Ataburl. Sue these guys. Now, there's a catch here. You can only check out these shows for free. That's true. If you're watching on a web browser or through an Android smartphone. When we said there were no strings attached, there was a single string. This was it. You're also not allowed to do this through your iPhone or through a smart TV or through a fire stick or on incognito. needo mode. Now more on those in a bit, but at first, this kind of feels like the classic freemium model that the tech industry loves. We've all experienced this. You download Spotify and you can listen for free if you listen to ads too, or you can upgrade and get the premium

subscription. One's free and you hear ads, one you pay a subscription for. But really, this Netflix thing with the free movies, it's actually a marketing website for customers who are concerned about price. The only ad you're experiencing is the content itself. And, a call to action to actually subscribe to Netflix in the future if you like the stuff. Right. So this isn't some revenue generator through the ads from Netflix, which is why we think they're targeting emerging markets like Brazil or India where people's incomes are lower. Now, typically, with like the sign up for one free month of Netflix, you got to like put in a credit card info and expect you're going to get, you know, charged in a few.

But with this easy website, there's no marking your calendar and being stressed out about whether you actually canceled it and you might see a surprise $14. Netflix fee on their credit card. And then you got to get in touch with customer service. Instead, you're just watching the 30 second Netflix at the beginning of this awesome show, and then you get to actually enjoy the show. Now, some of you might be like, why can't I try this out on my iOS device? Because Netflix figures, if you got an iPhone, you're probably going to afford the Netflix subscription. Yeah, they're not just giving the freebie to anybody. So, Jack, what's the takeaway for our buddies over at Netflix? Netflix needs new tools to find its next 100 million users. Snackers last quarter,

Netflix added 10 million new subscribers crushed expectations. Next quarter, they're projecting just 2.5 million a fraction of before. Now, they can't rely on like another global Keep Everyone at Home Pandemic-E event to keep making you a subscriber. Yeah. And by the way, Disney Plus, Quibi, Peacock, Apple TV Plus, HBO Max, all competition that didn't exist for Netflix one year ago. So going from like 193 million subscribers,

which is the present count of Netflix Nation, to 300 million Netflix subscribers. which is where Netflix wants to be, requires an unprecedented move and some fresh new tactics. Like letting people watch for free with no credit card attached, something Netflix has never done. For our third and final story, Lemonade is a broke company that still donates to charity.

And that's exactly why it thinks millennials and Gen Z will love it. We're talking the pink-branded online-only rent-home insurance company. It looks like it punched a grapefruit. All in the app, you can pay 15 bucks a month, and you're covered if your home. gets burglarized or like explodes or something. They got 814,000 customers as of June 30th, which is like nearly double from the previous year. And they IPOed on July 1st, becoming just the third ever B corporation to go public, be like banana. Let's move out of the dictionary. Being a B corp is why

lemonade donated 2% of its revenue to charities. Now Snackers, C-Corps are about 99% of the companies that we discuss on snacks. As in Charlie. But B-Corps are like they're like, younger sibling who has a hand-me-down Subaru. B-Corps still have a fish concert poster on their bedroom wall from Madison Square Garden. And they're 40 years old, someone should maybe remove that thing. Now, Snackers, B-Corps care just as much about purpose as they do profits. Yeah, B-Corps are literally and legally obligated to do the right thing. A lot different than a C-Corps.

And the news comes from the Wall Street Journal yesterday, which calculated that Lemonade Donates 17 times higher a percentage of their revenues than the average. average big corporation does. That is wild, 17 times more than your average corporation. Now, that's not surprising because this is a B corporation which tries to do good for the world. But Jack and I noticed it is awkward because they have never made a profit. I don't want to tell you how to live your life, Lemonade, but maybe cut back on the charitable donation since you're making horrible losses each year. Jack and I can't give investment advice bringing me more look at the whole giving to all this

money away situation. Now, this story brings us back to marketing 201. It's one step above marketing 101. It's just like a slight tweak in the syllabus. What product attribute is most important to consumers? That is the question. Now, for the product of renters insurance, is the most important attribute price? Is it generosity of coverage?

Should you actually have to make a claim? Is it convenience? It's not a particularly sexy industry, but those three are the only three attributes that all the insurance companies happen to be thinking about. Now, lemonade's like timeout. What about sustainability and social impact of the company. Those are just as important. Their calculation here is that charitable giving

loses them money, but only in the short term. In the long term, it's going to win love from young people who become customers of lemonade and make them less likely to lie about their insurance claims. Very true. So Jack, what's the takeaway for our buddies over at Lemonade? This is charity as marketing. Snackers, you got $1 million and your Lemonade's chief marketing officer. You could spend that on like a 20 seconds of a Super Bowl ad. That's what all the other insurance is. companies are doing every Sunday during the NFL game. Or you could donate a million dollars to charity instead and get people to praise you for being so woke. 70% of Lemonade's customers so far are under 35 years old, they're young, and their first time homebuyers or renters. We're talking about

a generation of customers that cares about purpose and Lemonade targets this generation of customers with these charitable donations. We appreciate it. Investors don't seem to appreciate it right now. Right. Investors don't love this strategy. They're annoyed and the stock is down 29% since the July 1st IPO. Wall Street's watching to see if social promise can win customer bucks. Where their charity can successfully become marketing. Jack, can you whip up the takeaways for us over there? The airline stocks all fell by 3 to 4% yesterday because they had to finally put down their finest profit puppy. Change fees are gone across the industry because like ducks, airlines fly together. Second takeaway, Jack. Netflix has a free sample option, which we think is targeting lower-income consumers.

Getting the next 100 million Netflixers is going to require some new strategies and some new offerings. For our third and final story, Lemonade is donating to charity, even though it really can't afford to do so. Their bet on consumers will buy insurance from a company that has values and a few posters. Now, time for our snack fact. This one tweeted in by Jeremy Waterbury in lovely New Palestine, Indiana. Nicholas, last week we covered the company Ball Corporation, which manufactures the aluminum cans that has a global supply shortage right now. Yeah, they kind of missed out in this case because everyone's consuming stuff in cans and they were not ready. Turns out that company was created by the five Ball Brothers who were also the same people behind Ball State University in Indiana. Lucius, William, Edmund, Frank, George, sounds like a lame law firm.

Universities and aluminum can companies, that's what the Ball Brothers do. But before we go, Snackers, Nico and Mariana engaged in Monterey Mexico. Congratulations. Happy anniversary to Leanne and Nick in Boston, Mass. Michael and Monica, COVID-style micro-wedding, they had it in Newport Beach, California. Happy anniversary to Robert and Sandra in Stockton, California. And Roland and Chante, a baby girl, bent in Arkansas, newest young snacker. Happy back to school to Arya Greenberg in TNak, New Jersey.

And same to Hannah Adam in Kansas, the state. Charlotte Orelia Solar. Happy coming into this world and congratulations to Joe and Bree in Sarasota, Florida. And a happy birthday to Farita in Lagos, Nigeria. And Rachel Zane in Brooklyn, New York. And Aditya Kamath in Muscat Oman.

And Sean Payne in Oklahoma. And Kendra Korni turning 31 in Jackson, Mississippi. Michelle Hearns in Stamford, Connecticut. And Yichet in Naperville, Illinois. And Sosso in Belize, Georgia. And Kevin Chu in lovely Brevard North Carolina. Snackers. You all look fantastic.

You all look fantastic. Now, if you got buddies who aren't snacking yet, please do us a favor and ask them HY HYSD. We got to grow Snacker Nation. Have you had your snacks daily? Nick and I'll see you again tomorrow. Can't wait. If you know, you know. This is Jack. I own stock of Spotify. The Robin Hood Snacks podcast you just heard reflects the opinions of only the hosts who are associated persons of Robin Hood Financial LLC and does not reflect the views of Robin Hood Markets, Inc, or any of its subsidiaries or affiliates.

The podcast is for informational purposes only and is not intended to serve as a recommendation to buy or sell any security and is not an offer or sale of a security. The podcast is also not a research report and is not intended to serve as the basis of any investment decision. Robin Hood Financial LLC, member FINRA, SIPC.