The Best One Yet - “Last pod until August 17th” — Take Two’s video game record. Disney’s ecosystem un-magic. Feather’s $30M rental furniture.

Episode Date: August 5, 2020

Our final Snacks Daily pod before vacation — We return to the mics on Monday, August 17th (we’ll miss ya until then, Snackers). In the meantime, Disney’s earnings underline the pain COVID is inflicted on physical businesses. Take Two’s video games are benefiting from the elusive double sales wave. And Feather is trying to become the Rent The Runway of furniture.$TTWO $DISLearn 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 Wednesday, August 5th. Nick, I got a good feeling about this pop. I know what you're thinking, Jack. This is the best one yet. We never done a better podcast. For our first story, full disclosure, my dream as a kid was very ambitious. It was to be a video game tester. Additional disclosure, our buddies over a take-to interactive actually do that for a living. Yeah, they do. And enjoying their record grand theft auto sales along with a record stock price. For our second story. Disney's greatest strength is its character ecosystem. Powerful. Wipped up in 1957 by Walt Disney himself. Gonna need a little more pixie dust because now its greatest weakness is its character ecosystem. For our third and final story. Feather believes you'd prefer renting furniture than owning it.

And $80 million of VC cash agrees. Light is a feather. But did COVID kill the millennial fuel trend of like, you know, not owning things? Not owning things is so in or was so in. You don't want to be touching someone's other stuff. The ex-dresser, that's kind of a questionable situation. But before we hit those story snackers, this is our last pot until Monday, August 17th. Nothing rests the podcasting trachea like a week off.

Everybody in the industry knows that. Little inside industry baseball, if you know what we're talking about. Now, full disclosure, my summer honeymoon got canceled. I was going to go with my wife about a year after a wedding, but it got canceled. The lovely couple was going to fly 6,239 miles. from San Francisco to Rome. So instead, we're going to drive 188 miles to Lake Tahoe. You know what they say about Lake Taho, Jack?

The Lake Como, the Sierra Nevada. Exactly. A little fewer carbs. You're not going to be gaining 30 pounds on this one. So Nick and I coordinate vacations like we coordinate the takeaways every day. Case and point, I was going to be hitting up Japan with my wife for a couple weeks as well. To celebrate mine and Alex's honeymoon. That's the only way we do it. But, you know, when they cancel like the Tokyo Olympics,

we realized it was time to cancel this whole entire trip. So instead, Nick's going to eat some sushi and, like, jump on the subway for no reason in New York City and then go over to Nantucket to spend some time with his in-laws. Extremely relaxing. Now, Snackers, turns out half of Americans didn't use all their vacation days last year. Guilty. Guilty. We didn't either.

We hope you can get some break time as well during, like, this whole weird summer situation. Jack and I have the most fun job in the world. We love speaking with you. Let's in our three stories. to the lawyers and we gotta get something legal out the way. It snacks about the hair ain't food. It's air candy. They don't reflect the views of the robberhood family.

It's all informational just so you know. We're not recommending any securities. It's not a research report or investment advice. Not an offer or sale of a security. Snacks is digestible. Business news for you. Robberhood Financial, LLC, member Fenra slash SIPC. For our first story, Disney's earnings show how Disney's epic character

ecosystem is like totally stuck at home right now. And the whole story hammers home just how much big tech is winning in 2020. Theme here is home. Now Snackers, there is like this, we got to share this with you. We'll tweet it out from at T-boy Jack and not Nick in New York. It is a beautiful hand-drawn Disney master plan from 1957. We think it was drawn on a napkin. We don't know why so many people draw things on napkin when there's plenty of paper everywhere. Kind of looks like a fresco though. We're going to go with that. At the nucleus of this Disney diagram drawn by Walt Disney himself is the IP, the intellectual property. Yeah, and that IP is like, those are the characters you love from the movies you get to know. We're talking to Lulans and the

Rattitudes. That is the secret sauce of Disney's success. They are step one in the assembly line of magic. I hope Disney's writers get credit for like Disney's $100 billion market cap. Jack, they literally get credits at the end of the movie. It's actually a great thing. Now, after the writers create those wonderful characters. The MBAs over at Disney repackaged those characters into a whole bunch of things. Yeah, they packed them into movies, TV shows, theme parks, lunch boxes, whatever, like, the spreadsheet says you should package it into, that's what the business school students package it into. To give a specific example here, you buy a ticket to Disney World to go on the frozen ride. But then on your way out, you got like the big turkey leg in your hand, you see a store, you jump in,

and you buy the Olaf doll. And when you're home, you subscribe to Disney Plus, because you got to watch Frozen 2. Then they launch Frozen 5, the sequel to the sequel sequel, and the whole cycle repeats itself, and it all starts with the guy or girl who drew that Olaf weird snowman thing on a piece of paper. Kind of looks like it was a mistake. Now, Snackers, that's Disney's powerful ecosystem right there, which just shrank a shocking 42% last quarter. This is the first shrinkage in revenue for Disney since Nick and I remember ever covering the news. Now, what we're experiencing right now, Snackers, is a fascinating tale of two ecosystems with different results. Apple and Disney. Apple just reported growth in like everything it does and the stock hit a record

high. Literally everything Apple does did better because you needed the latest gadgets so you can stream or scroll like everything on the internet during your shelter. You're listening to Apple music, on your AirPods, by you're working on MacBook and you're talking to Siri. You're actually probably not talking to Siri. Nobody's talking to Siri. Nobody's talking to Siri. Now, Disney, on the other hand, just reported shrinkage in revenue in three of its four key divisions. Jack, let's whip out the old scorecard here. Theme parks, one of Disney's profit puppies, how did they do? Sales fell by 85%.

Jack, cable TV channels like Natchie Graphic, ABC, ESPN, how did Disney do? They own them all. Sales slumped by 2%. Jack, movies, I'm thinking Milan got delayed, but they had some other stuff out there. How did Disney's movies do? Sales fell by 55%, which is shocking that 40, 4%. 35% of sales were still there. Who's going to like whatever, which was in theaters these past few months?

Kind of feels like a life risk for the whole family. Now, direct to consumer streaming jack, we're talking Disney Plus, Hulu, ESPN Plus. How did Disney do? That is the last division. That's the growth division, but it barely grew. Sales inclined by 2%. The highlight for this division was that they just hit 100 million streaming subscribers for all these Disney streaming properties.

But those new subscribers, subscribers probably cut their cable cord, so Disney made money on the one hand, but lost even more money because of the cord cutting. True. And 100 million is just like a nice round number. People cut the cord at record rates right now, which is bad for ESPN, but great for ESPN plus. Both owned by Disney, but a net negative. So Jack, what's the takeaway for our buddies over at Disney? COVID has helped the digital economy and hurt nearly everything else. It is so simple. It almost hurts us to say if a majority of a business can function. through a screen, COVID probably helped that business. And that helps explain so much of the divide between the stock market we read in the news and the real economy that we feel in our hometowns. Snackers, Jack and I are like looking at this. We're comparing Disney and Apple's earnings reports, and they totally capture this situation. The NASDAQ stock index is at a record high as Nick and I head into vacation. You got Netflix, you got Facebook, you got Apple, you got pelt on all those stocks are gaining and all of them are screened first. Now, small and medium

businesses in our hometowns, those are not at record highs because they don't have screens and they don't have stocks. So like they're not reflected in the stock marks. If your business requires people and places, COVID is probably hurting you. That includes the three quarters of Disney's business lines despite their awesome ecosystem. For our second story, take two interactive shows off the shocking strength of video game studios right now. Nicholas, 135 million people have now paid for Grand Theft Auto 5. Wild. Wild numbers. Jack, we're going to play, you know what? Zach is we're going to play a little game of where were you when. I'm very excited. Elementary school. Sega Genesis, Sonic the hedgehog.

Middle school. PlayStation 1 Madden, 2004. High school. Strum and sweet child of mine with guitar hero. First herniated disc. College, Jack. Oh, this one's easy. I was playing Marrowcart with you shooting you with three red shells. I still have like this irrational fear of when I see a banana. If you see the peel, it's freaky. Now, a lot has changed since Nick and I were playing video games, but the appeal of video games is still always the same. The business is basically built upon the concept of an escape.

You can play basketball in the street, or you can play hopscotch in the street. If it's 1963, or you could be a flying magical fox flying a spaceship with other magical foxes. Actually, you can play with not just other magical foxes, with 30 of your buddies without ever leaving the comfort of your couch. Now, the reason Jack and I are building up this context is because magical fantasy worlds thrive in a recession environment. Video games have been gaining customers as middle class American wages have declined compared to inflation. Yeah, part of this is you get the Grand Theft Auto 5 and it immediately deposits a million fake dollars in your Grand Theft Auto bank account. That's kind of exciting. It's aspirational. It's experiential. It's

experiential. True. And if you want, you can like blow things up and steal a car and chase away from ambulances. Powerful behavior drivers, none of which we're endorsing. Now, Snackers, this leads us to the fascinating earnings report behind Take 2 interactive. This is a video game studio, also a publicly traded stock. It was founded in 1993 in New York, New York. Yes, great city, great year. Revenues for this company in the last three months jumped 54% and its profit doubled. And now this stock is at a record high. Now, Jack and I are looking at this company, and we're looking then at the whole industry behind it, and we're noticing that Take 2 is catching not just one sales wave, but two sales waves.

The elusive double sales wave. You've got to ride that thing when you see it. So, Jack, wave number one, what are we seeing with video games? This one's not a shocker. Shelter in place makes demand for video games way higher. Yeah, and if you're the company, Take 2 Interactive, your profit puppy is Grand Theft Auto 5, whose sales specifically jumped 155%. As I said,

135 million copies of Grand Theft Auto 5 have been sold by Take 2 since it launched in 2013. We're talking 5 million more copies of that video game since last quarter at 25 bucks a video game. This isn't just some like TikTok app download. You have to pay money for Grand Theft Auto and 135 million have for the fifth version of the game. It's like two smoothies.

Now, NBA 2K20 is another game from Take 2 Interactive, and that costs $60. It costs $60, and it has sold 14 million copies. Plus, build this into the revenue stream. They make a new one each year that you kind of have to get. Okay, that's all just wave one, which has been really good for TikTok. I'm exhausted. I'm exhausted from Wave 1. Jack, wave number two, what are we seeing in Wave number two for Take 2? The gaming consoles come out with new versions this holiday season.

We're talking PlayStation 5 and Xbox Series X. And Snackers, we know that the driver of all tech-related products is the update. You gotta update your video games for the updated gaming console. Otherwise, your buddies are going to pick on the pixelation. God forbid your pixels be off. On all that excitement, the stock of Take-Two Interactive is 35% higher than at its pre-COVID highs. So, Jack, what's the takeaway for our buddies over a Take-Two? The big threat to the video game studios is democratization.

Snackers, the most profit. companies tend to be the ones that face the least competition. iPhone competes against like two or three other companies making smartphones. Microsoft Word competes against like Google Docs and paper. Yeah, and both those companies are really profitable. For decades in the video game industry, there's been just a couple of studios that were the gatekeepers of new games. And they could charge the high prices because they just didn't have any competition. But recently, with Fortnite and other mobile games, it pretty much seems you just need a Lord of the Rings fan, a designer, and a couple engineers to launch your own video game. You can do this via LinkedIn. If video game development truly

gets democratized, then anyone can publish games online and play online, almost like blogs. That is an existential threat to take two's ability to charge $25 for Grand Theft Auto 6. For our third and final story, we've got our almost unicorn of the day, feather, which just raised $30 million before coronavirus and raised another $30 million now mid-coronavirus. Feather is testing to see if you'd rather rent a couch that somebody else might have sat on. Might be nice. Or own your own, which is a lot more expensive. Big, big existential questions.

Now, Snackers, in the middle ages, your belt size was like associated with your wealth size. After World War II, the baby boomers, it was all about owning things. Classic. Two cars, cottage on the lake, huge grill, and two jet skis. Now, wealth is associated with flexibility, mobility, and your Instagram. And ironically, owning things makes you inflexible, immobile, and packs your Instagram with the same pictures of the same things you own. Which, again, not a good sign.

So Feather came around. This is a startup that's a classic case of copying the business model, pasting it into a new industry. Feather has been stocking rent the runway.com. Because Rent the Runway is like, why splurge $800 on a Diane from Thurstonperg dress that you're only going to wear once? Rent it for $100 instead. They'll take care of all the logistics. Enter Feather. Same question.

Why splurge $800 on a crate and barrel sofa for your one year? year in that East Village, two-bedder apartment. Feather is going to rent you the same couch but for $50 a month. And when you finally leave that apartment, no more listing it on Craigslist and trying to recoup like a couple hundred bucks. You're just going to leave it to your buddy, Timmy. So what Rent the Runway did for fashion, Feather is basically doing for furniture. But there's one big problem to just copy and paste rent the runway's business model.

Yeah, Jack and I are looking at the individual products here. And a $1,000 product gown is going to cost you only like. basic fabric, minimal storage, and like a pound of adorable shipping. A thousand dollar dresser, on the other hand, what feather is working on. You're talking 50 pounds of wood, a hundred cubic feet of storage, and a titanic ship ride from probably China to the United States. And it needed three tugboats. Now, that means we've got the same retail prices here, but opposite operational costs

just because of the individual product. Logistics ain't cheap, and furniture requires a lot of logistics. So Feathers kind of found a solution here where they're trying to control as much of the manufacturing process as possible. Feather is going directly to factories to cut out a middleman and get furniture for cheaper. So Jack, what's the takeaway for our buddies over at Feather? Did COVID germs kill the non-ownership sharing trend? That's the big question. But it looks like people are still willing to rent things depending on the product use.

Let's look at specific examples. Hertz's rental car filed for bankruptcy. but not because of germs. It's because the business trips that they rely on were all canceled because of COVID. Rent the runway is suffering right now, but not because of germs and the clothes, but because there are no gals or events or big things to be going to. And a couple companies are actually doing really well despite COVID. Airbnb seems to be doing better than it was like a year ago.

And WeWork claims that they are approaching profitability, which is a complete shocker because you're using a desk that somebody else can use. Now, they won't share their financial. figures over at Feather, but Jack and I have one good trick to check out a company's health when they won't. The job site. The job site. We looked at Feathers, 50-person company, with 17 job postings. That is a good sign that their business model is working. Jack, can you whip up the takeaways for us? I'm still going to say that every day, by the way. Disney's physical business line suffered badly from COVID-19. Gains and its one digital business weren't nearly enough to make up

for all that. Second story, take two profits double thanks to the sales wave of Shelton. in place. Its stock is at a record high thanks to the wave of PS5 coming this holiday. For our third and final story. Feather thinks you'd love to rent a $29-dollar framed Van Gogh for your short-term living situation. Charming Jack, that depends on germs not killing the sharing rental economy. Now, time for our snack fact of the day. This one submitted direct-to-consumer from Nick of New York and Jack of Brattleboro, Vermont. This is from Nick from New York and Jack from Brattleboro, Vermont. So, cut out the middle. You know, I like to do a little research before going somewhere.

I know you like to do a little research. I love it. It's fantastic. Get this, Lake Tahoe, aka the Lake Como of Sierra Nevada's. Its deepest point is 1,645 feet. That's deep enough to plunge the entire Empire State Building into the lake. But that's still enough room to plop the Statue of Liberty on top of that engulfed Empire State Building and still have water on top. You got a lot of room there.

New York City where basically is like in Lake Tahoe is what we're trying to say. Do you see what I did there, Nick? I kind of did a little your vacation, a little my vacation, little backgrounds. This is one. It's like a weave jacket. It's like woven. It's like a blanket. Now, before we head out, Snackers,

Happy Birthday to Harry Francis from London, England. Legendary Snacker, and happy birthday to Jeremiah in Texas. And happy birthday Z on the Lower East Side of New York. And Simon turning 16 across the East River in Brooklyn. Ritesh, happy birthday in Philadelphia. Pats are Gino's. Joss in Seattle. Happy birthday.

Patrick Claire from Cleveland, Ohio. Coleman in Raleigh, North Carolina. Vlad. the Russian American from Las Vegas, Nevada. What's born in Vegas, days in Vegas, Jack? And congrats to new parents, Andrew and Ashling, in L.A. for their baby boy, Frazier. And finally, congrats to Samantha and Jameson, who had a surprise, lovely engagement situation in Sleepy Hollow New York last weekend. Absolutely adorable. Snackers, we're going to miss you, and we cannot wait to see you on August 17th.

You all look great this morning. I'll be wearing slamming salmon. Me too. I might even get a haircut. We're going to see in a week. If you know. This is Jack. Nick owns stock of Apple. 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.