The Best One Yet - “Spotify’s not a tech company” — Pfizer’s $2B Operation Warp Speed. Misfit’s ugly veggie $85M. Spotify’s new record label deal.

Episode Date: July 23, 2020

Pfizer snags a $2B contract to produce 100M COVID-19 vaccines for the US government as part of Operation Warp Speed. Spotify has so many marginal costs, so it just added a new revenue stream to try to offset that. And Misfit just bagged $85M in fresh funding to scale its subscription food box for ugly fruits and veggies.Learn 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 Thursday, July 23rd. I'll tell you, Wall Street must be on vacation or something. Easy. This feels like August 2019, Jack. It's a pretty slow week.

Markets barely budged again yesterday. This time last year, half of Wall Street was in the Hamptons. This time, this year, 100% of Wall Street is in the Hamptons. Let's get right to our story, though, because this is the best one yet. TBOI, first story, Jack, what do we got? The Trump administration just made a reservation for 100 million COVID vaccine doses. It's an Uber Eats pre-order that went to Pfizer and cost us a cool $1.95 billion with a B-dollar. For our second story, Spotify is sick of being in a one-sided relationship with the three giant record labels.

So it just launched a two-sided market finally making the labels pay them. I had a dream that the hamburgers were in me. Third and final story, what are we got? Miss Fits just raised $85 million as the latest startup finding buyers of misshapen and ugly, but perfectly healthy fruits and vegetables. It's the good kind of fat. We all have a Charlie Brown Christmas tree. Misfits loves a Charlie Brown peach. But before we hit those stories, Snackers, we have an update on the sharing economy. Yeah, Jack and I are looking at this. And you can tell how close we're getting to peak sharing economy by looking at how intimate the things are that we're actually sharing via tech.

First, we started sharing our back seats with Uber and Lyft, which like isn't that big a deal. You're not going to get like lice from that situation. It's totally kosher. But then with Airbnb, we started sharing our homes and it's like, whoa, he can check out my underwear drawer? Is that Brad? Who's walking through the pantry right now? Can I be in my boxers? Is this okay? But now we've reached a new threshold. It's swimming pools. Yeah. The company that just launched called Swimply. Swimply, new startup from 15 to 300 bucks, they connect you with a pool. Someone else is not swimming in right now. The company is called Swimply, which we think is a combo of swim and simply, but it's really hard to say. It looks better than it sounds. And they're letting you book water by the hour. That's how this breaks down.

It's a simple concept. The owner of the swimming pool stays in their kitchen and accepts your money. In exchange, you get like an hour of freedom to jump into that thousand gallon of chlorinated water. Nothing gets the eyes red like a good pound of chlorine. Now, for $60 an hour, Jack and I jumped in snack style, you can go to Campbell, California, and they've got a putting green next to the swimming pool. Seems like a good deal. And if you're feeling fancy, you can upscale to a hundred bucks an hour for a mid-century modern design pool in San Jose, California. Jack. Apparently, they're only available in the South Peninsula. I knew you were going to pick that one getting Westdown vibes over here. Nothing Jack likes more than Cast Iron Mid-Modder. Now, this company has reportedly had 2,000% growth since it launched two years ago,

which I think means it had like three bookings its first year and 25 bookings this year. We didn't check the financials, but we're going to round up on that. And we're curious about what changed to cause that inflection point. It was actually this specific line from the Centers for Disease Control, the CDC. Picture Dr. Fauci saying this and picture the founders of Swimply, just smiling. In a bikini. Currently, there is no evidence that COVID-19 can spread to people through recreational water. Make that a tankini. F-Y-I-Snackers, it's B-Y-O-Swan pool toy if you want to jump into a Swimply. Let's jump into our 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 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. Right. Snacks is digestible. Business news for you. Robberhood Financial, LLC, member FINRA slash SIPC.

For our first story, Jack, left arm or right arm. I can't see your veins. You've got to work with me here. Pfizer and German biotech company just got $2 billion from the U.S. government to make a wonderful vaccine. Nick, you're just going to feel a little pinch and then it's going to be honest. Is this the knee? What's going on here?

Is that my thigh? We'd get that thing checked out. Nick, this is the largest whole. in the U.S. race to crush COVID with a vaccine. Snackers, we're talking about like basically the biggest pre-order situation ever. The USA just threw a hundred million doses of a COVID vaccine into the shopping cart. And they're not abandoning this thing. You hear a pre-order, you probably think like Tesla's cyber truck that'll be out in five years for a hundred bucks. Everyone's got a buddy you did it. This is a hundred million syringes or a hundred million pills. I'm not sure how it works actually.

The U.S. also made a reservation to buy 500 million more doses of this vaccine if we even need it. we're talking about a COVID vaccine candidate. This thing isn't definitely going to work, but it might work. And it's being jointly developed by Pfizer, the big U.S. pharmaceutical company and Germany's biotech leader, Biontech. It's called BioNTech, I think. Straightforward name with a little twist. Sticks with our theme of like pharmaceutical companies that must have a Z and X or a V in the name in order to be taken seriously. Now, this vaccine candidate has shown promising preliminary results. And if successful, it could be authorized for emergency use as early as October. October, we're talking a goal here of 1.3 billion doses by the end of 2021. So it's a mass production situation and shares of Pfizer and Bio-N Tech both jumped

about 4% after the news of $2 billion pre-order. But this insanely large order is actually part of a way bigger plan called Operation Warp Speed. That is the federal government's plan to accelerate the development of a COVID vaccine so we can all get back to normal. Yeah, because they typically go through like years and years of work. You got to do trial one, test B, section C, then you got to do the thing with like the lab report. You got to have a hypothesis. You need all these things, an abstract. And that like robust scientific process isn't going to cut it this time. For context, Nick, the Ebola vaccine just got approved. So Kennedy had like a race to get to the moon. We have a race to develop this pill. And the federal government as part

of that race is basically acting like a venture capital firm. Benning on 10 different project and just hoping that one of them pays off big. So Jack and I decided to whip up what this portfolio of venture capital from the government really looks like right now. All right. Novavax is a company that has $1.6 billion from the government to work on this. Astrozenica just got $1.2 billion to work with. Moderna, a company based in Cambridge Mass that is obsessed with RNA, they got $486 million from the government. Johnson and Johnson got half a billion dollars. And again, there were like six Zs and Xs and everything we just said. You get a billion. You get a billion. You get a billion. You get a bill it. You look under your chair, you're getting in an Oprah situation. So, Jack, what's the

takeaway for our buddies over at Pfizer and the rest of pharmaceuticals? Making this vaccine is hard, but ethically giving it out to the world will be even harder. Snackers, the sequel to Operation Warf Speed should be Operation Divi, Divi, Divi, Divi, Dive, Dive. That's because once we've developed the vaccine, how are we going to divvy it out to the world's seven billion people and how much are we going to charge for it? And where does the word divvy come from? Now, it's unclear whether rich countries are going to get it first. Probably, most likely. Or if those most in need are going to end up getting it. Unlikely, but that might be the right thing to do. But interestingly, some of these pharmaceutical companies are actually treating this like it's their duty to mankind. Pfizer, if you do the math, it's very simple math.

$2 billion divided by 100 million pills. Pfizer is charging just 20 bucks a dose, which is the same as like the standard off-the-shelf flu vaccine they do every fall. Like a $2 margarita pizza. It's the simple, straightforward only thing. their servant. They're going to break even on this price. Pfizer's kind of seeing this as their duty to mankind, but others are banking on this product being their like one and only once in a generation profit puppy baby. Moderna's like, we're not UNICEF. There is no way we're pricing this at cost. We're making some money off this thing. Yeah. We don't know what they're going to charge, but we know it's going to be a lot. It's not just that the U.S. is spending billions to secure doses. Other

countries are doing it too. For our second story, Spotify is getting a lot. of podcast love lately. And the stock just jumped 5% not because of podcast. No, but because of an ambitious move on its music side. On the music. Jack, we got to send an edible arrangement over to our buddies at Spotify. Well, they did just sign a deal with the world's largest record company. Yes. Universal Music Group. We're talking about the company that represents Rihanna, Taylor Swift, the Jonas Brothers, and One Direction, even though those last two are the same thing. They are the same thing. Now, Wikipedia actually lists 992 famous musicians on the Universal Music Group roster. Gotta hit that four-digit number.

Now, normally, Spotify pays the record label for the right to stream their music. That's how the business model works. But now, with this deal, the record label will also pay Spotify. And that's because Spotify has spent two epic years negotiating this brand new deal to turn from a one-sided marketplace into a two-sided marketplace. Somebody in the Spotify. legal department is getting a bonus, Nick, because they just doubled the sides of this contract. In a one-sided marketplace, you stream like Andrea Bacheli's angelic voice, and Spotify has to then

pay Universal Music because you just listen to Buccelli. Right. Universal Music owns Andrea Boccelli's music. So, of course, they should get a tiny piece of the $10 a month Spotify's getting, because they're really getting universal music's property. And Snackers, that's why Spotify isn't consistently profitable because it has to pay so much of its revenues to the labels while you're crushing on Bacheli. But now, the industry has changed. Half of music revenues come from music streaming, and Spotify controls 40% of music streaming revenues according to Universal Music Group's IPO paperwork. You add all that up, and that means Spotify's got itself, the old L, the leverage. So it's pushing the music labels to finally start paying Spotify, aka a two-sided market. We prefer just two-sided

relationship, by the way. That's true. It's true. They went with market because it sounds more technical. They're really trying to get into business school case study right now. Yeah, it's kind of an all-pay-you-if-you-pay-me situation that Spotify's trying to achieve. It's like when you say to your friends at, hi Jerry, and he's like, it's Mr. Thompson to you. That'd be a one-sided market. Now, here is Spotify's two-sided market pitch. Basically, we know more about music than Facebook does. Yeah, they're like, don't promo your new record on Facebook or Instagram. Use Spotify's unique marketing, data, and analytics service to make the launch of your single a success. For instance, say Taylor Swift and Rihanna both had breakups, and they both want to do a duet about breakups.

Spotify can send a push notification to all of its users who like songs on Spotify about breakups. And then you're like guaranteed that that launch will be a success. If you're listening to like a rainy day playlist, you're probably going to get this duet. The CEO Daniel Eck sums it up nicely. This is more effective than marketing dollars. Being in the right spot on the Spotify app is more effective than splurgeon money on ads. In other words, Zuck can't touch what I've got in the Spotify app. And what's Zuck can't touch?

Zuck can't Zuck. So Jack, what's the takeaway for our buddies over at Spotify? Spotify is not embraced as a true tech company because of one thing. It's marginal cost problem. Marginal cost. Snackers, every time you see a Google ad for like dandruff shampoo, that didn't really cost Google anything. No, most of Google's new revenue it gets every day become straight up profit because it didn't cost anything for you to see that Google ad.

Yeah, that's why Texo Prof, hardly any marginal cost comes with each new customer. Now, Spotify is a tech company, but it pays out most of its revenue, and it has to pay more and more to the record labels for each and every song that you stream on Spotify. If Spotify can counter those costs that come with like every single stream of your moody playlist with a new revenue source, then maybe the tech familiar will finally accept Spotify as one of their own. For our third and final story, Misfits just snagged $85 million in fresh venture capital funding. This is by far the biggest investment into ugly fruits and ugly vegetables that we have ever seen. Snackers, we're talking about the Philadelphia-based two-year-old grocery service that

sends you boxes of unwanted food. It's a subscription box, and you can get it weekly or every other week. Twenty-two bucks gets you a box with 10 to 12 pounds of fruits and veggies that just, they aren't in the best shape of their lives. Yeah, they're not just any fruits and vegetables. They are misfit fruits and vegetables. We're talking like carrots that are channeling an alien vibe. It's going to start with you when you open up the box because that potato has a third limb. Yeah. Looks like Mr. Potato had on rabies. This is basically the Statue of Liberty of Vegetables. They're like, give us you're broken, you're rotting, and you're kind of purple. The thing is, Nick, the food is ugly and it's imperfect, but it's perfectly good.

Like, if you cut up those carrots and put it in a salad, no one's going to know that it, like, wasn't shaped like a normal carrot rod. Yeah, and no one's judging you. And because of that, and because apparently retailers don't like to sell this, they're able to secure the food at, like, 25 to 40% off the wholesale price. That's their claim. And our claim is, you'll feel really good about yourself because the food's not going to the landfill. like it will end up otherwise.

Yeah, like Jack and I are picturing the ideal customer of misfits, and they probably recently adopted some kind of like a third-generation rescue mutt. Just like it feels good to rescue a puppy, it feels good to rescue a carrot that was going to the dumpster. But now the company is making an interesting pivot from just fresh produce to packaged goods. We just read that they acquired a palette with 50,000 perfectly good olive oil bottles, except the label was on backwards, so like Walmart didn't want it. So the fascinating question Jack and I think they're facing right now,

can misfits go from a supplement product to a core product? Right now, customers of misfits, they get a box of fruits and veggies, but let's be honest, you need to go to the grocery store to get everything else. You're not just a pure veggie vegetarian here. What misfits needs to do is become the core grocery order for when you're ordering groceries every week, not the supplemental one. And to do that, misfits just needs to offer more and offer a little more flexibility than just a one-size-fits-all box,

with 10 to 12 pounds of ugly fruit. It needs a long-term consistent customer, and it can do that if it can grow beyond just this produce to the packaged goods. Otherwise, you might get one or two boxes of this stuff and then be like, this is annoying. I still have to go to the grocery store. This isn't saving me any time.

That's a really good imitation of like an annoyed voice. So Jack, what's the takeaway for our buddies over at Misfits? Opportunities are born out of market inefficiencies. Snackers, Misfit says that a whopping, 40% of American produce is never eaten just because of cosmetic issues. The problem isn't that no one has ever wanted like ugly broken eggplants. It's just that there's never been a place to go to buy broken eggplant. And these market inefficiencies that misfit identifies, they aren't unique to food.

It's the same concept that drives everything behind the sharing economy. There is a sharing economy finally for sharing your car and for sharing your home. Imagine if there was a DVD sharing company in the 2000s, Blockbuzzle. would have gone out of biz, but there was no market. If there was a company called Air DVD, just saying, you know, I wouldn't need E.T, my neighbor wouldn't need E.T. My neighbor across the street wouldn't need E.T. We could just share the one ET. And Jack wouldn't have to use his annoyed voice. So one business's market inefficiency is another business's business. Jack, can you whip up the takeaways for us over there? Pfizer just got $2 billion of fresh cash to make that

dang vaccine. Even though it's selling it at a not profitable price, the stock rose. Yeah, why did the stock wrath? It's just one of those things. I think they'll get really good PR if they're like saved the world. They're not UNICEF. For our second story, Spotify can make your album famous with the right placement in the Spotify app. So it's charging record labels for all that good stuff.

Third and final story, misfits is trying to reduce food waste and save you money because market inefficiencies are major opportunities. Now, time for our snack fact of the day. This one sent in by Pete in lovely Seattle, Washington. The Netherlands, aka D. Netherlender, already eliminated pennies and two cent coins from circulation. Yeah, they're not happening. And in fact, if your transaction involves something that would require one of those coins, they just round up to the nearest five cents.

They actually round down if it's like 0.02 and they round up if it's three. And I'm wondering, is this like a net gain or loss for like the government? The answer is you always round down. Now before we go, congratulations Lucia from Auburndale Mass, who just finished writing our first book about personal finance. And happy birthday to Morgan White in lovely Cape Elizabeth Maine. And congrats to Tyler and Olivia Housman of Okabogi, Iowa, who just welcomed a new baby snacker, Holland Grace.

And happy four-year anniversary to Alex and Brittany Rodolfe in Kenosha, Wisconsin. Snackers, before we go, make sure to ask your buddies for us, HYHYSD. Have you had your snacks daily spread out loud? This is Jack. I own stock of Spotify, and we'll see you tomorrow. If you know, you know. 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.