The Philip DeFranco Show - PDS 11.7 DEFY Media's Controversial Shutdown, Where Is The Money, & What The 2018 Midterms Showed Us

Episode Date: November 7, 2018

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Sup you beautiful bastards, hope you're having a fantastic Wednesday. Welcome back to the Philip DeFranco Show and let's just jump into it. And the first thing we're gonna talk about today before we dive into the true crazy is the massive business and industry news around Defy Media. Defy Media, the owners of large YouTube channels like Smosh, Clever, AwMe, among others, they have now announced that the entire company is shutting down. Initial reports from yesterday said that employees at Defy's main office in Beverly Hills, they received an email that same day notifying them that the office would be shutting its doors down

by January 2nd and that all 80 employees would be laid off as a result. And at first it was assumed that only Beverly Hills was closing, which had nearly all the staff though, including President Keith Richmond, but it seems that their corporate office in New York where CEO Matthew Diamond works is also shutting down. And Defy also released a statement saying,

"'Regretfully, Defy Media has ceased operations today. "'We are extremely proud of what we accomplished here "'at Defy and in particular want to thank "'all the employees who worked here.'" They then go on to praise their team, credit them with building up over 75 million YouTube subscribers, 120 million social media followers, but then adding,

"'Unfortunately, market conditions got in the way "'of us completing our mission. "'Our main focus right now is to find homes "'for these great brands and people "'so they can continue to thrill and delight "' millions of viewers with as little interruption as possible. And so one of the questions following this is how did they get to this point? Defy Media was seen as a powerhouse with extremely strong brands like Smosh, Clever, also Screen Junkies, which we'll touch on in a second. Just two years ago we were seeing reports about how they secured 70 million dollars in investment.

But also at the same time over the past year you could see that something not so great was happening over there. Back in March it was reported they laid off around 8% of their staff and closed its programmatic advertising business. Then in July we saw them shut down on profitable channels. We also saw them sell off the screen junkies. Additionally we saw allegations around their ad program. Allegations that they had failed to pay out publishers that use them. Back in June you had ad age reporting other publishers are owed between several hundred dollars and forty thousand, according to a senior executive with direct knowledge of the situation. Also regarding the ad division, reportedly there is a three hundred thousand dollar lawsuit happening. It's also so weird because when you look at their successful properties, they were very successful. Like, in terms of growth measured as a percentage increase

of views over the last six months, Clever Style was the most successful channel with a roughly seventy-two percent increase. Smosh was also killing it with fantastic growth, increasing views 51% over the last six months. However, you also had some that were stagnant, some that have been dropping. We also saw responses from people on those previously mentioned properties. You had Ian Hecox, co-creator of Smosh, posting on Twitter,

"'This doesn't mean Smosh is going away. "'We're already in the process of finding a new home "'and we'll update you all as soon as we can.'" And adding, "'We hope to have some exciting news to share with you soon, "'but for now, please give your love to everyone involved at Smosh. Courtney Miller tweeting out, we'll figure this out.

Love you guys. We also had Lily Marsden, one of the long time faces at Clever saying, yes, Clever is looking for a new home. Also adding that her last full time date with Clever was actually last week. As far as my personal takeaway from this, I'm a little surprised, but also not surprised. I mean, as far as why I'm surprised,

I mean, you have several relatively successful properties. We just talked about $70 million in investment. How do you burn through that or just not cut away the parts that are pulling away from your main flagships, right? You know, rather than trying to sell off the properties and shutting down. And actually while recording this video, Anthony Padilla, who of course started Smosh,

he's no longer a part of it. He released a video talking about his thoughts around it and he asked a similar question regarding the money. That company was drawing in millions of dollars every year, and I was seeing a fraction of that. I have no idea where all that money went that the company was making, which I also just read had millions of dollars invested into it last year, and now it's gone.

Where did all that money go? But as far as the why I'm not surprised, I have to think about how I can say this without burning anyone. This is still me saying it as an outsider looking in. Based off of show costs and money spending things that I heard about, I'm also kind of not surprised. I think a lot of companies in the new media space aren't necessarily built to be self-sustaining businesses that you do not sell off in three, five, ten years. I think the goal of a lot of these companies is to show as much growth as possible

and then hopefully sell. And while there are companies that have been very successful using that route, where they grow a lot and they sell all, it's also important to realize when you spend maximum money to get maximum potential, you also get maximum risk. Essentially that mindset is you're driving

120 miles an hour towards a cliff and you are just hoping that a bridge will magically appear. Hey, sometimes it does, sometimes it doesn't. And I really do wonder with this situation with Defy if this is going to make other companies look at their own spending, look at their own plans. And so to kind of answer that question of do I think this is where new media is going? No. For some companies, yes. But as far as the industry as a whole, no. With all of that said, I do want to pass the question off to you. What are your thoughts on this shutdown? Also, what are your thoughts about kind of just the immediacy of it all? With that said, I do hope that everyone

that's been working on all those channels, they do land on their feet, whether they're acquired elsewhere or they're able to kind of stir things up and do something on their own. Yeah, that's where I'm gonna end that one. And then let's talk about something no one out there has a polarizing opinion on,

and that is the midterms. It happened last night, and while a ton has been decided, there are also races that haven't been called yet. And obviously, while there will be more to talk about, let's try and jump through a lot of this. So last night, did the blue wave happen? Not really. I wouldn't describe it as a tidal wave, more enough of a wave to have Nancy Pelosi

kind of boogie board into shore. Democrats were able to get the seats they needed to gain control of the House, and Republicans not only held the Senate, it seems likely that they'll grow some too. And so what that means is we now have a split Congress. And we'll start with the Senate, where as of recording this video,

Republicans have at least 51 seats, with Democrats having 46. Right now we're waiting on three more races to be called in Arizona, Florida, and Mississippi, although it's not crazy to think that Republicans will get 54. Where we saw Republicans thrive here were rural states that voted for Trump in 2016, but had Democratic senators. In Indiana, Republican Mike Braun beat incumbent Senator Joe Donnelly by 10 points. In Missouri, Republican Josh Hawley defeated incumbent Senator Claire McCaskill by six points. In North Dakota, we saw Republican Kevin Cramer beating incumbent Senator Heidi Heitkamp by 10 points. And it's very likely that you can add Florida to the list

because right now, Republican Governor Rick Scott is leading incumbent Senator Bill Nelson by 50,000 votes. And while we had an idea that Republicans would be able to hold and maybe even add a seat or two, this win is huge for the GOP. And if Rick Scott wins there, it's also actually historic. Four Senate incumbent defeats for the non-presidential party in a midterm would be the most losses since 1934.

Also one Democrat incumbent that was able to survive was Joe Manchin. He won the state of West Virginia by around four points. And that's of note because Manchin's the only Senate Democrat who voted for Brett Kavanaugh's confirmation. Also it is important to note that Democrats did actually pick up one seat last night, that being in Nevada, which isn't the most surprising because they voted for Clinton in 2016.

We also finally saw the end to the Beto O'Rourke-Ted Cruz situation. Ted Cruz, as predicted, ended up beating Beto O'Rourke, although it was only by three points. And so here we saw a lot of people saying, yeah, it's a win for the Republicans because Ted Cruz is actually in the Senate. But at the same time you had Democrats saying, no, what Beto O'Rourke did here is massive. Arguing that Beto O'Rourke had no reason to be as close as 3% since Ted Cruz last time he won by 16 points. And so we saw some Democrats saying that Beto O'Rourke is perfectly positioned to potentially run

for president in 2020. Right, and one of the ideas around that is if he can make Texas that close, then potentially could he pick up some of the swing states that Obama got in 2012, that Trump picked up in 2016. But a big point I want to hit on here is we literally just had the midterms. There are some races that aren't done.

We'll get to that eventually. We'll talk about that soon. But also once again, it really needs to be hit on on how important it was for Republicans to maintain the Senate and possibly even grow. I mean, with a Republican majority like this, it means that Republicans are gonna be able to confirm dozens of Trump's federal judges over the next two years.

And getting conservative judges on the bench has been a major priority for Republicans, and because they're not so close to 50, they can probably go a little more conservative. And then we look at the House of Representatives. As of this morning, Democrats have control of 223, while Republicans have 199. But that still means that as of right now,

Democrats have flipped 32 seats, while Republicans have only flipped five. And as far as the reason for these gains, many experts have been pointing to the suburban areas, places that analysts have been referring to as the Romney Clinton district. Right, these places outside of major cities have voted for Republican presidential candidate

Mitt Romney in 2012, but also voted for Democrat Hillary Clinton in 2016. And over the last few years in these areas, we've seen voters becoming more moderate. Now as far as what Democrats could do with this new control over the House, it's gonna be interesting. I mean, as far as what this means for Trump,

not a shocker, this isn't gonna be great news for him. Although I think you could argue yes and no. Depending on what we see over the next, it's gonna be interesting. I mean, as far as what this means for Trump, not a shocker, this isn't gonna be great news for him. Although I think you could argue yes and no. Depending on what we see over the next two years, it's not crazy to think that Donald Trump will very successfully campaign against the House. I mean, we've seen presidents in the past successfully campaign against Congress as a way to get reelected.

But on the not so great side for Trump, the House has subpoena powers. House committees have the authority to summon individuals and organizations to testify to provide documents under penalty of perjury. So for starters, the Democrats could definitely go after Trump's tax return.

And in fact, back in October, Nancy Pelosi said it would be one of the first things on the agenda. Also, it wouldn't be a crazy thing to predict that Democrats might subpoena Trump officials to answer questions about controversial policies. Like things like the sending of troops to the US-Mexico border, child separation, the White House response to the killing of Jamal Khashoggi.

But at the same time, I really don't expect Trump to cooperate, and if anything, I think he sees this as just another fight, which I think he's gonna be happy to go into because he's even said that he thinks that his base loves it when he fights, and I think he is correct when he says that. And in fact, this morning, we saw President Trump tweet, "'If the Democrats think they are going to waste

"'taxpayer money investigating us at the House level, "'then we will likewise be forced to consider "'investigating them for all the leaks "'of classified information and much else "'at the Senate level. Then we will likewise be forced to consider investigating them for all the leaks of classified information and much else at the Senate level. Two can play that game." Which I will say, personally I love that tweet because I get what he's saying kind of threatening there but also at the same time it sounds like the Democrats are gonna waste a lot of money so we are too! And also remember how I said that Donald Trump I think could successfully campaign against a Democrat majority? During a press conference this morning

he hit on that talking about the potential for bipartisanship but that subpoenas could mess everything up and then he said this. I think it's very inappropriate. We should get along and get deals done. Now we can investigate, they look at us, we look at them, it goes on for two years, then at the end of two years nothing's done. Now what's bad for them is being in the majority, I'm just gonna blame them. You understand. I'm gonna blame them. They're the majority. Honestly, it makes it much simpler for me. But that said, we can move to governors. There were 36 gubernatorial seats on the balance last night, 26 held by Republicans, 9 by Democrats, 1 independent in Alaska.

And as we talked about on Friday, these races were even more important than normal because governors elected this year have veto power over congressional maps. Right in those congressional maps they're gonna be redrawn after the 2020 census. What we ended up seeing is that Democrats were able to flip eight states their way while Republicans as of right now haven't been able to flip any but I say as of right now because as of recording this video they're saying Alaska and Georgia it's too close to call although it is leaning in the favor of the Republicans. And while I think the Democrats are still hurting from losses like that of Gillum in Florida, this is a net win for them. In addition to other things,

it essentially means the Democrats have more state power to fight back against Trump. We also had those attorneys general races that we were talking about last Friday. And as we said there, there were eight races to keep an eye on, seven that could flip Democrat, one that could flip Republican.

What we ended up seeing was that the one race that could flip Republican, that was the race in Minnesota, actually didn't flip. The Democrat there, Keith Ellison, ended up winning by four points. And of those seven states that could have flipped Democrat, we saw three flip, three didn't, and one is still too close to call. Before I jump into my final thoughts on this, I wanted to mention a few standouts, and this is by no means all of them. Four states had marijuana measures on their ballots. Missouri and Utah approved medical marijuana. Michigan approved recreational use. And North Dakota rejected recreational use,

but they already have medicinal use. So as a country, that means we have 33 states with medicinal use, 10 plus DC with recreational use. It's something that appears to be more and more accepted. We also saw Kim Davis pop up in the news. She was facing her first reelection campaign since she made headlines in 2015 after refusing to give marriage licenses

to same-sex couples, and she ended up losing to Democrat Elwood Caudill Jr. by about eight points. Also with this story, I saw some people saying that she lost to a person that she refused to give a marriage license to. That is not accurate. The person people are referencing is Dave Ermold,

and he actually lost in the Democratic primary to Caudill. Also Nevada's 36th Assembly District, Dennis Hoth won, which is actually really standout news because he died a few weeks ago, but he still won. Then, actually before I get to the last thing, I was actually on the ballot. Last night we saw a lot of talk around celebrities. For example, yesterday you had Beyonce three hours

before the polls closed posting a photo of herself wearing a Beto hat. There were a lot of his supporters that were really, really excited about this, so happy. And then we saw Aurora Clues, and then we saw some people online going like, "'Why did you endorse him so late?'' There were people like David Korn tweeting.

"'Someone should tell her that the time to stand "'and be counted was, well, any time before she did this. But on the other side of this, you had a lot of people defending Beyoncé. Popular tweets like, apparently 59% of white women in Texas voted for Ted Cruz, and white people are on here talking about what Beyoncé should have done differently. Just talk to your relatives. Online, we also saw a good number of people mocking Oprah and Taylor Swift. And it wasn't just random people. You had people like Fox News host Laura Ingraham, tweeting that among others, Oprah was one of the night's biggest losers. Oprah was supporting Democrat Stacey Abrams in Georgia.

You also had a lot of people mocking Taylor Swift because the guy she backed ended up losing. Among others you had Laura Ingraham again, tweeting, hey Taylor Swift, haters gonna hate, hashtag shake it off. And I will say, while I have complicated feelings as far as celebrity endorsements of candidates, I will say, while Taylor Swift made it abundantly clear why she was not for Blackburn, she stated who she was voting for, the reasons why, but she hit on this thing that I think is incredibly important Please please educate yourself on the candidates running in your state and vote based on who most closely represents your values for a lot of us We may never find a candidate or party with whom we agree 100% on every issue

We have to vote anyway, I really agree with that last part at the same time I really do question the effectiveness of the celebrity endorsement I mean one I don't think that you should vote for someone just because a famous person you would like says to vote for someone If they bring the person to your attention and you look into them further and then you go Oh, yeah, I agree great But the people behind these campaigns and the celebrities themselves you need to kind of consider Are you just going to ramp up the base that you're going against? Especially since I mean when we talk about celebrity endorse, a lot of the ones that we talk about

it's going towards the Democrats. And a common narrative is you have all of these millionaire elitists trying to tell you who to vote for. And I'm not saying these celebrities don't have the complete right to do so and they should completely stop. I just, I question the effectiveness. And I'm aware that I could be completely wrong on this part. For me, it's more of a personal feeling.

And because we're talking about feelings, it's one that you personally might not have. And the last one I'll mention, and once again, by no means all of the ones that mattered. Florida voted for and passed Amendment 4, which is massive. And it's an amendment that when it goes into effect, there should be around 1.5 million more eligible voters in Florida.

And that's because if you were convicted of a felony, but you've served your sentence, including fines, probations, and parole, you can now vote, asterisk, but not if you were convicted of murder or sex offenses. Right, so there's still levels to acknowledge there. And so of course this was massive news. But with all of that said, as far as my final thoughts here, if you were someone that was hoping that thanks

to whatever happened in these midterms, that things were going to calm down, you are going to be so sad. You should not be surprised if the next two years make the last two years seem like child's play. You should expect things to get very aggressive and for a lot of things to happen very fast. And actually, while having to put in an update here,

Attorney General Jeff Sessions, who of course famously recused himself from the Russia investigation, which has been a massive thorn in the side of Donald Trump, is now officially out, and it's been announced that Matthew G. Whitaker will be taking his place. And tonight I have people very concerned because among other things Matthew Whitaker wrote an op-ed for CNN last year titled

Mueller's investigation of Trump is going too far and that's the person that will now most likely be overseeing the Mueller Investigation because the only reason Rod Rosenstein had been overseeing it was because Sessions recused himself So of course now what is top of mind is what is gonna happen to Rosenstein, what happens to the Mueller investigation, what does Trump do, what do Democrats in the House do with their newfound power? So there's that part of it and then looking to 2020 without even knowing who the Democrats are gonna try and put up. Looking at last night's numbers I think gives us a lot of insight but we get even more insight if we look at some of the states that Trump flipped in 2016. And specifically what I'm talking about there is Florida, Pennsylvania, Ohio, Wisconsin, and Iowa.

When we look at the numbers across Senate, House, governor races, there are things that should get the Democrats excited. Things like Scott Walker losing in Wisconsin, but at the same time, they should be concerned about the margins, what their candidate can possibly do in these places. How will public opinion change over the next two years?

What will the narrative be over the next two years? There's a lot, and it's going to be a fascinating and exhausting thing for everyone to watch. But with all of that said, I do want to pass the question off to you, what are your feelings about last night? If you feel comfortable, let me know where you politically stand, how do you feel about how the House and the Senate and any of the stuff turned out. I'd love to know why you feel like that, any and all things, let me know in those comments down below.

And that's where we're going to end today's show. And remember, if you like this video, you like what I try and do here, hit that like button, it helps support the show. Also, if you want more, hit that subscribe button, that way new episodes of the show pop up in your subscriptions, which actually, if you did miss either of the last two shows, you can click or tap right there to watch those. But, with that said, of course, as always, my name's Philip DeFranco, you've just been filled in, I love yo faces, and I'll see you tomorrow.