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C (5:13)

on this show we enjoy a segment. We really like this one. It's called CEO of the Week and it shines a spotlight on an executive you may not have heard of who's doing interesting, groundbreaking, or sometimes just very difficult things. Well, today's CEO of the Week has only been CEO for a week, and there are plenty of, let's call them interesting things, challenging, challenging headlines that are marking his short tenure. I'm talking about the new head of Disney, Josh d'. Amaro. Between drama at the Bachelorette and the turbulence of major investment deals of OpenAI and Fortnite, it has been a rough week for Disney and a very rough first week for the new CEO. So, John, give us a brief bio of the new CEO and then let's get into the week. That was.

A (5:58)

Yes, Josh tomorrow took over the CEO role from Bob Iger on March 18, just last Wednesday. And you remember that succession has been a consistent challenge at Disney. Bob Iger originally stepped down as CEO of Disney in February 2020. He was replaced then by Bob Chapek, only for Iger to return from retirement less than two years later. Well, this time around, there were reportedly two internal employees that were seen as candidates to succeed Iger. That's Josh d', Amaro, the chair of Disney's experiences business. Think theme parks, consumer products, games and cruises, which we know have been doing well. And Dana Walden, she was co chair of the entertainment business. Think movies, TV and streaming. So in the succession battle, Josh prevailed. And just last week, he took over as CEO. And at the time, Josh presented a vision of connecting with fans by harnessing new technologies, specifically using Disney to not just show TVs and movies, but to engage the Disney faithful with games and interactive experiences.

C (6:55)

Well, I was listening to all of this and I've got to tell you, John, I was looking up the date Bob Iger. I grabbed my phone, I wasn't not paying attention, and I was frantically typing in when is the Ides of March?

A (7:06)

Yes.

C (7:06)

Right. So because just for the. I love these literary references. So the Ides of March is notoriously the day in the ancient Roman calendar marking the month's midpoint of full moon and the day that Julius Caesar was assassinated. Stabbed. Stabbed. So it's a date that is basically associated with not great things happening. And I've got to imagine that in Josh Tomorrow's mind, March 18th is the equivalent of the Ides of March for him because we're going to go through what on earth this poor guy has been dealing with since he stepped into the big seat. Let's start with Sora. So this was a major Disney investment in new technology designed to engage fans In a new way. You and I remember talked about this and there was this whole brouhaha about saying, is this the beginning of the end? Folks were saying Disney basically lending its ip, or rather licensing its ip, but blessing the use of AI with some of its key characters, beloved characters, was a moment that got a lot of, a lot of hearts, you know, beating very, very quickly.

A (8:01)

The question was, is this a, if you can't beat them, join them, or are you letting a fox into the hen house? Which is it going to be?

C (8:06)

That's exactly right. Well, all things have come to a bit of a stall, to say the least. And that's because OpenAI has decided to shut down Sora, which is a standalone text to video app. In the background here is in December, Disney had announced $1 billion investment in OpenAI. And again, that was in exchange for licensing its Disney characters to the service. So the kinds of thing that you could have done had this gone ahead was if you were a user, you could create a short video with a prompt like show Luke Skywalker having a sword fight with Jack Spar, by the way. I love that. But on Tuesday, this week. So yesterday, Sam Altman announced that OpenAI would in fact be shuttering its entire text to video capabilities. So shuttering Sora, and that's to focus on business and coding functions. It's really trying to double down on B2B. That's because of people like Anthropic have been showing a Gemini that that's doing very well, rather than all of the sort of direct to consumer capabilities. And he's doing that at OpenAI ahead of a potential IPO, which could be as early as the fourth quarter of this year. So he's, he's looking focus. Well, video generation took massive amounts of compute and power. I find this fascinating. So part of the thinking is here that it's not just about where your time and attention and your money goes. It is literally about where the tough stuff, the compute and the power, is going to fuel enterprise products instead going forward.

A (9:27)

Right, exactly. Maybe OpenAI is saying, how are we going to make money off of these Disney characters using all that scarce resources.

C (9:33)

Right, Scarce resources, exactly.

A (9:35)

So the Disney investment was unveiled in December, but appears that no money changed hands. The deal was never finalized. So that billion dollars is still in Disney's wallet. Disney released a statement last night saying, quote, as the nascent AI field advances rapidly, we respect OpenAI's decision to exit the video generation business and to shift its priorities elsewhere. We will continue to engage with AI platforms To find new ways to meet fans where they are while responsibly embracing new technologies that respect IP and the rights of creators. So that's going to be interesting where Disney goes from here. There are other companies that have AI video generation that they might be looking to partnering with. But this might also signal that for now, AI generated content may not be that threat that more traditional media fans have feared.

C (10:21)

Yeah, at least for now. The money and attention going elsewhere. So again, new CEO Josh d', Amaro, the, you know, the flagship AI partnership is now gone. Yes, Gone away. So what else could possibly have happened in Josh's first days? Well, let's take a look at Fortnite. Epic Games said that it would cut more than a thousand jobs after a drop in engagement for Fortnite, which is its flagship title. And by the way, that just shows the might and power of that one gaming franchise when you cut that many jobs after a drop in engagement. Extraordinary. Just to see what that signals.

A (10:55)

I'm not a gamer, but just reading about this, I understand that this is more of an online universe. And so these companies have to keep creating more and more content for those users to be engaged with, to spend money on, to capture their attention. It's not like in my day where you made one game and you had a feeding novelty.

C (11:11)

That constant change and that constant refreshing is really, really critical to keep.

A (11:15)

And apparently it's been stagnant.

C (11:17)

Exactly where Epic CEO Tim Sweeney said, quote, We've had challenges delivering consistent Fortnite magic. Market conditions today are the most extreme since the early days of the company founded in 1991. So why does Disney care, John?

A (11:33)

Well, Josh D' Amaro particularly cares because he was the chief architect before he had this role of CEO of the one and a half billion dollar Disney investment in Epic. And this was to lead to the creation of a whole new universe tied in Disney characters and stories. So just like we're talking about the sword fighting that might happen in Sora, this could be Captain Hook in Fortnite, you can play these different characters and skins. And so this partnership is still happening. It wasn't rolled back, but. And it's seen as a long term play. But the Epic layoff announcement highlights the stagnation of Fortnite that we talked about and underscores the challenges in the video game space. Specifically, another video game giant, Electronic Arts, laid off employees in September ahead of a purchase. They're being taken private for $55 billion.

C (12:17)

Yeah, I mean, this one's extraordinary. So Disney's investment in Epic had been seen as a real achievement. It was a feather in Josh Tomorrow's cap, specifically. And here's a nugget from a February 4 Wall Street Journal article about the succession rumors that were happen the time. So everyone was saying, who's going to replace Bob announcement days before the announcement. And the article says, quote, disney currently has a deal with Epic Games and doesn't want to do anything to take away from that relationship which Tomorrow oversees, according to people familiar with the situation. So cutting through that's code for a key factor in the succession plan was who was going to make sure that relationship panned out. So as we just take a step back, we've now talked about two SORA being shut down. I put that in not Josh d' Amaro's fault. Right. Fortnite and Epic Games. Not Josh d' Amaro's fault that that's happened. But you know, he's associated with it, right. And it's all optics. So number three, this one's really tough. And this definitely falls in the not Josh Tomorrow's fault bucket. Disney was excited to expand theme parks into certain geographies. And Abu Dhabi in the United Arab Emirates was a very hotly expected next step for Disney in moving into the Gulf region. It was announced last it's to be set Disney's seventh theme park destination, its first in the Middle East. And of course now, given the situation around Iran and the conflict in the Gulf, there hasn't been an explicit statement around whether this impacts the timing for what's going on at Disney. But we're going to have to wait and see how, how sentiment and investment sentiment pans out, you know, as that situation continues. So we're going to have to keep watching this one.

A (13:50)

And obviously, Josh does not have any control over geopolitical concerns, obviously. But it is interesting that he comes from theme parks and so that was part of his play. And then one final note, to pivot from experiences to entertainment, which is more of Dana Walden's lane because she was in charge of TV and the rival

C (14:10)

in the succession battle. Yes.

A (14:12)

So on Josh's second day on the job, Disney's ABC announced that the current season of the Bachelorette will be pulled after the titular Bachelorette had video surface of her engaging in disturbed domestic behavior. And we're not a Rewatch podcast, so I'm not going to get into the details there. But in addition to the Bachelorette being pulled, Disney's Hulu also put season five of the Secret Lives of Mormon Wives on hold. So that's two big properties. And to put some numbers around it, the Hollywood Reporter estimates that ABC will lose about $30 million due to the Bachelorette cancellation. And that doesn't include them now having to figure out another show or programming to put in that primetime spot.

C (14:49)

So shares in Disney, down 3% since last week, down 15% year to date. But it's really that down 3% as this is unfolded, down nearly 50% over the past five years. So all eyes are on. This is meant to be a pivotal, pivotal moment for Disney. I got to tell you though, if you're a new CEO, if he gets through this, if he sleeps and works out and manages to just get through the stress of this, I mean, this all may as well come at the beginning, right? Because then he's really been dealt a hand and he can be the guy who turns it around.

A (15:18)

I think, you know, on his first days in the chair, he said his charge is to turn around Disney. What is Disney? There's so many other streaming things. So instead of just competing in streaming, they're trying to make it interactive, they're trying to have games, they're trying to have user generated content.

C (15:33)

Huge lift.

A (15:34)

And so games, user generated content. It's taking a hit.

C (15:38)

It's taking a hit. But we also can't leave succession quite yet because John, I have to ask you, have you been watching the documentary on the Murdochs, the four episode? Is it on Netflix?

A (15:47)

It's on Netflix and I have completed three out of four episodes.

C (15:50)

I can't. So I watched the whole thing and it is just extraordinary. I could, you know, I rarely give show recommendations, but this one is absolutely, you know, binge watch it. It's super fun. I'm jealous. You've got the fourth one to look forward.

A (16:02)

Oh, good.

C (16:02)

Yeah, you've got, you've got something to look forward to.

A (16:04)

And Celebrity Sighting in the Wild. Two years ago I saw Rupert Murdoch leave the Fox News offices up on 6th Avenue. Lots of security, a private car, but it was one of those things we're like, oh, yo, that's like one of the most famous people in the world.

C (16:17)

Oh, did you shout? Oh yeah, one of the most. No, of course you didn't. But that's a very interesting perspective. Thank you, John. We're going to take a break and when we come back, spin through the headlines that are moving the markets today. John, are you a multi hyphenate?

A (16:30)

Yes, I'm a podcast producer and an award winning chef.

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C (17:30)

is, the closing bell 4pm on the east coast and the market's wrapping up for the day. We don't have a ticker tape, but we're going to throw it over instead to our human ticker. That's our producer, John the S&P 500

A (17:40)

finished up half a percent today, the nasdaq up over 3/4 of a percent and the Dow finishing up 2/3 of a percent. Some other market headlines, including this developing story. Earlier today a jury in Los Angeles found Meta and Google's YouTube liable in a high profile social media addiction trial, determining that the companies knew the design of their platforms were dangerous and failed to warn users of those dangers. The Los Angeles suit could be a bellwether for thousands of other lawsuits that have made similar accusations against social media platforms. A Meta spokesperson said the company respectfully disagrees with the verdict and the company is evaluating legal options.

C (18:18)

Interesting one there because Meta gets so much attention for this kind of thing. The fact that YouTube came up in this Los Angeles ruling particularly caught my eye because it's sort of expanding the conversation a bit. The other thing is this ruling comes on the heels of another major decision that was yesterday when jurors in New Mexico found Meta knowingly put children at risk and misled users about ACT app safety. Well, in that case, Meta was ordered to pay $375 million in damages, and that was based on the calculated number of violations there. Again, Meta has said that it plans to appeal well onto the world of travel because possibly there's only very few people cheering the long lines caused by an unfunded tsa and those would be perhaps shareholders in the company. Clear, the identity verification platform that has its own lanes in many airports, has been downloaded nearly 290,000 thousand times since the start of March as travelers felt the impact of these government shutdown related disruptions.

A (19:15)

Clear stock ticker U Y O U is up about 60% over the last month and last November in the midst of airport disruptions caused by that government shutdown. You spoke to Clear CEO Karen Simon Becker on this show and I found it really interesting that she was talking about the company's expansion into the World cup coming up, that they're going to provide security and it's a really great episode. I recommend that people check it out. Just look up Brew Markets Clear.

C (19:42)

Yeah, and I'll post on my social as well because it's a lot of fun. Also, for those of you struggling, I have a nugget. So I remembered specifically from that interview, I remember the CEO saying, well, not enough people know about Clear Concierge, which is where you pay a fee and then somebody from Clear will come meet you and escort you to the front of the line. So my partner was traveling, he was in Houston and he texted me and he goes and 240 minute wait to get through. And I said, I interviewed the CEO of Clear check out Clear Concierge. He said it was amazing. John. They met him curbside, they took him to the front of the line and he actually had a manager experience. So I was very grateful to hear that. It's incredible.

A (20:15)

It's a small amount to pay to make your flight and be disliked by everyone.

C (20:19)

Yeah, it's a be disliked pay for the hatred. Exactly. Well, finally, shares in EchoStar are lifting off with the satellite communications provider Ticker Sats seeing its stock jump nearly 11% after the Information reported that Elon Musk SpaceX could file for an IPO as soon as this week. EchoStar has around a 3% stake in the aerospace company. So if the IPO goes through, it could see a valuation boost by virtue of the monetization or real mark to market of that stake. So an active week for the company that was added to the S P500, by the way, on Monday. Busy week? Not as busy as Josh tomorrow's, but it's been a long one. That's it for today's Brew Markets Daily.

A (20:59)

Brew Markets Daily is hosted by Anne Barry and produced by John Coteau, Tark Abdelatif, Avani Laroya and Emily Millard. Technical direction by Luis Farias Brittany To Taco is our audio engineer and the president of Morning Brew, Inc. Is Devin Emery.

C (21:11)

Wake up tomorrow with the Morning Brew newsletter and tune in to Neil and Toby on Morning Brew daily. Morning. See you back here tomorrow. Same time, same place.

E (21:29)

I didn't expect this. TikTok has more short dramas than I could ever finish. Each episode leaves you wanting the next. Download TikTok now and try it.