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AppleTV+ is Losing $1B/Yr & Boeing Banks Big Defense Deal
00:28:35
Apple doesn’t mind losing billions & Boeing gets a much-needed win
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- [00:01]
Toby Howell
This episode is brought to you by Progressive Insurance. Fiscally responsible financial geniuses, monetary magicians. These are things people say about drivers who switch their car insurance to Progressive and save hundreds. Visit progressive.com to see if you could save Progressive Casualty Insurance Company and affiliates. Potential savings will vary. Not available in all states or situations.
- [00:30]
Neal Freyman
Good morning, Brew Daily Show. I'm Neal Freyman.
- [00:33]
Toby Howell
And I'm Toby Howell.
- [00:34]
Neal Freyman
Today, Apple may want to sever itself from its streaming service, which is losing $1 billion each year.
- [00:40]
Toby Howell
Then does the BPM of Lady Gaga's new album mean we're on the verge of a recession? We'll dig into the hashtag recession indicator memes sweeping the Internet. It's Monday, March 24th. Let's ride.
- [00:57]
Neal Freyman
Hope you all have had a great weekend. The first weekend of spring. Odds are you didn't make it to a movie theater. Disney's Snow White live action remake pulled in just $43 million in its domestic box office debut, a really disappointing haul for a film the company spent nearly $300 million to make. In fact, the controversy plagued Snow White posted the worst opening weekend of all Disney live action remakes. Surely this will be the end of these remakes, Toby, I mean, I think you're spot on.
- [01:26]
Toby Howell
Despite the controversies, people might just be a little these things. I mean, how many Uncanny Valley CGI resurrections of our childhood favorites can the market stand? Disney is hoping at least one more though, because we have a live action Lilo and Stitch coming down the pipeline in May. So we'll see if this tepid box office reaction was just a Snow White thing or if it speaks to a broader live action slowdown. Now, a quick word from our sponsor, Sophos. Neal, how good are you at solving problems before they actually become problems?
- [01:57]
Neal Freyman
I'm more of a wait until things are on fire kind of guy. Probably not ideal.
- [02:01]
Toby Howell
Unfortunately, I am the same. If I see my phone case start to break down, do I order a new one? No. I convince myself that I can go case free. In cybersecurity, though, waiting until there's a fire means you're already too late. Scrambling to fix a breach is way worse than preventing it in the first place.
- [02:18]
Neal Freyman
Luckily, with Sophos, there's no need for scrambling. They take a proactive approach, using over 500 cybersecurity experts to identify and eliminate threats before they impact your business.
- [02:27]
Toby Howell
With Sophos, you're in complete control with the ability to seamlessly manage your security and integrate hundreds of tools so issues get solved before there are even issues.
- [02:36]
Neal Freyman
It's cybersecurity designed around prevention, not reaction. Also by a phone case. You're stressing me out.
- [02:42]
Toby Howell
I'm married to the no case life these days. But don't be like me. Be proactive, stay protected and head to sophos.com to secure your business before trouble arises. That's S O P H o S Getting the Internet to agree on anything other than clowning that one dude's morning routine is a tough proposition, but right now a lot of terminally online people are convinced of one thing we are heading towards a recession. Why? It's not that any specific economic data points are flashing warning signs. Instead, the Internet's prognosis is based on recession memes. Search for hashtag recession indicators on social media and you might see people posting about Lady Gaga's new album, giving recession pop vibes, or pointing to Jason Sudeikis redonning his mustache for a fourth season of Ted Lasso as signs that times are getting tough. While economists may look at yield curves in GDP growth, normal people half jokingly and half seriously take their cues from cultural trends like how many people are spring breaking in Houston versus more exotic locales. At the core of these memes is a divergence in so called soft data like consumer surveys versus hard data like jobs numbers, which are painting contrasting images of the economy right now, Citigroup's chief U.S. economist told Bloomberg. If you just look at hard data, you're looking at what happened a month ago, sometimes even two months. Surveys are telling you what people are thinking about the future. So Neil, while the Internet has surfaced these semi serious data points that do speak to a wider anxiety people are feeling. Hard economic data like employment numbers, manufacturing output and inflation suggests the economy is in a relatively healthy spot.
- [04:20]
Neal Freyman
First of all, no shade on Houston. It seems like a perfectly fine place to go on spring break. They just had the world's largest rodeo there this past weekend and a couple weeks ago. There is a long tradition of economists not just using hard data, but also using behavioral measures to indicate whether the economy is growing or whether the economy is slowing. There's something called the Lipstick index which is suggest that people buy more lipstick when things are in a downturn because it is just that little luxury that you can afford. Fed Chair the former Fed Chair Alan Greenspan also coined the Men's Underwear Index to find out whether how the economy is doing by gauging men's underwear sales. There's also the Hemline index theory which posits that skirt lengths get longer during a downturn. So this is as old as the economics profession. And Field itself is looking at certain societal and behavioral attitudes and consumption trends to see how the economy, economy is going. Music has been often thrown out there and I guess this Lady Gaga album, people are pointing to that as one reason why they're feeling a little more uncertain about the economy.
- [05:28]
Toby Howell
Yeah, a big one is music because when times get a little tougher, we tend to prefer music that is slower, more introspective, more romantic, has more meaningful lyrics. When times are good, people prefer more upbeat songs, although it's not a perfect system whatsoever because the Top song in 2008 was Low by Flow Rider. So maybe people just thought I was talking about the stock market. But you are right that there are some uncommon recession indicators that people do like to look at. A lot of these are actual memes, like the Lipstick index, the headline index. There is actual economic theories behind those things. But for instance, people saying Will Smith is getting back in the studio to drop a new album, saying times must be tough, as if the Fresh Prince of Bel Air is, you know, getting behind the mic again. So I do think that there is truth in some of these because it does speak to just broader cultural feelings that people are expressing online. But yeah, obviously when you look at harder data, we can point to a lot of data points showing that the economy is doing just fine right about now.
- [06:29]
Neal Freyman
One area where you're actually seeing a significant slowdown in consumer spending is snacks. I don't know, should we just coin the snacks recession indicator? But to a T? All of these big consumer food companies have come out in the past two weeks saying we're seeing a big snacking slump. US convenience store sales are down 4.3% over the past year. General Mills has come out and said people are buying less Cheerios and our snacks, JM Smuckers as well. Sales of their sweet baked snacks fell 7% in the most recent quarter. You go down the line. Campbell's is also forecasting a big snacking slowdown. So maybe you just, maybe you just learned the new. The new indicator right here, which is a snacking slump. Apple TV plus Severance just wrapped up one of the buzziest seasons of television this year. But buzz isn't translating to profits. A new report from the Information revealed that Apple's streaming service is losing more than $1 billion annually six years after it was created. The report also found that Apple TV plus has just 45 million subscribers, far lower than streaming competitors like Netflix and Disney Plus. For comparison, Netflix has over 300 million paying subscribers and Disney plus has 100, 126 million. Now, some context is needed. Apple overall is one of the most profitable companies on earth with net income of nearly $100 billion last year alone. A $1 billion loss will hardly make a financial dent. Plus, it's not out of the norm for streaming services to be unprofitable as they ramp up. Netflix, Disney plus, Peacock and others all lost billions of dollars for years until they started to make money. Still, given Apple TV plus is shockingly bad performance. The entertainment industry is asking, why does this exist? Why is Apple lighting money on fire when there isn't a clear business case? Even competitors are throwing shade. In a recent interview, Netflix co CEO Ted Sarando said, I don't understand it beyond a marketing play, but they're really smart people. Maybe they see something we don't.
- [08:34]
Toby Howell
Yeah, what they're saying right now is just money going up in flames because 45 million subscribers isn't bad. Obviously it's not Netflix numbers, obviously it's not Disney plus numbers. But the issue is that Apple just spends so much dang money on their content, $5 billion production budget every year. They finally are pulling that back a little bit. They cut off 500 million from that budget, but they just can't do anything except for make the highest quality prestige tv. And I'm just going to go through some of the names that have been associated with Apple shows. Natalie Portman had an Apple show. Harrison Ford has an Apple Shard, Austin Butler, Barry Keoghan, Cate Blanchett, Jake Gyllenhaal, Colin Farrell, Brie Larson. These are the A listers of A listeners. The problem is, is that if I stopped you and say, you know, you have to answer this question correctly or else you probably wouldn't be able to tell me what any of those stars, what shows they actually, you know, starred in. So it's just indicative of the entire. It's condemning the entire project. If you are having these great shows coming out and you have 45 million subscribers, but none are really leaving a lasting impact that you would hope given the monetary output that you are expending here.
- [09:40]
Neal Freyman
So there is a theory why Apple has rolled out a streaming service. It's no secret. It's basically the Costco hot dog and soda idea where you get people into your ecosystem so they buy other products. The goal for Apple is obviously to sell as many smartphones and computers as possible. The theory is that if you get people hooked on your streaming service, then they will buy your gadgets as well. The thing is that hasn't necessarily panned out or actually we don't know because according to this information report, Apple doesn't have the data to show whether its streaming subscribers are buying their products or staying within their ecosystem. So they are living in this foggy situation that no one has much clarity on. The fact that they don't have data on this is is quite damning because that is the first thing you'd want to check whether you're streaming service loss leader. Costco Hot dog and soda combo is actually bringing people into your business.
- [10:38]
Toby Howell
It could just be a velocity issue too, because if you look at The Netflix top 10 page, that is a very fiercely fought over area of real estate that when you open the Netflix app, what's new and fun for this week? And that rotates through very frequently because just the sheer amount of output that Netflix is putting on their platform. If you look at Apple TV plus top 10 shows, you know it comes in at number one is severance. Number two is Ted Lasso though, which hasn't released an episode in almost two years now. So they went the like low volume, very high quality approach and maybe that's just not the correct approach to resonate with consumers. Moving on George Foreman, the heavyweight boxing champion turned grilling magnate passed away on Friday at the age of 76, leaving behind a legacy as unlikely as it is impressive. Foreman's exploits in the ring included an Olympic gold medal and an improbable return to his championship winning ways at the age of 45. But for a generation of home cooks, he was known more for the George Foreman Lean Mean Fat Reducing grilling machine than for his right hook. Introduced in the mid-90s, the portable grills small enough to fit on your kitchen counter, became synonymous with the charismatic boxing star. A generation of infomercial seared the catchphrase it's so good I put my name on it into the minds of many an aspiring panini maker. Since its introduction, over 100 million units have been sold worldwide. Part of the reason for its success was that it was truly a revolutionary product. Indoor grilling was not a thing before the Foreman Grill and its electric powered design pioneered the smokeless grill kitchen category. Despite Foreman's passing, the grill's legacy is still alive and well. Today. It remains a bestseller on Amazon and still bears the boxer's name. Neal Without a doubt one of the most successful celebrity endorsed products of all time.
- [12:28]
Neal Freyman
I'm not sure how many grills you find when you walk into the Smithsonian National Museum of American History, but you will find The George Foreman Grill. That's how iconic and important it was to American culture, especially in the 1990s when it came out. One of its biggest innovations, perhaps its biggest innovation was that the grooved grilling surface was pitched 20 degrees so that the fat would drain from the meat into this little plastic tray. We just showed a bunch of the infomercials here on the screen and you can just see all of these fat droppings into this tray that you're not eating. And a low fat diet was so big in the mid-1990s and it just hit perfectly resonated with consumers and and George Foreman was the perfect pitchman for this product. He put his and soul into it.
- [13:15]
Toby Howell
My favorite part of the Foreman Grill lore is the fact that the endorsement deal was originally offered to Hulk Hogan and he technically had a choice between endorsing a blender in a grill. But he didn't pick up the phone altogether. So salt and brands went on, which is the parent company of Foreman Grills, went and called George Foreman. He did pick up and he chose to chose to put his name on the grill. And my question is, have you ever heard of a Hulk Hogan blender? And the answer is no. Because this is Hulk Hogan saying, George got the lean mean grilling machine. I got a blender that when you put double a batteries in it, it would fart and then turn off. So it is just we were one phone call away for that being the Hulk Hogan lean mean fat reducing grilling machine. Instead it's the George Foreman grilling machine and it's made it all the way to, you know, the Smithsonian Museum. Up next, let's hit you with our winners of the weekend.
- [14:05]
Neal Freyman
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- [15:00]
Toby Howell
You rely on tech in your everyday life?
- [15:02]
Neal Freyman
I got a lot of health tracking apps running constantly to let me know how the body's holding up.
- [15:07]
Toby Howell
Technology can help us optimize some of life's most basic tasks. We've even got tech to help us brush our teeth.
- [15:14]
Neal Freyman
The Quip Ultra is a smart, sonic electric toothbrush that's packed full of some pretty cool tech you'll want to use daily.
- [15:20]
Toby Howell
It has a dynamic LED touch bar that lets you choose between 16 different brushing intensities from sensitive to deep clean for up to 15 times more plaque removal versus a manual toothbrush.
- [15:32]
Neal Freyman
And it's equipped with a timer that monitors your progress and your pressure to help you brush at just the right intensity.
- [15:38]
Toby Howell
You can even pair your Quip Ultra to the Quip app on your phone to get a personalized look at your.
- [15:43]
Neal Freyman
Oral health, still brushing the analog way? Get 15% off your Quip Ultra at getquip.com/brew and subscribe for auto shipping of brush pod refill heads to earn exclusive perks. That's GT quip.com/brew Welcome to Winners of the Weekend, the segment where Toby and I pick two things whose brackets are actually looking not so bad. I won the pre show George Foreman Grilloff so I get to go first. And here's a sentence you haven't heard in a long time. Boeing just scored a huge win. On Friday, President Trump announced plans for a next generation fighter jet called the F47, and Boeing was chosen to make it. We don't know the details of the deal, but estimates put the contract at an initial $20 billion, though experts say it could rise well above that. It is a much needed endorsement for the struggling Boeing, which lost nearly $12 billion last year amid a safety and confidence crisis around its commercial planes. Shares rose 3% on the news, while shares of Lockheed Martin, the contractor that lost to Boeing for the deal, fell nearly 6%. So what is the point of this ultra pricey F47? It's all about countering China in the skies. The jet is the centerpiece of the Air Force's next generation air dominance program, which seeks to replace the F22 Raptor with a plane that can give the US an aerial edge in a potential war in East Asia. It'll have greater range, enhanced stealth and better tech than the F22, all capabilities the Pentagon thinks are table stakes to confront China's increased military prowess. Toby is Boeing back?
- [17:22]
Toby Howell
I don't know. It's technically, you know, the doja vacation of the federal government is saying that we want to reduce the size of the, reduce the spend of the government. Yet here you are handing out this pretty large contract to Boeing. But then also the Pentagon has been pushing to give some new entrants like Andrew and Palantir more contracts related to software and drones. And yet here you are giving a very traditional defense contract in Boeing a very large deal. So Boeing is obviously very happy about it because it's a huge boost for its defense business that represents about a third of the company's revenues but has been like everything else in Boeing, a pretty money losing endeavor over the past several years because in classic Boeing fraction they've had, they've been locked into these money losing contracts, they've run into cost overruns and delays and whatnot. So definitely a win though. And you can see it just I encourage you to go look at the stock prices of Lockheed Martin and Boeing when this deal is announced because they diverge like Ralph Waldo Emerson to pass diverge in the woods with Lockheed dropping and Boeing going up because obviously $20 billion in upwards of $20 billion is a big deal for, for Boeing.
- [18:28]
Neal Freyman
Robert Frost called, he wants his, he wants his line back. Oh my God. There is greater scrutiny around whether manned or crewed aircraft are even viable or necessary in 2025 in this new age of warfare. Elon Musk has publicly campaigned against crude aircraft. He called them obsolete in the age of drones. The Russia, Ukraine war has really brought drones to the forefront. Some people in the military apparatus said we should be investing way more in drones, not in crewed aircraft. The Air Force Trump administration is pushing back to Secretary of Defense Pete Hex has say no, actually when we fight China, if we fight China, then crude aircraft like the F47 will be very critical, very critical for establishing air superior superiority to penetrate air defenses. So there is an internal debate about whether we should invest more in drones or whether we should invest more in these very high tech crude aircraft like the F47, like the F35, like the F22. And there is a lot of scar tissue from the F35 contract because those things are extremely expensive. They cost taxpayers $1.7 trillion. They cost about $80 million per aircraft. There have been a ton of delays, ton of technical difficulties, tons of cost overruns. And these fighters, the F47 are expected to be to cost way more than $80 million per aircraft.
- [19:53]
Toby Howell
My winner of the weekend is the IPO market because like a lean cuisine meal, pockets of it are starting to heat up even while the overall market remains a little chilly. AI infrastructure provider CoreWeave is set to debut soon by now, pay later. Giant Klarna finally put in its IPO filing last week, while everyone's favorite concert ticket op, StubHub also submitted for its filing last Friday. The flurry of activity breaks a lull for tech IPOs that dates back to late 2021, when rising interest rates and high inflation scared investors away from riskier assets. Many were hopeful that the incoming administration would usher in a better environment for public debuts, but that hasn't quite been the case so far due to the market roiling trade agenda. Still, promising debuts from Service Titan and Reddit in recent months have inspired some cautious optimism amongst investors with a trio of Klarna, core weave and StubHub on deck to test the level of Wall Street's IPO appetite.
- [20:52]
Neal Freyman
Yeah, let's start with StubHub. I mean interesting company that's been on an absolute rollercoaster over the past few years since COVID It was bought by Viagoga, which is a Europe ticketing company, for $4 billion in early 2020. I wonder what it would have fetched a few months later when no one was going out, no one was buying tickets. And then there was that huge roar back during the Eras Tour era when people were scooping up live tickets left and right. There are signs that the ticket and live industry live events industry is moderating a bit. So we'll see whether investors want to hop on the StubHub roller coaster because it could be a ride. Vivid seats which is arrival of StubHub may give an indication of how what the appetite is for this kind of company. Stock price has fallen more than 45% over the past year. It's reportedly seeking a buyer. So that's go to the StubHub S1 prospectus that I just gave you right there.
- [21:52]
Toby Howell
I mean I do think one StubHub needs to write a thank you note to Taylor Swift because 10% of the group's annual ticket sales came from 2023 eras tour so truly was one of those driving forces that turned around the prospects for this company. Another big name that I mentioned was Core Weave. Core Weave is looked at as this almost bellwether for the IPO scene. Basically what they do is that they operate and manage these massive chip farms that instead of outlaying all the money and buying your chips yourself, Core Weave will do it for you. So if you just want to train your data, you can say, hey Corey helped me train my data I don't want to do all the uptake in all the, you know, buying of these chips myself. And there's been few and far attempts of AI IPOs in this age we've entered. Obviously, Nvidia has been ripping, but that's been a public company for decades now. So it's really going to be one of the only data points we have to judge how the market feels about new AI companies. So people are going to be looking very closely at how Core Weave does and they expect it to be the biggest tech IPO of the year. They want to raise around $2.7 billion. So that will be a good proxy with how, how much, how hashtag back the IPO market really is.
- [23:01]
Neal Freyman
Yeah, I mean, Core Weave is a massive company. Is there what they want a valuation of around $35 billion? They've pretty much grown in lockstep with Nvidia because they've just hoovered up all these Nvidia chips. Nvidia owns a 5% stake in Core Weave. In 2024, sales jumped more than 700% to nearly $2 billion. Those are basically Nvidia numbers. So if you want another play similar to Nvidia and you want to ride with this, this AI roller coaster as well, then Corey is the company that can do that. 1. One problem with Corve is that it has, you know, only two main customers and one of them accounts for 60% of its revenue. That one customer is Microsoft. It's Monday, so here is your preview of the big events coming this week with the Fed meeting in the rear view. This week's economic calendar is a little lighter, but we'll get the monthly reading of the Fed's preferred inflation gauge, an updated look at consumer confidence, and a final reading of Q4 GDP plus earnings from the likes of Dollar Tree, Lululemon and Gamestop.
- [24:04]
Toby Howell
You can look at the Fed's preferred inflation gauge and updated consumer confidence. I will be looking at men's underwear sales and Will Smith's next album to see how strong the economy is. More reliable data points right there.
- [24:14]
Neal Freyman
And good news. The S&P 500 did break its four week losing streak last futures are up bigly this morning over reports that President Trump's planned tariffs, reciprocal tariffs on April 2, which he called Liberation Day, will be more narrow than expected. In culture. Speaking of Apple tv plus Seth Rogen's new show, the studio premieres on the service on Wednesday and it has nearly a perfect Rotten Tomatoes score. So that's pretty exciting. Over on Max Paul American, the new reality series following the lives of Jake and Logan. Paul drops on Thursday. And in music, new albums are out Friday from Lucy Dacus of Boy Genius and Mumford and Sons.
- [24:57]
Toby Howell
Oh man, our boxers used to launch these very successful infomercials supporting grills, and now they're dropping reality TV shows over on max. How far we've risen or fallen, I'd say I don't know. There's something there.
- [25:09]
Neal Freyman
And in sports, baseball's opening day is on Thursday with 28 of the 30 teams playing on the unofficial start of spring. The season soft launch last week with two games in Tokyo between the Dodgers and the Cubs, which highlighted the booming popularity of baseball in Japan. 25 million people watch the Tokyo series in Japan, bigger than any American baseball audience since Game 7 of the 2017 World Series.
- [25:34]
Toby Howell
Some people were a little upset that MLB, America's pastime, had its opening day in Japan. But you look at these numbers and you see exactly why the league did it. And it looks like it was completely worth it because those numbers are eye popping.
- [25:47]
Neal Freyman
And Shohei Ohtani, the hometown boy, put on a show. March Madness is rolling on the men. Cake off Sweet 16 games starting on Thursday while the women's begin the sweet 16 on Friday. Toby, how's your bracket looking?
- [26:00]
Toby Howell
I got seven of my elite eight still alive. My final four is looking good as well. But I do just want to give a shout out to our executive producer Emily for cooking on the women's side of things. She got 31 out of 32 games correct in the first round. I was almost calling up Warren Buffett who has that famous $1 million bet that he actually reduced to if you get the entire first round correct. Emily, you were very close to doing that. So shout out to Emily. And also congrats to your Maryland Terrapins for pulling it out yesterday.
- [26:30]
Neal Freyman
Let's wrap it up there. Thank you for starting your morning with us and have a wonderful start to the week. For any questions, comments or feedback, send an email to Morning Brew daily@morning brew.com let's roll the credits. Emily Milian is our executive producer and you can go to her with any college basketball questions. Raymond Lu is our producer. Olivia Graham and Olivia Lake our our associate producers. Uchenawa Ogu is our technical director. Scoops Dardus is on audio hair and makeup has decided Dairy Queen did not travel. Devin Emery is our chief content officer and our show is a production of Morning Brew.
- [27:04]
Toby Howell
Great show today, Neil. Let's run it back tomorrow.
- [27:13]
Neal Freyman
I'm CNN tech reporter Claire Duffy. Claire Duffy was I cover artificial intelligence and other new technologies for a living, and even I sometimes get overwhelmed trying to keep up with it all. So I'm starting a new show where together we can explore how to experiment with these new tools without getting played by them. It's called Terms of Service. This technology is so crazy powerful. Follow CNN's Terms of Service wherever you get your podcasts.