Morning Brew Daily: Comcast Dumps Struggling Cable Biz & Is Target in Trouble?

Release Date: November 21, 2024
Hosts: Neal Freyman & Toby Howell
Description: Morning Brew Daily brings you the latest news on business, the economy, and everything else you need to start your day with wit and insight.

McRib's Comeback and the "McRib Effect"

Timestamp: [00:53] – [02:11]

The episode kicks off with an exciting update from McDonald's: the return of the iconic McRib sandwich on December 3rd. Neal Freyman highlights the sandwich's sporadic availability, noting, “The McRib wasn't around in 2023 at all and was supposed to be on its Farewell tour in 2022” (00:53).

Toby Howell introduces an intriguing concept called the "McRib Effect", referencing an analysis from Dollars in Data. He explains, “when the McRib is available, the S&P 500 has a higher average daily return than days when it's not available” (01:26). This correlation suggests that the sandwich's return might have a surprising impact on the stock market, although Toby wisely cautions, “correlation does not equal causation” (01:50).

Comcast's Strategic Spin-Off of Cable Networks

Timestamp: [03:36] – [07:02]

The hosts delve into significant changes within Comcast, which is spinning off most of its cable television networks into a new publicly traded entity named SpinCo. Channels such as MSNBC, CNBC, and USA Network are among those being shed, along with digital properties like Fandango and Rotten Tomatoes. Interestingly, Bravo remains with Comcast, signaling confidence in its enduring popularity.

Neal Freyman points out, “Cable TV is a dying business, but even in a shrinking industry, scale matters” (04:15). The move to shed cable networks is driven by a decline in cable subscriptions, which dropped by 4 million in the first half of the year. Toby Howell adds that Comcast might be offloading "problem assets" and suggests, “This is just the start of some M&A activity in the future” (06:03).

The discussion highlights potential repercussions for the broader media industry, questioning how giants like Disney, Warner Brothers Discovery, and Paramount will respond to Comcast's aggressive strategy.

DOJ's Antitrust Case Against Google: The Future of Chrome

Timestamp: [07:02] – [10:48]

A major segment of the episode focuses on the Department of Justice's (DOJ) antitrust case against Google. The DOJ has proposed a groundbreaking measure: forcing Google to sell its Chrome browser to dismantle what it considers an illegal monopoly in internet search.

Neal Freyman outlines the potential ramifications: “If forced to hive up Chrome, Google would have far less visibility into the activity from users who sign into the browser” (08:40). This move could significantly impact Google’s advertising revenue, which relies heavily on user data from Chrome.

Toby Howell discusses Google's defense, emphasizing that Chrome serves as a "loss leader" that feeds into their profitable search and advertising services. He notes, “Google's lawyers say that spinning off Chrome would actually harm consumers because there are very few other companies out there that have the scale to maintain a secure browser” (09:39).

The hosts also speculate on potential buyers for Chrome, including OpenAI, and ponder the influence of the incoming Trump administration on the case, suggesting a possible shift in regulatory approach.

Target's Struggling Q3 Earnings Amid Retail Competition

Timestamp: [10:48] – [14:00]

Neal Freyman and Toby Howell turn their attention to Target's disappointing Q3 earnings. Target's stock plummeted by 21%, hitting a 52-week low after sales missed Wall Street expectations by 20%. The company also downgraded its full-year profit guidance, reversing previous optimistic forecasts.

Neal explains, “Target's bread and butter is discretionary items... but the number of people paying for Cable drops every year” (12:28). Unlike its competitor Walmart, which saw positive results in its discretionary division thanks to a strong grocery business, Target has struggled to maintain its market position. Toby Howell adds, “Target has been trying everything. They've been throwing the kitchen sink at this” (13:25), referencing Target's extensive price cuts on thousands of items to drive foot traffic, which unfortunately hasn't translated into sufficient revenue growth.

The discussion underscores the broader retail industry's challenges, contrasting Target's struggles with TJ Maxx's success, which reported strong holiday sales, showcasing the varied landscape of consumer behavior and retail strategies.

Neil's Numbers: Art, Real Estate, and Canine Favorites

Timestamp: [15:11] – [23:26]

In the much-anticipated "Neil's Numbers" segment, Neal shares three fascinating statistics:

1. $6.2 Million for a Duct-Taped Banana

   • A conceptual art piece featuring a banana duct-taped to a wall sold for $6.24 million at Sotheby's, purchased by crypto entrepreneur Justin Sun. The original banana was a simple fruit bought for 35 cents, highlighting the art world's quirky valuations (15:11).
   • Toby Howell humorously suggests, “If you have to keep the original banana taped to your wall, that is performance art” (18:55).

2. Via Monte Napoleon: Europe’s Priciest Shopping Street

   • Via Monte Napoleon in Milan has been named the most expensive shopping street in the world, surpassing New York's Fifth Avenue with prices at $2,047 per square foot, up 11% from the previous year (20:54).
   • Toby Howell remarks on the staggering costs, “If they are priced at Via Monte Napoleoni prices, I'd be looking at paying a nice one and a half million dollars a year in rent” (21:30), emphasizing the exclusivity and high demand driving these prices.

3. Lamb Chop Mania Among Dogs

   • Stuffed versions of the classic puppet Lamb Chop have become the most popular plush dog toys at Chewy's, second only to balls.
   • Toby Howell explores why these toys are beloved, noting their versatility for different dog personalities: “You can cuddle it... or rip it apart” (22:32).
   • Neal Freyman adds, “The fruit does have a pretty tangled history... or you can just say this is a banana stuck to a wall” (19:49), highlighting the debate over the toy's appeal.

Final Headlines: Federal Workers, Nvidia, Adani Fraud, and Movie Musicals

Timestamp: [24:11] – [29:44]

Federal Workers Back to the Office

Neal Freyman and Toby Howell discuss an ambitious plan by Elon Musk and Vivek Ramaswamy to mandate federal workers return to the office full-time. Their proposal includes banning remote work for the nation's 2.3 million federal employees, potentially igniting fierce battles with unions (24:11).

Nvidia's Earnings and Blackwell Chip

The episode covers Nvidia's recent earnings report, which showed nearly 100% revenue growth compared to last year. However, the stock remained largely unchanged due to a lower-than-expected Q4 sales forecast. The spotlight is on Nvidia's next-generation Blackwell chips, touted as “incredible” and essential for training and running large language models (25:15).

Gautam Adani's Fraud Accusations

A significant development involves Gautam Adani, chairman of the Adani Group, facing U.S. charges for allegedly orchestrating a massive bribery scheme. Prosecutors accuse Adani of sending over $250 million to Indian officials to secure solar energy contracts, adding to previous allegations of stock manipulation and accounting fraud (26:07).

Wicked Movie Sing-Alongs

The hosts touch on audience reactions to the movie musical Wicked, where some viewers sing along loudly, disrupting the experience. Neal Freyman muses, “It would just be hard to have that self-restraint” (28:18), contemplating whether interactive versions of the film might cater to different viewing preferences.

Conclusion

Neal Freyman and Toby Howell wrap up the episode by reflecting on the day's highlights and inviting listeners to engage with the show. They emphasize the importance of staying informed amidst a dynamic and often unpredictable business landscape.

Notable Quotes:

• Neal Freyman: “The McRib wasn't around in 2023 at all and was supposed to be on its Farewell tour in 2022” (00:53)
• Toby Howell: “Correlation does not equal causation” (01:50)
• Toby Howell: “This is just the start of some M&A activity in the future” (06:03)
• Neal Freyman: “If forced to hive up Chrome, Google would have far less visibility into the activity from users who sign into the browser” (08:40)
• Toby Howell: “Target has been trying everything. They've been throwing the kitchen sink at this” (13:25)
• Neal Freyman: “The fruit does have a pretty tangled history... or you can just say this is a banana stuck to a wall” (19:49)

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