Slate Money – The May the Fox Be With You Edition

December 16, 2017
Host: Felix Salmon and co-hosts
Podcast Theme:
A deep-dive into Disney’s historic $66 billion acquisition of most of 21st Century Fox, the shifting landscape of the entertainment industry, Apple’s low-key but telling purchase of Shazam, and a primer on the launch of Bitcoin futures and what it means for the cryptocurrency.

Main Topics Covered

1. Disney’s Acquisition of 21st Century Fox
2. Apple’s Purchase of Shazam
3. The Birth of Bitcoin Futures and the Concept of Contango
4. Numbers Round: Business Oddities and Economic Statistics

1. Disney Buys Fox: The New Shape of Entertainment

(Discussion begins ~02:10)

• The Deal: Disney acquires most of 21st Century Fox for $66 billion (including debt), marking a tectonic shift for Rupert Murdoch and the global media ecosystem.

  • “Those of us who grew up in the shadow of Rupert Murdoch, it’s almost impossible to overstate how big of a deal this is. This is Rupert selling off substantially all. I mean, he’s keeping like $10 billion worth of stuff…but he’s basically selling the vast majority of what he owns.” — Felix Salmon (02:22)

• Murdoch’s Motives:

  • Focused on remaining in news and sports, where he sees his legacy and passion.
  • Sheds profitable entertainment businesses, supposedly to double down on political and news influence.

• What Disney Gets:

  • Profitable franchises: The Simpsons, X-Men, Family Guy, and notably full control of the Marvel universe.
  • Star TV (India) and Sky (Europe) provide international reach, positioning Disney as a true global content powerhouse.
  • Regional sports networks, complementing ESPN for sports streaming expansion.

• Streaming Wars:

  • Disney now controls Hulu and much of the streaming landscape content, challenging Netflix/Amazon.
  • “The nice thing about Hulu is that it wasn’t what people call a walled garden. They kind of had content from everybody…Whereas Netflix is more becoming a platform for Netflix’s original productions.” — Host (06:33)
  • Disney likely to use Hulu for its own content or fold it into existing efforts, removing Fox/Disney content from rivals.

• Scale and Monopoly Concerns:

  • The entertainment industry is consolidating: “The need for insane amounts of scale has never been bigger.” — Felix Salmon (05:43)
  • Debates whether Disney is too powerful, even without a legal monopoly: “At some point, does a company like Disney become too powerful just in terms of its heft as this entertainment conglomerate?” — Co-host (12:48)
  • Counterpoint: Franchises won’t always dominate, although international markets and instant recognition (e.g. in China) currently favor sequels and brands.
  • “You need instant recognition. In China, that’s where sequels come in…by just glancing at a poster, it’s like, oh yeah, I recognize those characters.” — Host (13:49)

• Vertical vs. Horizontal Mergers:

  • New concerns about ‘vertical’ integration—content creators buying distribution (streaming) platforms.
  • Possible that Disney’s streaming move is ‘pro-competitive’ versus Netflix and Amazon, though with all the biggest franchises.

Standout Quotes

• “Disney is very good in movies… What they don’t really have is all of the other stuff people like to watch on TV… That’s what they’re getting with Fox.” — Felix Salmon (08:00)
• “I don’t think there’s more growth in news than there is in entertainment…Because news by its nature is basically a national industry, while entertainment is basically an international industry.” — Felix Salmon (04:57)
• “At the same time you’re staring at…a company that owns almost every important franchise film right now…does a company like Disney become too powerful?” — Co-host (12:53)

Key Segment Timestamps:

• [02:10–16:38] – Deep-dive into Disney/Fox deal, Hulu, streaming, monopoly debates, international scale.

2. Apple Buys Shazam: Data, Not Discovery

(Discussion begins at 16:38)

• The Acquisition: Apple acquires UK-based Shazam for $400 million—a modest sum given its prominence as a British tech success story.
• Shazam’s Real Value:
  • No longer about music purchases, but about music trend data and consumer insights.
  • “The real value of Shazam is in providing consumer data to people in the music industry. And Apple is a huge player…and wants to be a huger player.” — Felix Salmon (20:01)
• Synergies with Apple Music:
  • Data helps Apple compete with Spotify, providing insight into trends and user preferences.
  • Buying Shazam curtails links/referrals to Spotify, a poke at their streaming competitor.
• Financial Context: Purchase is small for Apple, and possible due to offshore cash reserves.
• Reflection on Apple’s Software Efforts:
  • Despite owning the hardware and app ecosystem, Apple Music lags Spotify, highlighting that Apple “actually [is] not being good at software.” — Felix Salmon (24:43)

Notable Quotes:

• “It’s a consumer data company, not a music discovery company… they’ve bought a data set.” — Felix Salmon (20:51)
• “Apple Music’s not doing badly, but… it’s growing more slowly than Spotify, which… is like, how is this possible?” — Felix Salmon (23:28)

Key Segment Timestamps:

• [16:38–25:24] – Shazam’s business model, Apple’s ambitions, Spotify rivalry, Apple’s software shortcomings.

3. Bitcoin Futures & Contango Explained

(Discussion begins at 25:24)

• Bitcoin Futures Debut:

  • Chicago Board Options Exchange launches Bitcoin futures, providing a way to bet on the future price of Bitcoin.
  • “The bitcoin futures market is like one week [old]… the fact that it exists is kind of astonishing.” — Felix Salmon (25:54)

• Futures Market Structure:

  • Normally composed of “hedgers” (with real exposure) and “speculators”; Bitcoin market is mostly the latter (“not what we refer to as ‘smart money’”). — Ann (26:35)

• Contango and Arbitrage:

  • Futures curve currently in “contango”—future contracts priced above spot market.

  • Usually, arbitrageurs exploit these gaps, forcing convergence, but the Bitcoin market’s volatility and lack of institutional participation makes this challenging.

  • “The price of Bitcoin next month is higher than the price of Bitcoin today…in the futures market that’s not how it works.” — Felix Salmon (27:38)

• Does a Futures Market Change Bitcoin?

  • Some ratification of Bitcoin as an asset class, but questions whether it’s commodity, currency, or something else.

  • Debate over Bitcoin’s store of value: no intrinsic use (unlike oil or wheat), more akin to gold—value based on social consensus.

  • “The value for Bitcoin is a largely arbitrary number… for the blockchain to work…all you need is that number is positive enough that you can keep on mining.” — Felix Salmon (41:26)

• Liquidity & Speculation:

  • Will futures invite rational pricing/shorting or more mania?

  • Barriers: Expensive shorts, technical limits, circuit breakers, Bitcoin trades 24/7 but futures exchanges do not, leading to potential disconnects.

  • “It is going to be very expensive and difficult to put on shorts. So… you’re only going to have people putting on longs and that is just going to create more mania.” — Ann (40:07)

Notable Quotes:

• “[Bitcoin] started off as digital gold, that was what it was… mirroring it [gold] as this weird collective delusion that people are sort of agreeing to use.” — Co-host (36:14)
• “I think what we’re seeing here is yet another example of Apple actually not being good at software.” — Felix Salmon (24:43)

Key Segment Timestamps:

• [25:24–41:26] – Bitcoin futures, contango, arbitrage, asset classification debates, the challenges of speculation and value.

4. Numbers Round: Quirky Business and Economic Stats

(Segment begins at 42:21)

• Contact Lens Startup Valuation:

  • Hubble, the “Warby Parker of contact lenses,” valued at $200 million—but allows orders with fake prescriptions.
  • Debate over dangers, regulation, and Silicon Valley’s casual approach to compliance.
  • “If you’re a company in the business of fulfilling prescriptions, you should do it legally.” — Co-host (44:27)

• German GDP and Berlin’s Effect:

  • “GDP per capita would be 0.2% higher if Berlin were not in Germany.” — Ann (45:09)
  • Discussion about Berlin as an inefficient but cultural and startup-rich city—contrasts to other European capitals.

• Greek Bonds:

  • Yield falls under 4% for the first time; a sign of Eurozone stability and the “extend and pretend” approach working for now.
  • “There was a lot of talk around 2011 saying you can’t kick the can down the road forever. Turns out, yeah, in fact, you can.” — Felix Salmon (50:21)

Key Segment Timestamps:

• [42:21–51:00] – Numbers round with regulatory, economic, and European anecdotes.

Conclusion

In this lively, insight-packed edition, Slate Money’s hosts dissect the seismic power moves by Disney and Apple in media and tech, unpack the emerging Bitcoin futures market with humor and clarity, and challenge assumptions about monopolies, competitive advantage, and the murky value of digital and real-world assets. Perfect for anyone seeking clarity on the changing entertainment and financial landscape at the close of 2017.

Notable Quotes (with Timestamps)

• “Those of us who grew up in the shadow of Rupert Murdoch, it’s almost impossible to overstate how big of a deal this is.” — Felix Salmon, [02:22]
• “The need for insane amounts of scale has never been bigger… you have to be truly enormous.” — Felix Salmon, [05:43]
• “The real value of Shazam is… in providing consumer data to people in the music industry.” — Felix Salmon, [20:01]
• “I think what we’re seeing here is yet another example of Apple actually not being good at software.” — Felix Salmon, [24:43]
• “The value for Bitcoin is a largely arbitrary number, and in many ways, for the blockchain to work, all you need is just that arbitrary number is positive enough that you can keep on mining it.” — Felix Salmon, [41:26]
• “There was a lot of talk around 2011 saying you can’t kick the can down the road forever. Turns out, yeah, in fact you can.” — Felix Salmon, [50:21]

No advertisements or non-content segments included. For anyone who missed the episode (or wants a refresher), this summary captures the essential arguments, the engaging style, and the unique chemistry of the Slate Money hosts as they tackle the headlines.