LT Weekly: June 21, 2024

Bridgerton, Money Heist, Stranger Things and Squid Games are just a few of the many original Netflix shows that have amassed a massive fanbase. Now, in what seems a move straight out of the pages of the Disney playbook, Netflix is looking to leverage its original intellectual property off the screen, as the streamer announced that it’s taking former department stores at malls in Dallas, Texas as well as King of Prussia, Pennsylvania and turning them into “Netflix House, an experiential entertainment venue”. These venues will be open year-round and will offer “unforgettable venues for viewers to explore their favorite Netflix stories and characters beyond the screen year-round” with immersive show-themed experiences and shopping opportunities. The Co had dabbled with pop up experiential events in the past, but this is now a deeper move into permanent facilities…

• Netflix will open its first two permanent immersive entertainment venues in 2025 (link/link): “At Netflix House, you can enjoy regularly updated immersive experiences, indulge in retail therapy, and get a taste — literally — of your favorite Netflix series and films through unique food and drink offerings,” per Netflix CMO Marian Lee
  • Will be located in Dallas, TX and King of Prussia, PA, because “they are part of two of the most popular shopping centers in America, boasting hundreds of retailers, high foot traffic, and proximity to major cities”
    • Both locations will occupy former department stores at Galleria Dallas and King of Prussia Mall, each spanning footprints of more than 100,000 sq ft
    • Outside of the venues, “fans will be treated to some eye-popping sculptures and a mural mash-up of characters from their favorite Netflix titles”
  • Features: Shopping outlets, eateries, and experiential activities
    • Building off of past pop-up events held across the country over the past few years: “We’ve launched more than 50 experiences in 25 cities and Netflix House represents the next generation of our distinctive offerings. The venues will bring our beloved stories to life in new, ever-changing, and unexpected ways”
  • Next step in the ongoing streaming wars? While Hulu, Max, and Prime Video have all held smaller pop-up events of their own, Netflix will be the first to launch a permanent experience; Additionally, while Disney also offers show-themed experiences, restaurants and shopping oppties at its long-established parks, it also offers rides, which Netflix House has not said it will offer

Price hikes across the Entertainment space have been pervasive for some time with the cost of streaming video, music, theme parks, etc. all edging up over the past several years. Connectivity services have also followed this path with more examples this week as both AT&T and Charter announced more pricing moves. For AT&T, compared to the $2.50/month per line increase that the company implemented last August (link), the magnitude of this year’s hikes will be much more substantial, ranging from +$5-20/month per account based on a customers’ usage or the number of lines associated with their account. In contrast, Charter’s coming price increases appear to be at a lower level than its hikes the previous year, mostly ranging between +$3-4/month versus a broad +$5/month adjustment in July 2023.

Separately, there were also several other notable updates concerning the telco incumbents this week, including some back-and-forth regarding T-Mobile’s “Price Lock” claims as well as Verizon joining several other groups in filing comments to FCC to oppose a plan that would assign 4.9 GHz spectrum estimated to be worth $14bn+ to AT&T’s FirstNet division.

See below for more details.

• AT&T annc’d price hikes on legacy mobile plans starting in Aug (link/link): The Co also introduced a new set of Unlimited wireless plans
  • AT&T Mobile Share plan prices will rise depending on data usage: Subscribers’ rates will increase by +$5/mo if they use less than 6GB of data and by +$10/mo if they use more than 6GB of data
    • Mobile share plans will now provide 5G access on compatible devices: This comes on top of the offering’s existing benefits, including unlimited talk & text in the US, mobile hotspot data, and AT&T ActiveArmor mobile security
  • Retired unlimited wireless plan prices will increase based on customers’ number of lines: Single-line accounts will see a +$10/mo rise, while those w/ multiple lines will see a flat +$20/mo increase (not a per-line adjustment)
    • Legacy unlimited plans will receive added high-speed data and hotspot data:
      • AT&T Unlimited Choice, Choice II, Choice Enhanced, Unlimited &More, and Unlimited Value plans will now include 75GB of high-speed data and 30GB of hotspot data
      • AT&T Unlimited Plus, Plus Enhanced, Unlimited &More Premium, and AT&T Unlimited (with TV) plans will now include 100GB of high-speed data and 60GB of hotspot data
    • Unlimited wireless plans will provide customers w/ “the most value for [their] dollar, along w/ added benefits”: Including 5G access, advanced mobile security and unlimited talk & text across North America, the three new tiers offer escalating benefits –
      • Unlimited Premium ^® PL: Also offers unlimited talk, text, and high-speed data when traveling to 20 LatAm countries, 60GB of hotspot data, and 4K UHD streaming
      • Unlimited Extra^® EL: Includes 30GB of hotspot data
      • Unlimited Starter^® SL: Includes 5GB of hotspot data

• Charter reportedly plans to raise prices for a second time this yr (link): In July, prices for TV will rise by +$3/mo in certain states, voice plan prices will increase +$3/mo, and internet base prices will go up by $3-4 for some customers, representing the Co’s second price hike in less than six months
  • Addt’l adjustments: Other packages such as Sports View will see a +$3/mo price increase, cable cards are going up by +$4/mo for those that still have them, and the cost of cable boxes will rise +$1/mo
  • Charter’s svs have been “impacted by rising costs”: A spokesperson noted that “some programmers continually raise fees for their content, which are passed through as increased fees to viewers and drive higher costs across the entire industry”
  • The Co raised prices for its low-income program back in Jan: On Jan 30, prices for Charter’s internet svs went up by +25% to $24.99 for its low-income program
    • Charter implemented a slightly higher broad price increase in July 2023: Then, the Co incr’d its phone and internet prices each by $5/mo, also citing programming cost increases

There Were Also Some Noteworthy Updates From The Other Telco Incumbents This Week…

• T-Mobile was advised by an industry group to stop using the “Price Lock” claim in its 5G Home Internet svs ads (link/link): The National Advertising Division (NAD) recommended that the Co should either quit using the claim or explain what it really means; The NAD’s decision came after AT&T brought forward a complaint
  • AT&T’s challenge – T-Mobile isn’t really committing to locking the pricing of its svs for any amount of time: AT&T highlighted that “Price Lock” really means that T-Mobile internet customers instead get their last month of svs free if T-Mobile ever raises the rate
    • AT&T also pointed out that T-Mobile’s disclosures contradict the “Price Lock” claim: Given limitations that make it clear that T-Mobile could increase the price of svs for any reason at any time
  • The NAD agreed w/ AT&T’s argument: Per the NAD, T-Mobile contended that “Price Lock” is not a claim, but the name of a pricing policy it implemented w/ respect to its home internet svs in Jan, arguing that its advertising doesn’t reasonably convey that the “Price Lock” policy is an absolute guarantee
  • T-Mobile will continue offering the “Price Lock” deal…: The Co “believe[s] the challenged ads clearly communicated [its] Price Lock benefit, which offers customers on eligible rate plans the oppty to get their final month’s svs charges paid by [T-Mobile] if their price changes”
    • … But will “take the NAD’s recommendations for clarifying the offer into consideration”

-> On a separate but related note, T-Mobile annc’d a new offer for its 5G Home Internet svs, providing those that sign up w/ $200 back for a limited time as well as a 15-day free trial where they can cancel the svs and still receive a refund; The Co also highlighted a $40/mo sale of its 5G Home Internet svs for existing T-Mobile wireless subs, though this was also its starting price entering the yr (link)

• Verizon was among several groups that filed comments w/ the FCC opposing a plan to assign spectrum to AT&T’s FirstNet (link): For context, the Public Safety Spectrum Alliance (PSSA) has been supporting a proposal to assign a nationwide license to the 4.9 GHz spectrum band to FirstNet, which runs on AT&T’s network
  • Other members of the opposition to the PSSA’s proposal include: The Coalition of Emergency Response and Critical Infrastructure’s (CERCI) as well as the CIO for the City of Boston and the MTA; These groups argued the plan would take control out of local first responders’ hands
  • Verizon – “Nothing in record documents that FirstNet lacks access to sufficient spectrum”: Verizon argued that “FirstNet has never explained the breakdown of AT&T’s use of Band 14, nor the percentage of Band 14 traffic that is AT&T public safety (i.e., FirstNet) vs AT&T commercial”
    • Verizon also believes the spectrum “giveaway” would disrupt the competitive mktplace in public safety & commercial: Notably, Verizon’s Frontline division currently supports 35,000+ public safety orgs across the US
  • The 50 MHz of 4.9 GHz spectrum in question is worth $14bn+, per the Brattle Group’s estimates: This would be a “substantial windfall” for AT&T and is why critics of the PSSA’s plan believe there needs to be a more “lawful way” to assign the spectrum, such as via a competitive bidding or auction process

The AR/VR headset market had a rough go in Q1:24 with a -67.4% y/y decline in global shipments in Q1:24, per International Data Corporation’s Worldwide Quarterly Augmented and Virtual Reality Headset Tracker. Concurrent with the drop in global shipments, the average selling price of headsets rose to about $1,000 in Q1, driven by Apple’s market entry and Meta’s premium Quest 3 headset. Despite the down trend in Q1, shipments are expected to return to growth later this year driven by a y/y increase in volume, newer headsets, and lower price points.

In addition to these data points, there were some company-specific updates out from Meta and Apple this week regarding their AR/VR strategies. Meta implemented a major restructuring across its Reality Labs division, the first since its formal launch back in 2022. All teams in Reality Labs have now been merged into either a central “Metaverse” organization or a new “Wearables” organization. The Co is aiming to enhance and streamline its operations in the Web3 and wearables markets, though as a result of the reorganization, there were some layoffs. Apple, on the other hand, is reportedly shifting its focus from the Vision Pro 2 to developing a more affordable AR headset. Despite aiming for a 2024 release, the product may be delayed to 2025 due to challenges in cutting costs without compromising quality.

See below for more.

• Global shipments of AR/VR headsets declined -67.4% y/y in Q1:24, though the decline in shipments was expected as the market transitions to include new categories such as Mixed Reality (MR) and Extended Reality (ER); This is as per new data from the International Data Corporation’s Worldwide Quarterly Augmented and Virtual Reality Headset Tracker
• The avg selling price (ASP) rose in Q1:24 to over $1000 as Apple entered the market and incumbents such as Meta focused on premium headsets such as the Quest 3
• Meta led the way in terms of share, while Apple’s recent entry into the market allowed it to capture the second position; ByteDance, Xreal, and HTC rounded out the top 5
  • Headset shipments are expected to return to growth later this year, driven by volume growing +7.5% y/y, newer headsets, and lower price points
  • Beyond that, headset shipment volume is expected to see a CAGR of +43.9% from 2024–2028
    • Expect ASP erosion across products over the next few yrs: “Because the overall market is still in its early stages with more expensive 1st- and 2nd-generation devices, prices will be high even as early adopters buy them. In order to reach scale in the mass market, vendors will need to reduce prices on later and upcoming devices”

Also This Week, Some Shifts And Movements In Meta And Apple’s AR/VR Strategies…

• Meta restructures Reality Labs (link/link): The restructuring will enable the creation of “more integrated product experiences across hardware, software, and experiences with less friction and fragmentation,” per an internal memo sent out by Meta CEO Andrew Bosworth
  • All teams in Reality Labs are being consolidated into two groups –
    • A central “Metaverse” organization, which is tasked with advancing Meta’s vision of a unified virtual environment, focusing on products like Oculus VR headsets, the Horizon virtual reality platform, and related metaverse technologies
    • A new “Wearables” organization, that encompasses the rest of Meta’s hardware efforts, including its smart glasses with Ray-Ban and future AR glasses innovations
      • Co’s smart glasses were “a much bigger success than we expected’
      • “We are doubling down on finding a strong product market fit for wearable Meta AI, building a business around it, and expanding the audience”
    • Restructuring also resulted in layoffs, which were a “relatively small number and focused on teams in Reality Labs where leadership roles are now redundant thanks to this new structure”

• Apple is reportedly shifting its focus away from Vision Pro 2 towards developing cheaper headset (link/link)
  • Have been deprioritizing the second-gen Vision Pro headset over the past yr, gradually assigning fewer employees to the project
  • Now developing a more affordable Vision headset with fewer features, which is in-line with Apple’s original plans to have two Vision models, akin to the standard and Pro versions of the iPhone
    • But is said to be having issues cutting costs w/o losing key features:
      • Apple reportedly wants the affordable model to retain the Vision Pro’s ultra-high-end displays and is working w/ Seeya Technology for cheaper displays, potentially replacing Sony, which until now has been the sole supplier of displays for the Vision Pro; However, Seeya has reportedly been struggling to meet Apple’s standards
      • Apple is also looking to make the cheaper model at least 1/3 lighter than the Vision Pro
      • The cheaper headset is expected to have fewer cameras, a simpler headband, and smaller speakers
    • Expected to be priced in-line w/ a high-end iPhone, at about $1,600
    • Revised 2025 release date may still be ambitious: Apple reportedly aimed to release the most affordable product at the end of 2024, but as of earlier this yr, Apple still didn’t have a firm prototype and is having trouble cutting costs w/o compromising too much on features; As a result, the product could likely slip beyond its revised release date for the end of 2025

We also wanted to flag a few noteworthy items from the ever-evolving AI space that hit the news tape this week. The main headline came from a Reuters report that surveyed nearly 100,000 people across 47 countries and found that the majority of global audiences possess high levels of distrust surrounding the use of AI in the news production process. Concerns about false news content also stepped up by +3% y/y, with respondents in the US and South Africa expressing particularly high levels of apprehension due to upcoming elections in both countries.

Elsewhere regarding AI, Snap released a new generative AI-powered features to help developers create more advanced AR features for users, and big-name investors Steve Cohen and Masayoshi Son both publicized commitments to invest more aggressively in AI moving forward.

See below for more details on this week’s key AI-related updates in the sector:

• Concerns about the use of AI in newsrooms and misinformation have been growing worldwide (link): Reuters’ annual Digital News Report, which surveys nearly 100,000 people across 47 countries, found consumers are suspicious of AI-powered news content, particularly in sensitive areas such as politics
  • 52% of US respondents and 63% of UK respondents would be uncomfortable w/ news content mostly produced by AI: That said, the respondents (~2,000 in each country) were more comfortable w/ journalists using AI behind-the-scenes to make their jobs more efficient
  • Concerns about false news content online rose +3% y/y: 59% of respondents said they were worried in this yr’s survey, w/ these percentages being higher in the US (72%) and South Africa (81%) w/ upcoming elections in both countries
  • Audiences are also unwilling to pay for news subscriptions: Only 17% of respondents across 20 countries said that they pay for online news, a figure that has been flat for the last three yrs after seeing some growth during the pandemic
    • 46% of Americans also pay less than the full price for their online news subscriptions
  • News influencers are playing a bigger role in disseminating info: In a survey of 5,600+ TikTok users, 57% said they mostly pay attention to individual personalities vs 34% that reported that they mainly follow journalists or news brands

• Snap launched gen AI-powered advanced augmented reality (AR) features (link): Now, AR devs will be able to create more realistic and whimsical special effects, or lenses, and Snapchat users will be able to utilize them when using phone cameras to film themselves
  • Snap annc’d an upgraded version of its dev program, dubbed Lens Studio: This program will enable artists and devs to create AR features for Snapchat or other websites and apps
    • Lens Studio now includes a new suite of gen AI tools: Including an AI assistant that can answer questions if a dev needs help, as well as another that provides devs w/ 3D image creation abilities for their AR lenses
    • Lens Studio will reduce the time it takes to create AR effects from weeks to hours: Per Snap CTO Bobby Murphy, who added that Lens Studio would also allow for more complex work on AR
  • This is still just the beginning of Snap’s AR ambitions: As the Co also plans to create full body AR experiences (instead of just facial ones), including generating new outfits

Big Name Investors Doubled Down On AI W/ Plans To Begin Investing More Aggressively Into The Space…

• SoftBank will ramp up its power generation biz in the US to support worldwide gen AI projects, per founder Masayoshi Son (link): Son was speaking at the annual shareholder meeting of SoftBank’s telecom division; SoftBank Group-backed SB Energy develops and operates renewable electricity bizs across the US
• SoftBank will also look for “seeds of new evolution” in its investments: These will mainly be outside of Japan
• Steve Cohen’s Point72 reportedly plans to launch a separate, AI-focused hedge fund (link): Sources indicate Point72’s new long/short equity fund focusing on AI and AI-related hardware will launch later in 2024 or in early 2025;
  • The Co is aiming to raise $1bn: Cohen and other Point72 employees are expected to contribute
  • The new fund will standalone separately from Point72’s main fund: This is due to its need for a more flexible net exposure, per sources

Cohen has been bullish on AI: He has described AI as a “really durable theme” for investing and said that he “[doesn’t] see it as a bubble”, w/ the mkt still discounting some of the oppties around AI

This week saw some new developments in a couple of court proceedings that have the potential to shake-up the sports media distribution landscape. The class action lawsuit against the NFL’s approach to bundling out-of-market rights in NFL Sunday Ticket has been ongoing for the last nine years, but the league has reportedly been making progress towards a favorable outcome that could enable it to avoid $20bn+ in damages and continue with its current operating model. There was also a new wrinkle in Diamond Sports’ bankruptcy saga, as the company filed for an emergency hearing this week in an attempt to hold off the NBA, NHL, and MLB’s demands to see its contracts with pay-TV providers, a move that Cox believes “risks significant competitive harm” to its business. Otherwise, beyond these court cases, another interesting sports update this week came from the world of electric motorsports, with DAZN signing a multi-territory agreement with the E1 World Championship all-electric boat racing league. E1 just launched in February and has already made rapid strides in growing its popularity with a long-list of celebrity team owners, including Tom Brady, Rafael Nadal, and Will Smith, to name just a few.

See below for more details on this week’s incremental updates from the sports world.

• The NFL Sunday Ticket trial reportedly has been progressing in the league’s favor (link/link): Per journalists attending the trail concerning the class action lawsuit over the NFL’s strategy of bundling out-of-mkt rights, the US District Judge overseeing the case has repeatedly expressed skepticism about the plaintiffs’ case
  • The case could be decided before reaching a jury: As the US District Judge could grant a motion for judgment as a matter of law, concluding that no reasonable jury could reach a different a determination
  • Some background on each side’s argument:
    • Plaintiffs – Bundling NFL teams’ out-of-mkt rights violates antitrust law and drives up prices for consumers; The class action began 9 yrs ago on behalf of 2.4mn+ residential and 48,000+ commercial subscribers to NFL Sunday Ticket
      • Damages could top $20bn+: The plaintiffs are seeking $7bn in damages that could be tripled under federal law
      • Proposals for substantial price cuts were presented as key evidence: Court testimony has reportedly revealed that ESPN proposed cutting the price of NFL Sunday Ticket from $349 to just $79 for the 2023 season to boost subscriptions
    • The NFL – Sunday Ticket is “a premium product, not just on pricing but quality”: During a cross-exam, NFL commissioner Roger Goodell added, “Fans make those choices whether wanted it or not… I’m sure there were fans who said it was too costly
      • Sunday Ticket also complements CBS and Fox’s standard game coverage, rather than supplanting it: Consequently, the NFL believes a change to the model of Sunday Ticket could create a potential ripple effect throughout its media portfolio
      • There are also benefits to consumers: As NFL Sunday Ticket ensures that fans can watch any game; If out-of-town fans had to rely on individual teams to arrange broadcast relationships, there would likely be some areas where games wouldn’t be available

• Diamond Sports requested an emergency hearing to stave off new demands from sports leagues (link): Diamond asked a federal bankruptcy court for an emergency hearing after the NBA, NHL, and MLB demanded to see the Co’s contracts w/ pay-TV providers, as Diamond’s impasse on a new carriage agreement w/ Comcast continues
  • The leagues want to look for “most favored nation” (MFN) clauses in Diamond’s pay-TV contracts: If Diamond acquiesces to Comcast’s demand to put Bally-branded sports channels on a more expensive premium tier would mean that other pay-TV operators could use MFN clauses to add similarly favorable terms
    • The broader implications of the leagues’ ask: Diamond’s contracts w/ Charter, Cox, DirecTV, and other pay-TV providers would help the NBA, NHL, and MLB determine whether Diamond still has the distribution scale to remain a viable local TV partner
  • However, pay-TV providers have expressed high levels of concern over the “highly sensitive info” requested: Cox sent a letter to the presiding bankruptcy judge indicating that the requested info “constitutes trade secrets… and [their] disclosure to the leagues… risks significant competitive harm to Cox”
  • Without an emergency hearing, Diamond’s next scheduled court date is on July 29: There, the Co will be tasked w/ presenting a “very clear” restructuring plan, per the presiding judge

• DAZN signed a deal w/ UIM E1 World Championship to cover the first all-electric race boat league (link): The deal runs until the end of the current E1 season and will start in July w/ the Championship’s showcase race at the home of motorsport in Monaco
  • The agreement covers multiple territories: DAZN will broadcast the E1 Series Championship to audiences in Germany, Austria, Switzerland, Canada, Japan, and Southeast Asia, among other territories
  • Background on the E1 World Championship (link): The league launched in Feb after being conceived during the pandemic by former McLaren Motorsport biz director and NASA consultant Rodi Basso and founder of Formula E and Extreme E Alejandro Agag
    • Teams are made up of one male and one female pilot: Currently, there are 8 teams that compete for the championship
    • Boats can reach up to 80 km/hr: Contestants will use the RaceBird, which is the first-ever all-electric race boat and uses cutting-edge hydrofoil tech
    • E1 has several celebrity team owners: Including Tom Brady, Rafael Nadal, Didier Drogba, Steve Aoki, Marc Anthony, and Will Smith

All the talk on social media regulation resulted in some action this week, as New York took a pioneering step by becoming the first state in the United States to regulate social media algorithms. Governor Kathy Hochul signed a bill that would require social media platforms to display content chronologically by default for kids under 18, restrict websites from collecting or sharing the personal data of users under 18 without consent, and require platforms to limit late-night app notifications. The bill has been hailed by many, including New York Attorney General Letitia James who said that the legislation would take on “the most dangerous aspects of social media, the addictive algorithm feeds that exploit impressionable minds” and would also empower her office “to set rules and ensure companies are following them”. That being said, it also has its fair share of critics, as some argue that the law is unconstitutional and could instead increase children’s exposure to harmful content by requiring websites to order feeds chronologically, which runs the risk of “prioritizing recent posts about sensitive topics”.

New York adds to a growing list of states have that either introduced or passed legislation on minors and online safety, creating a patchwork of legislation across the country as legislators continue to deliberate on federal proposals (like the Kids Online Safety Act). However, on a separate but related social media matter, TikTok filed a legal brief challenging the upcoming US ban of the platform, the latest move in the US versus TikTok back and forth.

See below for more on the above.

• New York Governor signs bill regulating social media algorithms, the first in the United States (link/link/link)
  • Signed two bills –
    • Stop Addictive Feeds Exploitation (SAFE) For Kids Act will require social media platforms to display content chronologically by default for kids under 18 years old, rather than content recommended by the app; It would also block platforms from sending minors notifications on suggested posts between midnight and 6am
    • New York Child Data Protection Act will restrict websites from collecting or sharing the personal data of users under 18 without consent (expanding an on existing federal privacy protections for children under 13)
  • Both provisions could be turned off if a minor gets what the bill defines as “verifiable parental consent”
  • Signing is just the first step, as the laws do not take effect immediately and social media Cos are expected to challenge the new legislation
    • What comes next? The NY state attorney general is now tasked with crafting rules to determine mechanisms for verifying a user’s age and parental consent; After the rules are finalized, social media Cos will have 180 days to implement changes to comply with the regulation
  • What do opponents of the legislation have to say?
    • Meta: “While we don’t agree with every aspect of these bills, we welcome New York becoming the first state to pass legislation recognizing the responsibility of app stores,” per a Meta spokesperson
    • Tech industry-funded policy organization Chamber of Progress says the restrictions on “addictive feeds” will violate platforms’ free-speech right to wield editorial control over their content
    • Tech industry group NetChoice said “the law will also increase children’s exposure to harmful content by requiring websites to order feeds chronologically, prioritizing recent posts about sensitive topics
  • Comes after US surgeon general called on Congress to put warning labels on social media platforms similar to those on cigarette packaging, citing mental health dangers for children using the sites (link)
  • Other states are looking to implement similar laws –
    • California announced plans to work the state legislature on a bill to restrict smartphone usage for students during the school day; In 2019, California governor Gavin Newsom signed a bill allowing school districts to limit or ban smartphones on campuses
    • South Carolina this month proposed a measure that would ban students from using cellphones during the school day across all public schools in the state
    • Arkansas, Florida, Georgia and Utah have also advocated for more age restrictions on social media platforms and more content regulation (link)

• Latest update on the proposed TikTok ban… TikTok files legal brief challenging proposed US ban (link/link): TikTok submitted a 99-page filing calling for the review of the constitutionality of the Protecting Americans From Foreign Adversary Controlled Applications Act (PAFACA), which was signed into law in April and introduces a US ban on “foreign adversary-controlled applications,” and specifically includes both TikTok and ByteDance by name
  • Law is “unprecedented” and violates the First Amendment: “The Constitution prohibits Congress from singling out a speech platform without findings or justifications, ignoring less restrictive alternatives, and discriminating based on speaker and content. The Act is unconstitutional and must be enjoined”
  • Singles out TikTok and ignores other applications: The bill “ignores many applications with substantial operations in China that collect large amounts of U.S. user data, as well as the many U.S. companies that develop software and employ engineers in China, all of which pose the same purported risks”
  • Divestment is “infeasible”: TikTok addressed the argument that the ban isn’t really a ban b/c ByteDance could just sell TikTok to a corporation the US approves of; According to TikTok, such a divestment within the 270-day timeframe they’ve been given is “technologically, commercially, and legally infeasible…the effect of the Act is therefore a ban”

What comes next? An appeals court will hear arguments challenging the federal law on September 16th, just four months before a ban could take effect

• Apple is shutting down its Apple Pay Later service less than a year after launch (link/link)
  • What was Apply Pay Later? The service allowed users to split purchases up to $1,000 made via Apple Pay through the Apple Wallet app on iPhones and iPads into four payments, spread over six weeks, with no interest and no fees
  • “No longer offering new loans” for Apple Pay Later, but existing ones aren’t affected: Users w/ current Apple Pay Later loans are still able to manage and pay them through the Apple Wallet app
  • Will instead offer installment loan options from other providers via Apple Pay and Wallet: Last week, Apple announced that iOS 18 will let iPhone users apply for Affirm loans directly within Apple Pay upon checkout and will also have integrations with Citi, Synchrony, and Fiserv; Existing debit and credit cards with split payment options will be available as well

• TikTok reportedly plans to begin acquiring and investing in music rights (link): From a TikTok jobs ad, Music Business Worldwide revealed that TikTok is forming an in-house Music Content Investment Team based in LA, NYC, and San Jose, focusing on “partnership or acquisition opportunities in the music content space on a global level”
  • The ads suggest TikTok’s new investment team will seek to acquire copyrights and invest in music Cos: The Co is currently hiring for two roles – a “Music Content Investment Manager” and a “Music Content Investment Lead”
    • Music Content Investment Managers will focus on developing TikTok’s content acquisition strategy: Notably, applicants will need at least three yrs’ experience at a reputable investment bank, mgmt consulting firm, or PE firm
    • Music Content Investment Lead will take on a more senior role: Will formulate and implement music content investment strategies and oversee the prep of financial valuation models for target Cos; Applicants will need at least five yrs’ experience at in IB, mgmt consulting, or PE
  • The move could be concerning for the major music labels: As it signals that TikTok is pushing into the competitive music M&A mkt; The Co acquired SoundOn, which distributes indie artists on TikTok and other svs, and could be looking to sign the catalogs of rising acts before the majors get a chance

• 49% of shoppers are more likely to search for an item after seeing it on TV (link): This was per Innovid’s new CTV x Commerce 2024 report made in collab w/ Target’s retail media network, Roundel; The report features findings from a Roundel survey of 2,876 Target shoppers; Other key findings include –
  • 91% of respondents are streaming subs: The surveyed Target guests spend an avg of 22 hrs/week on streaming svs, an increase of over +40% y/y
    • 57% use ad-supported svs: 49% report being likely to search for an item after seeing it on TV, and 33% say they will scan a QR code on their TV if they know it will take them to a familiar site
  • CTV accounts for 49% of total video impressions for CPGs over the last two yrs: CPGs also have the highest avg CTV campaign reach (25.24%) among all measured verticals,
    • CPGs have been seeing strong performances w/ the use of interactive ads: These ads typically have engagement rates that are +10x higher than standard video formats
  • Creative elements are crucial components to boosting the conversion rates of shoppable ads: It’s been demonstrated that action-oriented calls to action (CTAs), like “Scan to Shop” or “Scan to Add to Cart”, create a sense of urgency and drive consumers to engage with shoppable ads