Thursday night lights

Quote of the Day

It's been a terrible distraction and I really wish it didn't happen.”

Market Snapshot

• U.S. indexes bounced back after a round of strong earnings.
• Oil prices ticked higher as U.S. production hit 10 million barrels a day in November for the first time since 1970.
• AT&T shot up 3% after hours following a strong earnings report.
• Microsoft reported a Q4 charge of $13.8 billion related to the tax bill. Shares fell more than 2% after hours.

Fox Scores a Major Deal for Thursday Night Football

Because football wasn’t already on our minds this week, Fox and the NFL decided to fill the void by announcing a five-year $3.3 billion broadcasting deal for “Thursday Night Football.”

Yes, that Thursday Night Football (TNF). The one known for player injuries, declining ratings (12% drop last season), and poor quality—think 6-3 barnburners between the Colts and Browns.

Turns out it's really valuable content.

Why? Isn’t the NFL a sinking ship?

Well, even the Titanic took almost three hours to go down. And the NFL has more lifeboats.

Despite the never-ending controversies and decreased viewership, professional football remains by far the biggest fish in the shrinking pond of broadcast television. Of the top 50 TV broadcasts in 2017, the NFL accounted for 37 (only a few President Trump speeches and the Academy Awards snuck in).

So, for 21st Century Fox (-4.06%) President Peter Rice, it was an easy choice: “You either have the rights to the most-watched content, or you don’t.”

And who doesn’t have the rights to TNF now? CBS and NBC, which enjoyed joint-custody of the broadcast for the past two years. While they paid a combined $450 million per year, Fox will pony up $660 million annually, a 47% increase.

Which describes 21st Century Fox’s 21st century strategy

All-in on sports.

After agreeing to sell $52.4 billion worth of assets to Disney, a slimmed-down Fox will lean on Fox Sports 1, Fox broadcast network, and Fox News. Moving forward, TNF will be a critical piece of that puzzle.

But for Fox, the long-term deal is not without its risks. The NFL’s TV partners saw ad revenue sink 1.2% from 2016. Meanwhile, the entire concept of TNF has come under attack from viewers and players alike for being too much football each week. One notable critic? Fox’s own CEO James Murdoch, who as of October said the Thursday slot was “asking a lot from customers.”

Now he’s the one asking...for even more.

Mark Zuckerberg Emphasizes New Face for Facebook in Q4

Mark Zuckerberg is "2017 was a strong year for Facebook, but it was also a hard one." Sheryl Sandberg likes this!

Okay, so the days of Facebook status updates might be over, but the days of Q4 status updates are here to stay:

* Facebook revenue increased to $12.97 billion from $8.81 billion last year.
* EPS jumped to $2.21 from $1.41 last year.
* Users spent 50 million fewer hours a day on the site since last quarter (a 5% drop).

So what’s going on here? You might remember Facebook changing its algorithm to promote less sponsored and media-related content in favor of more organic posts from your friends and family.

The decision sprouted from a year’s worth of headaches including reports of Russian actors promoting “Fake News” to influence the 2016 election. And with the new algorithm, daily time spent on the platform could drop further.

Some investors had heard enough, sending the stock down 4.5% initially after hours. Others weren’t so quick to log off, suggesting Facebook has yet to truly monetize Instagram, WhatsApp, and Oculus.

Sysco and US Foods Sue After Tyson Ruffles Feathers

What came first: the chicken or the lawsuit? The age-old question is finally getting a modern-day answer as Sysco and US Foods—the country’s largest food distributors—are separately suing Tyson Foods, Pilgrim’s Pride, and other chicken suppliers for inflating wholesale prices for nearly eight years.

That’s right, the Brew’s first case of poultry price manipulation.

As Sysco (-0.68%) and US Foods (-1.41%) indicated in the lawsuits, Tyson (-3.52%) (and others) used:

1. A database to recognize supply patterns and deliberately keep poultry supply low to increase prices. Basically a Bloomberg Terminal for chicken.
2. An inaccurate pricing index (the recently suspended Georgia Dock Index) to drive prices up even further.

The issue? When Sysco and US Foods account for a combined 25% of US food distribution, those prices add up fast. Both companies credited the cost increases to recent earnings slumps. And if they can’t win the battle in the 10-K, then court will have to do.

Joint Account? California Considers Pot Bank

California is rolling around the idea of founding a state-owned bank for its newly legal recreational marijuana industry. John Chiang—California State Treasurer and Democratic candidate for governor—is leading the charge to study the pros and cons of a public pot bank.

And so are we:

Puff: California became state No. 8 to legalize recreational marijuana on January 1 and, according to Chiang, needs to “lead when it comes to bringing the cannabis industry out of the shadows” so it can be regulated and taxed properly.

Puff: Traditional commercial banks answer to federal regulators. And since marijuana is still illegal at the federal level, banks risk losing their licenses. So, weedtrepreneurs need somewhere to hold an eventual $7 billion in revenue.

Pass: The whole industry is in a haze since the DOJ’s decision to rescind the Obama-era “hands off” guidelines of not prosecuting in states where the drug is legal.

If instituted, California’s taxpayer-backed bank would be one of only two in the country. The other? The Bank of North Dakota, of course.

What Else Is Happening…

• Fujifilm acquired Xerox (+4.44%) for $6.1 billion, consolidating a joint venture that’s lasted more than 50 years.
• The head of the CDC, Dr. Brenda Fitzgerald, resigned after reports she bought tobacco stocks soon after taking charge of the agency. The CDC promotes anti-smoking efforts.
• Swedish telecom company Ericsson cut 10,000 jobs in Q4, capping a tough year.
• After another strong quarter, Nintendo has sold almost 15 million Switch consoles in less than a year.
• Uber is piloting a bike-sharing service with startup JUMP in...where else? San Francisco.

Economic Calendar

• Monday     Earnings: Lockheed Martin (+)

                    Economic Events: Personal Income and Outlays (+)

• Tuesday    Earnings: AMD (+), Aetna (+), McDonald’s (+), Pfizer (+)

                  Economic Events: Consumer Confidence (+)

• Wednesday    Earnings: Boeing (+), eBay (+/-), Mondelez (+), PayPal (+), Qualcomm (+)

                        Economic Events: Chicago PMI (+)

• Thursday   Earnings: Alibaba, Alphabet, Amazon, Apple, DowDuPont, GoPro, Mattel, Royal Dutch Shell, Time Warner, Visa

                   Economic Events: Motor Vehicle Sales, PMI Mfg Index, ISM Mfg Index

• Friday       Earnings: Charter, Exxon, Merck, Sony, Sprint

                 Economic Events: Consumer Sentiment, Factory Orders

The Bigger Picture: Movie Theaters

Coming soon: a possible collapse in the movie theater industry as we know it?

With fewer people flocking to the theater to see the latest release—we’ll catch Paddington 2 on Netflix next February—and ticket prices continuing to rise, theaters are hurting. And so are their stocks (except movie king, Regal):

this is a sweet chart

The subscription model of in-home streaming services has already started its invasion on movies with MoviePass, a startup whose monthly flat-fee is attractive to consumers. But maybe not enough to curtail their habit of staying at home. So, some major studios (like Warner Bros. and Universal) are considering direct digital partnerships with Apple and Comcast.

As the old saying goes: if the mountain will not come to the movies, then the movies must go to the mountain.

The Breakroom

Question of the Day

What is the smallest number, besides 1, that is one less than twice its digits reversed?

(Answer located at the bottom of newsletter)

Business Trivia

We’ve heard a lot about the U.S.’ trade deficits. But with which of the following countries does the U.S. have a trade surplus?

Germany, Mexico, Netherlands, Japan

(Answer located at the bottom of newsletter)

Stat of the Day

$1.4 billion—Ad sales NBC expects to bring in over the next 22 days. Hey, we’ll be glued to the Super Bowl and the Winter Olympics.

Breakroom Answers

Question of the Day: 73

Business Trivia: Netherlands ($24.2 billion surplus)