Top Ten Business Stories

Quote of the Day

We’ll miss you Janet Yellen.”—Brew Crew

Market Snapshot

• The Fed raised rates and indexes remained near record highs.
• The rate hike sent markets lower across Europe.
• Bitcoin futures dropped 10% midday, before the CBOE briefly paused trading.
• Litecoin fell after its massive two-day rally.

Why Is Disney Catching a Fox?

Comcast bowed out of the race for 21st Century Fox’s (-3.96%) film studio and television networks, leaving the final leg open for Disney (+0.19%).

And as CEO Bob Iger skips his way to the $60 billion finish line (securing himself a new contract on the way), we decided to step back and ask ourselves one very important question...

Why exactly is Disney acquiring Fox assets?

Good question, us. The short answer? Netflix.

To truly understand why this deal is crucial to Disney’s long-term success, let’s take a look at the traditional cable TV business model: content creators (like Disney) sold content to distributors (like Comcast), which in turn sold cable packages to consumers (like us).

In this model Disney had a lot of the negotiating power. Sure, distributors could charge consumers a small fortune. But would they pay if the content wasn’t good? For Disney (and its networks like ESPN) those were the good days.

Then Reed Hastings happened

Netflix’s slow-but-steady rise to the top came from licensing content that people love. It became a must-have platform for friends to watch Friends reruns until their eyes bled.

After years of patience and Tribbiani, Netflix finally flipped the traditional model on its head by offering its own original content (spending $6 billion this year and it’s not slowing down).

Then, all of a sudden, consumers no longer tolerated being jerked around by expensive cable companies offering “quality content.” They began cutting cords, and poof, Disney’s negotiating power was gone.

But this Fox deal could reawaken the Force

In the same way Disney purchased networks like ESPN and Nat Geo to command the traditional cable business model, it’s purchasing Fox’s studios and television networks (which include hits like Family Guy and the The Simpsons) to become its own Netflix and dominate the new TV order.

But unlike Netflix, Disney doesn’t need years of building rapport with its fan base by licensing other content (especially if this Fox deal goes through).

And now consider this: if Disney used to be powerful as just the content provider, what happens when they are the content provider and the distributor?

Let’s hope healthy competition with Netflix keeps those prices at bay.

South Korea Cracks the Crypto Whip

South Korea’s taking measures to ensure the Bitcoin delirium doesn’t derail its economy—it’s already got the PyeongChang Olympics for that.

To do so, it’s discussing a capital gains tax on crypto winnings and only permitting trading on government-approved exchanges by individual investors (no FIs and no minors).

This isn’t the first step South Korea’s taken to ensure its citizens don’t offer up their newborns for Bitcoin, but it is a big step forward at a crucial time.

Bitcoin demand in Jong Un’s backyard popped off ever since China cracked down on exchanges. Last week, despite having a third of the U.S.’ population, South Korea outpaced it in global Bitcoin trading volume. And the fix became so real, Bitcoin ballooned to a 23% premium relative to everywhere else in the world.

It was enough for the country’s officials to call an emergency huddle to slow things down.

Google’s Peace Offering to China: An AI Center

Google (-0.25%) is taking a crash course in corporate diplomacy as it opens an AI lab in Beijing.

The AI China Center, which will host local engineers doing R&D, has two main goals (one explicit, the other implicit):

1. Recruit the best and brightest Chinese tech talent.
2. Flatter Chinese administrators before launching a return bid to a country it was booted from in 2010.

Will it accomplish either? Who knows.

But what we do know is that the arms race for global AI talent knows no borders...nor budgets. This summer alone, U.S. tech companies led by Amazon, Microsoft, Apple, and Google spent $1.35 billion to recruit AI workers. Annnnd we officially chose the wrong field.

Google should find the prodigies it’s looking for in China, a country that’s on a mission to build out a $150 billion AI industry. Turns out government officials got the spooks when Google’s AI, AlphaGo, defeated South Korean champion Lee Se-dol in the board game “Go,” so they decided to figure out the tech for themselves.

Inspiration comes in many types bytes.

Target Ships with Shipt

Target (+2.70%) bought same-day delivery service Shipt for $550 million...and buckle up folks, we are off to the races!

See, if there’s one competency you strive for as a retailer in 2017, it’s speed—4 out of 5 consumers demand same-day shipping. And Shipt can deliver, with a network of 20,000+ “personal shoppers” rushing to get you that sack of potatoes just in time to hit the slow cooker.

This deal likely means the end of Target’s limited partnership with Instacart, a rival of Shipt. But it’s not shedding any tears. With a goal of same-day delivery for half of its 1,800 stores by mid-2018, Target’s trying to go toe-to-toe with the likes of Walmart, Best Buy, and of course, Amazon.

And it’s thanks to Shipt, which put its $65 million in VC funding to good use, building out a well-oiled logistics operation...one that would’ve taken Target years to develop.

What Else Is Happening…

• Here’s more on the Fed’s decision to raise rates.
• And more on the tax compromise.
• Airbus is engulfed in a corruption scandal involving senior officials.
• Eataly could go public in 2018 after a year in which it’ll hit $550 million in sales.
• Apple (+0.33%) invested $390 million in one of its camera sensor suppliers.

Economic Calendar

• Monday     Earnings: No Events

                    Economic Events: JOLTS (-)

• Tuesday    Earnings: No Events

                  Economic Events: No Events

• Wednesday    Earnings: No Events

                        Economic Events: FOMC Meeting Announcement (+/-)

• Thursday   Earnings: Costco, Oracle

                   Economic Events: Jobless Claims

• Friday       Earnings: No Events

                 Economic Events: Baker-Hughes Rig Count

Top 10 Business Stories of 2017

As 2017 draws to a close, we realized something: it's been an insane year for business news. From Bitcoin to Bezos (and a few Uber scandals in between) we've been lucky enough to share it with you every step of the way. So we did our solemn duty as newsletter writers and picked our top 10 business stories of 2017.

10. The year of China

It felt like we wrote a story about China every day, and for good reason—the world’s second largest economy flexed its muscles in 2017. Tech giant Tencent briefly passed Facebook in market cap and grabbed a 12% stake in Snap. Alibaba Singles Day did more in revenue in the first two minutes than Amazon did during all of Prime Day. Smartphone makers like Xiaomi and Huawei are breathing down Apple’s neck. Oh, and speaking of Apple...its revenue in Greater China is finally in the black after six miserable quarters.

9. AT&T vs. the DOJ and other media mix-ups

No one expected AT&T’s $85 billion takeover of Time Warner to be a walk in the park...but few expected such intense scrutiny from regulators. Whether you believe it’s the anti-competitive risks of a vertical merger (more likely), or rumors of President Trump putting his thumb on the scale (less likely), there’s no denying the DOJ is being super nosy...enough to take AT&T to court.

But if the deal goes through, it’ll set a huge precedent in a media environment dominated by emerging platforms and M&A activity. There’s Disney closing in on a chunk of 21st Century Fox’s assets to create an entertainment behemoth. Netflix upped its subscriber base past 100 million and raised prices, prompting Disney to announce the launch of its own streaming service.

Can you guess the year's top story? Read the full list here.

The Breakroom

Question of the Day

(a-x)(b-x)(c-x) ... (z-x) = ?

(Answer located at the bottom of newsletter)

Business Trivia

Which of these Japanese car companies is NOT named after a real person?

Toyota, Honda, Suzuki, Mazda

(Answer located at the bottom of newsletter)

Stat of the Day

47—Average age of Silicon Valley startup founders with a successful exit. Stay in school, kids…the Zuckerbergs of the world are the exception to the rule.

Breakroom Answers

Question of the Day: 0 (Explanation)

Business Trivia: Mazda