What did you expect?

MARKETS

  • Market influencers: There was hopeful news on the trade front, with some U.S. officials reportedly considering easing tariffs on China, per the WSJ (though the Treasury Department denied the report). But the shutdown is casting a shadow that's getting longer by the day (it's Day 28, if you're wondering).

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MEDIA

Netflix’s Q4? Yawn.

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Netflix fans took off their blindfolds just long enough to watch the company reveal its Q4 results. They managed to survive the ordeal, but the stock did fall about 4% after hours.

Expectations were really high

Netflix's Q4 showcased both a popular hit ("Bird Box," seen by 80 million accounts) and a critical hit ("Roma," seen by important Academy Award voters). It's also been pouring resources into overseas growth, envisioning a day when as much as 90% of its customer base is international.

So were expectations met? Let's just call it the trail mix of earnings reports—it had a little bit of everything.

  • Netflix added 8.8 million new paid subscribers around the world, topping the 7.6 million it had previously bet on.
  • Revenue ($4.19 billion) fell just short of targets, but profit came in higher than estimates.
  • Its Demogorgon-level of cash burn will total around $3 billion for the year, but execs expect that to improve moving forward.

We know Netflix is doing well...

...after all, it raised prices in the U.S. this week, and many of you went ¯\_(ツ)_/¯. So let's talk threats:

  • There's Hulu, a challenger that had more than 25 million subscribers at the end of 2018, up 47% from a year earlier.
  • Amazon has its own streaming service that can be bundled with other Prime perks. Bezos is still looking for his "Game of Thrones," though.
  • Plus, some major unknowns: AT&T and Disney are set to roll out their own hyped streaming products.

The thing is, Netflix says we're way off base

In its investor letter, the company wrote, "Our focus is not on Disney+, Amazon or others..." Instead, "We compete with (and lose to) Fortnite more than HBO. When YouTube went down globally for a few minutes in October, our viewing and signups spiked for that time."

Bottom line: Whoever competes with Netflix has quite a fight on their hands.

CLIMATE

Like the Justice League, but for Climate Economics

27 Nobel Prize in Economics winners +

4 former Fed chairs +

2 former Treasury secretaries +

12 former chairs of the Council of Economic Advisers=

The Climate Leadership

It's an all-star cast of economists (we're talkin' Janet Yellen, Amartya Sen, Larry Summers...) who came out in support of a carbon tax on businesses in a WSJ op-ed.

Their plan advocates replacing current "cumbersome" environmental regulations with a tax on companies that release environmentally harmful carbon into the atmosphere.

  • In theory, that should incentivize the private sector to use cleaner energy and implement climate-friendly tech at a faster clip.

What's in it for you? A little "political sweetener" to win bipartisan support. The plan suggests sharing the tax proceeds with the American people to offset higher energy costs firms will have to pass on to consumers.

  • Supporters say the tax would generate about $200 billion per year to start—which would translate to $2,000 for a family of four.

Zoom out: These economists know they have some selling to do. Even in left-leaning Washington State voters rejected a statewide carbon tax last November.

+ And wouldn't ya know: The World Economic Forum just identified environmental concerns as the biggest risk businesses (and the world) currently face.
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DEALS

How to Acquire a Biotech in 10 Days

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It hasn't hit theaters yet, but the story of how pharma giant Eli Lilly (+2.06%) bought biotech Loxo Oncology for $8 billion last week could be the indie hit of summer 2019.

Or at the very least, the next great Pixar short: This acquisition got done in a matter of weeks, while most deals drag on for months. Then again...Eli Lilly was in a rush, hoping to show off its prize at the J.P. Morgan Healthcare Conference, aka the "Super Bowl of healthcare." Let's check out the timeline, per a new filing...

  • December 20: Eli Lilly execs made their first offer to Loxo at $230/share. The company was particularly interested in Loxo-292, an experimental but promising cancer drug.
  • The next day...Loxo said the offer was "not adequate," and the deliberations continued (pausing only for Christmas Day). Meanwhile, Loxo never solicited any other bids from other potential buyers.
  • December 30: Eli Lilly came in with its next offer, $235/share, and Loxo's team said they'd take it. The deal closed on Jan. 5 and was unveiled two days later.

BEVERAGES

You Thought Dry January Was Rough?

For the third straight year, Americans are boozing less and less thanks to the growing trend of "mindful drinking or complete abstinence," said industry tracker IWSR.

Overall, U.S. alcohol volumes dipped 0.8% in 2018, even worse than the 0.7% decline a year earlier.

  • Beer was the hardest hit—volumes fell 1.5%, compared to a 1.1% drop a year earlier.
  • Wine volumes grew by 0.4% last year, but...don't break out the Château Pétrus. That's down from a 1% increase in 2017.
  • Spirits volumes climbed 1.9%, down from 2.2% growth in 2017.

So if you're a brewer or a distiller...what do you do? Push your boundaries. For example, Molson Coors (+0.85%) acquired a California kombucha maker last summer...while Budweiser brewer AB InBev (+2.19%) now sells spiked coconut water and a non-alcoholic "Budweiser Prohibition" brew.

Looking ahead: IWSR predicts low- and no-alcohol products will grow 32.1% by 2022, tripling the segment's growth over the last five years.

But listen, liquor companies, it could be worse. We marked Prohibition's 100-year anniversary on Wednesday.

QUIZ

Quiz Khalifa

You don't know how much you're paying for it because you're still using your ex's account...it's the Brew's weekly news quiz.

1. Fill in the blank: The Fed released a new study showing there's a clear link between ________ and low homeownership rates among young Americans.

2. Now that Theresa May's Brexit plan was defeated in historic fashion, there are an endless number of options on the table. But which one has definitely not been floated?

a) Try to get a new deal passed

b) Rebrand "Brexit" as "See EU later" to make it more palatable to lawmakers

c) Delay the March 29 deadline

d) Crash out of the EU without a deal in a "hard Brexit"

3. Which consumer goods brand released a controversial ad targeting toxic masculinity this week?

4. This former Fortune 500 CEO is reportedly in the running to be the next head of the World Bank. Do you know her name (1 pt) and the company she ran (2 pts)?
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5. The chairman of JAB, a European holding company, announced an abrupt exit this week. That's unfortunate for the company, but fortunate for us because it allows us to ask: Which of the following companies is not in JAB's portfolio?

a) Burger King b) Krispy Kreme c) Pret a Manger d) Peet's Coffee

Answers: 1) Student loan debt 2) "See EU later" is not an option...yet 3) Gillette 4) Indra Nooyi and PepsiCo 5) Burger King

WHAT ELSE IS BREWING

  • President Trump canceled the U.S. delegation to the World Economic Forum in Davos due to the partial government shutdown.
  • Les Moonves, the former CEO and chairman of CBS (+2.01%), will dispute the CBS board's decision to boot him without his $120 million severance package.
  • Morgan Stanley (-4.41%) closed out big bank earnings with a stinker of a report, revealing bond-trading revenue dropped 30%.
  • Tesla (+0.36%) is ending its customer referral program on Feb. 1 thanks to the costs the refer-a-friend setup is adding to models (especially the Model 3).
  • Google is buying the smart watch technology IP off watchmaker Fossil for $40 million.
  • Facebook (+0.52%) has removed another 500 or so pages and accounts linked to Russian misinformation campaigns from its platforms.

BREAKROOM

Map Battle
Microsoft said it would pledge $500 million to help address affordable housing in the Seattle area.

Which got us thinking about this graphic, which shows Seattle topping the nation in, well...something. Can you guess what these numbers represent?
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Breakroom Answers


Map Battle
Construction cranes

 

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