Big Tech CEO's Testify on Child Safety & T-Swift Gone from TikTok?

0:00Tonight on NBC, Jimmy Fallon and Bozma St John host the highly anticipated new competition show. I hired 10 creatives from all walks of life. They will be battling it out to see who can impress the world's biggest brands. This is a huge opportunity. This is the battle for the next big idea. This is not Play Play. We're spending millions of dollars. I'm so excited to embark on this adventure with all of you. Make the best I do win! On Brand with Jimmy Fallon. Series premiere tonight on NBC. Good morning, Brew Daily Show. I'm Neil Freiman. And I'm Toby Howell. Today, why you won't find music from Lady Gaga, YouTube, Bad Bunny, or Taylor Swift on TikTok anymore.

0:40Then a highly contentious and emotional hearing just went down between senators and big tech CEOs on Capitol Hill. It's Thursday, February 1st. Woo, we made it. Let's ride.

0:56Yes, Toby, it is February, but it's not just any February. It's a leap year February. So there's an extra day tacked on at the end. And this isn't just because we feel bad that February gets shortchanged with 28 days. It's necessary to keep the calendar in sync with the seasons. Because despite what you might have learned in first grade, a year isn't exactly 365 days. It takes about 365 and a quarter days for the Earth to complete its orbit around the sun. And we account for that surplus by making one out of every four years, 366 days. If we didn't have leap years, then the seasons would completely swap every 750 years, and the middle of the summer would be the middle of the winter and vice versa, and the United States would just not be able to handle Thanksgiving pool parties.

1:42I did the math even further, though. So, yes, Earth orbits the sun every 365 in a quarter days, but it's.256 days. But every 1 ,000 years, the year becomes shorter by around 5.5 seconds, according to this astronomy forum I was on. So that means eventually we won't need a leap year anymore. We can start cutting days again. So 0.256 days is 22 ,000 extra seconds. And if we're looking at 5.5 seconds every 1 ,000 years, in just over 4 million years, we'll be good. Do not get too comfortable with that 29th day, February. Exactly. We'll just cut it out eventually. Before we jump into the show today, we have a quick word from our sponsor, Veeam.

2:25It's February 1st, and Veeam is still here supporting the pod. Ride or die, Neil. It's so Veeam of them to stick around like this. You know, what do you want in a data security provider? Someone who dips out quietly at the end of the month? Or someone who sticks around and stands by your side? I want someone like Veeam to February and beyond. In celebration of Veeam sticking around for another month, head to Veeam.com today. That's V-E-E-A-M dot com today. This episode is brought to you by State Farm. Checking off the boxes on your to-do list is a great feeling. And when it comes to checking off coverage, a State Farm agent can help you choose an option that's right for you.

3:04Whether you prefer talking in person, on the phone, or using the award-winning app, it's nice knowing you have help finding coverage that best fits your needs. Like a good neighbor, State Farm is there. it has been a minute since we've had a big tech hearing on capitol hill yesterday the ceos of meta x tiktok snap and discord testified before the senate judiciary committee about the issue of child safety on their platforms this was about as bipartisan of a hearing that you'll see these days as senators from both sides of the aisle laid into the big tech leaders for their lax measures on protecting kids online.

3:43At one point, Mark Zuckerberg stood up, turned around to directly apologize to relatives of online child abuse victims sitting in the crowd. Some of the parents even brought pictures of their children who had died by suicide as a result of online bullying. Throughout the tense hearing, the key feeling permeating the chamber was one of frustration. Senator Amy Klobuchar lamented that no bills have been passed. Quote, I just want to get this stuff done. I'm so tired of this. It's been 28 years, she said, which both shows the power of big tech lobbying and the inability for Congress to figure out how to regulate this sensitive topic.

4:20Neil, a lot of reporters covering this hearing said it was unlike anything they'd ever seen due to the presence of the crowd there. It was intense. Very intense. I would say that Zuck and the TikTok CEO took most of the heat, even though there were five companies there. That moment of, I encourage everyone to kind to go watch the video, Josh Hawley is grilling, one of the senators is grilling Mark Zuckerberg and saying, have you ever apologized to the families and the victims of people who were harmed, of the kids who were harmed on your platform? And they go back and forth a little bit. And Zuckerberg finally just says, OK.

4:53And then he turns around and speaks directly to the audience and apologizes. And it was just this remarkable moment that I think speaks to this emotional, this emotional hearing. But when I'm talking about Amy Klobuchar and the other senators, yes, they want have wanted to do something for decades. But no meaningful legislation around kids safety on social media has been passed in 28 years. Obviously, social media wasn't even around then. They keep talking to each other. They keep wanting to do something. But social media platforms are not going to be compelled to make dramatic, significant changes unless Congress compels them to do something.

5:28I don't know. You know, this hearing was obviously emotional and intense and everyone got a little riled up. I don't know if it'll actually lead to anything. Yeah, it was definitely emotional. I mean, you mentioned Zuckerberg took the brunt of the attacks. He opened his opening statement was about how the existing body of scientific work has not shown a causal link between using social media and how young people have worse mental health. When he said that audience members literally laughed in the crowd because they're saying, how could there not be any link? And yes, even though these studies that have been shown that it's more of a correlation than a causation, still you have these parents back there who have suffered firsthand from some of the effects of social media on their children.

6:06Meta's been under heavy fire of late. It's being sued by dozens of states right now. There's a separate lawsuit in New Mexico accusing it of promoting underage accounts to predators. So definitely the brunt of the attacks. One of the big things that the senators tried to get was to have the CEOs commit on the spot to this Kids Online Safety Act, which would require platforms to enable really strong safety settings. Only Snap CEO Evan Spiegel and then exes Linda Iaccarino did so on the spot. The others kind of hedged their bets there. So, again, if you're looking for concrete outcomes, they tried to get one on the spot.

6:43They only got two out of five or six. What was interesting to me finally is that there was no YouTube, no Alphabet, which owns YouTube. And we know from surveys that YouTube is by far the number one video platform for kids. Ninety three percent of kids said they went on YouTube in the past month. Meanwhile, the second place by far is TikTok with only 68 percent. So I thought that was a pretty glaring omission not to have YouTube YouTube CEO in there as well. Moving on, the first Federal Reserve meeting of the year happened yesterday. And as Jerome Powell took the podium for his press conference, investors were praying he'd say one thing, that an interest rate cut was on the table for the Fed's next meeting in March.

7:23He did not bite. Powell threw cold water on Wall Street's hopes and dreams when he said he doesn't think it's likely that he'd cut rates in March because he's hesitant to hang that mission accomplished banner against inflation. Yes, inflation has come down dramatically since its peak in 2022, but it still remains above the Fed's target of 2%. Powell doesn't want to hit the gas on the economy, which is what lowering interest rates does, until he's 100 % confident that inflation isn't coming back for the sequel no one asked for. To give you the big picture about what's going on in Fed world, interest rates are at a 22-year high after the Fed jacked them up over the past two years.

8:01But in the past four meetings dating back to last summer, Powell hasn't changed them at all, including yesterday's. And that's because really the best case scenario is playing out. The job market has remained strong. economic growth is better than expected and inflation has come down so there's little urgency to begin cutting rates to juice the economy yeah i mean you said that this meeting kind of threw cold water on the on the market so i would say the water is is room temperature it's maybe lukewarm nice to the feel because even though that there's no rate cuts coming in march he did say that we believe that our policy rate is likely at its peak for this tightening cycle which is just fed peak for saying we're going to keep them where they're at which again if we go back a few months ago, rates were rising at a rate unlike any that we've seen in the last 20 years or so.

8:48So I would say that the water isn't freezing cold because, again, we are at this homeostasis point right now where rates are elevated, but things are chugging along quite nicely. I disagree. Investors were betting that they would start cutting rates in March, and that had really propelled the stock market higher, this so-called Fed pivot, where the Fed would start cutting rates. You know, you've looked at all of our brokerages. They've been going through the roof over the past couple of months, and S &P has been hitting all-time highs. When Jerome Powell went up to the podium and said, we're not cutting rates in March, stocks plummeted.

9:24The S &P had its worst day in four months, and the NASDAQ was down 2.2%, its worst day in three months. So investors did not react well to this, because a lot of them had thrown their chips in the basket, saying that we'd probably get a rate cut in March, and now it doesn't look like it's going to happen until at least May. Yeah, we do have the percentages. Financial markets see about a 34 % chance the Fed will lower rates in March. That's down from 73 % a month ago. So yeah, you can see the delta that this meeting kind of created. If we just zoom out, though, I mean, you mentioned it kind of at the top, and it takes stock of how the economy has done under these 22-year high rates.

10:02Inflation fell steeply. It's ending the year right around 2.6%, according to the Fed's favored measure. Economy expanded more quickly than we thought. GDP climbed up to 2.5%. And the jobs market stayed stronger than anyone thought. Unemployment rate in December was just at 3.7%, which was generally in line with where it was before the Fed started hiking rates. So again, we've said the word soft landing. We've said the word Goldilocks economy. But those figures right there show that we've navigated this rate cycle pretty dang well. And the next big thing on the economic calendar is on Friday, which is tomorrow, which is the jobs report.

10:37And obviously, Jerome Powell and all of us will be very keyed into what that has to say. Let's move on. TikTok is wrapped up in another major spat, not over its ties to China or its relation to child safety online, but over its usage of catalogs of popular music. Universal Music Group, which owns the right to songs from Taylor Swift, Drake, Olivia Rodrigo, etc., has begun pulling its music from TikTok. unless the two can come to a last minute licensing agreement. There's a whole bunch of reasons why UMG and TikTok aren't seeing eye to eye, artificial intelligence, copyright infringements. But the biggest one is that UMG felt TikTok simply wasn't compensating the label and its artists fairly.

11:17It's looking like a much bigger loss for TikTok than UMG right now. UMG is the second largest record label in the world and said TikTok only accounts for 1 % of its ad revenue despite its artists representing eight out of 10 of the most popular singers on the platform last year. However, around 60 % of TikTok videos include some sort of music. So if you suddenly lose eight out of 10 of your biggest stars, that's not very good. No, there's an intense negotiation going on over licensing this music. And UMG on Tuesday night wrote this letter to TikTok, a very scalding letter, and basically just pulled the nuclear option in any negotiation, which is just, I'm gonna walk away and we'll see how much leverage I actually have.

12:00And we'll actually see how much leverage UMG does have on TikTok. I mean, TikTok started as a lip syncing app, remember, musically, and then it became TikTok. So music is a part of TikTok's DNA. And while it has expanded into different types of videos, you know, music is still very much at the core of what TikTok does. So we'll see if TikTok, you know, kind of makes any concessions pays up for UMG. But I think one thing that it can't really address or hasn't said it would address is AI. UMG CEO is so has sounded the alarm about AI music for a long time. It went after that AI generated Drake and Weekend song very harshly.

12:42And so I think unless TikTok cleans up its act in the, you know, letting AI music proliferate on its platform, UMG might not come back to the table anytime soon. I actually saw some people likening this to the writers and actor strike that we underwent last year. There's going to be a lot of pain felt in the short term because again, it's going to hurt kind of artists exposure and maybe hurt their bottom line a little bit. But also UMG's hope is that it will lead to big changes, substantive changes that benefits everyone in the music industry long term. So UMG's kind of putting themselves as kind of like leading this noble fight against TikTok.

13:18They want people to get compensated more fairly, But also TikTok is a kingmaker. I mean, a lot of these artists rely on TikTok for exposure. And I mean, if we look at Taylor Swift, he doesn't really need exposure. But Cruel Summer, which was released under UMG, topped the Billboard Hot 100 four years after it was released, partially because TikTok made it a trend once again. And I mean, Murder on the Dance floor from Saltburn is also having a resurgence in a moment, mostly because Saltburn, but also because TikTok's role in it. And so the giant risk here with UMG's gamble is TikTok could fare just fine without its giant catalog.

13:55It eventually would force UMG and other music companies into much worse negotiating positions. So it's a fine line they're walking. I don't think they have as much leverage as they think. I think a lot of other under the radar artists are going big on TikTok. I don't think anyone cares so much about those massive songs that are under the UMG publisher label. So I don't know. I really I really think they are not in the negotiation negotiating position. They think they are. And TikTok doesn't need them as much as they think TikTok needs them. They're playing a dangerous game. All right. Before we jump in the next part of our show, we're going to take a quick break.

14:30Does it ever feel like you're a marketing professional just speaking into the void? But with LinkedIn ads, you can know you're reaching the right decision makers, a network of 130 million of them, in fact. You can even target buyers by job title, industry, company, seniority, skills, and did I say job title? See how you can avoid the void and reach the right buyers with LinkedIn ads. Spend$250 on your first campaign and get a free$250 credit for the next one. Get started at linkedin.com slash campaign. Terms and conditions apply. Eczema isn't always obvious, but it's real. and so is the relief from EBCLIS.

15:07After an initial dosing phase, about four in 10 people taking EBCLIS achieved itch relief and clear or almost clear skin at 16 weeks. And most of those people maintain skin that's still more clear at one year with monthly dosing. EBCLIS, LibriKizumab, LBKZ, a 250 milligram per two milliliter injection is a prescription medicine used to treat adults and children 12 years of age and older who weigh at least 88 pounds or 40 kilograms with moderate to severe eczema. Also called atopic dermatitis that is not well controlled with prescription therapies used on the skin or topicals or who cannot use topical therapies.

15:37EPCLIS can be used with or without topical corticosteroids. Don't use if you're allergic to EPCLIS. Allergic reactions can occur that can be severe. Eye problems can occur. Tell your doctor if you have new or worsening eye problems. You should not receive a live vaccine when treated with EPCLIS. Before starting EPCLIS, tell your doctor if you have a parasitic infection. Searching for real relief? Ask your doctor about EPCLIS and visit ePCLIS.lily.com or call 1-800-LILY-RX or 1-800-545-5979. Welcome to Neil's Numbers, the Thursday segment where I share three stats from the week's news that will make you spout off like Will Hunting.

16:10For my first number, you might be surprised to learn that Russia's economy is doing far better than expected nearly two years after it invaded Ukraine. The IMF said this week that Russia's GDP will rise 2.6 percent this year, more than double what the organization had projected as recently as October. This must be frustrating to the U.S. and its allies. Remember, after Russia invaded Ukraine, the West unleashed the mother of all sanctions on Moscow in an attempt to cut it off from global financial markets, squeeze its ability to export oil and overall hamper its economy to give Ukraine a fighting chance.

16:45But Russia appears to be weathering those sanctions just fine, not least because it's spending loads on its military, which is driving economic growth. Moscow allocated almost a third of its 2024 budget to defense, up from 14 percent in 2021, the year before it invaded Ukraine. I mean, let's go back to when it invaded Ukraine. Consumers were businesses were pulling out of the country left and right. Russian billionaires were getting their yachts. They're getting their sports team seized. The country couldn't even make bond payments, even if they wanted to, despite having the money to do it just because they were cut off from the global financial system.

17:20But then you look at how Russia kind of structured its economy. It's kind of built for this sanctioned environment. They've been building up their foreign reserves. They've been cutting their debt down. And they've actually developed alternatives to kind of that Western financial system, that swift payment system that governs the international banking industry. So it is interesting to see this. Russia has clearly seen the writing on the wall and has built their economy in a way that they can weather these sanctioned-fused storms. We'll see if it lasts in the long term, though, because this is a very distorted economy.

17:51We saw the military-industrial complex kind of kick into gear in the United States with World War II. And so when you're spending so much on defense, it kind of makes up for shortcomings in other areas of your economy. So economists aren't as bullish long term on Russia. They think these sanctions are going to work their way through the economy at some point. But for now, it is holding up much better than expected. And Putin's probably very happy about it. My second number can be encapsulated in a three word headline. Syphilis is soaring. The STI, once nearly eradicated in the U.S., is surging with a rate of new infections reaching its highest level since 1950, according to a new report from the CDC.

18:29More than 207 ,000 cases were diagnosed in 2022, which is an 80 % increase from 2018 and a 17 % increase from the previous year. What's going on? There are a few theories. First is that syphilis rates have been rising along with substance use, which is tied to risky sexual behavior. Another issue is the lack of sexual health services around the country. Experts say there just isn't enough disease intervention specialists and nurses at the meager number of sexual health clinics in the U.S. Finally, COVID. COVID has been such a public health focus over the past few years that maybe we let our eye off the ball when it came to other types of infections.

19:06Whatever the reasons, officials say skyrocketing syphilis cases is a problem that needs to be addressed. I went down such a rabbit hole with this and started researching how syphilis ever made it to kind of the widespread disease that it became and then was eventually eradicated. And Christopher Columbus was originally blamed for bringing syphilis back to Europe with him. There was this huge outbreak in the late 15th century when he returned from his voyage to the new world. But then there's all this debate in the scientific community. It was like, actually, no, it was way before him. And there was probably by the time he arrived back in Europe, there was three strains of syphilis present.

19:43So it probably wasn't him. And I was like, what am I doing? This is a business show. I got to research other stuff. You should have been prepping about the FET. I know, exactly. But yeah, so if you want to go down a rabbit hole, there is there is one right there. But yes, this this is a number that is definitely alarming public health officials and they want to find out what's going on and spend more research resources on trying to tamp down this surge. My final number is a lot more exciting and optimistic. Retail is in a fantastic spot right now. In fact, the vacancy rate for shopping centers in the U.S.

20:14fell to its lowest level since records began in 2007. Turns out the pandemic and the spike in online shopping didn't lead to the retail apocalypse that many had predicted. Americans still like going to physical stores and retailers are taking notice. Yesterday, Walmart said it was opening 150 more large format locations across the country in the next five years, a testament to the enduring popularity of brick and mortar. One important note about this data, one of the main reasons that the vacancy rate is at a record low is that we've slowed down on building more strip malls, allowing retailers to soak up the space that is available.

20:51Last year, just 8 million square feet of new retail space was constructed compared to 20 million in 2019 and an average of 41 million between 2008 and 2014. All in all, physical retail is looking really healthy right now. I mean, if we just zoom out for a second and think about what physical retail has been through, There was a bunch of store closings and bankruptcies when kind of the e-commerce revolution took out. And that was supposed to be the nail in the coffin of brick and mortar. And then COVID hit, leading to worries that it would literally never recover. But as you said, people just really like shopping.

21:25They like going into stores still. And then, yeah, combine that with like the depressed rates of construction. You've got this retail renaissance that not a lot of people saw coming. I think retailers are finding that you can have an online presence and a physical presence, and actually there's symbiosis between the two. Studies have come out showing that when a retailer opens a physical location, it actually boosts their online sales as well because that physical location serves as marketing. Yeah, it's a big brick-and-mortar advertising billboard right there that you can also shop in. Let's move on.

21:57Even though regulators have been cracking down on big tech mergers and acquisitions left and right, deals are still being done in a different realm, the sporting world. Just yesterday, we saw the PGA announce a deal to raise$1.5 billion from a group of U.S. investors, as well as a surprise sale of the Baltimore Oreos to private equity giant David Rubenstein. The PGA deal provided a much-needed cash infusion for golf's premier tour in its arms race against the Saudi-backed Live Tour, while the Oreos are just happy to have a deep-pocketed owner who also happens to be a Baltimore native. Neil, let's start with the PGA deal.

22:34This one and a half billing, which is coming from a group including Falcons owner Arthur Blank, as well as Fenway Sports Group, is a much needed cash infusion to help reward the players who stayed loyal. Yeah, I mean, this is so confusing, honestly. I mean, we pay attention to the golf world more than most. But back in June, the PGA Tour and Lyft announced a shocking merger where there was this massive schism. There was break. There was a crazy breakaway league that left the PGA tour. And then all of a sudden they shocked the world and said they would come back together. But over the past few months, the rest of 2023, there was very little details about what that merger meant.

23:13And now they are still kind of working together on coming together, but also at the same time, engaging in a arms race against each other as well. Liv has poached even more golfers, including Jon Rahm, for estimates of up to$500 million. And so PGA Tour is raising this war chest to be able to pay its own players and keep them from defecting to live, even as these merger negotiations still go on. Yeah. So those talks are still definitely going on. One of the reasons why those talks may have stalled a little bit was Congress got involved and like, we don't really want you taking money from the Saudi investment fund.

23:47So this has kind of helped quell those talks a little bit, even while they're still happening in the background. A lot of money is going into the game and people think they're a good thing because they've always thought that the product could be improved and having maybe a more profit oriented or just some more business people involved in a organization that used to be a non-profit is bullish in the long term according to some people let's also talk about the orio deal a little bit rubenstein is an absolute private equity kind of legend he was kind of around before the the crash started said the writing was on the wall, but then also rode the wave out of the crash after 2008 very well.