Is it Time to Breakup Google? & Disney Fights Wrongful Death Suit

0:00Tuesday 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 Tuesday on NBC. Good Morning Brew Daily Show. I'm Neil Freiman. And I'm Kyle Heggie. Today, Google could break up, but hey, it's not you.

0:38It's the DOJ. And why Disney Plus has found itself as the main character of a story that is truly stranger than fiction. It's Thursday, August 15th. Let's ride.

0:53Yet another business leader is walking back. Comments about how remote work is destroying companies. During a talk with Stanford Online that was posted this week, former Google CEO Eric Schmidt criticized the company's remote work policies in a response to a question about the Google OpenAI rivalry. Schmidt said Google decided that work-life balance and going home early and working from home was more important than winning. The reason startups work, he said, is because the people work like hell. After backlash, Schmidt decided he wanted a take-backsies. In an email to the Wall Street Journal, he said he misspoke about Google's work hours and regretted his remarks.

1:33It seems like he misspoke because he might have used Gemini to write a script or something. But I love when people are like, this young generation, they're soft. You got to like have a grind set and then they get any backlash and they're like, I'm so sorry. I take it back. If you're going to criticize people for being soft, man, like you got to own it. Don't walk it back. I'm a little disappointed in Eric. And meanwhile, he was talking about the Google OpenAI rivalry and about how Google is behind in AI development. And if you actually look at their remote work policies, Google and OpenAI have the exact same remote work policy.

2:05You have to go in three days a week, but you can work from home two days a week. So there's not that much daylight between the two. And I think once that was pointed out to him, he's like, yeah, I definitely misspoke about the fact that Google people could stay at home and OpenAI people had to go to work. And now a word from our sponsor, Beehive. I'm going to interrupt you, Neil. You know, I've been listening to you and Toby pitch Beehive for the past couple of weeks. You're doing a good job, but I think you haven't emphasized a certain feature enough that really separates this newsletter platform from others.

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3:07So the power is all in your hands. Happy. I'm very happy. I wish Tyler would text me, but I'm very happy. He will. I'll tell him. Check out the ad network and Beehive's other features at Beehive.com slash brew. That's B-E-E-H-I-I-V dot com slash brew to get a 30 day free trial and 20 percent off three months with code brew. 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. Whether 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.

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3:53Like a guy's hair about one week after they get it cut, the U.S.'s inflation picture just keeps looking better and better. Yesterday's Consumer Price Index showed that July prices grew 2.9 % from a year earlier, the first time it's come under 3 % since 2021. Meanwhile, core inflation, which strips out volatile goods like food and energy, ticked up just 0.2 % from the previous month, another sign that wild price increases are a thing of the past. In all, this makes four straight months that inflation has eased, and we're pretty much back to normal levels of inflation at this point. This is great news for you, because who likes paying more for things?

4:33And also the Federal Reserve, which desperately wants to cut interest rates from 23-year highs, but needs assurances that inflation is under control before it does that. Well, this report didn't throw any curveballs. September's rate cut is still a go, and the question now is not if they'll cut rates, but by how much. Kyle, if high inflation was a three-hour horror movie, the credits would finally be playing and the house lights have gone up. It sure seems like it, and I think this was a report exactly like you said, no curveballs, and probably exactly what we wanted to see. I remember we were talking about the jobs report maybe last week.

5:09Everyone was up in arms. We need an emergency cut. We need it now. Now, it seems like everyone has kind of cooled down. We're like, OK, it is going according to plan. And so I think the Fed has done a pretty good job of bringing inflation down at the rate we needed it to. And they're more focused now on the labor side of things. And that's what they're going to talk about at their symposium. In recent comments, the Fed has said that inflation is less of a worry for them. And they are more focused on a slowing economy, a slowing job market, which is why they are teeing up a rate cut in September.

5:42So what like inflation did increase 2.9 percent from a year ago. So what was driving the increase? It appears just to be one sector. Ninety percent of the monthly increase in inflation was due to shelter costs, a.k.a. rents. That is, first of all, very important because that is a huge expense for people. Economists also consider shelter costs in the CPI to be somewhat of a lagging indicator. and private data indicators show that rents and home prices are decreasing or slowing growth. So that's why they're not so worried that 90 % of the increase is due to shelter costs specifically, just because they view that as somewhat of an anomaly and not a perfect symbol of what is going on in the economy.

6:27But obviously still a huge concern for people as housing prices keep going up. The rest of the goods and services in the U.S. economy, though, pretty much growing at 2 % or less, which is what the Fed wants to see. I'm going to need J-PAL to put on a construction hand and just start building some homes. That might be our solution here. I will say eggs were up 5.5%. So if you're a big omelet guy like myself, you're still getting hurt. Eggs are probably the symbol of inflation, of food inflation over the past couple of years. But I do want to point out that the food inflation we all experienced when we went to the grocery store and saw the price of eggs, saw the price of fruits and veggies just skyrocket 20 % over the past couple of years.

7:05That is also a thing of the past. Food prices, especially groceries, have just barely increased for the past six months. Last month, month over month, they increased 0.1%. So it's pretty negligible. So the food price inflation that we've experienced does seem to be gone. And I think at this point, every single time the CPI comes out, this inflation report has been huge news. Markets have reacted one way or the other, whether it comes in hot or cool. And I think the muted market response yesterday, there just wasn't a big stock price jump one way or the other, is because this inflation report just hasn't become that important anymore.

7:45Inflation is back down. There are other reports that are more important, like the jobs report. And I think today is something you want to pay attention to because there are two big reports that I think could swing markets more so than the CPI. One is retail sales. We talked about how consumer spending is so important to the economy. And the other is very similar to retail. sales, it's just through a private sector, is Walmart earnings coming out before the bell. So those are two reports that may just be more important than CPI these days. Yeah, it seems like this has maybe cleared the path for a cut in September.

8:16They're going to get more inflation readings before then and another jobs report. But it seems like it's all going according to plan. It really is going according to plan. Okay, last week, Google was found by a judge to run an illegal monopoly in its search engine, the most damaging antitrust verdict against a U.S. tech company in two decades. But that verdict is just part one of the saga. Part two is now that Google is found to be a monopoly, what is the judge going to do about it? What are the penalties, whole hand down, to create more competition in this space? Well, I hope he remembers Long Division because the DOJ is reportedly considering asking the judge to take the nuclear route and break up Google into The goo and goal.

8:59Okay, that is a joke that would make my dad proud. But in actuality, the government is discussing proposals like forcing Google to split off parts of its business, like its Chrome browser or its Android smartphone operating system. And if they choose this aggressive path, it'd be the biggest corporate breakup since AT &T in the 1980s. Less ambitious proposals are also on the table. They include forcing Google to make its vast search data available to rivals or banning those exclusivity deals that Google paid to phone makers. Remember, the crux of this case was that Google pays Apple$20 billion a year to make its search engine the default on iPhones, which the judge said violated antitrust laws.

9:39Kyle, a Google breakup, it is apparently on the table, would be extreme and historic. Yes, I would have used Alphabet as splitting up from A to Z, but I liked your dad joke. I liked your dad joke, Neil. This is a really interesting case. We have J.D. Vance and Lena Khan agreeing on something as well, which is - Lena Khan is the FTC chair. Which is very notable. It's interesting because Satya Nadella, the Microsoft CEO, is actually part of the testimony. And he said that basically Google has created this Google Web with its relationship with Apple. And it's so dominant in some spaces that it's using that dominance to promote basically other products.

10:17And so you can't take off Chrome off your Chromebook. You have Android as a phone. You can't get Chrome off of that. And that's when I think the Fed or the Justice Department starts thinking about, OK, is this actually affecting consumers? And there is a big focus on their ad network where they dominate it so much. They're concerned it's hurting consumer and bringing prices up. And that's when I think you start having more serious conversations about monopoly. But the reason I bring up Microsoft is we tried to break up Microsoft in the early 2000s and it actually went through on appeals. it was taken back, but they had to do a few things because of that ruling.

10:55And it allowed players like Google, early Google, to get much bigger. And so even if it doesn't get broken up, I think this is going to create more space for startups and for other companies like a DuckDuckGo, other search engines, to gain a little bit of market share. So I'm really interested in how this is going to play out. Right. This process is fascinating because what the judge does and what the DOJ does is they go to all of Google's competitors and say, hey, what would you do? That's why you talk about Microsoft. So they go to DuckDuckGo and they're like, hey, how would you create more competition?

11:27What should we do to Google? They solicit opinions of all of Google's competitors and rivals and what DuckDuckGo said. So here they said, there's no silver bullet. They did not propose breaking up Google. They said that they should ban those agreements. That seems to be the biggest thing that they could do because if the judge found that those exclusivity agreements to make Google search the default on iPhones and other devices. If they found that was the problem here, then they probably should ban those exclusivity agreements. That seems like the first thing they should do. DuckDuckGo also talked about data sharing.

12:01That was a big part of the Microsoft settlement 20 years ago to give others access to Google's search and its knowledge. Google has 16 times more data through its search engine than its closest rival, which I don't even know what it is. Bing, DuckDuckGo, something that's not even remotely close to it. They also want to do what the EU does potentially and present users with a choice of what browser and what search engine you want to use when you open up your phone, which is not the case now. But those appear to be all on the table. A lot of tech analysts I follow were like, honestly, I don't see this Google breakup happening.

12:35This would be extreme in the sense of breaking up Google over the fact that you just found these exclusivity agreements to be violating antitrust law. Plus, as you mentioned with Microsoft, it goes through the courts for years. Google is going to appeal something like this to unwind a giant tech company. Just you can't snap your fingers and make it happen. But if it has happened before, and I know you went down the rabbit hole with AT &T in the 1980s. Yeah, AT &T was the last. This would be the biggest company to be broken up since AT &T in the 1980s. And they basically broke up and made these baby bells.

13:09So AT &T became seven other companies that were regional. It is funny because if you look at it now, they all basically got back together. I think Verizon is the only one that kind of actually stood on its own. So the market brought them all back together. But I do think in the terms of Google, even if the company doesn't get broken up, I picture this as like death by a thousand cuts. Every day that Sundar Pichai has to think about this court case is a day he's not thinking about AI. And so even if they don't get broken up, it is a distraction for Google. And I think it will give some sunlight to other companies.

13:40Plus, all these employees are working from home. Maybe Eric Schmidt was on to something. Okay, Neil, have you ever clicked agree to terms of service without fully reading the terms of service? If you answered no, you're probably lying. And if you answered yes, you're just like Jeffrey Piccolo, who signed up for a one-month free trial of Disney Plus streaming service back in 2019. Now let's fast forward to October 2023. Jeffrey and his wife, Kanakapur and Tank Swan, are dining at a restaurant located inside Disney Springs in Florida. after being repeatedly assured that the food was allergen free.

14:18His wife unfortunately suffered a fatal allergic reaction after eating at the restaurant. Now, Piccolo has gone on to sue the restaurant and Disney on behalf of his late wife in a wrongful death lawsuit. In steps Disney's legal argument, which feels right out of an SNL courtroom sketch where they claimed he waived his right to sue Disney and instead must go to arbitration because, you guessed it, there's a clause embedded in the terms and services of Disney Plus streaming service that he signed up for back in 2019. While this plot feels like something you'd watch on Disney Plus, I assure you this is real.

14:51Piccolo's lawyers have argued that, quote, the notion that terms agreed to by a consumer when creating a Disney Plus free trial account would forever bar that consumer's right to a jury trial in any dispute with any Disney affiliate or subsidiary is so outrageously unreasonable and unfair as to shock the judicial conscious. Neil, are we gonna see Mickey Mouse in a courtroom or do you think this ends up in arbitration? I mean, Disney may be able to protect itself in legal court in this case, but not in the court of public opinion. And ever since this came out yesterday, it has been absolutely hammered for this lawyer trickery that it's trying to pull off, trying to settle this dispute in arbitration, which is not a court.

15:36It is a private venue, basically, where a third party, not a judge, decides this dispute. And it's over$50 ,000, right? Piccolo wants$50 ,000 in damages plus lawyer fees. And it seems like this$50 ,000 is nothing to them compared to how bad they are losing the PR war right now. Public opinion has turned so much against them in the past 24 hours by using this clause in Disney. Plus, they also are citing a terms and conditions agreement that Piccolo and his wife used to actually buy passes to Epcot where they went to dine in October 23 to protect themselves, to shield themselves from liability in court.

16:20And these lawyers are saying, I can't believe you're using something from Disney Plus to apply to every single Disney affiliate or subsidy anywhere in the world. Plus, it's not just you. You're trying to apply it to your wife. Your wife had nothing to do with it. She didn't watch the Disney Plus show. She had nothing to do with it. So you're trying to protect yourselves against the estate of this guy's dead wife. It is a terrible look, and we'll see what happens. Yeah, it's not a good look. And of course, they do want to go to arbitration because it's more private. They get it out of the public eye.

16:50But I think the kind of genie is out of the lamp here, and everyone is focused on this case. What I found really interesting is two law professors from a previous research paper looked at the terms and services of the 500 most popular websites, and they basically found if you actually read them, you need to basically be a lawyer to understand what they are. So I think we have a broader issue, which is these terms and services are so complex that no one actually reads them. And then to be held accountable for legalese that you can't understand seems to be a tough spot. So there might be something interesting that comes out of this case in terms of terms and services going forward as well.

17:26Yeah, a Florida judge will decide whether this case can go to jury trial like Piccolo wants. Up next, how legalized sports betting has impacted people's finances.

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18:36Fixed Broadband Experience Report, August 2024.

18:41Welcome to Neil's Numbers, the segment where I share three stats from the week's news that will make you seem smarter than when you put on glasses. My first number is$30 billion, which is how much the candy giant Mars is paying to buy Kela Nova, the maker of Pringles, Cheez-Its, Pop-Tarts, and other snacks that your no-process food rule doesn't apply to. Yep, you might remember hearing rumors of this acquisition coming together a few weeks ago, but yesterday it was official and it is mega. Mars'$30 billion purchase is one of the biggest M &A deals of this year so far and one of the biggest deals in the food industry ever.

19:17Who are the players and what's the strategy? Well, you've got Mars, which is known for its candy and chocolate brands like M &M's, Skittles, and Juicy Fruit Gum. It is a massive company among the biggest privately held firms in the entire country. But cocoa prices have skyrocketed. Nobody's chewing gum anymore. And it's thinking it has to add more punch to its brand portfolio. And that's where Kela Nova comes in. While Kela Nova sounds like a moon of the planet Mars, It's actually a piece of debris from when Kellogg split up last year into two companies. Kellenova makes a bunch of salty snack brands like Pringles.

19:51And salty snacks are one of the few areas of growth in packaged foods. So Mars decided to pounce. Kyle, would you pay$30 billion for Cheez-Its? I would pay$30 billion for Cheez-Its, hands down. It's interesting. I think the M &A environment has been pretty tough in the U.S. the last couple of years. And so I wouldn't be surprised if antitrust regulators do actually go and look at this deal. but also did they forget about Ozempic? Like no one's snacking anymore. So maybe they have some inside intel here and they think snacks are going to rebound. Well, here's the thing. People are snacking. Snacking is, is huge right now.

20:25Nearly half of us consumers eat more than three snacks a day, which is up 8 % in the past two years. And us snack sales rose 11 % last year from the year prior to$181 billion. dollars. So whatever impact Ozempic and Wagovi are having, it does not appear to be curbing Americans' appetites. Americans love their little treats. What can I say? My second numbers are some concerning findings from recent studies into sports gambling, which show how the rise of sports betting is linked to negative financial health outcomes in states that legalized it in the past few years. Let's take one study led by management professor Brett Hollenbeck at UCLA.

21:07His team looked at a consumer credit data set of 7 million people to learn how online betting impacted their financial health, and it was not a pretty picture. In states where online betting is available, average credit scores drop by 1 % after four years compared to a credit score drop of 0.3 % in states where legal gambling is available of any kind. In states that allow online betting, the likelihood of filing for bankruptcy increases by up to 30 % after three to four years. Collection on unpaid debts also increased by about 8 % in those states. And these negative outcomes aren't spread evenly across the population.

21:44They disproportionately affect young men in low-income counties who experience more credit card delinquencies, higher financial distress, and higher rates of bankruptcy than other groups. Kyle, since the Supreme Court lifted a nationwide ban on sports betting in 2018, 30 states have made it legal. Sports betting ads are everywhere, and Americans wagered$120 billion on legal sportsbook last year, up from$93 billion in 2022. And we're only now just learning about how it's impacting people's personal finances. Yeah, this is super interesting, and I think Nate Siller was quoted in one of the stories about this, our favorite elections forecaster, who basically said these companies are hiring, like, MIT aerospace engineers to figure out how to hack your phone and hack you so you keep gambling.

22:26and it, I think, is drifting into predatory zone. And so it'll be very interesting to see. And I think it also was mentioned that they don't want to stop just at a casino in your pocket. They want like this thing called iGaming, which is like the Holy Grail, which basically allows you to bet on anything in the world, essentially, from your phone. I think we're going to look back on this in like, you know, two decades and be like, we probably should have had a little more regulation here. But it's tough because it does get to this freedom question of what should an adult be able to do on their phone.