Meta Investing Billions in Eyewear? & Netflix Keeps Adding Subscribers

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 Toby Howell. Today, a college football video game returns after more than a decade.

0:39Toby, are we going to take Western Michigan to the ship? Then Zuck is coming for your eyes. Why Meta is exploring an investment in the company that makes its Meta Ray-Bans. It's Friday, July 19th. Let's ride.

0:56If you're just waking up, brace yourself. It is total chaos out there. A massive IT outage has disrupted businesses, banks, airlines, media outlets, and emergency services across the world. The problem appears to be caused by a CrowdStrike update that affected millions of Microsoft Windows devices, sending them crashing in countries from the U.S. to China to Australia. Microsoft said it was working on a fix and was observing a positive trend in service availability. But as of 6 a.m. Eastern Time, it's still bedlam. I mean, this thing affected everything. The FAA at one point grounded all flights from Delta, United, American Airlines due to a communication issue.

1:36911 emergency call centers in Alaska and New York City have also been impacted. They were handwriting boarding passes at some airports in India this morning. And then the UK broadcaster Sky News literally wasn't able to broadcast its morning news bulletin because of the outage. It is chaos. Well, can I still watch the British Open? There's no word on the British Open, but I certainly hope so. if we can't watch it, let's try to get on a flight and go and watch it in person, Neil. I don't know if we can. I mean, everything is ground stopped. Yeah, this is total chaos. So just keep your eye on what's happening today.

2:08It looks like they're trying to restore it, but the effects will be widespread and will ripple across countries everywhere. Now, let's hear a word from our sponsor, Meta AI. There is something so fundamentally human about our search for answers. Resources like elders, books, and even search engines have always been around, but now we have the added advantage of being able to ask AI for help. And that's what makes Meta AI so special. First, it's embedded in the apps we all use daily, Instagram, WhatsApp, Facebook, and Messenger. But it also goes beyond just answers. It can summarize your notes, turn your words into images, while also weighing in on any question or how-tos you can toss its way.

2:45Plus, you can always have Meta AI respond like a village elder if that's how you want your answers package. I might just try that. Expand your world with Meta AI. Now on Instagram, WhatsApp, Facebook, and Messenger. I'm Christian McCaffrey, pro running back, and Abercrombie is an official fashion partner of the NFL. I'm not kidding when I say NFL by Abercrombie broke the internet last year, and I think this season's lineup is even cooler. And so does my wife, who keeps stealing all my hoodies. Stay fit for the season and Abercrombie's newest arrivals. Shop NFL by Abercrombie in the app, online, and in store.

3:24Never one to shy away from a spectacle, Mark Zuckerberg is now considering investing in spectacles. Meta is reportedly exploring a multi-billion dollar investment in the eyewear group Excelsior Luxottica to take a 2-5 % stake in the company. It has spent gobs of money in recent years trying to move from dominating your screen time to existing all over your body. Meta's push into wearables includes not only its bulky reality headsets, but also its sleek Meta Ray-Ban glasses first launched back in 2021 in partnership with Accessor Luxottica. They have turned into a smash hit for the company. The newest generation that launched in October of last year sold more in just a few months than the previous version did in two years, according to Luxottica's CEO.

4:10The glasses are part social media tool. You can live stream what you see directly onto Facebook and Instagram and part AI tool. The glasses come integrated with Meta's AI assistant, which you can interact with with your voice. You have all heard us talk ad nauseum about the headset wars ranging between the MetaQuest and the Apple Vision Pro, but clearly this potential investment shows Zuck sees a future in eyewear. He totally does. And he even told us himself when we interviewed him back in February, we actually have a clip of him specifically talking about the glasses. It's really been a very fascinating partnership.

4:44I mean, the technology behind even producing kind of normal glasses before you put any electronics in it is actually quite sophisticated. And through this partnership, I think we've produced something that brings state-of-the-art technology around AI with something that has been a fashion icon for decades. And I think it's pretty neat. You can just tell that he is really excited about this and he wasn't expecting it. And he just has this feeling of like, maybe we're onto something here. Yeah, previously, Zuck had said that glasses would need full holographic displays to be a large market. But you, again, heard in his voice, he's almost surprised by the success that Meta Ray-Bans have had.

5:21Part of the reason why Meta values this partnership so much is that unlike a smartphone, things or even like a smart watch, you wear things. When you wear things on your face, you have to have some sort of fashion sense. It can't just be a one size fits all. You do. People want different sort of sunglasses, different sort of silhouettes on their faces. So they've approached this very collaboratively with Ray-Ban to make sure that these products or something that you would be proud and you wouldn't. That's the issue that Snapchat has run into with their Snapchat spectacles. They didn't look very good.

5:54That's why Meta is doubling down on this partnership because they want to make beautiful-looking pieces of hardware. And a reminder, Essilor Luxottica doesn't just make Ray-Ban. They make every single thing that goes on your face, and they also own LensCrafter. So they have this retail distribution point to sell these things as well. And, I mean, Essilor Luxottica, we haven't talked about that. over the past year and a half on this podcast. They haven't come up once. And then now they're in our podcast for the last two days. Remember, yesterday they acquired, or they said they were going to acquire Supreme for$1.5 billion.

6:28And they are on the move to expand their technology and engineering capabilities in 2022. They bought an Israeli hearing tech startup called Nuance Hearing, which comes with acoustic beamforming technology. And then the same day they acquired Supreme. They also took an 80 % stake in Heidelberg Engineering, which is a German engineering company that specializes in eye surgery technology. So this is a glasses eyewear company that is trying to expand its tech capabilities. At the same time, Meta is also trying to get into, I guess, fashion. I have had a chance to wear the Meta Ray-Bans. And one of the killer features that I also have seen a lot of people share this assessment is actually they're great for listening to music or listening to audio while you're walking around because you don't have AirPods in.

7:13you just have your sunglasses on. And then the other killer use case that I can see for these Meta Ray-Bans expanding their market is as a parent, I would love these things because think about being able to film your kid growing up in first person via the Meta Ray-Ban smart glasses without having to pull your phone out every single time. So I do think that this is part of the reason why Meta is taking a step back and saying, all right, we do need to double down on this field because there are some use cases popping up that we didn't see coming and are also superior to maybe like the bulky headsets that they've been plowing billions of dollars.

7:47Yeah, I mean, they've spent$46 billion on the metaverse since they changed their name in 2021. And they might have just stumbled on the actual use case here with what seemed to be a limited partnership with Ray-Ban. So we'll see what comes of that and maybe more companies will invest in smart glasses. At a time when other media companies are in retreat, Netflix just keeps pushing the throttle. In its earnings report yesterday, the streamer said it added 8 million subscribers in the second quarter, much better than expected, and brought in 17 % more revenue than a year ago. Now with 278 million global subscribers, it is the undisputed streaming king, and we are all but serfs tending to its fiefdom.

8:27What got more users on board last quarter for Netflix? Maybe it was FOMO about the new season of Bridgerton or all the tea about the thriller Baby Reindeer. Maybe it was to laugh at the roast of Tom Brady, which attracted the company's largest live audience ever. And it could very well be that the company's two-pronged strategy to reignite growth is still humming right along. Remember, in 2022, Netflix was wobbling, losing subscribers, and held a tenuous grip on the streaming throne. But then it sprung into action. It began, one, cracking down on password sharing to get you off your family's account, and two, offering a lower-priced ad tier to lure new subscribers who were more cost-conscious.

9:05and it worked like a charm. This month, Netflix's share of total TV viewing in the US climbed to more than 8%, which is more than double any other paid streaming service. There's no stopping it. There's no stopping it. Netflix has gotten a lot better at making money. I mean, they've invested so much in getting their top-line revenue, gross revenue, a little bit beefier because stuff like that password sharing crackdown, stuff like its ad-supported tier, in addition to just hiking prices across the board, it has matured into a company. It is finally a company that wants to make money, doesn't want to lose money on subscriber growth.

9:40And that contributes to this quarter where they made$9.56 billion. It's very good at making money now. And you'll see, and you know how confident it is because they had this quote in their letter to shareholders that you don't typically see, which was kind of stomping on their rivals. They wrote, the challenge for so many of our competitors is that while they're investing heavily in premium content, it's generating relatively small viewing on their streaming. You don't always see that in a corporate letter, just taking a stab at your rivals, but it shows just how confident they are that they are just lapping the competition.

10:15Netflix just nails the content pipeline better than its streaming rivals. I mean, you mentioned Bridgerton came out. It's been crushing Baby Reindeer. It does seem like they create these cultural moments around each new content they piece. They're also pushing more into their live event strategy. I mean, the rest of Tom Brady attracting his biggest live audience yet is fascinating to me. I guess it shows Tom Brady still has some juice left in the tank. But they're also, remember, they won the streaming rights to two NFL games set to air on Christmas Day. So they're pushing further into sports.

10:44They're trying to satisfy their advertisers' appetite for this new kind of revenue stream that they've opened up. So their ad tiers chugging along very, very nicely. Group 34 % quarter over quarter. If you go back a year ago, the ad revenue tier only had 5 million subscribers. Now in May, it said it had 40 million subscribers, so that's growing very nicely. The future is looking very bright for Netflix going forward. It is. Yeah, and the one aspect of their company that we haven't talked about is the move into in-real-life experiences. They're opening Netflix houses, which are two 100-square-foot entertainment venues in former department stores in King of Prussia, Pennsylvania, and in Dallas.

11:27And they're trying to make that into a mini Disney World where, say, you watch Bridgerton or Squid Game. You go, and you can have an experience in real life with them and obviously buy some merch. And maybe that increases your loyalty to their IP, which they're hoping extends your longevity on their platform. Say goodbye to having a productive rest of the summer because EA Sports College Football 25 comes out today. This franchise has a stranglehold on a certain demographic of our listeners. If you came through high school or college during EA's NCAA football heyday, you no doubt have great memories of long nights grinding Appalachian State or some random school to bring them to the national title game.

12:03But it's been a long time since a new game came out. The previous NCAA football series was discontinued in 2013 after a court decision sided with players who sued the game developer over using their likeness. But NIL reopened the door for the franchise to come back with the added bonus of allowing the athletes to finally make money off their name, image, and likeness this time around. Neil, this game is going to be huge. There is so much pent-up demand for it. It looks great from a graphics and gameplay perspective. What school should we play as? UMass, baby. UMass let's go Victor Cruz no I grew up near UMass and they don't have a great football program but I want to bring them to the top of the the college football landscape yeah this may be the most anticipated sports video game release ever in the United States I mean sports video games come out year after year and the thing people want from them is mostly updated rosters but the fact that this has been dormant for more than a decade is just fueling a hype machine unlike any I've ever seen in sports video games.

13:07The scale of a college football game is just kind of mind-blowing to me because there are over 130 teams. And in order to get all of those players' names actually in the video game, they had to get their consent. So they sent birds out to over 14 ,000 players, walk-ons from Colorado State that have never even seen the field once. They needed to get their approval. And what they did was they paid them$600, gave them a free copy and some other perks to get them in the game. And some of these players are pretty hype about it. They were hustling to get as many athletes as possible. The first thing they did was just send out mass emails to their college email addresses.

13:47But if that didn't work, they started sliding into players' DMs, into their inboxes. They started calling their parents, their mothers. And then also sometimes they jump on to video conference team meetings and just say hey guys EA people are here they want to your signed consent to put you in the game I do think EA has also nailed this rollout they offered the game up for early release this past week it felt like the game has already been out if you just scroll through social media tons of clips have been going viral it's been very funny too because people were saying I've been waiting like a literal decade for this game and then like a few tweets later like I can't figure out how to stop the freaking run someone's got to help me here I'm out of practice So you know this is a passionate audience.

14:28Just to show how passionate this audience is, is that some fans have been manually updating the rosters on NCAA Football 14 for the last 10 years to keep those rosters up to date. So people are ravenous. College football fans are notoriously just pretty crazy. And combine that with video game fans as well. And you have all the ingredients for a very successful release. It just shows how the college sports landscape has changed from the previous editions of this game where when you would play, it would literally be like running back number five for USC and it would be a Reggie Bush kind of fake out and or number 15 for Tim Tebow on Florida and that would be Tim Tebow.

15:10But it just shows how this landscape has completely changed where players can get paid for their name, image, and likeness and video games are following suit. Up next, it's time to open those portfolios again because Stock of the Week, Dog of the Week is coming right up. Change is always happening. But no matter what changes in five years, there's one thing that will stay the same. The price of your internet. With the Xfinity five-year price guarantee, you get five years of the most reliable Wi-Fi with our best equipment included for a price that stays exactly the same. Restrictions apply. New residential customers only.

15:48Taxes and fees extra and subject to change. Most reliable Wi-Fi based on OpenSignal Awards USA. Fixed Broadband Experience Report, August 2024.

16:2288 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. EBCLIS can be used with or without topical corticosteroids. Don't use if you're allergic to EBCLIS. 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 EBCLIS. Before starting EBCLIS, tell your doctor if you have a parasitic infection. Searching for real relief?

16:48Ask your doctor about EBCLIS and visit ebglis.lily.com or call 1-800 - LillieRx or 1-800-545-5979. Stock of the Week, Dog of the Week is without a doubt my favorite segment of the show because it means the weekend is just hours away. But before we get there, you'll learn about one stock that summited a mountain and another that stayed at base camp. I won the pre-show baby juggling contest. Yeah, I went a full 10 seconds without dropping one. So I get to go first. And my stock is actually a group of stocks, the Russell 2000. The Russell 2000 is an index made up of companies known as small caps worth between$250 million and$2 billion.

17:29But don't tell them size matters. Over the past month, the previously stagnant Russell 2000 has surged about 8%, far outpacing the S &P 500, an index of large companies that has stayed flat over the same period. They're also calling the phenomenon the great rotation on Wall Street. And it's one of the main themes dominating investors' thoughts right now. Investors are pulling their money from tech behemoths like NVIDIA and Apple and putting them into smaller companies you've never heard of, sending their share prices soaring. And by companies you've never heard of, I'm talking Biopharma, Prelude Therapeutics, CryptoMiner, Cypher Mining, home medical provider Aviana Healthcare, and more obscure names that have all popped by double digits recently.

18:10The small cap rally did take a breather yesterday with the Russell 2000 dropping more than 2%. But the trend is clear. After being unloved for years, tiny public companies are starting to see interest pick back up. Yeah, the general thought of why this is happening is because small caps are particularly sensitive to macroeconomic shifts. They often carry a lot more debt, especially more floating rate debt. So they can't quite service as well as large cap companies. So that is why Powell's comments on interest rates and that the fact that the market is pricing in a near certain interest rate cut in September really affected the Russell 2000 more so than the S &P 500.

18:46In general, those small cap stocks are pretty underloved because if you think about it, the best small cap stocks eventually become mid caps. The best mid caps eventually become large caps. So why not just invest in the large caps because it's a self-filtering mechanism. But every once in a while, you do got to show some love to the Avon Therapeutics of the world. Right. I mean, they're all many of them are biotech companies where they just have this one drug in a pipeline and this clinical trial can really make or break it. So if they pass the clinical trial and it shows efficacy, then they'll pop like a Moderna of the world or something like that.

19:18But many of them just their drugs don't work in clinical trials and then they go to become penny stocks. So it's a very risky part of the market that, you know, a lot of investors just don't really pay attention to and they just focus on the invidious of the world. But there is a lot more attention now, and the AI trade of all these data center companies and big tech companies that are investing in AI has taken a huge breather over the past month. Yeah, just remember, though, over 41 % of small cap index is unprofitable compared to 7.4 % of large cap, so tread lightly. My dog of the week is Bud Light.

19:50The former number one beer in America has now tumbled even further from its purse to the number three spot. After getting passed by Modelo last year for the top spot, Michelob Ultra has snuck into the second position. If you look at the beer sales in the U.S. for the four weeks ending July 6th, you'll see Modelo on top with 9.7 % of the market, then the low-cal Michelob Ultra coming in at 7.3%, while Bud Light lags behind at 6.5%. The fall of Bud Light shows the lasting effect from the boycott that began in April of last year when a transgender influencer posted a video advertising for the brand.

20:25The next month, Bud Light lost its top spot and has trailed Modelo ever since. The brand has continued to suffer in the 14 months since, though, in most part because retailers have started to give it less shelf space. But it's not all bad news because guess who owns Michelob Ultra? AB InBev, the same company that brews Bud Light. Yeah, this shows that shelf space is destiny. AB InBev's CEO said that the conglomerate had lost between 5 % and 7.5 % of shelf space going into the spring with most of those losses coming from Bud Light. And this was not just any stretch on the beer calendar. It was from Memorial Day to July 4th when a lot of beer is consumed outside by the grill with a hot dog in hand.

21:08So this is a big deal and it shows the lasting impact of what happened to Bud Light and the rise of Michelob Ultra. Yeah, it is setting up to be a Michelob summer already. they had a very big summer sponsoring the Copa America. They sponsor Lionel Messi. And then they're also the sponsor for Team USA at the Paris Olympics. And Michelob does attract a more health-conscious drinker. It is low-cal, 95 calories. So it's trying to zero in on its target audience. And by sponsoring all these main sporting events, I think they're doing a great job of doing that. One other beer to pay attention to in AB and Bev's portfolio, Bush Light.

21:44Sales are up 13 % in the last four weeks. They know their audience. Yeah, I know Bush Light. Bush Light is targeting the concert series, the country concert. So again, AB and Bev, they're no fools here. They know exactly who their core audience for each beer is. And yeah, Bush Light is another beer that's on the come up. Elon Musk has had it with California and is packing his expensive toys up and leaving for Texas. The Mercurial Billionaire said on Tuesday that he is officially moving the headquarters of SpaceX and X from California to Texas. The straw that finally broke Musk's back, a new gender identity law signed by California Governor Gavin Newsom that Musk disagrees with.

22:24But the thing about companies is that people work at them. And when you make the decision to move companies, people have to move too. So other startups have started to circle SpaceX and X's most valuable assets, the brains and the brawn that build the rockets and the algorithms, looking to poach them away in a time of flux. At least two space companies have launched public appeals for SpaceX employees to come join them with one CEO from the startup Latitude, promising engineers 12 bottles of champagne if they make the jump. Neil, these CEOs were literally just jumping into the comments under Elon's Expo saying, hey, if you don't want to move to Texas or your values don't align with Elon's decision, come work for us.

23:02And frankly, I respect the hustle. We've seen that with a lot of companies owned by Elon Musk recently with other rival companies trying to poach employees, especially in X as their as their employee base has gone from 8000 down to 1500. It remains to be seen whether this is actually going to be a big shift in relocating workers, though. I mean, when Tesla—he moved Tesla's headquarters to Texas from California a few years ago, and in the interim, Tesla has only expanded its operations in California. And because SpaceX has over 13 ,000 employees, it has factories in states all over the country.

23:40It could be that they still maintain a big presence in California, and this is just a symbolic move by Elon to stick it to California and move to Texas, where the corporate friendliness is a little nicer. Right. There might be some tax implications here, but SpaceX is very heavily concentrated in Hawthorne, California. All its manufacturing facilities are there, and they've kind of grown out like an amoeba from this one spot. In that case, it is something where you cannot decouple from California completely. That said, though, they have invested a lot of money in Texas as well. That's where they have spent$3 billion in developing its star base there, where it launches its starship from.

24:22So, yeah, it comes with tax, comes with legal, comes with political implications. But Musk had almost already butt the future of the company on Texas as well. So maybe this is a more logical step. It's not as out of the blue as you might think. Definitely not out of the blue. And also, Texas is working to court more companies by establishing a court to rival Delaware's Chancery Court, which Elon Musk moved Tesla's incorporation from Delaware to Texas recently because of a court ruling that invalidated his$56 billion pay package, which is now back on the table. Finally, here's a wholesome story to send you into the weekend.