Wait, Allbirds is Pivoting to AI? & Jury Calls Live Nation a Monopoly

0:00Get informed no matter where you are or what you're doing. Subscribe to Bloomberg News now and get news when you want it on your schedule. Big tech dominating our headlines. Another win for Donald Trump. A key inflation report. These are short audio reports, five minutes or less, that bring you the latest headlines with context 24 hours a day. Stay on top of the latest news from around the world. Get it on your smartphone. Subscribe to Bloomberg News now on Apple Podcasts, Spotify or anywhere else you listen. Good morning, Bird Daily Show. I'm Neil Freiman. And I'm Toby Howell. Today, Live Nation is a monopoly, a jury says.

0:39Then Allbirds is pivoting from shoes to GPUs.

0:42Neal Freyman:It's Thursday, April 16th. Let's ride.

0:50Good morning. Who would you guess is the most popular figure anywhere in the world to Americans? Hello, I'm Dolly. Country music legend Dolly Parton is by far the most popular international luminary in the U.S., according to a new UMass YouGov poll. With a net favorability rating of 65%, Dolly is more than 50 percentage points ahead of second place, Barack Obama with 14%, and Vladimir Zelensky in third place with 12 % net favorability. Coming in last place with a negative 65 % net favorability score, Toby, I mean Russian President Vladimir Putin.

1:24Neal Freyman:Of the 1 ,000 people surveyed, only 5 % had an unfavorable impression of Dolly Parton. Now I need to know who the 50 people were who did have that opinion. What do you have against Dolly? I'm trying to think of anyone else not named in this survey who could possibly beat Dolly Parton in terms of popularity. The only thing that came to mind were some athletes, maybe some Olympic athletes, could be contenders. Alyssa Liu, after she won gold medal. But it is difficult. Even athletes are polarizing to a certain degree. So Dolly Parton, most liked person in the world, according to a thousand people.

2:01Neal Freyman:And I can't think of anyone more deserving. This episode is brought to you by On Investing, an original podcast from Charles Schwab. It's hosted by Lizanne Saunders, Schwab's chief investment strategist, and Colin Martin, head of fixed income research and strategy for the Schwab Center for Financial Research. Each week, Lizanne, Colin, and their guests analyze economic developments and bring context to conversations around stocks, fixed income, the economy, and more. You can download the latest episode and subscribe at schwab.com slash oninvesting or wherever you get your podcasts. Allbirds is having an identity crisis.

2:35Neal Freyman:The shoe brand that rose to prominence for offering sustainable merino wool sneakers has pivoted to a GPU as a service company. What? Allbirds has been going through it lately, selling off its IP to a brand management firm for a paltry$39 million after peaking at a market cap of$4 billion in 2021. And that seemed to be that. Its fate sealed as a cautionary tale of flying too close to the tech bro fashion sun. But yesterday, the company shocked the world by saying it was taking a$50 million cash infusion to buy high-performing GPU assets to turn itself into an AI-native cloud solutions provider.

3:13Neal Freyman:The new direction comes with a new name, New Bird AI. And what competitive advantage does New Bird AI bring to the crowded AI compute game? That part is unclear for a company that has spent its entire existence more concerned with Aglitz than AGI. However, the move has also pushed its stock in a new direction. After announcing the Switch, Allbirds exploded, rising as much as 800 % at one point because, of course it did. Neil, calling this a head-scratcher is an understatement. And it's an onion headline come to life. I mean, truly. So Allbirds finished up 582 % yesterday for a market cap of$147 million.

3:53We've seen this movie before, and investors usually leave before it ends. Back in 2017 and 2018, what was all the rage? Blockchain and crypto. I remember there was this company called Long Island Ice-T. It became Long Blockchain. And its stock did something very similar to what Allbirds did yesterday. but it was also delisted from the stock exchange less than a year later. A couple of other types of industries have moved into more hot ones like biotech. There were a few biotech companies that just became Bitcoin treasury companies. 180 Life Sciences Corp is now doing business as ETHZilla. So this is a playbook that comes from a position not of offense but of defense and Albert sold for pennies on the dollar.

4:36Now it's trying this desperate move to stay relevant as a meme stock.

4:39Neal Freyman:The issue is, though, that the AI compute crunch is a real thing right now. There is a rapidly drying up supply of computing power. If you talk about AI as a gold rush right now, we are running out of shovels. We are running out of computing power. So there is an opportunity here because if I am all birds, this is a crazy sentence to utter, but I'm looking at other companies like CoreWeave, which rents out GPUs to firms who want to use them. They raised prices by more than 20 % last year. A GPU rental of a Blackwell generation chip, which is NVIDIA's top of the line chip, is up 48 % from just two months ago.

5:18Neal Freyman:So clearly there is demand for these chips. Allbirds is saying, hey, might as well buy some because there will be demand out there. Right. The question, and I think you brought this up in the intro, is sort of what assets does Allbirds – I can't even, yeah, again, it seems like it's not real life. But what assets do Allbirds have that makes them capable of renting out GPUs? Besides, they just raised$50 million in financing. It seems like that is going to be the thing. Like, do they have real estate? Do they have data centers where they can stack these GPUs? It's all very unclear. Let's see what, you know, some analysts had to say about it.

5:53Neal Freyman:The Financial Times wrote an opinion piece that said, we suggest running away as quickly as possible if anyone can suggest a suitable brand of footwear for the task. But then there was a Bloomberg intelligence analyst who wrote, the move exits a structurally lower footwear and apparel model for a higher value compute business, though execution risk remains high. The company has potential to improve its long-term margin profile if the transition is executed well. Sounds like an AR wrote that. I think the though is doing a lot of work there, as is the potential to improve going forward. But yeah, we've seen this story before.

6:26Neal Freyman:Or maybe this industry has a little bit more to it than the blockchain pivots of days gone by. But Allbirds, GPUs, baby. If you're going to a World Cup game this summer, it's going to be ridiculously expensive. And I'm not just talking about the tickets. I mean, just the train ride to the stadium. The Athletic reported that NJ Transit is planning to charge more than$100 for return rail tickets from Penn Station and New Jersey's MetLife Stadium for the eight World Cup games being hosted there. Typically, and I've done this one, that ticket costs$12.90. So that's more than a sevenfold increase. And it's not just NJ Transit jacking up prices.

7:04Earlier in April, the Massachusetts Transit Authority said it would quadruple its prices for round-trip train tickets from downtown Boston to Gillette Stadium in Foxborough. If you want to travel to a World Cup game there, it'll cost you$80. But even that's less than a newly announced bus service that's charging$95 to take fans from Boston to Gillette. Not only have these prices enraged fans who are already paying up to$4 ,000 just to attend the games themselves, but they've caught the attention of politicians. And American officials are mostly blaming FIFA for saddling exorbitant costs on host cities and transit authorities.

7:36New York Senator Chuck Schumer called it a shakedown, saying FIFA's hosting agreement dumps added transportation and security costs onto states and cities, while FIFA keeps the revenue from tickets, broadcasting and concessions. NJ Transit sources told The Athletic that the overall cost to the agency for eight games will total up to$48 million, and they need to recoup these costs somehow. Totally less than two months out from the World Cup, and it's just one controversy after another.

8:00Neal Freyman:Yeah, it's about who the buck stops with, because obviously New Jersey political leaders don't want New Jersey taxpayers to be on the hook for transporting World Cup attendees to the stadium. But these costs are going to be incurred. So someone has to pay for them, which is why you are seeing these prices just go through the roof. The issue, too, is that it seems like FIFA has sort of misjudged demand for all of the World Cup hoopla because right now the hotel industry is saying like, hey, we are not seeing, you know, the bonanza that you promised us. We are seeing prices actually dropping about a third from their peak earlier this year at some of the major cities where the World Cup is going to descend upon.

8:43Neal Freyman:So maybe there is some miscalculation of just how much demand there would be and what prices you can charge. Yeah, the president of the Hotel Association of New York City said he could categorically say we haven't seen much of a meaningful boost yet. It's possible we will get some more demand. But at this point, it certainly will not be the cornucopia that FIFA was promising. It seems like all these swirling issues in the United States right now, maybe anti-American sentiment, the war in Iran, raising gas prices is really dissuading a lot of international visitors from coming. Tourism economics previously projected that international visitor numbers in the U.S.

9:17will rise this year 3.9 percent. They just revised that down to 3.4 percent just because it's going to be so expensive. It has to be the biggest reason. And Football Supporters Europe, which is a fan group, estimated that one supporter would need to spend at least$6 ,900 on tickets to follow their team from the opening game to the final of the World Cup. That is five times the cost of Qatar four years ago.

9:38Neal Freyman:U.S. fans don't have to worry about that. We're not making that of the group stage. I'm not going to put that bad juju out into the world. But one of the issues with the ticket prices, too, beyond just the exorbitant cost, is that FIFA's kind of been pulling the rug out from under people when they buy certain categories of tickets. So a lot of people are splurging for Category 1 tickets, which are supposed to be lower bowl, best seats in the house. But then once they actually have their seat assigned, it's anything but the best seats in the house. And if you, God forbid, bought a Category 3 ticket, people are so far up in the rafters.

10:10Neal Freyman:They're closer to the roof. They know they're not going to be able to see the game. So just all sorts of every issue that could arise around pricing and a World Cup being very expensive seems like it's coming to the fore right now. Hopefully everything gets ironed out and, you know, just like the love of the game takes over. But right now it's looking a little shaky. Moving on, what's the one thing Swifties in a federal jury have in common? They both hate Ticketmaster. A federal jury found Live Nation, the concert giant that owns Ticketmaster, guilty of operating an illegal monopoly yesterday.

10:44Neal Freyman:The evidence the jury looked at painted a very monopolistic picture. Live Nation controls 70 % of major concert venues and handles 86 % of ticketing at those venues. Overall, Ticketmaster sells about 10 times as many tickets as its closest rival. Live Nation's own employees did them no favors here. A series of internal Slack messages showed a ticketing employee bragging he was, quote, robbing them blind, baby, while charging fans excessive fees for parking and VIP upgrades. Another pivotal moment was a phone call recording from Live Nation CEO Michael Rapinoe berating the former chief of Barclays Center in Brooklyn that it was, quote, going to be a tough time to deliver tickets or concerts after the arena dropped Ticketmaster, showing evidence of the coercive power regulators were scared the company possesses.

11:32Neal Freyman:Remember, Live Nation was originally brought to trial by the DOJ, but halfway through, the government cut a deal with the company and walked. 34 of the 40 states involved in the initial suit said, actually, we want to keep going. And it's those state AGs who ended up winning, with a jury finding that Ticketmaster overcharged consumers by$1.72 per ticket. Neil, now the judge presiding over the trial will hold a separate trial of what punishment actually looks like, where options can range from hefty fines to a full breakup of Live Nation and Ticketmaster. We were just talking about World Cup tickets being expensive.

12:07Well, concert tickets make those look like a McDonald's value menu. In 1996, the average face value for a ticket to see one of the world's 100 top-grossing artists was equivalent to about$53 in today's money adjusting for inflation. By 2024, the average face value for a ticket was$142 in today's money. That's an increase of more than 150%. And the antitrust watchdogs in this trial successfully argued to a jury that, you know, this tie-up of Live Nation and Ticketmaster, which happened in 2010, which the government blessed with certain conditions, was a small reason why we're seeing these surging concert price tickets.

12:44Neal Freyman:Live Nation's defense was basically that, hey, we're not a monopoly. We just offer the best ticketing service. And that's the reason why everyone uses us is because we're just so dang good, which is often a tact that many of these companies adopt when talking about monopoly trials. But a lot of people just did some meta commentary on this and said this was a high profile test of antitrust enforcement under the Trump administration. They kind of balked at the last minute with this settlement. So the fact that the states came in and said, oh, we are not done with you. We want to keep going. It kind of does show that there is a path towards a different sort of antitrust enforcement with states picking up a lot of the slack that people felt the DOJ let go.

13:26Yeah, we have some big mergers coming up that are going to be under antitrust review, which I was thinking about. We have, you know, Paramount buying Warner Brothers and United Airlines maybe buying American. And we'll see what the federal government does. But they really blindsided everything, everybody, by the DOJ saying a few weeks ago, yeah, we'll take the settlement. Meanwhile, 34 states said, no, we're going to plow ahead. We'll see how that dynamic really affects these big antitrust reviews of potential mergers coming down the pipeline. What does it mean for Live Nation's business? Is this going to be a whole new concert ticketing paradigm that we're about to enter?

14:01It's very unclear. I mean, the judge does need to deliver these remedies and what they need to pay and whether Live Nation is going to be broken up with Ticketmaster. But at least on the stock market, you know, there were some minor, minorly significant moves. Live Nation was down 6 percent. And then some of its rivals, Vivid Seats, was up 9 percent yesterday. StubHub was up 5 percent. So maybe investors don't see a huge shakeout coming. But, you know, at the margins a little bit.

14:26Neal Freyman:If Live Nation is broken up, we know what they should do. And that is pivot to GPU as a service company. All right. We're going to take a quick break and come back with Neil's numbers right after this. This episode is brought to you by Apple. Neil, there's nothing like your first Mac. I remember my first Mac like it was yesterday. I got mine right as my sister started to get recruited to play soccer in college. I was given the very important task of making her a highlight tape, and iMovie was my best friend. She ended up playing at Georgetown, so I'd say it was all worth it. When I got my first Mac, I was heading into freshman year at the University of Maryland.

15:03A lot was uncertain that fall, but I knew I had a dependable sidekick for homework, connecting with other students, and devouring blogs about our basketball recruiting class.

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16:34Welcome to Neil's Numbers, the segment where I share three stats in the week's news that will make you smarter than Hermione in potions class. For my first number, the United States is a nation of hoarders, and we're dumping our extra junk in storage facilities at record levels. Over 12 % of American households rent storage spaces, tracked IQ's Noah Starr told The Wall Street Journal, adding, There has never been a period with more people using self-storage than today. The self-storage industry has grown into a$60 billion colossus and even more storage spaces on the way, with developers currently on track to add another 164 million square feet.

17:07But how much storage is too much? The swelling ranks of windowless drab facilities have put them in the crosshairs of local governments who call them eyesores and argue that the land could be put to better use that nurtures more street activity. According to the Journal, parts of at least 15 states have enacted bans on self-storage facilities since 2019, including Providence, Rhode Island, which slapped a citywide prohibition three years ago. But to that, Toby, I say you're going to have to pry all the stuff I don't and will never need from my cold, dead hands.

17:33Neal Freyman:It's why storage is such an enduring business model. Timothy Deitz, who is the president of the Self Storage Association, said the four drivers of customer demand are four Ds, downsizing, decluttering, divorce, and death. And those are just evergreen sources of demand. So this is why we see self storage just be such a ubiquitous industry for sure. But a lot of people are kind of waking up to the fact that maybe I don't need to keep my stuff in storage constantly. The Wall Street Journal also wrote an article earlier in the week saying that they talked to a woman who had spent nearly$100 ,000 storing things that weren't worth a tenth as much because basically she got on the auto pay for 30 years and never really understood what she was paying.

18:18Neal Freyman:So it is just one of those things where you set it and forget it and sometimes the bills add up. It's pretty lucrative industry if you're in the game though. Okay, for my next number, I got some interesting name information to share. So the government released its name data report for the 2020 census this week on Americans' first and last names. And here are the main takeaways. The fastest growing last names from 2010 to 2020 were Asian, due to Asians being the fastest growing of the country's racial or ethnic groups in the 21st century. The top three were Zhang, Liu, and Wang. Another takeaway, last names have remarkably little variation over the last 10 years, but also the last 230 years.

18:55In 2020, the most common last names in the U.S. were Smith, Johnson, Williams, Brown, and Jones. Those names were also among the most common in 1790, the date of the first census, which is wild to think about given that the U.S. population has increased more than 84 times over that time span. Final takeaway, the Hispanic or Latino population has a higher concentration of last names than any other group. 14.2 % of people of Hispanic or Latino origin share the group's top 10 last names. Overall, I was just struck by how few last names there are in the US. There are 7.8 million unique last names in a population of more than 330 million people, but I've yet to meet another Freiman spelled like mine.

19:35Neal Freyman:Not a lot of first names are changing either because if you look at census data, top five male first names in 2020, Michael, John, James, David, and Robert. If you go back to 1990, it was James, John, Robert, Michael, and William. So the only one we really lost there was Williams. Same thing goes for female names. In 2020, the top names are Mary, Maria, Jennifer, Elizabeth, and Patricia. Shout out Patricia's. And then in 1990, it was Mary, Patricia, Linda, Barbara, and Elizabeth. So again, there's not a lot of variation here because this is census data. It is not Social Security Administration data, which always has, you know, Olivia and Liam.

20:13Because those are just the newborns.

20:14Neal Freyman:Right. Those are new babies coming in. This is about the entire population. So that's why you see older names more represented there. But I do think it is fascinating how names come and go into culture. One of my favorite anecdotes about this is the fact that Jalen Rose, who played for the Fab Five Michigan team, he was one of the first Jalens ever born in the country. Now there are tons of Jalens out there. So names do have the opportunity to kind of get thrust into the zeitgeist, depending on if a prominent figure. Maybe there's more Dolly's now than ever before because of how well-liked Dolly Parton is.