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Hey Snackers,
From cardio to carpets… Peloton’s cofounders have spun up a new startup: custom rugs.
Crypto prices tumbled yesterday after top exchange Binance made a nonbinding agreement to buy rival FTX, which faced a liquidity crisis after $6B of withdrawals in 72 hours. A few days earlier, Binance’s CEO said his company would sell its entire stake of FTX’s native token. On the equities side, stocks rose again as investors waited for midterm results.
Looped
From Sony to Universal Music, the largest record labels want a bigger cut from TikTok as the app becomes a hit-maker
Sam Smith remix on loop… a TikTok loop, that is. As TikTok turns more tunes into viral hits, the world’s biggest music labels have taken note. Yesterday, Bloomberg reported that Universal Music, Sony Music, and Warner Music Group want TikTok to pay up to 10X more in license royalties — and share its lofty ad revenue with them. And negotiation time is ticking as contracts near expiration.
- Trending up: TikTok raked in $4B in revenue last year and is on track to triple that this year as advertisers keep flocking to it.
- Trending down: Back in 2020 labels were OK receiving a flat fee for TikTok to use their extensive music catalogs. But now that it has 1B+ users — and countless music-backed videos — labels want more $$ when their artists’ songs are used.
Running up that hill… As TikTok’s popularity has grown, so has its ability to turn tracks into chart-topping tunes. Now labels have started relying on the addicting app to promote new artists and singles, and with good reason:
- HotTok: Last year 175+ songs that trended on TikTok charted on the Billboard Hot 100, double the number from 2020.
- Nearly half of active TikTok users pay for a music subscription like Spotify or Apple Music, versus just a quarter of the general population.
Musical attention spans are shrinking... but music’s presence is expanding. In the ’80s, people were listening to albums beginning to end. Then single-song streaming took over, and now tracks are featured in everything from 30-second cooking clips to games like Fortnite. TikTok has modeled itself as more of a promo tool and doesn’t pay labels with the same revenue breakdown as Spotify or YouTube. But while TikTok needs the music industry, the industry increasingly needs TikTok.
Duopoly
Lyft shares plunge 23% as investors compare its record revenue (and growth strategy) to Uber’s
Ubering to the polling place… Investors didn’t cast a vote of confidence for Lyft yesterday. Shares of Uber’s smaller, pinker rival tumbled 23% as investors reacted to its quarterly earnings. Lyft beat on profit expectations, but fell slightly short of Wall Street’s revenue forecast.
- Lyft’s #s were solid, but investors expected a big beat based on Uber’s results last week — and we all know how important expectations are with investing.
- Pricing up: Lyft’s revenue rose 22% from last year, to a record $1B, thanks to record prices. Revenue per rider surged to $52 as long trips and airport rides rebounded.
- Cutting down: Last week Lyft announced it was laying off 13% of its employees (700 people) as its net loss for the quarter quadrupled to $422M.
A tale of two strategies… Lyft’s mission is to “improve people’s lives with the world’s best transportation,” but Uber has diversified beyond urban mobility. While ride-hail majorly rebounded, Uber’s delivery business made up half of its gross bookings last quarter (think: Uber Eats). Its Freight biz, which connects semitruck drivers with high-volume loads, quadrupled its revenue to $1.7B. That means that Uber’s Freight division alone makes more money than Lyft as a whole.
Your worst enemy is your best comparison… In the ride-hail duopoly, Uber and Lyft constantly compete as riders toggle between the two apps. Even though they’re two different companies, Lyft tanked as investors compared it to Uber, whose results had raised expectations for its rival. In industries with a few dominant players, the biggest competitors can’t escape these comparisons. The next frontier Uber and Lyft will be competing on: ads.
What else we’re Snackin’
- Minus: Disney’s parks and media divisions disappointed last quarter, sending shares down. While Disney+ subscribers jumped more than expected, losses ballooned and Disney said streaming growth could taper.
- Butter: Debt-laden AMC reported its 12th straight quarterly loss. Still, sales at America’s largest theater chain jumped 27% as consumers loaded up on popcorn and Icees while returning for blockbusters.
- Swap: Nvidia debuted low-bandwidth chips for Chinese buyers to comply with new US export rules. Regulators restricted chip sales to China in August, threatening $400M of Nvidia’s quarterly sales.
- Takeout: All the soup, none of the seating: Panera opened “to go” locations in NYC and Chicago and plans to “aggressively” expand them as digital-order sales drive fast-food growth.
- Reset: You can’t win ’em all: shares of NBA 2K maker Take-Two fell 14% after it lowered its outlook on the gaming slowdown. Take-Two bought Zynga for $13B this year, but mobile gaming growth is weak.
Wednesday
- Earnings expected from Rivian, Coupang, Roblox, Manulife Financial, Unity Software, Starwood Property, Wendy’s, Bumble, and SeaWorld
Authors of this Snacks own: bitcoin and shares of Apple, Disney, Nvidia, Spotify, Uber, Take Two, and Warner Music Group
ID: 2583581
