Meta Doesn’t Need Your News, Canada

Plus: Airlines might have to pay for their mistakes, finally. ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

May 9, 2023

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TOGETHER WITH

Good morning.

Jamie Dimon may have looked like an Alpha genius after that First Republic deal, but JPMorgan Chase has had its share of boneheaded moments.

Dimon found himself on the wrong end of a bizarre legal decision on Monday after a Delaware judge ordered the US’ largest bank to pay the legal fees of Charlie Javice, who JPMorgan is suing for fraud. After Javice sold her fintech startup Frank to Dimon and Co. for $175 million in 2021, the megabank alleged that she and her team had artificially inflated the number of users on her platform… by roughly 4 million. But as part of her deal, Javice was made a managing director at JPMorgan, making her entitled to having her legal fees covered by the bank. Frank-ly, it looks like another oopsie.

Morning Brief

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Meta’s not Canada’s buddy, guy.

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Oil runs cold, but the dividends are hot.

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Just call him Air Biden.

Tech

Meta Squares Up to Canada Over Publishing Law

(Photo Credit: Annie Spratt/Unsplash)

If Facebook stopped your uncle with a weakness for conspiracy theories from incessantly posting news stories, would that be so bad?

On Monday, Meta’s Head of Global Affairs Nick Clegg doubled down on Meta’s threat to block news on its platforms in Canada if the government goes ahead with proposed legislation to make Big Tech companies hammer out licensing deals with news publishers for their content.

Have I Not Got News For You

Clegg was due to appear before a Senate committee hearing in Ottawa on Monday to discuss the bill, but declared he’d be a no-show. He is protesting that the title of the hearing had been switched from “The Response of Companies in the Information Technology Sector to Bill C-18” to the ever more slightly loaded: “Tech Giants’ Current and Ongoing Use of Intimidation and Subversion Tactics to Evade Regulation in Canada and Across the World”.

Although Clegg said he’s sending some Canada-based Meta representatives to get roasted in his stead, he published a prepared statement insisting that Meta doesn’t really need the news:

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“Publishers choose to share their content because it benefits them to do so, whereas it isn’t particularly valuable to us at all,” Clegg said, adding: “Asking a social media company in 2023 to subsidize news publishers for content that isn’t that important to our users is like asking email providers to pay the postal service because people don’t send letters anymore.”

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He also appeared to go out of his way to throw Google under the bus. “We’re not Google. They are an amazingly successful company that does extraordinarily useful things for people, but they operate a search engine that functions by using links to news web pages.”

Google has a history of following through on similar threats to remove news from its feeds when faced with the prospect of paying for it. Google News vanished from Spain in 2014 when the country codified online copyright laws forcing Google to pay local publishers a monthly fee. It reappeared in 2022 after Spain re-wrote those laws in accordance with EU regulation, meaning Google could individually negotiate with publishers rather than being forced to pay up. It’s also already tested out blocking news for some Canadians.

Holding the Line: Facebook suffered some intense political backlash in 2021 after shutting down news links in Australia during a fight with lawmakers over legislation not dissimilar to Canada’s. Meanwhile, Google quietly struck deals with publishers Down Under, and, when a massaged version of the legislation eventually passed, both the government and Big Tech said they’d won. Now California is considering a bill that would make tech companies funnel 70% of advertising revenue from news content toward local publishers. Meta and Google must genuinely be sick of the news — just like the rest of us.

– Isobel Asher Hamilton

Oil

After a Two-Year Rally, Big Oil Ponders What’s Next

As a famous fictional oil baron once taught, “If you have a milkshake, and I have a milkshake, and I have a straw, there it is.”

After a two-year hot streak leading to bumper profits, the oil industry is suddenly facing the cold reality of a slowing economy and possible recession. While Wall Street typically turns tail in times like these, Big Oil is dangling a big carrot courtesy of post-pandemic boom times: hefty dividends.

Crude Awakenings

You remember the confluence of global forces that propelled big oil to big profits: In both 2021 and 2022, oil and gas groups catapulted the S&P 500’s energy sector into being the market’s best performer — highlighted by a 50% jump in value last year. But the good times, they don’t last. The energy sector is now the S&P’s biggest laggard, down 5% so far even though the overall index has climbed 8%. US benchmark crude oil prices have fallen around 11% to just over $71 a barrel.

Paradoxically, the companies themselves — especially the sector’s largest players — remain absolutely flush with cash. Unlike previous eras of chasing endless growth through reinvestment, oil companies have entered a bizarro world of cutting costs to generate plump profits.

In turn, falling share prices pinned to grim macroeconomics are colliding with the types of dividends-and-share-buyback payouts that Wall Street usually can’t stay away from. In other words, Big Oil is attempting to weather a typical bust cycle by rewarding faithful shareholders with a taste of their boomtime cash reserves:

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Oil’s big six — that’s Exxon, Chevron, BP, Shell, Eni, and TotalEnergies — own some $160 billion in cash or cash equivalents, according to their first quarter recent earnings reports. Chevron and Exxon, for example, collectively have over $48 billion in such assets, a massive increase from just $1 billion a year ago and surpassing the highs of the end days of the Bush 43 era, according to The Wall Street Journal’s accounting.

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The two giants have now spent more on shareholder returns than capital expenditures in 14 straight quarters, a stark reversal from 28 straight quarters where the opposite was true, the WSJ found.

Still, shareholder anxiety persists. “These companies had high share prices when they were losing money,” Trisha Curtis, CEO of energy consulting group PetroNerds, told the Financial Times. “Now they are making money hand over fist and not being rewarded.”

OMG ESG: The move away from fossil fuels continues to dampen stock market enthusiasm for the oil industry, analysts tell the Financial Times. And, on Monday, State Street announced it would be capitalizing on Wall Street’s waning interest in fossils and waxing interest in green energy by launching new back-office services to clients looking to invest in carbon credits — a market that has nearly quintupled in four years to $950 billion, according to Refinitiv. Maybe it is finally getting easy being green.

– Brian Boyle

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Whiskey casks have returned 12% to 15% annually over the last 15 years.

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They’re physical assets that won’t disappear when the broader market goes haywire.

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Policy

Biden Proposes Flight Compensation Mandates

Comedian John Mulaney has a bit where he asks a Delta boarding crew if he can get on a plane to go home. They say, “NO! It’s delayed nine hours,” spit in his face, give him a meal voucher that doesn’t work, and eventually frame him for murder. While hyperbolic, is it really that far off from the truth?

On Monday, the Biden administration proposed curbing those annoyances by requiring airlines to provide travelers with cash compensation, hotel, food, and transportation accommodations in the event of lengthy delays or cancellations that were within the carrier’s control.

You’re Grounded

Many airlines operating in the US already have policies in place that provide customers with compensation if a flight is delayed for more than three hours. But that’s generally restricted to cases where the airline is at fault – a lack of pilots, not enough flight staff, or mechanical issues with the plane. They can’t control the weather, so don’t expect to pay for it.

But what airlines offer right now are good faith measures to retain customers, not a legal obligation. According to the US Department of Transportation Airline Customer Service Dashboard, every major carrier in the country will rebook passengers on the same airline at no additional cost, most pay for hotel stays, and none offer additional cash compensation:

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In 2022, more than 2% of US flights were canceled, according to the DOT. That may not sound like a lot, but it actually equates to nearly 200,000 flights. Looking ahead to the summer, the Federal Aviation Administration expects a 45% increase in East Coast flight delays compared to last summer, fueled by pilot and air traffic controller shortages.

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At a press conference Monday afternoon, Biden argued that after the UK, European Union, and Canada passed bills legally requiring carriers to provide these compensations beyond just refunding tickets, the number of flight delays went down.

“Last holiday season, travelers were stranded for days,” Biden said. “Many missed family gatherings, spent Christmas at an airport, waited countless hours on line or on the phone because there weren’t enough pilots, there weren’t enough personnel, that’s unacceptable.”

We Are Family: This isn’t the only issue the Biden administration is tackling with air travel. Early this year, the White House proposed legislation that would guarantee families could sit next to each other without additional fees. Also, last fall, the DOT proposed legislation mandating airlines show extra fees like baggage, internet, and seat changes on their sites before customers purchase tickets. At this rate, it won’t be long before airlines stop framing their customers for murder, too.

–Griffin Kelly

Extra Upside

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All eyes on her: King Charles’ coronation viewership lags behind Queen Elizabeth’s funeral.

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Jumping ship: Amazon original shows and movies could wind up on other streamers or TV.

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We are standing at a moment of truth for Artificial Intelligence. On one hand, we have ample evidence of using AI to fuel economic activity (e.g. Uber adopting AI to help predict when you may be craving Sweetgreen). On the other hand, AI may be a shockwave in the job market, with executives at IBM planning to reduce workforce in favor of AI technologies. To fully understand the depth of AI’s economic impact, there’s no better resource than Patent Drop — a twice-weekly newsletter that unpacks how AI, and many other technologies, are shaping our future. Sign up for no cost here.**

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Just For Fun

Sticky business.

Self-care.

Disclaimer

*Source: Knight Frank Luxury Investment Index

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