Don’t You Dare Call Them Big Tech

Plus: EV truck maker Lordstown pulls the plug but mysteries remain. ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

June 28, 2023

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TOGETHER WITH

Good morning.

Want a Pepsi with your hot dog? How about on your hot dog?

The second-most popular soft drink brand is releasing a special condiment this summer that intends to put the “iconic sweet, citrusy taste of a crisp, refreshing Pepsi-Cola” directly onto grilled meat as opposed to in a glass beside it. Now, soda in condiments isn’t weird — pit masters have been putting Coca-Cola and Dr. Pepper into their BBQ sauces for decades, and Colachup, Pepsi’s new condiment, was developed with the help of the Culinary Institute of America. But can we not call it the Colachup Generation? Colachup.

Morning Brief

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It’s the end of the road for Lordstown Motors.

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Big Tech is a dirty word.

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Say bye-bye to Stitcher, all you podcast listeners.

EVs

Lordstown Motors Finally Sputters into Bankruptcy

Electric vehicle startup-turned-SPAC-star Lordstown Motors is officially out of juice.

On Tuesday, the EV truck-maker, which parked itself in the national spotlight by setting up shop in a closed General Motors factory in Rustbelt, USA, filed for bankruptcy amid an ongoing legal fight with investment partner Foxconn.

Foxconn Job 2: Electric Boogaloo

Lordstown is either a textbook case of corporate hubris in the low-interest rate era or a victim of Murphy’s Law. Or was it brought down, as the company maintains, by fraud perpetrated by Taiwanese electronics manufacturing giant Foxconn, which now has a bit of a track record of over-promising and under-delivering in small American towns? Let’s back up and start at the beginning.

In November 2019, Lordstown Motors, still more of a concept than a functioning company, agreed to buy a shuttering 6-million-square-foot plant from GM in Lordstown, Ohio for $20 million (mostly financed via GM loans). In October 2020, the company went public via a SPAC merger at a $1.6 billion valuation, raising $675 million in the process, or, per founder/CEO Steve Burns, “more than enough funding to get us through initial production” of the 100,000 truck preorders it claimed to already have. That was enough to rocket its market cap all the way up to $5 billion in February 2021. Then came a hype-busting Hindenburg Research report in March 2021, and the ultimate resignation of Burns and his CFO.

All the while, the company never kicked production into gear. A prototype infamously went up in flames. By September 2021, the company sold the plant to Foxconn for $230 million and another $50 million worth of shares, contracting manufacturing to Foxconn in the process. But what once looked like a lifeline turned out to be fool’s gold:

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Foxconn couldn’t figure manufacturing out either, building just 31 trucks in 2022, and delivering just three in this year’s first quarter, with Lordstown reporting $189,000 in revenue along with $171 million in losses. Ouch.

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In November 2022, Foxconn agreed to a $170 million investment in Lordstown via rounds of share purchases to occur across several months. But when a second round of scheduled share purchases, worth nearly $50 million, came in April, Foxconn balked — claiming Lordstown violated the investment agreement when its share price fell below $1, down from over $400 at its market debut.

In addition to filing for bankruptcy on Tuesday, Lordstown said it is also filing a lawsuit against Foxconn, alleging the manufacturer’s moves “had the intended effect of destroying the business of an American start-up.”

No Contest: If it’s any consolation to Lordstown, it’s tough all over for EV makers. In China, the number of EV manufacturers has plummeted to around just 100 from 500 in 2019, with that number expected to shrink further, according to a Bloomberg report earlier this week. Lordstown’s woes almost mirror that of similar startups in the domestic market, like Rivian, Nikola, and Lucid. It’s no wonder Elon Musk once called car factories “gigantic money furnaces.”

– Brian Boyle

Tech

German E-Retailer Launches Legal Fight Against Big Tech Classification

No one wants to be tarred with the Zuck brush.

Zalando, a German fashion e-retailer, is taking the EU to court after it was classified as a “very large online platform” for the purposes of the bloc’s upcoming Digital Services Act (DSA). Zalando doesn’t want to be lumped in with the dastardly likes of Amazon, Google, Meta, and Apple and — most importantly — it doesn’t want to be regulated like them.

Ich bin kein Big Tech

Regulators love to say they’re “reining in Big Tech,”— but what does that term actually mean? Culturally, Big Tech has been shorthand for a handful of unfathomably rich US companies with nebulous but overlapping business models. Common symptoms include algorithms, data collection, and congressional hearings. But a simple list of those companies hardly comprises a future-proof legislative framework, plus it can raise hackles from the US government over unfair persecution of its wildly successful tech firms.

The DSA, which will come into force in August, will regulate huge swaths of the online world: from disinformation to consumer rights, to algorithmic transparency. It will apply most stringently to companies that qualify as “very large online platforms,” which it defines as any platform with more than 45 million monthly visitors — much to Zalando’s dismay:

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Zalando is arguing that the EU shouldn’t be looking at visitors to its site, which number around 83 million per month, but rather the number who actually buy things from third-party vendors on the site, which is closer to 31 million. To put those numbers in context, Amazon said in March 2022 it had “over 300 million active customer accounts.”

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On top of being subject to Big Tech’s rules, CEO Robert Gentz told the Financial Times it’s just plain embarrassing to be lumped in with Silicon Valley behemoths. “These companies are talked about as bad actors and all of a sudden we are on the same list. This is bad for our brand,” Gentz said.

Zalando’s case has the potential put some chinks in DSA’s armor as it battles actual Big Tech. Any precedent that it sets about exactly what makes e-retail different from Big Tech could turn into a handy wedge for them to wield in the future.

Où est la bibliothèque? While Zalando takes on the EU, Amazon is fighting France over a piece of legislation from 2021 that adds a €3 ($3.28) charge to online book sales — the company’s original business model. Amazon isn’t alone, the European Commission has also raised concerns about the law, which is supposed to give France’s independent bookshops a leg up.

– Isobel Asher Hamilton

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Media

SiriusXM Shuttering Stitcher in a Plan to Push Users Into New App Bundle

(Photo Credit: Will Francis/Unsplash)

SiriusXM is hushing its popular podcast listening app Stitcher this summer.

The audio media giant hopes subscribers who were paying for a more exclusive tier of podcast content will migrate to the company’s more-expensive SXM app, Bloomberg reported Tuesday.

Off the Air

Stitcher launched in 2008 and has since been one of the premier platforms for creating and distributing podcasts. Not only does it offer free audio content, but a premium subscription offers access to ad-free shows as well bonus episodes of popular podcasts like Comedy Bang! Bang! and How Did This Get Made? According to media advisor Triton Digital, Stitcher’s library averaged 56.8 million downloads a week in 2022, outpacing other networks like NPR and Audacy.

Around the same time that Stitcher debuted on the app stores, Sirius and XM were merging to form what some have argued is a monopoly in satellite radio. Parented by Liberty Media, the combined venture went on to buy Pandora in 2019 for $3.5 billion and Stitcher in 2020 for $325 million. Last year, SiriusXM reported 32 million paid subscriptions and $4.3 billion in profit, and it appears they want to boost both categories:

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Stitcher is set to shut down on August 29, and premium members will be given six free months of SiriusXM Platinum, which provides listeners access to all of the services’ content including personalized Pandora stations, Howard Stern’s show library, sports broadcasts, talk radio, and hundreds of ad-free music stations. Podcasts won’t be ad-free, though — bummer.

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It’s all part of a consolidation effort to get more people listening to — and paying for — SiriusXM’s flagship satellite radio product. A Stitcher premium subscription is just $4.99 a month, while SiriusXM Platinum is $10.99. The company is hoping that after that initial six free months, customers will stick with the higher-priced package as opposed to one of its more basic plans.

Confusing Bundle Blunder: In-house mergers seem to be the big thing among streamers this year. HBO Max and Discovery+ have already combined into MAX. Disney will add some of its Hulu content to the Disney+ app while still offering standalone services. And by the end of the year, Paramount Global plans to move all of its Showtime content and users over to Paramount+ and form Paramount+ With Showtime. What’s clear is that none of these media companies are good at coming up with names for their apps.

– Griffin Kelly

Extra Upside

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Hmmmm…no: SBF asked charges be dismissed, judge said no way.

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Seacrest in: American Idol host to replace Pat Sajack on ‘Wheel of Fortune.’

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Covid caper: IG says fraudsters stole more than $200 billion in federal loans during pandemic.

Just For Fun

They got hops.

Watch your fingers.

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