The antitrust paradox
The rivalry between Mark Zuckerberg and Elon Musk began to heat up dramatically this week after Meta rolled out Thread, a Twitter competitor that on its first day became the fastest downloaded app ever.
In an era of intense antitrust scrutiny of big tech companies in the US, Europe and elsewhere, what questions do Meta’s efforts to expand the reach of its social media raise about the industry’s ability to expand into new areas — even as players build new services themselves, rather than than buy a smaller discount?
Size matters, but it’s just one factor. Tim Wu, an architect of antitrust policy in the Biden administration and now a professor at Columbia Law School, told DealBook that the threads “pit two antitrust instincts against each other.”
Challenging Twitter’s dominance is positive. “In general, we would like big companies to do business with each other, not just sit in their little bubbles scooping up money,” Mr. Wu said. By contrast, Meta is already dominating the social media scene with Instagram, Facebook, and WhatsApp. Expanding that empire and enabling it to collect more data, he said, “it’s hard to be elated.”
Regulators will want to see how Meta is gaining market share: By offering a better product, or using the advantages of scale to unfairly crush Twitter? Threads is integrated into Instagram, giving it access to nearly 2 billion monthly active users. Another Fixed Issue: Users have to delete their Instagram account to cancel their Threads account. (It’s unclear how the Federal Trade Commission, which has vowed to combat companies that make opting out of service so onerous, might view this arrangement.)
Data concerns loom large. Threads are not available in the European Union, where privacy watchdogs have long been concerned with how Meta handles users’ information. On Tuesday, the Supreme Court upheld the block Antitrust investigation of the meta On data privacy violations, he concluded that data is a critical factor in establishing market power.
Being big isn’t against antitrust law. Nancy Rose, a professor at MIT and former economist in the Justice Department’s antitrust division, told DealBook that organic growth isn’t an issue. It’s “sympathetic” to the idea that it would be better for a new player, rather than a tech giant, to challenge Twitter, but believes Meta is a “credible competitor.” Rose said the company has a “rapid start,” but that smaller alternatives like Mastodon have had a hard time taking off precisely because they don’t.
The key is network effects. said Doug Melamed, a professor at Stanford Law School and a former Justice Department antitrust official. Meta products are getting more useful to consumers as more users sign up. Melamed said that using it to improve the quality of the yarn would not in and of itself violate antitrust laws.
“There is a narrative that anything a tech company does is bad,” said Daniel Francis, a law professor at New York University and a former deputy director of the Federal Trade Commission’s Office of Competition. He argues that consumer dissatisfaction with the changes to Twitter prompted people to find an alternative. “The thread example shows that big tech companies can also be value entrants, bringing new competitive pressures,” said Mr. Francis. – Efrat Livni
In case you missed it yourself
Elon Musk is suing Wachtell for $90 million from the Twitter acquisition. X Corp., the entity that owns the social network, filed a complaint in California this week, accusing the elite law firm of trying to “change its fee arrangement as litigation counsel” in order to obtain an improper additional payment for Twitter’s representation during negotiations with Mr. Musk to buy it.
Slow job growth. Employers added 209,000 jobs last month, below economists’ expectations. But it was the 30th straight month of payroll gains, which sent the unemployment rate down to 3.6 percent. Investors are calculating that the labor market is still too tight for the Federal Reserve’s liking, and that policymakers will raise interest rates at their next meeting this month.
The Biden administration has ordered to limit contact with social media companies. A Louisiana judge ruled that a number of government agencies cannot communicate with the platforms about removing “content containing protected free speech.” This ruling may curtail efforts to combat false and misleading narratives about the coronavirus pandemic and other issues. The Ministry of Justice has it resume.
Hell on earth. Average global temperatures hit a record high this week, as meteorologists warn the planet could enter a multi-year period of exceptional heat. On Tuesday, the global average was 62.6 degrees Fahrenheit, or 17 degrees Celsius, making it the hottest day on earth since records began in 1940.
Hollywood’s New China Challenge. The Department of Defense will no longer support movie studios if they comply Censorship requests from China in order to distribute their films there, according to Politico. Last year’s “Top Gun: Maverick” was mired in controversy after the Taiwanese flag was removed from trailers for the film. It has been restored in the final version.
Familiar with what is really happening in China
Desmond Shum was one of the best businessmen in China. He and his ex-wife, Duan Weihong, used their connections with top government officials to build a multi-billion dollar real estate company during the golden age of entrepreneurs starting in the mid-1990s.
Now, tensions with the West are dominating the debate, with Treasury Secretary Janet Yellen sharply criticizing China’s treatment of US companies on a trip to Beijing this week.
Mr. Shom left China in 2015 as Xi Jinping, the country’s leader, asserted greater state control over the country and its businesses. But Duane, aka Whitney, disappeared two years later. (It is believed that the Communist Party officials I held her after the detention of a high-ranking political ally on suspicion of corruption).
Mr. Shum told the story of their rise and fall — and the murky realities of business in China — in his 2021 memoirs. Many details could not be independently verified but his role at the intersection of business and politics is certain. He now lives in Britain with the couple’s son (neither of whom has seen Duan since her disappearance) and says it is not safe for him to travel to China.
Mr. Shum will testify next week at the Congress on the challenges facing US companies operating in China, days after Treasury Secretary Janet Yellen sharply criticized Beijing’s treatment of US companies. DealBook spoke to him before he appeared in Washington. This conversation has been condensed and edited for clarity.
What has changed since you published your book?
First, the view of China has become more negative. Covid has had a lot to do with it, particularly in changing the views of the general public. And that helped speed things up in terms of how policymakers deal with China — they now have their ebbs and flows.
Second, the outside world underestimates how badly the Chinese economy has deteriorated. Many things struck me in the conversations I had with business people in China. A large dairy company is producing more milk powder because people are holding back on buying milk. This is usually one of the last things you will cut.
Many executives also say employees have been blatantly stealing from companies since the pandemic. Why? They have given up hope because the economic outlook is so bad.
How does this affect governance and business?
It adds to the growing insecurity of the Chinese Communist Party, so the government is tightening censorship using the measures it introduced during the pandemic. It affects business: raids on due diligence firms with Western connections and restrictions on access windsa Chinese data provider, is part of an effort to control foreigners.
How do global companies adapt?
Companies are dramatically reducing their exposure. People talk about “de-globalization”, but the appropriate term is “re-globalization minus China”. You wouldn’t have one country replacing China, but operations spread to Vietnam, Indonesia, Sri Lanka, India and other places. Look at how many Taiwanese manufacturers are moving to Mexico on a massive scale. Hence you have friendships and closeness in Europe.
Do the US messages – tough talk while also saying it wants to maintain dialogue – complicate matters?
After four years of Trump and three years of Biden, you see general consistency in China policy. A slight change or difference in tone will not affect China’s perception that the United States views it as defined. They need some stress relief in order to revive confidence in the business and bring in more capital. If they can mitigate or delay US measures, they want to do so. – Ravi Mattoo
Taylor Swift’s re-recording made her way onto the charts
On Friday, Taylor Swift released the re-recorded version of one of her old albums, “Speak Now.” Connection This move is “a form of rebellion.”
The singer is on a mission to re-record the first six albums in her catalog (she’s done three) after the rights to the originals were sold in a controversial deal to super dealer Braun’s Scooter Ithaca Holdings in 2019 for $300 million. The investment firm Shamrock Capital Advisors bought Masters a year later for about the same amount.
Mrs. Swift Argues That her re-registration would allow her to be recognized as the rightful owner of her business. But while the effort at artistic integrity has been welcomed, another looming question is whether it was a good piece of work. (Other artists have tried and failed to recover their masters.) DealBook dig into the numbers.
The first two re-recordings released in 2021: “Brave” in April and “Red” in November. Data from Luminate, Previously reported by Music Business Worldwide, It shows that by the end of 2022, Swift’s re-release was winning the audio streaming charts. (Broadcasting accounts for the lion’s share of recorded music sales.)
“Red” (Swift’s version) was streamed 961 million times last year, compared to 254 million times for the original — down 41 percent from the year before.
For “Fearless”, Swift’s re-release surpassed the original 401 million to 257 million.
Re-recordings lifted Swift’s entire catalog. Her six-disc stream jumped nearly 6.5 percent to nearly 2.5 billion streams in 2021. More importantly, a large proportion of it — 736 million — was for the “1989” album, which Ms. Swift has yet to re-record.
Shamrock deal ‘too weak,’ Larry Miller, director of the Music Business Program at New York University, told DealBook. However, since the company acquired Ms. Swift’s catalog after Having made it clear its intention to re-register its well-known masters, the Shamrocks likely factored in the potential impact of mitigation as part of the deal. (The company did not respond to a request for comment.)
Ms. Swift has had an impact on the wider industry. Universal Music Group has begun putting in more Restrictive re-registration requirements in its agreements with recording artists. As part of due diligence for deals, buyers are now “quite exhaustively” looking at contracts to see if there are restrictions on re-registrations, said David Dunn, founder of investment bank Short Tower Capital. – Lauren Hirsch
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