ByteDance, TikTok, China, Consulates and the NFL

ByteDance explores a majority sale of TikTok, China and the U.S. each close consulates and the NFL stares financial chaos in the eye.
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Bangkok, Thailand - JUNE 1, 2020: Woman using mobile phone to take video of others dancing to share on TikTok. (By Nattakorn_Maneerat)
Bangkok, Thailand - JUNE 1, 2020: Woman using mobile phone to take video of others dancing to share on TikTok. (By Nattakorn_Maneerat)

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Today’s word count is 1,274 words, or an 8-minute read. Let’s get to it:

TikTok’s Parent Said to Weigh Selling a Majority Stake in the Video App

ByteDance, the parent company of TikTok, is considering selling a majority stake in the app following the Trump administration’s threats of a ban in the United States. The talks, which are only in a preliminary stage, discussed a potential deal that would “essentially carve out the app.” TikTok would receive new investments from existing ByteDance stakeholders, with the Chinese company retaining a minority holding.

Why It Matters

Questions about TikTok’s data practices and ties to China have been continually present through the app’s popularity boom. In the last few months, those concerns intensified. ByteDance “now stands alongside” Huawei, as Chinese companies caught in the middle of rising tension between the U.S. and China. TikTok also faces scrutiny in India, which banned the app and several other Chinese services last month due to national security concerns.

“It is unclear whether the Trump administration would consider such a plan enough to defuse what it views as the national security risks of ByteDance’s ownership,” The New York Times writes. In the meantime, criticism of TikTok remains ever-present. This week’s defense spending bill approved by the Democratic-controlled House included a provision banning the use of the app on government devices. The U.S. government also opened a national security review on the app last year, which could ultimately end with it ordering TikTok to divest from Musical.ly, the American app ByteDance bought and would later transform into TikTok.

Numbers to Consider

  • 172 Million – TikTok’s downloads in the United States during the coronavirus quarantine, according to Sensor Tower.
  • 1.9 Billion – The app’s worldwide downloads during the pandemic.
  • $100 Billion – ByteDance’s value, according to PitchBook.

Read More: (NEW YORK TIMES)

China Orders U.S. to Close Chengdu Consulate as Payback for Houston Move

In retaliation to the U.S.’s mandate for China to vacate its consulate in Houston, China reciprocated Friday, ordering the U.S. Consulate’s closure in the southwestern Chinese city of Chengdu. Beijing didn’t provide a time frame in a statement but told the U.S. Embassy the Chengdu consulate “must cease all operations and activities.”

Why It Matters

The tit-for-tat closure of consulates is an unprecedented move dating back to when the U.S. and China normalized relations in 1979. But clashes over trade, technology, geopolitical influence and the coronavirus pandemic have eroded the ties between the world’s two large largest economies.

The U.S. and China had traded national security accusations of late, and as a result, American diplomats had been bracing for the widely expected move by China. The Chinese Foreign Ministry called the move a “legitimate and necessary response to the unreasonable behavior of the U.S.,” while urging Washington to rescind the Houston closure and “create the necessary conditions for bringing the bilateral relationship back to normal.” 

Read More: (WALL STREET JOURNAL)

Coronavirus Is Pushing the NFL Toward a Financial Cliff

For the last decade, the NFL watched as record earnings fueled its growth, and as the league got richer, teams spent more. But now the fallout from the Covid-19 pandemic is threatening the league’s financial future. The NFL, which earned $16 billion in revenue last year, is looking at a potential $4 billion loss this season thanks to coronavirus’s economic impact.

Why It Matters

The team owners and players have a 52-48 revenue split, which determines the league’s salary cap. Any changes in revenue move the cap. While business was booming, the cap has risen by at least $10 million seven consecutive years. But with limited or no fans at games, the NFL is inherently absorbing a significant hit to its bottom line. If revenues fall and in this case drastically, less money would be handed out to players in free agency, and teams could look for ways out of existing contracts.

The NFL and NFL Players’ Association already has a contentious history of negotiations over money. The uncertainty and risks posed by the virus have heightened those concerns and introduced new ones centered around health concerns. How this plays out will directly impact the next round of labor negotiations and whether the league can avoid a work stoppage. For now, tensions mount on both sides as we all wait and see whether the coming season gets played.

Numbers to Consider

  • $198 Million – The salary cap or the upper limit NFL teams can spend on player salaries in a given year.
  • $80 Million – How much the cap could drop in a worst-case scenario for the NFL.
  • $75 Million – The added cost of the NFL’s Covid-19 testing protocols.

Read More: (WALL STREET JOURNAL)

A Quick Look

Intel Delays New Chips, Shares Drop 10%

  1. Intel had good news to report this week as sales of chips for servers and PCs continue to expand during the Covid-19 pandemic. Its revenue grew 20 percent to $19.7 billion during its June quarter.
  2. However, Intel also announced the launch of its 7-nanometer chips being delayed into early 2023. Just over a year ago, the company said it would launch the new chips by 2021. The news resulted in a 10 percent decline on Intel’s shares in after-hours trading, while rival AMD, which already sells 7-nanometer chips, experienced an 8 percent bump.
  3. As its two largest businesses, chips for PCs and servers in corporate data center, improved by 7 percent and 43 percent, Intel is forecasting sales around $75 billion for its full fiscal year.

Read More: (THE INFORMATION)

Worth Your Time

Foot on the Gas: Tensions are mounting as Russian gas giant Gazprom inches closer to completing the Nord Stream 2, a Germany-to-Russia pipeline. Russian dominance over the European energy supply becoming political leverage for Moscow has grown to be a point of concern for the U.S. Last week, the State Department made arrangements to potentially expand sanctions against investors and other participants in the project. But on the other side, European officials and business leaders “bristling” at what they say is “Washington’s interference in European matters. (NEW YORK TIMES)

Money Money Money: Twitter is reportedly weighing subscription productions and commerce as monetization options to counteract falling ad revenue. The exploration is “very early,” and the social media platform doesn’t expect to earn income from these potential new streams in 2020. But “the prospect of a paid version of Twitter — free from trackers, annoying ads and irritating algorithms which meddle with the clean chronology of the timeline — has been a holy grail for certain Twitter addicts since (basically) forever,” Tech Crunch writes. (TECH CRUNCH)

Tidbits

The highly anticipated big tech antitrust hearing, featuring testimony from Facebook’s Mark Zuckerberg, Google’s Sundar Pichai, Apple’s Tim Cook and Amazon’s Jeff Bezos, will likely be postponed due to a schedule conflict with the memorial service for Rep. John Lewis.

TikTok is launching a $200 million “Creator Fund” in the U.S. to encourage its most popular users to pursue content production careers on the short-form video app.

Goldman Sachs agreed to a $3.9 billion settlement with Malaysia’s 1MDB, a scandal that plagued the Wall Street bank and rocked its politics. 

Verizon continued to add cellphone customers during the pandemic but saw its quarterly revenue decline in its core wireless business and online advertising unit.

With its economy under pressure from the pandemic and low oil prices, Russia’s central bank cut its key interest rate to a record low.

A Couple Cents Content

Check out Part One of Justin Oh’s breakdown of the war on TikTok. (YOUTUBE)

Catch up on Thursday’s Live Show, including the upcoming $1000 giveaway. (YOUTUBE)

Curious what people’s feelings are on returning to live events? Check out my Q&A with L.E.K. Consulting Managing Director Alex Evans (POST)

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