Friday, 13th October
Facebook COO Sheryl Sandberg is on a media blitz, fending off the political backlash against her company. She promised to do more to fight fake news and fraudulent ads, but took a step in the wrong direction by continuing to insist that Facebook is not a media company. “We are a technology company,” she told Axios’ Mike Allen. “We don’t employ journalists.”
I have known Sandberg for more than two decades, and consider her a friend. But I also served as president of the Pew Research Center in 2013, when it published its first report showing nearly a third of Americans were getting news from Facebook. By 2017, that had grown to nearly half. And Facebook isn’t just a distribution technology—like, say, a radio or a television. It’s a service whose algorithms profoundly influence what news gets seen. It has become the nation’s uber-editor—far more important to what news we see than any poor progeny of Ochs, Hearst, or Luce.
As for her defense that Facebook doesn’t hire journalists—well, therein lies another problem. Facebook doesn’t need to hire journalists—we do that for them. But it does sell advertising, and can profitably do so at much lower rates than any other media company because it doesn’t have to pay for content. That severely crimps the blood supply for those of us who actually employ journalists.
Which gets back to the backlash. The time has come for Facebook to step up and admit it has become a media company—indeed the most important media company in the country—and accept more responsibility for the quality of the information it provides, as all media companies must do. Until that happens, the backlash will grow.
I freely admit my bias on this one. Happy to hear from CEO Daily readers who feel otherwise. (I may even publish your responses!)
News below and enjoy the weekend.
• Samsung’s Chip Maestro Exits on a High
The CEO of Samsung’s chip business Kwon Oh-hyun announced his retirement, in what analysts said could herald the start of a new wave of upheaval at the top of the electronics giant. It came as the company guided for another new record in profits, driven mostly by Kwon’s booming semiconductor business. A recent report estimated that Samsung will make more money from chips used in the Apple iPhone X than it did from from its own Galaxy S8 phone. Kwon had reportedly intended to step down last year but stayed on to ensure stability while vice-chairman Lee Jay-yeong stood trial on corruption charges. Fortune
• Obamacare Jenga Nears Endgame
President Donald Trump ordered the end to billions of dollars in payments to insurers under the Affordable Care Act that subsidize coverage for low income families. Insurers have often said that participating in the ACA’s insurance markets is not commercially justifiable without them. The Department of Health and Human Services said the payments will be stopped immediately, citing an opinion from the Attorney General. The Wall Street Journal reported that the payments could still be preserved if a bipartisan deal on reform being led by Senators Lamar Alexander and Patty Murray bears fruit. The DJ Health Care Providers Index, which had lost nearly 5% in the previous week, approached a four-month low. Fortune
• Cord-Cutters on the Rampage
AT&T stock fell 6.1% after it admitted to losing a net 90,000 video subscribers in the third quarter. Given that AT&T’s cheaper streaming business DirecTV Now added 300,000 subscribers, that implies a hemorrhage of 390,000 subs from the higher-margin traditional pay TV service. The news took big chunks out of Dish (-5.1%), Charter (-5.9%) and Comcast (-3.9%), while Disney, Viacom, and AMC also came under pressure. The news underlines the importance of AT&T’s bid for Time Warner. Fortune
• Amazon Suspends Movie Studio Boss After Harassment Claims
Amazon suspended its studio head Roy Price after allegations that he sexually harassed an executive producer. Isa Hackett, who made the allegations, is the daughter of Philip K. Dick, whose book The Man in the High Castle has given Amazon one of its biggest streaming hits. The company also said it’s reviewing its options for two projects it has with the Weinstein Company, including a series by Matthew Weiner, the creator of The Sopranos and Mad Men. Actress Rose McGowan, back on Twitter, claimed that Price had refused to listen to her allegations of rape against Harvey Weinstein. New York police re-opened an investigation into allegations against Weinstein over an incident in 2015, raising the risk of his facing criminal charges. Fortune
Around the Water Cooler
• California’s Deadliest Week
The death toll from the California Wildfires rose to 31, making it the deadliest week of wildfires in state history. The state’s emergency operations director Mark Ghilarducci warned that “we are not even close to being out of this emergency,” with neighborhoods in eight counties transformed into wastelands. Over 3,500 homes and businesses have been destroyed, and over 25,000 people have been forced to flee. Fortune
• Bayer Smoothes Path for Monsanto Deal
Bayer agreed to sell part of its crop sciences division to German rival BASF for 5.9 billion euros ($7 billion) to smooth the path of its merger with Monsanto. The assets in question include seed-breeding facilities in Europe and North America and manufacturing facilities for fertilizer compounds. The deal makes BASF a player in seeds for the first time, and will alleviate antitrust regulators’ (if not farmers’) concerns about concentration after the current round of mega-mergers. The EU has already cleared the ChemChina/Syngenta and Dow/Dupont deals though. Bloomberg
• Bond Blues, Loan Provisions Hit Wall Street
J.P. Morgan and Citigroup posted mixed earnings for the third quarter, both held back by lower revenues from bond trading and by higher provisions against consumer loan losses (largely hurricane-driven). Demand for corporate loan demand, a core revenue stream for both, appeared to have suffered from uncertainty over tax and health care reform. Prior expectation management saved J.P. Morgan’s stock from embarrassment, but Citi’s fell 3.4%. FT, metered access
• It’s End of the World
According to Haruki Murakami, “everyone, deep in their hearts, is waiting for the end of the world to come.” Well, we have good news: you may not have too much longer to wait. A report from Arizona State University suggests that the supervolcano under Yellowstone National Park could erupt with much less advance warning than expected, cloaking the earth in a volcanic winter by discharging 2,500 times more ash into the atmosphere than Mount St. Helens did in 1980. But don’t start stockpiling propane canisters and tinned food yet, because the report’s author, for one, hasn’t stopped planning for the future. Her primary conclusion is the career academic’s time-honored war-cry: “More research is needed.” Fortune
Summaries by Geoffrey Smith; email@example.com