States Always Find Billions to Subsidize Hollywood
Even Michigan, which walked away from the competition, wants back in the game. And of course, they always say it’s to support small businesses.
Good Morning!
Here are today’s highlights:
Lots of brands are betting that TikTok is too big to ban.
India offers a case study in what happens when TikTok is banned.
The latest jobless claims suggest a stable labor market.
A corporate refugee adjusts to life as an entrepreneur with a “hunt what you eat” mentality.
ECONOMIC DEVELOPMENT
The rewards of spending billions to lure TV and film production may be dubious, but states keep trying: “Michigan desperately wanted a Hollywood makeover. And for $500 million, studios were more than happy to help. When the state started writing checks in 2008 from one of the nation’s most generous film incentive programs, productions flocked there, making box-office hits like Clint Eastwood’s ‘Gran Torino,’ Sam Raimi’s ‘Oz the Great and Powerful,’ and Zack Snyder’s ‘Batman v Superman: Dawn of Justice.’ Then Michigan did the math. After a state economist determined that ‘the film incentives represent lost revenue’ and that their economic benefits were ‘negligible,’ Michigan, which cut funding for the police and schools while facing a severe budget deficit, eventually decided to end its incentives.”
“Now, almost a decade after the state stopped paying Hollywood, lawmakers think they can no longer afford not to. ‘We’re not on an even playing field,’ said Dayna Polehanki, a state senator and one of the sponsors of legislation that would thrust Michigan back into fierce competition with dozens of states trying to woo studios. ‘We’re not even in the game.’”
“Even as officials have rethought public support of private industry, 38 states now allocate taxpayer dollars to film and TV production. Arizona, Indiana, Kentucky, Missouri and West Virginia have all introduced programs within the past two years. Like Michigan, Wisconsin has drawn up legislation that would bring back its program.”
“Many of those states hope to become the next Georgia, which has emerged as a dynamic film hub while spending at least $5 billion on its program. New York has handed out more than $7 billion to lure productions from California, which has dedicated more than $3 billion to try to retain them.”
“Industry advocates say the investments are worth it. Tax dollars can successfully attract projects, and government funding spurs other economic activity. Productions pay catering businesses to feed workers, hoteliers to house their crews and dry cleaners to do the laundry — all of which creates a ripple effect.” READ MORE
MARKETING
Lots of brands that depend on TikTok still have no back-up plan: “Youthforia, a makeup brand with more than 185,000 followers on TikTok, is thinking about moving more marketing to other platforms, like YouTube and Instagram. Underlinings, which makes the popular brand Nailboo, planned to use TikTok to launch a product with a major retailer in August and is now wondering if it will have to change course. And BeautyStat, which sells skin care products on TikTok Shop, can’t even fathom the idea of the platform’s disappearing. TikTok is ‘just too big, especially in beauty and in certain industries, I feel, for it to disappear,’ said Yaso Murray, BeautyStat’s chief marketing officer.”
“For some brands, TikTok has become an integral piece of marketing strategy and sales growth. That’s partly because the short videos are easily digestible by consumers and partly because marketing on the platform is relatively inexpensive for smaller brands.”
“New products or clothing can be highlighted by individuals who, unlike movie stars or models, feel more relatable to viewers. The quick how-to videos can show the best way to mix and match spring sweaters and jeans or the order in which to apply toner, serums, moisturizers and sunscreen in a morning skin care routine. Some people say they go to TikTok before Google for shopping.”
“‘For a direct-to-consumer business like ours, the platform is very unique,’ said Nadya Okamoto, who started posting TikTok videos about the organic menstrual products of her company, August, in the summer of 2021. First, TikTok’s ‘For You’ feed is constantly putting August’s videos in front of new consumers, not ones who have chosen to follow the brand on other social media platforms like Instagram.”
“Second, the platform allows Ms. Okamoto to be an in-house chief content creator. ‘Other brands are spending hundreds of thousands of dollars each month on advertising, and we’re spending next to nothing,’ she said.” READ MORE
Here’s what happened when India banned TikTok: “In India, a country of 1.4 billion, it took TikTok just a few years to build an audience of 200 million users. India was its biggest market. Then, on June 29, 2020, the Indian government banned TikTok, along with 58 other Chinese apps ... India’s online life soon adapted to TikTok’s absence. Meta’s Instagram swooped in with its Reels and Alphabet’s YouTube with Shorts, both TikTok-like products, and converted many of the influencers and eyeballs that had been left idle. The services were popular. But something was lost along the way, experts said. Much of the homespun charm of Indian TikTok never found a new home. It became harder for small-time creators to be discovered.”
“Nikhil Pahwa, a digital policy analyst in New Delhi, tracks the overall change to the departure from TikTok’s ‘algorithms, its special sauce,’ which was ‘a lot more localized to Indian content’ than the formulas used by the American giants that succeeded it.”
“Several Indian companies tried to get into the gap caused by the disappearance of Chinese competition. But America’s tech giants, with their deeper pockets and expanding global audiences, came to dominate India.” READ MORE
Meanwhile, Instagram may be making a comeback: “In 2021, The New York Times reported that Meta executives were freaking out about internal data showing that Instagram was losing favor with teens and were pumping money into a marketing campaign to lure them back. A year later, The Atlantic declared that ‘Instagram Is Over.’ It seemed like the nail was in the coffin. When The Atlantic says you're not cool, trust me … you're not cool. It has fact-checkers. But against all odds, Instagram is staging its comeback.”
“Sensor Tower shows that Instagram downloads were up by 20 percent in 2023 compared with 2022, in contrast to TikTok's 4 percent year-over-year growth. Instagram beat TikTok not only in growth but in sheer volume of app downloads in 2023: Instagram had 767 million while TikTok had 733 million. (TikTok, however, still beat Instagram in user-engagement numbers.)”
“EMarketer suggests a few reasons for Instagram's success last year. One reason is Threads, the newly launched Twitter competitor, which requires an Instagram account and may have prompted some people who were curious about Threads to redownload Instagram. Threads has been a surprising success.”
The second thing for Instagram that seems to be working is Reels. When the feature launched in 2020, it wasn't an immediate success. An internal report showed that Instagram was having trouble getting creators to actually post, despite having reportedly offered cash incentives to high-profile creators, and that it had low engagement from users, too.”
“But whether by hook or carrot, Reels content is suddenly more compelling. In fact, I've been enjoying Reels over TikTok lately, which is something I wouldn't have predicted even six months ago. The key? I'm seeing more original videos and fewer reheated TikTok leftovers.” READ MORE
THE ECONOMY
Jobless claims fall and show no signs of rising: “The number of Americans who applied for unemployment benefits last week fell slightly to 210,000 and continued to show a surprisingly low level of layoffs in the economy. Last week there were 212,000 unemployment filings. New jobless claims have ranged from 194,000 to 225,000 per week in the first three and a half months of 2024, which is extremely low from a historical perspective.”
“The U.S. labor market shows little sign of stress despite sharply higher interest rates. Hiring has slowed since last year, to be sure, but layoffs are still near record lows and the unemployment rate is just 3.9 percent.” READ MORE
Home sales jumped in February: “Sales of existing homes, the majority of purchases, surged 9.5 percent to a seasonally adjusted annual rate of 4.38 million, the National Association of Realtors said Thursday. Economists surveyed by The Wall Street Journal had estimated sales of previously owned homes to fall 1.3 percent in February. The momentum in sales over the last two months comes just ahead of the spring selling season and follows one of the most sluggish periods for the housing market in recent history.” READ MORE
INSURANCE
State Farm is issuing thousands of non-renewal notices in California: “California's largest home insurance carrier is getting ready to stop issuing commercial apartment policies as it readies tens of thousands of nonrenewals to policyholders throughout the state, including thousands in the Bay Area. State Farm General Insurance Company on Wednesday announced that it will issue non-renewal notices to approximately 30,000 homeowners, rental dwelling and other property insurance policies (residential community association and business owners), as well as a complete withdrawal from offering commercial apartment policies with the nonrenewal of those roughly 42,000 policies in the state.”
“In a letter to California Insurance Commissioner Ricardo Lara's office, State Farm acknowledged that its ‘capital position has severely deteriorated’ and that the company is ‘increasingly concerned about its financial well-being.’ Rex Frazier, president of the Personal Insurance Federation of California, told me that State Farm has hung on longer than many other insurance carriers that pulled back from California last year and he expects the uninsured to end up on the state's FAIR Plan.”
“The company also recognized the recent proposed industry changes coming out of [Commissioner Ricardo] Lara's office, such as streamlining the rate application process, accounting for catastrophe modeling and reinsurance costs in rates and addressing FAIR Plan vulnerabilities. Commissioner Lara earlier this month unveiled a proposal for industry changes that would allow insurers to use computer models of possible future catastrophes to justify rate increases.” READ MORE
PROFILE
Laid off by Google, Keith Chaney launched a startup that helps people build networks and find mentors: “Less than a year into my time at Google, I discovered I'd been laid off. I remember finding out in the car park of my daughter's daycare. The layoffs were part of a bigger trend for many tech companies like Google to ‘correct’ rapid over-hiring post-Covid – and were something I'd been privy to since the fourth quarter. Being laid off in January 2023 was a blessing in disguise despite my initial shock and disappointment. While at Google in 2022, I started my side business, Peadbo, which helps users build and manage teams dedicated to personal or professional growth.”
“When I was laid off, Peadbo was still in its inception stage, and I had no full-time employees. The only people involved were my co-founders, who had full-time jobs. Still, I realized this was the point where I had to take a leap of faith and put all of my energy and time into Peadbo.”
“I'm a risk-averse person, so it took getting laid off to push me toward pursuing my startup full-time. One of the biggest changes was the financial reality of going from a full-time job to a startup. At Google, I earned over $200,000 with robust benefits. As a startup founder, my salary is less than half that, but I love what I do and strongly believe in my mission.”
“The toughest part of being a founder is always thinking about the financial state of the company and the ‘runway.’ As a founder, you must have a ‘hunt what you eat’ mentality. It's very different from working at a company that will still be fine even if employees are not performing at their peak potential.” READ MORE
THE 21 HATS PODCAST
I Need a Business Model: This week, we offer you a taste of the 21 Hats Live event we held in Fort Worth two weeks ago. It’s a different kind of event where there are no speakers, only participants. It’s pretty much a three-day, peer-group session for business owners, where we share challenges and insights and make connections. There were 25 of us, including most of our podcast regulars. For me, the highlight was an exercise that Chris Hutchinson of the Trebuchet Group facilitates. He calls it a “Fish Bowl” because the idea is to have an owner stand up and expose everything about a specific challenge that he or she is confronting. Fortunately, we had one owner who was gracious enough to agree to reveal all, to answer any question.
“And that owner was—well, it was me, actually. The truth is, this was a priceless opportunity for me to get some feedback from a focus group of smart entrepreneurs who were already familiar with 21 Hats.
“It even got a little emotional, mostly because a couple of the owners were kind enough to say that, had it not been for 21 Hats, their businesses might not have survived the pandemic. We recorded the whole thing, and if you have any thoughts after listening, please send them my way.
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
Thanks for reading, everyone. — Loren