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Tomorrow in DC: Axios' Mike Allen will interview JPMorgan Chase & Co. CEO Jamie Dimon, comedian and activist Baratunde Thurston, AOL co-founder and Revolution CEO Steve Case, and MSNBC's Ali Velshi and Stephanie Ruhle. RSVP here.
Situational awareness: Snapchat follows Google, Facebook and Twitter in banning cryptocurrency ads.
1. Facebook in crisis
Of all the news crises Facebook has faced during the past year, the Cambridge Analytica scandal is playing out to be the worst and most damaging.
Why it matters: It's not that the reports reveal anything particularly new about how Facebook's back end works — developers have understood the vulnerabilities of Facebook's interface for years — but stakeholders crucial to the company's success seem less willing to listen to its side of the story this time.
The latest: The saga, which has been flooding cable news for days, intensified Monday night when the New York Times reported that the company's chief information security officer, Alex Stamos, is leaving the company after clashing with colleagues on how to handle disclosures of Russian activity on Facebook.
Two noteworthy occurrences from yesterday that make this scandal stand out from others:
- Facebook shares fell nearly 7% by market close on Monday. Its stock hasn't seen this type of a drop in response to any of the major scandals its faced over the past year. Even during the Russia hearings on Capitol Hill, Facebook stock hit record highs.
- Republicans were unusually swift to call for action. GOP Sen. John Kennedy and Democratic Sen. Amy Klobuchar sent a letter to Senate Judiciary Committee Chairman Chuck Grassley calling on Facebook CEO Mark Zuckerberg to testify before Congress. Republican Sen. John Thune said he'd send questions to Facebook.
The company responded with a rapid-fire defense with executive-penned blog posts and tweet storms — and sent out executives to let everyone know it was outraged. It even amended a blog post with a time-stamped update, something you would typically see on a breaking story from a news outlet.
Tick tock... It's worth noting that key Facebook execs, like CEO Mark Zuckerberg, COO Sheryl Sandberg and Chief Privacy Officer Erin Egan, have yet to comment.
2. How Europe's getting ahead of it
A sweeping privacy rule from the EU called the GDPR, the General Data Protection Regulation, will go into effect in two months, affecting all companies with digital audiences in Europe. The law is meant to protect consumer data and streamline data collection policies across Europe.
Why it matters: The law contends that companies need a lawful basis for conducting certain data processing activities, applying more scrutiny on companies using shady business practices to capture user data.
"It's basically the new constitution of Europe ... Everything will be judged by how it influences privacy."— Hosuk Lee-Makiyama, director of European Centre for International Political Economy (ECIPE) and European data trade policy expert, at a Microsoft Digital Trade event
GDPR is by far the biggest accomplishment of this Commission over the last five years, Lee-Makiyama argues: "This is basically 90% of its legacy."
3. Why Europeans are more skeptical of data-driven businesses
Europeans view privacy as a human rights issue, leading regulators there to be much more skeptical of data-driven businesses like social media, while Americans view privacy as fundamental right only via-a-vis government intrusion, under the Fourth Amendment, Axios' Kia Kokalitcheva writes.
Why it matters: Americans are beginning to worry about how data is used on some platforms like Facebook, particularly after news of the Cambridge Analytica scandal broke this weekend.
The big picture: Europe's history and culture plays a large role in shaping its views toward privacy. Granted, this history has to do with government access to personal information, but it's since extended to businesses.
- In Europe, privacy is a constitutional issue, Damien Levie, head of E.U. trade at its U.S. embassy, told me last week at South by Southwest. "You have not only these European Communist regimes but also the Nazi dictatorships regimes…. People know very well what it means for the government to have access to your data.”
- In the U.S., privacy laws are desegregated and hard to understand, says Julie Brill, Corporate Vice President and Deputy General Counsel at Microsoft. "Privacy is a fundamental right but it is vis-a-vis government intrusion, under the 4th Amendment. But it is deeper and broader in Europe."
Bottom line: American data laws tend to favor business over consumers. European data laws, especially GDPR, tend to favor consumers over business.
Cultural attitudes impact social media use: A Pew survey last year found that internet access doesn't necessarily lead to social media use, including in European countries like Germany, where only 37% of people use social media.
4. AT&T vs. DOJ trial off to a heated start
The court battle over AT&T’s $85 billion acquisition of Time Warner got off to a contentious start Monday as lawyers fought over what evidence they could bring into court, Axios' David McCabe writes.
Why it matters: Key themes are already emerging after the first day of the trial. For starters, the judge wants to hear from AT&T's competitors, and the government wants to show the hypocrisy of AT&T's arguments.
- Why we will be keeping a close eye on this: An AT&T victory would mean media companies would have a much better shot of consolidating, both vertically and horizontally. "If the deal is approved we'll see an acceleration in vertical M&A," says BTIG Media and Tech Analyst Rich Greenfield. "It’s game on if court rules this is fine."
- From an advertising perspective, the merger will give the combined company AT&T’s robust consumer data set and Time Warner’s digital advertising infrastructure to create a data-driven advertising business that will try to compete with the likes of Google and Facebook.
Be smart: The judge presiding over this case approved (after some skepticism) a similar case resulting in a settlement between DOJ and Comcast over the cable giant’s acquisition of NBCUniversal seven years ago. Meet Judge Richard Leon.
5. Treacherous times for terrestrial radio
Why it matters: The fates of iHeart and Cumulus raise questions about the future of terrestrial radio, which is struggling to compete with digital broadcasting and streaming services like Spotify. Although the companies' ad-driven revenue model is facing headwinds, market research indicates that consumers are still tuning into radio in robust numbers, Axios' Erica Pandey writes.
- A whopping 93% of adults over the age of 18 tune in to AM/FM radio each week, according to Nielsen's market research. Listening to radio comprises 17% of American adults' media diet, and that's compared to 41% of time devoted to TV and 23% to using an app or the web on a smartphone.
- But like TV, that audience is aging out: Teens listening to terrestrial radio has fallen about 50% over a 10-year period, Larry Miller, director of NYU Steinhardt's music business program, tells Axios.
And radio advertising revenue has fallen flat. Radio advertising for terrestrial radio grew by 1.6% in 2016, and that growth is projected to slow to just 0.4% by 2021. Compare that to the 7.5% annual growth expected for satellite radio advertising in 2021.
- One bright spot for terrestrial radio is online advertising, which brought in $1.35 billion in 2016 and is expected to see an annual growth rate of 8.6% by 2021.
- Still, the bulk of terrestrial radio's ad dollars come from broadcast advertising, which yielded $16.3 billion in 2016, but has essentially plateaued.
6. Tronc's timeline of turmoil
Newspaper publisher Tronc has had a rocky few months. Plagued by management shakeups, unionization battles, layoffs and accusations of sexual harassment, the media group formerly known as Tribune Publishing has struggled in its efforts to adapt to a digital landscape, Axios' Zach Basu writes.
Why it matters: An underwhelming year-end earnings report further sounded the alarm for Tronc investors earlier this month, causing the company to lose almost a quarter of its market value in a single trading session.
- June 20, 2016: Tribune Publishing officially rebrands as tronc, short for "Tribune online content," and begins trading on the NASDAQ.
- Jan 18, 2018: LA Times employees vote to unionize on the same day publisher Ross Levinsohn announces he's taking unpaid leave for inappropriate behavior.
- Feb. 7, 2018: Tronc agrees to sell the Los Angeles Times and San Diego Union-Tribune to the world's richest doctor, Patrick Soon-Shiong. When the deal officially closes, Tronc will become a significantly smaller company.
- March 7, 2018: Beyond disappointing figures, Tronc's earnings call is sullied by an overall lack of transparency about the company's direction.
- March 15, 2018: The Chicago Tribune lays off an unknown number of employees for the second time in five months.
- March 19, 2018: Tronc chairman Michael Ferro steps down from the board of directors after two years of leading the company. Later that day, two women accuse Ferro of inappropriate advances in an article published by Fortune.
7. VCs keep pouring money into media
For all of the stories about venture-backed media companies failing, venture capital firms don't seem to be shying away from investments. The latest:
- Cheddar has raised $22 million in its fourth round, led by Raine Ventures, an early-stage media-and-technology investment firm, The Wall Street Journal reports. Other investors include Liberty Global, Goldman Sachs, Antenna Group, 7 Global Capital, Dentsu Ventures, New York Stock Exchange owner Jeffrey Sprecher and Kelly Loeffler of Intercontinental Exchange.
- TheSkimm has raised $12 million in a round led by Google Ventures, along with Spanx founder Sara Blakely, Recode reports. Earlier investors, including 21st Century Fox, RRE and Homebrew, are in this round as well. The company has raised $28 million since 2012.
Other digital media startups with VC-backing over the past few months:
8. Media microtrends: A new generation of the internet
Mark Penn, now chairman of the Harris Poll and managing partner of the Stagwell Group — and a former pollster, Microsoft EVP and Burson Marsteller CEO — releases his new book today, Microtrends Squared.
Axios got a sneak peek at some of the media trends highlighted in the book:
- The number of "no-PCers," or people who only access the internet through mobile, is steadily rising. By 2020, eMarketer predicts that 41.6 million Americans will be using mobile-only for Internet access, up from 34.4% in 2017.
- A new class of high-end luddites is retreating from the chaos of an internet-connected society through flip phones. Scarlett Johansson, Jerry Jones, Rihanna and even Warren Buffet have all ditched the smartphone at some point in the past few years.
- The rise of "intelligent TV" viewing has skyrocketed with appointed programming stemming from big streaming providers. Whereas the concept of binge-watching premium programming was passé ten years ago, it's now the new normal and internet economics have followed. Netflix generates roughly 40% of all internet traffic.
Go deeper: Desktop dies on weekends.
9. 1 fun thing: Telemundo’s new Miami HQ
NBCUniversal Telemundo Enterprises will unveil new state-of-the-art headquarters, Telemundo Center, on April 9th, Axios has learned. The Spanish-language broadcaster will be consolidating several of its business units under one roof for improved collaboration and efficiency.
- Why it matters: The $250 million facility is being moved into the backyard of its biggest rival, Univision. The new digs, which will include 13 studios, two digital production studios, seven fully-capable production control rooms, and 40 conference rooms, shows Comcast and NBCUniversal's commitment to growing its Hispanic and international footprint.
- The multi-media production facility brings under one roof the Telemundo Network (news, sports, entertainment), Telemundo Global Studios, Universo, Digital Media operations, and NBCUniversal International Latin American headquarters.