Airlines are just banks now

Something we’ve heard from a few expert investors on airlines, all the value is in their loyalty programs. And that isn’t just a throwaway comment. Analysis by the Financial Times in 2020 found that Wall Street lenders valued the major airlines’ loyalty programs more highly than the airlines themselves. For example, United’s market cap at the time was $10.6 billion. However, lenders valued United’s MileagePlus loyalty program at $22 billion.

This article from The Atlantic explains why. It details the shifts over the past few decades that have turned the airline loyalty program into such a valuable part of the overall business. And in doing so, changed the way these airlines operate.

Traditionally, airline loyalty programs issued points for miles travelled. The more you flew the more points you received. However, in 2007 executives at Virgin America realised that miles flown wasn’t a good proxy for the profitability of a customer. In a world of different fare classes, money spent was a better proxy. So they were the first to switch their loyalty program from miles travelled to money spent. And since then, most of the industry has followed.

Today, many airlines look like banks. They just want you to spend with them. Take Australia’s Qantas as an example - credit cards, home loans, wine subscriptions. Their offering goes well beyond airfares and travel. The more your spend, the more points you’ll receive. Where Qantas don’t offer it themselves, they partner. Mobile plans with Optus, share trading with Superhero, internet plans with Kogan. Airlines aren’t restricted to airfares anymore. They just want your spending. And if you spend enough they’ll reward you with a free flight.

This shift has made loyalty programs giant businesses in their own right. Take America’s Delta Airlines. The airline’s credit card has such usage that American consumers now charge nearly 1% of American GDP to Delta’s American Express credit cards.

Mark Zuckerberg on Threads, the future of AI, and Quest 3

Mark Zuckerberg has been on a roller coaster ride these past few years. After the Trump Presidency was spent managing the fallout of Cambridge Analytica, and other political scandals, during the pandemic Zuckerberg went all in on the metaverse. The result of which was a brutal 2022: share price down 64%, the resignation of his deputy Sheryl Sandberg, and a lot of questions about Meta’s focus and ability to fight off TikTok.

2023 has seen far less of a focus on the metaverse and a big turnaround for Zuckerberg. Meta’s share price is up 141% year-to-date, their artificial intelligence offering - Llama 2 - has been well received and meanwhile, all of the focus has been on another billionaire that is doing a much better job destroying a social media company - Elon Musk and Twitter.

At the same time, Zuckerberg has switched from discussing the metaverse to being all in on generative AI and the company has shipping a number of new products this year, from their Twitter-like platform Threads to new hardware like the Quest 3 virtual reality glasses. But many of the questions around the long term future of Meta still remain.

Meta is probably the most polarising company in the world. But it is also integrated into so many aspects of our daily lives. There are 7 platforms globally that have over 1 billion users - Facebook, YouTube, WhatsApp, Instagram, WeChat, TikTok and Messenger. Meta owns 4 of them. So the company isn’t going anywhere anytime soon. The question is what they will do next and whether Zuckerberg will be able to recreate the early success of Facebook (or the later success of buying Instagram and WhatsApp).

The Hollywood writers strike is over - and they won big

After 148 days, the Hollywood writers strike is over. It will go down as the second longest strike in Hollywood history. And initial reporting in the aftermath suggests the writers have negotiated a great deal.

The Writers Guild of America were very pleased with the results, releasing this statement alongside the details of the proposed agreement, “We can say, with great pride, that this deal is exceptional — with meaningful gains and protections for writers in every sector of the membership.”

While the full text of the deal is yet to be released, initial reporting suggests some big wins:

• Increases to minimum wage and compensation

• Increases to pension and health fund rates

• Improvements to terms for length of employment

• Larger size of writing teams

• Better residuals (royalties for writers of TV and film), including foreign streaming residuals

There was some interesting language on Artificial Intelligence, which has been a key sticking point for both the Hollywood writers and actors strike. The agreement doesn’t prohibit the use of AI. Instead, the union’s statement explained, “A writer can choose to use AI when performing writing services, if the company consents and provided that the writer follows applicable company policies, but the company can’t require the writer to use AI software (e.g., ChatGPT) when performing writing services.”

While it is good that the strike is over, that the writers are getting paid and that we’re going to have plenty more content to fill our streaming services for years to come, it doesn’t feel like the big issues have been resolved. The term of this deal is until 1 May 2026. And we can only imagine how far AI will have come in the next three years. The larger threat of generative AI to the writing profession continues to loom and will continue to colour interactions between studios and writers for years to come.

The Definitive Guide to All Things Taylor Swift and Travis Kelce

Over the past week, we’ve learned that no organisation is large enough to not benefit from a bit of Taylor Swift. The NFL, the most lucrative sporting league in the world, has been abuzz after the 12-time Grammy Award winner was spotted at the Kansas City Chiefs game, all but confirming the rumours that she was dating Chiefs star Travis Kelce.

Amidst the sport and celebrity gossip angles, this past week has also revealed just how powerful the business of Taylor Swift is. We shared a post to our Instagram this week that unpacked some of the numbers:

And the NFL has leant into all thing’s Taylor Swift. The league even rebranded their Twitter account.

This article from The Ringer captures everything you need to know about the biggest story in pop culture and in sport last week.