Lego Cuts 1,400 Jobs After Profits Fall In First Half Of 2017, Plus Verizon’s New Rewards Program

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Market Snapshot

Playtime Is Serious Business

Somewhere between the Millenium Falcon and the Taj Mahal, Lego missed a brick. After its first revenue decline (-5% YoY) in 13 years, 1,400 employees will get the boot—that’s 8% of Lego’s workforce.

So what’s got the toy industry’s second-biggest player downsizing? For starters, technology. Video games and mobile apps have been battering Lego’s growth for years.

Another reason? Organization (or lack thereof).

Lego’s employee structure has become so convoluted it takes up to 20 teams to prepare “Ages 5 & Up” products for launch. (Don’t worry, they’ve hired little Timmy as a playtime consultant to smooth things out.)

Lego is no stranger to an uphill battle

Only a decade earlier, the Danish company was raising the white flag with its little yellow arms. Nearly $1 billion in debt, Lego filed for bankruptcy and in 2004 hired Jorgen Vig Knudstorp—former McKinsey consultant and kindergarten teacher—to save the day.

And Jorgen’s credentials proved fruitful. He cut unsuccessful businesses like Lego computer games and clothing lines, decreased the number of products from 12,000 to 6,000, and re-focused Lego on its core product offering: the brick.

By 2014, Lego had risen from the ashes to overtake Mattel as the world’s most profitable toy company (at least for a time).

Now it’s facing an all too familiar crossroads

Jorgen did well to prep the brickmaker for technology’s endless assault. Key licensing partnerships allowed Lego to win facetime with kids through everything from The Lego Movie to the Lego Harry Potter** video game. But that wasn’t enough.

After a decade-long era of growth (through which it doubled its workforce to 18,200), it has once again found itself where it started. Too many employees and too many business segments are crippling productivity and fogging up the path ahead.

Now, with Jorgen gone from office since last year, and the company’s first big misstep in over a decade, Lego will look to trim the fat and get back on track. One brick at a time.

Nothing’s for Free

What would you give up for the chance to win tickets to a Lady Gaga concert?

If it’s your browsing history, location data, and app usage, give Verizon a call. The largest wireless provider in the U.S. introduced a rewards program called Verizon Up, where users will receive credits that can be redeemed for the things that truly matter in life like free Uber rides and Apple music.

But before you hail that cross-country ride in a black Escalade, be aware that the rewards program seems to be an explicit ploy to grow Verizon’s digital advertising business from the $7 billion a year it did in 2016.

To that we say: best of luck! Verizon owns 4% of the digital advertising market in the U.S., whereas Google, the King of Data, reigns supreme at 41%.

An uphill battle, for sure. But me…want…free…Uber…rides.

Wanted: Live Sports to Stream

Facebook swung and missed in an ambitious $610 million bid to win the streaming rights for Indian Premier League (IPL) cricket. While it was a hefty offer, it was dwarfed by Star India’s bid of $2.55 billion, which included TV distribution in addition to digital streaming.

What in the bloody hell could Facebook possibly want to do with cricket? Well, put yourself in Zuck’s shoes. Facebook is committed to streaming live sports (securing minor deals with MLB and MLS among others), but right now the big fish are all hooked. The NFL’s rights are locked up through the 2022 season, and the NBA’s aren’t on the market until 2025.

And while you probably haven’t heard of it, the IPL is a widely popular league overseas, with over 185 million people tuning into the first three games of this season. By one metric, cricket ranks as the third most popular sport in the world.

So for now, Facebook will be on the hunt for the streaming rights to other sports. All signs point to Major League Swashbuckling.

Not Out of the Woods

It hasn’t even been a week since Hurricane Harvey made landfall in Texas, but another major storm, Hurricane Irma, is threatening the Caribbean, Puerto Rico, and Florida with Category 5 winds.

And the market is doing its best Al Roker impression.

Florida, of course, is a major producer of oranges. Since Irma could inflict significant damage to groves in the central part of the state, orange juice futures (yes, that’s a thing) rose more than 6%. We hope you like a lot of pulp.

Meanwhile, Florida’s home insurers are getting hit hard. UIH, a Florida-based home insurer, fell nearly 15%, while two other large FL insurance companies (HCI Group and Heritage Insurance) were also down double digits.

It all amounts to the worst day of the year for insurance companies, collectively.

Morning Brew 2017 Fall Internship Program

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Giveaway: Everything’s bigger in Texas…

Even the music festivals. We are giving away an all-inclusive getaway to Austin City Limits for two. Think Jay-Z, Chance, Red Hot Chili Peppers, and delicious BBQ all in one weekend.

Take a shot and enter here

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What Else Is Happening…

Economic Calendar

  • Monday:
  • Earnings: No Events Today
  • Economic Events: No Events Today
  • Tuesday:
  • Earnings: Dave & Buster’s (+), HPE (+)
  • Economic Events: Factory Orders (-)
  • Wednesday:
  • Earnings: Yext
  • Economic Events: MBA Mortgage Applications, International Trade, ISM Non-Manufacturing Index
  • Thursday:
  • Earnings: Barnes & Noble, Cloudera
  • Economic Calendar: Jobless Claims, Petroleum Status, Fed Balance Sheet
  • Friday:
  • Earnings: Kroger, PetSmart
  • Economic Calendar: Wholesale Trade, Baker-Hughes Rig Count, Consumer Credit

Water Cooler

Brewified Terms

Pic Image:

Twitter Line: The CBOE Volatility Index. It sounds complex, but trust us, it’s not.

The CBOE Volatility Index (VIX):

What is it:

The Volatility Index (VIX) measures the expected 30-day volatility of options traded in the S&P 500. By measuring the premiums placed on options, the VIX shows a daily moving average of whether investors view the market as “safe” or “risky.”

Low premiums = “safe” = VIX is low

High premiums = “risky” = VIX is high

This is why some people classify it as a measure of market risk, and has been dubbed the “investor fear gauge.”

Friendly reminder: An option is the ability to buy or sell a stock at a future date. Investors pay a premium for this right.

A little background:

The VIX was introduced in 1993 by the Chicago Board of Exchange (CBOE) to provide investors insight into future risk associated with options trading. It was eventually adopted in 2004 to cover the entire S&P 500.

How it works in practice:

The VIX typically is measured as a number between 10 to 30, where 10 is considered low volatility and 30 is considered high volatility.

So let’s say the VIX is at 13. This means the S&P 500 is expected to move +/- 13% on an annualized basis. But keep in mind the word “expected.” The VIX only predicts these percentage moves with 68% confidence.

Food for thought:

During periods of stock market growth, stock prices are typically stable and the VIX remains low. During periods of decline, the opposite tends to hold true.

*If you’re interested in diving any deeper, **[check this out](!*

Question of the Day

Jane is 5 years younger than George. George is 2 years older than Alice. If the aggregate age of Jane, George, and Alice is 68 years, how old is Jane?

(Give Up?)

Who Am I?

  1. I bought the Houston Rockets in 1993 for $85 million and sold the team yesterday for $2.2 billion. Yeah, I’m pretty pumped about it.
  2. I donated $10 million to a Hurricane Harvey relief fund.
  3. I was a bond trader for Lawrence Kotkin Associates.
  4. I own a vineyard in Long Island.

(Any Guesses?)

Stat of the Day

1.5 cents

That’s how much it costs to make one penny. In fact, in 2015 the U.S. produced 9 billion pennies that cost the country $49 million. We’re not too business savvy on this end, but that seems like a rip off.