Merry Chips-mas 🎄

Home » breaking news » news » Merry Chips-mas 🎄

Merry Chips-mas 🎄

View in Browser

We're up, we're down, we're challenging all the markets reporters out there to find synonyms for "volatility." Let's get into it.

By Allison Morrow

🎄 MERRY CHIPS-MAS

The global chip shortage has turned gaming nerds into online sleuths.

It's been more than a year since Sony released its PlayStation 5 and Microsoft unveiled its high-end Xbox. Those were the hottest consoles of Christmas 2020…and now 2021, too. We've officially reached Tickle-Me-Elmo-Circa-1996 levels of crazy.

Restocks of the devices sell out in minutes. In one incident in Texas, a 19-year-old who was trying to sell his PS5 to a man he met online. According to police, the man shot the teen while trying to steal the console.

Gaming consoles compete with every other industry for parts, and that's something of a Lord of the Flies situation at the moment.

QUICK BACKGROUND

Semiconductor manufacturing is concentrated in the hands of a few companies. Taiwan's TSMC and South Korea's Samsung together control more than 70% of the global market.
And when the pandemic hit, demand for gaming consoles, laptops and other devices shot up. After all, people were stuck at home, and, in many cases, flush with cash. There are only so many jigsaw puzzles you can do, and even those were hard to find (trust me).
Last fall, when Sony and Microsoft rolled out their new toys, they sold out in minutes. Retailers' websites were crashing left and right. It was mayhem. (Now, did Sony and Microsoft intentionally create a shortage to elevate the hype around their products or was it purely a result of the supply crisis? That's for another day…)

My colleague Jennifer Korn spoke to several frustrated buyers who've formed cartel-like groups sharing intel online to try to secure consoles. Some retailers are offering special access to restocks for shoppers who join their annual membership services, like Walmart+ and Best Buy Totaltech.

"The majority of Walmart+ memberships are probably just people trying to get the PS5 and then going to cancel it after they obtain it," one gamer told Jennifer.

And memberships are no guarantee, it seems.

"I joined Walmart+, Amazon Prime and GameStop's Pro membership so I can have an early chance of buying a system — and after a year, I still haven't gotten one," another gamer told her. "I have never in my life seen a console where one year after it came out you can't just go into a store and pick one up."

Naturally, there's a dark market making things worse. Scalper bots, which quickly buy items to resell at a higher price, have abounded. Jennifer's got the full story here.

Meanwhile, Matt Egan has the latest on the chip crisis and why the Biden administration is pleading with Congress to pass a $52 billion bill that would encourage domestic semiconductor production and research.

#️⃣ NUMBER OF THE DAY

$1.8 billion

Paging the party of fiscal responsibility...

Congress has until the end of the day Friday to avert a shutdown of the federal government that would cost the US economy $1.8 billion a week, according to estimates by S&P Global Ratings. Democrats unveiled a deal on Thursday that would keep the government funded into mid-February. But a handful of Republican senators are standing by their threats to delay passage of the continuing resolution over the Biden administration's rule that requires employers with 100 or more employees to ensure their employees are fully vaccinated against Covid-19 or undergo regular testing and wear face masks in the workplace

🔒 LOCKED OUT

Labor disputes are playing out across industries. Even baseball.

On Thursday, Major League Baseball locked out its players after the league and players union failed to reach terms on a new collective bargaining agreement.

That puts an end to 26 straight seasons of labor peace in the sport.

In the world of labor relations, a lockout is management's equivalent of a strike, my colleague Chris Isidore explains. An off-season lockout is in some ways a non-event. Assuming the two sides can reach an agreement in the next few months, no games, ticket sales or television rights dollars will be lost.

But the fact that these billionaire owners and millionaire players can't land a deal is a worrying sign for professional baseball. And even if all 162 games are played next year, the lockout clearly shows that the era of labor peace is over. A new era is starting, one that could lead to future strikes, lockouts and lost games.

Wait, are we really supposed to feel sorry for these guys?

Don't be silly: These are, of course, grown men who play sports for a living. But the financial component is complicated. And every side of the negotiating table is deeply frustrated.

The pandemic took its toll: Teams lost a lot of money in 2020, when they played to empty stadiums for a truncated season. Even in 2021, a full season, attendance down 34% from 2019 levels.
We're in the middle of a massive shift in how we watch TV: For decades, MLB made easy money from TV rights. Those rights deals were fueled by the fees networks could charge to cable systems for every subscriber they had, whether they were watching games or not, Chris explains.
The cable gravy train is gone for good: According to Pew Research, only 56% of American households had cable or satellite TV in 2021, and that percentage is only declining. That's got the league scrambling to figure out how to make up that revenue.
Players' salaries are falling: The average opening day salary in 2021 was still a healthy $4.2 million, but that was down 5% from 2019. And that average is hugely inflated by the paychecks collected by game's biggest stars
Key quote: "Obviously if you're one of the 10 best players there's never been a better time to be a player," said Victor Matheson, an economics professor at the College of the Holy Cross. "There are record contracts being signed right and left. But that's not true for the broad middle class."

WHAT'S NEXT?

Both sides will keep talking until they can reach a new deal.

MLB, in a move that to be honest seems extremely petty, is scrubbing its website of all players' names, likenesses and images, replacing their photos with gray silhouettes.

"We hope that the lockout will jumpstart the negotiations and get us to an agreement that will allow the season to start on time," the MLB commissioner said in note to fans Thursday.

The 2022 season is scheduled to begin in March, and players are scheduled to report to spring training in mid-February.

WHAT ELSE IS GOING ON?

📈 US stocks rallied Thursday, shaking off, at least for now, concerns about the Omicron variant and attempting to rebound from the prior two days of steep losses.

🥣 Kellogg reached a tentative agreement with the union that has been striking at its cereal factories for two months, signaling the end of one of the nation's highest profile labor disputes.

🛢️ Saudi Arabia, Russia and other leading oil producers decided to stick with plans to increase supply in January despite a recent plunge in prices driven by fears of a new glut.

🍔 In honor of the Whopper's 64th birthday, Burger King is dropping the price for two days to its original cost: 37 cents.