Business

Chipotle Mexican Grill has agreed to pay $240,000 to the former employees of an Augusta, Maine, location that tried to unionize.
The National Labor Relations Board found in November that the burrito chain violated federal labor law by shuttering the Augusta location and blacklisting organizers.
To date, just one Chipotle location has voted to unionize.

Chipotle Mexican Grill has agreed to pay $240,000 to the former employees of an Augusta, Maine, location as part of a settlement for closing the restaurant when workers tried to unionize.
Chipotle denied wrongdoing, despite settling the lawsuit with the federal labor board and the union.

“We settled this case not because we did anything wrong, but because the time, energy and cost to litigate would have far outweighed the settlement agreement,” Laurie Schalow, Chipotle’s chief corporate affairs officer, said in a statement to CNBC on Monday.
Employees at the Chipotle restaurant filed a petition to unionize under Chipotle United in late June, becoming the chain’s first outlet to do so. Prior to the filing, workers had already walked out in protest of working conditions and understaffing.
Less than a month later, Chipotle closed the restaurant, citing staffing issues and saying it respected workers’ right to organize. However, in November, the National Labor Relations Board found that the burrito chain violated federal labor law when it closed the restaurant and stopped organizers from being hired at its other locations in the state.

Chipotle restaurant in Teterboro, New Jersey.
SOPA Images | LightRocket | Getty Images

While Chipotle United counted the settlement announced Monday as a win, it fell short of reopening the closed location.
Now, former employees at the shuttered Augusta location will receive between $5,800 to $21,000 from Chipotle, dependant on their average hours, pay rate and the length of their tenure. Chipotle will also offer to put all of those workers on a preferential hiring list for other Maine locations for one year.

Roughly 40 stores in Maine, New Hampshire and Massachusetts will have notices posted saying it won’t close stores or discriminated based on union support. Those locations are under the leadership of the Chipotle regional manager who blackballed pro-union workers from jobs at other locations, according to Chipotle United, which is not affiliated with any larger unions.
To date, just one Chipotle location has successfully unionized. A restaurant in Lansing, Michigan, voted in August to unionize under the International Brotherhood of Teamsters.
The burrito chain hasn’t seen an avalanche of union petitions after organizers’ initial win in Michigan, unlike Starbucks, which has seen more than 290 locations unionize in a little over a year. But Starbucks Workers United has accused the company of employing similar anti-union tactics, including shuttering stores. The coffee chain denies all allegations of union busting, although former CEO Howard Schultz is set to testify Wednesday in front of a Senate panel about the company’s behavior.
— CNBC’s Kate Rogers contributed to this report.

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To understand the shift in tone that has taken place in Silicon Valley in recent months, look no further than Mark Zuckerberg’s declaration in February that 2023 would be the “year of efficiency”. It is hardly the kind of language to set the pulse racing—unless you are an employee on the receiving end of it. On March 14th Meta, the tech giant Mr Zuckerberg runs, announced it would fire 10,000 staff—on top of the 11,000 it laid off last November. Meta is not alone. On March 20th Amazon, another tech behemoth, said it would cut a further 9,000 corporate employees, having already let 18,000 white-collar types go. So far this year American tech firms have announced 118,000 sackings, according to Crunchbase, a data provider, adding to the 140,000 jobs cut last year. And more may lie ahead. On March 24th the chief operating officer of Salesforce, a business-software firm, hinted that the company would soon add to the 8,000 lay-offs it announced in January. Investors have cheered tech’s new-found cost-consciousness. The tech-heavy NASDAQ index is up 16% on its recent low point in late December. And there is more to come. Firings since the start of 2022 represent only 6% of the American tech industry’s workforce. Because tech companies continued to hire throughout 2022, lay-offs have only just begun to reduce total industry employment (see chart 1). By comparison, between the peak of the dotcom boom at the start of the 2000s and its nadir at the end of 2003, America’s overall tech workforce declined by 23%, or 685,000 jobs.Still, the recent lay-offs have been widespread and deep enough to warrant two questions. First, who is getting the chop? And second, where are the laid-off workers going? So far techies themselves have been mostly spared, observes Tim Herbert of the Computing Technology Industry Association (CompTIA), a trade body. Instead, the axe has fallen mainly on business functions like sales and recruitment. These had grown steadily as a share of tech-industry employment in recent years, a telltale sign of bloat (see chart 2). Between the depths of the pandemic in the spring of 2020 and peak employment at the start of 2023, the tech sector added around 1m workers. Simply hiring such numbers required hiring plenty of recruiters; as a headhunting rule of thumb, one recruiter can hire 25 new employees a year. Many of those recruiters may now be surplus to requirements. But the specialists are not immune. As part of its lay-offs, Meta will restructure its tech functions in April. Releasing talented tech workers back into the wild could be a boon for other sectors wrestling with digital reinvention. For years unsexy industries like industrial goods have struggled to compete with the tech industry for talent. Now they are pouncing. John Deere, an American tractor-maker, has been snapping up fired tech workers to help it make smarter farm machinery. Last year the firm opened an office in Austin, a thriving tech hub in Texas. Carmakers, increasingly focused on software, are also hungry for tech talent. So are banks, health insurers and retailers.Some of the laid-off techies are also helping fuel a new generation of startups. Applications in January to Y Combinator, a startup school in Silicon Valley, were up fivefold on the previous year. Excitement is particularly strong in the buzzy field of ChatGPT-like “generative” artificial intelligence (AI), which uses complex algorithms and oodles of data to produce everything from essays to artworks (indeed, this is one area where big tech continues to hire enthusiastically). Optimists hope that this technology will, like the smartphone before it, unlock a new wave of creative destruction, as entrepreneurs conjure up a variety of clever applications. The new AIs may in time mean even less need for, say, human marketers. But they could, like other breakthroughs before them, create entirely new job categories—not least in the tech industry itself. ■ More

To understand the shift in tone that has taken place in Silicon Valley in recent months, look no further than Mark Zuckerberg’s declaration in February that 2023 would be the “year of efficiency”. It is hardly the kind of language to set the pulse racing—unless you are an employee on the receiving end of it. On March 14th Meta, the tech giant Mr Zuckerberg runs, announced it would fire 10,000 staff—on top of the 11,000 it laid off last November. Meta is not alone. On March 20th Amazon, another tech behemoth, said it would cut a further 9,000 corporate employees, having already sacked 18,000 white-collar types. So far this year American tech firms have announced 118,000 sackings, according to Crunchbase, a data provider, adding to the 140,000 jobs cut last year. Investors have cheered tech’s new-found cost-consciousness. The technology-heavy NASDAQ index is up by 17% from its recent low point in late December. The companies are hearing the market’s message loud and clear. On March 24th the chief operating officer of Salesforce, a business-software firm, hinted that the company would soon add to the 8,000 lay-offs it announced in January. They have a way to go: firings since the start of 2022 represent only 6% of the American tech industry’s workforce. Because tech companies continued to hire throughout 2022, lay-offs have only just begun to reduce total industry employment (see chart 1). By comparison, between the peak of the dotcom boom at the start of the 2000s and its nadir at the end of 2003, America’s overall tech workforce declined by 23%, or 685,000 jobs.Still, the recent lay-offs have already been widespread and deep enough to warrant two questions. First, who is getting the chop? And second, where are the laid-off workers going? So far techies themselves have been mostly spared, observes Tim Herbert of the Computing Technology Industry Association, a trade body. Instead, the axe has fallen mainly on business functions such as sales and recruitment. These had grown steadily as a share of technology-industry employment in recent years, a telltale sign of bloat (see chart 2). Between the depths of the pandemic in the spring of 2020 and peak employment at the start of 2023, the tech sector added around 1m workers. Simply enlisting such numbers required hiring plenty of recruiters; as a headhunting rule of thumb, one recruiter can hire 25 new employees a year. Many of those same recruiters may now be surplus to requirements. But the specialists are not immune to the efficiency drive. As part of its lay-offs, Meta will restructure its tech functions in April. Releasing talented tech workers back into the wild could be a boon for other sectors wrestling with digital reinvention. For years unsexy industries like industrial goods have struggled to compete with the tech industry for talent. Now they are pouncing. John Deere, an American tractor-maker, has been snapping up fired tech workers to help it make smarter farm machinery. Last year the firm opened an office in Austin, a thriving tech hub in Texas. Carmakers, increasingly focused on software, are also hungry for technologists. So are banks, health insurers and retailers.Some of the laid-off techies are helping fuel a new generation of startups. Applications in January to Y Combinator, a startup school in Silicon Valley, were up five-fold on the previous year. Excitement is particularly strong in the buzzy field of ChatGPT-like “generative” artificial intelligence (AI), which uses complex algorithms and oodles of data to produce everything from essays to artworks—so much so that even big tech continues to hire enthusiastically in the area (see earlier article).Optimists hope that this technology will, like the smartphone before it, unlock a new wave of creative destruction, as AI entrepreneurs conjure up a variety of clever applications. The new AIs may in time mean even less need for, say, human marketers. But they could, like other breakthroughs before them, create entirely new job categories—not least in the technology industry itself. ■To stay on top of the biggest stories in business and technology, sign up to the Bottom Line, our weekly subscriber-only newsletter. More

What has actually been achieved on this video call? It takes Jared Spataro just a few clicks to find out. Microsoft’s head of productivity software pulls up a sidebar in Teams, a video-conferencing service. There is a 30-second pause while somewhere in one of the firm’s vast data centres an artificial-intelligence (AI) model analyses a recording of the virtual meeting so far. Then an impressively accurate summary of your correspondent’s questions and Mr Jared’s answers appears. Mr Jared can barely contain his enthusiasm. “This is not your daddy’s AI,” he beams.Teams is not the only product into which Microsoft is implanting machine intelligence. On March 16th the software giant announced that almost all its productivity software, including Word and Excel, were getting the same treatment. Two days earlier, Alphabet, Google’s parent company, announced a similar upgrade for its productivity products, such as Gmail and Sheets. The announcements add to a spate of similar ones in the past month or so from America’s tech titans. OpenAI, the startup which is part-owned by Microsoft and which created ChatGPT, an AI conversationalist that has taken the world by storm, released GPT-4, a new super-powerful AI model. Amazon Web Services (AWS), the e-commerce giant’s cloud-computing arm, said it will expand its partnership with Hugging Face, another AI startup. Apple is reportedly testing the use of new AI models across its business, including with Siri, its virtual assistant. Mark Zuckerberg, the boss of Meta, said he wants to “turbocharge” Meta’s products with AI. Adding to its productivity tools, on March 21st Google launched its own AI chatbot to rival ChatGPT, called Bard. The frenzy of activity is the result of a new wave of AI models, which are making their way from lab to the real world. No group of companies stands to benefit or lose out more than big tech. All five giants claim to be laser-focused on AI. What that means for each in practice, though, differs. Two things are already clear. The race for AI is heating up. And even before a winner emerges, the contest is changing the way that big tech deploys the technology. AI is not new to tech’s titans. Amazon’s founder, Jeff Bezos, quizzed his teams on how they planned to embed it into products in 2014. Two years later Sundar Pichai, Alphabet’s boss, started to describe his firm as an “AI-first company”. The technology underpins how Amazon sells and delivers its products, Google finds stuff on the internet, Apple imparts its smarts on Siri, Microsoft helps clients manage data and Meta serves up adverts. The new GPT-4-like “generative” AI models nevertheless look like a turning point. The firing gun sounded in November, with the release of ChatGPT, which became hugely popular thanks to its uncannily human-like ability to generate everything from travel plans to poems. The thing that makes such AIs generative is “large language models”. These analyse content on the internet and, in response to a request from a user, predict the next word, brush stroke or note in a sentence, image or tune. Many technologists believe they mark a “platform-shift”. AI will, on this view, become a layer of technology on top of which all manner of software can be built. Comparisons abound to the advent of the internet, the smartphone and cloud computing. The tech giants have everything they need—data, computing power, billions of users—to thrive in the age of AI, and consolidate their dominance of the industry. But they recall the fate of once-dominant firms, from Kodak to BlackBerry, that missed previous digital platform shifts, only to sink into bankruptcy or irrelevance. So whether or not the AI evangelists are correct, big tech isn’t taking any chances. The result is a deluge of investments. In 2022, amid a tech-led stockmarket crunch, the big five poured $223bn into research and development (R&D), up from $109bn in 2019 (see chart 1). That was on top of $161bn in capital expenditure, a figure that had also doubled in three years. All told, this was equivalent to 26% of their combined annual revenues last year, up from 16% in 2015. Not all of this went into cutting-edge technologies; a chunk was spent on prosaic fare, such as warehouses, office buildings and data centres. But a slug of such spending always ends up in the tech firms’ big bets on the future. Today, the wager of choice is AI. And the companies aren’t shy about it. Mr Zuckerberg recently said AI was his firm’s biggest investment category. In its next quarterly earnings report in April, Alphabet plans to reveal the size of its AI investment for the first time.To tease out exactly how the companies are betting on AI, and how big these bets are, The Economist has analysed data on their investments, acquisitions, job postings, patents, research papers and employees’ LinkedIn profiles. The examination reveals that serious resources are being spent on the technology. According to data from PitchBook, a research firm, around a fifth of the companies’ combined acquisitions and investments since 2019 involved AI firms—considerably more than the share targeting cryptocurrencies, blockchains and other decentralised “Web3” endeavours (2%), or the virtual-reality metaverse (6%), two other recent tech fads. According to numbers from PredictLeads, another research firm, about a tenth of big tech’s job listings require AI skills. Roughly the same share of big tech employees’ LinkedIn profiles say that they work in the field. These overall numbers conceal big differences between the five tech giants, however. On our measures, Microsoft and Alphabet appear to be racing ahead, with Meta snapping at their heels. As interesting is where the five are deciding to focus their efforts. Consider their equity investments, starting with those that aren’t outright acquisitions. In the past four years big tech has taken stakes in 200-odd AI firms. And these investments are accelerating. Since the start of 2022, the big five have together made roughly one investment a month in AI specialists, three times the rate of the preceding three years.Microsoft leads the way. One in three of its deals has involved AI-related companies. That is twice the share at Alphabet (one of whose venture-capital arms, Gradient Ventures, invests exclusively in AI firms and has backed almost 200 startups since 2019) and Amazon. It is more than six times that of Meta, and infinitely more than Apple, which has made no such investments at all (see chart 2). Microsoft’s most important bet is on OpenAI, whose technology lies behind the giant’s new productivity features and powers a souped-up version of its Bing search engine. The $11bn that Microsoft has reportedly put into OpenAI would, at the startup’s latest rumoured valuation of $29bn, give the software giant a stake of 38%. Microsoft’s other notable equity investments include those in D-Matrix, a firm that makes AI technology for data centres, and in Noble.AI, which uses algorithms to streamline lab work and other R&D projects. Microsoft is also a keen acquirer of whole AI startups; nearly a quarter of its acquisition targets, such as Nuance, which develops speech recognition for health care, work in the area. That is a similar share to Meta, which is a more eager buyer than piecemeal investor. As with equity stakes, AI’s share of Alphabet acquisitions have lagged behind Microsoft’s since 2019. But these, plus its equity stakes are shoring up a formidable AI edifice, one of whose pillars is DeepMind, a London-based AI lab that Google bought in 2014.. DeepMind has been behind some big advances in the field. It developed AlphaFold, a system which can predict the shape of proteins, understanding of which is both critical in drug discovery and notoriously hard to ascertain. But it is Apple that is the most single-minded AI acquirer. Nearly half of its buy-out targets are AI-related. They range from AI.Music, which generates tailor-made tunes, to Credit Kudos, which uses AI to assess the credit worthiness of loan applicants. Apple’s acquisitions have historically been small, notes Wasmi Mohan of Bank of America. But they tend to be quickly folded into existing products. As with investments, big tech’s AI hiring, too, is ramping up. A greater share of jobs listed by Google, Meta and Microsoft require AI expertise than they did, on average, over the past three years (see chart 3). Data from PredictLeads suggest that since 2019 nearly one in four of Alphabets’s job listings have been AI-related (see chart 4). Meta came second, at 8%. According to data from LinkedIn, one in six of Alphabet’s employees mention AI skills on their profile—a touch behind Meta but ahead of Microsoft (Apple and Amazon lag far behind). Greg Selker of Stanton Chase, an executive-search company, observes that demand for AI talent continues to be red-hot, despite big tech’s recent lay-offs.All these AI boffins are not twiddling their thumbs. Zeta Alpha, a company which tracks AI research, looks at the number of published papers in which at least one of the authors works for a given company. Between 2020 and 2022, Alphabet published about 9,000 AI papers, more than any other corporate or academic institution. Microsoft racked up around 8,000 and Meta 4,000 or so. Meta, in particular, is gaining a reputation for being less tight-lipped about its work than its fellow tech giants. Meta’s AI-software library, called PyTorch, has been available to anyone for a while; since February academic researchers can freely use its large language model called LLaMA, the details of whose training and biases have also been made public. All this, says Joelle Pinneau, the head of Meta’s open-research programme, helps it attract the brightest minds (who often make their move to the private sector conditional on a continued ability to make the fruits of their labours public). Indeed, if you adjust Meta’s research output for its revenues and headcount, which are much smaller than Alphabet’s or Microsoft’s, and only consider the most-cited papers, Mr Zuckerberg’s firm tops the research league table. And, points out Ajay Agrawal of the University of Toronto, openness brings two added benefits besides luring the best brains. Low-cost AI can make it cheaper for creators to make content, including texts and videos, that draw more eyeballs to Meta’s social networks. And it could dent the business of Alphabet, Amazon and Microsoft, which are all trying to sell AI models through their cloud platforms. The AI frenzy is, then, in full swing among tech’s mightiest firms. Promisingly for them, their AI bets are already beginning to pay off, by making their own operations more efficient (Microsoft’s finance department, which uses AI to automate 70-80% of its 90m-odd annual invoice approvals, now asks a generative-AI chatbot to flag dodgy-looking bills for a human to inspect) and by finding their way into products at a pace that seems faster than for many earlier technological breakthroughs.Barely four months after ChatGPT captured the world’s imagination, Microsoft and Google have introduced the new-look Bing, Bard and their AI-assisted productivity programs. Alphabet and Meta offer a tool which automatically generates an ad campaign based on the advertiser’s objectives, such as boosting sales or winning more customers. Microsoft is making OpenAI’s technology available to customers of its Azure cloud platform. Thanks to partnerships with model-makers such as Cohere and Anthropic, AWS users can access more than 30 large language models. Google, too, is wooing model-builders and other AI firms to its cloud with $250,000-worth of free computing power in the first year, a more generous bargain than it offers to non-AI startups. It probably won’t be long before AI.Music and Credit Kudos pops up in Apple’s music-streaming service and its growing financial offering, or an Amazon chatbot will recommend purchases uncannily matched to shoppers’ desires. If the platform-shift thesis is correct, big tech could yet be upset by newcomers, rather as they themselves upset an earlier generation of technology giants. The mass of resources that big tech is ploughing into the technology reflects a desire to remain not just relevant, but dominant. Whether or not they succeed, one thing is certain: these are just the modest beginnings of the AI revolution. ■ More

Pandemic-related emergency funding from the Supplemental Nutrition Assistance Program, formerly known as food stamps, ended this month in most states.
For retailers like Kroger, Walmart and Dollar General, the decline in SNAP dollars will put pressure on discretionary sales.
Add in lower tax refunds on average this year, and shoppers have fewer dollars to spread around.

A worker carries bananas inside the Walmart SuperCenter in North Bergen, New Jersey.
Eduardo Munoz Alvarez | AP

For some shoppers who already struggle to cover grocery bills, the budget is getting tighter.
This month, pandemic-related emergency funding from the Supplemental Nutrition Assistance Program, formerly known as food stamps, is ending in most states, leaving many low-income families with less to spend on food.

More than 41 million Americans receive funding for food through the federal program. For those households, it will amount to at least $95 less per month to spend on groceries. Yet for many families, the drop will be even steeper since the government assistance scales up to adjust for household size and income.
For grocers like Kroger, big-box players like Walmart and discounters like Dollar General, the drop in SNAP dollars adds to an already long list of worries about the year ahead. It’s likely to pressure a weakening part of retailers’ business: sales of discretionary merchandise, which are crucial categories for retailers, as they tend to drive higher profits.
Major companies, including Best Buy, Macy’s and Target, have shared cautious outlooks for the year, saying shoppers across incomes have become more careful about spending on items such as clothing or consumer electronics as they pay more for necessities such as housing and food.
Food, in particular, has emerged as one of the hardest-hit inflation categories, up 10.2% year-over-year as of February, according to the U.S. Bureau of Labor Statistics.
“You still have to feed the same number of mouths, but you have to make choices,” said Karen Short, a retail analyst for Credit Suisse.

“So what you’re doing is you’re definitely having to cut back on discretionary,” she said.
The stretch has made it impossible for some to afford even basic items. It’s still too early to see the full impact of the reduced SNAP benefits, said North Texas Food Bank CEO Trisha Cunningham, but food pantries in the Dallas-Fort Worth area have started to see more first-time guests. The nonprofit helps stock shelves at pantries that serve 13 counties.
Demand for meals has ballooned, even from pandemic levels, she said. The nonprofit used to provide about 7 million meals per month before the pandemic and now provides between 11 million and 12 millions meals per month.
“We knew these [extra SNAP funds] were going away and they were going to be sunsetted,” she said. “But what we didn’t know is that we were going to have the impact of inflation to deal with on top of this.”

Shifting market share

So far, retail sales in the first two months of the year have proven resilient, even as consumers contend with inflation and follow a stimulus-fueled boom in spending in the early years of the pandemic. On a year-over-year basis, retail spending was up 17.6% in February, according to the Commerce Department.
Some of those higher sales have come from higher prices. The annual inflation rate is at 6% as of February, according to the Labor Department’s tracking of the consumer price index, which measures a broad mix of goods and services. That index has also gotten a lift from restaurant and bar spending, which has bounced back from earlier in the pandemic and begun to compete more with money spent on goods.
Yet retailers themselves have pointed out cracks in consumer health, noting rising credit card balances, more sales of lower-priced private label brands and shoppers’ heightened response to discounts and promotions.
Some retailers mentioned the SNAP funding decrease on earnings calls, too.
Kroger CEO Rodney McMullen called it “a meaningful headwind for the balance of the year.”
“We’re hopeful that everybody will work together to continue or find additional money,” he said on the company’s earnings call with investors earlier this month. “But as you know, because of inflation, there’s a lot of people whose budget is under strain.”
Credit Suisse’s Short said for lower-income families, the food cost squeeze comes on top of climbing expenses for nearly everything else, whether that’s paying the electric bill or filling up the gas tank.
“I don’t think I could tell you what a tailwind is for the consumer,” she said. “There just isn’t a single tailwind in my view.”
Emergency allotments of SNAP benefits previously ended in 18 states, which could preview the effect of the decreased funding nationwide. In a research note for Credit Suisse, Short found an average decline in SNAP spending of 28% across several retailers from the date the additional funding ended.
Some grocers and big-box retailers could feel the impact more than others. According to an analysis by Credit Suisse, Grocery Outlet has the highest exposure to SNAP with an estimated 13% of its 2021 sales coming from the program. That’s followed by BJ’s Wholesale with about 9%, Dollar General at about 9%, Dollar Tree at about 7%, Walmart’s U.S. business with 5.5% and Kroger with about 5%, according to the bank’s estimates, which were based on company filings and government data.
Retailers that draw a higher-income customer base, such as Target and Costco, should feel comparatively less effect, Short said. If nothing else, the dwindling SNAP dollars could shift shoppers from one retailer to another, she said, as major players seek to grab up market share and undercut on prices.

Fewer dollars to go around

Another factor could make for a bumpier start to retailers’ fiscal year, which typically kicks off in late January or early February: Tax refunds are trending smaller this year.
The average refund amount was $2,972, down 11% from an average payment of $3,352 as of the same point in last year’s filing season, according to IRS data as of the week of March 10. That average payout could still change over time, though, as the IRS continues to process millions of Americans’ returns ahead of the mid-April deadline.
Dollar General Chief Financial Officer John Garratt said on an earnings call this month that the discounter is monitoring how its shoppers respond to the winding down of emergency SNAP benefits and lower tax refunds.
He said stores did not see a change in sales patterns when emergency SNAP funds previously ended in some states, but he added that “the customer is in a different place now.”
Tax refunds can act as a cash infusion for retailers, as some people spring for big-ticket items like a pair of brand-name sneakers or a sleek new TV, said Marshal Cohen, chief industry advisor for The NPD Group, a market research company.
This year, though, even if people get their regular refund, they may use it to pay bills or whittle down debt, he said.
One bright spot for retailers could be an 8.7% cost-of-living increase in Social Security payments. Starting in January, recipients received on average $140 more per month.
However, Cohen said, the cash influx might not be enough to offset pressure on younger consumers, particularly those between ages 18 and 24, who have just started jobs and face milestone expenses like signing a lease or buying a car.
“Everything’s costing them so much more for the early, big spends of their consumer career,” he said.

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Digital media companies including BuzzFeed, Vice, Vox and Bustle Digital Group are sharpening their focus on core strengths.
The smaller media companies’ emphasis on differentiation echoes a larger media movement to cut costs and focus on brands.
Executives are split on whether the digital media industry will have another wave of significant consolidation, especially as companies look increasingly different from one another.

BuzzFeed CEO Jonah Peretti stands in front of the Nasdaq market site in Times Square as the company goes public through a merger with a special-purpose acquisition company on December 06, 2021 in New York City.
Spencer Platt | Getty Images

When a marriage or an engagement fails, it’s common for the participants to take time to work on themselves.
That’s where the digital media industry finds itself today.

After years of focusing on consolidating to better compete with Google and Facebook for digital advertising dollars, many of the most well-known digital media companies have abandoned consolidation efforts to concentrate on differentiation.
“What you’re finding is companies are trying to find a non-substitutable core,” said Jonathan Miller, the CEO of Integrated Media, which specializes in digital media investments. “The era of trying to put these companies together is over, and I don’t think it’s coming back.”
A 90% decline in BuzzFeed shares since the company went public in 2021, a failed sales process from Vice, the collapse of special purpose acquisition companies, and a choppy advertising market have made digital media executives rethink their companies’ futures. For the moment, executives have decided that more concentrated investment is better than attempts to gain scale.
“Right now, everyone’s trying to get through a tougher market by focusing on their strengths,” BuzzFeed CEO Jonah Peretti said in an interview with CNBC. “We’re in this period now where we should just focus on innovating for the future and building more efficient, stronger, better companies.”
What’s happening in the digital media space echoes trends from the biggest media companies, including Netflix, Disney and Warner Bros. Discovery. After losing nearly half their market values, or more, in 2022, those companies have emphasized what makes them different, whether it be distribution, brand or quality of programming, after years of global expansion and mega-mergers. Disney CEO Bob Iger said the word “brand” more than 25 times at a Morgan Stanley media conference this month.

“I think brands matter,” Iger said. “The more choice people have, the more important brands become because of what they convey to consumers.”
Making strategic decisions based on consumer demand rather than investor pressure is a pivot for the industry, said Bryan Goldberg, CEO of Bustle Digital Group, which has acquired and developed a number of brands and sites aimed at women, including Nylon, Scary Mommy, Romper and Elite Daily.
“Too many of the mergers were driven by investor needs as opposed to consumer needs,” Goldberg said in an interview.

The rollup dream’s rise and fall

From late 2018 to early 2022, the digital media industry had a shared goal. Pushed by venture capitalist and private equity investors who had made sizeable investments in the industry during the 2010s, companies such as BuzzFeed, Vice, Vox Media, Group Nine, and Bustle Digital Group, or BDG, were talking to each other, in various combinations, about merging to gain scale.
“If BuzzFeed and five of the other biggest companies were combined into a bigger digital media company, you would probably be able to get paid more money,” Peretti told The New York Times in November 2018, kicking off a multiyear effort to consolidate.
The rationale was twofold. First, digital media companies needed more scale to compete with Facebook and Google for digital advertising dollars. Adding sites and brands under one corporate umbrella would boost overall eyeballs for advertisers. Cost-cutting from M&A synergies was an added benefit for investors.
Second, longtime shareholders wanted to exit their investments. Large legacy media companies such as Disney and Comcast’s NBCUniversal invested hundreds of millions in digital media in the early and mid-2010s. Disney invested more than $400 million in Vice. NBCUniversal put a similar amount into BuzzFeed. By the end of the decade, after seeing the value of those investments fall, legacy media companies made it clear to digital media executives that they weren’t interested in being acquirers.

Vice Media offices display the Vice logo in Venice, California.
Mario Tama | Getty Images

With no strategic buyer available, merging with each other using publicly traded stock could give VC and PE shareholders a chance to cash out of investments that were well past the standard hold time of seven years. Digital media companies eyed special purpose acquisition companies — also known as SPACs or blank-check companies — as a way to go public quickly. The popularity of SPACs picked up steam in 2020 and peaked in 2021.
Deal flow accelerated. Vox acquired New York Magazine in September 2019. About a week later, Vice announced it had acquired Refinery29, a digital media company focused on younger women. BuzzFeed bought news aggregator and blog HuffPost in 2020 and then acquired digital publisher Complex Networks in 2021 as part of a SPAC transaction to go public. Vox and Group Nine agreed to a merger later that year.
BuzzFeed, generally thought by industry executives at the time to have the strongest balance sheet with the best growth narrative, successfully went public via SPAC in December 2021. Shares immediately tanked, falling 24% in their first week of trading. The coming weeks and months were even worse. BuzzFeed opened at $10 per share. The stock currently trades at about $1 — a 90% loss of value.
BuzzFeed’s underwhelming performance coincided with the implosion of the SPAC market in early 2022 as interest rates rose. Other companies that planned to follow BuzzFeed shut down their efforts to go public completely. Vice tried and failed. Now it’s trying for the second time in two years to find a buyer. BDG and Vox, meanwhile, abandoned considerations to go public. Vox instead sold a 20% stake in itself in February to Penske Media, which owns Rolling Stone and Variety.

The industry turns inward

Consolidation was always a flawed strategy because digital media could never become big enough to compete with Facebook and Google, said Integrated Media’s Miller.
“You have to have sufficient amount of scale to matter, but that’s not a winning formula by itself,” Miller said.
Vice’s deal for Refinery29 is a prime example of a deal motivated by scale that lacked consumer rationale, said BDG’s Goldberg.
“The digital media rollup has proven successful only when assets are thoughtfully combined with an eye toward consumers,” Goldberg said. “In what world did Vice and Refinery29 make sense in combination?” 
Vice is engaged in sale talks with a number of buyers that fall outside the digital media landscape, CNBC previously reported. It’s also considering selling itself in pieces if there’s more interest in parts of the company, such as its TV production assets and its ad agency, Virtue.
Vice is a cautionary tale of what happens to a digital media company when its brand loses luster, Miller said. Valued at $5.7 billion in 2017, Vice is now considering selling itself for around $500 million, according to people familiar with the matter, who asked not to be named because the sale discussions are private.
A Vice spokesperson declined to comment.
“In the old days of media, with TV networks, if you were down, you could revive yourself with a hit,” said Miller. “In the internet age, everything is so easily substitutable. If Vice goes down, the audience just moves on to something else.”
Companies such as BuzzFeed, Vox and BDG are now trying to find an enduring relevancy amid a myriad of information and entertainment options. BuzzFeed has chosen to lean in to artificial intelligence, touting new AI-generated quizzes and other content that fuses the work of staff writers with AI databases.
BDG has chosen to primarily target female audiences across lifestyle categories.
Vox has focused on journalism and information across a number of different verticals. That’s a strategy that hasn’t really changed even as the market has turned against digital media, allowing Vox CEO Jim Bankoff the opportunity to continue to hunt for deals. Just don’t expect the partners to be Vice, BDG or BuzzFeed.
“We want to be the leading modern media company with the strongest portfolio of brands that serve their audiences on modern platforms — websites, podcasts, streaming services — while building franchises through multiple revenue streams,” Bankoff said. “There’s no doubt M&A is part of our playbook, and we expect it will continue to be in the future.”

Finding an exit

While executives may be making strategy decisions with a sharper eye toward the consumer, the problem of finding an exit for investors remains. Differentiation may open up the pool of potential buyers beyond the media industry. BuzzFeed’s emphasis on artificial intelligence could attract interest from technology platforms, for instance.
It’s also possible that there will be an eventual second wave of peer-to-peer mergers. While Integrated Media’s Miller doesn’t expect a future industry rollup, BuzzFeed’s Peretti hasn’t closed the door on the concept if market conditions improve. As executives invest in fewer ideas and verticals, the end result could be healthier companies that are more attractive merger partners, he said.
“If everyone invests in what they’re best at, if you put them back together, you’d have that diversified digital media company with real scale,” Peretti said. “That helps drive commerce for all parts of a unified company. I think it’s still possible.”
Disclosure: Comcast’s NBCUniversal is the parent company of CNBC.
WATCH: Axios’ Sara Fischer on BuzzFeed’s continuing struggles

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United Auto Workers members have ousted their president in the union’s first direct election, ushering in a new era for the labor group.
The union’s new leader will be Shawn Fain, a member of the “UAW Members United” reform group and local leader for a Stellantis parts plant in Indiana.
The union will enter negotiations with Detroit automakers later this year.

Supporters wave signs during an address at the Time Warner Cable Arena in Charlotte, North Carolina, on September 5, 2012 on the second day of the Democratic National Convention (DNC).
Mladin Antonov | AFP | Getty Images

DETROIT – United Auto Workers members have ousted their president in the union’s first direct election, ushering in a new era for the prominent organized labor group ahead of negotiations later this year with the Detroit automakers.
The union’s new leader will be Shawn Fain, a member of the “UAW Members United” reform group and local leader for a Stellantis parts plant in Indiana. He came out ahead in a runoff election by hundreds of votes over incumbent Ray Curry, who was appointed president by union leaders in 2021.

Fain, in a statement Saturday, thanked UAW members who voted in the election. He also hailed the results as a historic change in direction for the embattled union, which he says will take a “more aggressive approach” with its employers.
“This election was not just a race between two candidates, it was a referendum on the direction of the UAW. For too long, the UAW has been controlled by leadership with a top-down, company union philosophy who have been unwilling to confront management, and as a result, we’ve seen nothing but concessions, corruption, and plant closures,” Fain said.
Curry, who previously protested the narrow election results, said in a statement that Fain will be sworn in on Sunday and that he is “committed to ensuring that this transition is smooth and without disruptions.”
“I want to express my deep gratitude to all UAW staff, clerical support, leaders and most of all, our union’s active and retired members for the many years of support and solidarity. It has been the honor of my life to serve our great union,” Curry said.
More than 141,500 ballots were cast in the runoff election that also included two other board positions, a 33% increase from last year’s direct election in which neither of the presidential candidates received 50% or more of the votes.

The election was overseen by a federal monitor, who confirmed the results Saturday night. The results had been delayed several weeks due to a run-off election as well as the close final count.

Shawn Fain, candidate for UAW president, is in a run-off election with incumbent Ray Curry for the union’s highest-ranking position.
Jim West for UAW Members United

Fain’s election adds to the UAW’s largest upheaval in leadership in decades, as a majority of the union’ s International Executive Board will be made up of first-time directors who are not part of the “Administration Caucus” that has controlled the union for more than 70 years.
Fain and other members of his leadership slate ran on the promise of “No corruption. No concessions. No tiers.” The last being a reference to a tiered pay system implemented by the automakers during recent negotiations that members have asked to be removed.
The shuffle follows a yearslong federal investigation that uncovered systemic corruption involving bribery, embezzlement, and other crimes among the top ranks of the UAW.
Thirteen UAW officials were convicted as part of the probe, including two past presidents. As part of a settlement with the union in late 2020, a federal monitor was appointed to oversee the union and the organization held a direct election where each member has a vote, doing away with a weighted delegate process.
For investors, UAW negotiations with the Detroit automakers are typically a short-term headwind every four years that result in higher costs. But this year’s negotiations are anticipated to be among the most contentious and important in recent memory.
Fain has said the union will seek benefit gains for members, advocating for the return of a cost-of-living adjustment, or COLA, as well as raises and job security.
The change in the UAW comes against the backdrop of a broader organized labor movement across the country, a pro-union president and an industry in the transition to all-electric vehicles.

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A private island in Palm Beach could become the most-expensive home ever sold in Florida, if it gets its asking price of $218 million.
Developer Todd Michael Glaser and his partners bought 10 Tarpon Isle — the only private island in Palm Beach — for $85 million in 2021. They built a brand new house, turned the existing structure into a guest house, and added a giant pool, tennis courts and other amenities and have now relisted the property.

“I paid $85 million without a hesitation because there’s only one of them,” Glaser said. “You watch art, they sell. There’s a Mercedes 300 SLR that just sold for $142 million. … That’s what this is … it’s a one of one.”

Tarpon Isle, a private island in Palm Beach, Florida, is on sale for $218 million.

When Glaser bought Tarpon Isle, it held a modest 1940s house and plenty of potential.
“I came over the bridge, I saw the two trees and I said, ‘Guys, let’s knock down the garage and the guest house and the maid’s quarters and let’s build a brand new house,'” Glaser said.
The new main house is over 9,000 square feet. With the guest house, tennis pavilion and other structures, the property now has over 21,000 feet of living space. There are 11 bedrooms, 15 full bathrooms and seven half-baths.

Tarpon Isle, a private island in Palm Beach, Florida, is on sale for $218 million.

Unlike many Palm Beach mansions, which are Mediterranean-styled giants festooned with gold carvings and mahogany, Tarpon Isle is a study in modern simplicity, where the star of the home is sweeping water views on all four sides.

The master bedroom suite is a large complex of closets, bathrooms and sitting areas. The larger of two bathrooms is a temple of white Italian marble, covering the floors, countertops, ceiling and oversized shower. A large soaking tub perched in front of the windows overlooks the Intracoastal Waterway.

A waterfront bathroom inside the main home on Tarpon Isle, a private island in Palm Beach, Florida, on sale for $218 million.

“It’s the best bathroom I ever did,” Glaser said. “My wife picked it, and she did an incredible job. I’ve never seen anything like this bathroom.”
Outside, there’s a new 98-foot pool overlooking the views of the water to the south. A large dock can fit multiple boats or a mega-yacht. The guest house features resort-like amenities, including a spa, massage room, salon and entertainment area.
“That’s the way we designed it,” Glaser said. “When people come to Palm Beach they bring their families, they’re on vacation.”

A dock servicing Tarpon Isle, a private island in Palm Beach, Florida, on sale for $218 million.

Glaser said the human-made island, which was built in the 1940s, has a high sea wall. Because it’s well protected in the Intracoastal and well elevated, it has easily weathered big storms and tidal surges, he said.
Granted, $218 million is an ambitious price, even for Palm Beach. The record sale in the enclave was Oracle founder Larry Ellison’s $173 million purchase of billionaire Jim Clark’s oceanfront estate last year.

A living space inside the main home on Tarpon Isle, a private island in Palm Beach, Florida, on sale for $218 million.

Palm Beach is the most expensive real estate market in the country, with an average sale price of nearly $13 million, according to Douglas Elliman and Miller Samuel. Many homes saw their prices more than triple during the pandemic as ultra-wealthy buyers from the Northeast fled to Florida, and the coveted properties in Palm Beach in particular.
Christopher Leavitt of Douglas Elliman, who is listing the property alongside Christian Angle Real Estate, said interest in the property has been strong, especially from hedge fund managers and finance chiefs looking to relocate south.
“The buyer of this home is someone who wants the one and only private island on the island of Palm Beach, surrounded 360 degrees by water, accessible by your boat or a private bridge,” Leavitt said. “It’s somebody who wants that one property that no one else has, that one trophy property.” 
Glaser declined to say what profit he would make if the home sells for its asking price. He added that he and his investors spent “a fortune” on the new home and improvements. But he said the buyer will be making a long-term investment.
“Whoever buys this house, in five years they’re going to be very happy with the purchase,” he said. “It’s a legacy property that they’ll own for the rest of their lives.”

Tarpon Isle, a private island in Palm Beach, Florida, is on sale for $218 million.

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