Elon Musk Still Doesn’t Want Twitter
Although the Twitter board accepting Musk’s acquisition offer seems to settle the issue about the Tesla founder’s true motives, there’s a lot more to this story under the surface.
Before we get to today's main topic, some miscellaneous things worth sharing…
I’m dedicating this issue to the memory of Sean Finnegan, a digital media industry stalwart whose very premature death on Friday has shocked the thousands of lives he touched. He wasn’t larger than life: he combined generosity, thoughtfulness, mischief, and humanity in ways that captured life itself. R.I.P.
Listen to James Taylor and Manhattan Transfer covering Bobby Darin’s “Dream Lover.” It’s gorgeous. The other notable quasi-cover of that song is Darin’s own demo for it before the overproduced version became a big hit.
I just finished reading Dade Hayes and Dawn Chmielewski’s Binge Times: Inside Hollywood’s Furious Billion-Dollar Battle to Take Down Netflix, which is the story of the launches of Apple TV+, Disney+, HBO Max, Paramount+, and the ill-fated Quibi as they positioned themselves against Netflix. Netflix’s sudden downturn happened just as the book hit, so I’ll be eager to see the intro to the paperback edition in a year, but don’t wait to read this book. It’s a terrific story about a key inflection point in media: the explosion of streaming that the pandemic complicated and accelerated.
I loved this New York Times profile of Henry Winkler.
My wife and I were late to the party on The Kominsky Method on Netflix. The first two seasons were magnificent. So far, the third season is a weirdly different show: everything that was intrinsically motivated by relationships in the first two seasons is subordinate to an extrinsic MacGuffin (money) in the third. We’ll still probably finish.
This week’s Bradism: Listen more than you talk. (I’m bad at this, but #goals.)
Despite everything you’re about to read below, please follow me on Twitter for between-issue insights and updates.
On to our top story...
Elon Musk Still Doesn’t Want Twitter
Two weeks ago in Musk, Trump, Twitter, and New Media Math I argued that Elon Musk doesn’t really want to buy Twitter: he just wants to use the earned media to help him sell more Teslas.
Then, on Monday, to my surprise the Twitter board accepted Musk’s $44 Billion offer, for which Musk had arranged the financing. I thought, “Boy, did I call that one wrong,” and contemplated sending out a mid-week, “mea maxima culpa” special issue.
But by Wednesday I was back on the fence. That was the day Musk criticized Twitter’s chief legal officer, Vijaya Gadde, over her handling of the Hunter Biden story. This is just one of many of Musk’s tweets criticizing the company that he is trying to acquire.
This violates the terms of the takeover agreement filed with the SEC, which includes: “the Equity Investor shall be permitted to issue Tweets about the Merger or the transactions contemplated hereby so long as such Tweets do not disparage the Company or any of its Representatives.”
I can think of three reasons for Musk to violate the agreement:
The “that crazy Elon” idea that nonsensically suggests a genius, billionaire, inventor, workaholic somehow lacks self-discipline.
It’s evidence that he really is a “free speech absolutist” (whatever that really means) and will say whatever he wants whenever he wants regardless of the consequences (again, he’s too smart for this sort of foolishness).
He just wants to sell more cars after all: sabotaging the acquisition in the eleventh hour is a way to do so. (This is the reason I favor.)
Significantly, in the 4/27 episode of Kara Swisher’s Sway podcast, William Cohan of Puck observed that the filing contains a $1 Billion dollar walk away option for Musk. (Search “termination fee” in the SEC documents to find this.)
What if Musk understood his customer and the car buying demographics? Let's assume he's wrapped up the primary target market for luxury EV cars. He most likely has pricing leverage vs competitors, and he's launching a truck. Where are his new customers going to come from? Remember when MAGA crowd was blocking access to EV stations? Remember when they were keying Teslas? Strong possibility he knows if he can curry favor with the 50% of this country who previously hated him, he can compete on price, and he's got pickup trucks to sell, MAGA is the most lucrative market for Tesla the next 10 years. AND, by nature of the way in which he's doing it, he jumps from last to first place with this crowd. Before the shtick, 0% chance they're ever buying a Tesla EV. Now, I'd say Tesla would be their #1 choice. Not to mention, at the moment, he's got 0% penetration so if they start buying, he wins and becomes even wealthier.
If Musk either goads the Twitter board into cancelling the deal or walks away at the last minute, a $1B penalty is pretty cheap for somebody with his wealth.
Moreover, the cost/benefit analysis shows that so long as he’s willing to take the long view he won’t have to suffer that $1B loss:
According to Kelly Blue Book, the Tesla Cybertruck will cost roughly $40,000.
40K is more expensive than the cheapest version of a gas-powered 2022 Ford F 150 (roughly $30K). It’s the same cost as the new electric F 150.
However, in order to make buying a Tesla thinkable to the 46.8% of the U.S. voters who chose Trump, Musk cannot appear to be politically liberal.
Here’s the math:
46.8% of the 330 Million U.S. population is more than 154 Million people.
If Tesla can sell a total of just 25,000 Cybertrucks that will equal $1 Billion, which would pay his termination fee if he walks away from Twitter.
25,000 is only .016% of 154 Million.
1% of 154 Million is 1,540,000.
If Musk sells Cybertrucks to 1% of the U.S. Population he’ll make $61.6 Billion.
Even if we rejigger the math and say there are only 15 Million conservatives who will be in market for a pickup truck from Tesla from 2023 (its expected launch year) to 2028, 25,000 of that number is still 0.16%. Those are pretty good odds.
Seen through this lens, Musk’s statements about Twitter censoring conservative voices (which is a myth)—as well as a recent tweet where he graphically represents his own political views as unchanged but the left as having become more extreme—can be seen as a way of combating the perception that only liberals drive Teslas.
I am prepared to be wrong about this. In fact, part of me would even prefer to wrong because that would mean that Elon Musk is buying Twitter out of profound political convictions (even if I disagree with them) rather than out of cynicism.
In the near term, I’ll be watching for rumors that Musk may walk away or has become suddenly concerned about changing EU and UK regulations that might affect Twitter.
After that, time will tell.
Coming Soon: an issue arguing that Twitter isn’t social media at all: it’s just media.
Thanks for reading. See you next Sunday.