Not the Happiest Place on Earth: Kevin Mayer Resigns as TikTok CEO

Shanghai Disneyland it ain’t: According to the Financial Times (and according to HITS Magazine according to the Financial Times), former Disney honcho Kevin Mayer has resigned as CEO of TikTok. This should be a lesson to everyone who is negotiating favorable deals with tech companies only to jump ship–sometimes you can’t go home again.

According to FT, Mayer said:

“In recent weeks, as the political environment has sharply changed, I have done significant reflection on what the corporate structural changes will require, and what it means for the global role I signed up for. Against this backdrop, and as we expect to reach a resolution very soon, it is with a heavy heart that I wanted to let you all know that I have decided to leave the company,” Mr Mayer said in a letter to employees. “I understand that the role that I signed up for — including running TikTok globally — will look very different as a result of the US administration’s action to push for a sell off of the US business,” he added.

The smart money seems to be on an imminent sale (i.e., not waiting the full 90 days that they were given by the government), so Mayer is either getting out while the getting is good or may have been pushed out. Bear in mind–Bytedance CEO Zhang Yiming must be well aware that pre-acquisition review by the U.S. Government’s Committee on Foreign Investment (CFIUS) is a standard procedure which Bytedance chose not to pursue when it acquired Musical.ly.  Had Bytedance submitted the Musical.ly transaction to a pre-acquisition review, TikTok might still have a version of the current problem, but it would have to come from a less legally solid ground and the government probably would not be able to use CFIUS to force a sale.

But that would have required opening the kimono, so to speak, and that would have been out of character.

Another lesson to be learned about entertainment industry executives switching sides and going to work for big data lords is that you have no idea what they are really doing with the user data being scraped every minute of every day and stored who knows where. But you can bet on one thing–it’s pretty horrible stuff and it’s probably illegal. (TikTok already got caught and fined by the FTC for exploiting children in violation of U.S. law.) Not to mention that TikTok is a massive copyright infringer. Child advocates complained to FTC accusing TikTok of ignoring the prior FTC settlement, which should come as no surprise because it’s just too tempting and they get to scrape all that data. (Another reason why it made sense for TikTok to want a Disney person for the CEO spot since Disney also makes tons of money off of kids, so Mr. Mayer had all that “good” training.)

Given all of TikTok’s problems with scraping data on young children and other disgusting practices, it’s hard to believe that this government-mandated unwinding transaction (aka fire sale) is going to go down without a lot of transparency. Which does not bode well for the data lords because there are two things they will simply not tolerate: transparency and getting caught.

Also remember that Kevin Mayer comes from a background that on a certain level is very well suited to dealing with authoritarian regimes. But he was not ever subject to the laws of an actual authoritarian regime. Disney is a nasty place, but the executives don’t carry guns at the office if you know what I mean. Having looked into the abyss of the coming deluge, Mr. Mayer may well want to make a quick exit before getting pulled down the maelstrom. Remember, Chairman for Life Xi Jinping (call sign “Batman”) is good buddies with Crown Prince Mohammed bin Salman (call sign “Bonesaw”) (for example, Batman is helping Bonesaw build nukes). There’s no oxygen in that room for Kevin Mayer.

Bonesaw (L) and Batman (R)

It’s also worth noting that Mr. Mayer’s phraseology is quite reminiscent of another Bytedance executive who reconsidered his life after “reflection”. (Bytedance is the parent of TikTok.)

According to his Wikipedia page, Bytedance CEO Zhang Yiming understands what happens when you don’t toe the Party line:

ByteDance’s first app, Neihan Duanzi, was shut down in 2018 by the National Radio and Television Administration. In response, Zhang issued an apology stating that the app was “incommensurate with socialist core values“, that it had a “weak” implementation of Xi Jinping Thought, and promised that ByteDance would “further deepen cooperation” with the ruling Chinese Communist Party to better promote its policies.

So there’s a whole lot of reflecting going on at Not the Happiest Place on Earth. Good for Kevin Mayer for getting out. Hopefully, they’ll let him. What’s a few subpoenas among friends, anyway?

@Playback_Austin: “Stay Gold” Club’s Landlord Threatens Club With Half-Million-Dollar Lawsuit

An attorney representing the landlord of Eastside music lounge Stay Gold threatened its operators with a breach of contract suit totaling roughly half a million dollars. The warning, following strained negotiations, arrived after the tenants were five days late on August rent.

Dan Castro of Castro & Baker LLP sent an email on Aug. 5 informing Stay Gold owners Nathan Hill and Will Tanner that their landlord, David Contreras of El Leon Cantina, Inc., “has chosen to accelerate the rent due for the entire term of the lease.

“You now owe in one lump sum the entire amount that would normally be spread out over the entire length of the lease, plus attorney’s fees,” Castro’s letter specified.

Hill estimated rent for the remaining four years of the lease totals around $500,000. He and Tanner paid full rent April through July while staying closed because of COVID-19. During extended attempts at renegotiating the lease amid the pandemic, both sides drafted offers the other found unsatisfactory.

Each potential lease addendum involved reducing monthly rent during state-mandated bar closure, though to significantly variant amounts. The landlord’s initial offer involved the Stay Gold partners paying the reduction back in full. Castro says he convinced his client to forgive roughly half of that unpaid balance in a followup offer.

Hill described that offer as merely “extending the possibility of us shutting down later.” He and Tanner, meanwhile, sought an overall rent reduction that would scale back between 28 and 33% over the next four years. Hill, who co-owns a neighboring bar called High Noon that pays a far lower rental rate, has devoted much consideration to how much debt is worth taking on to sustain a venue during shutdown.

“What really matters is how much time you have left to pay back the debt,” he reasons. “At the White Horse [which he co-owns], I still have 10 years [on the lease], so I can still take on debt because I have time to make that back. For Stay Gold, with four years, I have to hope for the best, but plan for the worst, which is that we won’t be open until 2021 and maybe we can’t have bands.

“By that time, we have three years left and I’ll be in as much debt as it took to open the bar originally, when I had 10 years of lease to look forward to and no global pandemic looming.”

As Austin’s small-business community awaits a wave of evictions, Castro’s letter provides a glimpse into possible future scenarios involving landlords.

“Mr. Contreras may not be able to evict you right now, but he certainly can sue you personally for breach of contract, and file a motion for summary judgment for a quick win,” Castro wrote in the missive.

Read the post in the Austin Chronicle

Require Twitter to Disclose The TikTok-Twitter Connection for Your Fans’ Data

TikTok Marked

When you are driving your fans to TikTok, think about this:  Twitter is rumored to be in the hunt to acquire TikTok, but Twitter has long been supporting TikTok’s massive data collection and interference capabilities.  In addition to accessing a trove of your user data that you may have thought was private, Twitter has allowed the TikTok app “Make Your Day” to take a variety of actions on your Twitter account.

And these are the ones they tell you about.

Twitter should be required to explain why in the world any app, much less TikTok, needs access to all this data and functionality and what happens to the data once it is collected from your fans in the background.

Another reason why TikTok would be a fit for Twitter is due to the massive copyright infringement on both platforms.

 

What’s the Over/Under on How the US Could Shut Down TikTok the Massive Infringer?

TikTok seems more likely to be shut down in the US with every passing day.  How could this actually happen and what would “shut down” actually look like?  Given that TikTok is a massive infringer, we will lose no sleep if they find themselves in real trouble.  Still, it won’t be easy, particularly since the ACLU and Electronic Frontier Foundation (and other usual suspects who received Google and Facebook largesse) will no doubt rush to their defense.  I’ll do a little prognosticating with the “over/under” that will necessarily entail some speculation about the future political environment.

Google Cy Pres Large TikTok
The Class Action/Cy Pres Scam

Here are a few ideas, but my bet is that if it happens at all, it will be a combination punch.  One thing we know for sure is that TikTok’s chief lobbyist in Washington, Michael Beckerman (the Shoe Man) will be earning his millions.   Here’s a look at the old jab jab cross.

Michael Beckerman
Isn’t this what all the guys wear in Sing Sing?

The Ghost Ship:  If TikTok were determined to be a front for a foreign government (this time the Chinese Communist Party), Americans could be prohibited from working for TikTok and advertisers could be prohibited from doing business with the company under the International Emergency Economic Powers Act 50 U.S.C. § 1701. There are several different angles from espionage to election meddling to compromising Hong Kong, Tibetan, Taiwan or Uyghur human rights, or the decertification of Hong Kong.

If the shutdown is given effect under the International Emergency Economic Powers Act, it’s likely that installed versions of the TikTok app would continue to work, but would gradually degrade in user experience as the U.S. installed base could not lawfully be supported.

Over/Under:  This approach would be a great opportunity for TikTok to launch a Napster-style PR campaign.  They would probably let themselves be sued by the U.S. Government and hope to drag out the case to see if a  more sympathetic Vice President Biden is elected (particularly given the recent history of the Obama Foundation) and Big Tech’s jockeying for position in the Biden campaign.

obama_dinner_who

Et Tu CFIUS?  The US Government reviews significant asset sales to foreign investors (including state owned enterprises) that implicate national security.  This review is given effect in part through the Committee on Foreign Investment (CFIUS).  CFIUS is currently reviewing the acquisition of Musical.ly by TikTok parent Bytedance, a process that began on November 1, 2019.  It is possible that an acquirer like Bytedance can ask for a pre-clearance from CFIUS and–are you ready?  Bytedance did not seek that pre-clearance, which requires explaining why the target’s business implicates national security like handing over user data to China’s State Security agency.  Which is the very thing that is required by China’s National Intelligence Law but that TikTok denies doing.  And is also probably the subject of at least one FBI counterintelligence investigation at this very moment.

Over/Under:  This CFIUS investigation is ongoing, so will likely conclude.  CFIUS can require that the Musical.ly acquisition be unwound.  That would mean that the government could force a sale of TikTok (probably its US assets) or require TikTok to cease operations in the US.  CFIUS has also forced Chinese investors to divest from PatientsLikeMe and Grindr.  The CFIUS option has both precedent and is already in motion.  I like this option as an opening gambit as it would happen in the background as far as TikTok users are concerned.  Since Facebook is already trying to get licensed and also get in TikTok’s business, a sale would be relatively easy to accomplish.

No TikTok IPO For Bytedance:  Like the CFIUS review, there is already a process in play in the Congress that will make a U.S. TikTok IPO much less attractive to Bytedance.  The Holding Foreign Companies Accountable Act (S. 945) that unanimously passed the Senate on May 20 and was introduce in the House by Brad Sherman (D-CA) as H.R. 7000 where it is also expected to pass.  It will be very interesting to see who votes against it.

It shouldn’t be surprising that China’s President-for-Life Xi Jinping doesn’t like his public companies being audited by U.S. public accounting firms and held to the same standards as all the other public companies.  You know, Sarbanes Oxley and all that jazz.

Bloomberg China

For reasons that are difficult to fathom, China somehow managed to finagle a pass on SarBox compliance in 2013–ahem–that has been decried far and wide (recently by Arthur Levitt, President Clinton’s SEC chairman).  According to Reuters, “The audit-quality issue has been festering since 2011, when scores of Chinese firms trading on U.S. exchanges were accused of accounting irregularities.”

According to Bloomberg the Holding Foreign Companies Accountable Act says:

If a company can’t show that it is not under [control of a foreign government] such control or the Public Company Accounting Oversight Board, or PCAOB, isn’t able to audit the company for three consecutive years to determine that it is not under the control of a foreign government, the company’s securities would be banned from the exchanges.

Bloomberg also tells us:

Stricter U.S. oversight could potentially affect the future listing plans of major private Chinese corporations from Jack Ma’s Ant Financial to SoftBank-backed ByteDance Ltd. But since discussions on increased disclosure requirements began last year, many other Chinese companies have either listed in Hong Kong already or plan to do so, said James Hull, a Beijing-based analyst and portfolio manager with Hullx.

“All Chinese U.S.-listed entities are potentially impacted over the coming years,” he said. “Increased disclosure may hurt some smaller companies, but there’s been risk disclosures around PCAOB for a while now, so it shouldn’t be a shock to anyone.”

Why would they list on Hong Kong when they are already listed on NY?  Because they anticipate getting dumped from NY and they will still trade on the Hong Kong exchange for all the suckers.

Over/Under:  TikTok could become the poster child for holding foreign companies accountable.  HR 7000’s sponsor is Representative Brad Sherman who is a crack CPA and knows his way around this issue.  Representative Sherman is also Chair of the powerful House Financial Services Subcommittee on Investor Protection, Entrepreneurship and Capital Markets so it’s likely that the legislation will pass out of the House, although Mr. Beckerman and the vast network of CCP lobbyists and consultants will have their work cut out for them.  Trump would sign this bill faster than you can say “Rosatom”.  By denying Bytedance (and Softbank) access to the U.S. capital markets, it would weaken the incentive for TikTok to fight a ban in court as the legislation is unrelated to a ban.  Legislative action could not be easily reversed in a Biden Administration (who was in the White House when China got the exemption that the bill would now fix).

Criminal RICO:  TikTok may well be determined to be a racketeering organization and a criminal conspiracy for massive copyright infringement as a RICO predicate, not to mention potentially violation of the Export Administration Regulations for exporting data to a foreign country with a military purpose as evidenced by China’s National Intelligence Law.  It would at least be worth convening a grand jury to investigate.

@halsinger: As the Revolving Door Swings: Big Tech could be forestalling platform regulation in a stealthy way

Through a LinkedIn email, I learned that a recent staffer on the Senate Judiciary Antitrust Subcommittee was recruited by Amazon’s public-policy arm this month. I took to Twitter to express my dismay, and quickly learned that another staffer on the Senate Judiciary Committee was recruited by Facebook’s competition policy arm in May 2020.

These two staffers are now working for the tech platforms, and presumably against my ideas, after having heard my ideas in a private setting.

It is important to note right here that I have no beef with these fine folks.

But  I do.

Read the post on The American Prospect.