Please read the Unison Asset Management Social Media Disclaimer

Nintendo’s announcement of a live-action Legend of Zelda film sent the company’s shares flying as investors cheered Nintendo’s willingness to open its IP to new ventures outside gaming. Nintendo has one of the largest pools of underutilized IP in the world yet historically has failed to leverage this IP outside of gaming sales. The new Zelda movie comes after the blockbuster success of the Super Mario movie that raked in over $1B at the box office and became the most popular video game movie of all time. The success of the Super Mario movie is a clear indicator that the Nintendo IP is as hot as ever and fan fervor for Nintendo’s IP is at an all-time high which could be a boon for Nintendo’s growth ambitions. The issue remains whether Nintendo can take advantage of this fervor with the company taking reportedly less than $150 million in profit from the Super Mario movie sharing half the profits with cinemas and distributors. There are also questions on whether these movies have an incremental effect on software sales with viewers buying more Nintendo games/hardware after seeing the movies. So far evidence is inconclusive, but Nintendo has reportedly seen a 30% incremental sales increase in older Mario games after the release of the Super Mario movie and the company’s new Mario game is already at 4.3 million copies sold after two weeks of release. While there is promising evidence that Nintendo is making good progress in utilizing their IP investors are skeptical that these initiatives will add to the bottom line. Nintendo’s management has not offered any targets for their IP business nor has confidently stated that they expect these IP expansions will lead to sustainable increases in software sales moving forward. Nintendo is still approaching IP expansions cautiously and if early results are disappointing there could be investor backlash that could impact the stock price. The excitement behind the Zelda Movie, Nintendo Theme Parks, and other IP initiatives could be setting high expectations that will be difficult to meet for a company still in the early stages of its IP expansion.

The news of Sam Altman joining Microsoft after leaving OpenAI after being fired by the company’s board of directors dominated headlines yesterday. The beloved CEO has gathered majority support from current OpenAI employees, Microsoft, and OpenAI investors calling for the reinstatement of Altman and the resignation of the board. More than 700 of the company’s 770 employees signed a letter yesterday addressed to the board of directors stating that they “are unable to work for or with people that lack competence, judgment, and care for their mission and employees”. The letter called for every board member to resign and Altman to be reinstated or the employees would jump to Microsoft. Altman was reportedly fired due to disagreements with the board on how fast to develop and monetize AI. After initial negotiations to get Altman back as CEO, OpenAI has turned to former Twitch CEO Emmett Shear while Altman joined Microsoft as the head of a new in-house AI team. It seems like Altman is not returning to OpenAI after the fallout potentially pushing OpenAI’s employees to other tech firms. Salesforce has already offered to employ any OpenAI researchers who resign from the company. OpenAI is in the midst of a mutiny and the board will likely need to offer concessions to retain unhappy employees and keep investors satisfied. Some investors have already mulled writing down the value of their OpenAI investment to zero and OpenAI will likely struggle to raise any new capital until the current chaos is resolved. The shift away from Altman is a big philosophical change for OpenAI with Altman primarily focused on improving AI exponentially and the monetization of the technology vs new leader Shear who advocates for a more cautious approach. The big winner in all this chaos is Microsoft which gains a brilliant head of AI who is likely to leverage the company’s resources to forward AI tech research and find new ways to monetize the tech. For Altman Microsoft brings the capital and resources to help fund his own ambitious projects with more support and less oversight from a board that shares a similar AI philosophy.

The United Automobile Workers (UAW) won massive wage and benefit increases in contract negotiations for union workers with Ford, GM, and Stellantis. This big victory might be more important than first realized with the UAW forcing the hand of non-unionized automakers. Toyota, Honda, and Hyundai have all announced raises for U.S. factory workers even before the union membership has had the chance to vote on ratification of the new agreement. Toyota and Honda are raising wages by 9% and 11% respectively in a bid to remain competitive for talent, but more importantly, quell the calls for unionization of their workforces. This raise is an obvious ploy to keep current workers happy in the wake of union workers receiving big wage bumps and the return to power of the UAW who achieved the biggest union victory in decades. The UAW has pushed non-union workforces to unionize, citing the UAW’s increasing bargaining power to help improve the wages and working conditions for these workers. The tentative UAW deal gives an immediate 11% pay bump to members and guarantees wage increases totaling 14% over the next four years with a cost-of-living adjustment that could bring wages up 30% by the time the contract ends in 2028. This agreement is far better than wage increases seen at non-union automakers and could push talent toward unionized automakers or worse push non-union workers to unionize to secure a similar agreement. Regardless of whether more workers unionize, all automakers are on the hook for significant wage increases over the next few years which will bloat their cost structure and force price increases at an inopportune time in the macrocycle.