$2,000 A Month? OpenAI Reportedly Discussed New Pricing Model For More Advanced LLMs
Executives of ChatGPT maker OpenAI have discussed new pricing models that cost as much as $2,000 per month for upcoming advanced large language models, such as a new reasoning-focused LLM dubbed “Strawberry” and a new flagship LLM called “Orion,” The Information reports. This news follows Elon Musk’s public criticism of OpenAI’s transition from a non-profit to a hybrid “capped profit” business model.
People with direct knowledge of OpenAI’s proposed subscription price, which could soon cost some users $2,000 a month for premium LLMs, said nothing is final, suggesting there are ‘strong doubts the final price would be that high.’
The Information pointed out, “Still, it’s a notable detail because it suggests that the paid version of ChatGPT, which was recently on pace to generate $2 billion in revenue annually, largely from $20-per-month subscriptions, may not be growing fast enough to cover the outsize costs of running the service. Those costs include the expenses of a free tier used by hundreds of millions of people per month.”
There will likely still be a base tier but for more advanced models, such as Strawberry and Orion, which include additional thinking or processing time, more computing power only means more power costs.
The higher price point suggests that OpenAI executives are comfortable with the current white-collar demand and will likely be able to afford pricer LLMs.
New pricing discussions come as venture capital firm Thrive Capital and a handful of big tech companies, such as Apple and Nvidia, plan to invest in the Microsoft-backed OpenAI at (or around) a $100 billion valuation.
Meanwhile, in August, Elon Musk filed a new lawsuit against OpenAI and its chief executive, Sam Altman, reviving his claim that the startup backtracked on its mission to benefit humanity after signing a commercial deal with Microsoft.
“Elon Musk’s case against Sam Altman and OpenAI is a textbook tale of altruism versus greed,” the lawsuit read, adding, “Altman, in concert with other defendants, intentionally courted and deceived Musk, preying on Musk’s humanitarian concern about the existential dangers posed by AI.”
It said Altman and OpenAI co-founder Greg Brockman “assiduously manipulated Musk into co-founding their spurious non-profit venture by promising that it would chart a safer, more open course than profit-driven tech giants.”
Since 2019, Microsoft has invested $13 billion in OpenAI, giving the big tech firm a massive lead in the AI race over other Silicon Valley giants like Apple.
Back to The Information’s report: If the story is correct, AI monthly subscriptions are about to get much more expensive for some OpenAI users. Inflation…
Among the big winners of the Everything Bubble is–yes, I know you’re shocked–Wall Street.
Is the “Everything Bubble” about to pop? Let’s start with what we’re told: there is no bubble , all the assets soaring to unprecedented heights are reasonably priced at a “permanently high plateau” because of AI, scarcity of housing, scarcity of Ferraris, interest rates trending down, the Fed waving dead chickens around the campfire, people buying toothpaste, and so on: you name it, it’s a reason for assets to drift higher.
This all sounds rather splendid, but somehow the pump inflating the bubble goes unmentioned: it’s the money, Honey , the tens of trillions of yen, yuan, euros, dollars, pesos, etc., being borrowed or conjured into existence since the last spot of bother in 2008, where each unit of currency enters the global free-for-all chasing assets.
Thanks to historically low yields, cash is trash and the way to make a killing is to rotate from AI chip makers to Ferrari to Colgate, and then on to the next hot sector: maybe uranium, maybe bat guano, maybe a new doggy-themed crypto, maybe the next iteration of the yen carry trade, it doesn’t really matter because capital is digital and therefore mobile.
Hand-in-hand with the endless spew of new “money” and credit are financialization and globalization , which have transformed every asset into a fully globalized, commoditized asset that can be securitized, packaged, collateralized and leveraged in a financier’s Heaven of finance becoming the measure of all things .
The house across the street is no longer shelter: it’s a financialized asset that’s now part of a portfolio of rental properties owned (and leveraged) by some entity based in Dubai, which might securitize the portfolio and sell it to pension funds in Norway.
Or it’s one of dozens of short-term vacation rentals (STVR) in a wealthy family’s private wealth management portfolio.
The same holds true for every asset on the planet. Farmland isn’t for growing food–it’s for growing wealth as the global “scarcity” of places to stash capital drives its value out of the reach of those who would actually like to use the land to grow food.
For the wealthy, what’s abundant is credit, and what’s scarce is assets to soak up the sea of capital sloshing around the wealth management funds, philanthro-capitalist foundations, and other outposts of the top 0.1%, which as this chart illustrates, have ridden the credit-fueled Everything Bubble to unprecedented heights of private wealth.
We’re told the bubble is a tide raising all boats, but this is, ahem,misinformation, as the bottom 50%’s share of the financial windfall remains a signal-noise of 2.6%.
The primary effect of the Everything Bubble is an extreme of wealth-power inequality. As the chart above illustrates, the wealthy got much richer while everyone else acquired more debt, ie the obligation to pay more of one’s earnings to the wealthy who own the mortgage, auto loan, student loan. etc.
There’s a funny little effect of extreme wealth-power inequality known as social disorder which can manifest in all sorts of equally funny ways, as popular uprising, wildcat strikes, opting out , civil disobedience, and various other ways of expressing no mas .
Here we see just how extreme the Everything Bubble has become in residential real estate, nearly doubling the insanity of the 2006 housing bubble. Recall that the Case-Shiller Index tracks the market price of the same houses over time, so there’s no way to game the statistics.
Among the big winners of the Everything Bubble is–yes, I know you’re shocked–Wall Street , as the broker-dealer index has outpaced even the bubblicious S&P 500 stock index.
The Everything Bubble is global , which means its deflation is going to hurt the entire global economy. Consider this chart reflecting the concentration of China’s household wealth in housing: almost 80% of all household wealth is in housing, a bubble which is now popping despite the authorities’ efforts to reinflate the bubble. Prices are off 25% to 37% in Tier 1 cities, and even more in Tier 2 and 3 cities.
The reverse wealth effect as the primary store of household wealth wilts will be monumental. Trust isn’t just personal? trust is the critical glue in markets and governance. Once trust is lost, it’s somewhere between difficult and impossible to win it back.
That the bloom is off the Everything Bubble Rose is visible in anecdotal evidence dribbling in from the real world: housing valuations in various markets are off 25% from their peak, housing inventories are rising, sales are slowing, restaurant chains are going belly-up , credit card debt is soaring to new heights, dollar-store stocks are cratering, and so on.
But hey, the real world doesn’t count? the only thing that matters is financialized assets going up. If the yen-quatloo pair is taking off, everything’s good.
There are a couple of funny things about amassing $315 trillion in debts globally to drive “growth”: one is the interest due on all that debt , which becomes unsustainable should yields rise, and inflation, which either pushes yields higher, making it impossible to continue funding “growth” with more debt, or it lays waste to the purchasing power of wage earners’ incomes, popping the bubble of free-spending consumption propping up the global economy and debt bubble .
Gordon Long and I explain these dynamics in our new podcast :
To summarize: will the Everything Bubble pop? Yes.
Will the authorities try to reinflate the bubble? Yes.
‘Fact Of Life’ – Harris Disinfo Campaign Against Vance Peddles Deleted AP Propaganda
The Harris honeymoon must be over…
As even CNN admits that things are not as rosy as the manufactured euphoria around Kamala’s ‘second coming’ would suggest, the Harris campaign has resorted to the old Democratic Party dirty tricks playbook – disinformation.
This mini-campaign began – like always – with mainstream media’s assistance. In this case, The Associated Press drops a story that insinuates (callous, evil, gun-toting – our words, not theirs) Trump running-mate JD Vance sees school shootings as a “fact of life”.
Wow, that sounds callous!! Perfect.
Except… the context is completely (and clearly intentionally) removed. Thankfully, in America (as opposed to Brazil), we still have X and its liberty-loving community-noters who swiftly destroyed AP’s narrative…
Vance’s full comment was as follows:
“I don’t like that this is a fact of life.”
Sounds sensible – who would ‘like’ that? Further, Vance pushed for moire security:
“But if you are a psycho and you want to make headlines, you realize that our schools are soft targets. And we have got to bolster security at our schools.
We’ve got to bolster security, so if a psycho wants to walk through the front door and kill a bunch of children, they’re not able.”
Rational, common-sense strategy to counter the ‘psychos’ in society.
After the ‘Community Note’, AP then deleted the post on X, and added ‘context’…
But that didn’t matter to the Harris campaign who jumped on the fake news bandwagon, issuing a statement decrying the heartless Vance’s out-of-context statement, and at the same time somehow claiming that a vote for Harris is a vote to keep your children safe from crime (quick question – why didn’t she ‘keep children safe from crime’ for the last four years?)
Watch Vance’s full comments here (and decide for yourself)…
Chinese Steel Industry Warns Of ‘Flash In A Pan’ Recovery If Mills Ramp Production Amid Severe Slowdown
The official journal of China’s metals industry was correct late last month when it called the 10% jump in iron ore prices that breached $100/ton “irrational” and “lacked fundamental support.” Now, prices trend around the $90/ton handle as China’s top steel industry group warned mills to be cautious in boosting output.
Goldman’s Rich Privorotsky told clients this morning, “Iron ore is dropping to 90, China will continue to struggle, and commodities as a whole, I think, are reflecting the downgrade to growth expectations in the geography.”
The China Iron & Steel Association released a memo (first published by Bloomberg) to industry insiders this week, indicating, “There will be a certain degree of recovery in steel demand through September and October, which is favorable for the steel market.”
“However, we need to be cautious of the impulse to restart production,” the association said, adding the risk of too much steelmaking material output could dampen “any improvement in the situation will end up a flash in the pan.”
China’s steel industry has been under pressure amid a severe property market downturn and weak economic recovery. Last month, Baowu Steel Group Chairman Hu Wangming warned that economic conditions in the world’s second-largest economy felt like a “harsh winter.”
As the world’s largest steel producer, Baowu Steel’s chairman said the steel industry’s downturn could be “longer, colder, and more difficult to endure than expected,” potentially mirroring the severe downturns of 2008 and 2015.
This should serve as a major wake-up call for macro observers that a recovery in China isn’t imminent; in fact, Beijing might not unleash the monetary and fiscal cannons until after the US presidential elections.
In recent weeks, Goldman analysts led by Aurelia Waltham and Daan Struyven said iron ore’s “fundamental outlook remains bleak”:
The fundamental outlook remains bleak, in our view. While both port and in-plant iron ore stocks declined this week, visible stocks remain elevated compared to ‘normal’ August levels and mills’ destocking (despite the drop in iron ore prices) could be an indication of a negative production outlook. This would not be surprising given only 1% of Chinese steel mills are currently profitable, according to a Mysteel survey.
Meanwhile, our China property team have cut their forecasts for gross floor area starts and completions for 2024, and our China economists have highlighted rising downside risk to Chinese growth, both of which could have negative implications for steel demand, discussed in this week’s Macro Highlight.
In the absence of a hot metal output recovery, continued strong iron ore supply means that we maintain the view that iron ore needs to remain below $100/t for long enough to trigger a sufficient supply response to re-balance the market.
Here’s the most stunning chart from the report. It shows that only 1% of steel mills in China are profitable. As profitability collapses, hot metal output declines.
A separate Goldman note published earlier this week warned the Chinese steel industry downturn has created a “challenging environment for iron ore.”
The drop in Chinese rebar and hot-rolled coil prices to their lowest levels since 2017 signals the storm clouds continue gathering above, suggesting that a broader recovery won’t occur this year.
The broader commodities complex has been plagued by China slowdown fears, with Brent crude sliding to $73/bbl – ignoring Eastern Europe and Middle East war risks.
LME Asia copper inventories have surged to the highest levels since 2016.
Even veteran commodities analyst Jeff Currie dialed back his super bull thesis on the base metal because of mounting economic woes in China.
With the Bloomberg Commodity Index sliding and JPM Global Manufacturing PMI sub 50 in contraction…
… Zhao Liang, head of research at GF Futures Co, summed up the environment for Bloomberg in an interview: “The fundamental picture supports the slide in. Overall, it’s due to weak steel demand—people are pessimistic.”
Barnier’s new role was announced on Sept. 5 after a caretaker government was in place for more than 50 days.
The 73-year-old led the EU’s talks with Britain from 2016 to 2021 over its exit from the bloc.
Before that, the conservative politician held roles in various French governments and also served as the EU’s commissioner.
Barnier’s appointment follows weeks of intense efforts by Macron and his aides to find a candidate who could form a new government, two months after a snap election defeat.
The leader of the right-wing populist National Rally Party and Macron’s two-time presidential rival, Marine Le Pen, said on social media platform X that Barnier “seems to meet at least the first criterion” that had been requested.
Michel Barnier semble répondre au moins au premier critère que nous avions réclamé, c’est-à dire, quelqu’un qui soit respectueux des différentes forces politiques et capable de pouvoir s’adresser au Rassemblement national, qui est le premier groupe de l’Assemblée nationale. pic.twitter.com/tW7rjULMNA
“That is to say, someone who is respectful of the different political forces and capable of addressing the National Rally, which is the first group in the National Assembly,” she said.
However, Le Pen wrote that she would “not participate in a government of any kind whatsoever of Mr Barnier’s.”
“For the rest, that is to say on the fundamental issues, we are waiting to see what Mr Barnier’s general policy speech is and the way in which he leads the compromises that will be necessary on the budget,” she wrote.
National Rally’s president, Jordan Bardella, said that “after an interminable wait, unworthy of a great democracy” his party acknowledged Barnier’s appointment.
“We will judge his general policy speech, his budgetary decisions and his actions on the evidence,“ he said. ”We will plead for the major emergencies of the French, the cost of living, security, immigration, to finally be addressed, and we reserve all political means of action if this is not the case in the coming weeks.”
‘Democratic Coup’
The left-wing New Popular Front alliance (NFP) had nominated civil servant Lucie Castets for prime minister.
“The President has just decided to officially deny the result of the legislative elections that he himself had called,” NFP leader Jean-Luc Melenchon said. “It is not the New Popular Front, which came out on top in the election, that will have the prime minister. … The election was therefore stolen from the French people. The message was denied.”
Left-wing lawmaker Mathilde Panot, who, like Melenchon, is part of La France Insoumise (France Unbowed), which includes the Communist Party, the Greens, and the Socialist Party, called for its supporters to join them “on the streets” on Sept. 7 to protest against an “unacceptable democratic coup in a democracy.”
Last month, Macron said he would not agree to a government led by the left-wing NFP, further extending the ongoing multi-party stalemate that prevented the nation from forming a government since a snap election in June.
He said at the time that France needed institutional stability and that a government led by the NFP would immediately face a no-confidence vote from all other parties.
“The Socialist Party, the Greens and the Communists have not yet proposed ways to cooperate with other political forces. It is now up to them to do so,” Macron said.
He said he would start new consultations with party leaders on Sept. 3, and he urged the left to cooperate with other political forces.
Macron called a snap election on June 9 that delivered a hung parliament, creating political uncertainty. He has been holding talks on a new government since the election and said he would continue to do so.
No group emerged from the snap election with a clear majority, with the vote evenly split among the NFP, Macron’s centrist political party En Marche, and the right-wing National Rally.
Putin Avoids ‘Kursk Trap’ As His Troops Poised To Take Pokrovsk
President Putin has continued to downplay Ukraine’s major Kursk invasion, which has resulted in Russian territory occupied by Kiev forces, and has instead maintained that capturing and holding all the Donbass in eastern Ukraine remains the goal.
“We have to deal with these thugs who made it into Russia,”he said at an event while visiting Russia’s east on Thursday. He’s yet to launch a broader general mobilization despite the assault on Kursk and the border region.
He presented the Kursk operation as essentially a trap which he will not fall into. “The aim of the enemy [in Kursk] was to force us to worry, hustle, divert troops and to stop our offensive in key areas, especially in the Donbas, the liberation of which is our main primary objective,” Putin described at a forum in Vladivostok.
Putin further painted a picture of the Kursk operation already having backfired on the Zelensky government. He said Ukraine’s leadership sent “quite well-prepared units” into Kursk – but this only served to allow for Russia to make a quicker advance in Donetsk.
“The enemy weakened itself in key areas, our army has accelerated its offensive operations,” he asserted. He still sought to emphasize that Russian forces have begun to push the Ukrainian invaders back from Russian territory, however. But Putin said, “Our armed forces have stabilized the situation and started gradually squeezing [the enemy] out from our territory.”
Yet the Kursk fight has been on since Aug. 6 – and this alone has been a big symbolic blow for Kremlin war planners. It is the biggest incursion into Russia since WW2. “It is the holy duty of the Russian army to do everything to throw out the enemy from this territory and to protect our citizens,” Putin additionally declared.
President Zelensky in an interview with NBC this week claimed that Moscow had been forced to divert 60,000 soldiers from Ukraine to Kursk, but this has not been verified.
Currently there is broad consensus among analysts that Ukraine’s eastern city of Pokrovsk could fall at any moment. Russian forces are within five miles away, amid shelling and attacks on the city’s outskirts. If Pokrovsk falls, Russia will be in a position to more easily gobble up the rest of Donetsk, after which its hold on the whole of Donbass will be secured.
Al Jazeera reviews the situation, utilizing fresh battlefield maps, as follows:
Meanwhile Russian forces continued to press on towards Pokrovsk, a city in Ukraine’s eastern Donetsk region which has been their focus since they seized Avdiivka in February. They have formed a 29km (18 mile) long salient stretching to the west of Avdiivka since then and are within about 8km (5 miles) of the outskirts of Pokrovsk.
During the past week, Russian forces overran Novohrodivka and entered Hrodivka, two towns east of Pokrovsk. They also claimed to be on the outskirts of Myrnohrad, a town immediately to the east of Pokrovsk.
2/ Russian forces recently advanced in the Pokrovsk direction amid continued offensive operations in the area on September 4.
Geolocated footage published on September 4 indicates that Russian forces recently advanced south of Novohrodivka and marginally advanced west of… pic.twitter.com/PdlGexfStd
With all eyes on Pokrovsk in Ukraine and Kursk in Russia, the White House is still said to mulling greenlighting long-range missiles for Kiev, and their possible use on targets inside Russia.
The latest news wire out of Washington and from the administration is that the “US sees little value in sending Ukraine long-range ATACMS” systems.
Saudi Arabia’s economy has powered ahead despite Israel’s war in Gaza and Houthi attacks in the Red Sea, suggesting that the kingdom’s efforts to distance itself from regional tensions are paying off, literally. “Geopolitical events in the Middle East have not had any major impact on the Saudi economy so far,” the International Monetary Fund (IMF) said in its latest report published on the kingdom’s economy.
The report says that Saudi oil exports are not dependent on the Red Sea, where Iran-backed Houthis have targeted commercial ships, in what they say is in solidarity with Palestinians in Gaza. Likewise, Saudi Arabia’s tourism numbers “remain strong”. In general, the IMF painted a rosy picture of Saudi Arabia’s economy, with a strong banking system, growing home ownership and “robust” non-oil economic growth.
The report underscores the divergence between Gulf economies and those of poorer states like Egypt, Lebanon and Jordan, whose already weak economies have been battered by Israel’s war.
Saudi Arabia will take the IMF report as affirmation that it has successfully maneuvered to avoid getting sucked into the Gaza war. Saudi Arabia has become more vocal in calling for Israel to take steps towards a Palestinian state and has frozen talks to normalise ties with Israel, but it has held off on any further measures in solidarity with the Palestinians.
Saudi Arabia has also avoided joining the US’s military campaign against its one-time foe, the Iran-backed Houthis in Yemen. As the group wages a war on commercial shipping, Saudi Arabia has relaxed banking restrictions on them and resumed flights to Yemen.
Despite tensions over Gaza that have raised concerns about a regional conflict, Saudi Arabia has been focused on economic growth as part of Crown Prince Mohammed bin Salman’s Vision 2030 program, designed to wean the Saudi economy off of petrodollars.
The program is bearing fruit. At the end of 2023, Saudi Arabia’s unemployment rate reached a historic low, mainly because of a growth in private sector jobs, the IMF said.
Saudi Arabia’s non-oil GDP hit 3.8 percent in 2023, marking a slowdown from 2022 when it reached 5.3 percent, but was still “robust” thanks to strong investment and private consumption. However, the IMF also noted that Saudi Arabia has “recalibrated” some of its more ambitious mega-projects.
The kingdom has had to scale back Neom, a $1.5 trillion megacity project which organizers claim will eventually be 33 times the size of New York City and include a 170km straight-line city. Instead of 1.5 million people living in the city by 2030, Saudi officials now anticipate fewer than 300,000 residents. Meanwhile, only 2.4km of the city is set to be completed by 2030.
Is Saudi Arabia’s Neom centrepiece a visionary project or just a futile endeavour?
“The plans are completely ludicrous and Neom’s centrepiece has no real purpose” – Dr @andreas_krieg
The crown prince’s program is dependent on oil revenue. The IMF estimates that Saudi Arabia needs oil prices at $96 per barrel to balance its budget, roughly $20 less than they are now. The kingdom has tried to balance its efforts to support oil prices by cutting output and pumping crude before global energy demand peaks.
The IMF’s assessment that Saudi Arabia’s oil revenue is likely to decline quicker than previously estimated will raise concerns among Saudi officials. Revenue is expected to rise to $209bn in 2026, roughly 26 percent of GDP, before declining faster in 2029 to 4.1 percent less than expected earlier.
Intel Teams Up With Japanese National Research Institute To Further EUV Development
Intel and Japan are teaming up.
In fact, the Japanese national research institute is going to be teaming up with Intel to “build a research and development center in Japan for cutting-edge semiconductor manufacturing technology”, according to a new report from Nikkei Asia.
Japan’s National Institute of Advanced Industrial Science and Technology (AIST), under the Ministry of Economy, Trade, and Industry, will establish a new facility in three to five years equipped with extreme ultraviolet lithography (EUV) technology.
Intel will contribute its expertise in chip manufacturing using EUV. The center, the first of its kind in Japan, will allow equipment and materials manufacturers to pay a fee for prototyping and testing.
Nikkei reports that the initiative aims to strengthen Japan’s capabilities in the chip manufacturing sector, with total investment expected to reach hundreds of millions of dollars.
EUV (extreme ultraviolet lithography) is crucial for semiconductor manufacturing at scales of 5 nanometers and smaller, allowing more transistors to fit on a chip and increasing computing power.
And EUV equipment is expensive, costing over 40 billion yen ($273 million) per unit, making it a significant investment for suppliers of materials and equipment.
The U.S. has tightened restrictions on EUV-related exports to China amid growing strategic competition with China, slowing the return of research data to Japan. Having EUV equipment available at a domestic research facility will reduce this barrier, according to the report.
ASML Holding, based in the Netherlands, is the leading manufacturer of EUV lithography equipment. However, semiconductor production involves over 600 steps, requiring a broad range of specialized equipment and materials.
Japanese companies like Lasertec dominate the EUV inspection equipment market, and firms like JSR specialize in photosensitive materials for silicon wafer circuits.
Intel aims to strengthen ties with these Japanese suppliers through the new research center.
Putin Quips That He Prefers Harris To Trump, Cites ‘Contagious, Expressive’ Laugh
Russian President Vladimir Putin said during an interview at the Eastern Economic Forum in Vladivostok that Russia now wants Vice President Kamala Harris to win in November since they had previously supported Joe Biden – and Biden has endorsed Harris.
“I told you, our favorite, if I may say so, was the current president, Mr. Biden,” said Putin, smirking. “He was removed from the race, but he advised all his supporters to support Ms. Harris. So we will do it as well, we will root for her,” he continued.
Putin said Harris “laughs so contagiously and expressively, it shows she’s doing well.”
JUST IN: Vladimir Putin says he supports Kamala Harris for president, says he finds her laugh “fascinating.”
The comments come after the DOJ accused Russia of funding Tenet who then paid conservative influencers for videos.
“And if she is doing well, then … Trump introduced so many restrictions and sanctions against Russia, like no other president had ever introduced before him. And if Ms. Harris is doing well, perhaps she will refrain from doing anything like that,” he continued.
Putin’s comments are likely to be dismissed as a joke by the Harris campaign, while Trump will probably use them to deflect long-standing claims by Democrats that his campaign is supported by Russia.
According to Sky News’ Moscow correspondent Ivor Bennett, “Vladimir Putin is having a little chuckle himself here. His comments are almost certainly more mischief-making than a statement of fact because, as we know, Russia’s president doesn’t always say what he thinks.”
As we highlighted earlier this week, Kremlin spokesman Dmitry Peskov was asked by pro-Russia TV reporter Pavel Zarubin, “Then who is our candidate now?”
“We have no candidate. But, of course, the Democrats are more predictable. And what Putin said about Biden’s predictability applies to almost all Democrats, including Ms. Harris,” responded Peskov.
The Kremlin spokesman was also dismissive towards Trump’s claim that he could end the war with Ukraine within 24 hours.
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We live in an era in which cable television news is set to go the way of the 8-track tape player, and the changing media landscape is profoundly impacting how Americans get their political news.
As CNN, Fox, and MSNBC’s audiences shrink and age, the influencer era in American politics is officially underway.
If you need any convincing, zoom in on the Republican and Democratic conventions that wrapped up a few weeks ago. According to a recent RealClearPolitics article, around 200 content creators (or influencers) received credentialed invitations to the Democratic National Convention. This included exclusive access to VIP parties and events, as well as the chance to meet some of the delegates involved in the selection process.
Based on your age, it’s relatively easy to predict how you consume news. Boomers and Gen X primarily watch cable news, while younger generations consult social media, the internet, and podcasts for their information. This makes sense, as younger audiences tend to scroll endlessly through their phones, while older generations like to sit in front of the TV after dinner and watch cable.
This is why so much campaign money was spent on TV ads in recent elections. After all, that’s where you could reach citizens with a higher voting propensity.
But this old model is dated, and here’s why.
2024 is poised to be the first election in which millennials (ages 28-43) and Gen Z (under 27 voters) make up the majority. This new bloc of younger voters isn’t watching cable TV, and they’re definitely not seeing the political ads that cost modern campaigns a significant percentage of their war chests.
Airing ads on TV might have worked in 2004, but it will have limited success in 2024 – and that’s a big deal.
For a variety of reasons, the Republican Party has historically had trouble resonating with younger voters. This partially explains their electoral disappointments in 2020 and 2022, respectively. But instead of trying to rework their strategy to court this demographic, Trump and the GOP are doubling down on an old and outdated model. According to the Wesleyan Media Project, broadcast TV ads supporting Trump ran nearly 44,000 times across the country compared to only 33,000 for Kamala Harris/Joe Biden.
Rather than focusing on the young, independent swing voter, Trump continues to splurge on airwave advertisements. This might effectively get his base riled up and excited about the upcoming November election, but it won’t reach young people.
Today, political independents are the fastest-growing demographic in the country. These voters overwhelmingly skew millennial and are predominantly concentrated in the suburbs. Millennials are drastically different from any generation that’s come before them. They’re the first generation to come of age with the internet, and their consumption habits reflect this.
By all indications, Kamala Harris is working to broaden the Democratic coalition, primarily through her work to reach these independent voters. Team Harris has spent about $72 million through her digital ad campaigns alone compared with Trump’s $16 million.
For example, the DNC featured an influencer named Merrick Hanna. Hanna has more than 32 million followers/subscribers on TikTok alone. Let’s compare this with Fox News, which had 2.27 million primetime viewers for the entire month of August. The irony is that the people watching Fox News likely already know how they will vote.
As you can see, cable TV ads have all but lost their efficacy.
If you want to know why Kamala Harris is ahead in the polls, it’s because she’s making a concerted effort to talk to new and undecided voters outside of her key voting bloc, while Trump continues to preach to his loyal base.
Older generations can roll their eyes at influencers for their flamboyant and excessive behavior. But there is absolutely no denying their effectiveness at reaching mass audiences of young people at a shockingly low cost.
It’s often said that politics is downstream of culture. And culture is incredibly dynamic. Historians and political scientists frequently point to the 1960 presidential debate between John F. Kennedy and Richard Nixon. People who listened to the radio walked away thinking that Nixon won, while those who watched the debate featuring the handsome and well-tanned Kennedy thought the opposite.
Kennedy was more effective at using television to his campaign’s advantage. Today, whoever is more effective at leveraging social media will see a similar boost.
Old tactics simply don’t work in this new age, and both parties would be wise to recognize this.
Like it or not, the influencer age is here to stay.
