Good morning. 🚨 We see Facebook launching its TikTok rival Instagram Reels today. The move comes as ByteDance is in talks to sell TikTok to Microsoft amid pressure from the Trump administration.

📈 Today's earnings: Discovery, Roku, Sinclair, Sonos and The New York Times. Square was forced to release its report last night after Bloomberg's Katie Roof forced its hand.

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📸 Moving the Market

Can Instagram Reels stem the rise of TikTok?

Facebook's launch of Instagram Reels, an unabashedly TikTok-like service, represents Mark Zuckerberg's latest effort to maintain his company's dominance by imitating a would-be competitor just as it has captured the cultural zeitgeist.

• The big question is whether Facebook can leverage Instagram's scale (it claims more than 1 billion users globally) to offset the rising popularity of TikTok, a service that has come to define Gen Z.

• The big wild card is how ByteDance's divestiture of TikTok — to Microsoft in the U.S. and three other countries; and perhaps to other companies in Europe — would affect its global growth.

A very likely scenario is that Instagram will have the same success imitating TikTok as it did when it imitated Snapchat by creating Instagram Stories. "Success" in this regard would mean achieving at least two, if not all three, of the following:

1. Preventing Instagram users from defecting to TikTok, much as Stories prevented users from defecting to Snapchat.

2. Stemming TikTok's growth by providing consumers with a rival service — and, ideally, a better service.

3. Stealing away users from TikTok by reasserting Instagram as the preferred platform for social sharing.

Given Instagram's scale, it is likely to achieve at least the first two goals. If 15-second videos with music are indeed the future of sharing, it's hard to see why Instagram's 1 billion users wouldn't prefer to create and consume those videos on the service they're already using — especially because Reels will be fully integrated into the rest of the Instagram experience.

• As for the third goal, it's very possible TikTok users won't want to decamp to Instagram. That could be especially true for Gen Z users who practically live on TikTok and have already invested heavily in establishing their presence there. Then again, people said the same thing about Snapchat users and Instagram.

What's next: Competition! Reels vs. TikTok will fundamentally come down to who can provide the better service, and we're likely to see significant innovations from both in the years ahead. YouTube and Snapchat will also compete here, and both are rolling out their own TikTok-like services (see here and here) to meet the moment.

• But this is where the wild card comes in: Instead of competing with ByteDance, which invented TikTok, Facebook et al will likely be competing with Microsoft (in the U.S.) and perhaps other companies globally. It remains to be seen how that will affect TikTok's product, its growth as a business, and the war for developers and other talent.

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🏛️ Big in the Beltway

Trump's TikTok slice folds

President Donald Trump's legally dubious proviso that the U.S. would need to be financially compensated for a Microsoft-TikTok deal appears to be an empty threat, as expected.

• "White House officials on Tuesday could not say how the U.S. government would receive a portion of the proceeds from any sale of TikTok’s U.S. operations," Reuters reports.

The big picture: See Matt Levine.

🇨🇳 Big in Beijing 🇨🇳

ByteDance founder Zhang Yiming says Trump's real goal is to ban TikTok in the United States, despite his decision to greenlight Microsoft's pursuit of an acquisition.

"Their real objective is to achieve a comprehensive ban,” he said in a memo to his employees.

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📺 Talk of 30 Rock

Jeff Shell starts NBCU layoffs

Jeff Shell has started to lay off NBCUniversal employees as he seeks to stem the financial toll of the coronavirus while positioning the company for a transition toward streaming entertainment, a person familiar with the company's plans tells us.

• The cuts will affect less than 10 percent of NBCUniversal's overall workforce of 35,000 employees and will be companywide, hitting broadcast and cable networks, the movie studio and theme parks.

The big picture: The cuts come as major media companies face severe revenue declines tied to the pandemic. Disney has already implemented staff cuts, and WarnerMedia is expected to start cuts soon, according to WSJ's Joe Flint, who first reported the layoffs.

NBCUniversal is the parent company of NBC News.

Market Links

• Phil Schiller will step down at Apple (CNBC)

• Jack Dorsey sees Square revenue surge (Bloomberg)

• The Newhouses may break 1WTC lease (Variety)

• Justin Smith partners with The Athletic (Axios)

• Radhika Jones loans VF to Ta-Nehisi Coates (CNN)

Drew Angerer/Getty

🌴 Moving Moraga

Murdochs saved by Fox News

"Fox News remains the profit king at Rupert Murdoch’s diminished media empire. The cable news behemoth was the lone bright spot at its parent company Fox Corporation, which reported a drop in quarterly profit and revenue because of impacts from the coronavirus pandemic," NYT's Ed Lee reports.

• "Profit plummeted 69 percent to $145 million in three months ending in June because of a decrease in advertising and an increase in costs, including a significant impairment charge related to exiting a rights agreement with U.S. Golf Association."

Bloomberg/Getty

🏰 Big in Burbank

Bob Chapek sees DTC growth

Bob Chapek says Disney now has 100 million paid subscribers across its streaming platforms, which include Disney+, Hulu and ESPN+, a bright spot in an otherwise brutal third quarter for the Hollywood giant, CNBC's Lauren Feiner and Sarah Whitten report.

• The bad news: Chapek reported a net loss of $4.72 billion in the third quarter, while the theme parks business had a staggering 85 percent drop in revenue from a year earlier. The closure of parks alone cost Disney $3.5 billion for the quarter.

The big picture: Disney's brand power and the launch of Disney+ are sustaining a company that has seen nearly every aspect of its business ravaged by the pandemic, from theme park and theater closures to the suspension of live sports on ESPN and content production for all its film and television units.

• As of Monday, Disney+ had a total of 60.5 million paid subscribers, which means Disney hit its goal of having 60 million to 90 million subscriptions by 2024 four years early.

• ESPN+ also had massive growth with 6.1 million new subscribers due in part to UFC pay-per-view events.

• Chapek also announced plans to launch a new Star-branded streaming service overseas in 2021.

What’s next: Disney is taking steps to adjust to the pandemic. Theme parks have reopened gradually. On September 4, it will release “Mulan” directly to Disney+ subscribers for an additional $29.99, the first Disney tentpole to bypass a theatrical premiere.

👀 What's next: Have you watched the interview that Axios' Jonathan Swan conducted with President Trump yet? It went viral, and for good reason. Enjoy.

See you tomorrow.