The Bulletin Edition 16
From The Desk of
As I was walking from my kitchen, coffee in hand, to the corporate headquarters of The Bulletin (also known as my living room) my phone beeped and a notification displayed “Grocery delivery is here: Conrad, you can now get groceries delivered to your door via Uber Eats!”
If 2020 was the year of the ubiquitous phrase “You’re on Mute” then the 2021 phrase of the year will surely go to “Out for Delivery.”
My niece, who lives in England and turns three in April, has never sat on a bus, a train or been on a playdate to a friend’s house nor has she had any friends over. Recently my sister took her to the local equivalent of Walmart (for the first time just because the delivery forgot to include an item) and my niece was in complete bewilderment at the size of the store, the aisles, the products and the foods on display. She just thought everything came from a delivery van. Having all our needs shipped to our front door is convenient, especially when we are mostly all at home to receive the packages, however, it also highlights the uncomfortable reality that convenience comes with a price, sometimes in the small ways (such as for my niece) who since birth, has barely experienced childhood life outside of the four walls of her house.
Closer to home, I have been thinking about how productive working from home (or remote) has been in that it has encouraged me to put better systems in place and streamline working processes, all of which will be highly beneficial when we can return to the office in some shape or form. Scheduled Teams or Zoom calls seem more intentional, better organized and prepared and are more to the point. The mouse click in Teams to “raise your hand” seems to have more of a thought process behind it than just interjecting across a boardroom table. This isn’t a bad thing unless you are the now-famous zoom meeting from my home country that hit the news this week with a disastrous parish council meeting that resulted in absolute chaos and catapulted the heroic clerk into an internet sensation. It took me a few days to catch up on what happened, especially after some of my North American colleagues sent me messages saying “did you see what your people are up to?”
This week more results came out along with a continual slew of technology developments, partnerships and industry studies. The Game Stop saga continued, with many inexperienced “retail investors” coming out with stories of how much money they lost because someone advised them on Twitter to buy, buy, buy. The old saying still stands “if it sounds too good to be true, it probably is.” I still invest the old-school way, with an app that not only puts large delays on funding my trading account but then also won’t allow me to buy a stock that has a dubious short history or questionable financials. In other investing news, I spent an enormous amount of money on what I have termed as a “technical tea-cup, ” which is in fact a thermal mug. It’s not quite the Ember Travel Mug, that comes in at the princely sum of $180, but nevertheless, my new purchase has solved the hourly back and forth trips to the kitchen to re-boil the kettle or forgetting to drink my coffee so then it’s cold (no microwave suggestions please) The downside is, my daily steps are now lower and my Apple watch keeps telling me “it’s time to stand up and move around.“
As ever, thank you all for your support and words of encouragement and I wish you all the success for your coming week [C]
The Weekly Dispatch
Will this be the Superbowl that attracts a new type of viewer?
By the time I press “publish” on this week’s edition, many of you will be counting the boxes of chicken wings in your freezer or dusting off your new 70-inch 4K TV (see last week’s edition of The Bulletin and in the “Discussed” section of this issue) Although it should be noted that this years game will not be shown in 4K.
Today is Superbowl day and all week the media has been full of game result predictions, halftime show chatter (The Weeknd is performing in case you didn’t know) the advertising and all the other oddities that will make this year’s game like no other. In a few hours, all the predictions and questions will have been answered. However, this very interesting piece from Morning Consult should carry some weight months after today’s game when the true viewer results and statistics come out. Will the nature of this year’s “at home” Superbowl herald in a new type of viewer? A worthwhile read indeed and will also serve up much thought to other such major public events (music, sports) that will be coming up in 2021.
Spotify
The music streaming giant released its Q4 2020 earnings last week and with listeners tuning in from home as opposed to on their commutes, the company reported stronger than expected growth in the 4th quarter of 2020. End of quarter summary is as follows:
345m monthly active users, an increase of 27% YOY
155 million paying subscribers, an increase of 24% YOY
Subscription revenue accounted for €1.89 billion, an increase of 15% YOY
Advertising revenue accounted for €281 million, a second consecutive quarter increase of 29%.
Spotify increased the subscription price in seven markets and stated this did not affect subscriber churn. The company also expanded price increases in a further 25 markets this month (USA, Canada, Europe and LATAM) so one to note for next results.
ARPU fell 8% to EUR 4.26 ($5.13) from the previous year, mostly due to expansion into international territories where lower monthly subscription prices were a must for the local markets (India, Russia)
Ad revenue rose 29%, accounting for 13% of total revenue
More than 2,2 million podcasts are now available on the streaming service with consumption doubling from the previous quarter
25% of MAU’s tuned in to a podcast, up 22% from the previous quarter
The Joe Rogan podcast, which arrived exclusively on the platform in December, is the top show in 17 global markets where Spotify is available
Spotify will continue its growth curve and investment in podcasts, citing advertising and also subscription revenues
A look ahead:
For Q1 2021, Spotify forecasts that MAU’s would grow to between 354 million and 364 million, and paying subscribers would increase to between 155 million and 158 million. For 2021 as a whole, the company said it expects to increase MAU’s to between 407 million and 427 million and paying subscribers to between 172 million and 184 million.
Editor’s note:
With paying monthly subscriber addition estimates for 2021 missing analysts expectations by around 7%, Spotify’s stock fell after the earnings announcement. In addition to the lighter forecasts, it was noted that despite the growth, the revenue and the numbers of paying subscribers (and the price increases) the company is still losing money, some $2.2 million every day in 2020. Adding paying subscribers helps but the overall business model is still a messy one. Much of the revenue is paid out to the major record companies with an increase in listening resulting in an increase in label payouts, reducing the profit margins even more. I would imagine it was hard to predict that your subscriber base would not be listening to Spotify only during those pre-determined commuting hours back in 2019 and now with many users at home, individual listening hours has increased which means Spotify has to pay out more in rights which then, of course, eats into the individual amount paid by the subscriber. Spotify has tried to launch a podcast and audiobook strategy to try to offset some of the label costs but ultimately, it is down to what the subscriber wants to listen to. The on-demand service that wanted to take on radio and other lean-back audio services, maybe finding that “I’ll just leave Spotify playing all day at home as background music” is costing them a pretty penny.
Netflix: The Golden Globes and confidence increases global pricing
Streaming services swooped into The Golden Globe Award nominations last week and gobbled up pretty much everything that was on the plate, with Netflix receiving 42 Golden Globe nominations for its films and TV series, including "Mank," "The Trial of the Chicago 7" and "The Crown," and Apple TV+, Disney+, HBO Max and Amazon, also receiving nods. More worthy of mentioning is that these awards will be the first time female filmmakers have emerged as the foundation behind this year’s Golden Globe nominees, with Emerald Fennell, Regina King and Chloé Zhao being placed in the best motion-picture direction category for the first time.
This week Netflix continued flexing its confidence by increasing standard subscription prices in Japan by 13%, taking the cost up 170 yen to 1,490 yen ($14) per month. At the end of 2020, Netflix had more than 5 million paying subscribers in Japan, with 2 million added in the last 12 months alone, as work from home continues in the country.
The cinema will change, but to what?
The future of the cinema still remains in the air as the global pandemic pushes us ever towards wanting fresh air and open space. Businesses whose sole revenue models were around packing as many consumers into a room (including planes) sadly will be some of the last to benefit from vaccines or when the pandemic is under control. The cinema has been the cornerstone of the strip mall, shopping mall or small-town high street since film began so it’s hard to envision how cinemas will evolve during this current time.
Deloitte, in their insight “The Future of The Movie Industry,” has dug a little deeper into how cinemas could evolve as still the central piece of a new film’s release schedule, however, they most likely wouldn’t return to being the sole location of the screening of a new film.
One of the biggest challenges is that Hollywood has relied too heavily on cinema as not only a first window but also the box-office revenues that then justify making big-budget movies. It’s a chicken and egg situation. The draw of the big screen and the revenues has resulted in larger budget movies which bring an entire industry with it, employing hundreds of thousands of people the world over. However, at the same time, if cinemas become more of a premium location for watching a new release (with less seating due to social distancing, better concessions and an overall experience that justifies a higher ticket price) then the revenue gap could be made up with PVOD (premium VOD) where consumers can watch the same film at home at the same time. Studios currently take about 55% of box office revenues however with PVOD this margin increases to 80%. The cinema industry is certainly very wary of being edged out of the first window for Hollywood however, as the insight explains, it may be the only option to not be squeezed out altogether.
Discussed
As always, Discussed covers a few notable topics that came up this week during my interactions on social media and in communication with colleagues that I think are worthy of sharing. The discussions are cross-industry but as you will find, we are all merging into this digital world now where retail, home, entertainment, fitness and travel are all starting to morph together. Hopefully, my notes and observations below will get you thinking and any additional contribution to the topics is always welcome so please get in touch.
Food deliveries customized or exclusive to a specific event: With the Superbowl forging ahead today and with many other in-person events only being broadcast in the safety of consumers homes, there could definitely be an opportunity for cinema’s, sporting events and live concerts to partner with local restaurants to tailor menus for the experience. I am sure many UberEats and DoorDash deliveries will be Superbowl themed tonight so why couldn’t this extend out to PVOD and live-streaming viewing at home with cinema-style concessions or perhaps a “Billie Eilish” or “Dua Lipa’s” food favourites on the night of the concert live stream? Taco Bell announced this week a “digital-only” customizable menu box offering, hailing the new trend of “menu-bundling” which can now go with your pay-TV unbundling or your OTT bundling…
Loss leading hardware: It’s well known that many tech companies sell their hardware at a loss in order to entice buyers who then make up the loss with subscriptions, add-ons or (in the case of my printer piece a couple of editions ago, the actual part you need to make the hardware work) It’s not quite like selling a car at $1 and then the steering wheel costs $23k but companies such as Roku and now even Sony are selling their hardware at a loss, knowing (or hoping) the loss will be made up by subscriptions, ad-revenue and in-service purchases. It is also widely known that Apple TV’s streaming service where nearly 63% of the current subscribers are still under a free trial, is more of a hope that they will start paying once the period is up. But does this really matter?
Bundle streaming with pay-TV?: This week Parks came out with a study highlighting that 60% of pay-TV subscribers in the U.S. are interested in having an online streaming service included in their pay-TV subscription. With the study audience also accounting for nearly half of all U.S broadband households, this “blended bundling” approach could be an interesting way to look at pay-TV and streaming as not an either-or choice for consumers. Sports is of course one of the main retention points for pay-TV along with local news and the general habit of lean-back viewing experience that a wide demographic still appreciate. With pay-TV cancellations still accelerating, it will be important to see when the cord-cutting will stabilize, giving the traditional pay-TV industry a solid number of staying subscribers to work with.
A new way of searching for something to watch?: I am surprised this article didn’t pop up more in the industry press as it’s a genius yet simple way of solving the old “what do I watch?” questions. Step aside algorithms, how about just asking me how much time I have and then let me choose from there? Erika Smith, writing for Cosmopolitan, asks streaming services to add such an option, using the run time as a guide for when you have 1 hour, 2 hours, or even just 20 minutes to watch something. Then the recommendation engine kicks in. It does make perfect sense but then what would we all do without those nights where you start watching one episode and 12 hours later it’s time to get ready for work the next morning.
On Point
$8 billion - the record revenue posted by SiriusXM for 2020, up 3.2% from 2019 (SEC)
52.7% - the percentage of French people who subscribe to at least one SVOD service (The OTT NPA Conseil)
4 million - the number of subscribers on Crunchyroll, the anime streaming service, up from 3 million subscribers in July 2020 (Crunchyroll)
62% - the percentage increase of US teens and tweens listening to podcasts from Q1-Q4 2020 (Global Toy News)
8.5 million - the number of subscribers on Starz, the Lionsgate streaming platform (Lionsgate)
30% - the percentage growth of the U.S. AVOD market in 2020 (FilmTake)
55 million -the number of users on Amazon’s IMDb TV AVOD streaming service (also announced that it is finally coming to Roku) (Amazon)
17.5% - the percentage increase of Warner Musics quarterly revenues (to $692 million) (SEC filing)
$6.89 billion - YouTube advertising revenues in Q4 2020, up 46% from the same time last year (Google)
1 week - the time it took for the Gamestop saga to be turned into a planned Netflix movie, with script writing already underway (CNET)
Productivity
At a zippy length of only 1 minute and 56 seconds, this week’s piece fits very well into the productivity section. The four tips on how to keep the creativity flowing are overwhelmingly agreed with here at The Bulletin. Step outside your industry, see what is going on in other sectors, the trends and the lessons to be learnt. Everything is going digital and morphing into one so it has never been a better time to step outside of your box and seek inspiration from elsewhere. Come up with one new idea every single day, a new product, a new business, a new way of doing something. Even if you never do anything with it, it’s all about connecting the dots.
Diversion
A very appropriate diversion today but also a very interesting behind-the-scenes insight into how the NFL managed to pull off The Superbowl during a global pandemic. Many of us are wanting to return to events in person, including travel, sports, the cinema or live concerts however just “opening the doors” isn’t going to be part of the planning process as you will see in this video. Even if the spectators or public are not present, the logistics behind bringing an event like The Superbowl to the safety of viewers’ homes is quite overwhelming.
And Finally
Those in live music who have been hardest hit by the pandemic are the ones who really make it happen
The last few months have seen many musicians (Neil Young, Fleetwood Mac) sell their song rights to the highest bidder with many new startups sitting behind investment funds snapping up future royalties. Many established artists are also fronting years of earnings as their income has decreased to that of only music royalties with nothing coming in from touring or appearances. But what do you do if you don’t have the intellectual property that comes with being a musician? Actors have seen their livelihoods decimated over the past 12 months as many are paid per film and don’t receive ongoing royalties like musicians. The same has happened in theatre and much of the performing arts sector. Bobby Owsinki, writing for Forbes, explores those who make the whole live music scene function, yet are probably the ones suffering the most; the live music scene crew.
Big changes will be coming to pay-TV sports
The world of pay-TV sports is a topic I would like to spend more time on, however for now this read from Morning Brew (a newsletter I highly recommend signing up for) breaks down the current situation with pay-TV sports rights, who owns what, and what might happen when these contracts are up. If this won’t take things forward in the streaming revolution I don’t know what will. Let’s just say that there is an incredible amount of money at stake. The “sports war” will be greater than the “streaming war.”
This concludes this week’s edition of The Bulletin. If you would like further details on anything mentioned or have questions or suggestions that you would like to discuss on email or to schedule a call, please drop me a note.
Cheers and thank you for your support and I wish you all the success for your coming week.