Monday 17/07/23

1. In TECH & MEDIA NEWS, Microsoft/Activision advances, Twitter’s cashflow still falls short, Hollywood’s strike looks like it could have a major impact and Netflix gets more subscribers
2. In BUSINESS & CONSUMER TRENDS, Multinationals shift in China, UK companies collapse and face Brexit 2.0, Ozempic prompts a gold rush and Allbirds hits a tricky patch while consumers face a massive hit on household wealth, retired home renter numbers rise and house prices fall
3. In FINANCIALS NEWS, UBS hands EY a massive audit contract and the FCA gets inspected itself
4. In MISCELLANEOUS NEWS, the UK joins the CPTPP, Turkey triples petrol taxes, the Cybertruck finally goes into production and South Korea’s “ant traders” take on the hedge funds
5. AND FINALLY, I bring you some brilliant ultimate frisbee moments…

So Microsoft gets closer to its goal, Twitter lags, Hollywood’s strike looks set to do damage and Netflix sees a surge in subscriber numbers…

Did you know that there is a podcast to go with Watson’s Daily? In this podcast, I discuss two stories from the day’s edition in a bit more depth with a Watson’s Daily Ambassador, my mate Ralph (on the Weekly podcast) or a special guest. The idea of this is to help to give you more of an idea of what talking about this stuff could sound like 👍 You can find the podcasts on the buttons below:

FTC Loses Latest Bid to Halt Microsoft-Activision Merger (Wall Street Journal, Sarah E. Needleman and Jan Wolfe) shows that an appeals court rejected the FTC’s request for a court order that would have blocked the merger on Friday whilst the FTC’s appeal against the the July 11th decision handed down by the US District Judge is ongoing. That, along with Microsoft-Sony agreement opens way to seal $75bn Activision deal (Financial Times, Richard Waters and Tim Bradshaw) shows that Microsoft is inching ever-closer to its goal of buying Activision Blizzard as it announced yesterday that it signed a deal with Sony for the Activision Blizzard’s most popular title, Call of Duty to keep it on PlayStation if the acquisition went ahead. * SO WHAT? * Sony has been the biggest opponent of the deal because it was concerned that Microsoft would make Call of Duty exclusive to Xbox and its other services. It seems now that the main hurdle to the deal is the UK’s Competition and Markets Authority, but the CMA indicated last week that it was willing to talk in order to potentially to get the deal through…

Meanwhile, Elon Musk says Twitter cashflow still negative amid 50% drop in ad revenue (The Guardian, Reuters) shows that Twitter is continuing to struggle with its financials because the social media platform remains cashflow negative due to the massive near-50% fall in advertising revenue and its still-massive debt pile. Musk had originally pegged the company as being cashflow positive by June after the massive cost-cutting drive he put it through – but that clearly hasn’t worked out. New CEO Linda Yaccarino clearly has her work cut out (but we knew that already – having Musk breathing down your neck at every turn isn’t going to be a stress-free experience now is it!!!).

On the other side of the fence, What Threads Needs to Beat Twitter (Wall Street Journal, Nicole Nguyen) outlines a potential battle plan for what Threads needs to do to take most advantage of Twitter’s current weak position. Although it’s made impressive progress since its launch, it needs to do a lot (and pronto!) to ensure that the fickle audience doesn’t get bored and abandon it (BeReal is a good example of this, for instance – and I would suggest that Clubhouse is more of a slow-death kind of example). The article suggests that Threads needs to have a desktop app for better access, topic groupings, better targeted feeds (it’s all random at the moment), ways of searching for posts, bookmarks, ways to highlight trending topics, looser link with Instagram (you can’t delete one without deleting the other – but maybe that’s on purpose to buy Threads time?), an option for drafts, a counter to show you how close you are to hitting your 500 character limit, the ability to change your display name. * SO WHAT? * I would also argue that it needs to find something that is unique to Threads if at all possible. I don’t exactly know what that might be at the moment but I wonder whether something along the lines of creating more of a community feel – possibly with the merging of the online and offline? Maybe there could be more integration with Meta’s development of the metaverse.

In media news, Lights, camera, industrial action: Hollywood’s biggest strike in 60 years (Financial Times, Christopher Grimes) emphasises the gravity of the strike we are seeing stateside at the moment and reminds us that the last writers strike, which went on for 100 days in 2007/8, cost the state of California around $2bn! However, this wasn’t nearly as comprehensive as the strike we’re seeing now. It is also worth noting that all sorts of supporting businesses, such as florists, caterers and hairdressers (among others) will suffer as a result of this – not to mention the cinemas who are only just getting back to their feet after the pandemic. In the meantime, Netflix subscribers reach record after sharing crackdown (The Times, Callum Jones) shows that the number of paying subscribers is expected to hit a record high this week after its crackdown on password sharing and the introduction of a new ad-supported tier. The company’s results are due out this Wednesday, so we’ll know more then! * SO WHAT? * I wonder whether the Hollywood strike will actually be a short-term boon for Netflix as cinema releases will presumably be less prolific, prompting more people to divert their attention towards the streamers. If they did some kind of “nostalgia” campaign, reminding us of older (but classic) series that we might have missed first time around, I think that could help.

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

Multinationals pivot with China, UK companies fail and have to deal with Brexit 2.0, Ozempic prompts a rush in weight-loss drugs, Allbirds flies low, UK consumers face big dent to wealth, older home renter numbers rise and house prices weaken…

In business trends news, Multinationals in China accelerate push to decouple data (Financial Times, Ryan McMorrow, Joe Leahy, Sun Yu and Eleanor Olcott) shows that global companies are now scrambling to separate out their China data in their operations to avoid increasingly common accusations of spying. A newer more stringent anti-espionage law came into force on July 1st in China to strengthen national security – and this resulted in raids and subsequent sanctions being imposed on the likes of Bain & Company, Mintz Group and Micron Technology. The Cyberspace Administration of China has started to carry out data security assessments that will look at the flow of outbound data. Companies including McKinsey, Boston Consulting Group and Oliver Wyman are already de-coupling their IT systems and others are also localising their data storage. * SO WHAT? * Complying will existing stringent controls (and perhaps going a bit further in anticipating more!) is a very costly business and banks and fund managers in particular are having to spend on things like building separate infrastructures to avoid any “leakage” of sensitive data. It was also interesting to note that even retailers are having to separate out customer data from global loyalty programmes! It’s all going a bit crazy, but then I guess that’s what you get when countries don’t trust each other. Costs will rise and eventually these costs will filter down to the customers.

Nearer home, companies continue to face difficulties and Big rise in companies collapsing as costs soar (The Times, Helen Cahill) cites the latest data from restructuring firm Kroll which shows that company administrations shot up by 44% in the first half of this year thanks to the horrible cocktail of rising inflation and interest rates. The number of failures in the food and drink sector over this six month period exceeded the number of failures for the entirety of 2022. Construction and manufacturing were also badly hit. Then in British companies start to grapple with ‘Brexit 2.0’ (Financial Times, Peter Foster and Andy Bounds) we see that manufacturers are also having to think about how they’re going to deal with new EU rules on carbon border taxes (this involves having to compile reports on carbon emissions), plastic waste management and supply chains. * SO WHAT? * As if dealing with the original Brexit hasn’t already been hard enough, embattled British manufacturers are going to have to deal with future divergence of UK and European rules and more calls for proof that they have followed them (whereas members are “presumed” to be complying with them). The challenges will continue…

In other business trends, Drugs Like Ozempic Created a Gold Rush. These Drugmakers Want In. (Wall Street Journal, Jared S. Hopkins) shows that the launch of weight-loss drugs like Ozempic and Wegovy have just created a multibillion-dollar market category

in super-quick time. It has now become an increasingly important segment in its own right alongside cancer and heart disease and investors are trying to double-guess who’s going to be launching the next big project. * SO WHAT? * Until now, the weight-loss market had been going sideways with products that weren’t particularly effective and/or had unpleasant side effects. However, the advent of Eli Lilly’s Mounjaro and Novo Nordisk’s Ozempic and Wegovy have changed the whole landscape to the extent that analysts at Morgan Stanley reckon weight-loss drugs could become a top-12 therapeutic area that will see the area’s value skyrocket from a valuation of $2.4bn last year to potentially $54bn by 2030! The upside is huge as the number of people taking weight loss drugs is currently quite small. Amazing, eh?

Then in How Allbirds Lost Its Way (Wall Street Journal, Suzanne Kapner) we see how the much-hyped eco-friendly footwear company went from hero to almost zero as its share price has evaporated by over 95% since its November 2021 flotation. Its first shoe, the Wool Runner, did well but subsequent product launches designed to attract younger customers outside its 30-40-something base fell flat. It seems that other brands, such as On and Hoka, have superseded them while its forays into a broader clothing range appeared to be ill-conceived for the most part and ended up in failure. * SO WHAT? * Following its travails, it brought in Boston Consulting Group to sort out the mess and it was duly advised to return to its roots and concentrate on its best-selling shoes (the Wool Runner and Tree Dasher) in addition to the underwear, socks, t-shirts and sweats that were more popular with customers. It’s also being more circumspect about new store openings and how to expand overseas. I am inclined to think that Allbirds has just been a fad that will fade and potentially get bought up by a giant.

In consumer trends, Britain experiences biggest drop in wealth since the war (Daily Telegraph, Lauren Almeida, Szu Ping Chan and Tim Wallace) cites warnings from the Resolution Foundation think-tank that house prices will contract by 25% if interest rates keep rising as they are. Its report contends that Britain’s “unprecedented” wealth boom that has spanned the last 40 years is coming to an end thanks to the direct and indirect effects of higher interest rates. Meanwhile, House prices fall for second month (The Times, Emily Gosden) highlights stats from Rightmove which shows that house prices have weakened for the second month in a row as new sellers are starting to lower their expectations in an increasingly tricky market. * SO WHAT? * There aren’t that many positives to be drawn from what we’re seeing at the moment, but it is possible that weakening house prices should make it easier for younger people to get on the property ladder (although I’d argue that they should wait for a while longer yet!). Separately, it was interesting (and perhaps somewhat sobering) to see Surge in retired homerenters (Daily Telegraph, Tim Wallace) as research by Hamptons showed that the proportion of over-65s who rent privately is expected to double from 5.7% today to 11.5% in the early 2030s as many people will have been shut out from buying. Clearly, this is a scary prospect when people retire and there’s no money coming in.

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

UBS hands EY a fat contract and the FCA gets inspected itself…

UBS hands EY one of biggest audit deals in global banking (Financial Times, Owen Walker and Michael O’Dwyer) highlights the value of contract that EY is believed to have got in order to use it to audit the enlarged company post its merger with Credit Suisse. The contract is so big, in fact, that EY will have to pull in staff from other offices to service it. EY had already been UBS’s auditor and the latter paid the former $70m in fees, while Credit Suisse had paid PwC $90m to to the same job. The fee for the post-takeover UBS is thought to be more than the $148m that HSBC paid PwC last year for its services but less than the $160m that “new-UBS” would have effectively paid last year. * SO WHAT? * Although EY hasn’t officially commented on this yet, this is a bit of welcome

good news after its failed bid to split itself up. It already has banking clients including Deutsche Bank and BNP Paribas, but its role in the audit of failed and disgraced fintech Wirecard has limited its progress.

Then in FCA faces review over AI threat (Daily Telegraph, Simon Foy) we see that Britain’s spending regulator, the National Audit Office (NAO) has launched a review of the financial regulator, the FCA, to see whether it is able to deal with threats posed by rising popularity of crypto assets and AI developments in the future. This will be the first time the FCA has been investigated since 2014. It’ll be interesting to see how they like the taste of their own medicine! My question is, will the NAO be investigated to see whether it is able to investigate the FCA 🤣?? And who will monitor that??

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

The UK signs the CPTPP, Turkey goes ballistic on petrol taxes, the Cybertruck begins production (finally!) and South Korea’s “ant traders” take on the hedge funds…

In a quick scoot around some of today’s other interesting stories, Kemi Badenoch signs treaty for UK to join Indo-Pacific trade bloc (The Guardian, Pippa Crerar) shows that we have now signed up to the CPTPP Indo-Pacific trade bloc as part of post-Brexit efforts to get trade deals done although critics will focus on projections that it will only at £1.8bn a year to UK GDP after 10 years (which is equivalent to just 0.08% of our annual GDP!). * SO WHAT? * I guess that it at least shows willing, but it does sound pretty puny! On the plus side, the group accounts for 15% of global GDP.

Then in Turkey triples petrol taxes as Erdogan tries to repair public finances (Financial Times, Adam Samson) we see a dramatic move being made post-election as the government tries to claw back money that Erdogan doled out in his ultimately successful election campaign and fund reparations to his country post the disastrous earthquake that struck in February. This is the latest in a series of measures, which also included a VAT hike, announced by Erdogan since he was re-elected at the end of May. It sounds like there will be a lot more financial pain ahead for Turkey to get finances back on track.

Elsewhere, Tesla Begins Cybertruck Production After Yearslong Wait (Wall Street Journal, Nora Eckert) shows that production of the much-hyped and much-lusted-after Cybertruck started on Saturday a “mere” four years after the prototype was unveiled. It’ll be interesting to see how sales go for the Cybertruck – it’s certainly a polarising vehicle!

Then in South Korean ‘ant’ traders battle hedge funds in swarm on battery shares (Financial Times, Song Jung-a and Christian Davies) we see that the meme-stock thing is hotting up again – this time in South Korea – as its “ant traders” (individual retail investors) have pumped up battery materials company EcoPro and its subsidiary EcoPro BM’s share price by nine-times! Hedge funds have been putting shorts on the stock and the ants have been pushing back, egged on by popular YouTubers! * SO WHAT? * Retail investors are betting that South Korean battery makers and material producers will be net gainers from the booming market in EVs and US-China tensions that mean they will gain market share. Supporters say that this isn’t a GameStop (which was a failing company at the time) but more of South Korea’s future Tesla. Hmmm. This is certainly an interesting story to follow!

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

…in other news…

This ultimate frisbee malarkey looks absolutely brilliant! Have a look at this video for some amazing moments!