Monday 25/11/19

  1. In TECH/MEDIA NEWS, Chinese videogame makers make inroads into Japan while Uefa considers Champions League streaming
  2. In RETAIL & CONSUMER GOODS NEWS, LVMH buys Tiffany and we look at the problems caused by Black Friday returns and fake sellers on Amazon as well as Argos ditching AO World and shops going cashless
  3. In INDIVIDUAL COMPANY NEWS, Aramco can’t find a cornerstone investor and Uber’s days look numbered in London
  4. In OTHER NEWS, I bring you a talented dog driver…



So Chinese gamemakers up the ante in Japan while Uefa considers more streaming…

In Chinese videogame makers hunt for new market in Japan (Wall Street Journal, Takashi Mochizuki) we see that Japanese smartphone game makers are suffering from the successful onslaught of their edgier, deep-pocketed and faster-moving Chinese counterparts. Japanese firm DeNA makes smartphone games for Nintendo and blamed the halving of its most recent quarterly profits on increased Chinese competition. * SO WHAT? * China is currently the world’s biggest smartphone game market in terms of revenue but makers there are now looking outside their maturing domestic market for expansion. Tencent is already looking to expand in the second biggest smartphone game market, the US, via its partnership with Nintendo, but China’s #2 game provider, NetEase, is already seeing big success with games like “Knives Out”, which grossed $465m in 2018 – 80% from Japan – which compares to Epic Games’ Fortnite at $455m. Although concerns have increased over the proliferation of Chinese games/apps (especially ByteDance’s TikTok) and how gamer data might be misappropriated, Japanese gamers appear to be oblivious because they don’t realise they are playing a Chinese game and the whole data security thing hasn’t really been flagged

thus far in the country. In the meantime, Japanese developers are rightly fearful about Chinese rivals eating their lunch – in their own backyard.

Uefa explores move into Champions League streaming (Financial Times, Murad Ahmed) shows that European football’s governing body is looking at creating its own internet streaming service to show Champions League matches as traditional broadcasters balk at the ever-rising costs of buying the rights to show matches. Uefa is currently conducting an auction for TV deals to show its major competitions between 2021 and 2024, but it is considering streaming as an alternative option in some territories outside Europe where such auctions only tend to muster up €5-10m a year. * SO WHAT? * I think that this is definitely the right way to go and it could eventually lead to a different business model such as that of Major League Baseball in the US where its internet channel has a subscription service that generates annual revenues of around $620m. It won’t happen overnight, but it is definitely something worthy of note. You do wonder whether other sports which perhaps don’t have the clout to win big at auction would benefit from such a move if marketed in the right way. What about things like sumo wrestling outside Japan, for instance (just an example – just insert the name of a sport that has, say, big domestic audiences but not so much of an international footprint)? Aussie Rules? Kabbadi? Something like this could spark huge interest in previously unknown sports and bring new audiences (and revenues).



LVMH ups its offer for Tiffany, Black Friday looms with the cost of returns and fake sellers and Argos splits with AO World while shops go cashless…

LVMH bets it can restore Tiffany’s shine with $16billion deal (Wall Street Journal, Ben Dummett, Suzanne Kapner and Matthew Dalton) shows that LVMH has managed to reach an agreement to acquire Tiffany for just over $16bn. Naysayers believe that LVMH will be paying for a brand that’s past its best and that has been hit most recently by lower tourist spending and a strong dollar. Supporters of the deal say that this will strengthen its position in jewellery, one of the fastest growing segments in personal luxury goods. At least now, from Tiffany’s point of view, it will not have to answer to investors every quarter (LVMH will take over this duty), which will give the brand time to develop and will benefit from the LVMH “sugar daddy” using some of its $50bn in annual revenues to invest in the future.

Given that we are now heading towards the all-important Christmas trading period, I thought it was worth talking about some of the challenges facing already-challenged retailers and makers of consumer goods. Festive period sales returns land retailers with £2.6bn bill (Daily Telegraph, Laura Onita) shows that with higher consumer spending comes higher product returns as figures from ReBound say that fashion retailers will probably see their costs rising by £606m this coming Black Friday weekend as 25% of items bought online are expected to be returned! Some retailers are better set up than others to cope with this, but then Fake sellers make Black Friday bleak for authentic firms (Daily Telegraph, Hannah Boland and Laurence Dodds) shows that there’s another challenge facing them – the proliferation of sales of counterfeit

goods. Amazon is particularly guilty of selling such fakes despite having their own “brand registry” that is supposed to protect products and it gets worse at times where the market is awash with bargain deals. * SO WHAT? * Given that many retailers are experiencing difficult trading conditions at the moment, having to deal with returns and fake sellers won’t make the job any easier. They will just have to hope that volume will more than make up for these drags on sales and profitability.

Following on from last week’s news that AO is quitting the Netherlands, Argos delivers order blow to AO World (Daily Telegraph, Laura Onita) shows that Argos will be bringing TV and white goods deliveries in-house, meaning that it will no longer be using AO World to do so. The revenue for AO’s logistics division will suffer from this but it does have new deals in place with The Cotswold Company, Aldi and Simba.

Then in Cafe society makes leap into cashless society (The Times, Arthi Nachiappan) we see that there are a growing number of retailers who are going cashless for security reasons (nothing to rob) and because of the falling number of bank branches into which they can deposit their notes and coins at the end of the day. A survey of 1,000 small businesses in the UK found that about 40% of respondents in Bristol didn’t accept cash in 2018 with 30% of businesses in Manchester, Cardiff, Birmingham and Glasgow – and 25% of businesses in Brighton – also not accepting cash. Interestingly, the UK Finance trade body said that cash made up only 28% of all payments in 2018 versus 60% in 2008. * SO WHAT? * Overall, the cost of accepting cash is increasing while the cost of digital payments decreasing and it seems that we are going down the road of becoming a cashless society. Although it is argued that society’s most vulnerable will be affected most adversely by the disappearance of cash, there are many retailers out there who see it as a boon. I wonder whether charities and people begging in the streets will suffer particularly badly as people don’t mind so much giving cash to strangers but will probably mind quite a lot about giving them their card/bank details.



Saudi Aramco fails to find cornerstone investors and Uber faces losing London…

Aramco wants states to take a stake in oil float (The Times, Miles Costello) gives us the latest on the Saudi Aramco deal which is now trying to get neighbouring states to buy into the deal after international investors gave it a wide berth. Malaysia’s Petronas and Russia’s Lukoil are among those who said that they will not be investing. The state-owned oil company has seen the likes of the Kuwaiti Investment Authority, the Abu Dhabi Investment Authority and Singapore’s GIC recently and presented yesterday to investors including the state-owned Investment Corporation of Dubai. However, the flotation itself remains popular with retail investors. * SO WHAT? * Usually, in deals like this, the company likes to get in place a few big institutional investors to take a decent stake because they tend to buy shares and hold for longer. In theory, this means that these “cornerstone investors” become a stabilising influence on the stock (because they don’t sell it

after holding onto it for five minutes). Being popular with retail investors is all well and good but can lead to more volatile share prices because their movements tend to accentuate upswings and downswings as greed or panic take hold. Mind you, Saudi Aramco is only floating a rather weeny 1.5% of itself so I guess that, at the end of the day, it doesn’t really give a toss. It probably won’t matter in the grander scheme of things, but the fact that so many big names are not keen to touch it would suggest that it really is a bit of a stinker despite all the incentives. As the saying goes, you can’t polish a turd (although the company is desperately trying to roll it in glitter 😜).

Things are getting rather serious in Uber in last-ditch talks to extend London licence (Financial Times, Tim Bradshaw) as the ride hailer faces the real possibility of Transport for London letting its licence lapse. This is not good for Uber because London is one of five cities (along with New York, Los Angeles, San Francisco and Sao Paolo) that accounted for almost 25% of the company’s gross bookings last year. Rivals such as Ola, Kapten and Bolt have benefited from Uber getting caught up in a crackdown on passenger protection and driver vetting. Uber’s licence is set to expire just before midnight tonight! Neither side has made an official announcement as yet.



And finally, in other news…

I thought I’d leave you today with the clever/adventurous dog in Dog puts car in reverse and drives around in circles for an hour (Skynews Impressive!

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Some of today’s market, commodity & currency moves (as at 0902hrs green is up, red is down). THIS IS INTENDED AS A ROUGH GUIDE ONLY!

FTSE 100 *Dow Jones *S&P 500 *Nasdaq**DAX *CAC-40 *Nikkei **Shanghai **
7,328 (+1.19%)27,831 (+0.06%)3,108 (-0.02%)8,52013,160 (-0.07%)5,889 (-0.09%)23,113 (+0.32%)2,885 (-0.63%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

(markets with an * are at yesterday’s close, ** are at today’s close)