Thursday 30/07/20

  1. In TECH NEWS, Big Tech is roasted, Spotify strengthens podcasts, TikTok gets a chunky valuation and Qualcomm signs with Huawei
  2. In CORONATRENDS NEWS, UPS and FedEx get pricing power, Shopify overtakes eBay, UK consumers pay down debt and landlords overhaul rents for retailers
  3. In HIGH STREET/RETAIL NEWS, Next thrives, Aldi hires and Pizza Hut looks tricky
  4. In INDIVIDUAL COMPANY NEWS, Kodak goes through the roof, GSK has good and bad news and Universal agrees a key deal with AMC
  5. AND FINALLY, I bring you a lockdown song..



So Big Tech gets a roasting, Spotify beefs up, TikTok gets a price tag and Qualcomm signs with Huawei…

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Big Tech bosses told they have ‘too much power’ (Financial Times, Dave Lee, Hannah Murphy and Kadhim Shubber) chronicles the first day of grilling in front of Congress (well, virtually). Lawmakers homed in on things like Amazon’s treatment of third party sellers (they are accused of copying their ideas and/or undercutting them) and Facebook’s acquisition of Instagram (this eliminated a potential competitor) among loads of other stuff. * SO WHAT? * This is the first time that all four chief execs of Amazon, Apple, Facebook and Google have been involved in the same hearing and it is the first time that Amazon’s Jeff Bezos has had to address Congress in person. At the end of the day, the subcommittee has no authority to take direct action against any of the companies, but the report that they publish towards the end of the year after the hearing could be used to drive changes in antitrust laws.

Spotify aims to be the big noise in podcast war (Daily Telegraph, Laurence Dodds and James Cook) looks at Spotify’s efforts to build up its podcast offering as it announced yesterday that it had increased the number of monthly active users by a healthy 29% from the second quarter last year. Recently it paid Joe Rogan $100m for exclusivity on his podcast (and its share price value shot up by $1.7bn in 23 minutes after that announcement) but the Swedish company has now signed up Michelle Obama, Kim Kardashian West and the documentary show This American Life. * SO WHAT? * Interestingly, the number of users listening to podcasts only rose by 19% over the year, but the AMOUNT podcast listeners consumed has almost doubled. The company said that “podcast advertising outperformed in the quarter with momentum continuing

into July”. Apple used to be THE place for podcasts a few years ago, but given that Spotify has 138m subscribers versus Apple’s 60m, it now has a very large potential audience that it could tempt with new offerings. One of the reasons why Spotify has been able to develop so quickly on podcasts is that they have been keen to progress past the existing tech – which relied on distribution via a system called RSS that lists and directs users to audio files hosted ELSEWHERE. Spotify’s podcasts are hosted and played entirely within the app itself which means that it gets much more data on listeners and listening patterns which, in turn, allows it to have more control over the placement of personalised adverts AND gives it more to offer advertisers in the way of user data. Increased revenues will then, in turn, attract more podcasters. Nice.

TikTok valued at $50bn in run-up to potential takeover (Daily Telegraph, Hasan Chowdhury) puts a figure on what the video app might be worth by investors who are considering taking a majority ownership of the viral video app. This would imply a valuation of 50 times its estimated 2020 revenue, which would make it one of the world’s most valuable social media companies. Just to put that in perspective, rival Snap is now on 15 times its estimated 2020 revenue and is currently worth $33bn. TikTok remains under federal government review and a decision on whether to ban it or not will be made in the near future.

Qualcomm inks licencing deal with Huawei despite US-China tensions (Wall Street Journal, Asa Fitch) shows that the US mobile phone chipmaker Qualcomm has signed a long term deal with the embattled Chinese smartphone maker to licence its patented technologies for Huawei’s use despite the current tetchy relationship between the US and China. Qualcomm said yesterday that it would get a $1.8bn lump sum payment from Huawei for previously unpaid licencing fees. It added that this would give it a significant boost to future sales, but didn’t expand on how big that boost would be but its share price rose by 12% in after-hours trading on the back of this news. * SO WHAT? * This is a particularly surprising development considering what’s going on between the US and China at the moment. Clearly Qualcomm is unconcerned by any potential ramifications!



UPS and FedEx get pricing power, Shopify beats eBay, UK consumers prefer to pay off debt and landlords change tack on rents…

The coronavirus continues to alter the way we live and how companies do business and Coronavirus shifts pricing power to UPS and FedEx, and they are using it (Wall Street Journal, Paul Ziobro) shows that two of the biggest carriers are raising prices due to a major uptick in demand as online shopping activity continues to grow. Retailers need them more than ever now, but the carriers’ capacity is also being tested. * SO WHAT? * I would have thought that this is going to make things even more difficult for offline retailers who have eeked their way through lockdown by keeping online sales going but you can’t blame the carriers using such an opportunity to make a bit more money.

In Shopify overtakes eBay on sales as it swings to profit (Daily Telegraph, Matthew Field) we see that spending on Shopify, the Canadian e-commerce specialist that enables companies to build and run online stores, has overtaken eBay for the first time ever as revenues shot up by a whopping 97% as retailers flocked to it during the pandemic. Despite its success, it chose not to give out forecasts for the next quarter citing the unknown impact of the coronavirus. * SO WHAT? * Shopify has done extremely well over lockdown – and while it is remaining cautious about the near future, I would have thought that it will continue to see demand (although potentially at less frenzied levels) as retailers try to prepare themselves for a potential second wave. EBay may well have to take a long hard look at itself as it has clearly missed a trick here. Shopify’s share price has shot up by about 160% so far this year!

Nearer home, Consumer revival fizzles as households opt to clear debts (Daily Telegraph, Russell Lynch) cites the latest data from the Bank of England which shows that consumers are still preferring to pay off debts rather than spend despite shops starting to open last month.

Household borrowing is “significantly weaker” than the year preceding the outbreak and could be a sign that people are trying to clear debts ahead of an expected unemployment crisis. * SO WHAT? * This is good on the one hand, as household debts were heating up somewhat in the last few years, but the thing is that the economy needs consumers to spend in order to grow. If they just sit on the money, things will just get worse for the economy and there will be more job losses, resulting in the situation getting even more dire.

Given the tricky situation that more and more retailers are finding themselves in, Retailers and landlords do battle over the future of leases (Financial Times, George Hammond, Leila Abboud and Alistair Gray) shows how one landlord, Capital & Counties (which owns London’s Covent Garden market that is usually teaming with tourists), is having to change its normal way of doing things and offer some tenants variable leases where rents depend on how much turnover they generate. Legal & General shakes up rules of retail renting (The Times, Louisa Clarence-Smith) tells the same story, reinforcing the realisation of landlords that the days of upward-only rent reviews are over if they want to have any tenants left! Mind you, it’s not just retail that’s changing, Exodus from the office to knock chunk off rents (Daily Telegraph, Tom Rees) shows that offices are expected to see downward pressure on rents as more staff work from home. 90% of estate agents and landlords expect firms to reduce their office space in the next two years, according to findings by the Royal Institution of Chartered Surveyors. In addition, over 50% of commercial property insiders expect offices to move out of central locations, moving closer to where their staff live. * SO WHAT? * The outbreak has forced a lot of changes in behaviour and although I don’t think that offices are completely dead, their usage is definitely going to have to evolve. As for retailers, we have seen more and more gaps appear in our high streets over the last few years and I think that the catastrophe has forced previously deaf landlords to the negotiation table. It will be interesting to see whether variable rents will just prolong the agony or whether they will be enough to get retailers through this difficult period.



Next does well, Aldi wants more staff and Pizza Hut wobbles…

In mixed news today on the UK high street, Next expects to remain in profit as sales partially recover (The Guardian, Mark Sweney) shows that its second quarter sales decline of 28% was actually better than expected and it actually went on to upgrade its annual profit guidance. Stores in retail parks did a lot better than outlets in malls and town centres and pretty much everything apart from formal clothing did well under lockdown. It will continue to improve capacity of its warehouses in order to cope better with online orders. * SO WHAT? * This is a solid performance by the high street stalwart and shows that

they were largely successful in reacting well to the challenges of the pandemic. If they can consolidate this now, they stand a decent change of getting through a second wave – if there is one.

Aldi to take on 1,200 new employees in UK in expansion drive (The Guardian, Mark Sweney) highlights some rare good news in the retail sector as it continues its plans to expand store numbers, but then on the other hand, Pizza Hut considers insolvency as Covid-19 crisis threatens jobs (The Guardian, Jasper Jolly) shows that the company is considering a CVA, among other things, as it continues to suffer in the wake of lockdown. Although it hopes to benefit from the government’s “eat out to help out” voucher scheme as most of its outlets are now open, it may not be enough to ensure the company’s long-term survival given that the UK’s casual dining scene was already in dire straits before coronavirus came along.



Kodak’s share price goes moon-bound, GSK has mixed news and Universal makes a key agreement with AMC…

Talking about drugs, Glaxo warning as it agrees deal for 60m vaccine doses (Daily Telegraph, Hannah Uttley) shows that it struck a deal with the government for its potential Covid jab on the one hand, but also warned that its non-coronavirus related vaccine business was pretty weak as countries focused on the current situation.

In other bits of interesting news today, Kodak shares rise nearly 1,500% on Covid drug loan deal (Financial Times, Eric Platt and Kadhim Shubber) highlights the stellar performance of Kodak shares as the Trump administration offered the company a massive lifeline to make

coronavirus drug ingredients (it offered Kodak a $765m loan to produce the ingredients under the Defense Production Act). This is an incredible performance given that it emerged from bankruptcy back in 2013! Wow!

Then in Universal-AMC deal shrinks cinema’s ‘theatrical window’ (Daily Telegraph, Chris Johnston) highlights a potentially groundbreaking deal between AMC, the world’s biggest cinema operator (and owner of Odeon), and Universal Studios top cut the gap between when it shows movies on the big screen and when they go on premium video on demand from the current 90 days to just 17. * SO WHAT? * This could be massive. The argument here is that studios make most of their box office on the first three weekends – and they can make even more by sharing revenues from video-on-demand. Surely everyone else is going to have to follow suit, no? No doubt the success of Trolls World Tour – which made $100m online under lockdown, which is as much as its predecessors made at the box office – helped to convince them to embrace each other rather than continue to fight.



…in other news…

I thought I’d leave you today with a song, made under lockdown, by a London-based Japanese superstar that most of you will never had heard of in J-pop star Utada Hikaru filmed all of her newest video in her lockdown home, and it’s beautiful (SoraNews24, Casey Baseel).

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Some of today’s market, commodity & currency moves (as at 0752hrs 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 **
6,131 (+0.04%)26,540 (+0.61%)3,258 (+1.24%)10,543 (+1.35%)12,822 (-0.10%)4,959 (+0.60%)22,366 (-0.12%)3,287 (-0.23%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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