Wednesday 06/02/19

1. In MACROECONOMIC NEWS, Trump resets on the border wall, Italy and France drag the eurozone closer to recession and the UK services sector flatlines
2. In TECH NEWS, Apple gets some bad news, Snapchat’s parent has good news and Houseparty has ambitions
3. In HIGH STREET/RETAIL NEWS, Sunrise buys HMV while estate agents and Ladbrokes employees suffer
4. In STREAMING NEWS, the BBC teams up with Discovery and Disney outlines its plans
5. In OTHER NEWS, I bring you the opening of the Sapporo ice festival. For more details, read on…

So Trump changes tack slightly on the wall, Italy and France drag the Eurozone down and the all-important UK services sector slows right down…

I don’t want to go on about this too much because although it’s important, there’s a whole ton of noise on it BUT Trump seeks to reset border-wall debate (Wall Street Journal, Rebecca Ballhaus and Peter Nicholas) shows that Trump has adopted a slightly less aggressive stance in his renewed call for the border wall by not repeating recent threats to declare a state of emergency to get funding. He called for all parties to work together and suggested that there would be some flexibility on timescale. During his 82-minute State of the Union address he also announced more details of his second summit with North Korea’s Kim Jong Un. * SO WHAT? * So far so meh, but Trump’s recent re-opening of the government may only be temporary as Congress and the White House have until February 15th to agree on budgets INCLUDING spending on the border barrier otherwise 800,000 federal workers could have to go without pay once again and/or he could still declare a national emergency, which would release funds to finance the wall’s construction. The saga continues…

Italy and France push bloc to the brink of recession (Daily Telegraph, Ambrose Evans-Pritchard) takes a look at the eurozone’s rather precarious state at the moment. Chris Williamson, from IHS Markit, said on European manufacturing that “the worst may be yet to come: new orders received by factories are declining at the steepest rate for nearly six years and new business inflows into the

service sector have stalled…Italy is in its steepest downturn for over five years. It’s clear that the business environment is at its most challenging since the height of the region’s debt crisis”. There is also the looming problem of France’s banks being hugely exposed to Italy’s burgeoning debt – BNP Paribas and Credit Agricole hold over half of the exposure of the European banking system to Italy’s debt. * SO WHAT? * I keep pointing out current Eurozone weakness, so apologies for banging the drum about this somewhat, but if you couple Italy and France’s woes with Germany’s current problems you have an economic bloc that is highly vulnerable to any external shock at the moment – and with the interest rate already at zero, there are less tools in the box to fix what may be about to happen.

UK services sector flatlines as Brexit fears slow economy (The Guardian, Larry Elliott) is a rather unsurprising headline, but the article highlights the service sector’s weakest performance since the immediate aftermath of the referendum as the latest Cips/IHS Markit Purchasing Managers’ Index for the services sector indicated that the UK economy is slowing right down, with Chris Williamson (yes, him again!) pointing out that “service sector growth ground almost to a halt in January, matching similar disappointing news in the manufacturing and construction sectors. The last three months have seen the economy slip into its weakest growth spell for six years, and indicate that GDP likely stagnated at the start of 2019 after eking out modest growth of just 0.1% in the fourth quarter”. * SO WHAT? * Everyone is tearing their hair out over this because the services sector accounts for almost 80% of our GDP, so if this goes down, we ALL feel the effects. Pessimism will continue to reign until we get more clarity on Brexit.

Apple gets hit with some bad news, Snap bounces and Houseparty wants to go its own way…

Apple to pay hundreds of millions of euros in French back-taxes (Financial Times, Tim Bradshaw and Harriet Agnew) heralds some bad news for Apple as French authorities have ordered it to pay a hefty amount of back taxes after an audit was conducted into its business stretching back to 2008. This probably isn’t the end of the matter considering that Google actually succeeded in overruling something similar a couple of years ago – but then again the whole matter of big tech companies paying low taxes is not going away and there seems to be growing movement by governments to crack down on this (although no-one can agree on a pan-European digital tax because some countries – such as Ireland – would be shooting themselves in the foot for doing so). Apple retail chief Angela Ahrendts leaving company in April (Wall Street Journal, Tripp Mickle and Robert McMillan) signals another bit of bad news for the company as she was seen to be a bit of a legend and a potential successor to CEO Tim Cook. Her original remit was to revamp Apple’s stores and improve staff morale when she was taken on in 2014, but critics say that she didn’t particularly move the needle despite being clearly very competent. * SO WHAT? * All is not rosy at Apple and I suspect that there will be more reshuffling in the background as the company faces continued headwinds in iPhone sales. It can say all it wants about moving from a hardware business (selling iPhones) to a services one (iTunes, cloud etc.) but there’s that tricky in-betweeny time that it needs to address.

There’s good news for the one-trick pony in Snap’s revenue jumps, loss narrows (Wall Street Journal, Georgia Wells) as Snapchat’s parent company has made good progress towards profitability, according to its fourth-quarter results out yesterday. The company unveiled record quarterly revenues (up by 36%) and much-reduced losses due to a sharp rise in online advertising. The good news powered the company’s share price up by 22% in after-hours trading.

* SO WHAT? * Snap has never been profitable and faces a number of difficulties at the moment – how to break out of its niche appeal to teens and young adults, the continued threat of Instagram and the ongoing loss of users on Android devices. On the plus side, it has benefited from the growth of digital advertising (where it is expected to account for a 0.5% market share versus Google’s at 31.5% and Facebook’s at 20.5% according to research firm eMarketer), the number of Apple users is increasing and users are spending more time on it. IMHO, it still needs to do something more exciting with its offering to make people spend more time on it, which will in turn lead to more advertising revenues. Having Facebook constantly looking over its shoulder isn’t going to make this easy!

This video-chat app wants to be more like Fortnite, less like Facebook (Wall Street Journal, Betsy Morris) is an interesting article that takes a look at video-chat app Houseparty, which has built up a following among teenagers by being an anti-Facebook. The app lets users see and talk to each other in real time and the founders were originally keen to focus on engagement between small groups of friends rather than user growth and advertising revenues. However, the time has obviously come for the company to monetise its tribe and so it has started to offer games such as “Heads Up!”, publicised by the likes of Ellen DeGeneres and Christina Aguilera no less! The company now plans to add more games and content based on shared interests so that its model can be more like Fortnite where users buy things to enhance their experience and less ad-driven than the apps like Facebook and Snapchat. * SO WHAT? * This sounds like a very interesting offering as it has something its user base likes (about 60% are under 24 and they average 60 minutes a day on the app, according to Houseparty’s parent company Life On Air) but the key, as always, is how to monetise this – especially considering that this particular demographic is seen to be quite fickle. Maybe Snap could learn something here?

HMV gets a Canadian buyer and estate agents and Ladbroke staff suffer…

In a quick blast on the UK high street, HMV sold to Canadian group Sunrise Records (Financial Times, Jonathan Eley) marks a new chapter for the veteran UK music retailer as Sunrise Records & Entertainment will buy 100 HMV stores across the UK, safeguarding 1,487 employees, but shut down 27 stores (including the Oxford Street flagship) with the loss of 455 jobs. The stores that remain open will continue to trade as HMV, with four stores continuing to operate as Fopp. Sunrise previously bought 70 HMV stores from former owner Hilco in Canada. * SO WHAT? * Great news for many of the employees, but selling CDs and DVDs is a declining business – so let’s hope that Doug Putman’s plans to focus on vinyl and back 

catalogues works, otherwise this could be a slow death. Sunrise was late into the bidding process as Mike Ashley’s Sports Direct was the early frontrunner, but I suspect that Sunrise won given their expertise in this area and their previous recent history with HMV in Canada.

There’s less good news for employees in Estate agents are latest high street casualty as housing market turns (Daily Telegraph, Jack Torrance) as estate agent LSL announced that it’s going to close over 100 branches and slash jobs due to the continued slowdown in the housing market. This will affect the company’s Your Move and Reeds Rains brands. Then Ladbrokes staff told to sign gamblers to online accounts to avoid redundancy (The Guardian, Rob Davies) shows how employees of Ladbrokes Coral are being told to sign up as many gamblers as possible to online accounts to keep their jobs. According to letters to employees, the bookmaker is aiming to close up to 1,000 of its 3,500 shops in the next 18-24 months as a direct result of the government’s recent crackdown on Fixed-Odds Betting Terminals (FOBTs).

The BBC and Discovery agree to a tie-up and Disney looks to the future…

BBC and Discovery to pool wildlife programmes in streaming deal (Financial Times, Matthew Garrahan) highlights a deal to merge their history and wildlife programming libraries to make a new global subscription service. The wildlife streaming service will be owned by Discovery, with the BBC licensing its entire library of natural history programming including the likes of Blue Planet and Dynasties. The service won’t be available in the UK in China, but will be available in all other big international markets and will be officially unveiled in the next few weeks. * SO WHAT? * I referred to this change in yesterday’s Watson’s Daily – and I expect there to be more deals like this as broadcasters and content makers try to futureproof themselves against the march of Netflix and others. 

Disney offers fresh details on plans for digital future (Wall Street Journal, Erich Schwartzel and Maria Armenal) looks at how the world’s largest entertainment company is going to refocus itself as it gears up for a new streaming segment, called Disney+, as it unveiled its latest quarterly earnings. The company’s move into video-streaming is being closely watched after its very high profile $71bn deal last year to acquire major assets of 21st Century Fox. * SO WHAT? * This is going to be a huge gamble for the company as it is estimated that it will lose $150m a year in licensing income by taking Disney movies and shows off Netflix which it hopes to recoup in subscription fees for its own service. Disney already operates an ESPN-branded streaming service (called ESPN+) and will add another service, Hulu, in the near future when all the details are finalised following the Fox deal. Exciting times!

And finally, in other news…

I thought I’d leave you today with something I’ve always wanted to go to but never managed to organise myself in time: Sapporo Snow Festival 2019 opens in Japan (SoraNews24, Oona McGee https://tinyurl.com/y8tpukb6). The sculptures are amaaaaazing!