Wednesday 26/05/21

1. In TECH NEWS, we see the takeaways from Epic/Apple, Amazon announces more content – and gets taken to court – as Huawei releases its Android alternative and TikTok’s rival Kuaishou suffers
2. In CONSUMER-RELATED NEWS, it seems that we are spending money on houses, sofas, restaurants and baked goods while we will be encouraged to spend on cruises but not on Bitcoin
3. In MISCELLANEOUS NEWS, Amigo gets a kicking and China overtakes Germany on UK imports
4. AND FINALLY, I bring you a very weird model…

So we see the upshot of the Epic/Apple case, Amazon announces more content – and a lawsuit – while Huawei unveils its Android alternative and TikTok’s rival Kuaishou loses ground…

*** For those of you who are lawyers (or aspiring lawyers!), I’m doing my monthly roundup of business and financial markets developments with insightful legal overlay from Jake Schogger of the Commercial Law Academy. It’s going to be a real humdinger – so if this is something you’d be interested in, please head HERE to register (you will have to do this to attend the event). It will start at 5pm TONIGHT and will run for ONE HOUR ***

Epic vs Apple: what we learnt from the trial that could change the iPhone (Financial Times, Patrick McGee) highlights some of the key takeaways from the court case so far as the judgment appears to have become increasingly hard to call. Epic claims that the App Store has a 78% profit margin, representing a monopolistic gateway that developers have to pass in order to get to iPhone users. Apple did not want to discuss the details, arguably implying that it is aware of the anti-competitive nature of its behaviour. Apple CEO Tim Cook was also evasive when faced with questions about why the company cut commissions for some apps from 30% to 15% (was it because it was under investigation or because of competition?). There were questions asked (by the Apple side) as to why Epic Games was bringing the court case in the first place given that only 7% of Fortnite’s revenues came via the App Store. * SO WHAT? * A ruling is not expected for several weeks. I would be willing to bet at this stage that, at the very least, the 30% commission that Apple has charged FROM THE OUTSET for app sales will have to come down. In terms of overall impact, though, it’s hard to tell what effect it’ll have on Apple itself. This has been a bit of cloud hanging over Apple since Epic Games brought the challenge but it has still grown at rapid pace anyway! I would have thought that whatever the judgment will be, Apple’s share price will rise quite sharply because it would potentially draw a line under the whole thing and let them move forward. OK, so Apple wants to rely increasingly on recurring revenues from the services segment and less on hardware sales going forward, so this may dent things a bit. But then again, I think it’s got the volume from its user-base, so I wouldn’t be too concerned unless the judge really does a number on Apple.

Amazon to stream major National Theatre plays in UK and Ireland (The Guardian, Mark Sweney) shows that Amazon is partnering up with the National Theatre to stream four high-profile live-recorded stage shows from 11th June for Amazon Prime customers – another incremental addition to its existing content, albeit on a way smaller scale than the deal it is currently looking to finalise with MGM. But

then Amazon accused of abusing monopoly power in lawsuit (Daily Telegraph, James Titcomb) highlights a lawsuit being brought against the e-tailing giant as it stands accused of illegally raising prices by forbidding merchants on its website from selling at lower prices elsewhere. The Attorney-General for the District of Columbia brought the case yesterday, saying that Amazon was abusing its monopoly power and it broke antitrust law. * SO WHAT? * This is the first competition lawsuit being brought by a regional or national government against Amazon on its home turf. Funnily enough, Amazon had to stop binding sellers to these restrictions in the UK in 2013 following an Office of Fair Trading investigation and although the same thing happened in the US in 2019, Amazon sneakily replaced the clause with something very similar. Amazon is clearly not above dodgy behaviour (especially towards third party sellers), so it’ll be interesting to see how this plays out.

In other tech news, Huawei to release software that rivals Google’s Android (Daily Telegraph, James Cook) shows that the embattled Chinese telecoms giant is going to launch its own smartphone OS, called Harmony, next week. It hopes to have 300m devices on Harmony by the end of this year and it is also looking to make its own app store. * SO WHAT? * Huawei has had to accelerate the development of Harmony because of US sanctions blocking access to many services. The bans have really hit Huawei hard – recent figures showed that their handset sales took a massive dive as a result – and although this sounds like a brave rebound, I would have thought that a new OS is bound to have LOADS of bugs. Still, they have to release something and maybe it will become – over time – a decent rival to Android.

Then in Shares in TikTok rival Kuaishou tumble as user spending falls (Financial Times, Ryan McMorrow) we see that TikTok’s main rival in China saw an 11.5% fall in Hong Kong trading yesterday on evidence that users just aren’t spending so much on its live-streaming services. Kuaishou is facing increasing competition from Douyin (the TikTok of China) as well as online shopping groups such as Alibaba and Pinduoduo which are now also selling goods via live streaming. * SO WHAT? * This comes at a tricky time for the Chinese tech sector which is facing scrutiny from the Chinese authorities at the moment and Kuaishou is one of the thirty-odd companies who have been ordered to address their anti-competitive practices. It used to make virtually all of its revenues from taking a cut of the “tips” that users paid to live streaming hosts, but new rules that have limited this practice have put paid to that. A subsequent growth in ad revenues helped to narrow the shortfall but overall sales were weak. I think it’s interesting to see how this live streaming monetisation model has developed so much in China and it’ll be interesting to see whether this is something that becomes more widespread outside China.

We’re spending money on houses, sofas, restaurants and backed goods, encouraged to spend on cruises but discouraged to spend on Bitcoin…

So as Covid restrictions continue to lift, it seems that we are spending money on property – as per Value of UK house sales forecast to leap 46% this year as boom continues (The Guardian, Rupert Jones), which cites data from property website Zoopla which implies that the 2021 property market will be the hottest it’s been since August 2007 – and furniture to fill those properties. This has given some companies enough confidence to come to market – as per Made.com to raise £100m in London IPO (Financial Times, Jonathan Eley), which puts some figures on news we already know although it is a moot point as to how it is actually different from every other furniture seller out there.

We’re also spending money in restaurants, according to Wagamama enjoys rebound as customers dine alfresco (Daily Telegraph, Hannah Boland), and on baked goods – enough to embolden owners’ confidence as per Luke Johnson launches fresh attempt to sell bakery chain Gail’s (Financial Times, Alice Hancock). * SO WHAT? * I think that the main upshot of this kind of news is that consumers

are spending and businesses are really trying to capitalise on this – and quite rightly so. Some may argue that there is a whiff of “top of the market” with this and that businesses are trying to sell themselves or float on the stock exchange to protect against any potential headwinds while there’s a post-lockdown feelgood factor going on. This is all stuff that the central bankers need to take into consideration when thinking about the interest rates IMO.

Interestingly, it seems that we are going to be encouraged to spend on cruises in Cruises face a choppy voyage back to profitability (Financial Times, Brooke Masters), which shows that bookings for cruises are particularly strong for early 2022 as fans return. The industry faces some short-term difficulty as the memory of the Diamond Princess as poster child for the Coronavirus early on in the pandemic is still fairly fresh in everyone’s minds, but it is trying to put a brave face on it and is taking heart from 2022 demand. However, it looks like we are going to be actively discouraged from spending money on cryptocurrency in ‘Time to buy’ bitcoin adverts banned in UK for being irresponsible (The Guardian, Mark Sweney) as the Advertising Standards Authority has banned the high-profile ad campaign that has been plastered all over the London Underground and buses with the strapline “If you’re seeing bitcoin on the underground, it’s time to buy”.

Amigo takes a major blow and China overtakes Germany…

High-cost lenders suffer as judge rejects damages plan (The Times, Patrick Hosking) heralds a bad day for the high-cost credit industry as the High Court surprised everyone by rejecting a plan by Amigo, the guarantor loans specialist, to cut the compensation it would have to pay to mistreated borrowers. Share in Amigo fell by more than 50% on the news – and those of larger rival Provident Financial also fell (by “only” 12.7%) as investors expressed alarm. Amigo had said in the past that it would go bust if it didn’t get its way but the FSA financial regulator said that it believed that it could come up with a fairer scheme for its customers. * SO WHAT? * What a come-uppance for the company that makes money by ripping people’s faces off with sky-high interest rates. Yes, they provide a service – but at huge cost.

Then in China replaces Germany as UK’s biggest import market (The Guardian, Richard Partington) we see that China is now bigger than Germany in terms of being the UK’s biggest single import market. This has been mainly thanks to demand for Chinese textiles used for face masks and PPE, according to the latest figures from the Office for National Statistics. Imports from Germany have fallen by about 25% between the start of 2018 and Q1 of 2021, whereas goods imports from China to the UK have gone up by 66% in the same time period. Germany has pretty much been the UK’s biggest import partner since records began in 1997 (with the exception of six months at the end of 2000 and the beginning of 2001) and, funnily enough, Brexit has been a big factor in this decline. However, the EU as a whole is still the UK’s largest trading partner despite everything. Will this become a permanent thing I wonder or will an equilibrium eventually be reached??

…in other news…

I thought I’d leave you today with one of those “WTF” moments in Japanese squat toilet plastic model kit: Weird, gross, or both? (SoraNews 24, Casey Baseel). Who even came up with this idea?!?!?