Curated by Stuart Fogarty stuart@admaticallycom for AFAO'Meara Advertising, Streamabout The Video Agency and Admatic Ireland.
All comments will be posted - promise!
Amazon have launched 'Amazon Video Direct', a self-serve video platform (like YouTube is) but lets creators earn money on advertising share (a 'per the minute streamed' payment). It's a big head-to-head with Google's YouTube. YouTube make 2 Billion dollars a year and have 20% of the market. It's directed at professional creators (like Streamabout) with only HD formats allowed (so targeting Vimeo quality we'd guess). You can select various ways to have your video monetised - streamed, download, rent, buy - even subscription. And they're promoting it through their 'Stars' programme giving a share (small we'd think) of a million dollars a month fund, based on engagement. It's all about quality, all about Premium - good video. But of course, this way it's a lot cheaper than buying content and Amazon spend circa 3 billion dollars a year doing that. Better to get quality video on a revenue share. They'll also give full analytics so you know how well you're doing. It shows yet again, the growth in online video viewing and the need for corporates to be involved. Perhaps with a programme series? Yes we can.
Amazon, in a deal with UK retailer Morrisons, is going to sell fresh produce. Under their 'Amazon Pantry' brand launched last year, subscribers (to Amazon Pantry and Prime) will be able to get fresh fruit/veg and some frozen products within, 60 minutes delivery. It's a huge sector (probably £10 Billion pa) but instant/quick delivery of fresh produce is a real opportunity and, it may generate more volume in itself. Added to that, it's something else for Amazon to sell. Hmmmm. Ocado's shares are tumbling as a result now (-9%) because of the damage that this deal might do. Albeit Ocado has more than £1 billion in revenues but it too 'had' or has a deal with Morrisons as what they claimed was "exclusive" with "the contract preventing them from launching another service". Indeed.
'Oyster', often called 'The Netflix of books' is to close its doors. Which surprised all of us! Started in 2013, the concept was to have unlimited access to books for a monthly fee of 9.95 usd. Just seemed like a great idea...however, its demise is blamed both on a lack of publishers (so a lack of availability of some books) and competition from Amazon Kindle through their own "unlimited" subscription model. Scribd is still going strong. To be fair too, Oyster seems to be winding down with promises of subscription returns on so on. Really such a pity for such a great little idea.
Interesting data from Cable Company Time Warner (CNN, TNT, Cartoon Network, TBS) in the US for Q4 2014 just out, giving it a not too optimistic view for 2015. They're really suffering from the decline in traditional TV viewing as viewers switch to other devices and how that's starting to affect advertising spends. Netflix, Amazon, Hulu are starting to make inroads both into audiences and therefore, into Ad dollars. Time Warner Revenues were down in the last quarter meaning an uplift of only +3% for the year. But it's revenue is 27.4 Billion usd so that's still very strong. Operating profit was down nearly -6% on the year. 21st Century Fox has also reduced advertising expectations because of the slow advertising TV market and Nielsen reported live TV viewing down nearly 13% and Ad spends are down reflecting that. Time Warner are now focused on bundling more their digital assets with traditional TV buys and have recognised the shift. It's the first full and clear indication that TV audiences decline and as they do, so will advertising income. Nothing surer. Advertising money chases audiences as sure as night follows day. And when audiences shift, so too will advertising spends - just surprising that it has taken so long.
After all the talk, interesting to see Amazon's announcement this weekend that it will launch a Sunday delivery service. Starting in 7 areas in the UK but becoming the norm, it's about getting deliveries to people who might miss them (or not be around to get them) during the week. It will be a permanent feature in London from the get go. They've already tested them in December and they are free to members of Amazon's 'Prime' Service. This is nothing whatsoever to do with digital. Simply, it's just better business that happens to come from a digital business. If people want Sunday deliveries (and clearly Amazon's test show they do), then give it to them. There is no reason why existing traditional retail couldn't have done it and yet because they haven't, they'll now scramble to keep up. Online sales already account for about £1 in every £5 spent. Better customer service through Sunday delivery, will grow that. Traditional retailers have been dealt another blow. Hard to think of an excuse for them though. This is just, Better Business.
Interesting retail data from The Financial Times. Best Buy, an electronics chain, saw a 15% rise in online sales in Q4 to 499m usd. Home Depot, the DIY stores, online rose by 50% to 600m. Walmart online sales expected at 13 billion for 2014. Very strong rates of growth but ecommerce is still low in their overall sales. Only 6% at Best Buy, 3% at Home Depot and less than 3% at Walmart. Whereas generally, online now accounts for an average of about 11% of all retail sales. Consequently in fact, these traditional 'bricks and mortar' retailers have a lot of catching up to do. In particular, they need to win against pure online retailers (such as Amazon) who are offering better shipping times and better customer service. Amazon will do 75 billion online this year. The view is to be able to offer both experiences (online and offline) is the ideal notably at stores (like Home Depot) where customers feel they need to have the advice of a sales person. Indeed, 'click and collect' is seen as a classic example as to how to compete with Amazon's same-day delivery. I'm not sure they're right. Online is the new way to shop and will eventually overtake bricks + mortar. Consequently, these retailers need to focus on their online shops and start thinking like tech companies, not as pure retailers. Online is cheaper to provide (fewer staff, no high street rents/overheads) and it's better margin being direct. It's also global so provides the opportunity to sell into a new customer base, previously limited by store location. Online media is also cheaper, targeted and more effective in promoting online shopping and reduces the big advertising overhead that these large retailers hold. The switch from high street shopping to online is now well upon us and growing fast. That means that new retail ventures are starting online every day and chipping away at traditional customers of the large retailers. It has to be the focus now, instead of shops. And not a bit of both. It's what the customer wants.
Original online content is growing, to compete with traditional TV, just as expected. Following Netflix with 'House of cards' and others, Amazon have announced two new original series which they're producing. Alpha House, a comedy about US Washington Senators (with John Goodman), goes out on November 15th on Amazon instant. It is written by the great Garry Trudeau of Doonesbury fame. Betas, a series about social media start ups (yep, could be good), starts at the end of November. Silicon valley friends have their moment in setting up a new Social Media play. Both have 11 episodes. They've also 3 kids shows in production. This is the first time Amazon have produced their own original Series and no doubt, follows Netflix. It allows the online broadcasters to compete for viewers with good, quality programming and is great news again, for the online digital video sector. But it's more bad news for TV. Already being hit as viewers switch over to online low cost, programming on subscription, as well as, an ongoing obliteration of their audience by Social Media, now they have a content challenge. Their only hope was to retain viewers because of the content traditional TV offers and even this, is being eroded.
Furthermore, Netflix and Amazon are sitting on big cashpiles, and we understand that they're going to compete to buy broadcast rights for live events - notably big sporting occasions. TV will not be able to compete with them here either. Even as content providers, the recent YouTube deals show that online broadcasters, as YouTube is, are prepared to pay TV stations less for their content. So that revenue stream, small as it might be right now, is definitely reducing. And as sure as night follows day, Advertising money follows audience. More and more of it is going online. Yet, TV Stations persevere in the hope that terrestrial broadcasting will "see off" the continuing online challenge as they try to spin "good news" that's just not credible. They continue to live off in some cases, huge state aid, instead of getting into the space, embracing it and being prepared to re-formulate their model. Like newspapers have been prepared to do. The ticking clock, just got a lot louder.
LinkedIn announced this week that it has 259 million monthly active users. That's significant growth, up nearly 20 million quarter on quarter and up from 187 million last year. So more people are using LinkedIn actively. Firstly, it may reflect the general downturn as businesspeople have more time on their hands and secondly, they're looking for better business opportunities. However, it may also reflect that LinkedIn is more popular and it's just natural, organic growth. It puts LinkedIn ahead of Twitter (230 million active monthly users). That astonishes me anyway. Even more astonishing is that LinkedIn lags behind the dreadful Google+ (300 million active monthly users) which I can only think is because most of us are forced into Google+. It's hard to find one deliberate active user that I know anyway who actively uses Google+. LinkedIn posted strong revenues too of 393 million usd although Q4 forecasts were lower than expected. 62% of the revenue is still US based so LinkedIn needs to bring in more revenue from the 200+ countries in which it operates. Those countries are only accounting for 38% of revenue combined. An opportunity? That said, it's still good revenue, still strong. A quarterly loss of over 3 million usd, isn't and I just can't understand how, like Amazon, these companies can't turn profits on such extraordinarily high revenues? And if LinkedIn continues to grow its active members in the way that it clearly is, revenue uplifts must follow. They have a core market of businesspeople which in itself, has a premium value outside of just "the numbers" say compared to a Twitter. So in a way, it's a premium Social Network. A growing premium Social Network. That needs to stop losing money.
Amazon is making lots of money and losing lots of money. The darling of Wall Street (what the New York Times calls the company as "the teacher's pet") recent data on Q3, showed more of the same. Great sales with continued great losses. Revenue was up a staggering +24%, beyond expectations, to just over 17 billion usd. But it lost, 41 million usd in this quarter. They lost 274 million last year although some of that attributable to poor investment in the deals site, Living Social. But how do you generate 17 billion of turnover and still lose, 41 million? Beats me. Investors see it all as ramping up for the future, with the Amazon Share price now 10 times what it was in 2008. In particular, they see Amazon's investment in string after string of Warehouses (100+), as enabling it to become the biggest retailer in the country. Hmmmm. Amazon is still warning of a further loss in Q4 and investors are still smiling. I do think Amazon is a great company and I do think The Kindle will bring it places. However, I do not like a strategy of owning warehousing (although I understand why) because it's old economy. These services could be supplied by someone elsewhere - they are massively eating into potential profits. They require significant investment in perishing stock (which books for example, are) as well as high levels of investment in property that can quickly devalue. Maintenance is high and consistently rises. Staff are required 247. It's a little bit mad. The consistent growth in Amazon is undoubtedly superb and a real indicator that what they're doing is right. However, the losses cannot go on forever like this - it is truly laughable not to be able to generate a profit on these turnovers. Something is endemically wrong with cash management and that's not good long term. Investors are smiling. But for how long? I've seen it so many times before - investors will get tired of this and then things could go South. Amazon needs to make money early in 2014. Must.
The role of "Television" or "Broadcasting" is changing and indeed, those terms need new definitions. No longer should we think of "Television" being the sole domain of "Television stations". After all, consumers are now watching content in a variety of different ways. It's these changes in distribution, that's the core issue. Whether we watch content through a traditional TV set currently, it's more likely that viewers will be watching via a connected device such as Xbox or the very excellent, Apple TV next. Indeed, the myriad of choices offered by Apple TV alone, encourages viewers to watch other content than traditional TV broadcasts. It brings a lot of movie sites, YouTube channels and Social Media into the livingroom, which in turn, brings consumers massive choice. Apple TV, for a low investment, is just stunning. Where there's global choice of content, there's likely to be less viewing of domestic traditional TV "broadcasts" and the major US networks continue to lose audiences. Social Media is also getting in on the act. Twitter is trying to close the gap by becoming more involved in traditional TV through real-time conversation. Mind you, a tweet yesterday from Twitter UK saying "great to see the Xfactor bringing audiences closer and turning up the show's social soundtrack" was instantly slammed by users. Twitter are trying to become friends of the TV industry and it will fail. Twitter wants to be the 'TV Social network' that helps build audiences which in turn, means bigger audiences for Twitter. Indeed, they're showing 60 second Ads during TV shows on Twitter as an "add on" to the programming and encouraging advertisers to sync their advertising. Take a spot at a particular time on the traditional TV show and sync it with one on Twitter. In my view, they've tied their colours to the wrong mast. What connected "broadcasting" devices are bringing is choice and choice that may come without Ads (such as the current online DVD boxset "binge"). A choice that means you never miss the start, the end, or forget to record a programme because online content is not hamstrung by TV schedules. In the online world you get content, when you want it, rather than when a broadcaster decides to push it out. That is the main structural problem with traditional TV - Scheduling....rather than viewing freedom. And it's a difficult problem for TV stations to deal with, being so ingrained in their culture. Of course too, content makers (which includes traditional TV stations) have to get used to a new model, where they're prepared to give out that content to other networks, with the copyright/royalty issues that come with that. But they will in effect, become content providers rather than "broadcasters". BBC are starting on this path allowing 30 days access to content rather than a week, announced last week. Moreover, they'll allow some content to be viewed online beforeit has been traditionally broadcast. That's the sort of thinking required. The development of "live" programming (notably Sports) is going to be interesting too. At the moment, few online channels, outside of traditional TV stations, have shown an interest in providing live content because of both cost and technology issues. But they might buy it in.
The difficulty with "TV" is that distribution has changed and will change completely. If TV stations are to survive it, they have to be prepared to change their model and few, it seems to me, are. They'd rather rubbish the online experience in the hope that it will go away, which it won't. And whilst they take the seat of Nero, everything changes around them, quickly. Netflix develop original, exclusive content (winning Emmy's for their content such as 'House of Cards') but they're not the only ones as Amazon and Hulu now do the same. Big budgets too, so their content is real TV competition. Binge viewing is driving online as well, as all the content of a particular show (the full series for example) is available same day. No longer do you have to wait for weeks to get to the ending. Movie releases are following suit with some Studios releasing Movies online first. YouTube channels are developing at pace allowing ordinary content providers (be they members of the public or production companies) opportunities to broadcast. Awesomeness TV, a children's channel, now has a staggering 60 million viewers a month on YouTube. One YouTube gaming channel has 251 million. So these YouTube viewers have to be watching less traditional TV. Social Media such as Twitter and Facebook are venturing into the space albeit in a collaborative way, for now. But they will develop their own content in time with News content being their initial entry. Without any doubt, traditional TV has to change and become more online enabled and involved. Rebroadcasting of today's programmes via an App or online, doesn't cut it. It requires a complete re-think about how they create content, how they broadcast it and how they need to ditch their scheduling. Perhaps too, they have to re brand and realise that their future lies not on what they broadcast on TV sets, but rather through their website. It's their website that's king and critically, how that content is being made available. To prioritise the web over traditional, will require in traditional broadcasters, a massive mindset shift. All in all, it may be too late.....and in the eyes of this writer, it probably is because there is no sign of any dawn of realisation. None. It's gone past time to fight it.
So Wow, they were able to sell Blackberry..for a 9 dollar a share price bringing in 4.7 billion us dollars. Extraordinary. The buyer is Fairfax financial, a Canadian Insurance fund (Blackberry is Canadian too) who were also Blackberry's largest shareholder. Blackberry was, Canada's greatest star. It has come after a weekend of speculation, notably by the excellent UK 'Telegraph', when Blackberry announced losses of almost 1 billion usd in Q2 and planned to slash 4,500 jobs with shares slumping by -24% on Friday last. Shares were trading at circa 8 dollars and I remember them at 138 dollars. It had officially put itself up for sale last month having hired PWC to help. Amazon and Microsoft had considered buying it previously but Microsoft's Nokia deal put paid to that. The BBM (Blackberry messaging service) is the golden egg with 60 million users although the once dominant company has really struggled against Apple, HTC and Samsung since 2007. Blackberry once controlled half of the US market (!), now that's under 3%. The BBM service had one great advantage - as London rioters and drug dealers knew - it was hard to intercept. Hence it became popular with drug sellers and became known as 'Crackberry'. It only shipped 2.7m of its latest Z10 phones out of a planned 6.8m although it sold 5.9m smartphones in Q2, well below expectations. Apple, for example, sold 37m and the Iphone 5S sold out online.... in 5 minutes. Blackberry had slashed phone prices so effectively, they couldn't give them away. Its losses reflected a big write-down on this stock of unsold phones. The story of the downfall of Blackberry (if you call a sale of billions a downfall) is that they stuck with a corporate market and a keyboard, largely ignoring connectivity to the internet as having value. When they realised their mistake, it was too little, too late. Keyboards had their day, internet connectivity was king and the corporate market became a personal market. Executives choose their own phone for business and personal use, rather than a company bought phone. It's a sad story in one way but ultimately a good story in that they've done well to attain a good price now. Or lucky to have a shareholder like Fairfax, prepared to protect their investment and obviously being cash-rich enough to do so. Still. A once dominant brand like Nokia, bit the dust. Or has it?
The greatest rated TV show of all time. Officially. If one more person tells me 'Breaking Bad' is the best thing on television - ever! - I'll scream. And note the word Television. Everyone in Streamabout, who have a good eye for this sort of thing, are crazy about it, especially cameramen. Obsessive even. I watched 4 episodes, Series 1 and it lost me but unquestionably, I'm in a tiny, tiny minority. The show was created by Vince Gilligan for Sony Pictures, having previously written The X Files. This week's episode "Ozymandias" (episode 14, series 5... in case you're asked because fans talk like that) got a huge, perfect '10' from 12,000 reviewers on Amazon's IMDb. Which makes it into Television history. Nothing else has come close to that online reaction.
Critics went ecstatic and fans were left breathless. An OMG! reaction. The name, Ozymandias, is from a famous sonnet by Shelley about a crumbling empire. It has been talked about as being one of the best TV episodes "ever made". I kid you not. Set in New Mexico, the show premiered in January 2008 about a chemistry teacher who turns bad (or good some say?). This final ever series completes (a total of 62 episodes) on September 29th and Netflix has really helped to grow the audience and is the greatest rated TV show of all time in The Guinness Book of Records. I won't list the awards it has won, because it's just too long. But what Breaking Bad does show is that good drama, good content still works on Television and Online. It also shows that Social Media engagement in content, is more and more critical. When 12,000 online reviewers give it a '10', it makes you think that you have to watch it and so spreads the word, virally. Good shows get noticed quicker and get audiences faster, rather than the 'hit and miss' of old because of online recommendation. After all, it's the oldest cornerstone of advertising - word of mouth - and Social Media gives you that in droves. So Breaking Bad shows what can be done with traditional TV content, broadcasting online and Social Media engagement. So I for one am going back to it, to see what the fuss is all about. Or Chemistry. Yeah, I hear there's money in that?
Amazon instant video has now got fully updated with Airplay support on Apple TV. What does that mean? It means you can use their App to watch Prime Instant Video and The Amazon Instant Video store on your Apple TV. Like Netflix, it's a big upgrade for their competitor as Apple (who may control connected TV's) have reached a deal with Amazon. It also allows full integration with Amazon's IMDb which you might be familiar with and which also gives information on movie casts, soundtrack, history etc. In turn that allows them to offer you a Movie by the same Director? or including the same cast? So a lot more integration. You can also have other features which traditional TV doesn't give you; like customer reviews or ratings; like "if you like this, watch this"; like concurrent downloads; like so much stuff enhancing your viewing. The App is free and fully compatible too. Amazon, having tried to buy 'Roku' and not completing it, were rumoured to be producing their own set-top box. This may indicate that they've decided not to. As I see it, it's a clear example of a "deal" being done between a content provider (Amazon) and a device supplier (Apple). In other words, if you want your content on a device such as Apple TV, you'll need to do a deal too. Which will worry many because "free to air" on standard TV's, might not be a distribution route in the future simply because, standard TV's will phase out as they're replaced with Connected TV's. I suggest it's unlikely that your next TV will be a standard TV and more likely a connected one. And if you want to "do a deal" say as a traditional content supplier, Apple will need to be convinced that they want your content firstly. And even if they do (they may not want 'home produced' features or local content for example), you can be outbid by cash rich dotcoms to keep you off. How would Irish news for example, fit into this platform? Streamed online means moving around whilst a free App might do it? Don't know, but it will disrupt.
So this will change the world. Because it changes distribution.
All the talk of the Internet wreaking havoc on traditional media companies is changing. In fact, it's helping them!! I've stolen this from a great Article in the current August 17th edition of The Economist (cover above) which is well worth the read, called "digital pennies pile up at last". The reputable PWC reckons revenue for online media and entertainment will rise by 13% each year for the next 5. So the web is growing the entertainment business. Music, which record companies legally, stupidly, fought internet pioneers for years, is actually showing +.2% growth - the first time it's growing in a decade. Which means the internet increases royalty payments to....the very same record companies! And that's their IFPI trade group numbers. So the web is coming to their rescue as their CD and DVD sales collapse. Online radio and music streaming (Spotify etc) brought in a billion dollars in 2012. Mobile phone companies are benefitting too, by selling data to access these services whilst their call rates are going into a death spiral. YouTube are now paying small copyright fees too on music downloads. Netflix, Hulu and Amazon are of course buying rights to stream content online from traditional broadcasters. That's about 3 billion Dollars a year and rising. Online licensing accounts now for a third of the revenue growth at traditional CBS. Book sales are growing again by about 14% per year on Ebooks means bigger profits for publishers and for authors. Yes, it has meant the death of bookshops but in return, accessibility to books is far greater especially amongst the young and far more of us are reading. Digital newspapers subscriptions are working to a point too. The New YorkTimes has nearly 700,000 (!) online subscribers. The surge in smartphones, in tablets, in ipads coupled with the extension of broadband speeds are driving this growth. EMarketer, a US research firm, thinks Americans will spend more time online this year than on TV. And because people want content, 'on the go', they're becoming more prepared to pay for it. It's a fairly extraordinary turnaround that Internet companies are now becoming the saviour of traditional media companies such as publishers, record labels and TV broadcasters who tried so desperately to stop it. Instead of embracing it, encouraging it, because better access means higher sales, they were afraid of something they didn't understand. They'd have sold more far sooner, if they had. Ad revenue is bypassing Ad Agencies as it goes online. Like the book publishers, the record companies of old, Agencies are pooh-poohing it instead of selling it, embracing it. There's lessons here. Like the peasant's in Lamb's essay, we know not how to roast pork, other than to burn the house down. Interesting isn't it? You have to laugh though. Irony of ironies.
'We are Spotify, we are for music', sounds like the Pedigree Chum Campaign 'We are for dogs' and you can't help but see in Spotify's new, first, TV Campaign, influences from Apple advertising. I have no understanding of their copyline either, "Music is worth fighting for"? Sounds like a copywriter trying to be evocative without making sense. However, the point is that this is Spotify's bid to get into US Homes through TV advertising, promoting its music streaming business before competitors enter the space. And the space is hotting up. Apple, Amazon and most notably Google, are all primed to enter the Spotify space. Big players with big money. Music Streaming is different to music downloading (as in ITunes) in that it allows you to listen to tracks for a standard subscription. Launched in Sweden in 2008, Spotify currently has over 20 million active members with about 6 million paying and has a valuation of circa 3 billion usd. So it's a relatively young start-up that has grown and has trail blazed a new segment of streaming music. All from a base in Sweden. Not bad at all really. Its success hasn't gone unnoticed and hence they're now faced with big players coming into their market - always a problem for a start-up. If you're successful, others will follows. And hence therefore, this new TV Commercial to try to develop subscribers before the big boys get hold. Which is exactly the right thing to do, whether you like the commercial or not. Spotify deserves the success either way. And turning to Advertising will help it now. But it's now faced with the challenge of its young life.
Internet-only film businesses, have really declared war on Television. Netflix have invested 100 million usd in the remake of the British series, 'House of cards' with Kevin Spacey, as you'll probably know. A 26 episode series that's not on Television. Rather too, than asking people to wait week-by-week for each episode, it was all released at the same time to subscribers. Viewers could then schedule it as required, as it suited them - something which kills the rigidness of TV schedules. Indeed they produced 6 trailers. Each one targeting the particular demographic of the Netflix subscriber. So female subscribers got the weepy trailer, young males the fight scenes - another thing you can't do on traditional TV. Online content is also not beholden to advertisers...rather, is driven by subscriptions and subscribers on fixed monthly rates. Consequently programme viewership fluctuations, is not the issue anymore for online broadcasters - another gaping hole in the way TV works and is funded. Netflix, with nearly 30 million subscribers, just needs to keep attracting those subscribers to stay or join the service, nothing more. Whereas, TV stations have to keep reaching out to audiences, to get them to watch, to generate Ads, when we know, through second screen viewing, their audiences are shrinking. No, Collapsing. Netflix has already commissioned another feature, a horror called 'Hemlock Grove' and because they're not advertising dependent, they need to simply feature on quality broadcasting. But online broadcasters will force change too. Voice control is the future too, for Netflix rather than "gesture control" being considered by other online broadcasters (like the Xbox function). So you simply "call out" your movie and up it comes and online will eventually create too many features that will just force TV stations to close because they simply haven't the technology to match. Online broadcasting is affecting traditional movie-making too and not just TV. Profits in the traditional movie business are down. Between 2004-2011, the big 5 studios profits were down -40%. Time Warner for example, in generating 12 billion usd in 2012 from film, generated 14 billion usd from TV/Online. And that balance is quickly shifting away from traditional movie-making towards content making that has subscribers attached such as cable/online. Fees to cable/subscriber channels are estimated to be in the US, about 32 billion usd a year and growing +7% annually. And it's this steady income that content makers want to chase, rather than traditional TV dependent on advertising swings and thereby, focused on shows being popular (or not). Cinema revenue for film is equally volatile with "hits" and "misses". Content makers want broadcasters with steady income. Film Theatre/Cinema attendance is not a growth business with too many distractions, such as Netflix, at home on multiple devices. DVD/Blue Ray sales are obviously down too, about -46% in the past 6 years. DVD Pirating in Russia and China has become an issue too nevermind general illegal downloads. Actor and Director salaries are being cut, as are the number of projects. It is the likes of Netflix that has been the lifeline for Hollywood, with big talent like Spacey/Hoffman/Jeff Daniels moving away from movies into online content. Equally too, Netflix and Amazon's Love film are competing for broadcast rights against traditional broadcasters and have the cash war chests, to win. It's estimated that Netflix spent 5 billion usd in 2012 acquiring content. In terms of 'connected devices' such as smartphones, games consoles, laptops, ipads and so on, Americans own 2.6 of them in each household. So the "theatrical window" of holding back online movie release is now becoming defunct to allow movies access this online market. 'Arbitrage' with RichardGere, was released everywhere at once and understood to have made 3 times the money because it had a massive global audience at once. But movie makers don't like it (because they'll lose the cinema premium) and theatre owners don't like it either. So digital programme/content provision is winning time and time again meaning traditional movie makers will switch (as will talent) into creating online content. It also means traditional TV stations are getting more and more stuffed. They're being outbid for content; they're losing audiences; they're losing money (180m+ euro a year in Ireland for RTE) every year; their content is poor; and their model has a doubtful future. Even their anchor product - news - is being covered better and quicker (much quicker) by national newspapers online. This game is over.
Amazon shares are moving upwards (+10%) on foot of their last Q4 quarterly results which showed a jump in operating income to 405m usd from 206m usd a year ago. Not bad, up 22%. Revenue rose 21% to 21 billion usd although below industry expectations, slightly...... Down 47% was its profit - down from 177m usd to 97m and that's the number that's got the headlines when in fact, the key measure should be growth and operating income. Living Social, Kindle investment and increasing distribution centres all dragged the profit down. Cloud computing services, video content (its LoveFilm video streaming on demand service) sales helped to lift it. Operating margins were up too (the % of profit on a sale) and that bodes extremely well for the company that has struggled to make significant margins and profits over its existence. It is now on the threshold of greatness. Sales of books were up 5% but ebook sales were up 70% (!) and Kindle Fire being its most popular product on the site. Amazon are also forecasting +15% growth (and as high as +25%) in this quarter (Q1 2013). The main driver is the Kindle and the transition from printed books to ebooks. Like Apple's Itunes business, Amazon are ready for this long term. So too their video movie business which competes with Netflix. Ebooks are now a multi-billion business and this is the company that's driving it. I'm a fan of Amazon. What they're doing with Kindle, is actually bringing a low-cost Ipad to market. The core functionality might be book reading, but video and social and email and everything will be there soon. Own the device, you own the content. As regular readers (well okay, the 2 regular readers) of this blog will know, I'm a voracious reader but I switched early to Kindle with some reluctance. However, I have never looked back and nor has anyone I met who made the change. Fantastic innovation - which as we know, like Apple, is the key to success. Fantastic Amazon.
The growth of ebooks, especially after all those gifts of Kindles after Christmas, is destined to continue. Much like music, the ability to easily download tunes has actually led to a dramatic increase in the sale of music. It's reckoned that 50% of all books sold will be ebooks by 2016. Digital hasn't stifled book reading or music listening, but rather, has increased access and usage of it. Thanks to Amazon's kindle, more people will end up reading, not less. Digital is the delivery system that's easier, faster and better than driving/parking/shopping at a bookstore so it means more people buy books than before. However, those of you who use ebooks, know the importance of reviews as a method to help choose a book. Much like the "staff pick" cards in the bookstores of old, online reviews are like friends telling you what to read. However, it's a system that has been corrupted and Amazon has rightly started deleting the reviews. It has also banned writers on reviewing their peer's work. Some authors have recently has 50 reviews deleted without notice producing their criticism of Amazon, on blog posts. However, Amazon are simply trying to put right a system that those very same authors have abused. RL Ellory, for example, the best selling British writer of crime, was exposed for posting fake reviews about his own "magnificent genius" whilst criticising his rivals. He also tried to remove negative stories about him on Wikipedia as well as giving his own books 5 stars. Mind you, he probably thinks they're worth it. Actually, using the name "Jelly Bean", he posted a review of his own book 'A quiet belief in angels' that it was "one of the most moving books I've ever read". And maybe it was when he went back and read it....(embarrassing or wha?) And he went on...."It is so beautifully written I felt as though it enabled me to be a part of that era even though that can never actually happen. I would highly recommend this book to anyone who really wants to experience a class read." He also appears to have been posting as ‘Nicodemus Jones’, who described the same novel as a ‘modern masterpiece'. But when it came to another writers book, he posted anonymously, "This is the 2nd of this author's books I read, and to tell you the truth (sic), I can't be bothered anymore". Authors are well known to publish positive reviews of their own work and scathing reviews of their competitors, because they know the star review system sells books. These fake reviews (and there's thousands of them) mislead and Amazon is only starting to deal with the situation whereas the authors, are up in arms because they've lost a way to cheat to sell their books. Just look at the amount of 5 star ratings supposedly for books and writers no one has ever heard of! So don't pay them any attention really. Better off Googling online about the book and see what's being said. And if you haven't, buy yourself a Kindle. The greatest invention since the Iphone. (Thanks too to the many reviewers of this blog who not only gave it 5 stars but also said, "I cannot believe how good looking Stuart is in real life to have such an incredible mind and body". Thank you. I appreciate it. Shucks.)
On foot of my blog about the ongoing tax avoidance issues yesterday (which follows below), I was amazed to read the very brilliant Colm Keena's story in today's Irish Times newspaper - http://www.irishtimes.com/newspaper/finance/2013/0102/1224328327411.html I'm actually getting tired of blogging about what has become a tax avoidance issue but for some reason, the information just keeps coming to me. There's that much of it about. Shocking.
So it was interesting to see changes at Facebook and Zynga's Irish operation. I'm sure they're completely unrelated to the tax avoidance issue..... Colm reports that Facebook are moving all its non-US revenues to a new Irish subsidiary. Facebook Payments International Limited, a new Irish company, will now take on the billing from Facebook Ireland Limited, which showed revenue of 1 billion euro in 2011 - up from 229 million in 2010. What's interesting too is that it lost 18.7 million on that revenue of 1 billion and why you might ask? Because largely, of payments it made to its parent Facebook Ireland Holdings Limited owned by Facebook entities in the Cayman Islands. These are exactly the same type of controversial charges by parent companies to create losses (and thereby, meaning they pay little or no tax) and are very similar to the devices used by Starbucks and others - so highly criticised. What's also stunning is that Facebook has a registered company in The Cayman Islands ultimately - one of the great tax shelters of our time after Ireland. Interesting still, is that it's an unlimited company, meaning it can avoid prying eyes from journalists and not be subject to the usual company rigours. Which is really quite shocking for a PLc. In fact the whole thing just stinks. One of the ways Facebook generates these revenues is by way of "game credits" from gaming company Zynga. And it would seem, Znyga is another Irish company success! Zynga Game Ireland Limited (I kid you not) reported a pre-tax profit of a meagre 4.8 million on revenues of 369 million. This small, poor profit is because of.... yes you've guessed it.... payments to other Zynga companies. Exactly as Facebook/Starbucks and them all, are accused of, in order to avoid tax. By making payments to parent companies elsewhere, they avoid tax when those payments either exceed the income or practically wipe out any profit. So for example, of that 369 million revenue, a stunning 191 million for example, was paid in "royalties" to another Zynga company with registered offices at Solicitors in Dublin. That very company in turn, despite revenues of 191 million and no employees, reported a loss of 35 million! Get the pattern? Because....wait for it....it paid 50 million to its parent company in "royalties" and a further contribution of 174 million in R&D which is 224 million paid out after only generating 191 million. Funny too that only in November, Znyga's finance chief, David Wehner, left to join...Facebook as vice-president of corporate finance. Doesn't surprise me anyway.... Avoiding tax isn't illegal, just immoral. And it seems it's widespread. In fact with Google, Facebook, Zynga, Amazon, Starbucks, Microsoft all getting a mention already and so many previously "respected" names, it's hard to imagine that it's just not common practice.
However, it would seem that a lot of other companies with a lot of advisers, are involved in this style of doing business despite being sheltered by an appearance of integrity. On the scale of billions, which these activities are, would require the active involvement of a myriad of professionals. And yet again, they all have one thing in common, one thing that's bringing these stories to light. Ireland.
Well welcome back and indeed I hope your 2013 is as good as I plan mine to be! I think the great thing about Christmastime is that everyone else is off so you don't come back to lots of emails and messages. Social media and Business shuts down too - I think this year more than most because things have been so tough, everyone needed the break from it. Equally of course, there was little point in staying open given the general lack of activity. So although I was keeping an eye, not a lot happened during the break you can be assured....although the march over The Fiscal Cliff in the USA, is pretty scary in itself. One of the more major issues that I blogged many times towards the end of 2012 was the tax avoidance issue and where Ireland now facilitates widespread European tax avoidance. The Google Story is here http://streamabout.blogspot.ie/2012/12/the-tax-controversy-continues-now.html. Microsoft's shameful governance and use of Luxembourg and Ireland's help in doing it is here http://streamabout.blogspot.ie/2012/12/starbucks-try-to-sort-it-microsoft-now.html Starbucks story here http://streamabout.blogspot.ie/2012/12/starbucks-are-we-seeing-death-of-brand.html US senate view of Ireland as a tax haven along with Costa Rica/Belize is here http://streamabout.blogspot.ie/2012/12/now-dropbox-comes-to-dublin-for-greatly.html Amazon, WPP and others appalling tax behaviour is here http://streamabout.blogspot.ie/2012/12/starbucks-amazon-google-microsoft-wpp.html In particular, Ireland has become Europe's "biggest tax haven" in the view of the US Government no less and gets mentioned in the same breath as Costa Rica and Belize. Imagine. Although this tax avoidance controversy was sparked by the poor corporate behaviour of Starbucks, it quickly extended to Facebook, Amazon, Dropbox, LinkedIn and most notably Google with most having their European HQ in Dublin - largely to facilitate the tax avoidance through the infamous "transfer pricing". It's a story that is so bad it's not going away any day soon and I did wonder if the bad publicity would reflect on the brands themselves. And it has. Clearly it has nearly destroyed Starbucks and no bad thing either. They behaved badly in doing what they did but worse following a "faux" PR attempt to make amends by offering to pay tax. And in doing so, cut into their staff incomes to achieve it. A company that's being exposed for what it really is rather than what we thought it was. Google has also come out thus far, as being pretty poor too and therefore I was interested to see the annual 'Brandindex Table' by YouGov in the UK which asks 2,000 different people a day about good/bad things about brands, that Google has itself fallen off a brand cliff. Google have dropped out of the top 10 altogether. It has dropped from a 26.7 rating to 11.7 which is about as dramatic it can be in the short time and largely, according to BrandIndex, because of the tax issue. Another avoider to also feel the wrath on the same issue is Amazon. Amazon dropped from first to third - 32.1 rating down to 24.1 and again it's been late to the controversy so it will suffer more. Here is the Top 10- The top brand was The BBC Iplayer (remember this is a UK survey); John Lewis (big Department store with terrific advertising); Amazon; Money Saving expert; Marks & Spencer; Ipad/Apple; Sainsburys (retail grocery); BBC.co.uk; Samsung and lastly, Cathedral City (a cheese I think). So there's no doubt, brands that have been involved (and there's a lot) in this tax avoidance 2012 issue, will see damage in 2013 unless they put it right. However, countries that are associated with it and that actually contribute to it, will feel the damage too. Most notably those countries that terrorise their citizens into paying tax and at the same duplicitous time, help large corporates shamefully avoid it. Ireland beware.
