Netflix stock is soaring....and better still, they're showing The Interview.

Netflix stock is soaring tonight.

Up +13% in after hours trading on great last quarter numbers showing strong subscriber growth above expectations. Not bad, after a hard fall in October.

But better again, they've announced that they will screen 'The interview' on Jan 24. That's the movie that the North Koreans love and the movie that caused the consternation at Sony. And that's the movie that no one else was brave enough to air.

So good on Netflix.
And aren't we glad to have digital who'll show the things that no one would.

I hope the stock keeps going up - their credibility sure has.

What is a Brand? And why they might be dying.

Ad men and Advertising is driven by Brands. 
Marketeers are driven by brands. 
Company Balance sheets are driven by the values of those brands.

And yet, we may be seeing the end of them.

A brand is something a consumer is prepared to pay more for, a premium price. "Prepared" is the key word.

Largely, how Brands started, was with Sugar believe it or not when it was a hugely valuable commodity.

In the old days...you went into a grocer's store and asked for sugar which he kept in a large, open, hessian sack, behind the counter. 

If you had a jar,  the grocer filled it, weighed it and handed it back to you and you paid him. If not, the grocer had some sort of a container that he'd fill and sell to you.

But there were problems. 

The amount of sugar you got every time you went in, was different. The hessian sack wasn't always clean and the sugar not always hygienic, as flies circled it. The quality was different because the grocer bought it in bulk from different suppliers so it was never consistent. The taste varied. And so on.

So the grocer decided to bag the sugar. 

In doing so, standardising the weight, the quality, the hygiene and the named it something - they branded it.

What that meant was the customers knew what they were buying consistently and they were prepared more for it in return. That's the essence of a brand.

When I go into McDonald's for example, I get the same burger in Dublin as I do in LA. Or Coke tastes exactly the same in Jamaica as in Norway. That's a brand.

However, because of all that preparation in developing consistency as well as the advertising costs, brands demand a premium price. You trust it more than the hessian sack of sugar and so you pay more for it.

Straightforward.

Also, you'll develop loyalty to that brand for one reason or another. Maybe it makes you feel better buying a branded coat. Or perhaps you like the taste of a brand of sausages and are loyal for that. Or the packaging you feel, makes you look cool. And so on.

Loyalty to brands is a cornerstone of marketing because advertising can only get you to try a brand once. And if you like it having seen the Ad and tried it, you'll stay with it and so hence the long return on that advertising/marketing investment.

All good. 
Until that is, a recession hits.

What we're seeing now in Ireland and the UK certainly, is a pull back on brands. A major break in that loyalty.

The main reason is of course affordability but what's totally shocking is the quick reaction of consumers to switch to lower cost products. They're leaving established life-long brands and buying products they know nothing about, because they're cheaper. They're doing so without as much as a thought.

In retail for example, they're flocking to the discounters and buying products that they're unfamiliar with. In a lot of cases, brand names they've never heard of nor know nothing about that brand's heritage. It could have been produced in a shed.

In other retail, they're opting for lower cost products rather than the brand they trust and buying 'off deal'. Bogof and twofors (Buy one get one free, two for the price of one).

They're not prepared to pay the premium. And it's obvious even in my fridge. 

Established brands are reacting by reducing their prices, reducing in other words, their 'premium'. It's understandable - they have to sell - but it will kill them ultimately.

How many years did friends of mine develop Sony as the top end brand? How much money was spent on building that premium brand? And then I walk into Tesco on Saturday and lo and behold, there's Sony on the shelves. Any wonder Sony shares are graded at 'junk status'?

You see, as I said, if a company loses the value of their brands, they lose the Balance Sheet. As they trade their brands down in price, their brands have lower sale value should anyone want to buy them. And consequently, the company who owns the brand, eventually has a lower sale value in turn.

I looked after BMW when it had exclusive brand status. Now I see the BMW One series cheap version, at every traffic light. My 3 year old BMW car was then 80,000 euro new, and it's now 45,000 euro new. I do understand the short term gain in reducing prices, but understand too, the long term brand loss. I won't buy BMW or Sony again.... and I was a long term brand loyalist.

Consumers ultimately decide whether a brand survives. And right now I get a sense, they don't want them anymore. Shocking but we need to get our heads around it.

Brands aren't dead. 
But they might be dying.

Wearable computing begins. The Samsung Smartwatch launches September 4th.

The new generation of wearable computing kicks off on September 4th with Samsung's launch of its smartwatch believed to be called 'Galaxy Gear'.

It will make calls, receive calls, email, text, access the web and wait for it, tell the time. It's believed to have a camera integrated into the strap.

Google, Apple and Microsoft are working on versions of their own but the Korean company is first to market - a big first mover advantage and sure to steal the PR inches. It beats Google Glasses to a full launch, another long awaited wearable concept, although out there amongst a select few. The Sony Smartwatch is already out there but hey, who knows about it.

It will run on Android with a small key pad but brings mobile into a new space and will further the growth in mobile applications. It's much easier to wear a watch than carry a phone. Rumoured cost about 250 usd and it'll come in 5 colours.

Interesting times as we move into the wearable generation.

Netflix surges ahead. 3 million new subscribers last quarter. 36m to date. This is killing traditional TV viewership.

 

 
The surge of Netflix goes on and on.

They've just announced 3 million new subscribers in the first quarter (beating brands like HBO). That means they've over 36 million subscribers (of which 'm one).

Revenue for the quarter broke 1 billion usd and the share price went over 200 usd for the first time. Extraordinary stuff for what is, pretty ordinary content but the key is ease of access at a low cost. Their free trial, only resulted in 8000 people cancelling, a really low churn rate so generally people are happy.

Netflix are great at what they do and now lead the way in TV broadcasting and have developed their own shows. Nevermind killing high street video rental who were too slow at getting into the space.

They also know how to grow - market by market - with stealth. Pick off country by country.

The other beneficiaries of Netflix are brands like Sony who in allowing connectivity through their Xbox for example, generate revenue and indeed all connected TV's will do well out of this - provided, Netflix agree to allowing them take their content.

This is a case where such a strong content partner can now dictate who carries their signal and on what terms.

Whilst TV broadcasters continue to commission "reputable" research showing TV viewing still remains high, it is to say the least, dubious. They continue to try to hide the ongoing collapse of TV viewing habits but publishing data about the TV itself. In other words, claiming that those using are using a TV set to view content are "TV viewers" ....when in fact, they are watching other content such as Netflix. Or YouTube via their Television set.

These massive increases in online content viewing are helping to dispel the myth that TV viewing of traditional broadcasters content, is holding steady - when clearly it's not.

Simply, the Netflix numbers and the facts about usage of Social Media in the home from Facebook and others, are exposing the death of traditional broadcasting. 

They both cannot be right.
 

Hewlett Packard announce loses of 8.8 billion. Another old world company misses the bus.

Another sign of the times, HP (Hewlett Packard) have announced very bad numbers. Whilst most were expecting a profit of 2.2 billion usd, it actually was a loss of 8.8 billion. Its shares are in downward mode nearly at 2001 levels.

Like Sony, Sharp, Panasonic and others, HP is again an "old world" brand that is being killed by lack of innovation in the digital space.

Blogged here  http://streamabout.blogspot.ie/2012/04/sony-64billion-loss-and-death-of-brands.html and here http://streamabout.blogspot.ie/2012/11/sony-sharp-panasonic-brands-in-shocking.html

Acquisitions of Palm and Autonomy (which they paid nearly 80% more than the market cap at the time - 11 billion usd, last October) have gone badly. Last night they claimed Autonomy had overstated numbers and inflated values and to whit, they were informing the fraud office. The former co-founder of Autonomy, an Irishman, dismissed the claims and said the acquisition has simply been mismanaged by HP. However, either way HP didn't do their due diligence properly or are trying to divert attention following awful numbers. HP has shut down Palm. Those acquisition write-downs (5 billion) have contributed to these awful results.

But they do not account for the revolving doors of CEO's, constant management turnover and poor product design/marketing. Poor form too of Meg Whitman current CEO (and former head of Ebay) to blame past colleagues for the Autonomy purchase yesterday when it was approved by the overall Board who are still there. Nor the reductions in net revenue - which is where Whitman should be focused, surely. After all, it's the 5th straight quarter of decline.

Revenue in all its business units declined and most notably by -14% in its personal computing - the place where everyone else sees opportunity.

None of that has anything to do with Palm or Autonomy, now does it.

HP are now claiming that they're committed to "new products". A little after the horse has bolted don't you think? One analyst described it all as a "train wreck" on Reuters.com. The headline in the HP story on Wall Street Journal is, "analysts throw in the towel". It has become hard to read company expectations with results like this which are so much at variance from expectations. And the brand is just, well, boring.....and I used to look after their advertising once upon a time.

Whitman said today that they were "one year into a five year journey" but I'd except to see a lot of people stop travelling. Notably investors and you'll now see downgrades and sell/neutral recommendations.

So many times I've blogged and blogged about companies like these.
They just don't get the revolution that's upon them and don't get on board. With about 300,000 employees they've already planned to shed 27,000 whom deserve better which you can read here  http://streamabout.blogspot.ie/2012/08/hp-losing-27000-staff-and-9-billion.html

What a pity for what was once, a great company.

Sony, Sharp, Panasonic. Brands in a shocking downward spiral. Lessons to be learnt here for marketeers.

 

Anybody with a doubt in their head about how brands can suffer, who aren't prepared for the digital age, should look at the demise of Japanese electronics. Once held up in universities worldwide in the 80's, as the model for enterprise are now in deep trouble. They weren't prepared.

The continuing decline of brands like Panasonic, Sharp and Sony, and the incline of Samsung, show how the world has changed. And it's a lesson.

Sharp, a 100 year old company, has now raised concerns that it might no longer be a "going concern". Posting a loss of over 3 billion usd for the last quarter, Sharp it estimated to reach combined losses of 10 billion usd and now has problems raising finance. As well as, share price declines.

Because Sharp is burning through cash, it had approached private equity to shore up its position but rumours abound that it has failed and instead, has turned to the Japanese government for what is, a 'bailout'. 

Sony has just posted its 7th straight quarter loss (this one was 194 million usd) and is cutting 10,000 jobs. Sony was for so many years, the dominant premium brand. Panasonic is also forecasting dramatic losses.

All three are having nightmares on the Japanese stock market and reaching "junk status" quickly.

These brands have been wiped out by companies like Apple and Samsung in the new world order. Whilst they remained part of the old world order, they did not settle into the Internet world quickly enough. 

Sony, inventor of the Walkman, Bravia TV and so much else, took a back seat because they felt that their position was "too big to fail". Most Japanese producers did the same as you can see as indeed have Nokia.

The Internet has become a great brand leveller.

Who'd ever have thought that a South Korean company (not exactly silicon valley is it?) like Samsung, would outsell Apple by a big margin? Never mind leave the Japanese in its wake.

It's extraordinary stuff but extraordinary lessons.

Brands that ignore the online revolution will pay a heavy price.

The decline of these, once world class brands, only illustrate how quickly it can happen through a lack of innovation but also, a pooh-poohing of the online marketplace. 

So many established brands have such a poor online strategy that they'll be doomed to fail. Most even still, have poor websites. 

Has yours?