As we get ready to enter the second half of 2019, we will see several streaming video services launching, including the high profile ones from Disney and Apple, with more to follow in the coming quarters. No surprise as consumers flock to that aspect of our Digital Lifestyle investing theme, preferring to watch what they want, when they want on the device they want.
The question we are thinking through is how long until we see the once quality content filled streaming services become the new cable – filled with subpar programming and in some cases ads?
It seems every week there is a new streaming video service with recent ones including the ability to watch Broadway shows and short-form programming. An example of the latter is Quibi by Jeffrey Katzenberg, one of the former Disney Hollywood wonders, and in a world of other streaming services as well as short-form videos from Snap, Twitter, Facebook and Instagram, the Tematica jury is out on its success.
What’s interesting in the price point at $7.99 for an ad-free subscription, which is less than the $6.99 starting price for Disney+. That same $6.99 starting price was one of the factors that led Comcast to rethink its own streaming service in favor of selling its stake in Hulu to Disney.
The bottom line is we’ve seen these rushes in the past, and invariably there is a shakeout that will washout a number of entrants looking to capitalize on the trend.
Quibi, the short-form video platform founded by Jeffrey Katzenberg, hasn’t even launched, but has already booked $100 million in advertising sales, according to a report from The WSJ this morning. The company, which aims to cater to younger viewers with premium content chopped up into “quick bites,” says it has already booked advertisers, including Protector & Gamble, Pepsi Co., Anheuser-Busch InBev, Walmart, Progressive and Google.
It still has around $50 million in unsold ad inventory ahead of launch.
It’s hard to imagine how a service like Quibi will compete in a market dominated by paid streamers like Netflix and free services like YouTube — both preferred by a younger demographic. But Quibi has been raising massive amounts of money to take them on. In May, it was reported that Quibi was going after another billion in funding, on top of the billion it had already raised.
Beyond the industry’s big bet on Katzenberg himself, Quibi has booked big-name talent, including Steven Spielberg and Guillermo del Toro, and is filming a show about Snapchat’s founding, which may draw in millennial viewers.
But it sounds like Quibi may also be relying on gimmicks — like Spielberg’s horror series that you can only watch at night (when it’s dark outside). Not to mention the very idea that Quibi thinks it’s invented a new kind of media that falls between today’s short-form and traditional TV-length or movie-length content found elsewhere.
On Quibi, shows are meant to be watched on the go, through segments that are around 7 to 10 minutes long. Some of the content will be bigger, more premium productions, while others will be more akin to what you’d find on cable TV or lower-cost daily news programming.
The service will launch April 6, 2020 with two tiers. A $4.99 per month plan includes a pre-roll ad before each video segment. The ad is 10 seconds if the video is less than 5 minutes, and it’s 15 seconds for any videos between 5 and 10 minutes. Some ads themselves will tell “brand stories” throughout the program breaks.
A $7.99 per month tier offers an ad-free experience.
We see this every month in the Retail Sales report and almost every week in our everyday lives – consumers continue to flock to digital shopping – and that is spurring demand for distribution centers and warehouses as well as workers to fill them. As Amazon looks to expand not only the reach of its private label brands but move into the online pharmacy market courtesy of its PillPack acquisition, the odds are high that Walmart, Target and other companies will look to combat Amazon by at a minimum matching its buy/ship service. And that’s even before Amazon announced it will debut one-day shipping with Prime. More packages, more distribution centers, more jobs. A plain and simple result of our Digital Lifestyle investing theme.
Warehouse operators stepped up hiring in April as e-commerce demand drove up employment in distribution centers even as job growth across the rest of the freight-transportation sector slowed.
Warehousing and storage companies added 5,400 jobs last month, according to preliminary figures the Labor Department reported Friday, the fourth straight month of growth in a sector that includes fulfillment centers that process and ship online orders. The sector added nearly 70,000 jobs over the past 12 months.
The gains in warehousing and delivery come as rapid e-commerce growth pushes companies to open more fulfillment centers near major population centers to speed up delivery to customers. U.S. online sales jumped 14.2% in 2018, generating an estimated $513.6 billion, according to the U.S. Census Bureau.
Brian Devine, senior vice president of logistics-staffing firm ProLogistix, said he is seeing “huge growth” for logistics and e-commerce workers in key hubs like Southern California’s Inland Empire; areas of New Jersey near New York City; Atlanta; Indianapolis; and Memphis, Tenn.
“There are not enough workers in those markets,” Mr. Devine said. “The unemployment rate is so low that it’s difficult for us to fill those positions.” He said the average wage for ProLogistix workers jumped 6.8% in April from the same month a year ago, to $13.81 an hour.
While there are talks of student loan forgiveness on the 2020 campaign trail, the Treasury Depart is stepping up its game to collect on delinquent student loans. Data from the Bureau of Economic Analysis (BEA) points to disposable income once again coming under pressure during the first quarter of 2018. Paired with rising gas prices and renewed uncertainty over the global economy as well as the current state of US-China trade, we see the average consumer remaining in a tight spot.
It comes as no surprise to us that loan inquiries at consumer finance platform company LendingClub jumped significantly in the March 2019 quarter as consumers look to shore up their personal finance and manage existing debt levels. Disposable dollars for debt servicing take a bite out of consumer spending, which means our Middle-Class Squeeze investing theme remains an economic headwind. It does, however, bode very well for companies like Costco Wholesale, BJ’s, Walmart and Amazon that help consumers stretch their spending dollars.
Your rich Uncle Sam is calling in his chips.The U.S. government stepped up collections on delinquent student debt to $2.9 billion last year — or an average of $1,000 from 2.9 million former students and their cosigners, according to the Treasury Department. And the trend continues. In the first six months of fiscal 2019, which started Oct. 1, collections totaled $3.3 billion.
Walmart is teaming with Alphabet Inc. to take the grocery fight via voice ordering to Amazon and its Whole Foods, Alexa combination.
In a blog post, Walmart shared that starting this month, customers would be able to grocery shop through the Google Assistant by saying, “Hey, Google, talk to Walmart.” This seems like a positive for Google, especially if they are able to share in the data collection with Walmart, while for Walmart it seems like the enemy of my enemy is my friend. It’s also a way to add the functionality associated with our Disruptive Innovators investing theme without having to develop a solution in house.
Kudos to Walmart for continuing to innovate and partner for the new digital world we live in. And to be clear, while Amazon and Walmart compete on several levels, Walmart lacks the profit and cash flow powerhouse that is Amazon Web Services.
According to data from Loup Ventures and published by Voicebot.ai, Amazon’s Alexa had 52% global market share in 2018 vs. 32% for Google Home/Assistant. For now, that would appear to give Amazon the edge, but the reality is it comes down to the percentage of people using these devices to order groceries.
Here’s the thing, just because Walmart makes it available, it doesn’t mean consumers will be using Google Assistant to order groceries. Even I still like to pick out fresh produce and select my cuts of meat. But for generic and boxed items ranging from detergent to garbage bags, this could give not only Amazon a run for its money but also Costco Wholesale and Target.
Now to see how usage develops and what if any other other potential partnerships follow.
Retailers are turning to voice assistants to make it easier for customers to shop for groceries amid strong competition. Walmart, in one case, has rolled out an offering called Walmart Voice Order by working with partners such as Google.
The feature allows consumers to use voice commands to shop for groceries. Beginning in April, shoppers will be able to say “Google, talk to Walmart” and Google Assistant will add products directly to their Walmart grocery carts. Shoppers can also manage their shopping carts on the go, as the technology is available on a host of devices, such as Android phones.
The technology uses the shopper’s past purchases to create a more personalized experience. If a shopper instructs Google Assistant to add milk to the shopping cart, for example, the feature will add the size, brand and type of milk he or she regularly chooses.
In a blog post, Walmart Senior Vice President of Digital Operations Tom Ward noted, “We know when using voice technology, customers like to add items to their cart one at a time over a few days – not complete their shopping for the week all at once. So, this capability aligns with the way customers shop.” While Walmart is rolling out the function with Google, Ward hinted that other voice assistant options will be available in the future. “We’re kicking off the work with Google, adding others to the mix as time goes on,” he noted, adding that the service would be available to more customers in the weeks to come.
Walmart is joining the ranks of the tablet market, which comes at a time when some device owners are balking at the increasing price points for smartphones. This tablet, which will have a price point that is very friendly with cash strapped consumers associated with our Middle-class Squeeze investing theme, leverages Chinese manufacturing and the Android operating system. Odds are this means the key differentiator in a crowded Android playing field for Walmart’s tablet will be the price. This helps explain why Google is pulling engineers off its tablet team, but with Apple looking to tie its streaming video service to its tablets and other iOS devices, one has to wonder if those rumors of a Walmart streaming video service that would tap our Digital Lifestyle theme have any truth to them?
Walmart Inc. is moving into iPad territory.
The world’s largest retailer plans to introduce an inexpensive, kid-friendly tablet computer under its ONN store brand, part of a broader redesign of its electronics department. The device will be made by a Chinese supplier and run on Google’s Android operating system, according to photos found on a database of wireless product applications filed with the U.S. Federal Communications Commission.
After spending last year overhauling its apparel offering, Walmart will make electronics and home goods a focus this year, according to presentations given by senior management at a recent meeting of the company’s suppliers. Rival Target Corp. last year introduced its first consumer electronics store brand, called Heyday, with products including headphones and smartphone cases. The demise of technology-focused retailers like Circuit City has opened up opportunities for other chains to grab gadget sales.