Two Bloomberg interviews…
Tag: Business
Tencent vs. Toutiao and Tencent’s Core Asset
Just two days ago, one of the most popular growing app China “Douyin/Tiktok” (owned by ByteDance, formerly known as Toutiao) was founded to be blocked to login with WeChat (owned by Tencent) for new users.
The two old king in social apps is fighting the rising new star.
In March 2018, WeChat global MAUs surpassed 1 billion.
Douyin said its global MAUs is over 500 million in July 2018.
Tencent’s WeChat has been on the market way earlier (since 2011). Douyin was launched in Sep 2016 but its growth has been so terrifying that Tencent has adopted several defensive actions, including blocking sharing Douyin links in WeChat.
Tencent has also backed Qutoutiao to combat with Jinri Toutiao (Toutiao’s flagship and first product) and Weishi for Douyin.
Now the war has escalated. Toutiao launched a new social app “Duoshan” to challenge the King and Tencent blocked WeChat login for Douyin.
Things are just getting started. But it reminded me of the 3Q war in 2010 between Tencent and Qihu360. Tencent didn’t have WeChat yet and relied on its QQ platform (the previous King).
During the war, one particular action by Qihu was seen by Pony Ma (Tencent founder and CEO) as the most threatening and he forced users to log off QQ if they don’t uninstall Qihu.
The key in that situation and in Ma’s mind is the copy of social map. The full connections between almost every relevent Chinese internet user.
This is probably what Ma values most and is one of Tencent’s core secrets.
That is what Toutiao is trying to obtain with Duoshan and Douyin today ina different way than Qihu) – the social map of almost every relevant Chinese (young) mobile users. And those would be the future Chinese internet revenue sources/assets/reserves.
The war will continue to unfold and Toutiao is much more powerful than Qihu. Toutiao is one of the most valued private companies in the world, but it is also taking on Baidu for news feeds and ads – multi-battleground just like Uber.
Airline Operation Results 2017 & 2018 (2)
Following up on yesterday’s post – added Delta and United to the little python program.
Data Download
Airline Operation Results 2017 & 2018
Wrote a little python… to extract the monthly operation results from airlines, and calculated load factor change, RPM change and ASM change.
- RPM = Revenue passenger miles, and its percentage change year-over-year
- ASM = Available seat miles, its percentage change year-over-year
- Load factor = RPM / ASM, its change year-over-year
- RPM_g = RPM(t) / RPM (t-12) – 1
- ASM_g = ASM(t) / ASM (t-12) – 1
I did Alaska and Southwest tonight and will add more…
Data Download:
US Government Shutdown – an Incomplete List of Direct Effects in Business
On Jan 10, Fed Chair Jerome Powell commented at the Economic Club about government shutdown…
In the short term, if government shutdowns don’t last very long, they have typically not left much of a mark on the economy… A longer shutdown is something we haven’t had. If we have an extended shutdown, and I do think that that would show up in the data pretty clearly,… we would have a less clear picture into the economy if it were to go on much longer.
Here is an incomplete list of effects in business…
- SEC & IPO – Could the Government Shutdown Affect IPOs? by Knowledge@Wharton (delayed much-anticipated tech offerings such as Uber and Lyft… but market conditions have been “very difficult” for IPOs anyway…)
- FDA & Drug Approvals – Partial Government Shutdown’s Impact On FDA Drug Approvals (the FDA has suspended reviews of existing IND and BLA applications not covered by user fees, and is not reviewing applications for new drugs and biologics submitted during the shutdown period, except for emergency INDs and BLAs. The FDA is also not reviewing medical device applications submitted during the lapse period; and Gottlieb’s keynote address Tuesday was delivered via video conference from Washington)
- FAA & TSA & Airports – Travelers Feel Effects of Partial U.S. Government Shutdown as Airports Struggle
- SBA & Small Business Loans – Over 300 small-business loans a day aren’t happening because of the shutdown
- SEC & Fin-tech companies – Fintechs Start To Feel The Pain From Government Shutdown (Online lenders & alternative asset underwriters couldn’t get SEC permission to repackage loans and sell them or via an IPO offering of the luxury vehicles e.g. Rally Rd)
- TBB & Beer Labels and Permits –How The Government Shutdown Impacts Breweries (During the shutdown, the Alcohol and Tobacco Tax and Trade Bureau will not approve labels or process permits)
Lowered iPhone Sales Forecast and More
Since Apple announced that it would stop reporting the iPhone unit sales number during Q3 earnings call, things have not become easier.
iPhone Ban in China
The fight between Qualcomm and Apple has led to a sales ban on older iPhone models in China, ordered from a Chinese court (福州市中级人民法院). The case was filed against Apple in China in late 2017, saying the iPhone maker infringed patents on features related to resizing photographs and managing apps on a touch screen.
Apple said it planned a software update that would solve the issue; also, the ban would likely take time to enforce, according to Reuters.
iPhone Ban in German
In German, Apple will be pulling iPhone 7 and iPhone 8 models from its stores there following a win for Qualcomm in the District Court of Munich, which ruled that Apple’s devices were infringing on Qualcomm’s intellectual property related to power savings in smartphones. (The Verge)
Qualcomm said on Thursday (Jan.3) that it posted security bonds of 1.34 billion euros ($1.52 billion) to enforce the German court order.
Apple Outlook Cut Citing Weaker iPhone Demands in China
On Jan 2, a letter from Apple CEO Tim Cook to investors said sales will be about $84 billion in the quarter ended Dec. 29, down from earlier estimates of $89 billion to $93 billion. Apple posted sales of $88.3 billion in the fiscal first quarter a year earlier, so the new forecast would mean Apple is reporting a holiday quarter slowdown for the first time since Cook became CEO in 2011. (Bloomberg)
Apple shares fell 10% to $142.19, the biggest drop in almost six years, the next day.
In the letter, Cook said Apple’s gross margin will be approximately 38%. (also discussed in a previous post about Apple’s pricing strategy)
Chinese Phone Makers Gaining In Zero-growth Market
Although 2018 Q4 numbers are not yet available, Q3 numbers tell the same story. According to IDC Quarterly Mobile Phone Tracker on Nov 1.
| Company | 3Q18 Shipment Volumes (millions) | 3Q18 Market Share | 3Q17 Shipment Volumes (millions) | 3Q17 Market Share | 3Q18/3Q17 Change |
| Samsung | 72.2 | 20.3% | 83.3 | 22.1% | -13.4% |
| Huawei | 52.0 | 14.6% | 39.1 | 10.4% | 32.9% |
| Apple | 46.9 | 13.2% | 46.7 | 12.4% | 0.5% |
| Xiaomi | 34.3 | 9.7% | 28.3 | 7.5% | 21.2% |
| OPPO | 29.9 | 8.4% | 30.6 | 8.1% | -2.1% |
| Others | 119.9 | 33.8% | 149.8 | 39.6% | -19.9% |
| Total | 355.2 | 100.0% | 377.8 | 100.0% | -6.0% |
And in Gartner’s December report…
| Vendor | 3Q18 Units (thousands) | 3Q18 Market Share (%) | 3Q17 Units (thousands) | 3Q17 Market Share (%) |
| Samsung | 73,360.1 | 18.9 | 85,605.3 | 22.3 |
| Huawei | 52,218.4 | 13.4 | 36,501.8 | 9.5 |
| Apple | 45,746.6 | 11.8 | 45,441.9 | 11.8 |
| Xiaomi | 33,219.7 | 8.5 | 26,853.2 | 7.0 |
| OPPO | 30,563.4 | 7.9 | 29,449.2 | 7.7 |
| Others | 153,960.0 | 39.6 | 159,742.0 | 41.6 |
| Total | 389,068.2 | 100.0 | 383,593.4 | 100.0 |
What is good for Apple…
From Cook’s letter, we know Apple’s wearables sales grew by almost 50% year-over-year, as Apple Watch and AirPods were wildly popular among holiday shoppers.
2019 – A Year of Alliance?
As the first week of 2019 developed with JPM Healthcare Conference in San Francisco and CES in Las Vegas, several alliances across big companies attracted attentions. This might be a year of further cooperations as free growth is not possible and some major developments need different domain knowledge & power.
Intel & Facebook – AI chips (new Nervana Neural Network Processor for Inference) in the second half of this year, according to Reuters, and following the previous collaboration.
Qualcomm & Ford – demonstrating driving situations utilizing C-V2X direct communications, following last year’s partnership announcement.
Celgene & Bristol-Myers Squibb – collaboration-like merger for a stronger presence in oncology & immunology. (news release)
GM & DoorDash – deliver food in self-driving cars. (CNN)
and last month…
Starbucks & UberEats – expanding the partnership to more than 2,000 stores in the United States next year, about a quarter of all of the company’s locations in the country. (TechCrunch)
The Race in Aerospace – Positions of Private Equity Firms
~$40bn Apollo acquisition – GE Capital Aviation Services (GECAS), GE’s aircraft leasing operations
- Bidder: Apollo, an offer as much as $40 billion according to Bloomberg & Reuters
- GECAS has a fleet of more than 1,900 planes, which it provides to airlines under long-term leases.
- 1/4/2019
~$1bn KKR investment – Altavair, focusing on the acquisition of new and used commercial aircraft for leasing to passenger airlines and cargo operators
- Investor: KKR, $1 billion capital commitment to acquire commercial aircraft in partnership with Altavair + a 50% interest in Altavair; Altavair will be KKR’s partner for aircraft leasing investments going forward
- Since its inception in 2003, Altavair has completed over $8 billion in commercial aircraft lease transactions with over 40 airline customers in 27 countries representing over 200 individual Boeing and Airbus aircraft
- 1/3/2019, KKR Commits to Invest $1 Billion with Altavair
~$5bn Carlyle acquisition – StandardAero, largest independent maintenance, repair and overhaul (MRO) providers
- Bidder: Carlyle, for more than $5 billion (Reuters) from Veritas
- Veritas acquired StandardAero from Dubai Aerospace Enterprise Ltd (DAE) for $2.1 billion, including debt, in 2015
- Carlyle first acquired StandardAero in 2004. In 2007, DAE simultaneously purchased StandardAero and Landmark Aviation, also an aircraft maintenance services company, from Carlyle in a transaction valued at $1.8 billion, including debt.
- 12/18/2018, The Carlyle Group to Acquire Leading Aircraft Engine MRO Provider StandardAero from Veritas Capital
~$15bn Apollo acquisition – Arconic (ARNC), aluminum products used around the world by aerospace manufacturers
- Bidder 1: Blackstone, Carlyle, Onex and Canada Pension Plan Investment Board
- (winning) Bidder 2: Apollo, seems winning with a potential acquisition price of $22; also considered is a spin-off of its cladding operation with potential liability from the Grenfell Tower fire of two years ago.
- 10/8/2018, early report on bidders
- Jan. 22 Update: The deal didn’t go through. [WSJ – Arconic Scuttles Deal to Sell to Apollo Global]
Half of the 2018 Top 10 Movies in US Are Made by Disney…
2018 Top 10 movies in US
Here is the list by gross sales in US, according to boxofficemojo.com
| Rank | Movie Title (click to view) | Studio | Total Gross / Theaters | Opening / Theaters | Open | Close | ||
| 1 | Black Panther | BV | $700,059,566 | 4,084 | $202,003,951 | 4,020 | 2/16 | 8/9 |
| 2 | Avengers: Infinity War | BV | $678,815,482 | 4,474 | $257,698,183 | 4,474 | 4/27 | 9/13 |
| 3 | Incredibles 2 | BV | $608,581,744 | 4,410 | $182,687,905 | 4,410 | 6/15 | 12/13 |
| 4 | Jurassic World: Fallen Kingdom | Uni. | $416,769,345 | 4,485 | $148,024,610 | 4,475 | 6/22 | 10/4 |
| 5 | Deadpool 2 | Fox | $318,491,426 | 4,349 | $125,507,153 | 4,349 | 5/18 | 10/18 |
| 6 | Aquaman | WB | $270,596,781 | 4,184 | $67,873,522 | 4,125 | 12/21 | – |
| 7 | Dr. Seuss’ The Grinch (2018) | Uni. | $269,848,350 | 4,141 | $67,572,855 | 4,141 | 11/9 | – |
| 8 | Mission: Impossible – Fallout | Par. | $220,159,104 | 4,395 | $61,236,534 | 4,386 | 7/27 | 10/18 |
| 9 | Ant-Man and the Wasp | BV | $216,648,740 | 4,206 | $75,812,205 | 4,206 | 7/6 | 11/1 |
| 10 | Solo: A Star Wars Story | BV | $213,767,512 | 4,381 | $84,420,489 | 4,381 | 5/25 | 9/20 |
* BV (Buena Vista) was the brand name which was historically often used for divisions and subsidiaries of The Walt Disney Company, whose primary studios, the Walt Disney Studios, are located on Buena Vista Street in Burbank, California
Top 3 are all from Disney, as are #9 & #10, making Disney occupy half of the Top 10 seats of best-selling movies in US.
And according to ComScore, 2018’s movie business hit all-time benchmarks of $11.9 billion in North America and $41.7 billion globally, with Disney taking in nearly a fifth of that figure. (Variety)
Among Disney’s domestic box office of $3.09 billion, its top 3 got ~$1.99 billion (64.32%), top 5 got ~$2.42 billion (78.25%).
Besides, Disney’s movies in Top 10 all have rating of 7.0 or above, averaging at ~7.56 on IMDb (beating the Top 10 average of 7.35)
Overall…
Total US movie sales is barely growing. The figures below are not inflation-adjusted.
But the number of movie productions is increasing, partially due to a lack of funding after financial crisis (bottomed in 2009 with 521 movies that year).
As streaming is disrupting the market, increasing the number of production seemed to be a way to make up for the total revenue?
Then expenses are up and industry margin is low. It is a sure thing that movies are hard to survive alone.
Then no wonder the consolidation kicked in.
Disney bought Marvel for $4 billion in late 2009, bought Lucasfilm for $4 billion in late 2012. Before the financial crisis, Disney also got Pixar in a $7.4 billion in stock.
With the completion of $71 billion acquisition of Fox, Disney will add X-Men and Avatar to its list of movie series.
Warner Bros. will be under a new umbrella – AT&T’s, together with HBO and Turner.
Universal has been under Comcast since 2011.
Paramount is under Viacom and has teamed up with Netflix.
Movie is not a studio business anymore.