With news from the media/tech landscape flooding your inboxes daily, the VIP+ team stands ready to sift through the biggest stories of each week and share their insights in a rousing discussion every Friday on LinkedIn Live at 11:30 a.m. PT / 2:30 p.m. ET.
Agree — or disagree — with our picks? Want to make some of your own? Join us to bat it all around. Until then, watch the replay of our last session in its entirety, and check out our analysts’ takes on some of the events of the week that was.
Kaare Eriksen, Information Editor
The long-awaited Epic Games v. Apple trial kicked off Monday, pitting the “Fortnite” developer against one of the biggest tech companies in the world.
The core of Epic’s lawsuit is what Tim Sweeney views as monopolistic App Store policies allowing Apple to take 30% of in-app earnings, the model by which Epic makes money from players. Often referred to as microtransactions, the model is also finding itself under the scrutiny of the court.
“Fortnite” was removed from the App Store after Epic added an in-app payment system allowing players to skirt the App Store, something Apple cites as a terms-of-service (TOS) violation. However, Apple lawyers claim Epic could have redirected in-app purchases out of the app via Safari without violating TOS. Sweeney then explained that “Fortnite” purchases are built around player convenience, so this redirection was never feasible.
This allowed the judge to frame the “Fortnite” revenue model as impulse buying, a descriptor commonly associated with criticisms of microtransactions.
While potential implications for Apple’s long-maligned third-party developer policies are what the majority of onlookers are waiting to see, this trial is also shedding light on hard details of Epic’s gargantuan financials that have remained shadowy on account of Epic being a privately held company, whose largest shareholder after Sweeney is Tencent. Court documents showed “Fortnite” brought in more than $9 billion in revenue in its first two years of release.
Heidi Chung, Media Analyst/Correspondent
After last week’s monster Big Tech earnings, the same mega-cap names saw their stocks break down this week. Tech is the worst-performing sector so far and is on pace to close out the week in negative territory. Amazon stock was down about 6% as of midday Thursday, while Alphabet, Apple and Facebook all fell 2%. Microsoft saw modest losses of under 1%, as compared with the broader market, which was basically flat for the week.
Big Tech’s breakdown is a clear message from investors: Much of the Q1 strength was already priced into the stocks, and the robust growth from last quarter is unsustainable in the long term. To be clear, that’s not to say the Big Five — Alphabet, Amazon, Apple, Facebook and Microsoft — are done growing. But with the U.S. economy in serious recovery mode, investors are starting to rotate out of growth sectors like Tech into Financials and Energy, which are will likely get a boost when the economy comes roaring back.
Nevertheless, if you’ve been holding onto Big Tech shares since the market bottom last March, you’re not really losing. Since March 23, 2020, Amazon stock rallied 74%, while Apple rose 131%, Alphabet jumped 122%, Facebook soared 116%, and Microsoft gained 84%. So while some investors have taken profits this week, it could also be viewed as a pretty good buying opportunity.
Andrew Wallenstein, Chief Media Analyst
The newfronts may seem like they’ve been around forever, but this annual pitchfest from digital publishers to marketers only goes back to about 2008. I’ve covered them most years in some shape or form since their very modest beginnings, when premium online video was regarded as a media-industry backwater.
Fast-forward 13 years, and judging from the panoply of brands that have presented themselves virtually this past week, the newfronts have come a long way — so much so that from here on in, it’ll be difficult to see where the newfronts end and the upfronts begin.
That’s because the pandemic has put so much momentum behind streaming TV the traditional TV players will have to play up their connected-TV options in order to guarantee advertisers can target the eyeballs fast fleeing linear TV. Look no further than the presence of NBCUniversal and Fox-owned Tubi sitting alongside leading threats to siphon TV ad dollars away, including YouTube, TikTok and Amazon.
In light of the increasingly blurry lines between the many players in streaming video, perhaps 2022 should be one big uberfront without artificial boundaries.
Gavin Bridge, Senior Media Analyst
Fox announced this week the latest update in figures for its free streaming service Tubi, as well as unveiled plans for the streamer during the newfronts. First, the stats: As has been standard, Fox said the quarterly revenue was, year-over-year, triple digits ahead for Tubi. This marks the final full quarter before Fox’s purchase a year ago and the inclusion of Fox assets, so I expect this growth to tamper down starting next quarter as we enter the second year of Fox ownership.
Of the three key metrics shared, two were good and one was a little troubling. The median age of U.S. Tubi viewers is now 37, up from 34 last year. Given Fox is relying on Tubi to sell to advertisers that can reach younger audiences than traditional broadcast and cable, the aging up of viewers will be a little concerning and something to pay attention to in coming quarters.
Total viewing time (TVT) increased from September 2020, the last time figures were reported, with March’s 275 million hours watched globally on Tubi an increase of 25%. The number of monthly average users in the U.S. and Canada also increased by 21% from Q3 2020, to 40 million.
The newfronts showed that Fox is moving on from sharing older seasons of Fox shows with Tubi and is now commissioning 150 hours of exclusive content for the service that should be ready in Q3. On top of that, there will be an NFL VOD section on Tubi for the start of the season, with games set to be multicast on the service per the new deal signed this spring.
One other sporting event to potentially be on Tubi this summer is the Copa America soccer tournament, to which Fox just announced the rights. It will be free to air on Univision, so adding reach will help advertisers as well as enable Tubi to have a test run for multicast coverage.
Kevin Tran, Media Analyst
Young digital media firms remain keen on M&A opportunities. Most recently representative of that is five-year-old site The Athletic, which WSJ yesterday reported is still looking for a merger partner to expand its subscription business. The sports pub reportedly now sees The New York Times as a leading merger candidate, rather than Axios, with which the site halted negotiations, the WSJ said Thursday.
A tie-up between The Athletic (which counts over 1 million subs) and The New York Times (which just reported 5.3 million digital news-only subs) would mark one of the more interesting digital media M&A deals in recent memory. Mergers like Vice-Refinery29 and Vox-New York Media didn’t include publishing entities with news-subscription businesses as robust as those of The Athletic and NYT.
A tie–up between The Athletic and NYT could help accelerate growth in both brands’ subscriber bases. It seems likely both would still stand alone after a merger, given each is well established. Having separate brands underneath the same parent company paves the way for bundle deals where a consumer might be able to access both The Athletic and NYT at a price cheaper than paying for each separately.