Taking the Temperature of Top Media/Tech Companies, July 27-31

Taking the Temperature of Top Media/Tech
Cheyne Gateley/VIP

The VIP Heat Index evaluates the latest moves made by the companies dominating the previous week’s biggest tech and media headlines. Here’s how the temperature checks stack up for the week of July 27…

Universal Shatters Theatrical Window With Historic AMC Deal 

Universal scored a massive coup in its multi-year deal with AMC Theaters last week that will allow Universal and Focus films to hit premium VOD after just 17 days, a dramatically shorter time frame than the standard three-month window. But that doesn’t mean you’ll get to see the next “Minions” movie on Netflix within weeks of its theatrical release. Universal’s victory should allow it to better monetize its lower-budget and indie fare, as the shorter window means it can better capitalize on a film’s promotional campaign (the bulk of a film’s ads run in the two weeks prior to its release). But the bigger implication here is that it sets precedent for rival studios to negotiate similar deals with AMC and maybe even other exhibitors, which have little bargaining power during a pandemic that has cut off the lifeblood of their businesses.

Facebook Hits Fresh Record Highs After Crushing Q2 Expectations

Despite the highly publicized ad boycott, Facebook’s ad business was rather resilient during the quarter, even more so than fellow tech giant Google. Facebook stock jumped to record highs Friday after the social media giant posted big beats on both the top and bottom lines during its second quarter. Facebook’s revenue guidance of 10% growth (7.9% expected) for the third quarter was also rather encouraging. The company noted some headwinds ahead including the ongoing economic volatility, the ad boycott and regulations around ad targeting. But if Q2 was any indication, Facebook is simply too indomitable to see its growth slow; not even an antitrust hearing last week seemed to leave a ding.

Apple Shares Soar on Earnings Beat and Stock Split

Apple endured the COVID-19 pandemic a little better than many other companies, according to its fiscal Q3 ‘20 earnings last week. The tech company beat on earnings and revenue, logged year-over-year increases in all of its revenue categories and announced a rare 4-1 stock split. That was a good move for Apple to help it eventually broaden the accessibility of its stock, and more retail investor accessibility to Apple could help boost interest in Apple products. The stock split announcement fittingly occurred the day after Apple was examined by the House Judiciary Antitrust Subcommittee, which seemed to barely take notice of Tim Cook (he got 35 questions in total, while this figure was 59, 61, and 62 for Bezos, Pichai and Zuckerberg).

Amazon’s Dominance Shows in Huge Earnings Beat

Amazon couldn’t be doing worse PR-wise, with ongoing criticism of its warehouse working conditions and an antitrust investigation. But the e-commerce company blew away earnings and revenue expectations by roughly $8 billion. Shares climbed over 5% after the Q2 earnings report of Amazon, which is one of the companies uniquely positioned to benefit from the pandemic. Not only do stay-at-home orders engender online purchases, but they also boost video streaming. Amazon boasted of the various originals it launched during Q2 in its earnings report (including “Goldfinch,” “7500,” and “My Spy”) but they generated so little buzz, it demonstrates what a long way the company’s content efforts still has to go to make the same impact Netflix’s film operation has.

ViacomCBS Beefs Up CBS All Access Ahead of 2021 Rebrand

CBS All Access’ catalog got bulkier by way of 70 TV series from Viacom nets like BET, MTV, and Nickelodeon last week. But the big takeaway here is that ViacomCBS remains focused on dramatically increasing its SVOD footprint with its expanded CBS All Access to come in 2021. From what little is known about the new service now, it should be able to benefit from its beloved kids IP (All Access will be the exclusive home to a new “SpongeBob SquarePants” film in 2021), and it may get a boost from millennial Viacom loyalists that don’t mind paying for a dose of nostalgia via guilty pleasure-reality TV (MTV’s “Jersey Shore,” “Laguna Beach”). Still, the platform will need to come out swinging with marquee original TV series to measure up to the biggest SVODs.

Spotify Feels the Burn of Ad Pullback Too, Q2 Earnings Show

Spotify added more paid subs than expected in Q2, but this was overshadowed by the company’s revenue miss ($2.2 billion vs. $2.3 billion expected), which was impacted by the ad pullback that stung so many other companies during the past few months. Spotify’s ad revenue fell 21% year-over-year in Q2, a steep drop compared to the segment’s 34% year-over-year growth in Q2 ’19. Thankfully for Spotify, its aggressively expanding podcast operation may help it onboard more paid subs moving forward to help offset further COVID-19-spurred ad pullbacks. Joe Rogan’s podcasts will be exclusive to Spotify starting in 2021, for example, while Michelle Obama’s first podcast is a Spotify exclusive that debuted on the 29th.

Alphabet Experiences First-Ever Revenue Decline Due to COVID-19 

As expected, Google’s ad revenue got hammered during the past few months, declining over 8% year-over-year in Q2, a steep drop from its 10% growth in Q1. This ad pullback contributed to a 2% year-over-year drop in Alphabet revenue, the first revenue decline in company history. Alphabet CFO Ruth Porat indicated ad spend was recovering but cautioned against any notions it is now “out of the woods.” And that was smart, since many models suggest the toll of COVID-19 won’t let up any time soon.  

Trump Targets TikTok, But Microsoft May Still Make a Deal

After Donald Trump threatened to ban TikTok and even block Bytedance from selling its popular social-video app, the latter scenario re-emerged as a possibility with a statement issued Sunday by Microsoft CEO Satya Nadella suggesting his company would pursue the deal with the president’s approval. This one is way too wild to predict what’s next. If a sale happens, Bytedance could reap tens of billions of dollars should Microsoft be cleared to take TikTok off CEO Zhang Yiming’s hands, but that can’t be what he wants. He hired Disney’s Kevin Mayer to help navigate U.S. regulatory scrutiny precisely to avoid the predicament in which he now finds himself.

CAA’s Massive Layoffs Solidify COVID-19’s Toll on Agency Biz

CAA last week said it’s laying off 90 staffers and furloughing an additional 275 employees as part of a pandemic-induced cost-cutting effort. The dramatic downsizing should catch the eye of Hollywood watchers due to its magnitude; UTA temporarily laid off 171 employees in May, while ICM started cutting 40 staffers in June. WME laid off, furloughed, or reduced hours of nearly 300 in May. It’s a sign of the times: Agencies, which were already getting hurt financially by their dispute with the WGA, are struggling mightily given the paucity of Hollywood productions 100% up and running. Their diversification efforts in recent years haven’t done enough to protect them from the vulnerabilities inherent in their core business.

Double Trouble at Warner Bros.: ‘Tenet,’ ‘Ellen’ 

Warner Bros. is making the best of a terrible situation and settling for an international-first “Tenet” release. While it raises piracy concerns in the U.S., this is ultimately a positive because this route allows the film to finally get out the door to international markets that are less hard hit by COVID-19 and generate the majority of global box-office revenue. If that wasn’t bad enough, the backlash at “The Ellen DeGeneres Show” over its “toxic culture” gathered considerable steam last week. Damage control to date has done little to contain the controversy, opening up the real possibility that Warners will have to walk away from its daytime TV juggernaut.