MACY’S MOVING DOWNTOWN: Last month I posted an article using McDonald’s menu offerings as an anecdote for the polarization of our society – where the middle is collapsing as consumers gravitate toward either Premium or Value camps. Nowhere is this trend being felt more than in Retail. For a prime example of what I’m talking about check out the attached Business Insider link, which explains the strategic pivot Macy’s is making. A few decades ago Macy’s was known for superior service and making an experience out of shopping. But things have changed as Macy’s customers’ tastes evolve. Now Macy’s is going headlong into Value with the opening of more Backstage sub-stores which carry off-rack discount merchandise. Macy’s is even doing away with its associates in the shoe department by rolling out self-serve shoe kiosks. These moves are being made to help Macy’s stay competitive, since more of its customers just want it fast and cheap. Consider this change on a macro level – if a storied retail brand like Macy’s has to resort to the Value play how many other less established players will have to go even lower on price to stay alive?
IS THE DOJ BARKING UP THE WRONG TREE?: To understand this next article you first need to know the current consolidation that’s happening in TV’s content and distribution ecosystem. In a post a few weeks ago I explained how larger entities like AT&T and Disney are starting to gobble up smaller players to create end-to-end operations which create and distribute their own content. This has caught the attention of the DOJ (aka Trump Administration) who is challenging mega-acquisitions such as AT&T buying Time Warner, which could lead to the possible divestiture of CNN. (Confused yet?) With that as the backdrop check out CNN President Jeff Zucker’s comments from a Mobile World Congress interview in the attached AdWeek link. According to Mr. Zucker the DOJ is looking at the wrong players for a potential TV monopoly. Instead of the traditional networks Zucker points to Google and Facebook, with their domination of OLV, as the real gorillas in the video room. Per Mr. Zucker, “The fact is nobody for some reason is looking at the monopolies that are Google and Facebook, and that’s where the government should be looking and helping to make sure that everyone else survives.” Obviously this is an attempt to shift attention from CNN to other players in the space. But it’s also a legitimate question about why the Duopoly seems to be immune to antitrust questions while the traditional networks get all the scrutiny. Fair point, I think.
TWITTER SINGING THE SOUNDCLOUD BLUES: Did you even know Twitter had an investment stake in SoundCloud? If you didn’t you’re not alone. In 2016 Twitter’s Ventures unit invested $70M in the German Streamer, but only as a passive investor – so there was never a real business strategy with this. According to the attached RAIN link, even that stake is now just dust in the wind, with Twitter choosing to write off the entire $70M as a loss. In Twitter’s most recent financial report they justified the write down by saying the investment is “not expected to be recoverable within a reasonable period of time.” This move is bad for both parties. First, what was Twitter even thinking? To invest $70M in anything without a plan or reasonable hope of getting a return on the investment seems blindly naive. And then there’s SoundCloud, who’s been at death’s doorstep for the better part of a year. While their more recent $170M round of funding from The Raine Group/Temasek was a lifeline, they’re still not generating enough revenue to survive long-term. Hence the decision by Twitter to pull the rip cord. Seems like a bad situation all around.
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