Thursday Apr.04, 2019

Ikea's 30-nation rental feng shui

The race for $34/month living rooms
The race for $34/month living rooms

Hey Snackers,

Goldman's tossing around $100K if you can fix its #techproblems.

Markets are more focused on inching up toward 6-month highs.

Radio

iHeartMedia challenges Spotify with possible IPO

Long-time listener, first-time IPO'r... With 848 stations, iHeartMedia is America's biggest radio broadcaster. And it just filed paperwork to list its shares on public markets.

  • 1 catch: It filed for bankruptcy last year with $20B in debt from the '08 financial crisis. So it needs to thank a bankruptcy judge who said it only has to pay a portion of that debt back.

Battle of the bands 2019... is Spotify vs. iHeart. And antenna-loving iHeart is putting up a shockingly good fight:

  • Total $$: The two brought in about the same revenue last year (~$6B), but Spotify's growing much faster.
  • Total Ears: iHeart has 275M US listeners. Spotify has 207M (with 62M in North America).
  • Live Events: iHeartMedia leads with 20K/year, featuring Cardi B, Ed Sheeran, and iHeartRadio Fiesta Latina.
  • Podcasts: Spotify has acquired 3 podcast companies this year. But iHeart already connects 16.6M podders, making it the #2 podcast creator behind NPR.
  • Social: iHeart's radio hosts and personalities enjoy 145M followers, compared to the 28M following Spotify's.

"Companionship" is the jingle... iHeart dropped that word 21 times in its IPO filing. Talk radio personalities bond powerfully with daily commuters or anybody enjoying an AM/FM dial. It barely veils resentment for Spotify's core biz of "music collection...which essentially replaced downloads and CDs." It hopes advertisers agree.

Tube

T-Mobile seeks to "replace cable for the 5G era"

The Church of "Uncarrier"... is led by unordained John Legere. The T-Mobile CEO had already preached about his "Uncarrier TV," fixing all the stuff you hate about cable. On Wednesday, we got details: It'll feature Viacom's TV channels, including Comedy Central, BET, MTV, and Nickelodeon.

It's exciting for 1 company... It's desperation for the other:

  • T-Mobile (networks): Its business is low-cost phone plans. And it boldly (and kind of unrealistically) wants the same with TV. No bundling, no minimum 2-year contracts, "no BS." John's words, not ours.
  • Viacom (content): The last kid standing on the streaming dance floor. Other content companies paired-up to compete with Netflix. Viacom finally did, but Uncarrier TV hasn't even launched.

"Bundling" beats "discounting"... We hope Uncarrier TV will be free for T-Mobile subscribers. If it does, T-Mobile can keep winning new customers with freebies. Bundling in free stuff earned it a record 2.4M new subscribers last year:

  • Major League Baseball streaming comes free to each T-Mobile subscriber.
  • And "T-Mobile Tuesdays" offer up free things weekly: 1 free taco. A Dunkin' latte. 10 cents off Shell gas.
Uncouch

Ikea expands furniture rentals to 30 countries

Plush. Luxurious. Temporary... For $34/month in Holland, you get a bed, desk, table, and chairs. Ikea's now shipping that idea to 29 more countries. It copies the home-y rental partnership between Rent the Runway and West Elm (owned by Williams-Sonoma), and is fueled by demand for subscriptions over ownership.

2 distinct customer types... Many millions of customers. And they all want flexibility. Thanks to Task Rabbit, the gig handyman app Ikea acquired in 2017, these potential furniture renters don't even need to assemble the stuff. Or pronounce Äpplarö.

  • College students don't want to buy couches that they'll have to toss on Craigslist two semesters later.
  • Startups don't want to waste investor money on desks when the venture could fail before the launch party.

So many trends coming together... Ikea's pouring resources into scaling its anti-ownership rental plan. That's because it snugly fits in with 3 key current themes of twenty and thirty somethings:

  1. Transient: When you're bouncing city-to-city, you don't want the cost and weight of a dresser with you.
  2. Not rich: That 1.5-month security deposit was expensive enough.
  3. Environmentally conscious: Ikea's CEO wants designs like its Poäng armchair to embrace recyclable parts thanks to the new initiative. And to reuse furniture when the rental’s up.

What else we’re Snackin’

  • eDrive: Tesla reveals it sold 63K cars last quarter — That's 31% less than the previous one
  • ePlay: GameStop rebounds on plans to become the "local YMCA" slash "Pop Warner" of eSports
  • Anti-Social: Facebook slips after app developers leaked 540M user records on cloud servers
  • Acquired: WeWork drops a secret sum for confusingly-named office management platform Managed by Q
  • Folded: Alliance of American Football league shuts down (it was 2 months young)

Thursday

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Not so Gucci

French luxury fashion conglomerate Kering has seen its shares fall ~10% in the last 24 hours after reporting that sales at its flagship brand Gucci had dropped 21% in its latest quarter.

Kering’s other brands, which include Yves Saint Laurent, Bottega Veneta, and Balenciaga, fared slightly better — but the only real bright spot was the company’s eyewear division, where sales rose 24% (9% on a comparable basis).

With Gucci responsible for roughly two-thirds of the company’s profit, the ongoing struggles of the brand are weighing heavily on the bottom line: the company expects recurring operating profit to drop 40-45% in the first six months of the year.

Gucci execs will be hoping that new designer Sabato de Sarno can turn the iconic brand’s fortunes around, particularly in China where demand has dropped precipitously. His designs only started hitting stores in February.

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Kering Warns Profit to Tumble Following Gucci Woes in China

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With Gucci responsible for roughly two-thirds of the company’s profit, the ongoing struggles of the brand are weighing heavily on the bottom line: the company expects recurring operating profit to drop 40-45% in the first six months of the year.

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Yesterday, the FTC sued to block Tapestry Inc’s $8.5B acquisition of Capri holdings. The agency is worried that a merger between Tapestry, which owns the Coach and Kate Spade brands, and Capri, which owns Michael Kors, would eliminate competition in the market.

The crux of the FTC's argument lies in the scope of the "accessible luxury" handbag market, where Tapestry competes with Michael Kors, with the FTC saying the following:

Where Tapestry and Capri most vigorously compete against one another – mainly between Tapestry’s Coach and Kate Spade brands against Capri’s Michael Kors brand – is in the “accessible luxury” handbag market. Today, Coach, Kate Spade and Michael Kors continuously monitor each other’s handbag brands to determine pricing and performance, and they each use that information to make strategic decisions, including whether to raise or lower handbag prices.

The deal would eliminate fierce head-to-head competition on many important attributes including on price, discounting, and design. Tens of millions of Americans that purchase Coach, Kade Spade, and Michael Kors products could face higher prices

While Capri and Tapestry are two of the largest players in this market, winning an antitrust case won't be so straightforward, as consumers have other options at similar price points, including Marc Jacobs (owned by competitor LVMH), Tory Burch, Cuyana, and Mansur.

FTC Moves to Block Tapestry’s Acquisition of Capri

FTC Moves to Block Tapestry’s Acquisition of Capri

The crux of the FTC's argument lies in the scope of the "accessible luxury" handbag market, where Tapestry competes with Michael Kors, with the FTC saying the following:

Where Tapestry and Capri most vigorously compete against one another – mainly between Tapestry’s Coach and Kate Spade brands against Capri’s Michael Kors brand – is in the “accessible luxury” handbag market. Today, Coach, Kate Spade and Michael Kors continuously monitor each other’s handbag brands to determine pricing and performance, and they each use that information to make strategic decisions, including whether to raise or lower handbag prices.

The deal would eliminate fierce head-to-head competition on many important attributes including on price, discounting, and design. Tens of millions of Americans that purchase Coach, Kade Spade, and Michael Kors products could face higher prices

While Capri and Tapestry are two of the largest players in this market, winning an antitrust case won't be so straightforward, as consumers have other options at similar price points, including Marc Jacobs (owned by competitor LVMH), Tory Burch, Cuyana, and Mansur.

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Microsoft Makes a New Push Into Smaller A.I. Systems

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