Seth Gilbert, 10-6-2008
Smartphone sales were up handsomely in the U.S. in the first half of the year and the average price of smartphones was down 26% to $174 in August (via NPD Group). With consumer spending on the wane and all the doom and gloom of the current economic climate likely to seal wallets even tighter, some analysts still believe smartphone sales will remain resilient; the lower prices and increased competition luring consumers to substantial improvements and value at relatively low entry points. There’s not really any way of validating the forward looking claims but to start the week, a handful of new smartphone data points have hit the market to help fuel the debate. One even suggests Apple may have already sold ten million iPhones in 2008.
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Seth Gilbert,
Entertainment industries are sometimes called recession proof. When wallets tighten, retirement gets pushed back, or bills go unpaid, people will spend a little to escape fear and worry. There’s a need for entertainment in tough times, the theory goes. The reality is less forgiving: entertainment like anything else can fall victim to a weakening economy. Entertainment industries are recession resistant not recession proof. Glimpses of August data may be beginning to prove that point.
Mirroring a surprise shortfall in August gaming sales, Netflix came out Monday with a surprise adjustment for their third and fourth quarter guidance. A few weeks ahead of the actual earnings report (October 20th), the Los Gatos company preannounced that third quarter revenue and EPS will fall within prior guidance but subscriber numbers will fall “just below” the low end of guidance.
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Seth Gilbert, 10-3-2008
It was the “showdown,” the looming crisis, digital music’s “Ok Corral.” If you believed the headlines and bought into the sensationalism, the fate of iTunes, the future of the world’s leading digital music store, hinged on the decision of the obscure three judge Copyright Royalty Board (CRB). The reality was hardly so dramatic.
Thursday, the CRB was set to announce its decision on the mechanical royalty rate: the default per song license fees paid to music publishers for the sale of their music. It was the first time since 1980 a government hearing addressed the rate, the review the result of last year’s expiration of a 1997 agreement.
Lobbying on one side of the aisle sat the National Publishers Association. They were seeking a rate hike from the current 9.1 cents a song to 15 cents. On the other side, the Digital Music Association, representing music sellers like Apple and Amazon, lobbied for a price cut down to 4 cents per download.
The court, whose three judges are appointed by the Librarian of Congress had heard testimony and was set to break the stalemate.
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Seth Gilbert, 10-2-2008
Nintendo’s sold more than 14 million Wii consoles in the U.S and dominated the monthly U.S. sales charts for months, but leading into Thursday’s Nintendo media day in San Francisco, the palpable buzz was centered not so much on what Nintendo has in the market now (nor what Nintendo had to announce today) but instead on what the company might reveal in the next few years.
The trigger for the rumor mill’s rapid heart rate was a report published September 30th on parent-centric game site “What They Play.” Click to Read More
Seth Gilbert,
Crossing T’s and dotting I’s, this week there were a couple news briefs from the M&A front:
Sony BMG: After months of rumors, Sony announced August 5th that they’d reached an agreement to buy partner, Bertelsmann’s, fifty percent stake in their joint Sony BMG music label. Regulators in Europe approved the deal a few weeks ago and it’s now officially complete. The world’s second largest record label, which includes famed imprints Columbia, Arista, Epic and RCA records, will now be called Sony Music Entertainment, Inc. and be a subsidiary of Sony Corporation of America. Bertelsmann received $1.2b, including $300m in cash that was carried on Sony BMG’s books.
Take Two: EA walked from its hostile takeover attempt in August, and two weeks ago, walked from the prospect of a friendly deal too. Now Take Two Interactive, will walk away from sales discussions Click to Read More
Seth Gilbert, 10-1-2008
If content is king, Los Gatos based Netflix seems to be moving to try and grab some sort of throne for their subscription based on-demand video distribution service – and they’re not hesitating, even in spite of the prospect that widespread consumer adoption might be years away. Last week, the company announced catalog boosting deals with CBS and Disney. Today, they added more film and TV content for their streaming video service through a partnership with Liberty Entertainment’s Starz.
Per disclosed terms of the deal, approximately 2,500 programs from Starz library will be added to the “Watch Now” catalog of streaming titles. As with other “Watch Now” content, the programs will be available at no added charge for all Netflix subscribers who pay for an unlimited monthly rental program.
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Seth Gilbert,
Gamestop is billed as the world’s largest video game retailer but until today, they had no footprint in France, Europe’s second largest market. For $700 million, including debt, that will now change.
Gamestop announced Wednesday they will buy France’s Micromania retail chain from L Capital, a private equity firm affiliated with LVMH.
The all cash deal will be funded through a combination of cash on hand (the company had $539.9m in Cash and Equivalents as of August 2nd), a $150m term loan from Bank of America and existing lines of credit.
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