Call that a boomlet? It was a one-day wonder. It’s a bit like the morning after the day before, when we all had a blowout party. Instead of a “Flash Crash” it was more of a “Flash Dash”. The hangover’s terrible, a bucket load of coffee and Aspirin can’t kill the throbbing pain. Big Macs won’t work, nor will BLTs. “What did we do?” you ask, as you look at the trading account. I paid that for what? Then you look at the screen, red everywhere, the Aussie dollar down, oil down, Wall Street falling — it was back to normal the day after the Fed liberated the bulls for a few hours of fun in US, Australian and European markets in the wake of confirmation US interest rates will rise, but not by as much as previously feared. Our market opened weaker this morning — much of yesterday’s 1.8% surge remains on the table, but will be eaten away in coming days by grumpy investors. US oil was back around US$43.80, gold though was up (the bugs never lose faith) and the Aussie dollar was back around 76.30 US cents (down more than 2 cents from yesterday’s peak and the Reserve Bank is breathing normally again) and the euro was down to around US$1.06, (down 4 cents from yesterday’s madcap peak). And why the big moves? Well market reaction to the Fed’s statement and comments hit investors who were long the US dollar against the euro and who had shorted the Aussie dollar and oil — they had to scramble to limit their losses, hence the wild swings in Brent oil (up 11% at one stage) and those huge rises in the euro and the Aussie dollar, which have now been unwound. A dotty day’s trading best forgotten, like all nights on the tiles. It will get better with age. — Glenn Dyer
New Zealand economy hot, cooling weather approaches. Like the onset of winter, the Kiwi economy — one of the best performing globally among the major developed countries in 2014 — is facing a browning off, a cooling, an easing. While GDP rose 0.8% in the fourth quarter (and 3.3% for the year), that December-quarter growth was the slowest all year. There was a 0.5% slide in real gross national disposable income in the last three months of 2014, a calculation that takes into account changes in terms of trade. (Shades of Australia, another quarter of negative growth in real gross national disposable income and the Kiwis will have one of The Australian Financial Review‘s “income recessions”). But while tourism and retail spending, and housing and financial services drove growth in the fourth quarter, there are signs of a slowdown ahead.
Australian tourists dominate New Zealand tourism — around half of all visitors per year, or almost 500,000. They spent less last year and the fall in the value of the Aussie dollar against the Kiwi (making NZ more expensive) will see that fall in spending continue this year. Chinese visitors are forecast to continue to rise and continue to spend more, but the impact of the fall from Australia will be hard to shake. Dairy prices are down 27% for milk powder and that will have a bigger impact this year as returns to farmers are cut by Fonterra. The Reserve Bank of NZ is under growing pressure to trim its high official rate of 3.5% because inflation will remain weak and the high Kiwi dollar is starting to strangle the economy. But there’s a property boomlet on in Auckland, which is worrying the bank and government. The Kiwi economy’s 3.3% growth rate in 2014 was much faster than Australia’s 2.5% (0.5% in the December quarter). Their Sav Blanc is ubiquitous, I suppose they will now win the cricket world cup and the rugby world cup. I hope the economy catches a chill. — Glenn Dyer
Ignore News’ bulldust on sports rights. News Corp’s cheer squad — which includes Foxtel and the folk at the various staff newsletters, or “newspapers” as some allege — would have you believe that there will be a low-cost sporting nirvana if the sporting rights anti-siphoning rules are relaxed and News/Fox Sports and Foxtel can snap up exclusive rights to the AFL and NRL, just like its UK Murdoch clan stablemate, Sky has done with soccer. Well that’s a crock of you know what. Just look at Sky’s surprise fee rise this week (to start June 1), to help pay for the 4.2 billion pound (over $8 billion) three-year deal to keep its big share of English Premier League games for the 2016-17 season.
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Sky, in fact, offered 83% more than it is paying under the current contract. So up goes the cost for Sky subscribers — 9% for the family bundle and 2% for a sports bundle. It was only last September that Sky lifted the cost of a sports channel bundle by 6%. The Financial Times points out the cost of the sports bundle has risen around 30% above UK inflation since 2001. At the time of retaining its maximum share of the rights, Sky promised cost cuts and other ways of paying for the higher rights charges, and while there were hints at price rises for subscribers, they were played down. So now they have arrived, and no doubt there will be more cost rises in coming years. That’s the dirty little secret all pay-TV companies hide, especially those controlled by News — there’s no escaping the price/cost recoveries for consumers if you allow sport to go to pay TV and that’s the only way to watch. You pay for what you used to get for free. Sky has 11 million customers and the average cost rise will be 2.50 pounds a month, or around 330 million pounds in a full year (around $600 million). That’s one way of paying for an ego-driven overbid. No wonder Netflix is growing rapidly. — Glenn Dyer
Taylor Swift’s Pandora boycott had no impact. According to figures from the Recording Industry Association of America, streaming music services such as Spotify have topped CD sales and are closing in on digital downloads as the largest source of revenue in America, a development that will make a lot of people sit up and take notice — and also warn the established broadcast TV sector of the dangers from streaming video services such as Netflix. US revenues from subscription streaming brands such as Spotify and Rhapsody and streaming radio services such as SiriusXM hit US$1.87 billion in the US in 2014, up 29% from 2013 and equal to 27% of all industry revenues. CD sales fell 12.7% to US$1.85 billion, while sales of vinyl albums soared by nearly 50% to US$315 million. Download revenues (iTunes etc) fell 8.7% to US$2.85 billion, or 37% of total industry sales. They peaked in 2012 and have been falling ever since, just as sales of iPods have been sliding as streaming audio services have been taken up by smartphone owners. And some more interesting figures: income from advertising-supported free streaming grew slightly in 2014 to US$295 million, while revenue from streaming radio services, such as Pandora grew sharply from US$590 million to US$773 million, despite Taylor Swift removing all her music. All up, total US music-industry revenue was flat for the fifth year in a row at US$6.97 billion. Ringtones accounted for just 1% of revenues, or around US$70 million. — Glenn Dyer
SVOD update #567: Ignore the Apple TV price cut. Netflix, the biggest SVOD operator, had total 2014 revenues of more than US$4.7 billion, heading over US$5 billion this year, and possibly as high as US$5.3 billion. So, within a couple of years, Netflix’s annual revenue will move past that for the American music industry. Sony’s streaming service PlayStation Vue, entered the contest this week in parts of the US east coast (New York and Chicago) for Playstation 3 and 4, plus an iPad version to come (will it become an Apple TV app?). Just as Apple changed the music industry for good, there are growing signs Apple TV will transmogrify into a global TV/cable killer later in the year. Apple TV and Netflix are seen as complementary offerings. Stay tuned. Stan and Presto will battle to keep this invasion at bay in Australia, when Apple TV launches. Don’t be fooled by Apple TV’s price cut from US$99 to US$69. That is now seen as the traditional way retailers have of clearing stocks of old products ahead of the launch of the new model. Wait for the new model later this year. From all reports in the US, it will be worth it. The SVOD (over the top, not through existing cable) revolution is gathering pace. — Glenn Dyer