T-Mobile and YouTube's TV Pricing Shows Why Disrupting the Market Is Hard
Sixteen months after announcing plans to launch a TV service that would shake up the status quo, T-Mobile U.S. (TMUS) has launched TVision Home, a service that has a base price of $90 per month, with consumers charged another $10 per month for each connected TV. Separately, Alphabet/Google's (GOOGL) YouTube, just hiked the base price for its YouTube TV service by $10 to $50 per month, albeit while adding a slew of channels from Discovery Communications.
This is the second price hike for YouTube TV, which cost just $35 per month when it launched in February, 2017. And not long ago, AT&T (T) hiked prices for plans offered by its DirecTV Now online TV service by $10 per month, after having carried out a $5 per month hike last July. Ma Bell also revamped DirecTV Now's channel lineups for new subscribers, adding HBO to its cheapest packages but also removing a number of popular channels.
T-Mobile's new TV service admittedly provides quite a lot -- over 150 channels, 1TB of DVR storage, integration with various streaming and voice assistant services, iOS and Android viewing apps and a promise not to include any contracts or hidden fees. Nonetheless, considering how much T-Mobile has managed to shake up the status quo in the U.S. wireless industry via aggressive pricing and efforts to eliminate various service fees and taxes, TVision Home's pricing certainly feels underwhelming.
Between them, T-Mobile, YouTube and AT&T's TV pricing actions drive home just how hard it is to disrupt the U.S. pay-TV industry with a frontal assault. The leverage wielded by owners of popular TV networks -- both to charge high monthly affiliate fees for access to their channels, and to insist their content be sold via large bundles rather than on an à la carte basis -- makes it very hard for an upstart online TV service to significantly undercut incumbent cable, satellite and telco providers.
Netflix (NFLX) , Amazon.com (AMZN) and YouTube's traditional services remain the real disruptors for the U.S. pay-TV industry, accomplishing this by motivating a steadily-growing subset of consumers to stop paying for linear TV services altogether.
Weak PC Market Has Silver Linings for AMD, Microsoft and Others
With Intel (INTC) CPU shortages weighing, research firm IDC thinks global PC shipments fell 3% annually in Q1 to 58.5 million. Gartner, whose definition of what devices count as PCs is slightly different from IDC's, thinks shipments fell 4.6% to 58.5 million.
In spite of the negative growth, there are positives here for some industry players. IDC and Gartner both note that PC OEMs turned to AMD (AMD) CPUs to help deal with the Intel shortages. And the fact that IDC notes sales of "commercial and premium" PCs were relatively strong is a positive for both Intel and Microsoft (MSFT) -- on average, these PCs ship with costlier CPUs and versions of Windows that carry higher licensing fees, and are also less likely to run pirated copies of Windows.
On the flip side, in what's a negative for Microsoft but a positive for Google, Gartner estimates Chromebook shipments (not counted in its PC shipment estimate) rose by a double-digit percentage. The estimate comes three months after Google disclosed that 30 million Chromebooks are now used in the education market.And continuing a multi-year trend, the biggest PC makers continue taking share from smaller players with weaker brands, less economies of scale and smaller R&D budgets. IDC estimates that HP ( HPQ) , Dell ( DELL) and Lenovo collectively accounted for 63.9% of PC shipments in Q1, up from 61.4% a year earlier.
Jeff Bezos' Annual Letter Shows Amazon's New Political Sensitivity
As always, Jeff Bezos' annual letter to Amazon.com (AMZN) shareholders provides some insight into the corporate philosophy of Amazon and its founder. Among other things, Bezos emphasized Amazon's encouraging of out-of-the-box thinking, its willingness to tackle difficult technical problems, its tolerance of failures (for example, the Fire Phone) and its readiness to launch offerings that customers don't yet realize they want (no one asked for either AWS or Echo speakers, Bezos asserted).
But this time around, with politicians and regulators now more closely scrutinizing Amazon's business practices, Bezos also put some effort into arguing Amazon is a positive force for its numerous Marketplace sellers, as well as its 600,000-plus employees.
Bezos noted third-party sellers accounted for 58% of Amazon's physical gross merchandise sales in 2018, up from 34% in 2010 and just 3% in 2000, and highlighted the various services Amazon provides sellers to help them grow their businesses. "Third-party sellers are kicking our first party butt. Badly," he insisted.
The comments come shortly after Amazon, which has seen its Marketplace policies and efforts to support first-party sales get criticized by politicians, pared back attempts to promote its own private-label goods on its website. Also, the company was recently reported to be planning a policy change under which U.S. Marketplace sellers would no longer be prevented from offering items at lower prices on other platforms.
Bezos also declared Amazon still only accounts for "a low single-digit percentage of the retail market." In addition, he spent some time towards the end of his letter highlighting the company's 2018 decision to set a $15/hour minimum wage, while calling on retail rivals to do the same. And he went over Amazon's investments in education and job-training programs for employees, students and military veterans.
It's safe to say that Amazon, which chose the D.C. metro area for part of its HQ2 expansion, is more proactive about dealing with government scrutiny than it was a year ago. And this proactiveness extends to its CEO's public remarks.
Google Starts to Exploit Maps' Untapped Revenue Potential
Google Maps has over 1 billion monthly active users (MAUs), many of whom use it frequently to discover and get information about local businesses. Throw in Alphabet/Google's (GOOGL) extensive relationships with local advertisers and the tremendous amounts of user location, activity and interest data the company has, and you have a pretty big revenue opportunity.
A recent Bloomberg article notes that Google, which has been testing ads in Maps for a while, is now getting more serious about monetizing the platform. Among its options for doing so: Showing ads within Maps search listings; showing "promoted pins" in the map view when a user searches for businesses; providing personalized business recommendations; and selling ads for services such as food deliveries and Uber/Lyft rides.
Maps is just one of several meaningful revenue opportunities ahead of Alphabet that are still in the early stages of paying off. Other include Waymo, which just started a limited ride-hailing service in the Phoenix area; Google Assistant, which just started showing full search results (and with them, search ads) in response to some queries; and the various solutions being developed by the Verily life sciences unit.
Valuing Alphabet solely based on its near-term earnings serves to undervalue these nascent businesses, since they're collectively producing little revenue for now but are incurring meaningful expenses.
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