Volume 25: Apple re-imagines, Amazon is buying.
1. COVID-19 becomes convenient excuse for basic marketing errors.
Tl;dr: Quibi looking more like a damp squib-i.
A global pandemic is a terrible thing for almost everyone and almost every business, except if you happen to be in streaming media. With stay-at-home orders in place around the world, viewing figures at the likes of Netflix, Prime Video, and Disney+ are through the roof, with both subscriber numbers and valuations up. Then there’s Quibi.
Quibi, the mega-hyped $1.8bn mega-startup launched by entertainment impresario Jeffrey Katzenberg and serial tech-CEO Meg Whitman has attracted fewer than 3m people to their 90 day free trial, with only around 1m active. Tellingly, it sits below a game nobody has heard of in the Apple app store download list.
In a recent NY Times article, Katzenberg conveniently blamed COVID-19 for what actually looks to be basic marketing failures. They created a product people couldn’t watch on their TV when they wanted to, they didn’t include social, sharing or other elements, they invested heavily in “essential” news content that nobody watches (clearly not very essential), hired a list of celebrities that fit an exceedingly narrow window of what people want to watch, and based much of the proposition on a gimmick (flipping phone from vertical to horizontal) that they’re now being sued over.
While I’d love to see something brave and new work out, it’s actually quite shocking to see basic errors of market research and user-testing play out in such a public fashion. It was always going to be a tough slog to compete with the hundreds of billions being spent on content by Netflix, Amazon, Apple, Disney and others, so compounding that with what looks a lot like incompetence doesn’t exactly bode well. Barring a major turnaround, look for this damp squib to disappear entirely by summer.
2. Is Apple re-imagining the loyalty program? Moving Today online says maybe.
Tl;dr: Another strategic opportunity for a company with more than most.
In 2001, Apple executed one of the greatest business strategies in history when they re-allocated brand-building resources from the expense of advertising and media to the capital investment and profit-center of the Apple Store. Much pilloried at the time, it’s a strategy that paid off in spades as these highly controlled brand temples enabled them to supercharge growth of their premium-priced products.
In 2020, they have the potential to do something similar by taking Today at Apple out of these stores and using it to re-imagine the loyalty program.
Loyalty programs themselves have been around since the 18th century. Unfortunately, most end up being nothing more than costly discounts for customers that would’ve bought anyway, which has led observers like Byron Sharp to conclude that loyalty is a wasted investment: You should place all your resources into growing the brand with new customers instead.
I don’t fully buy this. Rather than dis-investing in loyalty, a bigger part of the problem lies with the nature of the loyalty programs themselves, and the fact that they don’t really inspire much loyalty except to the discount.
Having taken a class at a retail store with my son earlier in the year, Today at Apple is impressive. Unfortunately, a limiting factor is the store-based distribution model. Moving these classes online, as COVID-19 is forcing them to do, changes that calculus. As the stay at home situation supercharges streaming media, Apple now has the opportunity to take Today from its currently humble online status and supercharge it into a loyalty boosting streaming education service. Install it by default on a billion+ devices and boom, an instant re-imagining of the loyalty program. Only, this time not based on discounting the product, but unleashing the creative capacity of the customer instead.
3. And the strong began to eat the weak, and the weak began to eat each other.
Tl;dr: A wave of COVID-19 driven acquisitions is underway.
Rumor has it Amazon has been holding talks with AMC about buying the movie theater chain. With around 1,000 theaters and a market capitalization of only $500m, this represents a low risk investment for a business with the sheer scale of Amazon. In one fell swoop, they gain control over a distribution channel relied upon by other Hollywood studios, and create a new channel for content from their own. It’s easy to imagine AMC re-branded and re-imagined as Prime Theaters in a post-pandemic future, where in addition to movies, their programming revolves around special events featuring the Magical Mrs Maisel, Fleabag, Private Ryan and any number of future Amazon shows. Turning the traditional concept of the movie marathon on its head in the process.
If Amazon buying AMC is a decidedly longer-term bet, then Uber snapping up Grubhub is much more in the here and now. Based on news reports this week, the two are reportedly discussing an agreement perhaps as soon as this month. This is a much more troubling move. Parasite Capitalism as executed by Grubhub and the regulatory arbitrage so beloved of Uber are terrible business models. With neither looking likely of creating a sustained profit anytime soon, a merger can only be for a single reason - market power. And with that market power comes the ability to dictate terms to potentially hundreds of thousands of restaurants that are already barely getting by with low to no profitability.
As far as I can tell, Grubhub is a terrible company and Uber is no better. While I don’t care if these businesses incinerate VC capital, it’s fundamentally wrong that they be allowed to transfer wealth from disadvantaged restaurants and delivery drivers to the coffers of what will no doubt be a profitless behemoth. In any kind of normal world, this could never pass the regulatory sniff test. These days, I’m not so sure.