Global Marketing Monitor: Weekly Market Trends (March 20, 2021)

Retail including traditional storebased sales and ecommercerelated activity is a critical sales channel for many marketingdependent industries Related data for February was released over the past week for each of the US China and Australia which we review in this noteWe monitor earnings results and public information related to marketers and media owners along with government data and economic releases from countries around the world We do this to better understand consumer trends as well as advertising and digital transformation issuesNew US NFL rights agreed through 2033 On Thursday the NFL announced agreements with Disney Comcast Fox ViacomCBS and Amazon related to rights to their games between 2022 and 2023 Sportico reported that Disney39s average annual fees would rise from 19 billion to 255 billion Comcast39s from 950 million to 171 billion Fox39s from 179 billion including 660 million for Thursday night games Amazon will pick up on an exclusive basis to 203 billion ViacomCBS39 from 103 billion to 185 billion and Amazon39s to 132 billion up from 130 million for nonexclusive rights previously Comcast39s and Fox39s press releases indicated that the NFL retains termination rights to effectively end agreements in seven years if it chooses to do so for seasons after 2030Of interest neither DirecTV which pays 15 billion per year nor Verizon whose agreement obliges them to pay the NFL approximately 450 million per year were part of the days39 announcements those rights will presumably be separately renewed in the futureStreaming services feature prominently in the agreements Streaming rights featured prominently in the news Amazon39s rights are necessarily through a streaming service and at least some incremental rights were secured for the others39 streaming services Fox secured digital rights involving Tubi quotFOX will create an NFL experience on Tubi consisting of premiere VOD as well as condensed gamesquot ViacomCBS will be allowed to air the entirety of its package online while quotthe new agreement allows ESPN the opportunity to simulcast all ABC and ESPN games on ESPNquot Similarly Comcast39s rights include simulcasts of its weekly game on Peacock as well Further each of Comcast and Disney secured the right to air one game exclusively per year on Peacock and ESPN respectivelyNFL annual rights value will rise from nearly 9 billion presently to 13 billion after 2023 Presuming a similar inflation rate will apply to renewals of the DirecTV and Verizon rights we can estimate that total domestic rights in 2023 will be worth around 13 billion annually up from nearly 9 billion annually at present On a likeforlike basis if we take the midyear of the new agreement and compare it against a year such as 2018 the fee increases amount to around 4 annually which is lower than increases observed in recent years for most other major sports Such cost increases are likely higher than the direct revenue growth they will see from these agreements However the indirect contribution to rightsholders39 overall revenues help to justify the effortNFL already accounts for more than 10 of total content spending in the US but only around 3 of viewing Putting these agreements in the broader industry context content spending in the US by distributors cable and satellite operators plus directtoconsumer and SVOD streaming services equated to 82 billion last year Spending by packagers of content who selfproduce or license content meaning local TV stations broadcast networks cable networks and SVOD services probably amounted to something similar However it is defined and estimated spending on NFL currently accounts for around 10 of the industry39s total for all content but generates a substantially lower share of consumption approximately 3 of traditional TV viewing in 2020 Of course there is value in the transaction because of the outsized capacity a property such as the NFL will have to cause cable and satellite operators to pay high prices for cable networks or broadcast station retransmission consent rightsAmong the key takeaways for the broader industryIt39s Amazon39s world and other rights holders are living in it To Amazon the value of its rights is heavily weighted to indirect sources While the ad revenue they will generate is undoubtedly an incremental source of value for Amazon it probably doesn39t represent even half of the value that Amazon expects to recover from its investment More critical to Amazon is that exclusive access to content of this nature allows the company to persuade some consumers to become new subscribers to Prime and prevent churn for others Amazon assesses the value of investments by estimating its contribution to the company39s overall profitability So long as the NFL rights bring new subscribers or new purchases to Amazon that would otherwise occur to the degree that offsets content costs less direct advertising they could find significant value in these rightsOverall the deal is a significant one for Amazon as all other sports rights the company has secured in its history such as some regional New York Yankees rights a package of English Premier League football in the UK some UEFA rights in Germany as well as UK rights to the US Open and the Women39s Tennis Association amount to a fraction of the value of their arrangement with the NFL To the extent that Amazon can prove its value Amazon might more aggressively bid for additional rights in other countries around the world Of course it will be the end of next year before Amazon will have a sense of this value In the meantime we would expect that they will continue to relatively prudently invest in new content amp8211 including sports rights amp8211 at what is still a massive global scaleRights to single games per year on two services should provide a sense of incremental value for the next round of renewals The one exclusive gameperyear for EPSN and Peacock should provide those services39 parent companies and the NFL with data points regarding a single game39s capacity to cause consumers to sign up for a service This could influence future models for selling access to NFL games in subsequent yearsThe health of the NFL could impact global streaming wars for years to come If the NFL39s value deteriorates for those who secured those rights the traditional rights holders Comcast Disney Fox and ViacomCBS may each feel partially constrained in deploying resources towards their capitalhungry streaming services Netflix and Apple would not experience similar issues under any circumstance as they have effectively no sports rights to speak of Amazon is not constrained because of how small Prime Video is relative to the company39s other activities Further each of these three companies has practically unlimited access to capital if they want it It39s also worth noting that while ATampampT39s Warner Media is not an NFL rights holder it remains highly exposed to sports through its basketball obligations At the same time we are mindful that Warner Media could choose to split off its cable news business and sports rights into a separate company leaving the core HBO Max business otherwise unconstrained All of this could potentially impact the nature and composition of competition we might see in the global markets they aspire to grow inNew retail sales data for each of the United States China and Australia helps paint a picture of the world in February 2021 We look at retail sales data produced by governmental authorities to understand a range of trends related to different industries39 health and related consumer activities While headlines around this data tend to focus on sequentialmonthly trends meaning February39s growth over January levels we focus instead on yearoveryear trends as this is more directly comparable to the yearoveryear growth we can observe in marketer and media owner revenue growth trends As a broad theme sales trends are relatively healthy However interpretations of data become increasingly challenged as anniversaries of the most intensive periods of pandemicrelated lockdowns occur and as the impact of government stimulus payments skew spending patternsUS retail sales excluding food services were up 58 in February over 2020 levels Starting with the United States which provides the most detailed current data among the countries analyzed here under the broad definition of retail sales including food services and drinking places referring to restaurants and bars we saw 24 growth during February 2021 vs February 2020 This was slower than the upwardly revised 78 growth rate in January 2021 vs January 2020 A more helpful metric excludes restaurants and bars given the number of those that are closed and the reluctance of many consumers to go to those which are open On that basis February retail sales were much stronger growing by 58 While softer than January39s 11 gain this was still well above growth rates observed in recent prepandemic history between 2010 and 2019 the median year39s annual growth in comparable retail sales was 41 and should be considered to be relatively strong Stimulus payments by the US government to consumers in January which amounted to 163 billion could have been a factor in January39s relative strength We note that those payments were relatively modest compared to the more than 1 trillion in stimulus payments delivered to consumers this month which would presumably impact March and April results to a more significant degreeMost categories of retail activity were up yearoveryear with some sectors unambiguously positive Starting with the biggest retail activity category motor vehicle and dealer sales continued to grow rising by 46 in February after growing by 12 in January The fastestgrowing traditional retail sector during the pandemic building materials garden equipment stores continues to be very healthy sustaining doubledigit gains for the tenth consecutive month and rising by 11 Sporting goods hobby book and musical instrument stores held up at similar levels also growing 11 during February Food and beverage stores continue to post robust results as they have throughout the pandemic growth was 72 in February although this was below January39s 11 levelClothing and related stores remain weak as do restaurants Among the categories posting declines clothing and clothing accessory stores remain very weak falling by 15 in February following January39s 10 decline Clothing stores generated less revenue than in any February since 2011 Department stores struggled as well falling 18 in February after falling 56 in January Electronics and appliances stores declined by only a modest pace down 67 during February sustaining the 23 decline observed in JanuaryArguably the most significant category of decline around the broader retail environment remains food services and drinking places which employ disproportionately high shares of lowincome workers So weakness among these establishments brings higher human costs In February these businesses fell by 20 a deceleration from January39s 14 rate of declineEcommerce is likely still rising at a rapid pace In many instances where there is a decline amp8211 as with the department store and apparel stores amp8211 spending is picked up by pureplay ecommerce retailers such as Amazon or by mail order companies While ecommerce is not specifically broken out in the US monthly retail sales data all nonstore retailers combined grew 23 This was below January39s 27 pace but within the range of 2230 that has occurred in each month since April of last yearChina retail sales excluding food services were up 93 over 2019 levels Chinese sales data for this period combine January and February every year because of the New Year39s shifting date which can have the effect of changing activities between the weeks during this period Last year39s JanuaryFebruary period featured the most extreme of the pandemic39s lockdowns in China amp8211 retail sales declined 21 then amp8211 and so growth this year is off a depressed base Relative to 2020 total retail sales growth including food servicescatering was 34 but relative to 2019 growth was 64 Excluding catering growth was 32 over 2020 levels and up 93 over 2019 levels Automotive sales were even stronger rising by 78 vs 2020 and by 12 vs 2019 Online sales also rebounded rising by 31 yearoveryear vs the yearago period39s 3 growth rate This translates into a 32 growth rate over 2019 levels Underlying trends have been relatively tepid in recent months slowing to 6 growth in DecemberAustralia39s retail sales including food services grew 87 in February Australia which released its preliminary February retail sales this week also posted relatively healthy yearoveryear trends total sales including food services as with the Chinese data and broadlydefined US data were up by 87 yearoveryear This represented a deceleration from January39s 11 level but was still strong vs historical levels which were only growing at low singledigit levels in 2018 and 2019 Data presented on a preliminary basis does not break out food services but growth would presumably be faster if it were excludedOther news itemsPolitics and media have always had points of connection but the scale of impact will look more significant as the companies involved are bigger now than they ever were There were three meaningful examples of this fact in the past week alone In China Alibaba was widely reported to be facing a demand from the government to sell its media assets which include Youku Tudou its video streaming service the South China Morning Post its film studio and a stake in Weibo It also found its UC Browser blocked from app stores this week In Russia this week Twitter was threatened with an outright ban within a month if it does not remove quotbanned contentquot related to activity opposed to the Russian government In Europe we saw a quotspatquot between Germany and Ireland in time for St Patrick39s Day no less where Germany39s Federal Commissioner for Data Protection wrote to the European Parliament complaining about Ireland39s treatment of data privacy and its slow handling of related cases Ireland is of course the legal home to Facebook Google and others within the EU Germany39s view of enforcement is different than Ireland39s and over time approaches and philosophies on these matters will probably convergeCopyright and Republished with permissionPhoto courtesy of GroupMClick the social buttons to share this story with colleagues and friendsThe opinions expressed here are the author39s views and do not necessarily represent the views of MediaVillagecomMyersBizNetamp160

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Global Marketing Monitor: Weekly Market Trends (March 20, 2021)

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Global Marketing Monitor: Weekly Market Trends (March 20, 2021)

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