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Today's Markets: In God we Truss

Liz Truss pledges to protect cash and streaming services feel the squeeze
August 19, 2022
  • Liz Truss pledges to protect cash
  • 589,000 UK households cancelled their Amazon Prime subscriptions
  • Updates from Just Eat, Joules, Kingspan

Liz Truss’s pledge to protect cash as a form of currency should play well with the electorate. At least that’s the impression you would get from anecdotal evidence. By contrast, the good burghers at HMRC probably salivate at the prospect of a cashless society given that it would sound the death knell for the ‘black economy’ - the part of a country's economic activity which is unrecorded and untaxed by its government. The fact that certain corners of the economy don’t fall under Whitehall’s purview may be undesirable from a fiscal perspective, but cash affords a certain degree of anonymity which is comforting when you consider the extent to which your activities can be monitored in the digital economy.

Saving the Amazon

It's emerged that 589,000 UK households cancelled their Amazon Prime subscriptions during the second quarter of 2022 as punters look to trim their household budgets. Netflix has also seen its subscription numbers pull back, although numbers at Disney+ have held up a little better, possibly due to the proportion of its content aimed at children.

The latest survey by the Broadcast Audience Research Board shows that the number of homes with at least one subscription streaming service fell from 19.57mn in the first quarter to 19.19mn at the end of the second, a net decrease of 382,000.

We were always going to see softening numbers once the pandemic restrictions eased and Ofcom regulators have made the point that the inherent flexibility in the streaming model, ergo the ability to subscribe, cancel and re-subscribe at the flick of a switch, is an attractive feature for consumers of media.

However, investors might see it in a slightly different light. Said flexibility doesn’t afford much in the way of top-line visibility, nor clarity on average viewer acquisition costs. In a bid to counter the rate of churn, Netflix is rolling out a cheaper, hybrid model that incorporates third-party advertising and it has also been implementing a more schedule-based release programme, particularly for its blockbuster series – the days of binge-watching may be over.

Ultimately, the main consideration for investors is the high cost involved in producing original content. The fact that Hollywood appears to be in a state of torpor doesn’t help matters. If punters aren’t treated to a regular stream of high-grade, original content, then they will simply go elsewhere.

What’s slightly worrying for shareholders in Amazon (AMZN) is that the Prime streaming service is ancillary to its main function as an online marketplace (the Prime services enables online shoppers to have their goods delivered within 24-hours in many cases and for free, or at significantly reduced delivery costs). If households are ditching Prime, does that also mean they will be eschewing online shopping?