The Commercial Experience 21.06 - iPhone launch, ad supported VOD and online retail sales trends.
Get ready for a few graphs today people.
Hello everyone, welcome to this weeks edition of The Commercial Experience.
I’m still not settled on a consistent day/time to release. To give you a bit of an explanation, I find it hard to write to a schedule. If there’s nothing that I am finding interesting, or feel I can’t add anything to an existing area, I will often struggle to put pen to paper.
So it’s much easier to be sparked by a bit of news, or data, or discussion, and use that as momentum to crank out something I hope is interesting to you. As always feedback is welcome (I’ll give you another secret - no one ever sends feedback!)
A new iPhone launches - so what does the data tell us.
Last week Apple announced the new iPhone 13. As per usual, the media went into overdrive on the new release and it became a big part of the news cycle. Of course, this is normal when the iPhone is a device that so many of us own.
I’ve had some experience working on mobile phone launches in past roles, and one trend that is pretty consistent is that there is never more simultaneous search interest in a new phone than there is the week it launches. After that launch week, the search interest begins to drop off as the models move from launch buzz to the retail cycle.
Today I decided to have a look at the iPhone 13 spike in Australia, and compare it with the iPhone spikes over the past 10 years. The below is from Google Trends.
Source: Google Trends Australia
We can see for each launch there is a spike. And we can see that these spikes peaked in 2021. In fact, the 2021 iPhone 13 spike is 50% of that 2012 iPhone 5 launch spike.
What does this mean? Does it mean we are losing interest in iPhone launches? It could look this way. Since iPhone 5, each spike has steadily dropped as a trend.
I checked worldwide search index volume to see if this was an Australian specific thing, or a bigger trend. Turns out it’s a bigger trend. Below is the worldwide search index in blue. However, in red is annual iPhone unit sales volume.
Source: Google Trends, Apple Investor Relations
do we see? Well, yes search volume is going down. But sales volume is increasing. Apple is on track to sell 240-250m iPhones in 2021 according to estimates, which would be 3.5x the sales volume of 2012 when search interest peaked.
What it ultimately suggests here is initial search buzz is not correlated to sales success. It appears initial search interest in the iPhone is dropping on the week of launch, but sales suggest steadily increasing unit sales. Apple is holding iOS users as they renew, and it’s adding users.
This usage addition is important as services volume becomes more important. Over the past 10 years, iPhone sales as a percentage of overall Apple revenue has been declining. The iPhone is still the jewel in the crown, but the business has a much more diversified source of revenue across devices and services.
But make no mistake - search buzz may decrease, but Apple is still flying.
Deloitte Media Trends - my take on what it says about VOD and advertising.
Deloitte has released its 2021 Media Trends Survey. It’s an interesting read and I recommend you download it.
The most interesting area for me was around SVOD services and how these continue to grow.
According to Deloitte, in 2021 70% of households have a paid streaming service. Based on this I’ve attempted to create a model based on reported financial data where available, plus total households as well as an estimation of revenue by service. Note - this is only based on the Deloitte data, extrapolated by the ABS figure on total households and the current cost of each service, with GST backed out. The revenue figure is an estimated annual figure. For reference, the Stan figure is correlated by the Nine Entertainment Company 2021 Financial Year reported results.
Source: Author modelled
As you can see, Netflix is the biggest player, with a reasonable gap between it and the rest of the pack. In my mind, this ultimately means Netflix has the most to lose and the least to gain when it comes to growth in this market.
The Deloitte data suggests across generations - from Millennials to Boomers - everyone is spending more on streaming services than their ideal budget would suggest. The short takeout of this is people are spending more than they claim to be comfortable with.
If you take this as accurate (which a lot of claimed behaviour is not), then growth for everyone who isn’t Netflix has to come at the expense of Netflix or another service. And here’s where it becomes more interesting.
There is a data point in the report which suggests that “47% of respondents would be willing to view advertising in exchange for a 30% drop in SVOD prices.”
Until now, no SVOD service in AU has been willing to put an ad supported model into the market. But how long can we expect this to continue? Especially when this Deloitte data suggests that 1/ we are likely reasonably close to the level of households we can expect to newly acquire their first SVOD services, and 2/ most people claim they are spending around 10-15% more than they want to be on premium subscriptions.
My view is it’s a matter of when, not if. Someone will launch an ad supported model at a price around $4.99-$6.99 and see what happens. In the US, around 70% of Hulu’s total subscribers are on ad supported plans. Who out of Stan or Binge are going to be first to move?
ABS: July online retail data tells an interesting story
When it was released a few weeks back I missed the ABS retail sales data release for July but have just gotten up to speed on it.
It turns out, locked down capital cities are great for non-food online retail. The lockdown of Melbourne and Sydney caused a cratering in non-food retail sales volume generally, but it (obviously) saw online sales revenue tip over 20% of total. And this is for the first time since April of 2020.
Source: ABS
Pre Delta, online retail sales for non food had normalised around 13-14%. Impressive, but not quite at the 16-20% levels we had seen across 2020. Still, online retail sales were increasing year on year as total retail bounced significantly across the same period.
What we saw post the first lockdown in 2020 was a huge bump in online retail sales, and then a sustain of this figure across 2020 and into the start of 2021. However, as 2021 continued post March, the momentum dropped and online retail sales (adjusted) started to go down.
Source: ABS
The July 21 bump would have been welcomed by Australian retailers, and their hope will be they can now sustain this jump as a new normal heading into the Christmas period and into 2022.
I’ve had enough of graphs, give me something entertaining dammit.
You could watch this - it’s people being like David Brent, but not intentionally. The one with the man from SAS Australia is hilarious. Accidental Brent on TikTok
You could read this - the just released The Housemate by Sarah Bailey
You could laugh at this perfect comedy. Norm Macdonald as Burt Reynolds on SNL. RIP Norm.