Twitter’s uncertainty
There has been much uncertainty surrounding Twitter of late. Rumors of internal turmoil, a stock price that has fallen 37% in 2014, and a newly branded credit rating of BB- by Standard and Poor’s continue to put the tech giant’s strategies into question.
S&P has assigned Twitter’s $1.8 billion September debt issues a junk-grade rating of BB-, well below that of the level for investment. Apparently, Twitter’s heavy push for acquisitions despite slow earnings growth justifies the rating. “Depending on the level of business reinvestment, Twitter may not generate positive discretionary cash flow until 2016,” S&P said in a note. Twitter shares went down almost 6% in the aftermath of the rating announcement.
The company has also been scrutinized for internal management issues. At the end of October, Twitter’s head of Analytics and VP of Engineering resigned and moved on. The day after that, the company demoted its VP of Product and hired a new one. While few details were provided on the exits, the management changes led many to speculate about internal turmoil.
Perhaps Twitter has taken the right step forward to appease investors by publicly laying out a future strategy at an event in San Francisco on Wednesday. The company’s CEO, Dick Costolo, opened the presentation: “We are working toward a Twitter that everyone in the world can get value from immediately,” he said.
Some of the new improvements will reportedly include a better private messaging function, the ability to shoot and post live video, and a feed of relevant or most popular posts for users to access if they haven’t logged in for a while, according to the New York Times. The company also plans to increase advertising on the platform, for the first time targeting people who visit Twitter’s site but don’t actually have accounts for the social media service.
The 7% share rise following the presentation day was quickly negated by the S&P’s below investment grade rating of the social media giant. But with promising strategies set to be implemented, including a new office to open in Hong Kong to expand advertising and sales reach into the region, Twitter might soon escape from this cloud of uncertainty and bring in as much revenue as the likes of fellow tech mammoths Google and Amazon.
YouTube’s subscription service
YouTube, the world’s most popular music platform, will now offer a subscription option for users who will be able to stream ad-free music for offline use, something not previously possible with YouTube material.
For small charges, the company will also offer additional perks like higher quality audio feeds and the removal of all advertising for premium users.
The move is meant to satisfy fans and the owners of the content alike. “We want to give fans more ways to enjoy music on YouTube, but also give artists more opportunities to connect with fans and earn more revenues,” said Christophe Muller, the company’s music partnerships director, according to the New York Times. With additional revenue streams, YouTube will be able to compensate its artists in a bigger way.
Royalties has proved a problem recently in the music market. Popular artist Taylor Swift removed her songs from streaming platform Spotify after she accused the company of not divvying enough revenue to artists. And Soundcloud, another popular platform, recently signed a deal with Warner Music Group to pay royalties to artists, something it has never done before.
At first due to piracy, and now because so many streaming platforms offer free services, conventional ways to sell music – CD sales and paid downloads, for example – continue to decline. That has meant that the industry is increasingly reliant on royalties paid back to them from platforms like YouTube, Spotify, and SoundCloud.
YouTube’s service, dubbed Music Key, will go for $9.99 per month though it is only available for beta users now. Android users will be the first to have access, followed by Apple devices; so far, there is no plan to extend the service to PCs. For the first time, users can stream YouTube material in the background of their phone and simultaneously use other functions or applications.
It’s unclear how YouTube’s royalties will compare to other platforms, so will Music Key pose a threat to existing platforms like Spotify and SoundCloud? Spotify’s CEO Daniel Ek responded to Taylor Swift on Tuesday, claiming the platform pays out $2 billion in royalties.
“If you – as many people do – listen to both Spotify and use YouTube for music, then this is genuinely a reason to switch, because you not only have all the unlimited music but also the ability to move from audio to video, which is a very compelling experience,” Forrester analyst James McQuivey told the BBC.
Spotify’s CEO Daniel Ek responded to Taylor swift on Tuesday, claiming the platform pays out $2 billion in royalties. He also called it the fastest growing source of new revenues for the music industry, according to the Washington Post. That claim will be put to the test with YouTube’s arrival, and its subsequent new revenue stream, in the music streaming sector.
Amazon and Hachette make up
Amazon and French publishing house Hachette have resolved a dispute that has been carrying on for months. The internet retail giant delayed shipments of a substantial number of Hachette books, seeking more revenue from the publishing firm while lowering the prices of its books. It also reduced discounts and disallowed pre-orders of Hachette titles to pressure Hachette into submission.
In what has been an uncertain few months for Amazon, the dispute has harmed the company’s public image – something the internet giant doesn’t need after posting net losses of $437 million for Q3 this year and projecting more potential losses on the horizon. Amazon investors have openly scrutinized the company’s reinvestment strategy, which has seen the retail giant make multiple multi-million dollar acquisitions to spur growth.
The company has taken a step towards patching back together its fragile public image by signing a multi-year deal that will give Hachette responsibility for setting consumer prices of its ebooks, and in turn, better financial incentives. The move will appease outraged organizations like Authors United and prominent writers such as John Grisham, Stephen King, and Donna Tartt, who took exception to the retail giant using its scale to bully the writing community for more money.
The CEO of Hachette Book Group, Michael Pietsch, voiced his pleasure at the news and received commendation for his protection of the publishing community. “This is great news for writers. The new agreement will benefit Hachette authors for years to come. It gives Hachette enormous marketing capability with one of our most important bookselling partners,” he said, according to the Guardian.
While this problem has been resolved, it opened up questions about Amazon’s power as a platform upon which so many retailers across so many industries rely. The company will want to avoid further ethical disputes of this nature.
Amazon struck a similar deal with Simon & Schuster two weeks ago, according to the BBC, where the publisher also retained significant control over its own ebook pricing.
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