Monday, February 6, 2012
Quickflix Wins Investment From American Television Network HBO
American television network HBO has invested $10 million in DVD and online rental business Quickflix, which says it intends to start ramping up its marketing efforts as subscriber growth continues to climb.
The announcement comes just weeks after Quickflix announced a partnership with HBO, which would allow the company to stream the network's library of television shows through its online rental service.
Chairman Stephen Langsford told SmartCompany this morning the deal comes after maintaining a strong business relationship with HBO's parent, Time Warner, for quite awhile.
"The investment just comes at a time when we are demonstrating very good growth, we've launched our streaming services with a number of devices and soon we'll be adding more studios and devices."
"The investment really allows us to execute our growth strategy."
The investment gives HBO 83.3 million shares, resulting in a diluted interest of 15.7%. HBO will present a new representative to the Quickflix board as a result of the deal, which is still subject to shareholder approval.
Quickflix has enjoyed a few quiet years of growth, but Langsford now says the marketing efforts will ramp up as subscriber numbers grow beyond 100,000. With the service now streaming over Sony and Samsung devices, Langsford says the subscriber base is ready for more streaming services – a strategy which can now be assisted by the new investment.
However, Langsford wouldn't comment on whether the move is an attempt to hedge the company's bets against the future entrance of an international player, such as Netflix, which is the leading provider of streaming services in the United States.
"We feel this is a great opportunity on the IPTV wave, to have the support of a media entertainment icon. It's the largest premium television network in the United States, and it's great to have that support.
"This provides a great level of funding to execute our strategy. On top of the growth we've already seen, it's a great opportunity for us."
Although HBO has made content deals with other service providers, it is rarer for the company to make an actual financial investment.
To read more details, Please click here
Local Group Buying Sector Tipped To Reach $1 Billion By 2015
The former chief executive of Australian group buying pioneer Cudo says the "gloss has come off" the Australian sector, with international players hurting margins and profitability as they strive to acquire new customers.
The comments, from former Cudo chief executive Billy Tucker, come as a new report from Telsyte claims revenue in the group buying sector will hit $1 billion by 2015, with revenue jumping from $498 million in 2011 to $600 million in 2012.
Tucker told SmartCompany this morning that the float of US group buying site Groupon in late 2011 "opened the hood" on how the industry really operates.
"We're seeing a lot of crazy in the market. We're seeing the international guys spending a ton of money, and there's been this willingness to acquire customers or to sell stuff with a bit of a disregard for the brand."
Tucker points to LivingSocial local head Colin Fabig, who confirmed to the Australian Financial Review the company spent $10 million on marketing in the second half of last year.
But more importantly, Tucker believes sites are selling products across a huge variety of categories, which can dilute the brand.
"In that sense, I feel like the gloss has come off. I think before the Groupon IPO people saw the industry as very grand. But it's a tough industry, like retail, and you have to start from scratch every day."
"The explosion of group buying sites caused many to believe it was a very profitable business. But now, people are much more aware and less willing to invest such significant marketing dollars."
Tucker suggests major sites may be under more pressure than they let on.
"If what I understand about staff numbers is anything to go by, these sites may be losing significant money."
The research from Telsyte shows the group buying market was worth $498 million in 2011 – up from the earlier forecast of $400 million – while the industry is expected to reach $1 billion by 2015. Next year, it will turn over $600 million.
According to the report the best performing category was physical products, which now account for 30% of the market. According to Telsyte senior research manager Sam Yip, this represents a fundamental shift.
"This means group buying industries are now competing against other parts of the commerce world, and general online shopping environments."
"As the industry grows, it's going to be much harder to compete and gain customers. Especially in 2012, as we believe the group buying sites will maintain a lot of the customers gained through 2011 due to loyalty."
Scoopon chief executive Gabby Leibovich says this shift to physical product will be difficult for other sites to maintain – especially as it will put more pressure on margins.
"Everyone is selling products and fewer services. But at the end of the day, we've already been sourcing great deals through Catch of the Day and that's how we supply through the Scoopon site."
"The other side of the industry is really struggling with that. They rely on third party suppliers, many of which are based overseas, and shipping takes quite a long time."
Leibovich has also slammed the money being spent by the American giants, suggesting these sites are "just stupid kids with a rich parent running the business".
To view more details, Please click here
Banks Urge Savings Account Tax Breaks From Wayne Swan
The nation's bank leaders have challenged Wayne Swan to give new tax breaks on savings accounts to give the banks access to cheaper money.
The banks have also warned that pressure from the Treasurer to absorb higher borrowing costs threatens to push Australian banks into a downward spiral that would force them to cut back on their lending. Mr Swan significantly escalated his rhetoric against the "hugely profitable" big banks over the weekend and said that if tomorrow's meeting of the Reserve Bank of Australia were to cut the official cash rate, then customers would be angry if banks failed to pass this on in full - despite warnings that funding costs had increased markedly.
Mr Swan said the banks had a much higher return on equity than most of their global peers and accused them of trying "to maintain forever huge profitability". National Australia Bank chairman Michael Chaney hit back, warning that it would only backfire if the banks absorbed higher funding costs as this would reduce their profits and returns on equity.
"What he's proposing is very dangerous," Mr Chaney told The Australian. "A reduction in their profitability would threaten their credit ratings. That would lead to higher borrowing costs, even lower profitability, further credit rating threats and so on, in the downward spiral we've seen with foreign banks."
Suncorp Bank chief executive David Foster, Westpac deputy chairman John Curtis and ANZ chairman John Morschel also weighed into the debate yesterday, saying tax incentives to encourage deposits would help banks further reduce their reliance on volatile offshore markets, while HSBC Bank Australia chairman Graham Bradley said political pressure should not centre on returns for struggling foreign lenders.
With the rolling sovereign debt crisis in Europe, markets are trading on the basis that a rate cut on Tuesday is a near-certainty. Most market economists expect the Reserve Bank to respond to weaker jobs figures and falling house prices by delivering its third rate cut in a row, cutting the benchmark cash rate to 4 per cent.
However, signs of economic recovery in the US and stabilisation of the European crisis may lead the Reserve to leave rates on hold for another month. If fully passed on by the banks, a rate cut would lower standard mortgage rates from their current level of about 7.3 per cent to just above 7 per cent. The long-term average mortgage rate is 7.25 per cent.
Banks are unlikely to pass on the full magnitude of a cut because they are facing higher costs on their offshore borrowing, which they say has risen to levels last seen during the global financial crisis.
Mr Swan said yesterday consumers had every right to be angered if their bank decided to hang on to part of a cut in the official cash rate of 4.25 per cent to boost their profits.
He encouraged them to search for better deals if their existing bank was not looking after them. He said Labor's banking reforms had made this easier and had contributed to smaller lenders increasing their share of the home mortgage market over the past 12 months.
Despite the volatility gripping global markets, he added, the return on equity of the banks was much higher than most of their global peers and their net interest margins were back to levels of before the GFC.
"I'm not saying they should become paupers - what they are saying is they should have a right, irrespective of any particular market condition, to maintain forever huge profitability," Mr Swan said.
"Now I think there's a lot of other businesses out there who would look at that sort of approach of the banks and they'd be pretty puzzled because the market place isn't working like that for them."
But Mr Chaney said that it was precisely because other international banks had low returns on equity that they could not tap capital to meet prudential requirements, so they were forced to reduce lending, "as we are seeing in Australia today with the withdrawal of foreign lenders". "We live in a very fragile financial world and our political leaders should be exhorting banks to ensure they maintain their profitability in the face of funding cost pressures," Mr Chaney said.
Mr Bradley said comparing the returns on equity of Australian banks to some of their "impoverished" competitors around the world was not a valid measure. "What is a valid comparison is a proper risk-adjusted rate of return for the riskiness of Australian banks, which has been quite high because of their dependency on foreign wholesale capital markets. That alone would justify higher returns for investors."
The tenor of Mr Swan's most recent comments have deeply concerned bank leaders, who believe they are being sent a signal by the Treasurer that he wants the banks to be less profitable.
The banks are increasingly wanting to decouple moves by the RBA from their own moves on the interest rates they impose on mortgages and small business on the grounds that international uncertainty and competition for bank deposits are now the main influences on their funding costs.
About 60 per cent of bank funding comes from deposits; this has grown by about 10 per cent as banks have competed for deposits, winning consumers looking to pay down debt and find safe havens for their savings. A spokesman for Mr Swan said deposits were already growing strongly. "Bank deposits now represent a larger proportion of banks' funding since the start of the GFC, which have reduced banks' reliance on offshore funding markets," he said.
But Suncorp's Mr Foster said there was a need for further incentives to encourage savings in deposits. "The thing that is going to drive the ability of banks to sustain customers is the ability to have sustainable and affordable funding," he said. "It's the ongoing challenge for the industry."
The Henry review recommended a 40 per cent income discount apply to earnings from deposits and other savings. The government instead promised a 50 per cent tax discount on interest income up to a cap of $1000, but the start date has been deferred to July next year to allow more time for consultation on the plans.
Mr Foster said while the government had made "a small step in the right direction", this was "not enough to really make a material difference".
Mr Morschel noted other countries had different treatments for interest earned on bank deposits and that the issue was worth government considering, if it was concerned about "the cost of living and the cost that the average family and business incurs in terms of interest cost".
"The government needs to look at all the available instruments that they have at their disposal and . . . consider what they feel is the best treatment for the various investment alternatives," he said.
Mr Curtis noted that while investments in property attracted negative gearing, and investors in equity receiving a franked dividend also received a tax credit for tax paid by the company, there were no such treatment for bank deposits. "We should be encouraging people to save," he said.
To view more details, Please click here
Australian Equities Market
THIS MORNING
The Australian share market ended slightly weaker in quiet trading before the release of US non-farm payrolls data, an expected decision on private sector involvement in Greek bond haircuts, and a new loan package for Greece. The All Ordinaries fell 13.1 points (0.30%) to 4,320.1.
OVERNIGHT MARKETS
Stocks rose after the US economy added more jobs than expected last month, driving the Nasdaq Composite to an 11-year high and pushing the Dow to its highest close in nearly four years.
The Dow Jones Industrial Average advanced 156.82 points, or 1.2%, to 12,862.23, ending the week with its best finish since May 19, 2008. The Standard & Poor's 500-stock index tacked on 19.36 points, or 1.5%, to 1344.90, capping off a fifth-straight weekly gain.
The technology-oriented Nasdaq Composite Index gained 45.98 points, or 1.6%, to 2,905.66, closing at its highest level since December 2000.
All three major indexes are considered officially in a bull market as of Friday's market action, defined as 20% or higher above October's closing lows. The S&P 500, up 6.9% so far this year, and the Nasdaq, up 12%, are each off to their best starts to a year in more than two decades.
All 10 of the S&P 500's sectors rose on Friday, with financials and consumer-discretionary stocks leading the way. Bank of America rose 39 cents, or 5.2%, to $7.84, while Caterpillar added $3.61, or 3.3%, to $113.94.
Friday's gains followed a strong report from the US Labor Department. January data showed non-farm payrolls rose 243,000 last month, marking the biggest gain since April. The jobless rate fell from 8.5% to 8.3%, the lowest it has been since February 2009.
Other data showed that the US non-manufacturing sector expanded at a faster rate in January, while a factory orders came in lower than expectations.
The surprisingly strong jobs report boosted the US dollar, as evidence of a rebounding labour market helped diminish expectations of more expansionary monetary policy by the Federal Reserve.
FRIDAY’S MARKET
The Australian share market ended slightly weaker in quiet trading before the release of US non-farm payrolls data, an expected decision on private sector involvement in Greek bond haircuts, and a new loan package for Greece. The All Ordinaries fell 13.1 points (0.30%) to 4,320.1.
The S&P/ASX 200 weakened 16.6 points (0.39%) to 4,251.2. Westpac Bank (-$0.13) Chief Executive Gail Kelly said the bank would adopt a wait-and-see approach to next week's policy meeting of the Reserve Bank of Australia, refusing to confirm if any cut in interest rates would be passed on to its customers. Extract Resources (unchanged) was halted from trading while the company, which owns one of the world's biggest deposits of uranium, awaits a likely bid from China Guangdong Nuclear Power Corp. that would value it at almost $2.2 billion. Austar United Communications ($0.02) said it remains confident that a $1.9 billion buyout by pay television company Foxtel will be successful.
Westpac Bank Chief Executive Gail Kelly said the bank would adopt a wait-and-see approach to next week's policy meeting of the Reserve Bank of Australia, refusing to confirm if any cut in interest rates would be passed on to its customers. "I'm not going to foreshadow ahead of the time what decision we are going to make with regard to interest rates. We will just have to wait and see what happens next week," she told Australian Broadcasting Corp radio.
She said bank funding costs are now at their highest levels than at any time since the start of the global financial crisis, due mostly to the uncertainty in Europe. However, Kelly added that actions by the European Central Bank in December to bolster euro-zone banks has meant that the risk of a cataclysmic event in the region has diminished. "I think the actions of the ECB in December were very important to take off the table the cataclysmic risk of the euro-zone collapsing," she said. WBC declined 13 cents (0.62%) to $20.79.
To read more details, Please click here
Friday, February 3, 2012
HR Managers Say Labour Costs Soaring Under Fair Work Act
The people charged with administering the Fair Work Act have mixed feelings about the legislation although sentiment is souring, with human resources professionals reporting that labour costs have increased and the needs of small business are not being adequately addressed.
An annual survey of HR managers compiled by the Australian Human Resources Institute found that just under half (47%) believe the Fair Work Act would decrease an organisation's willingness to take on new employees over the next three years.
The survey of 691 HR people across private and government bodies also found that 58% said their labour costs had risen. One third of the respondents had between 100 and 499 employees. Ten percent had between 50 and 99 employees, 5% had been 20 and 49, and 8% had fewer than 20.
The percentage of practitioners saying the unfair dismissal threshold has made it harder to make jobs redundant has also risen nine percentage points to 35%.
Australian Human Resources Institute national president Peter Wilson told SmartCompany this morning that the "net movement is negative as more people get to grips with the Act."
Wilson says this is because HR professionals are finding the legislation "costly, bureaucratic and not easy to deal with".
The problems arise from the heavy involvement of third parties such as trade unions and the tribunal, high administrative costs and long processes, he says.
Wilson says HR managers are "in-house" experts on the Act, and therefore best placed to state how it is working in practice.
The report found that complaints with the Act centred on:
It is not considering the needs of small business.
Reduced employer flexibility to hire casuals or vary the schedule of part-time hours.
Overtime provisions, particularly in the health sector.
The increased costs associated with complying with provisions.
The increased prerogatives conferred on trade unions.
An increase in vexatious unfair dismissal claims and adverse action claims.
Conversely, some respondents noted that the Act:
Improved conditions within the workplace.
Is a good compromise between the extremities of the Conciliation and Arbitration days and the WorkChoices days.
Is a positive piece of legislation that needs some tinkering to reduce the right to take protection action, the effects of adverse action [and] take-away money in unfair dismissal claims.
To view more details, Please click here