A week ago we covered a Wall Street Journal article highlighting potential trouble for Facebook’s Libra cryptocurrency, as multiple backers were reconsidering their commitment to the project.
Fast-forward a week and things have only gone from bad to worse. As Bloomberg reports, PayPal was the first to announce they were leaving on October 6, with Visa, Mastercard, eBay, Stripe and Mercado Pago following suit. Each of these companies provided a brief statement, expressing their interest in monitoring Libra’s progress. Nonetheless, without these companies’ support, Libra is left without a single payment processor in the U.S.
The high-profile exits follow increased pressure from U.S. senators, who cautioned Mastercard, Visa and Stripe about backing the currency. Since Facebook first announced the Libra project, governments around the world have been critical of the endeavor, expressing concern about how the cryptocurrency will impact financial markets. In the days leading up to the companies pulling their support, senators cautioned them about how Libra could impact their broader payment business as well.
Critics are mixed about whether these high-profile defections spell doom for Libra or a new opportunity. Michael Pachter, an analyst for Wedbush Securities, told Bloomberg TV that he “didn’t think Facebook can do this by itself. Short of a big bank stepping in like JPMorgan, I don’t think this could ever happen.”
As SiliconANGLE highlights, however, several other companies emphasized their support, “including Kiva, Mercy Corps, Andreessen Horowitz, Anchorage and Xapo. Arguably, the change sees Libra look more like a startup now with the lack of mainstream company support.”
The news comes days before the Libra Association is scheduled to meet to sign a charter agreement. It’s probably a safe bet there will be far more to talk about in the wake of these defections.
“Does Netflix have enough stuff that’s good enough to keep us coming back?” asks Michael Pachter of Wedbush. “That’s the real acid test. I actually think all these metrics they’re giving us on the crap shows are telling you that people are willing to watch whatever they throw at them because they’re running out of really great stuff to watch. So you get 40 million people watching Adam Sandler, which shocks me, but it happened.”
Michael Pachter, an analyst at Wedbush, discusses Netflix earnings, which reported a huge drop in US subscribers, and if Netflix can survive against Disney and other content streaming companies in interviews on CNBC and Bloomberg:
Does Netflix Have Enough Stuff To Keep Us Coming Back?
I think this is a blip. Netflix subscriber growth is going to be like the movie box-office and when there’s lots of great stuff they’re going to see an increase in subs. The numbers on Stranger Things are pretty impressive. It is a really good show. They have a handful of really great content. They’ll probably hit their 7 million subs number. I think the real problem is next year when there’s competition. We saw a preview of next year with this quarter. So I think next year you’ll probably have a couple of quarters where they actually lose subs.
By my count, Netflix produces about ten times as many shows as HBO and they get about the same number of Emmy nominations. So throwing 10x at the wall they’re going to have their hits. I actually think subscriber growth is going to be based on one of two things, either water cooler chatter kind of shows like Breaking Bad, Ozark, and Stranger Things, that we talked about when they were on and we told people they have to see, or good enough content, which is a high quantity of okay content.
Do they have enough stuff that’s good enough to keep us coming back? That’s the real acid test. I actually think all these metrics they’re giving us on the crap shows are telling you that people are willing to watch whatever they throw at them because they’re running out of really great stuff to watch. So you get 40 million people watching Adam Sandler, which shocks me, but it happened.
Price Increases Drove Subscriber Losses
Price increases probably drove the subscriber loss domestically. I think that they’re probably bumping up against the ceiling on what they can charge and continue to grow. I personally believe that they’ll keep 80 percent of their domestic subscribers at as high as a $20 monthly charge. Their last 10 million subscribers are probably middle-income households and they notice when prices go up a couple of bucks, which they did in January. You’re going to see continued defections as content migrates away from the site and as competition starts to materialize.
There’s Disney Plus in the fall, Warner and Comcast next year, and more content leaving at the end of this year and the end of next year. Middle-income households are probably going to have to think about whether they subscribe to one or two or three plans. Yes, they can cut the cord and maybe afford all of them, but the fact is that Netflix did see a decline of domestic subs. That’s what fuels international expansion and they’re about to lower prices in India. So I just don’t see how they’re really worth the $450 price target most of my competitors have on the stock. Today’s correction makes a lot of sense.
Does Netflix Have Enough Stuff To Keep Us Coming Back? asks Michael Pachter of Wedbush
Netflix Is an Overvalued Company
That’s the reason we have cable TV. It was just the easy way to get 200 channels and we’re going backward. Actually, the right solution which is not going to happen is that Hulu is going to be the aggregator. You had three of the four networks that owned Hulu. If they had pooled content I think that actually was the winning formula. Disney has pretty much consolidated ownership of Hulu. I think that ESPN Plus and Disney Plus layered on top of Hulu might actually get us back to that old cable model. We’re going to go over the top (OTT) but you’re going to have a content aggregator and I think it’s going to be Disney. That’s Bob Iger’s vision. and I frankly think you’ll get HBO Max layered on top of that as well.
Netflix has a place. They’re not going out of business. I have a price target that implies an enterprise value of $90 billion which is bigger than Warner Brothers was sold for. So I don’t think this is a worthless company. I think it’s an overvalued company. If consumers are going to try to replicate what they have with cable now at a lower price, sure cut the cord, no more CNBC, too bad, and maybe you can get Hulu, Disney Plus, HBO Max, the Comcast service, Netflix, and Amazon for less money. That’s what Netflix is banking on.
At the End Of the Day, Disney Is Going To Win
Investors are foolish to think that anybody’s going to win except the content creators. The point is we’re watching this show (CNBC) because of you, not because of the platform. We want to see you. You’re the insightful person on this platform. You’re the content and you should command a premium for the content that you provide. Disney’s going to win. I really think at the end of the day Disney has the content. They win.
Stranger Things isn’t going to cut it. It’s one good show out of hundreds and hundreds and hundreds. You can’t name a Netflix original that they own that you actually watch other than Stranger Things. They don’t own Ozark. They don’t own House of Cards. They don’t own Orange Is the New Black. They own stuff like Flaked which you don’t watch or The Ranch which you don’t watch.
At the End Of the Day, Disney Is Going To Win and Netflix is Overvalued, says Michael Pachter of Wedbush
Predictions are fun, especially when said predictions involve video games in some capacity. That’s why it’s no surprise that analysts are already making predictions about what the video game market will look like in 2016 – three years after the launch of the Xbox One and PS4.
In a note sent to investors today, Wedbush Securities analyst Michael Pachter provided his very own predictions of how all three consoles will fair in three years time. It’s important to note that these consoles will be nowhere near done in 2016 and we’re likely to still see games being released on the Xbox 360 and PS3 at that time. A three year timeframe does, however, give analysts enough time to factor in a potential price drop that’s likely to occur within the first three years of a product’s life.
Moving onto the predictions, Pachter says that the PS4 will lead in 2016 with 37.7 million console units sold. Microsoft will be a little behind Sony with 29 million Xbox One units sold. As for the Wii U, he doesn’t expect it to reach 20 million by 2016.
Of course, there are those console games who won’t buy into new hardware until a price drop. Pachter expects Sony and Microsoft to both drop the price of their consoles by 2016 with the PS4’s price dropping to $299 and the Xbox One’s price dropping to $349. He gives no prediction for Nintendo, but he does expect the company to continue producing the Wii U through 2016. I personally expect Nintendo to institute another price drop in 2014 to further push Wii U hardware.
As for games, he expects the price of new games to stay at $60. There’s always room for a price increase though. Some publishers may look at the rising cost of game development as an excuse to charge even more for games. While the AAA blockbusters will still sell well, the A and AA games will continue to suffer with the rising cost of game development. As they are now, indie developers will likely still be the ones propping up the lower end of the development spectrum while major publishers like EA, Activision and Ubisoft duke it out in the AAA packaged market.
Like always, it’s important to note that this is all merely speculation. While Pachter and other analysts have access to data that helps better inform their decisions, they can still be (and are often) wrong. The games industry is an especially volatile market and one little change can have major repercussions throughout the entire industry.
The cost question is arguably the most important when it comes to next-generation game consoles. Even with all the best games in the world, too high of an asking price will ensure that nobody but the most hardcore of gamers will buy the new console. One analyst thinks that the price of the next-gen consoles will be pretty reasonable this time around though.
Wedbush Securities analyst Michael Pachter recently sent a note to investors saying that the PS4 will retail for $350 while the Xbox One will retail for $400. The price discrepancy is all due to the price of building materials which he pegged at $275 for the PS4 and $325 for the Xbox One.
Even at those prices, it may be hard to convince consumers to buy into them. The Wii U retailed last year for $300/$350 and it’s still struggling to find an audience. Of course, you can mostly blame that on the lack of games for the console, but the high price does factor into the equation.
In today’s age of subsidized smartphones, consumers are less and less interested in paying the full price of an electronic device upfront. Pachter says this may factor heavily into Microsoft’s strategy as he predicts the company will offer a subsidized version of the console to consumers:
“We believe the ability to watch live TV from a cable, telco, or satellite set-top box through Xbox One could entice an MSO to drive subscriptions through a subsidised box in exchange for a multi-year contract. The ‘always connected’ requirement for the Xbox One likely means that a broadband connection will be required, suggesting to us that ISPs may have an incentive to offer a subsidy as well.”
Even without a subsidy, Pachter’s predicted prices are lower than what the Xbox 360 and PS3 launched at in 2005/2006. The premium Xbox 360 retailed for $400 in 2005. When taking inflation into account, a $400 Xbox One would be cheaper than the Xbox 360 at launch. As for the PS3, it launched with a ridiculous price tag of $600. Sony would be absolutely foolish to try that again.
We’ll probably hear about official launch dates and price points at E3 next week. Sony and Microsoft will both hold press conferences on Monday, June 10.
Zuckerberg’s hoodie and the arguments its spawned have amused me to no end. Now, I’m obviously not a Wall Street type of guy; one look at my bank account, not to mention my wardrobe (or lack thereof), suggests that I am a) a full-blown slacker with zero ambition, b) a pot-smoking layabout who would rather get stoned and play Skyrim all day, or c) someone who will never, ever rub elbows with those who make six figures. I came to terms with my lack of financial ambition eons ago, so you probably shouldn’t feel too sorry for me.
That having been said, I do feel that the boys and girls on Wall Street are starting to show their collective age. Why else would they complain about something a pointless as a hoodie? The only other explanation is that they have nothing better to do with their free time than to whine about what Facebook CEO Mark Zuckerberg wears to meetings. Since when did a person’s attire determine whether or not they were suitable to run a multi-billion dollar company? Truthfully, the whole debate is kind of embarrassing, and suggests there’s a generational chasm growing between modern, twenty-something businessmen and those who have been doing this sort of thing for a very, very long time.
Wedbush Securities analyst Michael Pachter recently told Bloomberg that Zuckerbeg’s decision to wear a hoodie to a meeting with potential investors shows a lack of “maturity”. He went on to add that Zuckerberg would make a better product manager than a CEO. Pachter might be well respected in his field, but judging a book by its cover is never a good idea, especially when the book in question currently makes more than you do.
In a manner of speaking, Zuckerberg’s hoodie is Facebook’s unofficial trademark. While the CEO was building his empire, he was dressing exactly how he wanted to dress. As soon as the 27 year-old puts on Wall Street-approved attire, he’s going to be labeled a sell-out by his peers, thus ruining the image of Zuckerberg as some sort of Internet maverick, a man who made his fame and fortune on his own terms.
Now, I’m no analytical guru, and I don’t pretend to be. However, I do understand that, in this day and age, a guy can make a buck wearing nipple clamps while seated in his one-bedroom apartment. Zuckerberg is cashing his own checks, making his own decisions — at the moment, he answers to no one. The hoodie shows that he doesn’t have to play by anyone’s rules but his own, including those found in Pachter’s very narrow-minded playbook.
Am I way out of my league here? Does it matter what Zuckerberg wears when he meets with investors? At this stage in the game, shouldn’t they know what he’s all about? Leave your comments below.
