Weekend Reading

19 January 2019 | by Ensemble Capital

A summary of this week’s best articles. Follow us on Twitter (@INTRINSICINV) for similar ongoing posts and shares.

Netflix Raises Prices on All of Its Subscription Plans (Joe Flint, @JBFlint, Wall Street Journal)

Netflix opted to raise prices across all of their subscription plans this week.  The new prices will go into effect immediately for new customers and over the next few months for existing customers.  Ensemble Capital’s Arif Karim wrote about Netflix’s Pricing Power, explaining the ability for Netflix to raise prices and not lose customers.  Arif also did a deeper dive on the reasons behind investors’ enthusiasm for Netflix in his blog post Netflix and the Rise of the Global Scale Media.

China’s Annual Trade Surplus With U.S. Hits Record Despite Trump’s Tariff Offensive (Liyan Qi, @QiLiyan, & Xiao Xiao, Wall Street Journal)

Despite the Trump administration’s tariff policy targeted at China, the country’s trade surplus with the United States hit a new record high last year.  Part of the increased surplus was due to exporters who accelerated their shipments in anticipation of increased tariffs.  The US and China had been aiming to reach an agreement by March 1 to help ease the trade conflict, but U.S. Officials are currently debating lifting China tariffs to hasten a potential trade deal and calm the financial markets (Bob Davis, @bobdavis187, & Lingling Wei, Wall Street Journal).  The equity markets reacted positively to the news.

Microsoft’s Leap Into Housing Illuminates Government’s Retreat (Emily Badger, @emilymbadger, The New York Times)

In an effort to combat the affordable housing crisis in Seattle, Microsoft announced a pledge of $500 million to help build affordable housing in Seattle.  The pledge is indicative of a nationwide void in addressing the issue of affordable housing.  Rather than cut a check to charities or build housing just for their own employees, Microsoft is aiming to fix a market failure.  “It really represents something almost unprecedented,” said Matthew Gordon Lasner, an associate professor of urban studies and planning at Hunter College. “What we’re seeing Microsoft do is in effect privately assume the role that historically the federal government and the states have played.”

As Americans Drink Less, Booze Makers Look Beyond the Barrel (Saabira Chaudhuri, @SaabiraC, & Jennifer Maloney, @maloneyfiles, The Wall Street Journal)

Americans are consuming less alcohol driven by “a growing trend toward mindful drinking or complete abstinence, particularly among the millennial cohort,” says IWSR’s U.S. head Brandy Rand.  To combat the slowdown in sales, producers are looking for ways to expand their product line into non-alcoholic alternatives to appeal to teetotalers.  “IWSR forecasts low- and no-alcohol products in the U.S.—still a small slice of the market—to grow 32.1% between 2018 and 2022, triple the category’s growth over the past five years.”  Sean Stannard-Stockton wrote about the influence of the millennial generation in a recent blog post.

Rihanna and LVMH Make a Deal and, Possibly, History (Vanessa Friedman, @VVFriedman, The New York Times)

Moët Hennessy Louis Vuitton LVMH, the parent company of Dior, Givenchy and Fendi, recently agreed to a deal to back Rihanna’s fashion brand, “making her the first female designer of color at the largest luxury conglomerate in the world.”  The deal represents a shift in the fashion industry as celebrity and social media influencers have a new power in how brands target different audiences.  Besides Rihanna’s 14 No. 1 singles on the Billboard 100 chart, more than 50 Top 40 hits, and 67 million Instagram followers, her influence in the fashion and beauty world has already been notable with the incredible success of her Fenty Beauty brand.

The Most Powerful Person in Silicon Valley (Katrina Brooker, Fast Company)

According to Fast Company, the most powerful person in Silicon Valley isn’t Elon Musk, Jeff Bezos, or Mark Zuckerberg, it’s billionaire Masayoshi Son.  Through his Vision Fund, he is spending hundreds of billions of dollars to create an AI-powered utopia where machines control how we live.  The Vision Fund invests a minimum of $100 million in the companies in its portfolio and since October 2016, the fund has committed over $70 billion of capital into some of the most influential companies in the world including Uber, WeWork, Nvidia, ARM and Flipkart among many others.  The companies within the Vision Fund have the potential and power to influence the $228 trillion real estate market, the $5.9 trillion global transportation market, and the $25 trillion retail business.

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