Apr 25, 2022
The Weekly Scan April 25, 2022
Find out what’s happening in the world of business this week
Welcome to the Weekly Scan. Here’s what we’re following for the week of April 25, 2022.
Ad-ing and subtracting. Streaming video giant Netflix experienced its biggest loss of subscribers in more than a decade, according to its most recent earnings report for the fourth quarter 2021. The streamer added 8.2 million subscribers, below its estimate of 8.5 million subscribers for the quarter. The streamer also said it hopes to add 2.5 million new customers in the first quarter of 2022, lower than forecasts. So far, Netflix has lost 200,000 subscribers in the first quarter, marking the first time the company has lost viewers since 2011. Following Netflix’s fourth-quarter report, Netflix’s share value dropped 35%, the biggest decline since 2004.
- The takeaway: Netflix cited competition from other streaming companies such as HBO, Netflix, Hulu, and Disney as a reason for slower growth. To combat this slide, Netflix is raising prices in the United States and Canada, and considering adding an ad-supported subscription to its offerings, which it has long avoided. Netflix said it will increase the price of its basic plan by $1 to $9.99, its standard plan by $1.50 to $15.49, and its premium plan by $2 to $19.99. Netflix’s losses bled over to other streaming services, including Spotify, Disney, and Paramount, whose shares all lost value following Netflix’s report. Netflix is one of the FAANG stocks—Facebook, Amazon, Apple, Netflix, and Google (Alphabet). These stocks are often grouped together because their growing size and former rapid increase in earnings have made them important components of both the Nasdaq and S&P indices. They are all tech companies and the stock performance of these companies has far exceeded almost any other over the past decade.
Unmasked. A federal judge in Florida struck down the national mandate that has made it a requirement for passengers to wear masks on airplanes, trains, taxis and ride-share vehicles, and in transit hubs. U.S. District Judge Kathryn Kimball Mizelle of the Middle District of Florida ruled that Centers for Disease Control and Prevention (CDC) could not maintain its mask mandate, which had been extended to May 3, 2022. The Transportation Security Administration (TSA) can no longer force people at airports to wear masks. Individual airlines, such as United Airlines, American Airlines, and Delta Air Lines, have already said that they will no longer ask that passengers wear masks in order to fly, with certain exceptions.
- The takeaway: The Biden administration said it plans to appeal the district court decision. Elsewhere, overturning the mask mandate has received mixed reactions. Airlines have been pushing for the reversal of the mask mandate since March 2021, when executives from ten airlines wrote a letter to President Biden calling for an end to pandemic-related travel policies. Air travel has increased significantly this spring, with more than two million passengers going through security some days. Meanwhile, Covid-19 cases have been on the rise again, due to a new, more contagious strain of the virus, the BA.2 omicron subvariant.
Making Lululemonade. Fitness clothing retailer Lululemon announced it is rolling out free and paid subscription services that give customers access to product drops, in-person events, and workout content. Currently, an all-access membership to Lululemon’s Mirror fitness platform costs $39. Lululemon is also partnering with Rumble, Y7, Pure Barre, and DogPound to provide workout content for subscribers. The membership program is slated to start in the fall of 2022.
- The takeaway: Lululemon is reportedly banking on the subscription model lowering its costs for acquiring customers. The legging retailer previously tested a membership program in 2018, in which customers paid $128 each year for benefits like free shipping, workout classes, and events. Since then, Lululemon acquired Mirror for $500 million in 2020. Other fitness wear brands, such as Alo Yoga and Athleta, have also added workout memberships. Lululemon’s plan is part of new revenue objectives for the company to reach an annual revenue of $12.5 billion by 2026, double its 2021 revenue.
Ordering in is out. Just Eat Takeaway, parent company of Grubhub, is considering selling the food delivery service due to slumping sales. The Amsterdam, Netherlands-based company acquired Grubhub in 2021 for $7.3. In the first quarter of 2022, Grubhub’s sales fell 5% in North America and 1% globally. Grubhub’s market share of delivery sales has also decreased to 11% in March 2022, down from 21% two years prior.
- The takeaway: Grubhub and other delivery services saw an increase in usage during the pandemic as people avoided going out to eat and in-person dining paused. Founded in 2004, Grubhub was the first online delivery service in the U.S. But the platform has since faced pressure from competitors such as DoorDash and Uber Eats. DoorDash is the biggest player in the U.S., with 57% of the market share as of March 2022, up from 44% two years ago. In 2020, Uber Eats acquired delivery app Postmates for $2.65 billion.
Other stories we’re following:
Florida vs. Magic Kingdom. The Florida House of Representatives voted last week to remove Disney World’s distinction as a special tax district, which has allowed it to self-govern the park for 55 years, and has saved the company millions in taxes and fees annually. Florida’s governor Ron DeSantis reportedly introduced the legislation in response to Disney’s opposition to the state’s “Don’t Say Gay” bill.
Get real. There’s a new social media app on the scene: BeReal. Nearly seven million people have downloaded the app which encourages people to “be real” by posting once a day, without filters.
Here’s what we covered last week in the Scan:
- Inflation increased at an annualized 8.5% rate in March, the biggest increase since 1981.
- Elon Musk made an unsolicited $43 billion cash offer last week to acquire Twitter and take the company private.
- Consumers continued to flood restaurants and retailers in March, spending $655 billion, an increase of 0.5% over the previous month.
- The 169-year-old piano manufacturer Steinway Musical Instruments Holdings Inc. has filed papers with the Securities and Exchange Commission (SEC) to go public.