Rebecca Day

Spotify fell short of its monthly average user guidance for Q2 on “ongoing COVID-19 headwinds” and a “temporary issue” with user intake on a third-party platform, said CEO Daniel Ek on a Wednesday call. MAUs grew 22% year on year to 365 million. There was “user sign-up issue” with email verification on a third-party platform that created “unexpected intake friction,” management said. Chief Financial Officer Paul Vogel said this “was on our end” due to a change “not caught soon enough” that had a 1 million-2 million impact on MAU growth. It's corrected, he said. Q2 revenue exceeded expectations at $2.7 billion, up from $2.2 billion year on year. Shares closed down Wednesday 5.7% at $223.32.

Supply constraints hit iPhones hard in the quarter that ended June 26, said Apple Chief Financial Officer Luca Maestri. CEO Tim Cook called such chip and other shortages an industry problem. For the iPhone, demand “has been so great and so beyond our own expectation that it's difficult to get the entire set of parts within the lead times that we try to get,” he said Tuesday: Supply constraints have largely been on legacy semiconductor nodes. “We're paying more for freight than I would like to pay, but component costs continue in the aggregate to decline,” he said. “We'll do everything we can to mitigate whatever set of circumstances we're dealt.” IPhone sales in Q3 jumped 50% from the year-ago quarter to $39.5 billion. Such “sales remained extremely strong across all regions” and exceeded Canaccord's 35% estimate, Michael Walkley wrote investors Wednesday. “Apple is well-positioned to continue to benefit from the 5G upgrade cycle,” the analyst wrote. He anticipates “strong overall growth trends as 5G smartphones ramp.”

U.S. smartphone shipments will rise 10% this year to 154 million units, with $73 billion of sales, a 15% jump, said CTA on Thursday. More than 106 million 5G smartphones are expected to ship, up 530%. Audiobooks and podcasts are driving audio sales growth of 18% to $10 billion. Video streaming will rise 15% to $43 billion. Demand for technology is forecast to lift retail tech sales 7.5% to a record $487 billion. The pandemic “strengthened consumers’ relationship with technology,” said CTA CEO Gary Shapiro.

Emerald expects 20% fewer CEDIA Expo exhibitors than 2019 due to people’s “comfort levels for in-person events,” a spokesperson emailed Wednesday. The trade show company hopes for about 300 exhibitors Sept. 1-3 in Indianapolis, she said. Last year’s expo, scheduled for Denver, was canceled. Feedback has been positive among exhibitors, attendees and media who registered for the coming show, the spokesperson said. They're "excited to get back to business," she said. Emerald updated its health and safety plan for the gathering, said a Tuesday email. A seven-question survey focused on willingness to attend trade events, what people miss about going and how far they’re willing to travel to such events. For other conferences' safety precautions, see our report here. Our calendar of events is at communicationsdaily.com/calendar.

Labs processing New York state-collected nasal swab samples for COVID-19 testing must have a New York state clinical laboratory permit, a spokesperson for the state Department of Health emailed Wednesday, responding to our question on the inability of New Yorkers to order Amazon’s test kit (see Notebook, July 7 issue of this publication). A notification, in red lettering, next to the test kit at Amazon.com says “cannot be shipped to your selected delivery location” for customers identified as living in New York. The department spokesperson said that “the lab associated with this kit does not currently have a permit issued by the Department of Health. Other at-home collection kits are permitted and available.” Amazon is working to make its consumer COVID-19 at-home test collection kit available for purchase in New York as soon as possible, we’re told. It announced general availability Tuesday. Customers get results within 24 hours of the sample’s arrival at a lab in Hebron, Kentucky. Amazon didn’t respond to a question asking about other states.

Use of connected TV devices leveled off over the past year after being “pulled forward” in 2020 during the COVID-19 pandemic, said a Q2 Leichtman Research Group report. Still, 39% of adults watch video on a TV via a connected device daily, 60% weekly and 70% at least monthly, it said. Despite consumers having more ways to watch video, TVs are “overwhelmingly” their preferred delivery method, said Leichtman. Given a choice of screens, 78% of survey respondents said they prefer to watch video on a TV, 11% on a laptop or desktop computer, 8% on a smartphone and 3% on a tablet. About 82% of U.S. TV households have one internet-connected TV device, with an average 4.1 per TV household, said the report. That’s up from 74% in 2019 and 30% in 2011. Nearly nine in 10 households that bought a TV in the past year have at least one smart TV, it said. Younger people are most likely to use connected TV devices. Among ages 18-34, 54% watch video on a TV via a connected device daily -- compared with 43% of ages 35-54 and 22% of ages 55-plus. Major pay-TV providers lost about 1.9 million subscribers in Q1, while just over a million broadband subscriptions were added. About 250 million more TV households have connected TV devices than pay-TV set-top boxes, said Leichtman. In 2016 that number was 35 million, it said.

Netflix’s venture into consumer products, announced several weeks ago, along with reports it may be expanding its game offerings, indicate the company is “looking to build a new profit pool or two a la Disney,” MoffettNathanson analyst Michael Nathanson wrote investors Tuesday. But consumer products or gaming won’t be enough “to change the narrative,” said the analyst, suggesting Netflix instead should add a live sports tier or advertising-based VOD offering to reach new customer segments and markets, especially in emerging regions with low average revenue per user. Since the start of 2018, Netflix has underperformed the S&P 500, rising 34% vs. 57% for the broader market, Nathanson said, saying a maturing U.S. subscriber base and an intensifying competitive environment among streaming services contributed to limited stock performance. He questioned how much growth is left in Netflix’s subscription VOD business, while “the success of AVOD businesses has been especially notable this year, and Netflix seemingly would have pole position to capture that market.” He noted Netflix “has a fundamental opposition to advertising,” but he said emerging pressure to find growth “as well as a more developed AVOD ecosystem may make Netflix more amenable to advertising on the service.” Netflix benefited from the COVID-19 pandemic with record subscribership last year, but subscriber growth slowed to below guidance in Q1 at 4 million subscription adds. The analyst expects an acceleration in signups in the second half as more content is available, but “as economies further reopen, we believe people will spend more time engaging through in-person activities rather than streaming content at home.” Netflix didn’t comment Tuesday.

Video streamers are “overwhelmed” by over-the-top streaming options, Horowitz Research reported: They feel the “pain” and fatigue of too many streaming services to choose from, as content fragments. Half of TV content viewers in a May survey of 2,183 consumers said there are too many streaming services. About 44% said they often have a hard time finding something to watch. The researcher Wednesday cited launches of Disney+, Apple TV+, BET+, HBO Max, Peacock and discovery+; the rebranding and relaunching of CBS All Access into Paramount+; the launches -- and shuttering -- of Quibi and TVision; and the exit of PlayStation Vue. It noted arrival of AT&T TV as the “latest iteration of DirecTV Now and AT&T TV Now: “Consumer perceptions of chaos and their continued retention of (and perhaps nostalgia for) managed MVPD services is … not surprising.” Of MVPD nonsubscribers, 36% cut the cord within the past two years, up from 23% in 2020; 16% cited COVID-19.

NBCUniversal’s Peacock over-the-top streaming service will launch a Tokyo Olympics destination July 15, said the company Wednesday. Olympic events will be available to stream free on the advertising-supported Peacock tier. USA men’s basketball coverage will be exclusive to Peacock Premium subscribers, it said. We learned that 4K HDR, though on Peacock's road map, won't be part of its Tokyo Olympics coverage. Peacock didn't comment. NBCUniversal will beam the Tokyo Olympics in 4K HDR to its U.S. “distribution partners,” which will “individually choose how to make the content available to their customers,” said the network this month (see 2106110043). Peacock will be available to more viewers when it launches Thursday on Amazon Fire TV and Fire tablets, said NBCUniversal and Amazon Wednesday.

Amid antitrust and other scrutiny, Amazon touted Prime customers spending $1.9 billion on more than 70 million small business' products over the two-day Prime Day that wrapped up Tuesday. Small- and medium-sized firms that sold on Amazon grew revenue 100%, said the platform Wednesday. The $11 billion industrywide e-commerce spending during the event suggested a “pent up demand for online shopping as consumers look forward to a return to normalcy,” emailed Adobe Digital Insights Director Taylor Schreiner. Also Wednesday, the House Judiciary Committee marked up legislation targeting tech companies including Amazon (see 2106230063).