Weekly Reads - December 26, 2022
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Christmas week brought great joy to Meta who saw their Oculus Quest App climb to the tops of the Apple App Store and Google Play Store for the first time ever on Christmas day. During the week of Christmas in the U.S, Oculus app downloads jumped 517% week-over-week reaching 1.5 million installs. Even the week after Christmas downloads were still 42% higher than 2021 indicating that the Quest 2 sold extremely well. The Quest 2 launched in 2020 and as of November 2021 sold 10 million lifetime units. The Quest 2 sells for the reasonable price of $299 making it an entry level product most users can afford. The Quest App works with the Quest 2 and Meta’s legacy products (Rift & Rift S) and allows users to download new VR apps and games and find friends to connect with in VR. Despite a tough year for the Metaverse it seems that user adoption of VR continues to grow as Meta continues to launch better and more affordable products.
The Federal Trade Commission (FTC) is ordering Mastercard to stop forcing merchants to routing debit card payments through its own payment network. The FTC wants Mastercard to start providing competing networks with customer account information they need to process debit payments. The FTC alleges that Mastercard has used a process called “tokenization” to block the use of competing networks. Tokenization involves the process of replacing the card holders account number with a different number to protect the user’s account information making card transactions more secure. To be able to intake transactions that use tokens an alternative payment network must have access to the primary account information (the actual card number). According to the FTC, Mastercard has hidden this information in its proprietary token vault preventing alternative payment networks from being able to service these transactions. This FTC ruling could pressure Mastercard’s debit volumes, but will likely not make a material difference to revenue and profits since a majority of the business is driven by credit card volumes.
The NFL Sunday Ticket is changing hands from DirecTV to YouTube. The NFL Sunday Ticket makes out-of-market games available to subscribers across the nation and is a staple in many football watching households across the U.S. YouTube is reportedly paying $2.5 billion annually to acquire the rights to the Sunday Ticket, $1 billion more than former holder DirecTV. This is likely a massive overpay for a service that is a probable loss leader that will be an add-on to YouTube’s YouTube TV service. Even if all of YouTube TV’s subscribers pay $400 a year for Sunday Ticket it will be barely enough to cover the cost of the package. DirecTV hasn’t made a single dollar of profit when they held the Sunday Ticket despite only paying $1.5 billion for the service and selling the Sunday Ticker for $300 a year. It is likely that Alphabet understands that the Sunday Ticket is a forever lost leader but sees value coming from the number of new subscribers it can attract and improvement in user retention.