Posted by: Mark Scott on November 26
Xavier Rolet, the London Stock Exchange's chief executive, hasn't had a good week. On Nov. 26, technical glitches halted trading on the 300-year-old bourse, leaving traders unable to execute deals after 10:35am London time. That's the second time technical problems have stopped LSE trading this month. And it mirrors a similar outage in September, 2009 that caused London's financial bigwigs to miss out on the market rally when the U.S. government bailed out Fannie Mae and Freddie Mac.
To make matters worse, the Nov. 26 glitches come a day after the LSE posted a 39% annual drop in net profits for the six-month period ending Sept. 30, 2010. According to the bourse, net profits totaled £50.9 million ($84.3 million) vs. £83.7 million ($138.6 million) for same period last year. Revenues also dropped 9% compared to last year to reach £310.9 million ($514.7 million).
"The overall Group performance reflected market conditions depressed by the fall out from turmoil in financial markets last year and increased competition," LSE's Rolet said in a statement.
Stumbling market activity, particularly at the beginning of 2009, certainly has hurt the LSE's bottom-line. But competition has been the main driver of the bourse's dwindling profits. Since Europe liberalized its financial services sector, start-ups such as Chi-X and BATS Europe (a subsidiary of Kansas-based BATS) have been picking up market share (see graph below). That's predominantly down to cheaper running costs, more up-to-date technology, and a focus on flash trading, which allows financial players to make millisecond, high-volume trades.
For sure, competition has been nipping at the LSE's heels since 2008. But the latest results just show how much the start-ups are hurting London's venerable bourse. Further financial pain, including the LSE cutting its fees to hold on to business, is expected in the near future.
Source: ThomsonReuters -- Percentage of Market Share in London Listed Stocks (Based on Turnover)
Posted by: Kerry Capell on November 18
A bidding war looks set to ensue for British confectionary maker Cadbury (CBY) after U.S. chocolatier Hershey (HSY) and Italian confectioner Ferrero issued separate statements confirming their interest in the company. After rejecting an initial $16.7 billion offer in September, Cadbury dismissed Kraft's latest proposal of $16 billion on Nov. 9 as "derisory."
Strategically, the three-way tie-up makes sense. Hershey, which already owns the license to produce Cadbury chocolates in the U.S., would gain access to faster growing emerging markets. The U.S. company also would get a foothold into the non-chocolate confectionary market through Cadbury's gum brands and Ferrero's ownership of Tic-Tacs. And Ferrero, whose sales are now focused on the Italian, German, and French markets, would get much greater global exposure.
Culturally, the three companies share similar values. Cadbury has a long heritage as a socially responsible employer. That's a focus Cadbury has tried to embed in its brands, such as premium organic chocolate maker Green & Black's. A big proponent of ethical sourcing, Cadbury has pledged that 25% of its Cadbury Dairy Milk global sales and 350 million Cadbury Dairy Milk bars will be Fairtrade certified in 2010.
Continue reading "Hershey, Ferrero Consider Cadbury Bid"
Posted by: Jack Ewing on November 12
Avatar, the fabulously expensive 3D sci-fi flick opening Dec. 18, may presage the future in more ways than one. James N. Gianopulos, CEO of News Corp.’s Fox Filmed Entertainment, which is behind Avatar, sees big growth in 3D as the technology gets cheaper and more theaters acquire the necessary equipment. For film companies, Gianopulos told an informal late-night gathering at the Monaco Media Forum Nov. 11, 3D movies offer better profits as well. “Audiences value and are willing to pay incrementally for the enhanced presentation of 3D,” Gianopulos told BusinessWeek in a follow-up e-mail.
Three-dimensional movies are much easier to make than when they first gained popularity in the 1950s. Cameras are no longer the size of refrigerators, and the additional cost compared to a traditional film is a relatively modest 15%. In addition, the number of theaters able to show 3D movies is rising, in part because studios are helping theater-owners finance the necessary digital equipment. Distributing a digital film costs less than distributing a traditional 35-millimeter film, and studios are using the savings to help theater owners make loan payments on the new equipment.
Avatar, directed by James Cameron of Titanic fame and costing nearly $500 million, should provide impetus for more theaters to upgrade to 3D. And there’s another benefit. Because viewers need to wear special glasses to watch a 3D movie, content pirates can’t make illegal copies by simply pointing a video camera at the screen, as they often do. The no-taping aspect “is an incidental but valuable benefit,” Gianopulos says.
Posted by: Jack Ewing on November 12
Mathias Döpfner, CEO of German publisher Axel Springer, and Arianna Huffington, co-founder of the Huffington Post politics and news blog site, made sure the Monaco Media Forum isn’t just a digital media lovefest. Döpfner, whose empire includes Bild, Europe’s largest newspaper, debated with Huffington whether journalism published online should be free. The discussion before a media industry audience at a seaside Monaco hotel on Nov. 12 quickly got loud.
Döpfner pleaded for stronger intellectual property rules, sarcastically portraying the current state of online journalism as “stupid old-school guys who are investing in quality content…and new-school guys who are stealing it.”
That statement annoyed Huffington. “ ‘Stealing’ is not a word you should be allowed to use. We are meticulous about copyrights.” Döpfner quickly added that he hadn’t meant to imply that the Huffington Post was among the offenders.
Döpfner’s point was that news and analysis by professional journalists, as opposed to the mostly unpaid bloggers on Huffington Post, is threatened by web sites which gather content from traditional publishers, generating advertising revenue while doing little original research. “If you want to sell beer for free, fine. But don’t take our beer and sell it to someone else,” Döpfner said.
He expressed optimism that consumers can be weaned from the expectation that news content on the Web is free. "For hundreds of years people have been paying for things they are interested in." Huffington replied that the idea that publishers can change consumer habits is “incredibly hubristic.”
“The ship has sailed, consumer habits have changed,” she said.
Döpfner chided Huffington about her use of unpaid bloggers. “If all our journalists were working for free, that would be great,” he said. “You can handle the negotiations.”
Posted by: Mark Scott on November 11
Christmas is still more than six weeks away, but Coca-Cola (KO) wants to tap Londoners' holiday cheer. On Nov. 11, the U.S. drinks giant announced a deal to sponsor performers (or buskers, as they're called in Britain) on London's Underground subway. The agreement, which starts on Nov. 30 and runs until Jan. 4, 2010, includes Coke-emblazoned logos across the British capital's public transport system, and will be tied in to the company's Christmas-related advertising campaign.
So far, so good. But there's a problem. Coke also wants singers to perform its theme tune 'Holidays Are Coming' and other Christmas carols as part of the viral ad campaign. Unfortunately, many of the 240-plus buskers -- who range from classical singers to rap artists -- have balked at flogging Coke's message. (Transport for London, which manages the Underground, says no one will have to perform a song or jingle if they don't want to).
According to the London Evening Standard, Michael Ball, a 47-year-old jazz guitarist, said:
"Not in a million years will I play some Coke jingle. Most buskers make half their annual income in December. Londoners are really up for it and generous at this time and we know what songs and music work. Do commuters really want to hear a corporate jingle from every busker? What a daft idea."
So will the campaign backfire? Probably not. Whether performers pump out 'Holidays Are Coming' won't matter that much after Coke secured the sought-after ad space on the Underground (used by millions of commuters each day). Still, it just goes to show that this time, Coke can't teach the world (of buskers) to sing.
