Markets down in the dumps, reports suggest Netflix’s new plan isn’t working, Games Workshop in Amazon tie-up and Rank warns on profit

“Moves by three major central banks in a week to continue pushing up interest rates has put a halt to any thought of a Santa rally for the markets. The Nasdaq sank 3.2% on Thursday while European stocks continued their decline on Friday morning, including a 0.5% drop in the FTSE 100,” says Russ Mould, Investment Director at AJ Bell.

“The fall in US and UK retail sales just goes to show how the higher cost of living is hurting people and businesses. People appear to be more cautious on Christmas spending and they’re going out less which is hurting the hospitality industry.

“When Christmas wish-lists include a warm house rather than a PlayStation or Apple Watch, you know the country is experiencing a deep freeze in both weather and the economy.

“The idea that interest rates will keep going up has shifted investors’ attention back to the banking sector, with NatWest among the top FTSE risers. It is one of the few industries whose earnings should benefit from the higher cost of borrowing.”

Netflix

“Netflix’s new cut-price advertising-led subscription tier was meant to be its saviour. It would bring in more subscribers and help to retain existing ones who were thinking about leaving because they could no longer afford the standard service.

“Not only would it bring in more revenue on the subscription side, but Netflix would also be paid for carrying third party promotions. Furthermore, the lower price point might even persuade people who previously borrowed a friend or family’s account to get their own one.

“Early reports suggest take-up has been disappointing, sending its share price crashing nearly 9% in a day.

“Despite having some big name shows that have become water cooler discussion points in the office and on social media, such as Wednesday and the Harry/Meghan documentary, the sign-up rates to the ad-led subscription tier apparently haven’t lived up to expectations.

“Reports suggest some advertisers have been offered refunds because Netflix hasn’t delivered the expected audience figures.

“Billionaire investor Bill Ackman of Pershing Square dumped his company’s holding in Netflix as soon as the advertising plan was announced, saying its business model had changed as advertising income was unpredictable. Many people mocked Ackman after Netflix’s share price then soared, but they’re not looking so clever now.”

Games Workshop

“News of a tie-up with Amazon to produce TV and films associated with the Warhammer universe is potentially huge for Games Workshop.

“A lot of the excitement around the stock in recent years has been built around the licensing opportunities associated with Games Workshop’s intellectual property, which has a large and very loyal fanbase.

“Developing in this area has several upsides for Games Workshop. It generates extra revenue and cash flow for a relatively limited extra cost and, while Amazon will be granted the relevant merchandising rights, it could deepen fans connections with Games Workshop’s table-top gaming products and bring them to a wider audience.

“There have been modest efforts in the past to bring Games Workshop’s creations to the screen. Amazon’s deep pockets and its huge reach, more than 50% of British households have an Amazon Prime account, puts this in a different stratosphere.

“The deal is not signed and sealed yet but, barring a last-minute hitch, this could be an extremely significant step in Games Workshop’s development.

“The big risk is that, by almost certainly surrendering any creative control, Games Workshop is at the mercy of Amazon making something which might alienate its existing followers. The mixed reaction of Tolkien fans to Amazon’s recent Lord of the Rings prequel is something to consider.”

Rank

“In an unfortunate case of nominative determinism, the latest update from Mecca Bingo owner Rank is, well, pretty rank.

“The market is rightly quite sceptical when companies blame the weather, but the recent freezing temperatures will have had a disproportionate impact on a clientele who will be less willing to brave sub-zero temperatures to make it out to the bingo.

“Rank has had plenty of warning that the World Cup was happening and disruption to trading should really have been built it into the company’s guidance well in advance. The cost-of-living pressures are now just a fact of life for the business which isn’t going away any time soon.

“The poor showing for its Grosvenor Casino arm suggests people’s willingness to play the high roller when household budgets are so squeezed is substantially reduced.”

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