Having a lot of data is powerful. Handling is NOT easy

Brands’ blunders in their emails

Over the past few weeks, I had a couple of incidents in which brands sent me pretty awkward emails. The first incident was with the online pet store 1800PetMeds. A few weeks ago, I found out that my cat had ringworms. I went to 1800PetMeds to buy an oral solution that his vet prescribed. The transaction took place on 21st February 2021 and went smoothly; which I was thankful for. The bottle’s capacity is 52ml. My cat is supposed to take 1ml per day for 7 consecutive days on alternate weeks, meaning that we can’t use up that bottle in 30 days. Even if he takes it every day, it will have to take around 50 days to finish the bottle. Nonetheless, 1800PetMeds waited only for 30 days before they sent me an email encouraging me to buy another bottle. Their email headline read: Kimi’s next Intrafungol order is read. While I appreciate their initiative, I prefer my cat being healed completely to having to buy another bottle.

Another incident was with Hulu. It sent me an email at 10AM in the morning with a one-month free trial as a gift for my birthday. While the note was late by some margin, I still appreciated it. Less than 12 hours later, it sent me another email at 7PM, asking me to become a subscriber. If that’s not awkward enough, here is the kicker: I already received the same trial offer a few days ago and took it! I doubt that there is a system in place at Hulu that manages the delivery of marketing emails.

Handling a lot of data isn’t easy

1800PetMeds and Hulu aren’t some mom-and-pop shops that don’t have the resources to acquire and analyze data. On the contrary, they are Internet companies that should be experts in data analytics. Yet, they still have blunders like my examples above. To be clear, there is not a human-being sitting at a desk and sending out emails like above from Outlook. They are all automated from email tools such as Mailchimp. Hence, this is a product of my information being stored in their database and their operationalizing it.

This post isn’t to ridicule them. Since I have first-hand experience in dealing with data and knowing how difficult it is, I feel for them. At work, I deal with credit card data. There are many partners in our portfolio, some of which can have hundreds of thousands of accounts. Many accounts have hundreds of thousands of transactions every year. The sheer amount of transactions, coupled with their randomness in frequency, makes it a monumentally challenging task to figure out the purchase pattern for each person so that we can offer personalized marketing. For good measure, depending on how good your payment processor and internal data system are, the problem can be compounded by the irregularities in merchant descriptions. Below is what I have to do at work to categorize purchases into merchants. Think about what it is to do it for so many merchants out there

This is just one of the many aspects of what my job entails. We also have to look at how some attributes such as FICO, Balance, Credit Limit changed over time, how an account is engaged digitally (whether it enrolls online, mobile, e-statement, billpay, auto-pay or whether it is connected to a digital wallet), how profitable an account is and where that profitability comes from, and how we can be more efficient in acquiring account (whether direct mail, Internet, our retail branches, our Financial Institution partners or our Cobrand partners’ stores are the most efficient channels).

When I first joined my current team, my boss told me that it would take me a year or at least 6 months to be comfortable, not yet proficient, with what we do on a daily basis. He wasn’t wrong. Our learning curve is very steep. Plus, when dealing with a large amount of data, you have to take into account the infrastructure elements. Here are just a few on a high level

  • Is your current data infrastructure set up to assist fast data retrieval?
  • Does your data warehouse have high availability? Or does it crash a lot?
  • Is it easy to get the data you need or does it take hours to run complicated SQL queries?
  • Is there a set of universal definitions of metrics and fields?
  • Do you have a data visualization that can aid in presenting complex data? Is it connected straight to the data warehouse? Is it in a coding language that requires your team to learn?
  • Do you have a machine learning capability in-house to create proprietary models?
  • Is there a tool that can help eliminate biases to create apple-to-apple comparisons? If yes, how is data transferred from internal data warehouses to that tool?

I don’t believe my company is elite in data analytics. Not even close. I don’t know for sure, but companies like Netflix or Google should be an exciting place to work at because you’d be able to see how they handle an ocean of data at their fingertips. For many companies such as my employer, even though data driven operations are worthy visions, they are highly difficult to realize. Well, so is making money, I guess.

Notes from Disney’s Q1 2020 earnings call

Today, Disney announced its Q1 2020 results. There are a lot to unpack as the business is pretty diverse. I am just covering some of the stuff I mainly care about.

Overall, revenue increased 36% year over year. The effect from investments in Disney+ is reflected on operating income which increased only by 9% compared to last year

Parks made up 35% of Disney’s revenue, but more than 58% of its operating income. Parks also provided the largest margin at 32% among Disney’s segments, followed by Media Networks.

Subscribers

  • Disney+: 28.6 million paid subscribers as of 3rd February 2020 from US, Canada, Netherlands, Australia and New Zealand
  • ESPN+ 7.6 million paid subscribers as of 3rd February 2020
  • Hulu has 30.7 million paid subscribers as of 3rd February 2020

Given that Disney publicly set a target of 60-90 million paid subscribers worldwide and of profitability in 2024, it is a promising start to reach the 28-million mark already just a few months after launch. Bob Iger wisely tried to play down any enthusiasm from the figures by citing the inability to point out the reason for the growth and uncertainty in the key international markets where Disney+ will debut soon.

Average Revenue Per User

The dip in ESPN+ and Hulu SVOD APRU was attributed to the bundle that offers Disney+, ESPN+ and Hulu Ad Supported for $12.99/month. Regarding the Hulu APRU, it’s even higher the non-ads subscription of $11.99/month. Christine McCarthy, Disney’s CFO, had the following comment:

The ad supported, the product is priced at $5.99. And but the ad-supported part of the equation makes the ARPU come out even higher than the ad-free. Most of the subscribers subscribe to the ad-supported. So that’s a good balance of the ARPUs when you stack them up next to each other.

Source: Atom Finance

Regarding the APRU of Disney+, since the service is offered at different pricing tiers including the promotion with Verizon, the 3-year plan last year, the bundle and full price, it’s difficult as to what to make out of the figure. Below are a few things from the earnings call:

  • 50% subscribers came directly from disney.com
  • Bob Iger mentioned “20% of those subscribers” came from Verizon. The comment in the earnings call wasn’t clear, but he clarified it in this interview with CNBC
  • Most subscribers came from the US
  • Conversion from free-to-pay and churn rates were better than what Disney had expected
  • No significant churn after Mandalorian Season 1 ended

Other notes

  • “It was 65% of the people who watch Mandalorian watch at least 10 other things”
  • Each Disney+ subscriber spent 6-7 hours every week on the service
  • 18-22% guests to parks were international guests
  • “Attendance at our domestic parks was up 2% in the first quarter, and per capita guest spending was up 10% on higher admissions, merchandise and food and beverage spending. Per room spending at our domestic hotels was up 4%, and occupancy was 92%. So far this quarter, domestic resort reservations are pacing up 4% compared to this time last year, and booked rates at our domestic hotels are currently pacing up 10%.”
  • The fight between McGregor and Tyrone brough “1 million pay-per-view purchases and 0.5 million new subscribers”

Disclosure: I own Disney stocks in my personal portfolio

Notable notes from Disney’s earning call

Today, Disney released their 2019 Q3 result. Below are a few points that stood out for me

  • Hulu got 28 million paid subscribers while the figure for ESPN+ stood at 2.4 million
  • The integration of 21 Century Fox had negative impact on Disney’s earning, including the subpar performance of movies such as Dark Phoenix
  • Direct-to-Consumer & International segment expected to make $900 million loss in the next quarter, due to investment in the launch of Disney + and support for Hulu, ESPN+
  • Fantastic results for the studio as per Bob Iger

The studio has generated $8 billion in global Box Office in 2019, a new industry record. And we still have five months left in the calendar year with movies like Maleficent: Mistress of Evil, Frozen 2 and Star Wars: The Rise of Skywalker still to come. So far this year, we’ve released 5 of the top 6 movies including four that have generated more than $1 billion in global Box Office. Avengers: Endgame is now the highest grossing film in history with almost $2.8 billion worldwide. Captain Marvel, Aladdin and The Lion King have each surpassed $1 billion. And with more than $960 million in Box Office to date, Toy Story 4 will likely cross that threshold in the coming weeks. And all of these movies will be on Disney+ in the first year of launch.

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  • The leadership behind the studio will manage the film strategy for 21 CF as well
  • Deadpool, Fantastic 4 and X-Men will be part of Marvel Studios
  • Come this November, users can have access to Disney+, Hulu (ads-supported) and ESPN+ as a bundle for $12.99 a month, well below the total sum of all threes, if subscribed separately
  • “Hotstar had more than 300 million average monthly users, served an unprecedented 100 million daily users and delivered a high-quality streaming experience to 25.3 million simultaneous users, which is a new world record”
  • Disney is discussing deals with Apple, Amazon and Google as distribution partners, deals that are expected to close
  • Focus on marketing for Disney+, per Bob Iger

Disney+ marketing is going to start to hit in later this month, later in August. We’re actually going to allow members of D23 to be the first to subscribe. I’m actually going through a comprehensive marketing plan with the team next week. Comprehensive probably is an understatement. It is going to be treated as the most important product that the company has launched in, I don’t know, certainly during my tenure in the job, which is quite a long time. And you will see marketing both in traditional and nontraditional directions basically digital and analog also significant amount of support within the company on basically company platforms. And then of course all of the touch points that the company has, whether it’s people staying in our hotels, people that have our co-branded credit card, people who are members of D23, annual passholders, I could go on and on. But the opportunities are tremendous to market this. And I feel good about some of the creative that I’ve already seen. But you won’t start to see it until later this month.

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Quick Thoughts

I cannot wait to see the battle of the streamers and how well Disney+ will fare. As a student of business, I am fascinated to see the strategies and execution of Disney+ vs Netflix. Netflix has a huge subscriber base as advantage over Disney+, in addition to a household name (ever heard of “Netflix and chill”?) and some great original content. But Disney has its own strengths as well, including marketing expertise, household name, a great content library and additional revenue streams.

I am thrilled to see how fast Disney+ will be able to sign up folks. The emphasis on marketing, the aggressive pricing of the streaming service, the bundle and the focus on exclusive content in spite of loss from licensed deals show that Disney is dead serious. It will be interesting to see how viewers will react and whether there will be some market share loss by Netflix at the hands of Disney+ and other upcoming streamers.

I honestly don’t know how it will go. As a fan and a consumer, I cannot wait to see.

Disclaimer: I own Disney stocks in my portfolio.