The week’s news included; Microsoft’s Activison-Blizzard takeover may harm competition says CMA, Google loses $100bn amid AI chatbot race, Manchester City facing sanctions for FFP breaches.
Below are our top 10 stories that you need to know about. Be sure to check our twitter page, Facebook page and Instagram Page, for regular posts of important headlines. Get all the important stories and insights straight into your inbox by subscribing to our mailing list here.
Opinion articles of the week:
- City A.M. – Let’s be honest, we are suffering from a national crisis of bad vibes
- BBC News – Have Biden’s economic plans hit the buffers?
- CNBC – The ChatGPT AI hype cycle is peaking, but even tech skeptics don’t expect a bust
- BBC News – Has the Brexit fishing promise come true?
1. CMA FINDINGS ON MICROSOFT’S ACTIVISION-BLIZZARD TAKEOVER
The Competition and Markets Authority has revealed its provisional findings of its investigation into Microsoft’s $68.7 billion acquisition of Activision Blizzard. They found that the deal could harm rivals and competition in the sector. Sony would be the main loser in this situation as Microsoft’s biggest competitor in the gaming world. Activision Blizzard is behind a number of huge gaming titles such as Call of Duty, Candy Crush and World of Warcraft. There is concern, particularly with Call Duty. Call of Duty is all a best seller on Microsoft’s Xbox and Sony’s Playstation. Microsoft could limit Sony’s access to the Call of Duty title if the deal goes through although the tech giant has denied it would do this.
Fundamentally, the CMA considers that Microsoft purchasing one of the largest game publishers in the world would unduly harm competition in the gaming sector and lead to higher prices for consumers. The CMA has now approached all involved to explore potential remedies. The final report will be published on April 26.
2. UK LOSES EU TRADE DISPUTE
The UK has lost a trade dispute against the EU and has paid £2.3 billion to the bloc. This is a legacy issue regarding a dispute that occurred while the UK was in the EU. The dispute centred around imports of Chinese textiles and footwear between 2011 and 2017. These products were allegedly undervalued and below the lowest acceptable price for imports. The EU claimed the UK did not take adequate steps to prevent this happening and was seeking £1.7 billion in damages. Subsequently, the European Court of Justice agreed that the UK was liable for most allegations. The government paid €700 million last year, a further €700 million last month and €1.2 billion last week. In total, €2.6 billion or £2.3 billion was paid to the EU on this issue. The total sum included accumulated interest on the initial award.
3. JOB CUTS CONTINUE
Swathes of large companies are slashing jobs as the global economic outlook worsens. Most of the cuts are in the tech sector. The scale and speed of these cuts is staggering as the sector had recently enjoyed a period of rapid growth.
Tech giant Dell is cutting 6650 workers as demand for personal tech declines. The cost of living crisis has hammered demand for laptops and personal computers leading to cuts across the sector.
Zoom is cutting 1300 workers as its pandemic fuelled bumper period has come to an end. This amounts to a huge 15% drop in its workforce. The company tripled in size in just two years as it was the preferred service provider for lockdown remote work and social calls. As entertainment venues reopened and workplaces dragged workers back to the office, demand for its services has been declining.
Ebay is cutting 500 jobs as it tries to remain viable. The company will be investing in new technologies to combat falling customer demand. Disney is slashing 7000 jobs after the initial boom of its streaming service subsides. Disney + ‘s subscriber numbers fell by 2.4 million to 161.8 million, its first decline ever. The streaming service also posted a $1.5 billion loss last quarter. Aerospace giant Boeing is cutting 2000 jobs primarily in its finance and HR departments. This is designed to simplify its corporate structure. Yahoo is also cutting 1600 staff, roughly 20% of its workforce to improve profitability.
4. AI RACE HEATS UP AS GOOGLE LOSES $100BN
The race for artificial intelligence (AI) supremacy is heating up in big tech and Google is losing. The tech giant lost $100 billion in share value last week alone after a poor week in pitching its AI offering. AI chatbots are the future of daily life and will be integrated into or replace current search engines. These chatbots can generate advanced responses to open-ended queries, answering in a human-like fashion rather than simply bringing up relevant links. These chatbots can write essays, speeches and even computer code.
Microsoft is one of the front runners in this field. The tech giant unveiled it’s Bing search engine with ChatGPT integrated. Ultimately, this development could see Google’s search engine dominance under threat.
Last week, Google showed just how far behind Microsoft they are. Google’s new advert was supposed to show the power of its AI bot. Unfortunately, the AI bot in the ad answered a query incorrectly. Twitter users who saw the ad were quick to point out the AI bot error. Furthermore, Google’s presentation last week on AI integration was lacklustre and offered little to get excited about. Investors poured out of Alphabet, Google’s parent, seeing its share price tank 7%, losing $100 billion in value.
5. MERCEDES-BENZ DIESELGATE CASE
Mercedes-Benz has appeared in a UK court for the first time over the dieselgate scandal. Affected drivers are seeking to launch a class action to obtain damages. If successful, all affected drivers can opt-in to the group claim. The automaker is accused of cheating on emissions tests and misleading customers on the toxic nitric oxide and nitrogen dioxide emissions of their diesel cars. Mercedes-Benz has already been hit with a class action lawsuit in Germany over the same issue.
Mercedes’ competitor Volkswagen has also been hammered by the dieselgate scandal over the past few years. The German automaker has already paid out over €30 billion in damages and fines. Volkswagen Group owns the Porsche, Audi, SEAT, and Lamborghini car brands.
6. MANCHESTER CITY FFP BREACHES
Manchester City Football Club has been hit with 100 charges by the Premier League relating to breaches of financial fair play rules. This follows a four year investigation into the club, covering conduct as far back as 2009. The club allegedly failed to provide accurate revenue information and to cooperate with investigations. City’s case has now been referred to an independent commission who will decide what action, if any, to take against City.
In a worst case scenario for City they could face a points deduction or even expulsion from the Premier League. Manchester City and the Premier League can appeal to the commission but cannot appeal to the Court of Arbitration for Sports.
The club has hired Lord Pannick KC, a renowned barrister who advised Boris Johnson on the Partygate scandal. Pannick can charge up to £10,000 per hour. At this price, this puts him on a similar wage, pro rata, to Manchester City’s best paid footballer, Kevin De Bruyne, who earns £400,000 per week. Pannick is seldom called upon for first instance hearings but the fact that City have done so shows how serious this case is. City has also called upon Magic Circle firm Clifford Chance to defend them.
7. BNPL GROWTH
New research has shown that the use of buy-now-pay-later (BNPL) services have been funding much of consumer spending. Adobe Analytics found that £1 in every £8 spent online was sourced from BNPL providers in January 2023. This illustrates the growing importance of BNPL in modern shopping. The rising cost of living and squeeze on households means that BNPL offers an increasingly attractive way to spread costs.
Typically offering interest free repayments over 1 to 3 months, BNPL services are more accessible and cost effective than credit cards for most people. Like credit cards however, failure to pay BNPL repayments on time can have a devastating impact on users’ credit scores. Regulators are monitoring BNPL providers closely to ensure users are not being exploited and lumbered with huge BNPL debt. Klarna is the largest BNPL provider in Europe and was valued at $6.7 billion last July. This valuation tumbled from its high of $45 billion in 2021.
8. UK AVOIDS RECESSION
The UK narrowly avoided a recession in 2022 as the GDP growth was 0% in the last quarter. December saw a notable 0.5% drop in GDP, primarily due to the strike action throughout the month. A recession requires two consecutive quarterly economic contractions. While GDP in Q3, (July-September) saw a decline, a recession was narrowly avoided in Q4. In 2022, The UK economy grew by 4% overall, the largest increase of G7 countries. The Bank of England still expects the UK to fall into a recession in 2023 although not as deeply as first feared.
9. NETFLIX PASSWORD SHARING RESTRICTIONS
Netflix is introducing its password sharing restrictions in four more countries. The streaming giant initially trialled the restrictions in South America. Now, Canada, New Zealand, Portugal and Spain are all subject to the new rules. Customers who want friends and family outside of their household to have access to their account must pay an extra fee. In Canada, setting up a “sub-account” for users outside their home would cost CAD$7.99 (£4.92). Alternatively they must periodically sign in to the network at the account owner’s primary location using their device. Over 100 million people globally are estimated to share passwords. The plans will be in force in the UK by the end of March. This forms part of Netflix’s plan to improve profitability amid its declining subscriber base.
10. ADIDAS COULD CUT YEEZY LOSSES
Adidas is set to lose €500 million if it writes off its Yeezy footwear stock. The sportswear retailer issued a profit warning last week, citing its trouble with Yeezy stock. Adidas collaborated with rapper Kanye West to sell Yeezy trainers. The partnership was profitable and brought in nearly $2 billion a year. In October however, they cut ties with West after a number of anti-Semitic rants. Adidas is now deciding what to do with the remaining stock. Writing off the stock along with a business reorganisation is set to push Adidas to a €700 million operating loss for 2023. While the company expects to return to profitability in 2024, this whole saga makes sour reading for shareholders. Adidas shares plunged 10% in response to the news.