Vested Shorts: Ads on Amazon Prime, Fitness industry, Crypto in the UK, and Hollywood’s AI stance

by Parth Parikh
September 30, 2023
3 min read
Vested Shorts: Ads on Amazon Prime, Fitness industry, Crypto in the UK, and Hollywood’s AI stance

In today’s edition

  • Amazon Prime introduces ad-supported tier
  • Lululemon and Peloton form a partnership
  • Chase UK takes a stand against crypto purchases
  • Hollywood takes on AI

Market Snapshot

U.S. stocks concluded a tumultuous September with increased volatility as elevated Treasury yields, soaring oil prices, and anticipation of enduring high interest rates by the Federal Reserve impacted the markets. Despite aligned inflation data with the Personal Consumption Expenditure Index (PCE) showing a 0.4% rise in August, the markets remained unsettled.

The S&P 500 Index experienced a fourth consecutive weekly drop. By the week’s close, the S&P 500 was down 0.7% for the week, the Dow Jones had fallen 1.3%, and the Nasdaq Composite was up by 0.1%.

Market close data: Week of Sep 25-29, 2023

News Summaries

Amazon Prime Video is introducing an ad-supported tier in the US by early 2024, with an additional $2.99 monthly charge for an ad-free experience. This move is designed to support Amazon’s increasing content spending, which grew by 28% to $16.6 billion in 2022. Advertising on Amazon has been a significant revenue stream, with a recent quarter recording $10.7 billion from ads, outperforming platforms such as YouTube, and Twitter combined. Despite its size, Amazon’s ad business only accounted for approximately 8% of its $134 billion net sales during the period. Notably, while the ads on Prime Video will generate revenue, they are expected to be less profitable than regular Amazon ads due to the absence of “high intent” from viewers.

Lululemon and Peloton have announced a five-year partnership to release a line of co-branded clothing and collaborate on content for Lululemon’s exercise app. This partnership follows Lululemon’s $500 million acquisition of Mirror in 2020, a move to enter the at-home fitness market and compete with Peloton during the pandemic’s at-home fitness surge. However, Lululemon plans to cease the sales of its Mirror hardware by the end of 2023. Peloton had also entered the apparel market, previously causing a legal dispute with Lululemon over design infringement, which was settled out of court. The collaboration appears more crucial for Peloton, whose market cap has decreased by 97% since its peak during the pandemic, while Lululemon has maintained most of its pandemic gains due to sustained demand for premium activewear.

Chase UK will decline crypto-related purchases, citing customer protection after a 40% rise in crypto-fraud losses over a year. This move aligns with the UK’s intensified financial regulatory measures and the Financial Conduct Authority’s (FCA) increased emphasis on consumer protection in the face of emerging technologies. Previously, banks such as NatWest, HSBC, Nationwide, and Santander UK imposed limitations on crypto transactions. Unlike the U.S., where regulatory actions are seen as threats to crypto businesses, UK banks seem more cautious, potentially setting a trend of tighter controls on cryptocurrency transactions.

The Writers Guild of America (WGA) has secured a landmark three-year labor agreement after a 148-day work stoppage, introducing formal worker protections around AI, which could set a precedent for other industries. The agreement stipulates AI can’t write or rewrite literary material, nor can it be used for source material or replace a writer’s credit. Writers are free to use AI, like chatbots, but studios can’t mandate AI software usage and must disclose if provided materials are AI-generated. This high-profile contract is pivotal as it not only governs how AI will be used in Hollywood but also serves as a standard for employee safeguards, ensuring consent, compensation, and clarity in AI’s professional applications, maintaining human involvement in projects and addressing concerns over AI displacing jobs.

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