Five on Friday: Recalls, Buyouts and Sharing

Featuring Peloton, Hearst, Substack, FuboTv and Facebook

Recalls, buyouts and sharing are in this week’s edition of Five on Friday. Last week, we reported about Peloton’s voluntary recall of its treadmills. Now the company is saying that recall will reduce revenue by an estimated $165 million. Also, Hearst is offering buyouts to 600 staffers, Substack adds Sections, fuboTV adds 43K subscribers in the first quarter and, finally, Facebook wants to know if you have read the article you are about to share.

Peloton Says Recall Will Reduce Revenue by $165M and Increase Costs

Last week, we reported that Peloton agreed to voluntarily recall its Tread and Tread+ treadmills after more than 70 injuries to children and pets and one child’s death were reported. On its earnings call, Peloton explained that the recall would reduce sales by $165 million. At the insistence of the U.S. Consumer Product Safety Commission, Peloton halted sales, recalled previously purchased treadmills, and delayed a May 27 launch of the less expensive Tread model. On its May 6 earnings call, Peloton updated its annual revenue guidance, lowering it to $4 billion from $4.075 billion.

“While there will be a short-term financial impact due to the steps we’re taking, we are putting and will continue to put our members first,” said John Foley, co-founder and CEO of Peloton.

Chief financial officer Jill Woodworth explained the financial impact in more detail when discussing the company’s outlook.

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“With the recent developments John mentioned with the Tread line, it is more difficult than usual to predict our financial results. But based on what we know today, we are updated our Q4 outlook. Our revised revenue guidance for Q4 is $915 million,” Woodworth said.

“We estimate the revenue impact of the Tread and Tread+ recall will be approximately $165 million. The breakout of this impact to revenue is as follows. One, we currently estimate that ceasing Tread and Tread+ deliveries will negatively impact revenue in the quarter by approximately $105 million. Two, we are offering both Tread and Tread+ members the ability to return the product for a full refund,” Woodworth added.

“We currently estimate an increase to our return reserves for this in Q4 of about $50 million. And lastly, three, we will continue to produce Tread content, as John mentioned, and in conjunction with the Stop Use Directive, we will be waiving monthly all access subscriptions for both Tread+ and Tread members for 3 months. We estimate that this will impact subscription revenue by approximately $10 million in Q4. Here are a few additional drivers of revenue guidance for Q4,” said the CFO.

In addition to these impacts, the company will also incur logistics and shipping costs for picking up returned Tread+ and Tread treadmills from members who want a refund or repair.

Peloton Says Recall Will Reduce Revenue by $165M and Increase Costs

Hearst Offers Buyouts to 600 Non-Editorial Staffers

A year ago, Hearst Newspapers announced there wouldn’t be any layoffs, furloughs or pay cuts during the COVID-19 pandemic. In fact, all employees were supposed to receive a 1% bonus. The same is not true for Hearst Magazines, who publishes Cosmopolitan, Elle, Esquire, HGTV Magazine, Popular Mechanics, Road & Track, and other consumer periodicals. The New York Post reports that the magazine arm of Hearst is offering buyouts to about 600 employees. Editorial employees, who voted to unionize last summer, are not among those directly affected. Details of the buyout packages were not disclosed.

In a memo to employees, Hearst Magazines president Debi Chirichella said, “While our goal is to solicit enough volunteers, it is possible that involuntary departures may occur later this spring. If this happens, I want to assure you that this process will be done with compassion and respect for all.”

“While the magazine division is strong, the pandemic has accelerated trends in consumer behavior and media consumption,” Chirichella added. “We need to transform our sales and marketing to better serve advertisers and to invest in growth areas.”

Hearst Magazines International will also be impacted, says The Post, and the cuts could be more significant. In addition, Hearst Magazines will reorganize its seven operating segments into four: Lifestyle, Luxury, Youth & Fitness, and Design.

Last fall, O, The Oprah Magazine, changed its business model, moving from 12 print issues to 4 per year and moving to a paywalled website.
Last fall, O, The Oprah Magazine, changed its business model, moving from 12 print issues to 4 per year and moving to a paywalled website. Image: Bigstock Photos

In related news, last November, Hearst Magazines announced changes, including layoffs, at O, The Oprah Magazine, which got its start in 2000. The popular consumer magazine founded by celebrity Oprah Winfrey reduced its print frequency from 12 issues per year to four issues. As a result, 59 employees were laid off.

Last fall, the magazine had a print audience of 10 million and 7.8 million unique visitors to OprahMag.com. An all-access “pass” to OprahMag.com (now OprahDaily.com) is now $50 per year, and it includes exclusive content, access to 10-years of digital archives, a weekly newsletter with deals and discounts, a year of the new print magazine, O Quarterly, and members-only invites to video livestreams featuring Oprah and BFF Gayle King.

Substack Adds Sections

As Substack has grown, so have the needs of its publishers, writers and journalists. To help bridge the gap, Substack is adding sections to publications, allowing users to create and manage separate newsletters and podcasts within one primary publication. This gives those users more opportunities for creativity and segmentation to reach specific audiences with different types of content.

For example, if Subscription Insider was on Substack, we might call our newsletter “Inside with Subscription Insider.” Within that main newsletter, we could add sections like News Stories, Premium Content, Subscription Round-Up and Weekly Podcast.

Within a publisher’s, writer’s, or journalist’s newsletter Settings page, they will have option to:

  • Add a newsletter or podcast
  • Edit the title and one-line description
  • Decide whether readers are automatically subscribed

The separate sections will show up as different tabs at the top of a publication’s home page. Think of it like a digital news site that has different tabs, or pages, for different major topics (e.g., News, Sports, Lifestyle, Finance, etc.). Subscribers can opt in or out of emails about the individual sections.

“We’re excited to build more tools that give writers the flexibility to grow their media empire and give readers more agency over what they read,” Substack said in a blog post.

The post did not offer a lot of detail, so it generated more than 100 comments, questions and suggestions from users as well as some answers from Substack. Most of the replies from Substack were along the lines of forwarding suggestions to Substack engineers, but some users got the answers they were looking for.

Bottom line: Substack is evolving, particularly as more publishers, writers and journalists are choosing this medium for their work. This is likely just the beginning of exciting new changes we can expect to see from the newsletter platform. They’ll need to keep innovating to ahead of the growing field of competition.

Substack adds sections. Image courtesy of Substack.

fuboTV Adds 43K Subscribers in Q1

Despite all of the available streaming services, fuboTV had an impressive first quarter in terms of subscribers and revenue. During the first quarter, fuboTV added 43,000 more subscribers over the previous quarter. The ad-supported streaming service had grown to 590,430 subscribers by the end of the first quarter, a 105% increase year-over-year. The company anticipates growing to 603,000 subscribers in the second quarter of this year and to 840,000 by year end.

Subscription revenue (GAAP) for the quarter was $107.1 million, compared to $46.4 million in the first quarter of last year. From this, the company subtracted prior period subscriber deferred revenue of $17.3 million and added $20.1 million in current period subscriber revenue for total non-GAAP subscription platform bookings of $109.9 million. Average revenue per user per month was $69.09, an increase of 28% year-over-year.

In the first quarter, users – both paid and trial users – streamed more than 228 million hours, an increase of 113% year-over-year. Monthly active users watched 129 hours a month on average, an 8% increase over the same period in 2020.

In addition, the company grew advertising revenue from $4.1 million in the first quarter of 2020 to $12.6 million in the first quarter of 2021, an increase of 206%. The company’s advertising average revenue per user (ARPU) grew from $4.54 in the first quarter of 2020 to $7.11 in the first quarter of this year, a 57% increase.

“The first quarter of 2021 was an inflection point for fuboTV,” said David Gandler, co-founder and CEO, fuboTV. “For the first time in any first quarter, we reported sequential revenue and subscriber growth, despite past seasonality trends. This tells us that consumers are increasingly cutting the cord. We believe they are choosing fuboTV, enticed by superior value, our year-round content offerings and a customer-centric, innovative consumer product experience relative to legacy pay TV (cable / satellite / telco). We see this trend continuing to accelerate as more consumers discover they can cut the cord without losing access to the sports teams, live channels and content they love.”

fuboTV is a streaming + live streaming service with 100+ channels, live and on-demand programming. The service also includes a cloud DVR. The starter package is priced at $64.99 a month, followed by the elite package at $79.99 a month. There is also a Latino quarterly package for Spanish language programming that is $33.00 per month.

fuboTV reports a strong first quarter, including 43,000 new subscribers. Image courtesy of fuboTV.

Have You Read the Article You’re Going to Share? Facebook Wants to Know

You aren’t seeing things if you get a new pop-up on Facebook that asks if you have read the article you are about to share. Facebook is testing a new feature, much like the one Twitter rolled out last year. The company made the announcement on Twitter May 10. The tweet received three dozen comments as of this writing, many of them commenting that Facebook had borrowed the idea from Twitter.

According to The Verge, about 6% of Android users will see this test in the near future. The idea behind the feature is to slow the spread of misinformation by encouraging people to read articles before sharing them on their news feeds. Twitter began testing its own tool in June 2020, with a wider rollout taking place last fall.

This is not likely to stop the spread of misinformation or of people sharing articles they haven’t read, but it certainly can’t hurt. It is just odd that Facebook is acting like this is a brand new tactic not previously tried. It is also ironic that they chose to make the announcement on Twitter.