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Commercial Awareness Update - July 2019!
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<blockquote data-quote="Jaysen" data-source="post: 12127" data-attributes="member: 1"><p>Hi everyone!</p><p></p><p>Welcome to this week's commercial news update. Happy reading!</p><p></p><p><strong>Commercial News Update: 24th July 2019</strong></p><p></p><p>Topics covered this week are:</p><ol> <li data-xf-list-type="ol"><span style="color: #0059b3">Second-Quarter Reports of US Investment Banks (by [USER=525]@Sara Moon[/USER])</span></li> <li data-xf-list-type="ol"><span style="color: #0059b3">Netflix and the Streaming Wars (by [USER=1]@Jaysen[/USER])</span></li> </ol><p><strong><u>1. Second-quarter reports of US investment banks (by [USER=525]@Sara Moon[/USER])</u></strong></p><p></p><p><strong>The Story</strong></p><p></p><p>Last week, US investment banks reported their second-quarter performance. The six largest US banks (Morgan Stanley, Citigroup, J.P. Morgan, Wells Fargo, Goldman Sachs and Bank of America) all exceeded analysts’ profit expectations. Goldman Sachs reported higher-than expected-income from advisory work on mergers and initial public offerings (IPO), despite a sharp drop in revenue in investment banking. JPMorgan suffered in both M&A business and investment banking but managed to top expectations thanks to tax benefits gained through the resolution of tax audits and better performance in consumer banking. Consumer business also brought higher profits at Citigroup, Wells Fargo and Bank of America. Morgan Stanley experienced better-than-expected results in wealth and investment management.</p><p></p><p><strong>Impact on Businesses and Law Firms</strong></p><p></p><p>The performance of US banks contrasts with the situation of European banks. Due to Brexit, M&A deals and investment banking revenues in the UK tumbled by 66% and 36% respectively compared to a year ago. Similarly, M&A deals fell by 34% across Europe, the Middle East and Africa. This resulted in big European banks like Barclays, HSBC and UBS slipping down the world league tables, their places newly replaced by US banks.</p><p></p><p>However, with the Federal Reserve expected to cut interest rate later this month, US investment banks might experience a fall in net interest income in the next quarter. The cut will be a particularly strong headwind to JPMorgan, which heavily relies on its customer deposits and loan business for its profits. Investor concerns led to JPMorgan’s stocks fall last Tuesday.</p><p></p><p>Banks and lawyers work closely together. While investment banks advise companies on M&As or IPOs by focusing on financial matters, law firms focus on legal issues, such as preparing necessary documents to structure a deal or addressing tax issues.</p><p></p><p>Banking lawyers advise investment banks on the various business they undertake. Their work can range from those of a transactional nature, such as negotiating contracts relating to underwriting to advising on contentious issues, such as litigation threats, bankruptcy-related issues or fraud (along with, perhaps, the litigation team).</p><p></p><p><strong><u>2. Netflix and the Streaming Wars (by [USER=1]@Jaysen[/USER])</u></strong></p><p></p><p><strong>The Story</strong></p><p></p><p>Netflix found itself in trouble last Wednesday as it reported its first drop in US subscribers in almost a decade. The internet giant had 130,000 fewer domestic subscribers in the second quarter of 2019, while its international subscriber growth also fell short of expectations.</p><p></p><p>In response, Netflix’s shares fell 11% on Thursday morning, its largest one-day percentage loss since June 2016.</p><p></p><p><strong>Impact on Businesses and Law firms</strong></p><p></p><p>You might be thinking: <em>One quarter of missed results, what’s the big deal?</em></p><p></p><p>First, Netflix has been burning through enormous amounts of cash for many years. By issuing high yield debt (essentially high-risk bonds) and longer-term loans, it has been able to fund licensing agreements and original content.</p><p></p><p>Second, this news comes at a time when new rivals are pulling back their content as they enter the race. Comcast’s NBCUniversal is taking back The Office; while Warner Media, formed after the 2018 AT&T acquisition of Time Warner, is pulling Friends, the second most-watched Netflix show in 2019 by time spent.</p><p></p><p>Lenders and investors have so far been willing to overlook Netflix’s minimal profit because it promised fast subscriber growth and greater margins when it raised prices. However, with subscriber growth missing expectations and new rivals entering the market, there are doubts over Netflix’s ability to sustain its debt-heavy business model.</p><p></p><p>In addition to competition at home, Netflix must also navigate new regulations and competitors in international markets. For example, in the UK, ITV and the BBC recently announced their own streaming service after working together to produce BritBox. Their last joint venture attempt, Project Kangaroo, was rejected by the Competition Commission a decade ago. But this time, the media regulator Ofcom welcomed the move, with CMS and Hogan Lovells advising on the landmark deal.</p><p></p><p>With regulators trying to get to grips with overseeing competition in the digital age, it’s an interesting time to be a competition lawyer.</p></blockquote><p></p>
[QUOTE="Jaysen, post: 12127, member: 1"] Hi everyone! Welcome to this week's commercial news update. Happy reading! [B]Commercial News Update: 24th July 2019[/B] Topics covered this week are: [LIST=1] [*][COLOR=#0059b3]Second-Quarter Reports of US Investment Banks (by [USER=525]@Sara Moon[/USER])[/COLOR] [*][COLOR=#0059b3]Netflix and the Streaming Wars (by [USER=1]@Jaysen[/USER])[/COLOR] [/LIST] [B][U]1. Second-quarter reports of US investment banks (by [USER=525]@Sara Moon[/USER])[/U][/B] [B]The Story[/B] Last week, US investment banks reported their second-quarter performance. The six largest US banks (Morgan Stanley, Citigroup, J.P. Morgan, Wells Fargo, Goldman Sachs and Bank of America) all exceeded analysts’ profit expectations. Goldman Sachs reported higher-than expected-income from advisory work on mergers and initial public offerings (IPO), despite a sharp drop in revenue in investment banking. JPMorgan suffered in both M&A business and investment banking but managed to top expectations thanks to tax benefits gained through the resolution of tax audits and better performance in consumer banking. Consumer business also brought higher profits at Citigroup, Wells Fargo and Bank of America. Morgan Stanley experienced better-than-expected results in wealth and investment management. [B]Impact on Businesses and Law Firms[/B] The performance of US banks contrasts with the situation of European banks. Due to Brexit, M&A deals and investment banking revenues in the UK tumbled by 66% and 36% respectively compared to a year ago. Similarly, M&A deals fell by 34% across Europe, the Middle East and Africa. This resulted in big European banks like Barclays, HSBC and UBS slipping down the world league tables, their places newly replaced by US banks. However, with the Federal Reserve expected to cut interest rate later this month, US investment banks might experience a fall in net interest income in the next quarter. The cut will be a particularly strong headwind to JPMorgan, which heavily relies on its customer deposits and loan business for its profits. Investor concerns led to JPMorgan’s stocks fall last Tuesday. Banks and lawyers work closely together. While investment banks advise companies on M&As or IPOs by focusing on financial matters, law firms focus on legal issues, such as preparing necessary documents to structure a deal or addressing tax issues. Banking lawyers advise investment banks on the various business they undertake. Their work can range from those of a transactional nature, such as negotiating contracts relating to underwriting to advising on contentious issues, such as litigation threats, bankruptcy-related issues or fraud (along with, perhaps, the litigation team). [B][U]2. Netflix and the Streaming Wars (by [USER=1]@Jaysen[/USER])[/U][/B] [B]The Story[/B] Netflix found itself in trouble last Wednesday as it reported its first drop in US subscribers in almost a decade. The internet giant had 130,000 fewer domestic subscribers in the second quarter of 2019, while its international subscriber growth also fell short of expectations. In response, Netflix’s shares fell 11% on Thursday morning, its largest one-day percentage loss since June 2016. [B]Impact on Businesses and Law firms[/B] You might be thinking: [I]One quarter of missed results, what’s the big deal?[/I] First, Netflix has been burning through enormous amounts of cash for many years. By issuing high yield debt (essentially high-risk bonds) and longer-term loans, it has been able to fund licensing agreements and original content. Second, this news comes at a time when new rivals are pulling back their content as they enter the race. Comcast’s NBCUniversal is taking back The Office; while Warner Media, formed after the 2018 AT&T acquisition of Time Warner, is pulling Friends, the second most-watched Netflix show in 2019 by time spent. Lenders and investors have so far been willing to overlook Netflix’s minimal profit because it promised fast subscriber growth and greater margins when it raised prices. However, with subscriber growth missing expectations and new rivals entering the market, there are doubts over Netflix’s ability to sustain its debt-heavy business model. In addition to competition at home, Netflix must also navigate new regulations and competitors in international markets. For example, in the UK, ITV and the BBC recently announced their own streaming service after working together to produce BritBox. Their last joint venture attempt, Project Kangaroo, was rejected by the Competition Commission a decade ago. But this time, the media regulator Ofcom welcomed the move, with CMS and Hogan Lovells advising on the landmark deal. With regulators trying to get to grips with overseeing competition in the digital age, it’s an interesting time to be a competition lawyer. [/QUOTE]
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