Latest / What the Flux / Flight Centre's profit forecast is in freefall | Aussie streamers choose ads | Facebook Australia's tax loophole (again)

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Flight Centre's profit forecast is in freefall | Aussie streamers choose ads | Facebook Australia's tax loophole (again) · What the Flux

• 0:05
  Speaker 1: This is pot the Flux.
• 0:06
  Speaker 2: I'm Brett and I'm justin and it's Wednesday, thirtieth of April.
• 0:09
  Speaker 1: Does wait? We know that being on the plane was
• 0:12
  Speaker 1: the very last excuse for not being able to communicate
• 0:14
  Speaker 1: on the phone, But now not even the skies are
• 0:17
  Speaker 1: an excuse because Quantus has quietly switched on Wi Fi
• 0:20
  Speaker 1: on a number of international routes years after many of
• 0:23
  Speaker 1: its competitors, and that's probably the reason why it didn't
• 0:26
  Speaker 1: make such a big song and dance about this one.
• 0:28
  Speaker 1: Now there is no excuse not to answer that work
• 0:31
  Speaker 1: call on your way to Europe.
• 0:33
  Speaker 2: That's why everyone flu quintus right am. As we roll
• 0:35
  Speaker 2: on into a brand new month, it's when all of
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  Speaker 2: your subscriptions start ticking over as well, your Netflix, you Stan,
• 0:41
  Speaker 2: your Disney Plus, your Gym subscription, and about a million
• 0:44
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• 0:47
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• 0:54
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  Speaker 2: is check out the flux subscription track up every educational stories.
• 1:01
  Speaker 1: Today, Juzzy Boy, Let's do it for our first. Flight
• 1:04
  Speaker 1: Center has cut its profit forecast by nearly one hundred
• 1:07
  Speaker 1: million bucks as many people start to fear about US travel.
• 1:10
  Speaker 2: This guy's are looking a little bumpy for Flight Center,
• 1:12
  Speaker 2: b man, get your seat belt on and tell me
• 1:14
  Speaker 2: all well.
• 1:15
  Speaker 1: Flight Center is Australia's biggest listed travel agency. It was
• 1:18
  Speaker 1: founded in nineteen eighty two. Without highly annoying, highly effective
• 1:21
  Speaker 1: jingle lotst airfares. Indeed, the juz Boy Lowest Airfares or not,
• 1:26
  Speaker 1: Flight Center has copped a heck of a beating yep.
• 1:29
  Speaker 2: It's officially ditched the profit guidance that it previously shared
• 1:32
  Speaker 2: with the market.
• 1:33
  Speaker 1: Previously, the profit was expected to be between three hundred
• 1:36
  Speaker 1: and sixty five and four hundred and five million bucks,
• 1:39
  Speaker 1: but now.
• 1:39
  Speaker 2: They're saying it could be up to one hundred million
• 1:41
  Speaker 2: dollars less than that And why the sudden one eighty
• 1:44
  Speaker 2: will be man A big part of this is because
• 1:46
  Speaker 2: travelers from Australia, the UK and Europe are getting real
• 1:49
  Speaker 2: spooked about traveling to the.
• 1:51
  Speaker 1: US and Juzzy Boy supposedly corporates are also rethinking where
• 1:54
  Speaker 1: to send employees to the US. In fact, March saw
• 1:57
  Speaker 1: a seven percent drop in Australian visitors to the US,
• 2:00
  Speaker 1: which is the worst since the pandemic.
• 2:01
  Speaker 2: And they man Despite the grim update for US travel,
• 2:04
  Speaker 2: flight Center actually reckons that its total transaction volumes will
• 2:07
  Speaker 2: hit record highs this year and they're also.
• 2:09
  Speaker 1: Looking to offload some non core assets just to tidy
• 2:13
  Speaker 1: things up a bit.
• 2:14
  Speaker 2: So what is the key learning here?
• 2:15
  Speaker 1: When times get tough, companies turn to selling off non
• 2:18
  Speaker 1: core assets.
• 2:19
  Speaker 2: Non Core assets are parts of the company that are
• 2:21
  Speaker 2: not essential to its main mission.
• 2:23
  Speaker 1: It could be poorly performing business units or maybe even
• 2:27
  Speaker 1: office properties.
• 2:28
  Speaker 2: And sometimes even investments that no longer fit with the
• 2:31
  Speaker 2: biggest strategy anymore.
• 2:32
  Speaker 1: And selling non core assets helps companies to free up
• 2:35
  Speaker 1: some cash or pay down some debt, and.
• 2:36
  Speaker 2: It also sends a message they're going to focus their
• 2:38
  Speaker 2: energy on the most profitable areas of the business.
• 2:41
  Speaker 1: For flight Center, selling non core assets is a way
• 2:44
  Speaker 1: to manage the US travel slow down. And flight Center
• 2:47
  Speaker 1: isn't the first travel business to do a cheeky cash
• 2:49
  Speaker 1: grab during tough times.
• 2:50
  Speaker 2: Nope. Remember during COVID when Quantus sold land near Sydney
• 2:54
  Speaker 2: airport yep.
• 2:54
  Speaker 1: They wanted cash in their coffers while flights were grounded,
• 2:57
  Speaker 1: so they pocketed over eight hundred million bars.
• 3:00
  Speaker 2: And be man Despite this disappointing news for flight Center,
• 3:02
  Speaker 2: the cost cutting and the selloff of non core assets
• 3:05
  Speaker 2: actually saw flight cent to share price jump.
• 3:07
  Speaker 1: For our second story, Australians are feeling the pinch with
• 3:11
  Speaker 1: their streaming subscriptions, but rather than cancel, they're just downgrading
• 3:15
  Speaker 1: to ads.
• 3:16
  Speaker 2: The fear of missing the next season of White lotus
• 3:18
  Speaker 2: more terrifying than sitting through a few shampoo hads be manned.
• 3:21
  Speaker 1: So don't we more well, Josie boy. As we know,
• 3:23
  Speaker 1: when Netflix and Disney Plus and pretty much every other
• 3:26
  Speaker 1: stream platform launched, the deal was pretty simple.
• 3:28
  Speaker 2: We pay you a monthly fee and you give us
• 3:30
  Speaker 2: endless binge material.
• 3:31
  Speaker 1: But then Netflix had a cheeky little idea in late
• 3:34
  Speaker 1: twenty twenty.
• 3:34
  Speaker 2: Two, what if we made a cheaper version but sprinkled
• 3:37
  Speaker 2: in a few ads right in the middle of the
• 3:39
  Speaker 2: big plot twists.
• 3:40
  Speaker 1: The next minute. Disney Plus, HBO, Max, Paramount Plus and
• 3:43
  Speaker 1: Hulu all have their own AD supported tears as well,
• 3:46
  Speaker 1: but now be manned.
• 3:47
  Speaker 2: A new report from Canta has shown that the latest
• 3:49
  Speaker 2: consumption habits of Ossie's.
• 3:51
  Speaker 1: YEP twelve months ago AD supported streaming services, we're in
• 3:54
  Speaker 1: around twelve and a half percent of all households.
• 3:56
  Speaker 2: Now AD supported streaming services are in thirty percent of households.
• 4:00
  Speaker 1: Act Netflix Australia now has more than sixty percent of
• 4:02
  Speaker 1: all new subscribers join its AD supported.
• 4:05
  Speaker 2: Tier, and b man wle that sounds like a lot.
• 4:07
  Speaker 2: Netflix is not complaining one little iota.
• 4:10
  Speaker 1: That is because the unit economics from the AD model
• 4:13
  Speaker 1: supposedly are even better than the typical revenue from subscriptions.
• 4:17
  Speaker 2: So what is the key learning here?
• 4:18
  Speaker 1: Unit economics is the revenue and the cost tied to
• 4:21
  Speaker 1: serving one individual user or customer.
• 4:24
  Speaker 2: And this measure is crucial for overall profitability in the
• 4:27
  Speaker 2: tech industry.
• 4:28
  Speaker 1: Get this one, jazz boy in the US, Netflix generated
• 4:30
  Speaker 1: more than seventy US dollars per AD supported viewer just
• 4:34
  Speaker 1: last year, and that's not even including the monthly subscription
• 4:37
  Speaker 1: that they're paying all the fact that AD rates are
• 4:40
  Speaker 1: planning to increase next year. In BEMAN for streaming services,
• 4:43
  Speaker 1: AD supported tiers offer a dual revenue stream. They get
• 4:46
  Speaker 1: a smaller subscription fee plus sweet sweet advertising dollars, and
• 4:50
  Speaker 1: on the flip side.
• 4:50
  Speaker 2: The price barrier is lower too, which is why sixty
• 4:53
  Speaker 2: percent of new sign apps are choosing this plan.
• 4:55
  Speaker 1: Lower price means lower barrier to entry for the customer.
• 4:58
  Speaker 2: Lower barrier to entry for the customer means cheap a
• 5:00
  Speaker 2: customer acquisition.
• 5:01
  Speaker 1: So streaming services believe that by generating two revenue streams
• 5:04
  Speaker 1: means they can actually achieve better unit economics. For our
• 5:07
  Speaker 1: third and final story, Facebook's Australian revenue has jumped to
• 5:10
  Speaker 1: nearly one point five billion dollars, but the Australian tax
• 5:13
  Speaker 1: offers will likely see very little of this another year.
• 5:17
  Speaker 1: Another tax loophole for the meta crew. Juzzy Boy, so
• 5:19
  Speaker 1: tell me more.
• 5:20
  Speaker 2: Okay, So, meta platforms is the og social media giant
• 5:23
  Speaker 2: that still dominates our screens here in Australia.
• 5:25
  Speaker 1: We're talking Insta, WhatsApp, Facebook, and be Man.
• 5:28
  Speaker 2: Despite the fact that Facebook is pretty much used exclusively
• 5:31
  Speaker 2: for birthday reminders and marketplace, it still reaches seventy eight
• 5:35
  Speaker 2: percent of ozsi's age shover sixty.
• 5:36
  Speaker 1: Interestingly, Dozzie Boy, well, WhatsApp and Instagram don't lodge financial
• 5:40
  Speaker 1: accounts in Australia. For some reason, Facebook does.
• 5:42
  Speaker 2: And now be Man at Facebook's Australian revenue has jumped
• 5:44
  Speaker 2: by one hundred and ten million bucks in twenty twenty
• 5:46
  Speaker 2: four to one point four to six billion dollars.
• 5:49
  Speaker 1: But surprise, surprise, most of this revenue that was earned
• 5:52
  Speaker 1: in Australia was not recognized in Australia. In fact, Metas
• 5:55
  Speaker 1: sent one point twenty five billion of its Australian revenue
• 5:58
  Speaker 1: to other Meta subsidiary. Good old fashioned transfer pricing.
• 6:02
  Speaker 2: So what is the key learning here?
• 6:04
  Speaker 1: Transfer pricing is a technique used by big global companies
• 6:07
  Speaker 1: to shift profits from higher tax countries to lower tax countries.
• 6:10
  Speaker 2: Global companies like Meta they set up subsidiaries in the
• 6:13
  Speaker 2: low tax countries like Ireland, where the corporate tax rate
• 6:15
  Speaker 2: is twelve and a half percent.
• 6:16
  Speaker 1: Compare that to Australia's thirty percent tax for large corporates.
• 6:20
  Speaker 2: And that means when Facebook Book's revenue in high tax
• 6:23
  Speaker 2: countries like Australia, they're often shifted offshore super.
• 6:26
  Speaker 1: Fast, meaning the remaining revenue and profit in the local
• 6:29
  Speaker 1: country is minimal, if anything at all.
• 6:31
  Speaker 2: In fact, be Man Meta pages forty four million bucks
• 6:34
  Speaker 2: in income tax in Australia on its one point four
• 6:36
  Speaker 2: to six billion dollars of revenue.
• 6:38
  Speaker 1: And we've seen a whole host of other multinationals used
• 6:40
  Speaker 1: transfer pricing.
• 6:41
  Speaker 2: From Netflix to Spotify and Amazon as well. Fluxam. If
• 6:44
  Speaker 2: you want to be able to track all your subscriptions
• 6:46
  Speaker 2: in the one place and see how much you're spending
• 6:48
  Speaker 2: each month so you can cancel the ones you're not
• 6:50
  Speaker 2: using anymore, you've got a head to the Fluck subscription
• 6:52
  Speaker 2: tracker in the blucks out.
• 6:53
  Speaker 1: Thanks for listening, and we'll see you on Friday.