Exponential: August 23rd, 2015

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Exponential 

The business & strategy press summarized and analyzed 

Carrie’s new “Mr Big” – 

Why Big Bird’s new nest 

is HBO 

In this issue: 

Image: Richard Termine / Sesane Workshop 

August 23 rd , 2015 | New York, NY 

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• Indian technology for India not for export 

• Knead to know: Paris baguette crisis 

• The Global Round Up 

• 5 Business Must Reads in 30 seconds. 

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Exponential the Skillbridge Magazine 

The global round-up 

US crude oil prices fall now below 

$40 a barrel 

For the first time since the 

financial crisis of 2007, US crude 

oil prices have fallen to below $40 

a barrel. The US shale industry 

continues to supply high levels of 

oil while data from Baker Hughes 

indicates an increase in the rigs 

currently drilling in the US. As the 

market works through a surplus of 

1 million barrels a day, analysts 

predict that prices will remain low 

in the short term. 

El Nino set to return 

waklingsf via 

flickr 

Mike Halpert, the deputy director of 

America’s National Oceanic and 

Atmospheric Administration, predicts 

that the current Nino could be “among 

the strongest since records began in 

1950.” Parched Californians might see 

this as a blessing but four years of 

drought and wildfires have left the 

landscape vulnerable. Heavy rainfall on 

exposed land may lead to mudslides and 

floods. The current record for El Nino 

was set in 1997-8. Storms are 

calculated to have caused $36 billion in 

damage to houses and infrastructure. 



McDonalds to expand in Russia 

McDonalds has announced their 

intention to open 20 new restaurants in 

Russia. The FT reports that the move is 

significant as the American fast-food 

giant has been “caught in the middle of 

deteriorating relations between Moscow 

and Washington.” In 2014, McDonalds 

found itself the subject of a wide-ranging 

investigation over food safety standards. 

The probe caused the temporary closure 

of 200 of its 500 restaurants. Despite 

employing 40,000 people in Russia, its 

operations in the country provide less 

than 5% of the company’s overall 

operating profits. 

Japan Post expects $11 billion triple 

listing on November 4 

Reuters reports that the huge IPO of 

Japan Post Holdings - over a decade in 

the making - is expected to take place 

on November 4 2015. The Japanese 

government expects to sell at least $11 

billion of shares. Initially, it was 

thought that there would be an 

approximate 50-50 split between 

domestic and foreign investors. It now 

seems likely that up to 80% of stock 

will be reserved for domestic investors. 



Why a changing market 

forced Elmo to move home 

• Over 40% of US households are using Subscription Video on Demand 

• Consumer spending on digital media will overtake traditional media in 2015 

Revenue in television is now streaming in 

Richard Termine / Sesane Workshop 

Blockbuster TV shows are following their audience and moving 

to streaming networks. Nielsen report that over 40% of 

American households are now watching TV online. Sesame 

Street’s move to HBO from PBS appears to be financially 

orientated with the production company said to be receiving a 

substantial increase on their current contract. However, 

changing consumer behaviours in how TV is consumed and, 

increasingly purchased, is forcing content producers to change 

they way they operate and who they work with. 



Sesame was brought to you by the letters DVD not PBS 

“Yesterday’s DVD is today’s SVOD” according to Steve 

Youngwood, COO of Sesame Workshop. At present, only 10% of 

production costs are funded by PBS. The shortfall was largely 

made up from DVD sales and licensing. Both streams have been in 

freefall: since 2008 combined revenues from these sources 

dropped by 50%. Sesame Workshop made a $11m loss in 2014. 

Consumers are leaving DVD behind and consuming an increasing 

amount of content via paid-for Subscription Video On Demand 

(SVOD) providers such as Netflix and Amazon Prime. The launch 

of HBO Now indicates that HBO is shifting its premium content 

model from Cable to SVOD. 

Subscription streaming services are playing a game of thrones 

Penetration of Streaming 

Video On Demand 

(SVOD) in US TV 

Households 

• Any SVOD: 40.3% 

• Netflix: 36.0% 

• Amazon Prime: 13% 

• Hulu Plus: 6.5% 

Source: Nielsen 

With the numbers of SVOD users projected to rise, the major 

players are fighting battles for both market supremacy and 

customer retention. A key tactic is to invest heavily in what the 

FT describes as “Tent Pole” content – star programmes which a 

service is known for and which props up the larger offering. 

Market leader Netflix was the first major investor in the strategy 

spending $100m on House of Cards in 2011. In July, Amazon 

spent a rumoured $250m for Top Gear, the British car program. 

The figure is close to the BBC’s entire annual talent budget. 

Sesame Workshop will not comment on the exact value of its 

HBO deal, only commenting that it is an order of “multiples” over 

what PBS paid. 

What the brains think… 

In its 2014 Global Media Report, McKinsey points to two trends 

that may be fuelling the change from DVD to SVOD. Firstly, the 

authors project that consumer spending on digital media will 

overtake traditional media in 2015, and be 26 percent larger by 

2018. Secondly, the article argues that “access to content is 

replacing ownership of content”. By 2018, it is estimated that the 

ratio of spending on access as opposed to ownership will be as 

high as 71:29. The cable industry is also feeling the pinch from 

SVOD. Their industry body estimates that about 40% of thirdand 

fourth-quarter TV-ratings declines can be attributed to 

subscription video services. 

Key Reading 

• HBR: What Sesame 

Street’s Move to HBO 

Says About the 

Media Business 

• FT: Amazon pays 

$250m to sign 

departing Top Gear 

trio for new show 

• Variety: Why 

‘Sesame Street’ Had 

to Turn a Corner 

• McKinsey: Global 

Media Report 2014 



From outsourced to 

home grown 

• Venture capital inflows reach record highs of £4bn in India 

• Indian online market set to double to 580 million users in the next three years 

• Expanding market brings new and different challenges 

Indian technology for India not for export 

Last year saw $4 billion of venture capital funds invested in 

India with the lion’s share being devoted to tech companies. 

According to the WSJ, over 300 VC deals were completed, a 

figure double that of the year before. Indian entrepreneurial 

talent is increasingly staying in the subcontinent or 

returning home. Investors are on the hunt for a successor to 

China’s Alibaba; global giants are doubling down their bets 

on India’s digital economy in response. 



High stakes games 

India - historically known as a technology outsourcing and 

exporting hub - is rapidly transitioning into a thriving domestic 

battleground. BCG estimates that the online market in India 

will double in size to 580 million users in the next three years; 

the value of online-enabled business is projected to increase by 

65% to $200 billion in the same time frame. In the hunt for the 

next Alibaba, investors and corporations have been aggressive 

in their pursuits- leading e-commerce marketplace Flipkart 

raised a $1 billion funding round in 2014 only for Amazon to 

instantly pledge to invest $2 billion in its Indian operations. 

India has unique challenges 

Investment alone is unlikely to be sufficient to win Indian 

markets. Both Flipkart and Amazon must grapple with the 

challenges of a rapidly changing Indian internet consumer and 

market landscape combined with complex local challenges. The 

WSJ points to sceptics citing India’s poor internet and logistics 

infrastructure, its cash-based economy and the wide spectrum 

of languages used as challenges for digital companies. Flipkart 

have responded to these challenges robustly. By September 

2015, the platform will only be accessible via mobile. In 

addition, the firm has built a substantive non-urban delivery 

network, with on cash-on-delivery payment systems. 


In its India@Digital.Bharat Report, BCG is bullish about the 

prospects of India’s digital economy, estimating that the 

domestic internet economy may be worth as much as $200 

billion. In keeping with the trend for building ‘Indian 

technology for India’, it argues that India’s landscape will be 

“older, more rural, more gender balanced, more mobile, and 

more vernacular” than today’s users who are largely under 25, 

urban, and English-friendly. 

India faces notable challenges in delivering internet to 

increasing numbers. In the HBR, Chakravorti and Chaturvedi 

claim that the Indian government’s current connectivity plans 

may well be sub-optimal for the scope of the nation’s ambition. 

Key Reading: 

• HBR: Digital 

Fairness vs. 

Facebook’s Dream of 

World Domination 

• WSJ: Venture Money 

Floods Into Indian 

Startups 

• BCG: INDIA @ 

DIGITAL . BHARAT 



Apple Watch – cool 

or corporate? 

• Large Enterprise CRM and Intelligence invest heavily in wearables 

• Apple watch to hit 16.7m shipments by end of 2015 

PauliCarmody / Foter / CC BY 

Is the Apple Watch more work than play? 

While Apple remains tight lipped about exactly how many 

timepieces it has sold, the Apple Watch’s market share is 

estimated to hit 68% this year with Forbes reporting that the 

firm will make approximately 16.7m shipments by the end of 

2015. The device, launched in April and positioned as a 

premium consumer item, has seen a swathe of consumer apps 

developed for it. It remains unclear, however, exactly how 

successful these apps have been. Enterprise vendors who have 

traditionally been late entrants into Apple’s ecosystem seem 

notably more bullish about the potential of the device. 



What’s keeping Apple Watch users happy? 

Despite criticism about the limitations of the Apple Watch, 

Apple CFO Luca Maestri cites a study by research firm Wristly 

which claims that 97% of customers are satisfied with the 

device. The same research firm later published a study pointing 

to Apple Pay, Apple’s payment service on the watch, as a notable 

driver of satisfaction - over apps and other features. Few 

consumer app developers have been vocal about the positive 

impact of the device on their business. An exception is Henrik 

Torstensson, CEO of Swedish health start-up Lifesum, who tells 

Bloomberg that their Apple Watch app is driving growth in the 

US market. Lifesum has increased its user base from 11m to 

20m in 9 months. 

Enterprise firms are starting to “think Different”. 

More prominent Apple Watch advocates are Enterprise data 

and intelligence juggernauts, who are putting significant weight 

behind their efforts for the device. In June, SAP, the German 

software giant, announced 12 watch apps to increase the 

availability of operational company data. Not to be outdone, 

rival Salesforce has created a whole division for developing 

wearable technology. This month Salesforce went live with 20 

apps for the Apple Watch, ranging from project tracking to 

providing logistics information for workers in the field. 

Salesforce views the watch as an opportunity to provide greater 

responsiveness to customers. Apple Watches “can give you the 

right intelligence and predictive information you need at the 

time you need it” said Lindsey Irvine, head of the Salesforce 

Wear initiative. 


In its “Wearable Future” report, PWC underlines the healthy 

growth trajectory of wearables, and points to the possible 

parallels with tablet adoption. PWC cite Enterprise firms as 

having a notable role in the adoption of wearables, not primarily 

for functionality but for cost: 72% of consumers are willing to 

use wearable devices such as the Apple Watch but only if their 

employer pays for it. PWC’s research data indicates that the 

simplicity of software and productivity features must be clearly 

visible. Such goals are not easily attainable given the nascence 

of the device and the limited screen real estate. 

Key Reading: 

• Forbes: Apple Watch 

To Dominate 

Smartwatch Market 

For Years 

• FT: Apple Watch 

beats internal 

forecasts – CFO 

• Bloomberg: Apple 

Watch Boosts 

Downloads at 

Swedish Fitness App 

Lifesum 

• PWC: The Wearable 

Future 



Knead to know: Paris 

baguette crisis 

Parisians struggle at the boulangerie 

The streets of Paris are echoing to the sound of “zut 

alors” as labour reforms have made it harder to find an 

open bakery, creating a shortage of baked goods. For the 

first time in fifty years, bread-makers are no longer 

having their summer holidays regulated by Parisian 

authorities and can take off as much time as they like in 

July and August. While bakers seemed pleased, the same 

cannot be said for their clients. According to the FT, the 

reforms are part of a set of programmes “designed to 

liberalise a range of markets including intercity coach 

services and legal professions”. 



Winners and Losers 

Good Week For: SkinVision 

SkinVision, a start-up that deploys smartphone 

technology and visual algorithms to let users track 

changes in their moles, has announced that it has 

received an additional $3.5 million in funding. In total, the 

firm is thought to have received between $5.7-6.8 dollars. 

Bad Week For: Toyota 

Two huge explosions near Tianjin in northern China have 

disrupted the supply chains of major companies including 

Toyota and John Deere. The blasts at a warehouse for toxic 

chemicals is thought to have killed more than 100 people. 

Bad Week For: Walmart 

Good Week For: Coursera 

Coursera has disclosed that it has taken more than 1 

million registrations for online courses in China. Given 

that the internet firewall and cultural differences act as 

high barriers to entry, the US ed-tech company’s 

performance is impressive. China has now become the 

firm’s second largest market, overtaking India. 

Walmart has cut its full-year earnings guidance as America’s 

second largest retailer revealed that staffing costs had risen 

more than expected. The company’s share price is down 

almost 19% in 2015. 


The Briefing 


Five key reads 

aiigle_dore via flickr 

Wired: Easy DNA editing will remake the world 

GENETICS; BIOTECHNOLOGY–Two venerable universities are currently 

engaged in a battle to patent a technique for editing genes. The battle 

between MIT & Harvard versus the University of California over CRISP- 

Cas9 might be appear obscure. In fact, as Wired reports, the winner of the 

legal dispute will have prime rights to a generation-defining scientific 

advance. CRISPR-Cas9 allows scientists to delete, add or modify genes with 

unprecedented speed and ease. The technique has been likened to a wordprocessor’s 

“find and replace” function, and can be used to introduce or 

remove a number of genes at the same time. The breakthrough’s most 

powerful – and morally alarming - implications could be to give scientists 

the ability to “edit” a human embryo. While deep ethical questions remain, 

four CRISPR start-ups have already raised $158 million in venture funding. 

The Economist: “Death of a Car Salesman” 

AUTOMOBILES; FRANCHISING– Ten years ago Americans visited an 

average of five car dealers before they made a final purchase; today, 

according to McKinsey data, the figure is down to just 1.6 trips per sale. The 

Economist’s piece highlights the declining role of the car salesman. 

Customers increasingly arrive at forecourts with clear knowledge of the 

model and specification they want and the exact price they are willing to 

pay. With cars being built and tested to higher standards even the fabled 

“test drive” is on the wane. Customers are now demanding something 

different of the car salesman: rather than a smooth-talking seller they want 

someone to talk them through the digital features – navigation systems, 

entertainment services and automated parking – which cars can offer. 

Following Apple’s lead, a range of manufacturers including BMW, Daimler 

Benz and Kia have introduced “product geniuses” to their showrooms, 

further eroding the salesman’s once unassailable authority. 



The Briefing 

Bloomberg: Egg-Price Surge Forces Restaurants to Hype 

Burgers and Smoothies 

COMMODITY PRICES; ADVERTISING -As egg prices 

continue to rise amid the American bird-flu epidemic, 

companies are being forced to adopt unusual marketing 

strategies. In order to restrain demand for egg-based 

products, Dunkin’ Donuts are advertising smoothies and iced 

coffees while Denny’s are pushing burgers rather than 

omelets. At Denny’s, eggs make up approximately 10% of 

overall commodity costs. 

HBR: Why people thrive in co-working spaces 

CO-WORKING; DIVERSITY -Research suggests that people 

in co-working environments are more likely to experience 

higher levels of “vitality and learning”. On a 7-point scale, coworkers 

come close to reporting an average score of 6. The 

authors of the study suggest that people who use co-working 

spaces see their work as more meaningful than their 

corporation-bound counterparts. Co-workers have to deal 

with less direct competition and the distractions of office 

politics. At the same time, they enjoy increased opportunities 

to form a distinctive identity within a diverse community. 

HBR: Digital Fairness vs. Facebook’s Dream of World 

Domination 

INTERNET ACCESS; NET NEUTRALITY - As Mark 

Zuckerberg continues on his mission to bring the benefits of 

the internet to the 4.5 billion people who currently lack 

access, Bhaskar Chakravorti and Ravi Shankar Chaturvedi, 

pose a set of ethical questions about the possible 

consequences. Internet.org – the Facebook-led initiative – 

offers free access to a selected number of websites including a 

“lite-version” of Facebook. The Tufts academics ask whether 

society should always strive to become more digitally 

inclusive even if this means that net neutrality is 

compromised. 



We heart h charts 

Trane de Vore via flickr 

The world’s most “liveable” cities 

Fifty-seven of the world’s largest 

cities are becoming more difficult to 

live in according to The Economist 

Intelligence Unit. The most amenable 

places are “mid-sized cities in 

wealthier countries with relatively 

low population density.” 

Top influencers in social media have unexpected power 

Source: The Economist 

Manufacturing isn’t dead 

The unstoppable rise of digital data 

Source: Thomson Reuters in the Economist 

Data never sleeps. Every interaction 

with digital technology creates trails 

of information which can be 

measured and analysed. In an average 

hour, Tinder users reject the advances 

of 35 million suitors and Vine users 

play a staggering 62 million videos. 

Source: Domo 

Where is the talent? 

For the second year in a row, the United 

Arab Emirates has topped the LinkedIn 

global migration study. The UAE has 

focused on diversifying job opportunities 

and the majority of new professional 

migrants are working in tech, financial 

services and engineering. 

Source: LinkedIn

Exponential: August 23rd, 2015

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