The COVID Bounce: How COVID-19 is Reshaping Entertainment Demand

The economic disruption and social dislocation caused by the COVID-19 pandemic is not evenly distributed. Some business face catastrophe, while others thrive. Across the entertainment industries the same is true, ranging from a temporary collapse of the live business through to a surge in gaming activity. As we explain in our free-to-download COVID-19 Impact report, the extra time people have as a result of self-isolation has boosted some forms of entertainment more than others – with games, video and news the biggest winners so far.

To further illustrate these trends, MIDiA compiled selected Google search term data across the main entertainment categories. The chart below maps the change in popularity of these search terms between the start of January 2020 up to March 27^th. Google Trends data does not show the absolute number of searches but instead an index of popularity. These are the key findings:

• Video streaming: All leading video subscription services saw a strong COVID-19-driven spike, especially Disney+ which managed to coincide its UK launch with the first day of national home schooling.
• Music streaming: Little more than a modest uptick for the leading music services, following a long steady fall – reflecting a mature market sector unlike video, which has been catalysed by major new service launches.
• Video demand: With the mid- to long-term prospect of a lot more time on their hands, consumers have been strongly increasing searches for TV shows, movies and games to watch and play. The fact that ‘shows for kids to watch’ is following a later but steeper curve reflects the growing realisation by locked-down families that they have to stop the kids going stir crazy while they try to work from home.
• Music demand: Demand for music has been much more mixed, including a pronounced downturn in streams in Italy. Part of the reason is that music is something people can already do at any time in any place. So, the initial instinct of consumers was to fill their newfound time with entertainment they couldn’t otherwise do at work/school. As the abnormal normalises music streaming will pick up, as the recent increase in searches for music and playlist terms suggests. Podcasts, however, look like they will take longer to get a COVID bounce.
• Games: Games activity and revenues have already benefited strongly from the new behaviour patterns, as illustrated by the fast and strong increase in search terms. However, the recent slowdown in search growth suggests that the increase in gaming demand may slow.
• News: The increased searches correlate strongly with the growth of the pandemic, but the clear dip at the end provides the first evidence of crisis-fatigue.
• Sports: The closure of all major sports leagues and events has left a gaping hole in TV schedules and the lives of sports fans. The sudden drop in search terms shows that sports fans have quickly filled their lives with other entertainment and have little interest in keeping up with news of sports closures.
• Leaders: Finally, Boris Johnson has seen his search popularity grow steadily with the pandemic, while Donald Trump’s has dipped.

Take Five (the big five stories and data you need to know) December 2nd 2019

Bytedance / TikTok split: Bytedance appears to be getting nervy about the impact of Chinese censorship regulation on TikTok, to the extent that it is reportedly mulling spinning off the app as a separate company. This follows negative reactions to the closure of an account of a TikTok user that posted about Uyghurs. TikTok’s value to Bytedance is external to China, so it appears to want to ring-fence it from China. Whether Chinese authorities will permit that is another issue entirely.

Netflix at the movies: Netflix is reopening an iconic, boutique movie theatre in New York. This is all about cultural relevance and credibility. Netflix already does small screenings of some of its movies to be eligible for awards. This enables it to have red-carpet, star-studded premiers which will help its actors, directors and producers feel like they are still in the movie business. Old-world hangover.

Joyn (not a typo): ProSiebenSat.1 and Discovery have added a premium tier to their free OTT service Joyn (which is apparently a combination of ‘joy’ and ‘join’…). Naming quibbles aside, we are going to see more and more video services launching. Consumers will have to spend ever more in order to get all the shows they want to watch. The original streaming promise of replacing expensive pay-TV with a couple of cheap streaming subscriptions is dying on its feet.

Create Music, one to watch: Streaming and independent artists are rewriting the music business. A new(ish) breed of companies is emerging, playing by the new rule book. One to watch in 2020 is Create Music Group, which just signed a global distribution deal with Latin and hip hop label First Order Music.

Piracy is back: Well, maybe. But the principle that piracy could be the big winner of the streaming wars is valid. The more expensive it becomes to stream all the shows you want due to service fragmentation, the more likely people are to start pirating again, and streaming piracy is way harder to deal with than peer-to-peer downloads.

Take Five (the big five stories and data you need to know) November 18th 2019

Bytedance subscription: Bytedance, parent of TikTok, is reportedly close to launching a music subscription service, initially focused on emerging markets. The big question is whether Bytedance will get the deals to launch something genuinely new, built on TikTok’s foundation, or just end up launching a cookie-cutter “all you can eat” 9.99 service.

Netflix and Nickelodeon team up: Netflix and Viacom’s Nickelodeon have announced a multi-year partnership to create kids shows. This shows two things: 1) Netflix is ensuring its kids offering is up to competing with Disney+, and 2) not all traditional TV companies see Netflix as being the enemy. This is becoming a heavily nuanced market.

Tencent looking for backing: Tencent is reportedly looking for external partners to come in as part of its $3.3 billion acquisition of 10% of UMG. Given Tencent was bullish about going it alone and paying a premium, something feels odd here. Maybe Tencent got spooked by slowing streaming growth in Q3 – something MIDiA said at the start of the year would happen.

Disney streaming woes: Good news for Disney+ with 10 miillion sign ups in 24 hours – that’s more than Apple Music got in weeks after launch. Bad news: it couldn’t cope with the demand, with widespread user complaints.Turns out it is just as hard for a media company to become a tech company as vice versa. There will be broad grins in Netflix towers.

BT keeps Champions League rights: UK telco BT has secured television rights for the European Champions League for another three seasons from 2021. The deal is reported to be worth £1.2 billion ($1.6 billion), with streaming service DAZN missing out in the bidding process. Sports rights remain a highly valued asset, but the bubble will burst at some stage in the next five years or so.

The Attention Economy Has Peaked. Now What?

Regular followers of MIDiA will know that we’ve been writing about the attention economy for a number of years now. Throughout 2019 we have been building the concept that we have arrived at peak in the attention economy – that all of the addressable free time has been addressed. In 2017, Netflix’s Reed Hastings said sleep was his biggest enemy. By 2019 he claimed Netflix was competing more with Fortnite than HBO (it wasn’t really, but the concept of competing in adjacent markets is valid). In the old world, media was nicely siloed by dedicated formats and hardware (print newspapers, books, DVDs, CDs, radio sets). Now, though, we access through devices where everything is separated by nothing more than a finger swipe. Attention saturation was always going to be an inevitability, not a possibility. The important question is not why this happening, but what will come next and what the right strategies are for surviving and thriving in this post-peak world.

A mine full of canaries?

What got MIDiA first thinking about peak attention was seeing the mobile gaming audience declining every quarter in our quarterly tracker surveys. Mobile games were the canary in the mine for peak attention. When we first got mobile phones, we didn’t have a huge amount to do with them. We couldn’t watch our favourite shows, and we couldn’t easily (legally) listen to new music. So many consumers filled their ‘dead time’ by playing games, as they were de rigueurin the early days of the app stores. Before long casual gamers were the core audience of titles like Angry Birds and Clash of Clans, while your middle-aged aunt was spamming you with Facebook invitations to play Candy Crush Saga. Once Netflix, Spotify and others had got traction, however, those casual gamers started reverting to consuming the content they actually liked the most. The result was a long steady decline in the mobile gaming audience. Now, music looks like it may be following suit.

Across the US, UK, Australia and Canada, the share of people that listen to the radio declined steadily between Q1 2018 and Q2 2019. Meanwhile, those streaming audio for free remained relatively flat. The net result is that the combined audio audience declined. So many lapsing radio listeners exited the audio market as a whole (though a share shifted to podcasts, which is not considered in the above chart). The ‘share of ear’ battle is looking a lot like a minor theatre of conflict in a much larger conflagration. Amazon will continue to do a good job of shifting older, high-net-worth consumers to streaming, but that is not enough to stem the tide – especially as Amazon’s global footprint is unevenly distributed.

This is what happens in the era of attention saturation.

Social video is eating the world

Four years ago, MIDiA argued that video was eating the world. Now social video is eating the world. Video is becoming the omnipotent format through which we communicate, consume and share. Social video is eating everything. Captioning looked like it was heralding a new era of silent cinema, but it was in fact a trojan horse – a means of enabling us to fit extra video consumption into our wider consumption patterns. Over time, though, sound has become more important and with the increased tolerance of video we are now far more willing to unmute. Nowhere is this better seen than Instagram and TikTok. Audio is the victim in that equation. Not only are there are many other scenarios where audio is slipping, there are even more scenarios where other media formats are losing out. For example, Epic Games’ decision to allow Fortnite players to watch live video of the Fortnite World Cup while gaming hints at how games companies understand that there is a delicate balance between video extending brand reach and competing directly for gaming time.

Looking back gives us a feel for what comes next

Understanding what comes next in a saturated attention world requires looking back at previous markets that have peaked. The mobile phone and PC markets give us some pointers, butthe industrial revolution’s impact on the labour market is an even more useful analogue. Attention is like labour. It is a product of human behaviour and it is scarce. Digital content is analogous to the labour market, and content supply is now beginning to exceed attention output. This is already translating into increased customer acquisition and retention costs.

This is exactly the wrong time for bringing more content to market, but that is exactly what is happening. Nowhere is this better seen that the video subscriptions space with a blizzard-like flurry of new services from Disney, Warner, Apple, Discovery and NBC.

The net result of an over-supply of content is that attention saturation will become an attention deficit for many players, Netflix included. The marketplace needs a new currency for measuring success and monetising audiences.

The MIDiA Attention Economy Event

This is where I am going to cut to credits, leaving you on a cliff edge. For those of you in London next Wednesday (November 20th), come along to our free-to-attend attention economy event, where you can hear my colleague Karol Severin present our attention saturationresearch and our take on what will be the next audience currency that content providers will need to compete for. For those of you not in London there will also be a live stream, which you will be able to find here at 7pm GMT. Also, check back in next week when I will post the next chapter in this story.

NOTE: I shamelessly sat on the shoulders of giants in this post – these ideas were collectively crafted by the entire, amazingly talented MIDiA team.

Why Music Streaming Could Really Do with a Disney+

The music and video streaming markets have long been best understood by their differences rather than similarities, but the flurry of video subscription announcements in recent months have upped the ante even further. New services from the likes of Disney, Warner Bros, Apple and AMC Cinemas point to an explosion in consumer choice. These are bold moves considering how mature the video subscription business is, as well as Netflix’s leadership role in the space. Nevertheless, Netflix is going to have to seriously up its game to avoid being squeezed. The contrast with the music streaming market is depressingly stark.

Diverging paths

The diverging paths of the music and video subscription markets tell us much about the impact of rights fragmentation on innovation. In music, three major rights holder groups control the majority of rights and thus can control the rate at which innovation happens. As a consequence, we have a streaming market in which each leading service has the same catalogue, the same pricing and the same device support. If this was the automotive market, it would be equivalent of saying everyone has to buy a Lexus, but you get to choose the colour paint. Compare this to video, where global rights are fragmented across dozens of networks. This means that TV rights holders have not been able to dictate (i.e. slow) the rate of innovation, resulting in dozens of different niche services, a plethora of price points and an unprecedented apogee in TV content.

Now, Apple and major rights holders Disney and Warner Bros have deemed the streaming video market to be ready for prime time and are diving in with their own big streaming plays. Video audiences are going to have a volume of high budget, exclusive content delivered at a scale and trajectory not seen before. There has never been a better time to be a TV fan nor indeed a TV show maker.

The music streaming market could really do with a similar rocket up its proverbial behind right now. The ‘innovation’ that is taking place is narrow in scope and limited in ambition. Adding podcast content to playlists, integrating with smart speakers and introducing HD audio all are important – but they are tweaking the model, not reimagining it. Streaming music needs an external change agent to shake it from its lethargy.

Do first, ask forgiveness later

The nearest we have to that change agent right now is TikTok. TikTok has achieved what it has by not playing by the rules. It has followed that long-standing tech company approach of doing first and asking forgiveness later. Sure, it is now locked in some difficult conversations with rightsholders – but it is negotiating from a position of strength, with many millions of active users. TikTok brought a set of features to market that rightsholders simply would not have licensed in the same way if it had gone the traditional route of bringing a business plan, pleading for some rights, signing away minimum guarantees (MGs) and then taking the neutered proposition to market.

I recall advising a music messaging app client who was just getting going to do the right thing. I hooked him up with some of the best music lawyers, made connections at labels, and basically helped him play by the rules. Two years later he still hadn’t managed to get a deal in place with any rightsholders – though he had racked up serious legal fees in the process. Meanwhile, Flipagram had pushed on ahead without licensing deals, secured millions of users and tens of millions of dollars of investment and only then started negotiating deals – and the labels welcomed it with open arms. To this day, this is my single biggest professional regret: advising this person who was betting his life savings to play by the rules. He lost. The ‘cheats’ won.

We need insurgents with disruptive innovation

The moral of this story is that in the consumer music services space, innovation happens best and fastest when rights holders do not dictate terms. This is not necessarily a criticism. Rights holders need to protect their assets and their commercial value in the marketplace. They inherently skew towards sustaining innovations, i.e. incremental changes that sustain existing products. New tech companies looking to build market share, however, favour disruptive innovations that create new markets. Asking an incumbent to aggressively back disruptive innovation is a bit like asking someone to set fire to their own house. But most often it is the disruptive change that really drives markets forward.

Streaming subscription growth will slow before too long, and as a channel for building artist-fan relationships they are pretty much a dead end. There is no Plan B. Back in 1999 there was only one format; it was growing well, but there was no successor. Looks a lot like now.

Take Five (the big five stories and data you need to know) November 4th 2019

Music manager shift: A new ‘Managing Expectations’ report from the MMF indicates the role of music managers is transforming. Headline: music managers are doing an ever wider and more complex range of tasks. As artist income streams fragment, the tech and business sophistication of an artist’s manager will become crucial, even more so than now.

Streaming wars heat up, again: Oh, how music could do with streaming wars like video is experiencing. HBO Max is the latest entrant, targeting 90 million subscribers and including new (e.g. anew Game of Thrones spinoff) and old (Friends). It will also only release shows weekly – traditional media company afraid to embrace change? Or savvy recognition that binge watching destroys audience time ROI?

Political ads, decision time: Twitter drew a line in the sand, banning political ads.Facebook got all defensive but made some vaguely positive noises. Meanwhile, Google remained silent. The single biggest political advertiser on Google? The Trump Make America Great AgainCommittee. Facebook’s Sandberg says political ads are only 1% of revenue, not worththe hassle but important for free speech. Regulation may be needed.

Podcast heroes: Netflix is making a podcast spinoff of its teenzombie apocalypse show Daybreak. This is all about brand extension but also lets Netflix test the podcast waters. Do not bet against Netflix becoming a key player in the space. Indeed, the podcast market is going to look a lot more like video subscriptions (fragmentation, exclusives) than it does music. Podcasts will not be a winner-takes-all market.

Tree beast: MrBeast has carved out a distinct YouTube career (26.5 million subscribers) by giving stuff away to people and good causes. Now he is a leading a campaign to plant 20 million trees by 2020 to, one, make a difference and two, show policy makers that Gen Z and young millennials are vested in environmental issues. Jack Dorsey, Elon Musk and others have signed up.

Take Five (the big five stories and data you need to know) October 14th 2019

Fortnite black hole: In what may be the most audacious global games marketing stunt ever, Epic Games killed off Fortnite in Sunday’s end-of-season event, which one million people viewed live on Twitch. The game got sucked into a black hole, with Epic deleting 12,000 Fortnite tweets and all information on its website. Has Fortnite really gone for good? Did Elon Musk delete it? The likelihood is it will be back for chapter two sometime this week.

CDbaby, independent artist boom: Independent artist distributor CDbaby is now collecting $1million a day in revenue for its 750,000 independent artists. Earlier this year, ambitious publishing group Downtown acquired CDbaby’sparent AVL meaning the publisher is also now a top player in the independent artists space. Publishers are reversing into recordings.

Analytics curve ball:Little Big League baseball team Minnesota Twins isusing analytics to revamp its pitching staff, including figuring out which players should be throwing what types of balls. Sports has long been ahead of the performance analytics curve. Lots of lessons for media companies here.

Netflix Italy deal: Netflix has agreed a co-production deal with Italian media giant Mediaset. Under the deal the two companies will co finance seven movies that first will be distributed globally by Netflix then broadcast free-to-air in Italy one year later. Netflix needs to deepen its international content but can’t afford to do it by itself anymore.

Spotify/Apple – regulation storm brewing: It is a case of when, not if, tech majors (Apple, Alphabet, Amazon, Facebook) are going to be regulated. The effect could be like when the EU compelled Microsoft to unbundle Windows Media Player in the 2000s, instigating its long-term decline. Spotify’s complaint against Apple is building momentum with US law makers and could be the first step.

Take Five (the big five stories and data you need to know) September 30th 2019

Music licensing hubs: Monokromelaunched its Rights Hub, contractual rights and file management platform for rightsholders, while Soundfeed put its label sub-licensing platform into open beta.Fragmented fandom sees streams more widely shared among middle class artists which means more small rightsholders in need of services.

Fortnite – you bot!: Fortniteis adding computer controlledplayers.  The stated rationale is to ensure newer gamers are matched against similar skill opponents. This suggests there aren’t enough new gamers to create enough even matches. Mega-hit free-to-play games franchises burn bright and fast (Angry Birds, Candy Crush, Clash of Clans) but when their time is up, it is up.

We(don’t)Work:Troubled WeWork has parted company with CEO Andy Neumann.The tech-wash veneer has worn off WeWork and investors are seeing it for what it is: an office rental business with huge costs that doesn’t own its buildings.

Netflix, burst balloon: Momentum is everything with tech stocks. Investors want to see perpetual growth and market transformations. Netflix excelled at delivering both, until now. Poor Q2 results, loosing shows and impending competition from Disney, Warner and Apple have wiped off all Netflix’s 2019 peak stock price gain.

NBA, go East: eSports is becoming a great export vehicle for sports leagues. NBA’s eSports league NBA 2k features teams each affiliated to NBA clubs. But now it has just announced a Shanghai addition for 2020. The eSports vs traditional sports dichotomy is false. Instead their futures will be intertwined.

Why Spotify and Netflix Need to Worry About a Global Recession

A growing body of economists is becoming increasingly convinced that a global recession is edging closer. The last time we experienced a global economic downturn was the 2008 credit crunch. Although the coming recession will likely be a bigger shock to the global economy, it nonetheless gives us a baseline for what happens to consumer spending habits. When consumer income declines or is at risk, discretionary spend is hit first and often hardest. Crucially, entertainment falls firmly into discretionary spend so, as in 2008, it will be a canary in the mine for recessionary impact. However, streaming is the crucial difference between 2008 and 2019, and is one that could prove to be like throwing petrol on a fire.

Streaming has driven the rise of the contract-free subscriber

The growth of streaming music and video has been a narrative of the new replacing the old; of flexibility replacing rigidity. Crucial in this has been the role of contracts. Traditional media and telco subscriptions are contract-based, legally binding consumers into long-term relationships that typically need to paid off in order to be cancelled. Digital subscriptions, however, are predominately contract-free. For video this has created the phenomenon of the savvy switcher – consumers that subscribe and unsubscribe to different streaming services to watch their favourite shows. For music, because all the services have pretty much the same music, there has been negligible impact. In a recession, however, all of this could change.

No contract, no commitment 

Faced with having to cut spending, the average streaming subscriber would most likely look to cut traditional subscriptions first. For example, a Netflix subscriber with a cable subscription may want to cut the cable subscription and keep hold of Netflix because a) it is cheaper, and b) it is a better match for their content consumption. However, that consumer would quickly learn that cancelling a cable subscription mid-contract actually costs a lot of money. So, they would end up having to cancel Netflix instead, because there is no contractual commitment. The irony of the situation is that a consumer is having to cut the thing they least want to cut, simply because that is all they can do.

Music subscriptions could be collateral damage

The same consumer may also find themselves having to cancel their Spotify subscription, because cancelling Netflix did not save anywhere near as much money as cancelling cable would have done. On top of this, they probably would not feel the impact of cancelling Spotify anywhere near as much as cancelling Netflix. When Netflix goes, it just stops. Spotify on the other hand has a pretty good free tier, and that’s without even considering YouTube, Soundcloud, Pandora and a whole host of other places consumers can get streaming music for free. Streaming music is essentially recession-proof, but in a way that works for consumers, not for services.

If we do enter a global recession and it is strong enough to dent entertainment spend, then a probable scenario is that traditional distribution companies will be the key beneficiaries through the simple fact that that have their subscribers locked into contracts. This could even give these incumbents breathing space to prepare for a second attempt at combatting the threat posed by streaming insurgents. It would almost be like winding back the clock.

Tech majors may bundle their way out of a recession

Some companies could use this as an opportunity to aggressively gain market share. Amazon’s bundled approach could prove to be a recession-buster proposition, giving consumers ‘free’ access to a range of content as part of the Prime package. Similarly, Apple could decide to take its suite of subscription services (including Apple Music and Apple TV+) and bundle them into the cost of iPhones. This would enable it to help drive premium-priced device sales in a recession by positioning them as value-for-money options.

Stuck between contracts and bundles

For Spotify, Netflix and other streaming pure-plays, a recession could see them squeezed between traditional distribution companies and ambitious tech majors with contracts on one side and bundles on the other. Streaming services have been the disruptors for the last decade. A recession may well role-switch them into the disrupted.

Profit Didn’t Disappear, It Just Moved

One of the recurring themes in analysis of tech businesses is the role of profit, and most often, the apparent lack of it – or at the very least, the way in which it plays second fiddle to growth. Amazon, one of the most successful global businesses in today’s global economy, famously sacrificed profit for much of its existence in order to focus on long-term growth and expansion. Similarly, Spotify remains laser-focused on growth and market share, almost apologizing when it generated a net profit for the first time in Q4 2018. The logical way to interpret this worldview is that it points to a lack of sustainability in the underlying business models of such tech companies, and that profit is a scarce commodity in the world of tech business. In actual fact, profit is still being made right across the value chain. It is simply not appearing on the balance sheets of tech companies.

Profit, an ‘old world metric’

Back the early 2000s, at Jupiter Communications in my early days as an internet analyst (back when you could actually have that job title), I used to tire of hearing the same line from dotcom start-ups when asked about profitability: “Profit is an old world metric. We measure ourselves by internet-era metrics.” When the dotcom bubble burst and VCs started pulling their money out of the dotcom space, virtually all of those business quickly learned that profit really did matter when the investment dried up. Most of those companies folded very quickly (Amazon being one of a few strong exceptions to the rule). Fast forward nearly two decades and that ‘new world’ mentality is more in evidence than ever before. So, what gives?

The development of finance is one of the most important 21^st century events

One of the most important developments in capitalism in the 21^st century has been the development of the financial sector, both in terms of the sophistication of products and services and in terms of the sheer scale of value that flows through it. For tech businesses, this has manifested as unprecedented access to finance at all stages of business. Historically, traditional businesses had some access to start-up capital, though it was often debt-based such as taking a bank loan. Fewer new businesses came to market, but those that did had a stronger profit imperative as they needed to service their start-up debt. Tech start-ups now most often have ready access to equity-based finance (i.e. selling a share of their business in return for investment) long before they go to market, and then have the further ability to raise more investment as they build their businesses. This enables companies to focus on growth, product development and brand building at a much faster rate than if they were relying upon organic revenue growth for funding. We wouldn’t have most of the big successful tech companies we do today without this model. The question still remains, however: when and where does profit fit in?

When looking at the financial reports of many tech businesses, net profit is conspicuous by its absence. For example, Uber has warned that it ‘may never be profitable’. This does not mean that profit is not being made, however – it is just found in different places. Take the example of Spotify. It is generating enough gross margin to be able to invest heavily in its business and to pay salaries that are competitive enough to ensure it can build an A-class team. It also generated enough money at its DPO to ensure its founders, investors and record labels all profited from the sale. Meanwhile, Spotify and other streaming services are driving revenue and profit for rightsholders, delivering nearly $10 billion of record label revenue in 2018 alone. Profit is being made by Spotify; it has simply moved across the value chain.

A new commercial ecosystem

The Spotify example illustrates how profit has shifted across the value chain in tech businesses, delivering profit for investors, suppliers and founders. In effect a new ecosystem has evolved in which the new profit centres can support the distribution part of value chain indefinitely. With growth valued over profitability by shareholders, the markets provide further sustenance to the ecosystem.

This model works, until it doesn’t. The big risk factor here is availability of credit. My colleague Tim Mulligan argues that the current availability of credit is the result of an abnormal macro credit cycle rather than a new model of economic sustainability, with interest rates at historical lows. As soon as interest rates go up, VC funding will significantly decrease due to institutional money leaving the VC funds for the equity markets. The corporate debt market will then start to dramatically contract, reducing the working capital available to unprofitable public businesses. On top of this, the cost of holding leveraged positions funded through the short-term money markets will start to become too expensive for many of the existing hedge funds to maintain their positions. An interest-rate driven, financial domino effect could happen very quickly.

Every time we have a bubble we are told that this time it’s different, and it never actually is. The financial component of the value chain can only generate profit as long as its primary cost base – i.e. interest rates – remain low. When they stop making profit, the whole ecosystem crumbles. At which point, tech companies will be well placed to consider the old maxim: revenue is vanity, profit is sanity.