Flight Centre has cut its profit forecasts by more than $100 million as many people start to fear about US travel.
Aussies are feeling the pinch with their streaming subscriptions… but rather than cancel, they’re just downgrading to ads.
Facebook's Aussie revenue has jumped to $1.46 billion, butthe Australian Tax Office will likely see none of it!
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Episode Transcript
This is pot the Flux.
Speaker 2 (00:06):
I'm Brett and I'm justin and it's Wednesday, thirtieth of April.
Speaker 1 (00:09):
Does wait? We know that being on the plane was
the very last excuse for not being able to communicate
on the phone, But now not even the skies are
an excuse because Quantus has quietly switched on Wi Fi
on a number of international routes years after many of
its competitors, and that's probably the reason why it didn't
make such a big song and dance about this one.
Now there is no excuse not to answer that work
(00:31):
call on your way to Europe.
Speaker 2 (00:33):
That's why everyone flu quintus right am. As we roll
on into a brand new month, it's when all of
your subscriptions start ticking over as well, your Netflix, you Stan,
your Disney Plus, your Gym subscription, and about a million
others as well. If you have no idea what you're
paying for and how to track it, we have it
all covered in the Flux Subscription track Up. It tracks
all your subscriptions in under thirty seconds and highlights how
(00:54):
much you're paying each and every month. So the best
thing you can do to start off the new month
is check out the flux subscription track up every educational stories.
Speaker 1 (01:01):
Today, Juzzy Boy, Let's do it for our first. Flight
Center has cut its profit forecast by nearly one hundred
million bucks as many people start to fear about US travel.
Speaker 2 (01:10):
This guy's are looking a little bumpy for Flight Center,
b man, get your seat belt on and tell me
all well.
Speaker 1 (01:15):
Flight Center is Australia's biggest listed travel agency. It was
founded in nineteen eighty two. Without highly annoying, highly effective
jingle lotst airfares. Indeed, the juz Boy Lowest Airfares or not,
Flight Center has copped a heck of a beating yep.
Speaker 2 (01:29):
It's officially ditched the profit guidance that it previously shared
with the market.
Speaker 1 (01:33):
Previously, the profit was expected to be between three hundred
and sixty five and four hundred and five million bucks,
but now.
Speaker 2 (01:39):
They're saying it could be up to one hundred million
dollars less than that And why the sudden one eighty
will be man A big part of this is because
travelers from Australia, the UK and Europe are getting real
spooked about traveling to the.
Speaker 1 (01:51):
US and Juzzy Boy supposedly corporates are also rethinking where
to send employees to the US. In fact, March saw
a seven percent drop in Australian visitors to the US,
which is the worst since the pandemic.
Speaker 2 (02:01):
And they man Despite the grim update for US travel,
flight Center actually reckons that its total transaction volumes will
hit record highs this year and they're also.
Speaker 1 (02:09):
Looking to offload some non core assets just to tidy
things up a bit.
Speaker 2 (02:14):
So what is the key learning here?
Speaker 1 (02:15):
When times get tough, companies turn to selling off non
core assets.
Speaker 2 (02:19):
Non Core assets are parts of the company that are
not essential to its main mission.
Speaker 1 (02:23):
It could be poorly performing business units or maybe even
office properties.
Speaker 2 (02:28):
And sometimes even investments that no longer fit with the
biggest strategy anymore.
Speaker 1 (02:32):
And selling non core assets helps companies to free up
some cash or pay down some debt, and.
Speaker 2 (02:36):
It also sends a message they're going to focus their
energy on the most profitable areas of the business.
Speaker 1 (02:41):
For flight Center, selling non core assets is a way
to manage the US travel slow down. And flight Center
isn't the first travel business to do a cheeky cash
grab during tough times.
Speaker 2 (02:50):
Nope. Remember during COVID when Quantus sold land near Sydney
airport yep.
Speaker 1 (02:54):
They wanted cash in their coffers while flights were grounded,
so they pocketed over eight hundred million bars.
Speaker 2 (03:00):
And be man Despite this disappointing news for flight Center,
the cost cutting and the selloff of non core assets
actually saw flight cent to share price jump.
Speaker 1 (03:07):
For our second story, Australians are feeling the pinch with
their streaming subscriptions, but rather than cancel, they're just downgrading
to ads.
Speaker 2 (03:16):
The fear of missing the next season of White lotus
more terrifying than sitting through a few shampoo hads be manned.
Speaker 1 (03:21):
So don't we more well, Josie boy. As we know,
when Netflix and Disney Plus and pretty much every other
stream platform launched, the deal was pretty simple.
Speaker 2 (03:28):
We pay you a monthly fee and you give us
endless binge material.
Speaker 1 (03:31):
But then Netflix had a cheeky little idea in late
twenty twenty.
Speaker 2 (03:34):
Two, what if we made a cheaper version but sprinkled
in a few ads right in the middle of the
big plot twists.
Speaker 1 (03:40):
The next minute. Disney Plus, HBO, Max, Paramount Plus and
Hulu all have their own AD supported tears as well,
but now be manned.
Speaker 2 (03:47):
A new report from Canta has shown that the latest
consumption habits of Ossie's.
Speaker 1 (03:51):
YEP twelve months ago AD supported streaming services, we're in
around twelve and a half percent of all households.
Speaker 2 (03:56):
Now AD supported streaming services are in thirty percent of households.
Speaker 1 (04:00):
Act Netflix Australia now has more than sixty percent of
all new subscribers join its AD supported.
Speaker 2 (04:05):
Tier, and b man wle that sounds like a lot.
Netflix is not complaining one little iota.
Speaker 1 (04:10):
That is because the unit economics from the AD model
supposedly are even better than the typical revenue from subscriptions.
Speaker 2 (04:17):
So what is the key learning here?
Speaker 1 (04:18):
Unit economics is the revenue and the cost tied to
serving one individual user or customer.
Speaker 2 (04:24):
And this measure is crucial for overall profitability in the
tech industry.
Speaker 1 (04:28):
Get this one, jazz boy in the US, Netflix generated
more than seventy US dollars per AD supported viewer just
last year, and that's not even including the monthly subscription
that they're paying all the fact that AD rates are
planning to increase next year. In BEMAN for streaming services,
AD supported tiers offer a dual revenue stream. They get
a smaller subscription fee plus sweet sweet advertising dollars, and
(04:50):
on the flip side.
Speaker 2 (04:50):
The price barrier is lower too, which is why sixty
percent of new sign apps are choosing this plan.
Speaker 1 (04:55):
Lower price means lower barrier to entry for the customer.
Speaker 2 (04:58):
Lower barrier to entry for the customer means cheap a
customer acquisition.
Speaker 1 (05:01):
So streaming services believe that by generating two revenue streams
means they can actually achieve better unit economics. For our
third and final story, Facebook's Australian revenue has jumped to
nearly one point five billion dollars, but the Australian tax
offers will likely see very little of this another year.
Another tax loophole for the meta crew. Juzzy Boy, so
tell me more.
Speaker 2 (05:20):
Okay, So, meta platforms is the og social media giant
that still dominates our screens here in Australia.
Speaker 1 (05:25):
We're talking Insta, WhatsApp, Facebook, and be Man.
Speaker 2 (05:28):
Despite the fact that Facebook is pretty much used exclusively
for birthday reminders and marketplace, it still reaches seventy eight
percent of ozsi's age shover sixty.
Speaker 1 (05:36):
Interestingly, Dozzie Boy, well, WhatsApp and Instagram don't lodge financial
accounts in Australia. For some reason, Facebook does.
Speaker 2 (05:42):
And now be Man at Facebook's Australian revenue has jumped
by one hundred and ten million bucks in twenty twenty
four to one point four to six billion dollars.
Speaker 1 (05:49):
But surprise, surprise, most of this revenue that was earned
in Australia was not recognized in Australia. In fact, Metas
sent one point twenty five billion of its Australian revenue
to other Meta subsidiary. Good old fashioned transfer pricing.
Speaker 2 (06:02):
So what is the key learning here?
Speaker 1 (06:04):
Transfer pricing is a technique used by big global companies
to shift profits from higher tax countries to lower tax countries.
Speaker 2 (06:10):
Global companies like Meta they set up subsidiaries in the
low tax countries like Ireland, where the corporate tax rate
is twelve and a half percent.
Speaker 1 (06:16):
Compare that to Australia's thirty percent tax for large corporates.
Speaker 2 (06:20):
And that means when Facebook Book's revenue in high tax
countries like Australia, they're often shifted offshore super.
Speaker 1 (06:26):
Fast, meaning the remaining revenue and profit in the local
country is minimal, if anything at all.
Speaker 2 (06:31):
In fact, be Man Meta pages forty four million bucks
in income tax in Australia on its one point four
to six billion dollars of revenue.
Speaker 1 (06:38):
And we've seen a whole host of other multinationals used
transfer pricing.
Speaker 2 (06:41):
From Netflix to Spotify and Amazon as well. Fluxam. If
you want to be able to track all your subscriptions
in the one place and see how much you're spending
each month so you can cancel the ones you're not
using anymore, you've got a head to the Fluck subscription
tracker in the blucks out.
Speaker 1 (06:53):
Thanks for listening, and we'll see you on Friday.
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