A peacock is pictured outside NBC headquarters at Rockefeller Center in New York, January 16, 2020.
Carlo Allegri | Reuters
Without a deal, Roku and Amazon Fire TV users won’t have access to Peacock’s content, which includes TV shows such as “30 Rock,” “Saturday Night Live” and “Friday Night Lights” and movies such as “Jurassic Park” and “Reservoir Dogs.”
Peacock continues to negotiate with both Amazon and Roku, said the people, who asked not to be named because the discussions are private. One person familiar with the talks described the likelihood of reaching an agreement with either party by July 15 as “less than 10 percent.”
The issues under negotiation present a window into what’s important to media and technology companies as they build an infrastructure for the next generation of television. While programmers and pay-TV distributors — cable, telecom and satellite TV companies — have successfully negotiated carriage deals for decades, subscription video services are striking their first deals with digital video aggregators, such as Apple, Amazon and Roku.
Both providers and content companies want to ensure they’re building viable business models, especially as Wall Street judges overall corporate performance on the success of their streaming video initiatives. These deals, which typically cover multiple years, will be the backbone for streamers to reach profitability in the coming years.
Roku and Amazon Fire TV, the two largest connected TV platforms, make up about 70% of the connected TV market, according to eMarketer. There are about 400 million Internet-connected TV devices in U.S., and about 80% of U.S. TV households have at least one Internet-connected TV device, according to a June report from Leichtman Research Group.
Both Roku and Amazon have also failed to strike a pact with AT&T‘s HBO Max, which launched May 27.
Spokespeople for Roku, Amazon, HBO Max and NBCUniversal (which is the parent company of CNBC) declined to comment.
Control over user data
Peacock and HBO Max are wrestling with Amazon on issues regarding who controls user information.
NBCUniversal executives don’t want Peacock to be included within Amazon Channels, Amazon’s store for video app purchasing, two of the people said. While some streaming apps, such as CBS All Access and Starz, can be purchased through Channels, others, including Disney+, cannot. Amazon takes a percentage of revenue for each customer that subscribes through the store.
Both AT&T and Comcast, which owns NBCUniversal, are pushing back on Amazon because of its deal with Disney, which was struck in November, according to people familiar with the matter. Disney’s deal with Amazon allowed Disney+ — a new streaming service at the time — to appear on all Amazon Fire TV devices while keeping it out of the Amazon Channels store. That decision forced customers to sign up and watch all programs directly through Disney+, giving the entertainment company a direct, one-to-one relationship with its customers.
Like Disney, NBCU wants all users to sign up and watch through the Peacock application or website. That would give NBCUniversal valuable credit card information and first-party user data, including information about the shows and movies that users watch. This data can then be used for targeted advertising, allowing Peacock to charge advertisers higher rates. The downside for NBCUniversal is that Channels distribution can help broaden reach and awareness for Peacock.
HBO Max is willing to be included in Amazon Channels (HBO’s solo app already is), according to a person familiar with the matter. But it doesn’t want Amazon to let users watch its shows from directly within Amazon Prime Video, the person said. Instead, WarnerMedia executives want users to be kicked into the HBO Max application. This would give HBO Max more control over the user experience — for instance, the company could recommend other HBO content while users are watching a show — as well as data that can be used to target ads. HBO is planning on launching an ad-supported product in 2021.
“We remain committed to making HBO Max available on every platform possible to as many viewers as possible so they can enjoy beloved shows from HBO, favorites from the Warner Bros. movie and TV library and a diversity of hit programming exclusive to HBO Max,” a WarnerMedia spokesman said in a statement. “We look forward to reaching agreements with the few outstanding distribution partners left, including with Amazon and on par with how they provide customers access to Netflix, Disney+ and Hulu on Fire devices.”
Ad inventory sharing
Peacock’s sticking points with Roku revolve around the sharing of advertising inventory, according to people familiar with the matter.
For years, Roku has been building an advertising business by taking a slice of advertising inventory from each of the streaming applications it distributes on its platform. Roku’s standard is to take 30% of available ad inventory to sell itself, one of the people said. Roku also takes a standard 20% cut of apps bought through Roku Channels and any pay-per-view video.
Roku’s carriage agreements vary depending on popularity and advertising availability. For applications that will likely entice tens of millions of users, the percentage cut on ad inventory is often lower than 30%, according to people familiar with the matter. Negotiations with Peacock have centered around a number closer to 15%, one of the people said. NBCUniversal has estimated Peacock will have up to 35 million users by 2024.
Still, Peacock’s ad sales staff wants to keep as much inventory as possible for itself. One possible remedy under consideration is to give Roku additional inventory for NBCUniversal’s older, existing TV Everywhere application, two of the people said. NBCUniversal may also be willing to give Roku access to certain less-popular content while keeping ad inventory for more popular shows and movies, the people said.
NBCUniversal estimates Peacock will generate average revenue per user (ARPU) per month of $6 to $7. This is an aggregate total for NBCUniversal’s three tiers of Peacock — the free tier that will make money solely from advertising, a $4.99 per month tier that will have a more robust content offering but still include some ads, and a $9.99 tier with no advertising.
NBCUniversal Chairman Steve Burke said last year Peacock will air between three and five minutes of ads per hour of programming, and NBCUniversal expects to make $5 per month from every user on the service from advertising, he said. NBC’s research showed subscribers prefer free services with low ad load, Burke said.
But that $5 per user number could be in jeopardy if NBC gives away its inventory to platforms. Amazon also wants a cut of advertising inventory, one of the people said.
Legacy media companies such as NBCUniversal and WarnerMedia can present difficult negotiations for Roku because they’re used to a fixed amount of advertising inventory in a TV world, one of the people said. In linear TV, with only so much advertising time available, any losses in advertising can’t be made up. Roku has argued to both companies that streaming video is fundamentally different — there are an infinite number of shows available at any time, each which can contain targeted ads, and its audiences are generally growing while linear TV audiences are shrinking. As more people sign up for Peacock or HBO Max on Roku, advertising opportunities will grow in tandem.
There’s also a technology issue at play. NBCUniversal is hesitant about connecting Peacock with third-party ad tech software it can’t control, according to people familiar with the matter. Both NBCUniversal and Warner own proprietary advertising technology.
A game of leverage
Ultimately, both sides will benefit from reaching an agreement. Roku and Amazon will get revenue from including more applications with a broader choice of shows, and HBO Max and Peacock will get broader distribution. But the timing may come down to which party has more leverage.
Both NBCUniversal and WarnerMedia are reluctant to rush into distribution deals when coronavirus quarantines have shut down production of new programming, potentially diminishing immediate consumer demand. Limited original programming slates may cause many users to delay signing up for both services until Hollywood opens again. Peacock will also get a boost in 2021 when it gets exclusive rights to “The Office,” one of the most popular shows on Netflix. NBCUniversal and HBO Max may also feel support from each other in holding out for better deal terms.
Then again, waiting too long may allow millions of potential viewers to become comfortable with other streaming options, which could lead to habits that don’t include HBO Max and Peacock.
Ultimately, at least Roku has said it expects to get a deal done with Peacock.
“We’re an essential partner for any streaming services trying to build a national audience in United States,” Roku CEO Anthony Wood said in February. “So, I think it would be natural to assume that there will be some sort of deal down there.”
Disclosure: Comcast owns NBCUniversal, which is the parent company of both Peacock and CNBC.
Futures contracts tied to the major U.S. stock indexes rose at the start of the overnight session Wednesday evening just hours after the Nasdaq Composite clinched its 25th record close for 2020.
Dow Jones Industrial Average futures climbed 50 points at the start of the overnight session, implying an opening gain of 0.3% when regular trading resumes on Thursday. S&P 500 and Nasdaq-100 futures pointed to similar opening climbs of 0.3% each.
The after-hours moves Wednesday evening followed a positive regular session on Wednesday, with the major indexes brushing off a record daily increase in new U.S. Covid-19 cases. Big Tech continued to carry the broader market higher on during regular trading and again allowed the Nasdaq Composite to outpace the S&P 500 and Dow industrials.
Since last week’s close, the S&P 500, Dow and Nasdaq Composite are up 1.28%, 0.93% and 2.79%, respectively. The Nasdaq is up 29.68% over the last three months.
The latest iteration of the Labor Department report on weekly jobless claims will be released Thursday morning.
The weekly figures provide Wall Street with critical insight on how many Americans continue to collect unemployment benefits, known as continuing claims.
Another 1.39 million workers are expected to have filed first-time claims for state unemployment benefits during the week ended July 4. That would mark a deceleration from the prior week, though still well above any reading prior to the pre-Covid era.
Last week, the government said initial jobless claims rose by 1.427 million in the final week of June. That marked the 15th straight week in which initial claims remained above 1 million.
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The vast majority of Apple stores closed due to the Covid-19 pandemic are located in the U.S., Morgan Stanley says
A staff member checks a customer’s temperature at an Apple Store entrance during phase one of reopening after lockdown from the COVID-19 outbreak in New York City, New York, U.S. June 17, 2020.
Brendan McDermid | Reuters
The vast majority of Apple stores closed due to the Covid-19 pandemic are located in the United States, according to a new analysis from Morgan Stanley.
100 Apple retail stores were closed around the world at the end of last week, and 92 were located in the United States, according to the note. Apple has 510 stores worldwide and 271 stores in the United States.
Apple was one of the first major companies to close its retail stores during the pandemic, and the company says it monitors the Covid-19 situation to determine whether it is safe to operate its stores.
Apple stores are often in major malls or business districts, making it a key indicator of how smoothly and where retail operations can restart amid the Covid-19 pandemic. The ratio of closures in the U.S. suggests Apple sees a significantly riskier environment for retail in its home country versus the rest of the world.
Overall, closures are picking up again. Morgan Stanley analyst Katy Huberty wrote that last week saw the first net increase in Apple Store closures since March, when Apple first shut down all stores outside China.
“As of July 7th, 410 of 510 Apple retail stores, or 80% of all stores, are reopened, down from 457 the week prior.”
Last week, Apple said that it has reclosed 77 stores in the United States because of rising Covid-19 cases in many regions. Previously, it had been reopening many locations with social distancing, mandatory masking and curb-side pickup or service appointment options.
An Apple spokesman said at the time in a statement: “Due to current COVID-19 conditions in some of the communities we serve, we are temporarily closing stores in these areas. We take this step with an abundance of caution as we closely monitor the situation and we look forward to having our teams and customers back as soon as possible.”
Apple has continued to reclose stores, including one location in Georgia and one location in California this week. It also said on its website that it will close four additional stores in the Melbourne, Australia area as the city goes on lockdown because of Covid-19.
Efforts to restart the United States economy are faltering as states are increasingly pausing plans to ease restrictions on businesses. On Wednesday, there was a record single-day spike of 60,000 new coronavirus cases reported in the U.S. over a 24 hour period.
Our work-from-home ETF could have staying power beyond the pandemic, Direxion’s head of product says
Work-from-home stocks are working.
The Direxion Work From Home ETF (WFH) has been attracting investors since its June 25 launch, a testament to the rising interest in offerings based on the new normal brought about by the coronavirus pandemic.
David Mazza, head of product at Direxion, told CNBC’s “ETF Edge” on Monday that WFH has seen “a significant increase in assets and trading volume as investors begin to embrace the fact that it’s not just about stay-at-home trades or work-from-home trades.”
The fund has climbed more than 5% since its launch. Its top 10 holdings are as follows:
“This is a long-term theme that’s beginning to play out in the market, and by that I mean societal acceptance of having greater remote work and the ability to work from anywhere,” Mazza said. “The names … in this portfolio cover four technological pillars that are driving the ability for people to work from home.”
- The first pillar is cloud technology, represented in Direxion’s fund by tech giants Microsoft and Amazon, which both have growing cloud-computing businesses, Mazza said.
- The second pillar is cybersecurity, which folds in stocks such as Fortinet and Okta.
- The third pillar is “project and document management,” Mazza said, citing holdings such as Box and Dropbox.
- The fourth and possibly most relevant pillar is remote communications, which accounts for high-profile holdings such as Zoom Video, but also lesser-known names including 8×8 and Twilio, Mazza said. He added that Twilio is helping facilitate New York City’s Covid-19 contact-tracing initiative.
“Many of these might not displace a Microsoft or displace an Amazon just because of their influence and pervasiveness across so many pillars that we use as consumers,” Mazza acknowledged. “But I think the broader point is that when we begin to think about what are the themes that are going to have legs in the new normal, to me, one of those is all the potential … to empower us to be productive, to be efficient, whether that’s working partially in an office, collaborating with people that are socially distanced from us there or collaborating where some of us are in the office, some of us are at our homes or some of us may be other places.”
Tom Lydon, the CEO of ETF Trends and ETF Database, said in the same interview that investing in stay-at-home stocks is “definitely not a fad.”
“Everybody in America and around the world is embracing technology, and stocks are benefiting from that,” he said. “Some of these stocks you maybe have never heard before, but the ETF companies like Direxion do a great job in talking about the underlying stocks and, really, why they might be different from other holdings that you have in your portfolio.”
Lydon called attention to the market’s near-obsession with the FAANG names, the longtime acronym for the stocks of Facebook, Amazon, Apple, Netflix and Google parent Alphabet. Along with Microsoft, the six are heavily represented across indexes and ETFs given their massive market caps.
“The question is: What are the future FAANG stocks going to be?” Lydon said, adding that the equal-weighted S&P 500 is now down more than 12% year to date, a sign that big-cap names are responsible for the broader index staying afloat in 2020. The S&P 500, which is market cap-weighted, is down nearly 3% for the year.
“It’s been those big stocks that have kind of carried the day, but there are also other stocks that are growing that haven’t yet made it into those indexes,” Lydon said. “So, we have opportunities with these new creative ETFs that are out there.”
WFH climbed 1% on Wednesday. In mid-June, BlackRock filed for its own thematic ETF called the iShares Virtual Work and Life Multisector ETF, though it has not yet disclosed any holdings.
A customer wearing a protective mask shops at a Hennes & Mauritz (H&M) clothing store at Westfield San Francisco Centre in San Francisco, California, U.S., on Thursday, June 18, 2020.
Michael Short | Bloomberg | Getty Images
Desparate to keep their workers safe and their lights on, retailers reached out to the National Governors Association Monday, urging policymakers for their help in sending a strong and uniform message about social distancing and wearing a mask.
The letter from the Retail Industry Leaders Association comes amid a huge surge in coronavirus cases — with total cases in the U.S. doubling since mid-May — and an increasingly hostile backlash against facial coverings. Businesses, from retailers to movie theaters, have been faced with a patchwork of rules from state and local governments as they reopened their businesses. With no other choice, they have been attempting to implement their own mandates for face masks and also enforce them.
“Despite compliance from the majority of Americans, retailers are alarmed with the instances of hostility and violence front-line employees are experiencing by a vocal minority of customers who are under the misguided impression that wearing a mask is a violation of their civil liberties,” the retail group, whose members include Best Buy, Dollar General and Home Depot, wrote, in the letter, which was made public Tuesday. “Wearing a mask is not about fear, and it certainly should not reflect one’s politics.”
The Centers for Disease Control and Prevention recommends the use of facial coverings such as masks when it’s difficult to maintain a distance from other people, although there’s no federal order requiring people to do so.
Mask mandates, however, have increasingly become a debate, drawing criticism and in one instance, threats that led a top local health official in Southern California to resign. Even in states where masks are required when in public, workers are often called upon to enforce the policy in stores, bars and airplanes when customers arrive without them. Some instances have resulted in violence.
In the Van Nuys section of Los Angeles in May, before California required masks be worn by all residents outside their homes, a Target employee was punched by a customer who refused to wear a mask. The employee fell and broke his left arm, according to the Los Angeles Police Department. At a Dollar Tree in Michigan, a customer wiped his nose on an employee’s shirt after she advised him to wear a mask inside the store. And a security guard at a Family Dollar Store was fatally shot after a dispute broke out when he asked a customer who wasn’t wearing a mask to leave the store.
Many public health and infectious disease experts agree that masks have proven effective at preventing the spread of Covid-19. A statewide mandate is better than a local version because places where masks are required are controlling their outbreaks, and a statewide mandate unifies the messaging about their effectiveness, said Dr. Luis Ostrosky, a professor of infectious diseases at McGovern Medical School at UTHealth in Houston.
“I’m completely baffled as to why masking became such a political issue and such an ideological issue,” Ostrosky said. “We’ve never had a problem with no shoes, no shirt, no service. We’ve never had a problem with no smoking indoors.”
Proven to prevent spread
Scientists say the virus can spread through respiratory droplets that pass when an infected person coughs or sneezes and studies suggest face masks may serve as a helpful barrier.
“All politics aside, it’s clear from scientific and safety perspectives that wearing a mask reduces the likelihood of transmission of disease. Whether you’re Republican or Democrat, you breathe the same air and you exhale the same air,” said Dr. Betty Chu, associate chief clinical officer and chief quality officer at Henry Ford Health System in Michigan.
“I would say it’s pretty clear from a scientific perspective that wearing a mask reduces the transmission,” she said.
At first, the CDC didn’t advise the use of face masks, but that was before experts understood the extent at which people could spread the virus before the onset of symptoms, according to the Mayo Clinic. It also wasn’t known that some people who have Covid-19 and show no symptoms could unknowingly spread the virus.
“The evidence is conclusive that places that do better in masking have lower rates,” Ostrosky said. “And I think we’re experiencing the consequence of ambiguous, unclear messaging about masking.”
Mask mandates vary
In some cases, states without widespread orders have left the debate for municipalities and businesses to decide, including areas where cases are spiking, like Arizona and Florida.
In Texas, Gov. Greg Abbott has maintained that wearing masks would help the state’s economy remain open. He’s urged residents to cover their faces to prevent the spread of Covid-19, even if they felt like it would be an “infringement of freedom.” But until last week, when hospitals were starting to get hit with a wave of Covid-19 patients, he was reticent to require masks. Even when he did, the statewide mandate includes a large number of exceptions.
Other states such as Kansas have joined Texas in recent days to issue their own orders. But there are numerous holdouts. Nebraska Gov. Pete Ricketts, for example, has strongly opposed such efforts. He told local governments in June that they would not receive any federal money to help fight the effects of the coronavirus pandemic if they implemented mandates.
President Donald Trump‘s comments have helped to politicize the debate. In late June, he said in an interview with The Wall Street Journal that some Americans might wear face masks not as a way to prevent the spread of coronavirus but as a way to “signal disapproval of him.”
Last week, he said he would have “no problem” wearing a mask in some circumstances, but he continues to say it’s not necessary to make masks mandatory throughout the U.S.
And that’s likely why businesses are looking to the states for action.
Dr. Neal Jain, a clinical allergist and immunologist at San Tan Allergy and Asthma and director of research at Arizona Allergy and Immunology Research, was one of over hundreds of doctors in Arizona who signed a petition sent to the governor urging he sign a statewide mask mandate.
Gov. Doug Ducey initially didn’t allow local jurisdictions to implement their own face covering mandates but reversed that order on June 17. After the change, cities from Phoenix to Tucson adopted mask requirements.
“I think it is a public health 101 mandate that should be in place to protect all of our citizens from the potential ramifications,” said Jain, a member of the Committee to Protect Medicare.
An economic argument
Jan Hatzius, Goldman Sachs’ chief economist, has also made an economic argument for face masks after his team examined the link between the use of face masks and controlling Covid-19 cases. Hatzius said a national mandate could prevent lockdown orders and save the economy from taking a hit as businesses shut down.
Tilman Fertitta, the chairman and CEO of Houston-based restaurant giant Landry’s, touched on this argument as well as he urged U.S. residents to wear masks, saying it’s necessary to keep the economy open. Fertitta, whose business empire includes more than 600 restaurants and Golden Nugget casinos, said wearing a mask is, ultimately, about respect for others.
Some businesses have tried to stay neutral in the absence of government mandates with mixed results.
Walmart, requires its employees to wear face coverings but says its optional for customers, although they strongly encourage people to wear them. The company will remind customers whether there are local or statewide mandates requiring masks before entering the store, a spokesperson said.
Target instituted a similar policy, providing face coverings and gloves to employees on the job. The company has added signage and stationed team members outside stores to remind people to wear masks while shopping in areas where local governments are mandating residents to wear them, a spokesperson said.
But AMC was forced to reverse course. Initially, the movie theater chain decided that masks would be optional, saying the decision not to require masks was made in an effort to avoid politics, but it was soon met with an “intense and immediate outcry” from customers, AMC CEO Adam Aron said in a statement. It now will require all moviegoers to wear face coverings.
Lack of federal rules in air travel
The Trump administration last week released a series of guidelines for air travel in the Covid-19 era, saying travelers should wear masks and that airlines should inform travelers when social distancing isn’t possible. But the government stopped short of mandating masks in airports or flights. It also doesn’t require airlines to limit capacity on board and carriers’ policies have differed on that issue.
While there aren’t government mandates, all major U.S. airlines now require that passengers wear face coverings like masks on board, an effort to protect both customers and crews. There are some exceptions for those with medical issues, for very young travelers and when passengers are eating or drinking.
Not all passengers are complying.
A spokeswoman for budget carrier Frontier Airlines said law enforcement removed a passenger on Denver-bound flight before departure from Los Angeles last month for “refusing to comply with crew member instructions, including refusing to wear a face mask.”
American Airlines in June banned a traveler after he refused to wear a mask on board a Dallas/Fort Worth-bound flight from New York last month. He declined to tell CNBC why he didn’t want to wear a mask. American said it would allow him to fly again once masks are no longer required on board.
While travelers are required to follow crew member instructions, some industry members and lawmakers say federal rules would carry more weight than carriers’ own policies.
Delta Air Lines‘ CEO Ed Bastian told Axios in an interview that aired on HBO last month that a government mandate for masks for travelers would make the policy easier to enforce. The largest flight attendant and pilot unions in the U.S. have also called for federal mask requirements for passengers.
“Sadly, the Administration’s guidance is still just that – unenforceable and woefully inadequate recommendations,” said Sens. Edward Markey (D-Mass.) and Richard Blumenthal (D-Conn.) after the Trump administration published its guidelines last week. “We need federally enforceable mandates to keep the traveling public safe.”
The Department of Transportation cites CDC guidelines.
“The DOT and the [Federal Aviation Administration] expect the traveling public to follow airline crew directions and policies, which are in place for passenger protection and the health of air crews, and to take very seriously the precautions recommended by the CDC and the International Civil Aviation Organization,” the agency said in a statement.
Last month, Delta’s Bastian told staff that the airline would ban travelers who don’t comply with its rule.
“We take the requirement to wear a mask very seriously. Customers who choose not to comply with this or any other safety requirement risk losing their future flight privileges with Delta,” Bastian said an employee memo. “So far, there have thankfully only been a handful of cases, but we have already banned some passengers from future travel on Delta for refusing to wear masks on board.”
An employee wearing a face mask is pictured inside a shop at Westfield Santa Anita mall during the outbreak of the coronavirus disease (COVID-19), in Arcadia, California June 25, 2020.
Mario Anzuoni | Reuters
Just as shoppers were beginning to inch back to stores, with local economies reopening and malls turning their lights back on, retail traffic declines are accelerating yet again, according to a report.
Retail traffic in the U.S. was down the most so far in 2020, on a year-over-year basis, during the week ended April 18, according to data from the retail consultancy ShopperTrak. It fell 82.6%.
From then, up until the past 14 days, there were slight improvements. Those declines shrank each week, according to ShopperTrak, which is part of part of Sensormatic Solutions. The decline had eased to being down just 34% from the year prior, for the week ended June 20.
But over the past two weeks, retail traffic declines have accelerated once more, as Covid-19 cases surge nationwide with hot spots in states including Florida and Texas. Customers are retreating for a second time. Apple has made one of the boldest moves, so far, closing dozns of stores in malls for a second time.
The week ended June 27, traffic in the U.S. was down 35.7%, according to ShopperTrak. Last week, it was down 39.5% compared with the prior year.
But not all states are looking the same.
Thirty-seven states, plus Washington, D.C., have trended down over the past two weeks on a year-over-year basis, according to ShopperTrak senior director Brian Field. Thirteen states, meantime, have continued to show improvement in traffic, he said.
The divide between the two, according to Field, is largely driven by the safety precautions that are being taken in each of those states. Of the 38 states with traffic falling again, only eight of those are requiring masks statewide, Field said. Of the 13 on the rise, 11 require the general public to require masks, he said.
The biggest growth in retail traffic is happening in states including New Jersey, Maryland, Massachusetts, Rhode Island and New York, according to ShopperTrak data. The biggest drop-offs, meantime, are happening in Mississippi, Texas, South Carolina, Louisiana and Alabama.
“It’s all about consumers feeling confident,” Field said in a phone interview.
Thanks to a swelling resurgence in coronavirus cases, the vast majority of Americans are still being forced to work from home and will likely continue doing so for the foreseeable future. So, it was only a matter of time before issuers started orchestrating work-from-home plays in the form of ETFs.
Just two weeks ago, Direxion launched the world’s first work from home ETF (ticker: WFH) — comprised of companies ranging from software, cloud computing and cybersecurity to online videoconferencing and project management. The fund highlights names like Twilio, CrowdStrike and Zoom Video — all companies at the forefront of the global shift to remote productivity. But the fund also offers exposure to names like Amazon, Facebook, Microsoft, IBM and Google parent Alphabet.
BlackRock, the world’s largest asset manager, has followed up with its own iShares Virtual Work and Life Multisector ETF — though has yet to disclose any holdings. The BlackRock ETF has been filed with the SEC for approval but hasn’t launched. According to the SEC filing, the fund will seek to track the investment results of an index composed of U.S. and non-U.S. companies that “provide products, services and technologies that empower individuals to work remotely, and support an increasingly virtual way of life across entertainment, wellness and learning.”
It’s safe to say the work-from-home theme draws on similar demand for popular stay-at-home trends like streaming, e-commerce, gaming and sports betting — as shown by the recent launch of the Roundhill Sports Betting and iGaming ETF (ticker: BETZ) – and the outperformance of funds like the VanEck Video Gaming and eSports ETF (ticker: ESPO) and the Amplify Online Retail ETF (ticker: IBUY) — both up roughly 40% so far this year.
Todd Rosenbluth, senior director of ETF and mutual fund research at CFRA, said it should come as no surprise that thematic investing is gaining traction again.
“This time, there’s actually a rotation from individual stock selection and trying to pick a long-term theme and getting the benefits of diversification from ETFs,” he said last week on CNBC’s “ETF Edge.”
He pointed to Direxion’s new launch as an example — saying investors can gain exposure not only to established growth tech titans like Amazon and Alphabet, but also to more targeted companies specifically tied to the work-from-home culture.
With more asset managers flocking to opportunities created by the pandemic, Rosenbluth expects to see many more players in the work-from-home space.
He mentioned investors are also looking to products like the newly minted ETFMG Treatments, Testing and Advancements ETF (ticker: GERM), which tracks biotechnology companies engaged in testing and treating infectious diseases.
“We’re going to see more of these thematic-oriented ETFs in response to the current environment,” Rosenbluth said. “And I think all investors benefit from these choices.”
Bryon Lake, head of Americas ETF distribution at J.P. Morgan Asset Management, agreed — saying such themes speak to the overall flexibility of the ETF wrapper.
“Of course, you’re going to see a lot of the same names keep bubbling back up,” he said in the same “ETF Edge” segment — referring to mega-cap tech titans like Amazon, Apple and Netflix. “But [regardless of] whether that’s quality or whether that’s a thematic work-from-home play, what we do know is that investors like to own what they know.”
As for whether he sees this as a lasting investing trend, Lake said that remains to be seen.
“I think that ties into this whole theme of winners and losers coming out of this crisis,” he said. “And some of those work-from-home companies may benefit over the long term, just given the structural shifts that we’re seeing.”