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Chinese apparel manufacturers battle wave of market challenges

Can ComScore Break Nielsen's Near-Monopoly On Ratings?

Most TV Everywhere Viewing Is Live TV In The Home

Consumer Insights Online Video User Overview

Public Companies Going Private


Chinese apparel manufacturers battle wave of market challenges

China's once-booming textile and garment production industry faces mounting difficulties both at home and abroad, S&P Global Market Intelligence learned July 9 from market players exhibiting at the Hong Kong Fashion Week sourcing fair.

Brands sourcing from mainland China can expect longer lead times as the local production cycle lengthens amid a tough operating environment, according to Jiansen Huang, export manager at Fujian Teamwork Import and Export Co. Ltd., a Chinese producer of swimsuits and sportswear with clients including Spanish apparel chain Mango and Amazon.com Inc.

Fujian Teamwork's production cycle is about three months, but Huang predicted it will eventually extend to four months. "The number of factory workers is decreasing," he said. "As employment opportunities expand with China's growing economy, young people nowadays aren't willing to work in production anymore. The average age of factory labor now is around 40 to 50."

An environmental push by the Chinese government has led to increased closures of dyeing and finishing factories for failing to meet green manufacturing standards. That, in turn, is shrinking the pool of fabric suppliers. "We only needed 10 to 15 days before to have our fabric made; now it takes one month to 45 days," Huang said.

Feng Jiang, an executive at Shaoxing Hourun Textile Co. Ltd., also noted that the crackdown on pollution has hit many small and medium-sized businesses, adding: "In most of the closure cases, it's not because those factories don't want to shift toward being green, it's because they cannot afford to do so."

He said a small-scale factory needs to pay about 4 million Chinese yuan for a sewage treatment facility and typically must spend another 2 million yuan per year to operate and maintain that equipment.

Profit margins for factories are further squeezed by rising labor costs, with Jiang citing his company's home base in eastern China as an example. "The average monthly salary of a textile worker in Shaoxing has jumped to 9,000 yuan from 3,000 yuan over the past eight to nine years," he said.

With expenses escalating domestically, many Chinese manufacturers have turned to Southeast Asia, where labor is relatively cheap and preferential trade agreements with developed economies bring lower tariffs to apparel manufacturers.

However, operating production bases in that region is not an easy task, according to Wenjing Sang, an assistant business manager at Ningbo Seduno Group, a Chinese supplier to brands including H&M Hennes & Mauritz AB, Abercrombie & Fitch Co. and Industria de Diseño Textil SA, also known as Inditex and owner of the Zara brand.

"There is a lot of effort invested into protecting local workers' human rights," said Sang, whose company has factories in Vietnam, Myanmar and Cambodia. Workers in these countries have been vocal about their rights and often go on strike.

"We have to ensure they don't work overtime. We also hired local people who can speak Chinese to enhance communication between our company and the labor unions," Sang said.

"There is too much uncertainty, politically and culturally," Shaoxing Hourun's Jiang added. He said his company just gave up a plan to invest in a Vietnamese factory after a site visit in June coincided with an anti-Chinese protest.

But other mainland Chinese manufacturers lack the scale or financial capacity to move their operations to emerging markets, said Guoping Chen, general manager of Ningbo Baina Fashion Co. Ltd., a childrenswear producer that supplies brands including Seed and Noukie's.

Chen said his company saw former clients such as Armani Junior and Jacadi shift their sourcing to Southeast Asia over the past few years.

"Large orders that have basic designs are normally produced in Southeast Asia nowadays," he said. By contrast, "orders coming to China are typically those requiring special or functional fabrics, sophisticated skills like embroidery, or that come in small batches but varied styles."

In order to survive, a growing number of Chinese garment producers on the mainland are trying to evolve into original design manufacturers. "Based on seasonal trends, we design fabrics, accessories and styles for our clients, hoping to provide them with some inspiration," Chen said. His company also developed its own label called Gabby Loop in 2012, which is said to contribute to 20% of Ningbo Baina's revenue.

"Right now, our focus is on building brands, not on manufacturing," Chen said. "Perhaps someday in the future, we could grow big enough to outsource some of our production to Chinese manufacturers that are busy setting up factories in Southeast Asia today."

As of July 9, US$1 was equivalent to 6.62 Chinese yuan.


Technology, Media & Telecom
Can ComScore Break Nielsen's Near-Monopoly On Ratings?

Highlights

The following post comes from Kagan, a research group within S&P Global Market Intelligence.

To learn more about our TMT (Technology, Media & Telecommunications) products and/or research, please request a demo.

Sep. 17 2018 — Advertising agencies are becoming increasingly frustrated with the inability of Nielsen Holdings PLC's Nielsen Media Research to convince the major media companies to embrace its new cross-platform measurement system, called Total Audience Measurement. This creates a huge opportunity for comScore Inc., formerly Rentrak.

ComScore is trying to reinvent itself following its delisting in 2017 — it was relisted June 1 — following an accounting scandal. The company's stock has fallen from $65 per share intraday on Aug. 17, 2015, to close at just $18.06 per share on Sept. 6. It currently has a total enterprise value of less than $1.2 billion, paltry in comparison to Nielsen Holdings' $12.9 billion.

In April, comScore named Bryan Wiener, previously executive chairman of Dentsu's digital media agency 360i LLC, as its CEO. On Sept. 5, the company announced that it hired Sarah Hofstetter to serve as president and head up commercial strategy, including sales and marketing.

Wiener and Hofstetter have worked together for two decades, most recently at 360i, where Hofstetter was CEO and chairwoman. The two executives' deep ties to the advertising community may be just what is needed to bring a competing cross-platform measurement system to the broadcast and cable network industries.

Cable network ad revenue grew for decades before stumbling, albeit modestly, during the last recession. More recently, despite a booming economy the cable network ad industry has faltered, in part due to cord cutting and cord shaving but also because current ratings do not include all of online viewing and out-of-home viewing.

Currently, the ratings only include online viewing within a three-day period, which includes the exact same commercial load as linear. Many media companies do not believe that online viewers will tolerate the huge ad load that exists on linear TV and do not include the same commercial pods that appear on linear TV when serving up the shows online.

Although negotiations between Nielsen Media Research and the major media companies have been going on for some time, many in the industry are tired of the delays in adopting a new system and are looking at alternate ways to measure viewing.

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Technology, Media & Telecom
Most TV Everywhere Viewing Is Live TV In The Home

Highlights

The following post comes from Kagan, a research group within S&P Global Market Intelligence. To learn more about our TMT (Technology, Media & Telecommunications) products and/or research, please request a demo.

Summary: subscribers to telco operators were more likely to indicate they streamed TV Everywhere content compared to cable and DBS subscribers.

Sep. 17 2018 — Streaming live TV Everywhere to a mobile device inside the home is the TV Everywhere activity most often performed at 52% of multichannel TV respondents, according to data from Kagan’s MediaCensus online consumer survey.

While 58% of respondents surveyed in multichannel homes viewed TV Everywhere in the last three months, just 46% did so out of their home. Click here for the full Kagan report.

Viewing live TV inside the home was not only the TV Everywhere activity performed by the most respondents; it was also the most frequently performed.

Subscribers to telco operators were more likely to indicate they streamed TV Everywhere content compared to cable and DBS subscribers. Subscribers to some operators are more likely to stream TV Everywhere content, with AT&T U-verse (64%) being the highest and WOW! (42%) the lowest among operator subscribers surveyed.

Younger subscribers, especially Millennials, were more likely to stream TV Everywhere content compared to older subscribers.

For more information about the terms of access to the raw data underlying this survey, please contact support@snl.com.

Data presented in this article is from the MediaCensus survey conducted in February 2018. The online survey included 20,035 U.S. internet adults matched by age and gender to the U.S. Census, with additional respondents subscribing to the top multichannel video operators in the U.S. The survey results have a margin of error of +/-0.7 ppts at the 95% confidence level. Generational segments are as follows: Gen Z: 18-20, Millennials: 21-37, Gen X: 38-52, Boomers/Seniors: 53+.

Consumer Insights is a regular feature from Kagan, a group within S&P Global Market Intelligence's TMT offering, providing exclusive research and commentary.

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Technology, Media & Telecom
Consumer Insights Online Video User Overview

Highlights

49% of survey respondents use more than one SVOD service.

Sep. 14 2018 — Data from Kagan’s U.S. online consumer surveys shows that 23% of respondents exclusively use one service, while almost half (49%) use more than one SVOD service. The service which is most commonly used exclusively is Netflix, while users of smaller services almost always use at least one other service.

Netflix is so universally used that it is both the most exclusively used service and the service most often used in conjunction with another service. In terms of demographics, Netflix users are very similar to the general population compared to smaller services that tend to have a younger user base.

With the exception of Netflix, most respondents indicated they have never subscribed to the top four services, including Netflix, Hulu, Amazon Prime Video and HBO NOW. Among those who indicated they dropped one of the top services, price was a principal reason for dropping, although content-specific reasons differed by service. Content is one of the most defining characteristics of online streaming services, which can be seen in the content viewed and most enjoyed on each service. In large part users of Netflix, Hulu and Amazon Prime Video most enjoy the content each service is known for.

A broader overview of this data was presented in a recent webcast.

Data presented in this blog is from U.S. Consumer Insights surveys conducted in September 2017 and March 2018. The online survey included 2,526 (2017) and 2,523 (2018) U.S. internet adults matched by age and gender to the U.S. Census. The survey results have a margin of error of +/-1.9 ppts at the 95% confidence level.

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Capital Markets
Public Companies Going Private

Sep. 14 2018 — The recent tweet from Elon Musk has understandably made big news, but it is worth pointing out that the appetite for taking public companies private has been a key area of activity this year. S&P Global Market Intelligence’s data shows that 2018YTD is already at 39% of 2017 numbers, standing at €17.8bn of deal value across 32 completed deals, globally. Going-private closed deal count is at a healthy 49% compared to full 2017 numbers.

In terms of most popular sectors for going-private deals, since 2013 - Information Technology has been leading the pack with €108.9bn of aggregate deal value recorded across 104 deals, while Consumer Discretionary* is trending as a distant second with €49.7bn of total deal value.

The top target location for going private deals is the US, and interestingly – China comes in at second place, with UK following. The three regions have seen total deal size of €218.8 during the period of 2013 through 2018YTD. The popularity of these locations is further supported by the fact that after going private, average target’s EBITDA values have increased compared to when those companies were public. The US-based going private targets grew their EBITDA by average of 56% since leaving the public market, while Chinese and the UK-located companies grew EBITDA by 10% and 38%, respectively. Overall, the going private moves proved to be successful for ex-public companies globally within the 2013 – 2018YTD deals’ time frame, where their average Net Income values grew by 58% while EBITDA values grew by a smaller but yet attractive 29%.

In terms of the deal pipeline, 18 going-private deals were announced globally since 1st January 2018 and would add €25.8bn of aggregate deal value to already closed €17.8bn.

The following was originally published on Angel News on August 16, 2018: Public companies going private, S&P Global comment

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