Weekly Commercial Awareness Update - 1st Week Oct 2020
Who’s gonna be the next player in this game?
Amazon introduced ‘Luna’, its new cloud gaming service that will allow users to play famous games without having to buy consoles or individual game packs. If Amazon combines Luna with Twitch, its world’s leading video streaming service for gamers, this could create a huge source of revenue through subscriptions and advertisements.
Amazon is not the first to enter into the video gaming industry. Google already has its own gaming service called ‘Stadia’. It could also combine this with its ever-expanding YouTube and create a huge gaming hub.
So, seemingly, Big Tech’s new race will be taking place in the gaming industry. With the trend in the gaming industry becoming subscription and freemiums rather than a one-time purchase, it is to be seen how tech companies will utilise this to further expand their businesses.
China’s on the lead
With the global economy tumbling amid the pandemic, China’s industrial sector showed an increase in profits for the fourth straight month in August. In particular, the raw material manufacturing profits increased by 32.5% from 14.7% in July, partly due to a rise in prices of commodities like crude oil.
This is welcoming news to many countries whose economies are dependent on China. For example, 35% of the eurozone economy is dependent on China and in Asia, South Korea and Japan are particularly dependent on China. Their dependence is due to various reasons, such as a large share of export going to China or a huge percentage of their foreign direct investment stock being invested in China.
However, with the US-China conflict still going on (e.g. the US’s warning to ban TikTok in the UK), it is to be seen whether China’s economy will continue to grow. Also, because many foreign companies rely on supplies from Chinese companies or vice versa, what action the US takes to Chinese companies is also likely to have implications for other companies. For example, when the US banned Huawei, this led a Japanese microchip maker Kioxia Holdings to cancel its IPO because Huawei was their major customer and any fall in demand from Huawei would mean a significant fall in their earnings.
The Covid-19 Insurance Test Case
The judgment for the Covid-19 Insurance Test Case came out weeks ago but due to its significance, I thought it is still worth explaining it in this week’s update.
The Financial Conduct Authority (FCA) brought a test case against eight insurance companies to ask the court for clarification of certain clauses in insurance policies that were potentially relevant to business disruptions caused by Covid-19. The FCA submitted 21 sample wordings, but these were representative of many other insurance clauses and FCA estimates that interpretation of these wordings will affect around 700 types of policies.
The High Court gave judgment on 15 September. It found favour of the FCA on the majority of issues. In particular, it held that business interruptions caused by Covid-19 triggered most disease and hybrid clauses and denial of access/public authority clauses. Disease clauses provide cover for business interruption caused by diseases and denial of access/public authority clauses provide cover where there has been the prevention of access to premises due to the government or other authority orders. Hybrid clauses provide cover where restrictions are imposed on premises due to a disease.
The High Court’s judgment is welcoming news to many business owners which are now able to make a claim on their insurance policies. However, they must carefully consider their individual policies based on the judgment because firstly, the judgment did not state that all insurance provisions provide cover for Covid-19 situations, and secondly, it warned that whether or not cover is provided depends on the specific wording of a particular clause. Therefore, they would have to consult with insurance lawyers before making their claims.
Finally, it must be noted that insurance companies still have the opportunity to appeal to this judgment, so insurance lawyers would have to keep an eye on how the case progresses.