How the beauty industry left Revlon behind

This is an audio transcript of the FT news roundup podcast episode: How the beauty industry left Revlon behind

Juana Kao
Good morning from the Financial Times. Today is Thursday June 30th and this is your FT news roundup.

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Juana Kao
Chinese stocks are making a comeback. Facebook’s rules for its VR app store are frustrating for developers. And Revlon has struggled to keep up with the changing beauty industry. I’m Joanna Kao, replacing Marc Filippino, and this is the news you need to start your day.

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Juana Kao
Chinese equities are on track for their best month in nearly two years. The CSI 300 index is up more than 8 percent in June. Investors are betting that the worst of the strict Covid-19 lockdowns is over. Authorities managed to bring outbreaks under control in Shanghai and Beijing, and this week eased travel quarantine restrictions. Investors were also encouraged by suggestions that regulators would take a lighter approach to the tech sector.

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Juana Kao
Tech companies are gearing up to cash in on the metaverse. That is the virtual world that some herald as the future of the Internet. Facebook’s parent company, Meta, has a crucial advantage in making money right now. He sells an important tool that he needs to access the metaverse: a virtual reality headset. Meta has imposed fees for headset-related apps and app developers are not happy. Some have vented their frustration with the FT’s Patrick McGee. He joins me now. So Patrick, what have these app developers told you?

patrick mcgee
I think the frustration is that if you’re some kind of developer who’s been building things for iPhone or Android for the last 15 years, you’ve been paying this 30 percent fee and you’ve seen Meta, Facebook, as a potential ally because they’ve taken this anti-Apple stance involving full page newspaper ads declaring that Apple has this stranglehold on the App Store and what comes to your phone and is a monopoly. And one would think, given all that rhetoric, in their chance to build a computing platform, they would have a more pro-developer paradigm in place. But when you look at their terms and conditions, it’s really not that different from what iPhone and Android have set up for the last 15 years. The key is that the standard rate for purchases of digital goods within the virtual reality world that Meta has is 30 percent.

Juana Kao
What kind of apps are we talking about here? What is available in the metaverse?

patrick mcgee
Yes. So there aren’t that many productivity apps. I mean, it really is a game store. You know, my personal experience, I have a Quest 2 headset, is that I have two boxing games. So yeah, I mean, you have to pay for these games. And I think a set was $35, but maybe one was $10. But 30 percent of that would go to Meta because I bought it through that platform.

Juana Kao
What has Facebook said? Have they responded to the developer’s frustrations?

patrick mcgee
So Facebook says that unlike Apple, we allow developers and users to use alternative stores. One is SideQuest. So it’s an informal app store where developers can market their app and it’s not formally related to Meta. That’s a decent answer, except it’s seen less than 400,000 downloads, while the Oculus app has 19 million downloads. So in terms of what the vast preponderance of users do to download their apps, it’s pretty clear that the answer is the official app store that comes with the headphones. In other words, I think it’s a great answer to a question. But is it kind of a legitimate answer in terms of use? It doesn’t seem to be.

Juana Kao
Well, is there another headset that developers can use instead?

patrick mcgee
Yes, but the Meta headset called the Quest 2 has a market share of more than 70 percent. So if you’re a developer and you don’t like the 30 percent fee, there’s really nowhere else to go right now. You know, it could be when Apple gets in the game or whatever. But for all intents and purposes, the Oculus is the only headset where you’d simply miss out on an entire audience by deciding not to be there.

Juana Kao
Patrick McGee is the FT’s San Francisco correspondent.

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Juana Kao
Let’s go back to the 1980s, when big beauty brands like Revlon were at their peak. They had supermodels like Cindy Crawford in their TV commercials, sporting great hair and bright lipstick.

Revlon TV ad clip
Revlon faces aren’t afraid to get up close. . . Not so close. . . Or even that close. . .

Juana Kao
But oh how the mighty have fallen.

news clip
Well, this is just in: Iconic beauty company Revlon has filed for bankruptcy.

Juana Kao
To understand how the 90-year-old company got to this point, I’m joined by FT Paris correspondent Leila Abboud. Hi, Leila.

Leila Boud
Hello.

Juana Kao
So what happened to Revlon? I mean, the company has been a mainstay of the beauty industry, and it just filed for Chapter 11 bankruptcy.

Leila Boud
I think it’s probably a combination of reasons. But, you know, the effect of time, the marks on beauty, they really come and go. And it takes a lot of investment, creativity and intelligence to keep them on top. And I think over time Revlon just lost the golden touch on how to do that. There is also a kind of more boring financial reason. It’s just, you know, it was the subject of one of the largest, I think, leveraged buyouts of its time. You know, that left him with a balance sheet that was heavily in debt. And when you have companies that have a lot of debt, don’t count that they can afford to invest what it takes to stay on top of trends. And beauty is too, it really requires a lot of publicity.

Juana Kao
Yes, let’s talk about it. The Internet has changed a lot in the beauty and advertising industry. How has that affected Revlon?

Leila Boud
Basically, what is happening in the beauty industry because of the Internet is twofold. There’s the rise of these independent brands that come out of nowhere. So the best example of this is Rihanna’s Fenty or Kylie Jenner’s makeup line. And I would say that that boom period maybe started in 2015 or so for makeup in America and, you know, it just transformed the industry. It kind of coincides with the whole period when Instagram was pretty big and the rise of influencers, and it shakes up the beauty industry in a pretty new way.

Juana Kao
Can the big companies keep up with these small, fast-moving brands?

Leila Boud
I think there’s a perception that, you know, independent brands are eating the big guys’ lunch and the Revlon bankruptcy feeds into that narrative. But really, the big companies, the ones that are really good at what they do and, you know, L’Oréal, Estée Lauder, are making it in this world because they can use their global reach. , its scientific knowledge to innovate. And they’ve also ripped off a lot of what’s creative from independent brands. They could just be fast followers. It’s just that Revlon has failed on all of those fronts.

Juana Kao
Leila Abboud is the FT’s correspondent in Paris. Thank you Leila.

Leila Boud
Thanks.

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Juana Kao
Before we go, remember the then 99-year-old British war veteran who went viral for lapping around his garden in 2020? The late Captain Sir Thomas Moore’s fundraiser raised £38m for the NHS during the early days of the coronavirus pandemic. He died about a year later from Covid-19. Well, a charity linked to Moore is now under investigation. The charity commission watchdog announces the investigation today. He is concerned about links between the foundation and a company controlled by Moore’s daughter. The chairman of the foundation’s board said he would work closely with the commission to address his concerns.

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Juana Kao
You can read more about all of these stories on FT.com. This has been your daily FT news digest. Be sure to check back tomorrow for the latest business news.

This transcript has been automatically generated. If by any chance there is an error, please send the details for correction to: typo@ft.com. We will do our best to make the modification as soon as possible.

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