Smart Homes Diminish Cost of Living Crisis
15 November 2023
Times of high inflation drive change, and today’s rampant price rises are pushing people to spend more leisure time in the smart home.
It’s well known that a rising cost of living has historically been a powerful driver of change. Political upheavals from the French Revolution to the Arab Spring have been rooted in times of high inflation. And in today’s Europe, almost a third (32%) of voters cast their ballots for anti-establishment parties last year, according to research from the Guardian1.
On a more personal level, people are delaying life choices such as buying a home or raising a family. In a recent survey in the United Kingdom, for example, nearly 60% of respondents cited the high cost of living as the key reason to delay or not have children at all.
Change is certainly afoot, as people cut spending. They are changing their habits partly through smart home solutions, as we reported in our December 2022 blog.
Spending More Time at Home
Instead of eating out or ordering in, for instance, people are preparing more restaurant-style meals at home to save money. Smart home options like meal kit delivery service HelloFresh (a current portfolio company), recipe apps or streamed cooking content make it easier.
Moreover, meal kits can actually beat grocery shopping in terms of pricing and waste – you only get what you need for a recipe. And they take the hassle out of meal planning and grocery shopping, helping to explain why HelloFresh’s order value continues to grow.
People are also going out less often, preferring to watch films at home, play games or listen to music. VanEck Smart Home UCITS ETF (CAVE) tracks this trend with investments in gaming stocks like Electronic Arts, Sony and Nintendo. With an implied cost per hour of $0.49, video games are less expensive than movie theaters ($5 per hour), theme parks ($12.50 per hour), sports events ($16.67 per hour) or concerts ($33.33 per hour)2.
CAVE also invests in other forms of entertainment. Meticulous in its investment selection, the CAVE team prefers music publishers like Universal Music Group to streaming services, because the publishers capture more upside than the streaming platforms.
With video, yet another dynamic is at work. Whereas gaming and music both provide hours of (repeated) entertainment, people typically watch video content only once. This raises the risk of churn as subscribers binge their favorite shows and then unsubscribe. To tackle this problem, streaming services are tailoring pricing to different customer segments (e.g. adding an ad-based tier) or use bundles (for instance with distributors) to lock-in consumers (see also this blog).
CAVE does invest in streaming video, but here we prefer the pure-play company Netflix. As its recent earnings report showed3, the company grew subscribers in every region as its efforts to limit password sharing took shape. Moreover, it has neither a declining legacy TV business nor challenging debt levels to manage. In addition, it launched a lower-cost, ad-supported plan, attracting more cost-conscious consumers and opening a new potential revenue stream.
A Smart Home ETF may be subject to the risk that economic, political or other conditions that have a negative effect on the relevant sectors or industries will negatively impact the Fund's performance to a greater extent than if its assets were invested in a wider variety of sectors or industries.
New Habits That Last
Some of the emerging habits and cost cuts described in this blog are likely to stick. By doing more at home, and making full use of the technology inside it, we can become more resilient to deal with the cost of living.
2 Bernstein, US Media Roadshow, May 2018
3 https://ir.netflix.net/financials/quarterly-earnings/default.aspx
Important Disclosures
VanEck Asset Management B.V., the management company of VanEck Smart Home Active UCITS ETF (the "ETF"), a sub-fund of VanEck UCITS ETFs plc, engaged Dasym Managed Accounts B.V., an investment company regulated by the Dutch Financial Service Supervisory Authority (AFM), as the investment advisor for the Fund. The Fund is registered with the Central Bank of Ireland and actively managed. The value of the ETF’s assets may fluctuate heavily as a result of the investment strategy.
Investors must read the sales prospectus and key investor information before investing in a fund. These are available in English and the KIIDs/KIDs in certain other languages as applicable and can be obtained free of charge at www.vaneck.com, from the Management Company or from the following local information agents:
UK - Facilities Agent: Computershare Investor Services PLC
Austria - Facility Agent: Erste Bank der oesterreichischen Sparkassen AG
Germany - Facility Agent: VanEck (Europe) GmbH
Spain - Facility Agent: VanEck (Europe) GmbH
Sweden - Paying Agent: Skandinaviska Enskilda Banken AB (publ)
France - Facility Agent: VanEck (Europe) GmbH
Portugal - Paying Agent: BEST – Banco Eletrónico de Serviço Total, S.A.
Luxembourg - Facility Agent: VanEck (Europe) GmbH
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This is a marketing communication. Please refer to the prospectus of the UCITS and to the KID before making any final investment decisions.
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VanEck Asset Management B.V., the management company of VanEck Smart Home Active UCITS ETF (the "ETF"), a sub-fund of VanEck UCITS ETFs plc, engaged Dasym Managed Accounts B.V., an investment company regulated by the Dutch Financial Service Supervisory Authority (AFM), as the investment advisor for the Fund. The Fund is registered with the Central Bank of Ireland and actively managed. Investing in the ETF should be interpreted as acquiring shares of the ETF and not the underlying assets.
Investors must read the sales prospectus and key investor information before investing in a fund. These are available in English and the KIIDs/KIDs in certain other languages as applicable and can be obtained free of charge at www.vaneck.com, from the Management Company or from the following local information agents:
UK - Facilities Agent: Computershare Investor Services PLC
Austria - Facility Agent: Erste Bank der oesterreichischen Sparkassen AG
Germany - Facility Agent: VanEck (Europe) GmbH
Spain - Facility Agent: VanEck (Europe) GmbH
Sweden - Paying Agent: Skandinaviska Enskilda Banken AB (publ)
France - Facility Agent: VanEck (Europe) GmbH
Portugal - Paying Agent: BEST – Banco Eletrónico de Serviço Total, S.A.
Luxembourg - Facility Agent: VanEck (Europe) GmbH
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