How the beauty industry left Revlon behind

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

Joanna Kao
Good morning from the Financial Times. Today is Thursday, June 30th, and this is your FT News Briefing.

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

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

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Joanna Kao
Tech companies are gearing up to profit from the metaverse. That’s the virtual world some are heralding as the future of the internet. Facebook’s parent company, Meta, has a crucial moneymaking advantage right now. It sells an important tool you need 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 to 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, you know, if you’re some sort of developer that’s been building things for the iPhone or Android for the last 15 years, you’ve been paying this 30 per cent fee and you’ve viewed Meta, Facebook, as a potential ally because they have adopted this anti-Apple stance involving full-page newspaper ads declaring that Apple has this stranglehold on the App Store and what gets on your phone and it’s a monopolist. And you would think, given all that rhetoric, in their opportunity to build a computing platform, they would have more pro-developer paradigm in place. But when you look at their terms and conditions, it’s really not so dissimilar from what iPhone and Android have had set up for the last 15 years. The key thing being that the standard fee for digital goods purchases within the virtual reality world that Meta has is 30 per cent.

Joanna Kao
What kind of apps are we talking about here? What’s available in the metaverse?

Patrick McGee
Yeah. So there are not that many productivity apps. I mean, it really is a game store. You know, my personal experience — I do have a Quest 2 headset — is I have two boxing games. So, so yeah, I mean, you have to pay for these games. And I think one game was $35, but maybe one was $10. But 30 per cent of that would go to Meta because I purchased it through that platform.

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

Patrick McGee
So Facebook says, unlike Apple, we do allow developers and users to use alternative stores. One is SideQuest. So it’s this, like, informal app store where developers can market their app and it’s not related to Meta formally. So that’s a decent answer, except that it’s seen fewer than 400,000 downloads, whereas the Oculus app has 19mn downloads. And so in terms of what are the vast preponderance of users actually doing to download their apps, it’s pretty clear that the answer is the official app store that comes with the headset. In other words, I think it’s a great answer to a question. But is it a sort of legitimate answer in terms of usage? It doesn’t appear to be.

Joanna Kao
Well, is there another headset entirely that developers could go to instead?

Patrick McGee
Yeah, but the Meta headset called the Quest 2 has a more than 70 per cent market share. So if you’re a developer and you don’t like the 30 per cent fee, there really is no other place that you’re going presently. You know, it could be when Apple steps into the game or what have you. But for all intents and purposes, the Oculus is the only headset wherein you would just be losing yourself an entire audience by deciding not to be there.

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

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Joanna Kao
Let’s go back to the 1980s when big name beauty brands such as Revlon were in their heyday. They had supermodels like Cindy Crawford on their TV ads, sporting big hair and bright lipstick.

Clip from Revlon TV ad
Revlon faces aren’t afraid to get close . . . Not this close . . . Or even this close . . . 

Joanna Kao
But oh, how the mighty have fallen.

News clip
Well, this just in: iconic beauty company Revlon has filed for bankruptcy protection.

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

Leila Abboud
Hello.

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

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

Joanna Kao
Yeah, let’s talk about that. The internet has changed so much about the beauty industry and advertising. How has that impacted Revlon?

Leila Abboud
Basically what happens in the beauty industry because of the internet is sort of twofold. There’s the rise of these independent brands that kind of come out of nowhere. So the best example of this is Rihanna’s Fenty or Kylie Jenner’s make-up line. And I’d say that that period of kind of boom maybe sort of started in, like, 2015 or so for make-up in America and, you know, it just sort of transformed the industry. It kind of coincides with the whole period of Instagram being quite big and the rise of influencers, and it shakes up the beauty sector in a way that’s quite new.

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

Leila Abboud
I think there’s a perception that, you know, the indie brands are kind of eating the big guys’ lunch and the Revlon bankruptcy kind of feeds into that narrative. But in reality, the big companies, the ones that are really good at what they do and, you know, L’Oréal, Estée Lauder, they’re managing to sort of thrive in this world because they can sort of use their global reach, their scientific knowhow to do innovation. And also they’ve kind of ripped off a lot of what’s creative of the indie brands. They could just kind of be fast followers. It’s just that Revlon has kind of failed on all those fronts.

Joanna Kao
Leila Abboud is the FT’s Paris correspondent. Thanks, Leila.

Leila Abboud
Thank you.

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Joanna Kao
Before we go, remember the then 99-year-old British war veteran who went viral for walking laps around his garden in 2020? The late Captain Sir Thomas Moore’s fundraiser brought in £38mn 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 is announcing the inquiry today. It’s concerned about links between the foundation and a company controlled by Moore’s daughter. The chair of the foundation’s board said it would work closely with the commission to address its concerns.

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Joanna Kao
You can read more on all of these stories at FT.com. This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.

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