Tag: leisure

Nike says 'newness' is crucial to its growth. One analyst says it's not working

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As sneaker makers try to stay relevant amid waning demand, Nike Inc. executives on Thursday said they were banking on “newness and innovation” to win over reluctant shoppers. And as sales deals on shoes proliferate, they said interest in its sneakers that cost over $100 is still solid, and that an expansion of its Jordan brand — beyond basketball gear and shoes — represents an opportunity to boost profits.

But one analyst on Friday cast doubt over whether those plans will work for all of Nike’s
NKE,
-11.83%
customers in the long term.

“Nike needs improved marketing outside of basketball, streetwear and lifestyle trends,” TD Cowen analyst John Kernan said in a research note on Friday. “Innovation at the higher end of its assortment is not resonating at scale while . . . Nike faces disruption from smaller competitors in footwear and apparel. Jordan brand moving into lower price points and away from a scarcity model creates risk to the fastest-growing piece of the business.”

That assessment came after Nike’s quarterly results and dimmer outlook after the market close on Thursday sent shares reeling. Management said that consumers were still cautious, as higher prices for essential goods siphon away what they can spend on new sneakers and clothes.

Following the results, TD Cowen analysts on Friday downgraded the stock to their version of a hold rating. CFRA, meanwhile, also lowered its opinion on the stock to sell from hold.

Shares of Nike were down 11.6% on Friday.

During Nike’s fiscal second quarter, sales trends were shaky in both the athletic-gear maker’s digital channels and its markets abroad, executives said Thursday. In North America, sales slipped 4% year over year. For the holidays, sales were softer outside of the big discount days like Black Friday and Cyber Monday. And competition from the likes of Adidas
ADDYY,
-5.55%,
Deckers Brands
DECK,
-1.48%
subsidiary Hoka One One and running-shoe maker On Holding
ONON,
-3.71%
hasn’t gone anywhere.

Nike’s results, Kernan said, were a sign that Wall Street’s profit estimates were too high for Adidas and other competitors like Vans owner VF Corp.
VFC,
-3.23%
and Under Armour
UA,
-3.52%.

On the company’s earnings call Thursday, Nike said it didn’t plan on getting sucked into a “race to the bottom on digital,” where weaker online traffic forced more markdowns. But like Kernan, Raymond James analyst Rick Patel also had questions about Nike’s efforts to push full-priced product.

“Nike noted that it intends to focus on full-price selling and doesn’t want to participate in aggressive discounting,” he said. “Also, it aims to manage inventories for key franchises more carefully going forward in order to avoid the promotional fray, which also limits sales growth. We view these as the right moves to protect the health of the brand, but also acknowledge that it leaves Nike at a near-term competitive disadvantage to drive revenue.”

CFRA analyst Zachary Warring, in emailed commentary, said some of Nike’s other rivals could cut into demand.

“Although Nike maintains a fortress balance sheet with significant capital returns, we believe the multiple will trend back down to pre-pandemic levels as the company faces competition from brands like Hoka and On [Holding] while it looks for new growth drivers and focuses on cutting costs,” Warring said.

Nike executives on Thursday said Jordan-branded clothing and products for golf, soccer and football, along with products for women and children, would bring stronger results. They said the same for bras, leggings, retro-themed running shoes and other offerings in its business geared toward women.

The company also announced plans to save up to $2 billion over the next three years. That savings effort, it said, could include simplifying its product selection, bringing more automation into its operations, and “streamlining” the company by shedding management layers.

Nike has reportedly already begun laying off workers. The company on Thursday said it expected to book pre-tax restructuring charges of around $400 million to $450 million “primarily associated with employee-severance costs.”

Nike plans to reinvest those savings back into the company. But as the company tries to fatten margins, Jefferies analyst Randal Konik said those reinvestments could do the opposite.

“We would expect [management] to reinvest a majority of these cost savings, likely leaving less margin and earnings ‘cushion’ should top-line performance continue to soften over the next 6-12 months,” he said.

In recent years, Nike has been trying to sell fewer items through outside retail chains and more through its own stores and online channels. But executives on Thursday said that multiyear effort had created “complexity and inefficiencies”

Edward Jones analyst Brian Yarbrough told MarketWatch that Nike is likely cutting costs after weighing the broader economic backdrop and weakness in its digital business against its sales and margin goals.

“Combined with a slower revenue-growth environment — and the fact that digital, which is their more profitable channel, is slowing and in some markets declining — I think they probably said, ‘If we’re going to get there, it’s probably going to have to come with some cost cuts,’” Yarbrough said.

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December 22, 2023
'Smidcap' companies are becoming a big deal. Here's a look at some of the best.

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The stocks of long-neglected small companies are finally showing signs of life as the market rally broadens. But these tiny companies still remain vastly undervalued. So, they are one of the best buys in the stock market right now.

Small- and medium-cap companies, or smidcaps, have not been this cheap since the Great Financial Crisis 15 years ago. “Smidcaps relative to large caps look very attractive,” says says portfolio manager Aram Green, at the ClearBridge Select Fund LBFIX, which specializes in this space. “Over the long term you will be rewarded.”

Green is worth listening to because he is one of the better fund managers in the smidcap arena. ClearBridge Select beats both its midcap growth category and Morningstar U.S. midcap growth index over the past five- and 10 years, says Morningstar Direct. This is no easy feat, in a mutual fund world where so many funds lag their benchmarks.

The timing for smidcap outperformance seems about right, since these stocks do well coming out of recessions. Technically, we have not recently had a recession. But there was an economic slowdown in the first half of the year, and the U.S. did have an earnings recession earlier this year. So that may count.

To get smidcap exposure, consider the funds of outperforming managers like Green, and if you want to throw in some individual stocks, Green is a great guide on how to find the best names in this space.

I recently caught up with him to see what we can learn about analyzing smidcaps. Below are four tactics that contribute to his fund’s outperformance, with nine company examples to consider.

1. Look for an entrepreneurial mindset: Green’s background gives him an edge in investing. He’s an entrepreneur who co-founded a software company called iCollege in 1997. It was bought out by BlackBoard in 2001. He knows how to understand innovative trends, identify a good idea, secure capital and quickly ramp up a business. This experience gives him a “private market mindset” that helps him pick stocks to this day.

“Founder-run companies regularly outperform.”

Green looks for managers with an entrepreneurial mindset. You can glean this from company calls and filings, but it helps a lot to meet management — something most individual investors cannot do. But Green offers a shortcut, one which I regularly use, as well. Look for companies that are run by founders. This will give you exposure to managers with entrepreneurial spirit.

Here, Green cites the marketing software company HubSpot
HUBS,
+0.79%,
a 1.9% fund position as of the end of the third quarter. It was founded by Massachusetts Institute of Technology college buddies Brian Halligan and Dharmesh Shah. They’re on the company’s board, and Shah is chief technology officer.

Academic studies confirm founder-run companies regularly outperform. My guess is this is because many founders never lose the entrepreneurial spirit, no matter how easy it would be to quit and sip Mai Tai’s on a beach after making a bundle.

In the private market, Green cites Databricks, a data management and analytics company with an AI angle. This competitor of Snowflake
SNOW,
-0.92%
is likely to go public in 2024. If you feel like an outsider because you lack access to private market investing, note that Green says he typically buys more exposure to private companies on the initial public offering (IPO), and then in the market. “We like to spend time with them when they are private so we can pounce when they are public,” Green says.

2. Look for organic growth: When companies make acquisitions their stocks often decline, and for good reason. Managers make mistakes in acquisitions because they overestimate “synergies.” Or they get wrapped up in ego-enhancing empire building.

“We favor entrepreneurial management teams that do not make a lot of acquisitions to grow, but use their resources to develop new products to keep extending the runway,” says Green.

Here, he cites ServiceNow
NOW,
+2.62%,
which has grown by “extending the runway” with new offerings developed internally. It started off supporting information technology service desks, and has expanded into operations management of servers and security, onboarding employees, data analytics, and software that powers 911 emergency call systems. Green obviously thinks there is a lot more upside to come, given that this is an overweight position, at 4.6% of the portfolio (the fund’s biggest holding).

Green also puts the “Amazon.com of Latin America” MercadoLibre
MELI,
+0.17%
in this category, because it continues to expand geographically and in areas such as logistics and payment systems. “They have really morphed into a fintech company,” Green says. He puts HubSpot and the marketing software company Klaviyo
KVYO,
-5.73%
in this category, too.

3. Look for differentiated business models: Green likes companies with offerings that are special and different. That means they’ll take market share, and face minimal competition. They’ll also enjoy pricing power. “This leads to high margins. You don’t have someone beating you up on price,” he says.

Green cites the decking company Trex
TREX,
+0.10%,
which offers composite decking and railing made from recycled materials. This gives it an eco-friendly allure. Compared to wood, composite material lasts longer and requires less maintenance. It costs more up front but less over the long term. Says Green: “The alternative decking market has taken about 20% of the market and that can get to 50%.”

Of course, entrepreneurs notice success, and try to imitate it. That’s a risk here. But Trex has an edge in its understanding of how to make the composite material. It has a strong brand. And it is building relationships with big-box retailers Home Depot and Lowe’s. These qualities may keep competitors at bay.

4. Put some ballast in your portfolio: Green likes to keep the fund’s portfolio balanced by sector, size, and business dynamic. So the portfolio includes the food distributor Performance Food Group
PFGC,
-1.69%.
The company is posting mid-single digit sale growth, expanding market share and paying down debt. Energy drinks company Monster
MNST,
-0.85%
also offers ballast. Monster’s popular product line up helps the company to take share and enjoy pricing power, Green says.

It’s admittedly unusual to see a food companies in a portfolio loaded with high-growth tech innovators. But for Green, it’s all part of the game plan. “Rapid growth, disrupting businesses are not going to work year in year out. There are times they fall out of favor, like 2022. So, having that balance is important because it keeps you invested in the equity market.”

In other words, keeping some ballast means you’re less likely to get shaken out by sharp declines in high-growth and high-beta tech innovators when trouble strikes the market.

Michael Brush is a columnist for MarketWatch. At the time of publication, he owned AMZN, TSLA and MELI. Brush has suggested AMZN, TSLA, NOW, MELI, HD and LOW in his stock newsletter, Brush Up on Stocks. Follow him on X @mbrushstocks

More: Nvidia, Disney and Tesla are among 2023’s buzziest stocks. Can they continue to sizzle in 2024?

Also read: Presidential election years like 2024 are usually winners for U.S. stocks

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December 17, 2023
Activision Blizzard to pay $55 million to settle California civil-rights lawsuit

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Videogame maker Activision Blizzard has agreed to pay nearly $55 million to settle a California civil-rights lawsuit brought over complaints of sexual harassment, discrimination and pay disparities by women employees that helped trigger the company’s acquisition by Microsoft.

The settlement, announced by the California Civil Rights Department on Friday evening, resolves the lawsuit filed against the “Call of Duty” videogame studio by the agency in 2021 over claims that it “discriminated against women at the company, including by denying promotion opportunities and paying them less than men for doing substantially similar work,” CRD said.

The agreement, subject to court approval, will see Activision pay nearly $46 million into a settlement fund dedicated to compensating women employees and contract workers at the company, plus more than $9 million in attorneys’ fees and costs. Additionally, Activision will take steps “to help ensure fair pay and promotion practices at the company,” including retaining an independent consultant to evaluate its compensation and promotion policies.

Yet the settlement also sees CRD withdraw its initial claims alleging a culture of widespread, systemic workplace sexual harassment at Activision, according to a copy of the agreement provided to MarketWatch. The document notes that the department is filing an amended complaint that removes the sexual-harassment allegations against the company and focuses on the gender-based pay and promotion claims.

CRD made no note of its prior sexual-harassment claims against Activision in its announcement Friday. A spokesperson for the department said the statement “largely speaks for itself with respect to the historic nature of this more than $50 million settlement agreement, which will bring direct relief and compensation to women who were harmed by the company’s discriminatory practices.

Representatives for Activision declined to comment.

The Wall Street Journal first reported the news of the settlement Friday.

The California agency’s complaint was one of several high-profile investigations by both state and federal regulators in recent years into alleged workplace misconduct at Activision and failures by its leadership to respond appropriately.

While Activision repeatedly denied the allegations, they ramped up pressure on the Santa Monica, Calif.-based company and its CEO, Bobby Kotick, and eventually led to a $68.7 billion takeover bid by Microsoft
MSFT,
+1.31%
in January 2022. The acquisition closed this October after receiving approval by U.K. and E.U. antitrust regulators, though the U.S. Federal Trade Commission continues to challenge the deal in court. Kotick is expected to leave the company, which he led for more than three decades, at the end of this year.

The settlement would be the second-largest ever for the California Civil Rights Department, according to the Journal, after its $100 million agreement with another Los Angeles-area videogame developer, Riot Games, to resolve gender-discrimination allegations in 2021. The agency had initially sought a much-larger settlement with Activision, the publication reported, citing how the state had estimated the company’s liability at nearly $1 billion to some 2,500 employees with potential claims.

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December 15, 2023
This is what we can expect to see from meme stocks in 2024

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It may be a couple of years since the meme-stock feeding frenzy hit its heights, but we’re still seeing occasional bursts of meme-like activity in number of stocks.

No discussion of meme stocks would be complete without OG AMC Entertainment Holdings Inc.
AMC,
-0.89%.
But while the movie theater chain and original meme stock darling still grabs plenty of attention, it no longer fits the bill of a meme stock, according to Alicia Reese, VP of equity research at Wedbush. “AMC has seemingly lost its meme status, its share price having come crashing back down to earth over the past several months, particularly since its APE fold-in and reverse stock split,” she said. “AMC is now trading at a more normalized valuation, even if still at the high-end of its pre-meme historic range.”

AMC’s shares ended Friday’s session at $6.65, a far cry from their high of $393.63 on June 2, 2021, during the meme-stock frenzy.

Related: AMC’s stock falls more than 5% after company completes $350 million equity offering

“AMC’s premium valuation here is driven in part by a sub-section of the shareholders it gained during its meme stage, who have remained loyal to the company and have long claimed to be AMC shareholders for life,” Reese added. “AMC shed all the rest of its meme-era shareholders and are now left with the lifers, along with some institutional shareholders now that valuation has come back to a more normalized range.”

The analyst thinks that in 2024, AMC will continue to issue pre-authorized shares to pay down its high-debt balance, as evidenced by the $350 million equity offering completed this week. “The company is focused on right-sizing the balance sheet, while attempting to maintain strong relations with the AMC lifers still propping up the stock,” said Reese.

Fellow original meme stock GameStop has also been in the news recently, with the company’s board of directors approving a new investment policy, which lets the company invest in equity securities, among other investments. The board also gave Chairman and Chief Executive Ryan Cohen the authority to manage the investment portfolio. The new policy was dubbed “alarming” and “inane” by Wedbush Managing Director Michael Pachter.

“If he can invest in anything – farmland, chicken feed, cryptocurrency – that’s not in the best interests of the shareholders,” he told MarketWatch. “Heaven knows what he will do.”

Related: GameStop’s plan to buy stocks with company cash ‘alarming’ and ‘inane,’ analyst says

As for GameStop, the analyst describes the videogame retailer as a declining business, pointing to the company’s third-quarter revenue of $1.078 billion, which was down from $1.186 billion in the prior year’s quarter. “They are shrinking, period, and they can’t save their way to prosperity,” he added.

The company’s new investment policy could also fuel more meme-style activity, according to Pachter, who says that Cohen’s moves will be closely watched. “He will invest in something and it will possibly become the next meme stock,” the analyst told MarketWatch.

Pachter pointed to Cohen’s decision in 2022 to unload his huge stake in beleaguered home goods retailer and sometime meme stock Bed Bath & Beyond Inc. just months after buying it. In August of that year Cohen sold his entire stake in Bed Bath & Beyond five months after accruing the stake in an activist campaign, amassing a profit of more than $58 million.

Stocktwits, a social platform for investors and traders, told MarketWatch that it has seen a dedicated core audience of retail investors stick with the likes of AMC and GameStop. “Message volume and sentiment have remained elevated on the platform throughout the year, with their audiences growing temporarily around earnings or other events that create volatility,” Tom Bruni, senior writer at Stocktwits, told MarketWatch.

Related: Small-cap Chinese stocks spark meme-like buzz

Retail traders are still on the lookout for high-volatility situations, according to Bruni, who cited the example of Vietnamese electric vehicle stock VinFast Auto Ltd.
VFS,
+13.54%,
which had a “crazy month” in August before crashing back down. “However, we would note that there have been fewer instances of these types of meme stocks occurring this year, and their lifespan tended to be pretty short,” he added.

“For stocks with the ‘meme’ potential in 2024, look to beaten-down areas of the market that already have strong retail investor communities around them,” Bruni told MarketWatch. “Several that stick out are electric vehicle stocks (specifically startups), solar stocks, or anything China-related. Traders will likely be looking for stocks at the intersection of these themes, like Lucid Group ($LCID), as potential ‘powder kegs’ for volatility in 2024.”

Shares of Lucid Group Inc.
LCID,
-7.20%
are down 30.2% in 2023, compared with the S&P 500 index’s
SPX
gain of 22.9%.

One thing is for sure – the social media dynamics that created the meme stock phenomenon are not going away. “Internet culture will continue to be more prevalent in markets as the world becomes more digitized and young people age into participation,” Tommy Tranfo, head of community at Stocktwits, told MarketWatch. “Crypto markets are an area where we expect to see a large concentration of this activity, particularly within the context of a crypto bull market, which will likely bring in a new wave of market participants who will skew toward the internet culture demo.”

Related: This EV company has a bigger market cap than Ford or GM. But you may not have heard of it.

“New crypto meme communities such as the $BONK (a dog-themed coin on the Solana blockchain) are already clear examples of this craze taking place,” he added.

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December 15, 2023
Hasbro to lay off more workers amid toy sales slump

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Hasbro Inc. is cutting about 900 jobs as the company is facing a slump in toy and game sales after a boom during the pandemic.

The cost-saving plan will result in “the reallocation of people and resources,” including early retirement for some employees and layoffs over the next two years, Hasbro
HAS,
+0.39%
said in a filing late Monday.

The Wall Street Journal reported the layoff plans earlier Monday, citing a memo it had viewed.

The maker of My Little Pony and Monopoly launched the plan in January, and at the time announced the layoffs of about 15% of its workforce.

It has booked about $94 million in expenses related to severance, stock compensation and employee benefits, and expects to book an additional $40 million, the company said in the filing Monday.

Hasbro in October missed third-quarter earnings expectations and slashed its full-year outlook, citing a “softer toy outlook.”

Shares of Hasbro and rival Mattel Inc.
MAT,
+0.05%
fell about 4% and 3%, respectively, in the extended session Monday, as the Wall Street Journal report also cited “early data points to another weak year” for the toy industry following the a boom during the pandemic.

Mattel in October reported a better-than-expected third quarter, thanks in part to its wildly successful Barbie movie.

Shares of Mattel have gained 6% this year, which contrasts with a 20% drop for Hasbro stock. Both stocks, however, have underperformed in relation to the S&P 500 index
SPX,
which is up about 20% in 2023.

In a February filing, Hasbro said it had about 6,500 employees worldwide as of the end of 2022.

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December 11, 2023

Domino's Pizza Backs Guidance, Eyes Opening More Stores

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By Najat Kantouar

Domino’s Pizza Group said it backed its fiscal 2023 guidance expecting accelerating growth through additional opportunities mostly in the U.K. and Ireland markets.

The pizza chain–the holder of the master franchise agreement to own, operate and franchise Domino’s stores in the U.K. and Ireland–said that it expects underlying earnings before interest, taxes, depreciation and amortization to be in the range of 132 million pounds ($165.6 million) to GBP138 million.

The company added that it still expects to open at least 60 new stores this year.

“Material progress has been made in recent years but there are a number of areas where we can significantly enhance growth,” Chief Executive Officer Andrew Rennie said.

Write to Najat Kantouar at najat.kantouar@wsj.com

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December 10, 2023

Shari Redstone reportedly in talks to sell Paramount parent to Skydance

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Media tycoon Shari Redstone is in talks to sell controlling interesting in Paramount parent National Amusements to media and entertainment company Skydance, Puck and the New York Times reported Sunday.

On Friday, shares of Paramount Global Inc. rallied 13% after Deadline reported Skydance and private-equity firm RedBird Capital were kicking the tires on National Amusement, which has a 77% stake in Paramount.

According to the Times, Redstone — the daughter of late Paramount CEO Sumner Redstone — has held talks with Skydance in recent weeks, though the Times said it was unclear if a deal would be reached.

Skydance, which is led by David Ellison, son of Oracle founder Larry Ellison, is one of Hollywood’s top independent studios, and has produced Paramount blockbusters such as “Mission: Impossible — Dead Reckoning” and “Top Gun: Maverick.” RedBird is a financial backer of Skydance.

A sale would be a major reversal for Redstone, who waged a bitter battle for control of the company in 2016, and who later led the effort to merge CBS Corp. and Viacom, which led to the creation of the current Paramount Global.

Deadline had reported that Skydance would be more interested in Paramount’s IP and movie studio, and could look to sell its TV assets, including CBS.

A deal could signal the start of a major shakeup across the media industry, as traditional TV companies are struggling to make money in the streaming age. Comcast Corp.
CMCSA,
-0.17%,
which owns NBCUniversal, could be looking to expand, while Warner Bros. Discovery
WBD,
+6.01%
could be a potential seller. Disney
DIS,
+0.84%
CEO Bob Iger recently floated the idea of selling ABC, but quickly walked that back.

Paramount Global shares
PARA,
+12.11%
have surged nearly 40% in the past month, but are still about flat year to date.

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December 10, 2023
Krispy Kreme has launched in Paris — and is already in trouble with the mayor's office

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Krispy Kreme has already run into trouble with the deputy mayor of Paris after opening its first store in the French capital this week.

The opening saw hundreds of Parisians flock to Krispy Kreme’s
DNUT,
+0.31%
new shop, which occupies a site that previously housed a restaurant run by Michelin-starred chef Alain Ducasse.

The North Carolina doughnut purveyor’s arrival in Paris, however, also attracted the ire of Deputy Mayor Emmanuel Grégoire, after the business put up a series of posters on the streets of Paris.

The Socialist Party politician slammed Krispy Kreme’s poster campaign for “littering the streets,” which he described as “illegal, polluting and costly for the community.” The so-called guerrilla marketing tactic of flyposting is illegal under French law.

“Prepare to get a big fine!” Grégoire said in response to a tweet celebrating the campaign that read: “Prepare to change your diet with @KrispyKremeFrr.”

The poster campaign was developed by advertising agency Buzzman Time, which has previously designed marketing campaigns for Burger King and Uber Eats.

The opening of Krispy Kreme’s Paris store marks the company’s first foray into France, which is now the second-biggest fast-food market in the world.

The New York–listed company, which was founded in 1937, plans to build 500 doughnut stalls across France over the next five years. Krispy Kreme doughnuts are currently available in 38 countries, including Cambodia, Myanmar and Kazakhstan. Its 379 locations in the U.S. are in 41 states and the District of Columbia.

According to its most recent financial results, Krispy Kreme generated $407 million in revenue in the third quarter of 2023, a 7.9% increase over the previous year.

Krispy Kreme and Buzzman Time have not responded to a request by MarketWatch for comment.

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December 8, 2023
Why Brenda Lee may not see much money from her No. 1 Christmas song

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In case you missed the news, the pop-chart star of the moment is Brenda Lee, a 78-year-old Rock & Roll and Country Music Hall of Famer whose 1958 holiday hit, “Rockin’ Around the Christmas Tree,” is remarkably now the nation’s No. 1 song, according to Billboard.

It all follows a major push by Lee’s label, Universal Music Group’s UMG Nashville/UMe
UMG,
+0.28%,
to bring the decades-old rockabilly-flavored song to the fore. That included releasing the first-ever video for the song, with cameos by country greats Tanya Tucker and Trisha Yearwood, plus a new EP.

But here’s a related story that could come as a surprise: Lee may stand to gain relatively little financially from her chart-topping success, according to a number of entertainment-industry attorneys and experts who spoke with MarketWatch.

David Schulhof, a veteran music-industry executive who is behind the MUSQ ETF MUSQ, an exchange-traded fund focused on the music business, said that Lee might take home $250,000 at best directly from recording royalties through her label.

Not quite the millions of dollars you might expect, in other words. And certainly not the estimated $2.5 million to $3 million that Mariah Carey rakes in annually from her holiday hit, “All I Want for Christmas Is You,” the song that has given Carey the unofficial title of “Queen of Christmas.”

But Lee’s case is not unique, Schulhof said. “A lot of these artists appear to be richer than they are,” he said.

MarketWatch reached out to Lee for comment through Universal Music, but didn’t receive an immediate response.

Lee did issue a statement through the company, however, saying, “This is amazing! I cannot believe that ‘Rockin’ has hit No. 1 65 years after it was released, this is just so special!…The song came out when I was a young teenager and now to know that it has resonated with multiple generations and continues to resonate — it is one of the best gifts I have ever received.”

A label spokesperson didn’t have immediate comment on the recent royalties generated by the recording.

Not that Lee’s royalty earnings this year may be anything to sneeze at — certainly, $250,000 is not a bad payday. But in general, the big money in the music business often goes to songwriters, Schulhof and others explain.

“The richer pot of the two is definitely the composer’s side,” Barry Chase, a Miami-based entertainment attorney, told MarketWatch.

That is, songwriters are guaranteed a solid chunk of royalties in most contractual arrangements. Indeed, the reason Carey does so well with “All I Want for Christmas Is You” is because she helped pen the hit, which is said to have earned her $60 million since its 1994 release. (That said, Carey is now facing a $20 million copyright lawsuit connected to the song.)

In the case of “Rockin’ Around the Christmas Tree,” the songwriter is the late Johnny Marks, who also penned such holiday hits as “Rudolph the Red-Nosed Reindeer,” “A Holly Jolly Christmas,” “Silver and Gold” and “I Heard the Bells on Christmas Day.” Marks’ catalog is now managed by his estate, with the songwriter’s son, Michael Marks, helping guide the business.

“Who would have thought?” Michael Marks told MarketWatch about the recent chart-topping success of “Rockin’ Around the Christmas Tree.” But he didn’t want to respond to other questions, saying, “This is a busy time for us.”

A key reason songwriters stand to benefit so much is that they receive money from radio play, whereas recording artists — and record labels — do not, explained Chase. And while radio is not as significant in the era of Spotify and other digital outlets, it still counts for something.

Chase says the radio arrangement was set in motion decades ago and that record companies didn’t push for money tied to airplay because they were eager for the exposure, which they saw as a way to drive sales of the singles or albums.

Other issues are also at play for recording artists that affect their earnings, experts explain. That’s especially true for older artists who signed contracts decades ago, when the industry was especially known for taking advantage of singers.

Further complicating matters: The artist contracts back in the day didn’t anticipate the advent of everything from digital platforms like Spotify to ringtones, all sources of royalty revenue, experts note. And while there might have been clauses that allowed for the potential of such future sources, there’s no saying those arrangements were fair.

“‘It takes a lot of streams to make money.’”

— Entertainment attorney Lisa Alter

Contracts can be renegotiated, of course — and often are, particularly if a label is trying to stay on good terms with an artist in anticipation of keeping them signed and making more hit records, industry professionals observe.

But when it comes to something like Spotify, the royalties still may not amount to much — reports say they can be between $0.003 to $0.005 per stream. And even then, the artist is splitting that streaming revenue with the record label.

“It takes a lot of streams to make money,” Lisa Alter, a partner and entertainment attorney with the New York-based firm Alter, Kendrick & Baron, told MarketWatch.

Schulhof throws another wrinkle into the equation: Often, a contract renegotiation involves the recording artist getting an upfront payment from the label in advance of future royalties. So, in theory, an artist like Brenda Lee could be receiving nothing in 2023 from her label, with the money having been paid out years ago, Schulhof said.

Lee can still mine her chart-topping success in other ways, however. Namely, through concert engagements, personal appearances and film, TV and advertising opportunities. Schulhof said that could easily add $100,000 to $150,000 in earnings this year, but probably not more.

But Holly Gleason, a veteran music journalist who knows Lee personally, said Lee is both “cute-as-a-button crazy” and sharp and smart — in other words, just the formula that would make her someone in demand for a variety of opportunities and someone who would know how to mine them properly.

And Gleason told MarketWatch that those opportunities could be endless. “Maybe she’ll be on QVC selling Christmas trees,” Gleason said.

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December 6, 2023
Taylor Swift is Time's person of the year

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You can’t shake this off: Taylor Swift is Time’s person of the year.

The pop star topped several other prominent contenders previously announced by the publication, from tech titan Sam Altman to Chinese President Xi Jinping. Even Barbie was on the shortlist.

But Swift, who was also recently named to the MarketWatch 50 list of financial movers and shakers, stood out for a number of reasons, according to Time.

Primarily, she was a positive force in a world rocked by so much negative news in the past year, said Time editor editor-in-chief Sam Jacobs.

“We picked a choice of someone who represents joy,” Jacobs said in an appearance Wednesday morning on NBC’s “Today Show.”

Swift’s “Eras Tour” proved to be one of the biggest events in pop history. Not only did the star sell out show after show, but her fans traveled throughout the country to attend the concerts. In all, it’s estimated that Swiftie spending tied to the tour reached $5 billion, with businesses large and small benefitting.

And that’s on top of Swift’s continued success on the pop charts, with her release of two albums, “Speak Now (Taylor’s Version)” and “1989 (Taylor’s Version).”

Swift’s relationship with Kansas City Chiefs tight end Travis Kelce has also been a buzzy story — and a financial boon for the National Football League.

Swift’s impact will likely extend far beyond 2023, of course. Her touring will continue in 2024. And as veteran music journalist Holly Gleason told MarketWatch, Swift is serving as an inspiration to a generation of young women.

“Whether you’re a little girl who wants to start a business or write a song or publish a book … whatever it is you want to do, she’s the role model that says, ‘Hell, yeah,’” Gleason said.

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December 6, 2023
TUI AG FY23 Rev EUR20.665B

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TUI swings to profit in fiscal 2023 on record revenue, bookings up 11%

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December 5, 2023
What to expect as Netflix, Disney and other big streaming names shift strategy

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Streaming customers are likely to see more familiar faces and less megabudget content in the coming year.

Shifting consumer tastes and corporate strategies portend changes in programming, with artificial intelligence looming in the background, as major streaming services consider how to use technology and new forms of programming without escalating annual multibillion-dollar content budgets.

“The big quandary is, how do we make [services] profitable? Things have shifted so dramatically and so quickly in how people consume,” Cole Strain, head of research and development at Samba TV, which tracks viewership of shows, said in an interview. “The streamers that find out what consumers truly want — they win.”

Streaming services are facing some big choices, noted Jacqueline Corbelli, CEO of software company BrightLine. “The cost of the content and the length of the content war will force them to make some major decisions. They are trying to figure it out,” she said in an interview.

“Great content has to be paid for, and investors want to see an increasingly efficient and profitable business,” she said, adding: “Right now the economics of these are at odds with one another.”

This year’s prolonged Hollywood strikes, the prevalence of up-close-and-personal sports documentaries and the increased licensing of older cable-TV shows are the most tangible evidence so far of how content is evolving. Throw in cost-cutting, and customers of services like Netflix Inc.
NFLX,
+0.28%,
Walt Disney Co.’s
DIS,
-1.33%
Disney+ and Hulu, and Amazon.com Inc.’s
AMZN,
+1.41%
Prime Video are looking at a vastly different content landscape.

What’s at stake? Streaming’s big guns continue to spend lavishly in the pursuit of engagement, which is the single most important metric in media. During its third-quarter earnings calls, Netflix said it would spend $17 billion on content in 2024, while Disney pledged $25 billion, including sports rights.

“‘I think when it comes to creativity, quality is critical, of course, and quantity in many ways can destroy quality.’”

— Disney CEO Bob Iger

Complicating matters and raising the urgency is the pressure, particularly at Disney, to cut costs. The very future of blockbuster movies is also in doubt in the wake of box-office misfires such as “Wish,” “Indiana Jones and the Dial of Destiny” and the latest Marvel entries, “Ant-Man and the Wasp: Quantumania” and “The Marvels.”

“One of the reasons I believe it’s fallen off a bit is that we were making too much,” Disney CEO Bob Iger said at a recent employee town hall meeting in New York City. “I think when it comes to creativity, quality is critical, of course, and quantity in many ways can destroy quality. Storytelling, obviously, is the core of what we do as a company.”

Also read: Disney CEO Bob Iger walks back comments about asset sales

Speaking at the New York Times DealBook Summit last week, Iger acknowledged that “the movie business is changing. Box office is about 75% of what it was pre-COVID.” Noting the $7 monthly fee for a Disney+ subscription, he said the experience of viewing content from home on large TV screens is both more convenient and less expensive than going to the movie theater.

Iger’s task is significantly more fraught than those faced by his rivals. He is in the midst of a turnaround at Disney aimed at making streaming profitable and is simultaneously fending off yet another proxy fight from activist investor Nelson Peltz.

Part of Iger’s plan is to slash costs. Of the $7.5 billion Disney intends to save in 2024, $4.5 billion will come out of the content budget. Previously, the company was aiming at a $3 billion content cut out of a total annual reduction of $5.5 billion. Disney plans to spend $25 billion on content in 2024, down from $27.2 billion in 2023 and a record $29.9 billion in 2022.

Read more: Bob Iger: ‘I was not seeking to return’ as Disney CEO

What streamers have done so far hews closely to the classic TV model of producing original movies and series, broadcasting live sporting events and throwing in licensed content, or syndication. They’ve also displayed a willingness to place ads on their services after vowing not to (in the case of Netflix) and have managed to mitigate spending on pricey sports rights with behind-the-scenes content.

Most prominently, Netflix has licensed older shows like USA Networks’ “Suits,” reintroducing the cast, including a then-unknown Meghan Markle, to solid viewership. “As the competitive environment evolves, we may have increased opportunities to license more hit titles to complement our original programming,” Netflix said in its third-quarter earnings statement.

During the company’s earnings call in October, Netflix co-CEO Ted Sarandos pointed to the historic streaming success of “Suits.” “This continues to be important for us to add a lot of breadth of storytelling,” he said. “Our consumers have a wide range of tastes, and we can’t make everything, but we can help you find just about anything. That’s really the strength.”

The success of “Suits” and of original sports programming, among several tweaks, indicates that consumers like what they see so far. Streaming additions at Netflix and Disney were significant — 8.76 million and nearly 7 million, respectively — during the recently completed third calendar quarter.

Read more: Netflix’s stock jumps more than 10% on huge spike in subscribers, price hikes

“There exist a lot of popular, good shows that people hadn’t seen before. HBO Max has licensed ‘Band of Brothers.’ ‘Yellowstone’ is on the CBS network after performing well on Paramount Global
PARA,
-2.76%
and Comcast Corp.’s
CMCSA,
-3.41%
Peacock,” Jon Giegengack, founder and principal of Hub Entertainment Research, said in an interview. “Consumers increasingly don’t care if a show is new, if they haven’t seen it before.”

On the sports front, Netflix and Amazon Prime Video have sidestepped expensive rights to live sporting events and instead produced docuseries such as Netflix’s “Quarterback” and “Formula 1: Drive to Survive” and Amazon’s “Coach Prime” and “Redefined: J.R. Smith.” Amazon also continues to air “NFL Thursday Night Football.”

Competition for eyeballs is tight with so many suitors — from Alphabet Inc.’s
GOOGL,
+1.33%

GOOG,
+1.35%
YouTube to TikTok, both of which are developing long-form content — and viewers face “too many streaming options,” said Brittany Slattery, chief marketing officer at OpenAP, an advertising platform founded by the owners of most of the large TV networks.

“There is a high churn rate, because consumers keep popping in and out of services because they can’t afford all these services,” Slattery said in an interview.

Also see: Here’s what’s worth streaming in December 2023: Not much new, yet still a lot to watch

Mark Vena, CEO and principal analyst at SmarTech Research, sums up the typical customer experience: “There are too many services for streaming. I will buy service for a month, watch a movie and then cancel.”

Using technology for a new experience

Major streamers are pinning many of their hopes on technology as a way to entice viewers and expand beyond the traditional TV model they’ve adopted. Strategies include mobile gaming (Netflix), gambling (Disney’s ESPN Bet) and shoppable media (Amazon).

The biggest near-term change would bring ESPN exclusively to streaming, perhaps as early as 2025, although big games would probably be simulcast on network TV to retain older viewers.

“Technology will be a major impetus for being in the winning circle,” said Hunter Terry, head of connected TV at global data company Lotame, pointing to Amazon’s shoppable-media strategy during Prime Video’s broadcast of an NFL game on Black Friday.

The NFL game, the first ever on a Friday, featured QR codes of Amazon ads for direct purchases via mobile devices and PCs, contributing greatly to what the e-commerce giant said was its best-ever sales day — 7.5% higher than Black Friday 2022. The game drew between 9.6 million and 10.8 million viewers, according to Nielsen and Amazon, making it the highest-rated show on Black Friday for young adults (18-34) and adults (18-49).

And what of generative AI, a major flashpoint in the writers and actors strikes that roiled Hollywood for months earlier this year? Creators feared generative AI would be used to produce low- and middle-brow entertainment without the need for writers, actors or production crew.

The technology is as intriguing to streamers as it is vexing. Full-blown adoption would rankle creators as well as customers. There are also limitations: AI-created content is lacking in humor and original thought, said David Parekh, CEO of SRI International, a leading research and development organization serving government and industry.

“The pressing question is, who goes first among the streamers and risks getting blowback from studios and consumers?” said Rick Munarriz, a contributing analyst at the Motley Fool who covers streaming-service stocks. “You don’t want to offend people, but there are tools to create ideas” at little cost.

AI and machine learning are already being used to mine data to find out what resonates with viewers.

“It is very hard to produce successful content,” said Ron Gutman, CEO of Wurl, which helps streamers and publishers monetize and distribute content, and which was recently acquired by AppLovin Corp.
APP,
-0.80%
for $430 million. “The market is so fragmented. The problem is connecting people to content.”

Straight to streaming?

Big-budget busts present another potential source of content, by salvaging unreleased movies, according to experts.

The so-called dust-bin option is the natural successor to straight-to-video and straight-to-pay-per-view movies. There has been some precedent, with the release of Disney’s superhero hit “Black Widow” simultaneously on streaming and in theaters in May 2021.

Will streaming services end up as the first stop for movies abruptly canceled before release? Candidates include “Batgirl,” which cost $90 million to make and was in post-production when Warner Bros. Discovery Inc.
WBD,
-4.57%
pulled the plug.

The same fate could also await two other shelved Warner Bros. movies, “Scoob! Holiday Haunt” and the completed “Coyote vs. Acme.”

While the $90 million “Batgirl” is a tax write-off, there could be upside to “Coyote” and “Scoob!” if they went to streaming without a costly marketing campaign, said SmarTech Research’s Vena.

Still, the long-term plans of streaming giants to meld tech to TV remains a ticklish task, said Wurl’s Gutman. “TV is a lean-back experience, not a lean-into technology medium,” he said. “People are looking at their phones while watching TV. It is a passive experience.”

Tracy Swedlow, founder and co-producer of the TV of Tomorrow Show conference, said: “They’ve been burning a candle at both ends, investing in original content as well as licensing long-tail content such as ‘Suits’ and ‘Breaking Bad.’ Something has to give.”

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December 5, 2023
Americans did a record amount of shopping on Thanksgiving. Here’s what they bought.

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Americans opened both their mouths and their wallets on Thanksgiving, doing a record amount of shopping on the annual day of giving thanks.

Consumers spent an all-time high of $5.6 billion shopping online on Nov. 23, up 5.5% compared with last year’s Thanksgiving, according to Adobe Analytics ADBE, which tracks ecommerce and mobile shopping.

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November 24, 2023
Walmart, Nvidia, Novo Nordisk, Vista Outdoor, GM, and More Stock Market Movers

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Stock futures pointed higher Friday as Wall Street returned for a shortened trading session following the Thanksgiving holiday. Retailers will be in focus on Black Friday, which marks the unofficial start to the Christmas shopping season.

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November 24, 2023
The best city for celebrating Thanksgiving? It’s San Francisco.

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The City by the Bay is the best place to enjoy a Thanksgiving bash, at least according to a new report.

The personal-finance website WalletHub ranked San Francisco as the top U.S. spot to celebrate Turkey Day. New York, home to the Macy’s Thanksgiving Day Parade, didn’t even crack the top 10 of the cities the site surveyed, landing instead in position No. 37.

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November 23, 2023
S&P 500 futures stall near four-month highs as traders eye Nvidia earnings

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U.S. stock futures on Tuesday showed the November rally stalling ahead of results from AI chipmaker Nvidia.

How are stock-index futures trading

On Monday, the Dow Jones Industrial Average DJIA rose 204 points, or 0.58%, to 35151, the S&P 500 SPX increased 33 points, or 0.74%, to 4547, and the Nasdaq Composite COMP gained 159 points, or 1.13%, to 14285.

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November 21, 2023
How Starbucks Lost the Top Spot in China’s Coffee Race

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Starbucks is losing its prime spot among chains racing to meet China’s growing thirst for coffee.

Luckin Coffee has surpassed Starbucks as China’s biggest coffee chain by sales and units, company reports show, a comeback for the Chinese company after an accounting scandal that stalled its growth.

Copyright ©2023 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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November 18, 2023
Everton handed 10-point deduction for breaching Premier League’s financial rules

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LONDON (AP) — Everton was deducted 10 points by the Premier League on Friday for breaching the competition’s financial rules.

The club reported three-year losses totaling nearly 372 million pounds ($454 million) last season. The league’s profit and financial sustainability rules allow clubs to lose a maximum of 105 million pounds ($128 million) over a three-year period or face sanctions.

Everton has 14 points after 12 games. The penalty drops the team to four points, which is the same as last-place Burnley.

The club said it was “shocked and disappointed” by the ruling and will be appealing against it.

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November 17, 2023
Plug Power, Trade Desk, Doximity, Unity Software, Illumina, Wynn, and More Stock Market Movers

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These Stocks Are Moving the Most Today: Plug Power, Trade Desk, Doximity, Unity Software, Illumina, Wynn, and More

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November 10, 2023
Unity Software’s stock skids 12% on revenue miss, uncertain outlook

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Unity Software Inc.’s stock fell about 12% in extended trading Thursday after the company reported a revenue miss and withheld from offering guidance.

“Our results in the third quarter were mixed,” Unity
U,
-3.15%
said in a letter to shareholders. “While revenue came in within guidance, we believe we can do better.”

The beleaguered game-engine software company has been whipsawed by a series of missteps and departures. In September, it announced new fees based on the number of people who install games built with Unity’s editor software — only to backtrack and revamp its plan following a chorus of complaints that dented the stock. Last month, John Riccitiello announced he was retiring as chief executive, effective immediately.

Also read: Opinion: Unity Software has a fleeting moment to win back developers — and investors

“While we did not expect the introduction of the fees to be easy, the execution created friction with our customers and near-term headwinds,” Unity said in the letter. “We expect the impact of this business-model change to have minimal benefit in 2024 and ramp from there as customers adopt our new releases.”

Unity executives are mulling several new strategies that include layoffs, a reduction in office space and product discontinuations, but it did not offer timing or guidance, according to the shareholder letter.

Unity reported a fiscal third-quarter net loss of $125.3 million, or 32 cents a share, compared with a net loss of $250 million, or 84 cents a share, in the year-ago quarter.

Revenue was $544.2 million, up from $322.9 million a year ago.

Analysts surveyed by FactSet had expected revenue of $554 million.

Shares of Unity have dipped 12% this year. The broader S&P 500 index
SPX,
-0.81%
is up 13% in 2023.

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November 9, 2023