Hollywood’s writers and studios have a preliminary labor agreement.
Talks between the Writers Guild of America and the Alliance of Motion Picture and Television Producers resumed last week after months of starts and stops, ultimately leading to a tentative deal that would end the ongoing writers strike.
The WGA and AMPTP are still drafting the final contract language.
“What we have won in this contract — most particularly, everything we have gained since May 2nd — is due to the willingness of this membership to exercise its power, to demonstrate its solidarity, to walk side-by-side, to endure the pain and uncertainty of the past 146 days,” the WGA negotiation committee wrote in a letter to members Sunday night. “It is the leverage generated by your strike, in concert with the extraordinary support of our union siblings, that finally brought the companies back to the table to make a deal.”
Striking members of the Writers Guild of America and supporters march toward the La Brea Tar Pits in Los Angeles, June 21, 2023.
Irfan Khan | Los Angeles Times | Getty Images
Hollywood scribes initiated a work stoppage in early May as negotiations broke down with studios including Disney, Paramount, Universal and Warner Bros. Discovery. Television and film writers sought protections against the use of artificial intelligence, in addition to increases in compensation for streamed content.
The WGA did not disclose what provisions ultimately made it into the preliminary contract, but told union members that “this deal is exceptional — with meaningful gains and protections for writers in every sector of the membership.”
Once the WGA and AMPTP agree on the language within the contract, the negotiating committee will vote on whether to recommend the agreement and send it to the Writers Guild of America West Board and the Writers Guild of America East Council for approval. Then, the board and council will vote on whether to authorize a contract ratification vote by membership.
WGA leadership noted that the strike is not over and no members of the guild are to return to work until the agreement is officially ratified. Members were encouraged to continue standing in solidarity with striking actors on the picket lines.
President Joe Biden, who often touts his pro-union stances, cheered the agreement as he prepares to head to a United Auto Workers’ picket line Tuesday in Michigan.
“This agreement, including assurances related to artificial intelligence, did not come easily,” Biden said in a statement released by the White House on Monday. “But its formation is a testament to the power of collective bargaining. There simply is no substitute for employers and employees coming together to negotiate in good faith toward an agreement that makes a business stronger and secures the pay, benefits, and dignity that workers deserve.”
Following negotiations with writers, the AMPTP will need to turn its attention to SAG-AFTRA. The acting guild’s members have been on strike since mid-July and are seeking contract updates similar to those requested by the writers.
Hollywood performers are looking to improve wages, working conditions, and health and pension benefits, as well as establish guardrails for the use of AI in future television and film productions. Additionally, the union is seeking more transparency from streaming services about viewership so that residual payments can be made equitable to linear TV.
“SAG-AFTRA congratulates the WGA on reaching a tentative agreement with the AMPTP after 146 days of incredible strength, resiliency and solidarity on the picket lines,” the Screen Actors Guild-American Federation of Television and Radio Artists wrote in a statement Sunday. “While we look forward to reviewing the WGA and AMPTP’s tentative agreement, we remain committed to achieving the necessary terms for our members.”
Disclosure: Comcast is the parent company of NBCUniversal and CNBC. NBCUniversal is a member of the Alliance of Motion Picture and Television Producers.
The company announced Friday that its streaming service — a part of Prime subscriptions that cost $14.99 a month — will now have limited ads in its TV series and movies.
Advertising on Prime Video, known for shows such as “The Boys” and “The Marvelous Mrs. Maisel,” will roll out in the U.S. and other cities in early 2024, with other countries to follow later in the year. If U.S. customers don’t want commercials, they will have to pay an additional $2.99 a month. Live events and sports will continue to feature ads in this tier, the company said in its announcement.
Prime customers will get an email in the weeks leading up to the advertising rollout, which will include the option to sign up for the ad-free tier.
“To continue investing in compelling content and keep increasing that investment over a long period of time, starting in early 2024, Prime Video shows and movies will include limited advertisements,” the company said in a post Friday.
Amazon said it plans to have “meaningfully fewer ads than linear TV and other streaming providers.”
Prime Video will now join rival streaming services, including Netflix, Warner Bros. Discovery‘s Max and Disney‘s Hulu and Disney+, that are leaning on advertising. The ad-supported options are not only giving consumers a cheaper option as the list of streaming apps grows, but are also bringing in an additional revenue source.
Media companies in particular have been trying a variety of ways to make the streaming business profitable, from advertising to password-sharing crackdowns to cost cutting.
Streaming behemoth Netflix switched gears late last year and began offering a cheaper, ad-supported plan. Netflix was slow to embrace advertising, but as subscriber growth slowed, the company instituted the option in an effort to boost revenue.
The company recently removed its cheapest, ad-free plan in a push to get more sign-ups for its ad option. Company executives have said the economics of its ad plan were higher than the basic plan, and that advertising is incremental to Netflix’s revenue and profit.
Hollywood writers and studios are reportedly near an agreement to end one of the months-long strikes that have brought production of TV shows and movies to a halt.
Citing sources close to the negotiations, CNBC reported Wednesday night that the two sides were close to a deal following a face-to-face meeting earlier in the day. The sides are reportedly optimistic that an agreement can be finalized Thursday. However, the report also said the strike could drag on through the end of the year if a deal is not reached.
People carry signs as SAG-AFTRA members walk the picket line in solidarity with striking WGA workers outside Netflix offices in Los Angeles, July 11, 2023.
Mario Tama | Getty Images News | Getty Images
Picket signs have lined the gates of Hollywood’s studios for nearly five months, as the industry’s writers and actors rally for AI protections, better wages and a cut of streaming profits.
The problem is streaming isn’t yet profitable for many studios.
Sparked by the creation of Netflix’s direct-to-consumer platform in 2007, streaming has upended the economics of the media industry. Yet, it’s still unclear whether it’s a sustainable business model for the future.
“Without sounding hyperbolic, the change in the economics of the North American media industry in the last five years has been breathtaking,” said Steven Schiffman, an adjunct professor at Georgetown University.
Legacy media companies like Disney, Warner Bros. Discovery, Paramount and NBCUniversal scrambled to compete with Netflix when it began creating original content in 2013 and slowly pulled market share over the next five years. The studios padded their platforms with massive content libraries and the promise of new original shows and films for consumers.
However, the subscription-based streaming model proves vastly different than the ad-revenue-fueled traditional TV bundle. High licensing costs and low revenues per subscriber quickly caught up with studios, which had previously placated shareholders with massive subscription growth.
Netflix was the first streamer to report a loss in subscribers in 2022, sending its stock and other media companies spiraling. Disney has followed suit. Since then, both have set subscription numbers aside in favor of advertising, a password-sharing crackdown and raising prices.
Media companies also have begun slashing content spending budgets. Disney CEO Bob Iger has promised the company will focus on quality over quantity when it comes to both its streaming and theatrical businesses, pointing to Marvel as an example of too much content.
Yet streaming remains the focus for all of these companies as consumers rapidly cut the cord and opt for streaming. To make up for the losses, media organizations are now relying on methods that once made the traditional bundle so successful.
“What’s the fundamental solution? In some way, shape or form, it’s everything brought together,” said CEO Ken Solomon of the Tennis Channel, owned by Sinclair, of the various business models in media. “It’s about understanding where to put a little more resources and how they all are glued together to satisfy the consumer.”
Two strategies media companies long relied upon — windowing content to various platforms and creating more cable channels to reap higher fees from the bundle — proved lucrative and still reap profits.
“This gun has been cocking itself for decades,” said Solomon, noting that the pay TV bundle was a good value proposition until it became too expensive for consumers. That gave Netflix an opening to upend how the entertainment industry makes and spends money.
Legacy media companies scrambled to follow suit, unsure if the model actually worked. But they were desperate to keep up with changing consumer demand, and in the process they depleted other revenue streams.
Now turmoil rules the industry. Companies like Disney and Warner Bros. Discovery are in the midst of reorganizations — slashing jobs and content costs while trying various ways to piece together profits.
An image from Netflix’s “Stranger Things.”
Source: Netflix
“All of these companies spent more money than they likely should have,” said Marc DeBevoise, CEO and board director of Brightcove, a streaming technology company.
Netflix, with a considerable head start, is the only company to make a profit off of streaming. “For everyone else, it’s still dictated by linear TV,” said UBS analyst John Hodulik. “That’s a problem as the decline in customers accelerates and streaming is not a big enough opportunity to offset that.”
Although subscriber growth initially ramped up streaming subscriber growth and bolstered many media stocks, it was short-lived. Fears of a recession, inflation and rising interest rates led Wall Street to reassess these companies and focus on profitability as subscriber growth slowed.
Netflix’s entrance into media signaled the beginning of a content arms race that, ultimately, hasn’t paid off for any media company.
Content spending ballooned across the industry, with each company spending tens of billions of dollars for new shows and films in an effort to lure in new subscribers — and keep the ones they already had.
“The networks had aligned with their streaming services and taken all the elasticity out of it. They were throwing money at a problem and hoping that it was going to solve itself,” said Solomon. “There was no economics behind it.”
Race to launch
Netflix — launched streaming service in January 2007, first original content launched February 2013
Hulu — launched streaming service in March 2008
Paramount+ — launched as CBS All Access in October 2014, rebranded as Paramount+ in March 2021
Disney+ — launched streaming service in November 2019
Peacock — launched streaming service in April 2020
Max — launched as HBO Max in May 2020, rebranded as Max in May 2023
There were also massive one-off licensing deals for shows like “The Office,”“Friends” and “Seinfeld,” which viewers were actively watching on repeat.
Studios even struck exclusive contracts with some of Hollywood’s biggest writer-producers — Ryan Murphy, Shonda Rhimes, J.J. Abrams, Kenya Barris and the duo of David Benioff and D.B. Weiss — in the hope that they could create new projects that could capture the attention of audiences.
Show budgets draw a lot of attention these days. But Jonathan Miller, a former Hulu board member and current CEO of Integrated Media, doesn’t recall that being a focus when it was just the four major broadcast networks creating all of the content.
DeBevoise, a former ViacomCBS (now Paramount) executive, said he doesn’t remember greenlighting a show, including “Star Trek Discovery,” in the mid-2010s at CBS for more than $10 million an episode, noting many were “much, much less expensive.”
Meanwhile, Solomon, who once ran Universal Studios Television, recalled when his budgets for top TV shows like “Law & Order” were below $2 million an episode. “I thought budgets were out of control back then,” he said.
Shonda Rhimes attends 2018 Vanity Fair Oscar Party on March 4, 2018 in Beverly Hills, CA.
Presley Ann | Patrick McMullan | Getty Images
Disney sought to capitalize on the success of its Marvel Cinematic Universe by developing more than a dozen superhero shows for its Disney+ platform. Although the seasons were shortened, often only six to 10 episodes, each episode cost around $25 million. Similar production budgets were seen for the company’s foray into the new live-action Star Wars TV series.
Netflix has poured money into multiple seasons of political drama “The Crown,” science fiction darling “Stranger Things” and a series based on The Witcher video game franchise. Production costs per episode for these series ranged from $11 million to $30 million.
And Warner Bros. Discovery is adding more Game of Thrones series to its catalog of direct-to-consumer offerings with “House of the Dragon,” which cost around $20 million per episode, and the upcoming “A Knight of the Seven Kingdoms: The Hedge Knight,” which has not begun filming.
Meanwhile, e-commerce giant Amazon shelled out a record $465 million on its first season of a Lord of the Rings prequel series, which was met with tepid responses from critics and fans alike.
“The price of content isn’t always determinant of success. ‘The Simpsons’ were crudely animated initially, right? So, it’s not necessarily that if you go spend a lot of money, it works,” Solomon said.
Bart Simpson plays esports in an episode of “The Simpsons” that aired on March 17, 2019.
Fox
At the same time the economics for actors, writers and the industry as a whole changed.
“The problem is that the cost increases don’t make sense given the revenue models. Something got broken in this part of the business if that kind of increase happened and actors and writers don’t feel like they got their fair share,” DeBevoise said.
While many of Hollywood’s biggest studios are publicly traded and must share quarterly financial reports, there are no rules about providing streaming-viewership data. This lack of transparency has made recent contract negotiations between studios and the industry’s writers and actors especially contentious.
“There’s a frustration about how these people can get together and share this information and come up with something that is reasonable for both sides,” said Schiffman, the Georgetown professor. “But until that happens, in my view, this thing goes on until next year.”
Streaming studios, in particular, have long been reluctant to share data around viewership and don’t want compensation to be tied to the popularity of shows, including those that have been licensed from other studios.
This is in stark contrast to how linear television has handled popular shows. Traditionally, studios pay residuals, long-term payments, to those who worked on film and television shows after their initial release. Actors and writers get paid every time an episode or film runs on broadcast or cable television or when someone buys a DVD or Blu-ray Disc.
When it comes to streaming, there are no residual payments. Studios that get a licensing fee pass on a small sum to actors and writers, but no additional compensation is given if the show performs well on the platform. Actors, in particular, are looking to change this.
“Why I think the streaming model has been a difficult model for the actors and writers, and I was part of helping that model, is that there was a fundamental shift of long-term versus short-term economics that likely wasn’t properly understood or explained,” said DeBevoise.
Media companies’ effort to make streaming profitable is drawing out many of the old business models that were successful in the past.
The subscription streaming model is being subsidized now by tried and true models like advertising, licensing content to other platforms, cracking down on password sharing, and windowing content to different platforms with longer stretches of time in between.
“Netflix understood finally, because of the Street, that subscriber numbers don’t mean jack, if the economics don’t pencil out,” said Peter Csathy, founder and chair of advisory firm Creative Media.
Even the pay TV bundle, despite rampant cord cutting by consumers, remains a reliable source of revenue.
The recent dispute between Charter Communications and Disney highlighted this fact, and led to Disney+ and ESPN+ being bundled with some pay TV subscriptions.
“We, the distributors, are funding the streaming experience. And it’s frankly a better content experience on streaming than what is provided to us on linear TV,” said Rob Thun, chief content officer at DirecTV. “These companies will cease to exist without the funding of distributors’ licensing fees. Perhaps this is a moment of awakening.”
Disney and even Netflix, which long resisted ads, are among the companies relying more on ad-supported offerings to boost subscriber growth and bring in another revenue stream, even as the ad market has been soft.
This is especially true as free, ad-supported streaming services like Fox Corp.’s Tubi and Paramount’s Pluto — which are likened to broadcast networks — have also exploded. Besides the parent companies leaning on the ad revenue from these platforms, other media companies, like Warner Bros. Discovery, are funneling content there for licensing fees.
“In terms of the business models, they all ‘work,’” said DeBevoise. He noted paid tiers for the more expensive, timely content will remain, while free and options with commercials will support the older library shows and movie. “There are going to be hybrid models that reincarnate the dual-revenue cable TV model with both a subscription fee and ads. It’s all going to be about price-to-value and time-to-value for the consumer.”
Disclosure: Comcast is the parent company of NBCUniversal and CNBC.
Chief executive officer of The Walt Disney Company Bob Iger and Mickey Mouse look on before ringing the opening bell at the New York Stock Exchange (NYSE), November 27, 2017 in New York City.
Getty Images
Usually when a person or company sells something, the primary motivation is getting back as much money as possible.
Disney‘s motivation to potentially sell ABC and its owned affiliates, linear cable networks and a minority stake in ESPN isn’t predicated on what these assets will fetch in a sale. It’s about signaling to investors the time has come to stop thinking about Disney as old media.
Disney’s market capitalization is about $156 billion. The company has about $45 billion in debt. Selling assets can help the entertainment giant lower its leverage ratio while buffering the continued losses from its streaming businesses.
Still, that’s not the prime rationale for why Disney Chief Executive Bob Iger told CNBC in July he’s contemplating selling off media assets — something he’s long resisted. Rather, a sale of ABC and linear cable networks would be a message to the investment community: The era of traditional TV is over. Disney is ready for its next chapter.
“Disney almost has a good bank and a bad bank at this point,” Wells Fargo analyst Steven Cahall said in a CNBC interview. “Streaming is its future. It’s its strongest asset, next to the parks. The linear business is something Disney has clearly signaled is going to be in decline. They’re not looking to necessarily protect it. If they can move some of that lower, negative-growth business off of the books and to a better, more logical operator, we think that’s good for the stock.”
Nexstar has held preliminary conversations with Disney to acquire ABC and its owned and operated affiliates, Bloomberg reported Thursday. Media mogul Byron Allen has made a preliminary offer to pay $10 billion for ABC and its affiliates along with cable networks FX and National Geographic, according to a person familiar with the matter.
Disney released a statement Thursday saying “while we are open to considering a variety of strategic options for our linear businesses, at this time The Walt Disney Company has made no decision with respect to the divestiture of ABC or any other property and any report to that effect is unfounded.”
The value of broadcast and cable networks has significantly declined from the 1990s and early 2000s as tens of millions of Americans have canceled cable in recent years.
Cahall values ABC and Disney’s eight owned affiliate networks at about $4.5 billion. That’s a far cry from the $19 billion Disney paid for Capital Cities/ABC in 1995 — the deal that brought Iger to the company.
ESPN has a valuation of about $30 billion, according KeyBanc Capital Markets analyst Brandon Nispel, “though we view it as a melting iceberg,” he added in a September note to clients. LightShed analyst Rich Greenfield values ESPN at closer to $20 billion.
Disney would like to keep a majority stake in ESPN, Iger told CNBC. It currently owns 80% of the sports media business, and Hearst owns the other 20%.
Disney’s most interesting decision may be deciding what to do with the ABC network. The company can easily sell off its eight owned and operated affiliate stations — located in markets including Chicago, New York and Los Angeles — without changing the trajectory of the media industry.
But divesting the ABC network would be a bold statement by Disney that it sees no future in the broadcast cable world of content distribution.
Selling ABC would be particularly jarring given Iger’s comments both to CNBC and in Disney’s last earnings conference call that he wants the company to stay in the sports business.
“The sports business stands tall and remains a good value proposition,” Iger said last month during Disney’s third-quarter earnings conference call. “We believe in the power of sports and the unique ability to convene and engage audiences.”
There’s clear value, at least for the next few years, in keeping a large broadcast network for major sports leagues. NBCUniversal executives hope ownership of the NBC network will convince the NBA that it should be cut into a new rights agreement to carry NBA games. NBC is a free over-the-air service and can increase the league’s reach, they plan to argue. Even if the world is transitioning to streaming, millions of Americans still use digital antennas to watch TV.
Currently, ESPN and ABC split sports rights. Selling ABC may trigger certain change-of-control provisions that force existing deals with pay TV operators or the leagues to be rewritten, according to people familiar with typical language around such deals.
Moving on from the network also may obstruct ESPN’s ability to land future sports rights deals. Without ownership of ABC, leagues may choose to sell rights to other companies, thus further weakening ESPN.
If Iger is true to his word and Disney stays in the sports broadcasting business, the company will have to weigh the negative externalities of losing ABC with the positive gains of showing investors it’s serious about shedding declining assets.
“Obviously, there’s complexity as it relates to decoupling the linear nets from ESPN, but nothing that we feel we can’t contend with if we were to ultimately create strategic realignment,” Iger said last month.
If Disney does land a deal to sell ABC, and investors cheer the move, it may also function as a catalyst for other large legacy media companies to sell their declining assets. NBCUniversal, Paramount Global and Warner Bros. Discovery all have legacy broadcast and cable networks in addition to their flagship streaming services.
Disney may become the leader in pushing the industry forward.
“We see this as a real bullish sign at Disney.” said Cahall. “There’s a lot going on now at Disney, between ESPN and partnerships and divesting some of this stuff. Disney is suddenly feeling a little more catalyst-rich than it was recently.”
– CNBC’s Lillian Rizzo contributed to this article.
Disclosure: Comcast owns NBCUniversal, the parent company of CNBC.
WATCH: Nexstar could ‘no doubt’ take ABC and monetize it really well, says Wells Fargo analyst
It was the night cable TV went out across most of America.
Late Thursday, all Disney channels, including ESPN and ABC, went dark on Charter Communications Inc.’s CHTR, -3.16%
Spectrum cable service as discussions over affiliate renewals hit an impasse — in the middle of the U.S. Open and college football season, and with the NFL regular season kicking off this Thursday night on NBC.
The carriage dispute between Charter and Walt Disney Co. DIS, -0.55%
threatens to upend business for both companies and dramatically reshape both the pay-TV and streaming ecosystems, and it could also spill over to affect content distributors and millions of consumers. The result will likely be far less spending on content from media and entertainment companies, including on sports and original programming.
If Charter exits the TV business altogether, millions of homes are likely to abandon the pay-TV bundle, potentially speeding its decline as other, smaller TV providers follow suit, analysts said.
“If Charter can drop ESPN, then any network (broadcast station or cable network) can be dropped,” analysts at LightShed Partners said in a note Tuesday. “Nobody is safe and the leverage will have permanently shifted to the distributor not because content is no longer king, but because too much content no longer requires the big video bundle and because the video bundle no longer is economically viable for distributors.”
Indeed, the pandemic-era boom that streaming services enjoyed is unlikely to return. Netflix Inc. NFLX, +2.00%
recently introduced an ad-supported tier while cracking down on password sharing. Disney also announced higher prices last month.
“The collateral damage could be wide-ranging from sports leagues with rights coming up for renewal, local TV station affiliates seeking material step-ups and creative talent tied to the programming investments made by linear networks,” MoffettNathanson analysts Michael Nathanson and Craig Moffett said in a report Friday.
Cable TV system needed a reset
Billions of dollars and hours of must-see-TV time are at stake. The conflict boils down to two issues: How much the carrier will pay per channel, and what percentage of a distributor’s footprint will be required to have the channel in their package.
The showdown was inevitable, with murmurings the cable TV model was fundamentally broken and with programmers like Disney continuing to pursue direct-to-consumer options. For example, Disney has indicated it plans to take ESPN, its most valuable property in the pay-TV bundle, direct to consumers in the coming years.
The conflict “marks the beginning of the end of the media-carriage bundle extortion on [multichannel video programming distributor services], and does not bode well for other networks that are perceived to have far less clout than Disney,” Raymond James analyst Frank G. Louthan IV said in a note on Friday.
Oppenheimer analysts went so far as to deem the dispute a “tipping point” for legacy TV and a defining moment for Charter, the country’s second-largest cable TV provider with 14.7 million subscribers.Media providers like Disney are transitioning to over-the-top (OTT) TV — streaming content via the internet — but are still expecting cable providers such as Charter to keep paying the same amount for legacy TV, the analysts said.
“The linear TV business model is broken. The only thing that can save it somewhat longer term is by combining and bundling with OTT services,” the Oppenheimer analysts said.
The impasse has Disney executives urging Charter subscribers to ditch the cable giant for Hulu with Live TV, which offers EPSN, ABC, Disney+ and other channels. Disney owns two-thirds of Hulu.
“Disney deeply values its relationship with its viewers and is hopeful Charter is ready to have more conversations that will restore access to its content to Spectrum customers as quickly as possible,” Disney executives wrote in a blog post late Monday. “However, if you are one of these frustrated customers, it can be infuriating to not be able to access the content you want. Luckily, consumers have more choices today than ever before to immediately access the programming they want without a cable subscription.”
Charter has remained firm that it is prepared to abandon its video business.
“We’re on the edge of a precipice. We’re either moving forward with a new collaborative video model, or we’re moving on,” Charter CEO Chris Winfrey said on a conference call with Wall Street analysts Friday morning. “This is not a typical carriage dispute. It’s significant for Charter, and we think it’s even more significant for programmers and the broader video ecosystem.”
Looking to spend your entertainment dollars wisely in September? Watch Hulu and read a book or two.
That pretty much sums up a hugely underwhelming lineup from streaming services, which burned through their best shows in the spring and have little to offer for the start of the traditional fall TV season. That’s not to say there aren’t a handful of promising shows — there are — but is one decent new show per service worth the price of multiple monthly subscriptions? Almost certainly not.
Tencent sign is seen at the World Artificial Intelligence Conference (WAIC) in Shanghai, China July 6, 2023.
Aly Song | Reuters
BEIJING — Corporate earnings releases are picking up on a few bright spots for China’s consumer in a competitive market where people are less willing to open their wallets.
JD.com, Tencent and Alibaba this month reported results for the three months ended June that pointed to a steady pick-up in consumer spending that quarter, but with less clarity on whether that growth has continued.
Here’s where companies said they saw consumer-related growth, according to public disclosures and FactSet transcripts of earnings calls:
Livestreaming e-commerce saw 150% year-on-year growth in gross merchandise value in the second quarter to an unspecified number. GMV measures total sales value over a certain period of time.
On an annualized basis, that livestreaming GMV “is in the tens of billions” yuan.
WeChat Mini program e-commerce has GMV “in the trillions” of yuan on an annualized basis. GMV for physical products has exceeded 1 trillion yuan on an annualized basis.
Advertising revenue across all categories — except automotive — is up double-digits from a year ago in recent weeks. Ad sales rose by 34% to 25 billion yuan in the quarter ended June.
Overall, Tencent reported earnings for the quarter that missed expectations, but showed a third-straight quarter of revenue growth.
Direct China commerce sales, primarily from Tmall Supermarket and Tmall Global, grew by 21% year-on-year to 30.17 billion yuan.
The overall Taobao and Tmall Group saw revenue grow by 12% to 114.95 billion yuan.
A recovery in offline shows and the movie theater box office boosted Alibaba’s ticketing and movie studio units. Video platform Youku also saw subscription revenue rise. In all, digital media and entertainment revenue surged by 36% year-on-year to 5.38 billion yuan — and its first profitable quarter.
Local services revenue rose by 30% to 14.5 billion yuan. That was driven by orders on food delivery app Ele.me and growth in Alibaba’s map app Amap, which sells services such as ride-hailing and hotel booking.
Alibaba management did not provide much detail on the state of the consumer since the end of June.
Data for July have pointed to a slowdown in China’s economy, including a modest 2.5% year-on-year increase in retail sales.
Theme parks, however, have done well as tourism has picked up domestically.
Shanghai Disney saw record high revenue, operating income and margin during the latest quarter, the company said.
Read more about China from CNBC Pro
Universal Studios Beijing “enjoyed its most profitable quarter,” Comcast said. The park opened in September 2021, during the pandemic.
Listed companies don’t capture all major channels for online spending in China. ByteDance, which is not publicly listed, has become another e-commerce platform through its Douyin app, the local version of TikTok.
Consumers in China spent 1.41 trillion yuan in purchases from merchants on Douyin, up 76% from the previous year, according to The Information. ByteDance did not immediately respond to a request for comment.
ByteDance’s smaller rival Kuaishou is set to release earnings Tuesday, as are Chinese tech giant Baidu and video content platform iQiyi. E-commerce giant Pinduoduo has yet to announce when it’s scheduled to release earnings.
Other companies in China, or those with exposure to China, have showed some pockets of growth, albeit compared to a low base in 2022 when the metropolis of Shanghai was locked down for two of the three months in the second quarter.
The Chinese sportswear company said its Anta brand retail sales value rose by high single digits in the second quarter from a year ago. Its Fila brand saw high teens growth year-over-year. The company’s Descente, Kolon Sport and other brands saw growth of 70% to 75% year-on-year.
Apple CEO Tim Cook said the iPhone maker saw “an acceleration‘’ in China, with 8% year-on-year quarterly sales growth to $15.76 billion. That’s a reversal of a 3% year-on-year drop in the prior quarter.
The company said it saw “a June quarter record in Greater China” in the wearables, home and accessories category, as overall product group saw sales increase by 2% year-on-year to $8.3 billion.
Former Goldman Sachs CEO Lloyd Blankfein said he couldn’t imagine returning to his old firm, disputing a news report that said Blankfein offered to return in some capacity.
The New York Times piece “misquoted” Blankfein told CNBC Monday in a phone conversation.
The Times reported Friday that Blankfein told his successor, David Solomon, in a June phone call that he was growing impatient with the firm’s progress. He could return to help their efforts, the Times reported.
“My conversation with him was, I offered to be helpful,” said Blankfein, who expressed support for Solomon. “I never used the word ‘return’.”
A New York Times representative didn’t immediately return a request for comment.
Solomon, who took over from Blankfein in October 2018, has been under fire for months for an ill-fated consumer banking effort. Current and former Goldman executives have leaked damaging details to the press about losses tied to the strategy, as well as embarrassing anecdotes about Solomon’s leadership style and DJ hobby.
When asked if he would return to helm Goldman, as CEOs at Disney and Starbucks have done in recent years, Blankfein laughed and said it never came up in conversation.
“I can’t imagine returning to the firm,” Blankfein said. “I think my days working 100-hour weeks are over.”
Blankfein then said he couldn’t speak further as he was in the midst of one of his retirement pursuits — playing a round of golf.
““We are actively exploring ways to address account sharing and the best options for paying subscribers to share their accounts with friends and family.””
— Disney CEO Bob Iger
Pour another one out for streaming freeloaders.
Netflix Inc. NFLX, -2.14%
has been cracking down on account-sharing, and now Walt Disney Co. DIS, -0.73%
is likely to follow suit.
Bob Iger, the media giant’s chief executive, said Wednesday that the company was “actively exploring” how to tackle the fact that many streaming subscribers on Disney+, Hulu and ESPN+ share passwords and accounts with loved ones.
“Later this year, we will begin to update our subscriber agreements with additional terms on our sharing policies, and we will roll out tactics to drive monetization sometime in 2024,” he said, according to a transcript provided by AlphaSense/Sentieo.
Whereas Netflix suggested that it could be housing 100 million global account borrowers, Iger declined to put a number on Disney’s own base of password sharers, “except to say that it’s significant.”
“What we don’t know, of course, is as we get to work on this, how much of the password-sharing, as we basically eliminate it, will convert to growth” in subscribers, he said. “Obviously, we believe there will be some, but we’re not speculating.”
The company plans to “get at this issue” next calendar year, and the initiative could have some impact on Disney’s business in that period.
“It’s possible that we won’t be complete or the work will not be completed within the calendar year, but we certainly have established this as a real priority, and we actually think that there’s an opportunity here to help us grow our business,” Iger continued.
Disney is making a big push to improve the financials of its streaming business, after spending the stay-home pandemic era focused on raw subscriber growth. Now the company is targeting streaming profitability by the end of fiscal 2024, and it just announced a new round of price hikes in pursuit of that goal.
“We grew this business really fast, really before we even understood what our pricing strategy should be or could be,” Iger commented. In the past six months, the company has started to pursue a pricing strategy “that’s really aimed at enabling us to improve the bottom line, ultimately to turn this into a growth business.”
Netflix is farther along in its efforts, and it’s won praise from Wall Street for them. Executives at the streaming giant indicated early success with Netflix’s broad password-sharing crackdown, though it will take time for the impact to fully manifest in the company’s financials.
Analysts got to the point early and often during a conference call late Wednesday: What are Disney Chief Executive Robert Iger’s M&A plans, particularly following reports that former Disney executives Kevin Mayer and Tom Staggs, now co-CEOs of Blackstone-backed Candle Media, have been retained in a “consulting capacity” to decide ESPN’s fate?
The prospect of an Apple-Disney combo seems far-fetched in a heated regulatory climate, where the Federal Trade Commission is attempting to crack down on Big Tech acquisitions, but it could happen should Disney sell off assets and Apple gobbles up Disney’s direct-to-consumer business that includes streaming service Disney+, some media analysts speculate. Apple could conceivably even buy ABC, which reportedly is on the block. But the path is long and circuitous.
Yet the rumors persist, dating back to Apple co-founder Steve Jobs’ reverence for the Disney brand, and the increasingly overlapping businesses of both companies over the years.
When pressed by analysts during a conference call late Wednesday, Iger declined to discuss the future of Disney’s structure or possible asset sales. When asked if Disney might “plausibly” be snapped up by one company — read Apple — an exasperated Iger said he would not “speculate” on the sale of Disney to a technology company or anyone else, given the current global stance of regulators. The FTC has aggressively challenged mergers from the likes of Microsoft Corp. MSFT, -1.17%
and Facebook parent Meta Platforms Inc. META, -2.38%,
with limited success.
Since Iger hinted at the potential sale of Disney’s assets in an interview with CNBC last month, rumors have swirled around ESPN.
ESPN and related properties likely could command at least one-third of Disney’s current depressed market cap of about $150 billion, say some media watchers, though Iger has denied ESPN is for sale. He has acknowledged “the sports leader” is seeking “strategic partners” — possibly with the NFL, MLB, NBA and NHL — to generate revenue. Late Tuesday, ESPN stuck up a deal with Penn Entertainment Inc. PENN, +9.10%
to create ESPN Bet, a digital sportsbook to launch in the fall in 16 states.
Another possible property being dangled is ABC. But with rights to the NBA Finals and two Super Bowls in the next eight years, it is unclear who would acquire the network and how Disney would replace lucrative sports revenue.
Other properties on the block include cable channels Freeform and Disney Channel, according to a report by the Wall Street Journal.
“If an asset sale happens, will the proceeds be deployed into fortifying its balance sheet or beefing up its remaining operations?” Rick Munarriz, senior media analyst at The Motley Fool, said in an email.
Disney, which is in the midst of a $5.5 billion cost-cutting campaign, is exploring several avenues to prop up sales as linear TV ads shrink, Disney+ subscriptions decline and attendance at Walt Disney World wanes.
Shares of Disney are trading at half their highs from a few years ago, in large part because of dwindling sales and profits at ESPN and Disney’s other cable networks.
Enter Mayer, who previously ran Disney’s strategic planning group for years and engineered a trifecta of mega deals: The acquisition of the aforementioned Pixar Animation Studios from Steve Jobs for $7.4 billion in 2006, the purchase of Marvel Entertainment for $4 billion in 2009, and the acquisition of Lucasfilm for $4.05 billion in 2012. Mayer also led the $71.3 billion acquisition of 20th Century Fox’s entertainment assets in 2019, which has drawn mixed reviews.
Walt Disney Co.’s stock dipped in after-hours trading Wednesday after the company posted mixed quarterly results roughly in line with analysts’ expectations amid a cost-cutting frenzy.
Separately, Disney said it is hiking prices on almost all of its streaming packages in an aggressive push to boost its bottom line. Commercial-free Disney+ will cost $13.99 per month, a 27% increase, beginning Oct. 12. Ad-free Hulu will increase 20% to $17.99 per month. A new Disney+ and Hulu Bundle ad-free plan launches Sept. 6 for $19.99.
The media giant DIS, -0.73% reported a fiscal third-quarter loss of $460 million, or 25 cents a share, mostly because of restructuring and impairment charges. After adjusting for restructuring costs and other effects, Disney reported earnings of $1.03 a share. Revenue grew 4% to $22.3 billion from $21.5 billion a year ago.
Analysts surveyed by FactSet had on average expected adjusted earnings of 96 cents a share on revenue of $22.5 billion. Disney shares declined about 3% in after-hours trading immediately following the release of the report, after dropping 0.7% to $87.52 in the regular session.
“Our results this quarter are reflective of what we’ve accomplished through the unprecedented transformation we’re undertaking at Disney to restructure the company, improve efficiencies and restore creativity to the center of our business,” Disney Chief Executive Robert Iger said in a statement announcing the results. Disney is in the midst of a $5.5 billion cost-cutting plan overseen by Iger, who returned to the CEO position to right the ship in late 2022.
Direct-to-consumer (DTC) sales, which includes streaming services and some international products, hauled in $5.5 billion, compared with analysts’ forecast of $5.7 billion on average and last year’s total of $5.05 billion. The division did reduce its quarterly losses to $512 million, compared with $1.06 billion a year ago. Analysts were expecting a loss of $758 million.
Still, the company has lost more than $10 billion in its DTC segment since launching Disney+ in late 2019. Disney had told investors for three years it expects Disney+ to be profitable by September 2024. During a conference call with analysts late Thursday, Iger said Disney is “actively exploring” options to crack down on account sharing when the company updates subscriber agreements later this year and will “roll out tactics to drive monetization” in 2024.
The company’s iconic theme parks around the world and product-sales business increased to $8.3 billion in revenue from $7.4 billion a year ago. The average analyst estimate was $8.1 billion.
Disney’s largest business segment, media and entertainment distribution, raked in $14 billion during the quarter, down from $14.1 billion a year ago. Analysts on average predicted $14.3 billion, according to FactSet.
Disney’s television networks generated sales of $6.7 billion, while analysts’ average estimates called for $6.74 billion. Content sales and licensing, a category that includes Disney’s film business, reported revenue of $2.1 billion, compared with analysts’ expectations of about $2.15 billion.
In the weeks leading up to Disney’s results, there has been a whirlwind of fear and doubt over the current state of the company’s streaming services — including ESPN — as well as linear-TV ad sales, the actors’ and writers’ strikes that have shut down Hollywood, Disney’s theme parks and its legal and political battle with Florida Gov. Ron DeSantis.
Front and center is the health of Disney+ as it battles streaming rivals like Apple Inc. AAPL, -0.90%,
Netflix Inc. NFLX, -2.14%,
Amazon.com Inc. AMZN, -1.49%,
Warner Bros. Discovery Inc. WBD, -2.15%
and Comcast Corp. CMCSA, -0.26%.
Macquarie Equity Research analyst Tim Nollen believes in Disney’s streaming services over the long term but said “we see too many near-term issues to overcome to support a more constructive view.”
Disney+ had 146.1 million subscribers globally, 7% fewer than the 157.8 million it had in the previous quarter. The decline mostly came from India, where Disney lost the rights to stream a popular cricket league last year.
Disney and DeSantis, who is running for the 2024 Republican presidential nomination, have filed dueling lawsuits that stem from the company’s criticism last year of a Florida law that bans classroom discussion of sexuality and gender identity with younger children. Earlier this week, a group of mostly former Republican high-level government officials called DeSantis’s takeover of Disney World’s governing district “severely damaging to the political, social, and economic fabric” of Florida.
The somber vibe prompted Deutsche Bank analysts on Tuesday to lower their price target on Disney shares 8% to $120, with “lower advertising revenue, underperformance at the box office, and lighter parks attendance in Orlando” chief among their concerns.
“This is Iger’s most important earnings call since returning to Disney late last year. He came in with a punch list that was too long to realistically knock off in two years,” Rick Munarriz, an analyst at the Motley Fool, said in an email. “Now the board has given him four years, and every word he uses during Thursday afternoon’s earnings call has to carry some serious heft.”
Disney’s call was to start at 4:30 p.m. Eastern.
Shares of Disney have inched up 0.7% this year, while the S&P 500 SPX
has climbed 16%.
Members of the Writers Guild of America and the Screen Actors Guild walk the picket line outside of Disney Studios in Burbank, California, on July 18, 2023.
Robyn Beck | AFP | Getty Images
When the markets close Wednesday, all eyes will be on Bob Iger.
The Disney CEO has a laundry list of issues to address during the company’s fiscal third-quarter earnings call.
Linear advertising and television subscriptions are down, its movie studio has been hit or miss at the box office, Hollywood’s actors and writers are on strike and streaming losses continue to escalate.
Iger has hinted that Disney’s TV networks, excluding ESPN — which has been searching for strategic partners and on Tuesday announced a sportsbook partnership with Penn Entertainment — “may not be core” to the business anymore.
Here is what analysts expect from Disney’s quarterly report:
EPS: 95 cents per share expected, according to a Refinitiv consensus survey
Revenue: $22.5 billion expected, according to Refinitiv
Disney+ total subscriptions: 151.1 million expected, according to StreetAccount
Ahead of Disney’s earnings call, investors are looking for more clarity on how Iger plans to fix Disney’s TV business and juggle the decline of subscribers at Disney+.
Separately, Iger is lookin to take full control of Hulu, which Disney shares ownership of with Comcast. Buying out the remaining one-third stake is expected to cost at least $9 billion before negotiations.
The only bright spot for Disney appears to be its theme park division, which has more than rebounded after pandemic-related closures and is expected to post revenue of around $8.1 billion, a nearly 10% jump year over year, according to StreetAccount estimates.
Disclosure: Comcast is the parent company of NBCUniversal and CNBC.
This is breaking news. Please check back for updates.
Online sports-betting company Penn Entertainment Inc. sealed a $1.5 billion deal with Walt Disney Co.’s DIS, +1.50%
ESPN to launch ESPN Bet, a branded sportsbook for fans in the U.S., and pivoted away from Barstool Sports on Tuesday, selling the platform back to founder Dave Portnoy.
Penn Entertainment PENN, -0.68%
will rebrand its current sportsbook and relaunch as ESPN Bet in the fall in 16 legalized-betting states where Penn is licensed.
The rebrand — which includes the mobile app, website, and mobile website — sent Penn’s stock soaring 13% in after-hours trading Tuesday. ESPN Bet will benefit from exclusive promotional services across ESPN’s platforms, including access to ESPN talent, the companies said.
Penn will pay ESPN $1.5 billion over 10 years as part of the strategic partnership, and will grant ESPN $500 million of warrants to purchase about 31.8 million Penn common shares, with additional bonus warrants possible.
“Together, we can utilize each other’s strengths to create the type of experience that existing and new bettors will expect from both companies, and we can’t wait to get started,” Penn Entertainment Chief Executive Jay Snowden said in a release.
Penn also said it has divested 100% of its stake in Barstool Sports to Portnoy, allowing the sports media platform “to return to its roots of providing unique and authentic content to its loyal audience without the restrictions associated with a publicly traded, licensed gaming company.”
For Penn, the ESPN partnership represents “a clear step up from Barstool in terms of mass appeal…and minimal regulatory risk,” according to Wells Fargo analyst Daniel Politzer, who said it was a “nearly impossible challenge for a publicly traded, licensed gaming company” to own “a media platform that thrived on viral/provocative content.”
Still, he said in a note to clients that “it’s premature to conclude this is a game change” since past partnerships between online sports-betting companies and media players have come up short of what initial fanfare would’ve suggested.
The news sent rival DraftKings Inc. shares DKNG, +0.25%
sinking about 5% in after-hours trading.
The decline in DraftKings shares comes as they’ve advanced 178% so far in 2023, through Tuesday’s close. Two analysts upgraded DraftKings’ stock just this week.
Online retail giant Amazon.com Inc.’s AMZN, +8.27% second-quarter results and third-quarter forecast sales last week were a bet that more consumers would start buying more things, but Wall Street’s expectations for the third quarter overall have only grown dimmer.
With most of the 500 companies that make up the S&P 500 Index SPX
already through the second-quarter earnings reporting season, slightly more than normal have reported per-share profit that beat Wall Street’s estimates, according to FactSet.
For the third quarter though, analysts now expect a mere 0.2% increase in per-share profit growth overall, according to a FactSet report on Friday, or slightly lower than the 0.4% growth that was expected for the third quarter on June 30,
And with some two months still left in the third quarter, and with that forecast likely to come down as the period progresses, Wall Street’s profit expectations are getting ever closer to turning negative.
Wall Street analysts overall still expect a bigger rebound for the fourth quarter, the FactSet report said. And they expect 2023 overall to eke out a per-share profit gain of 0.8%.
Worries of a U.S. recession emerging at some point during the back half of this year have started to fade at least a little after many economists fixated on the possibility earlier this year when the Federal Reserve was raising interest rates to combat a jump in inflation in 2022 . Some analysts now say savings fatigue could prompt more shoppers to splurge this year, after relentlessly tightening their budgets due to rising prices.
Federal Reserve Chair Jerome Powell last month said policymakers at the central bank had also shucked off their worries of a downturn.
“The staff now has a noticeable slowdown in growth starting later this year in the forecast. But given the resilience of the economy recently, they are no longer forecasting a recession,” he said last month.
Not everyone is convinced that a downturn has vanished from the horizon though. Sheraz Mian, director of research at Zacks, told MarketWatch last month that more bearish analysts had kept pushing out their recession forecasts, after being defied by the actual, and more positive, economic data. Some economists continue to push out those forecasts.
“We still expect a recession, but now we are looking for it to begin in Q1 2024 rather than Q3 2023,” Thomas Simons, U.S. economist at Jefferies, said in a research note on Friday.
He said that interest rate hikes from the Federal Reserve were only just starting to affect customer behavior. Households were trying to rebuild their savings, after spending through whatever they had built up during the pandemic. Student-loan payments were returning, he said, and corporate margins were thinning.
“Corporate profit margins are narrowing, and businesses will look to cut costs through layoffs,” he said.
This week in earnings
Among S&P 500 index companies, 34 report results during the week ahead, including one from the Dow Jones Industrial Average, according to FactSet.
Results from Walt Disney Co. DIS, +0.95%
will likely gobble up more media attention, but earnings from Paramount Global Inc PARA, +3.58%
— which oversees CBS, Showtime, Comedy Central and other channels — will offer more detail about how studios are positioning themselves with Hollywood actors on strike. Lions Gate Entertainment Corp. LGF.A, -2.44%
also reports.
Results from Tyson Foods Inc. TSN, +0.34%
will give investors and customers a brief look at the state of the grocery aisle where higher food prices over the past year have strained spending on other things. Beyond Meat Inc. BYND, -1.38%,
which also reports during the week, will be hoping new product launches of plant-based meat-like alternatives can overtake analyst skepticism, amid competition with fake meat and real meat alike.
Elsewhere, ride-hailing platform Lyft Inc. LYFT, -5.73%,
online dating service Bumble Inc. BMBL, -3.86%
and video-game maker Take-Two Interactive Software Inc. TTWO, -2.45%
also report during the week. And Canadian pot producer Canopy Growth Corp. CGC, -3.47%
will get another chance to pick up the pieces, after over-expanding and now trying to hold onto its cash.
The call to put on your calendar
Disney drama: One way or another, people on both coasts are mad at Disney DIS, +0.95%
Chief Executive Bob Iger right now, as his company prepares to report quarterly results on Wednesday. Shares of Disney are down slightly this year. The company is currently fighting with Florida Gov. Ron DeSantis, who is trying to stamp out Disney World’s self-governing privileges after the company criticized the state’s restrictions on classroom discussion of gender identity. When Iger accused striking actors and writers in Hollywood of not being “realistic,” the actors and writers shot back, noting his hefty executive compensation plan.
While the friction in Florida hasn’t hurt Disney’s parks attendance, the Hollywood shutdown has threatened Disney’s massive film and TV show operations, as Disney+ subscribers fall and investors more aggressively seek profits from studios’ streaming operations. Elsewhere, Rich Greenfield, an analyst at LightShed Partners, said “Pixar and Disney Animation have not had a breakout hit that impacted children’s play patterns and both Marvel and Lucasfilm feel increasingly tired from overuse.”
The sense is growing that more time is needed for Iger to fix Disney’s problems. On Wednesday, analysts may get a deeper sense of how much more, with the chance of more drama between Disney and its home state and the writers and actors the company depends on.
The number to watch
UPS and the Teamsters deal: United Parcel Service Inc. reports quarterly results on Tuesday, as rank-and-file Teamsters vote on a tentative labor agreement struck with the package deliverer in an effort to avert a strike. The deal, if approved, would raise worker pay and give the economy and businesses a breather, after threats of strikes or work stoppages at the nation’s ports and railways were averted over the past year.
Local Teamsters unions have voted overwhelmingly to at least endorse the agreement, between UPS UPS, -0.31%
and the Teamsters union, which represents 340,000 UPS workers, but not everyone was happy with the deal. Some part-timers felt the Teamsters could have used their leverage to wrest more from UPS, following a profit windfall at the company. And investors have held out for more detail from UPS executives themselves on what the deal might mean for the bottom line and for shipping prices.
Republican presidential candidate, former U.N. Ambassador Nikki Haley speaks at the American Enterprise Institute on June 27, 2023 in Washington, DC. Haley’s remarks focused on the future of U.S.-China relations and her foreign policy views.
Drew Angerer | Getty Images
American companies should be ready to stop treating China as an economic competitor and start viewing it as a national security threat, Nikki Haley, a Republican presidential candidate and former ambassador to the United Nations, said Monday.
“I think China’s an enemy. I think we have to take them incredibly seriously. And the problem is, you can look at dollars and cents or you can look at a threat to America,” Haley said on CNBC’s “Squawk Box.”
“Companies and people have said for too long, ‘We’ll deal with China tomorrow.’ But China is dealing with us today. We’ve got to address this,” she added.
Haley said “every company needs to have a Plan B” in the event that China decides to “pull the rug out from under us.” She called Beijing “the biggest threat we’ve had since Pearl Harbor.”
The former governor of South Carolina also criticized Treasury Secretary Janet Yellen, who recently said the U.S. relationship with China need not be a “winner take all” contest.
“To even say that means you don’t understand China,” Haley said of Yellen.
Haley’s latest remarks build on the hawkish position she laid out last month in a Wall Street Journal op-ed, in which she vowed to push U.S. businesses “to leave China as completely as possible.”
She also urged businesses to forge stronger ties with U.S. allies, such as India, Japan and South Korea, to become less dependent on China.
Haley pointed to a series of actions taken by China’s communist leadership in recent years that she said pose a multi-layered economic and security threat to the United States. They include buying hundreds of thousands of acres of U.S. farmland, purchasing the country’s largest pork producer, floating spy balloons over America, spreading propaganda in universities, lobbying Congress through “front companies,” rapidly building up a massive naval fleet, stealing U.S. intellectual property and developing new weapons.
The Chinese Embassy in Washington, D.C., did not immediately comment on Haley’s remarks. Chinese government officials frequently insist that Beijing merely seeks a mutually beneficial, “win-win” relationship with the United States. But American diplomats privately joke that “win-win” here means China wins twice.
Haley also suggested that China’s role in the U.S. fentanyl crisis raises questions about the future of the bilateral trade relationship.
Many of the precursor chemicals that make up fentanyl originate in China before being illegally diverted to Mexico, where they are processed by cartels to create the deadly synthetic opioid. The Department of Justice has said fentanyl overdoses are the leading cause of death for Americans ages 18 to 49.
Firefighters help an overdose victim on July 14, 2017 in Rockford, Illinois.
Getty Images
“I think if it means us ending normal trade relations, you go to China and say, ‘We’ll end normal trade relations until you stop killing Americans,’” she said.
Haley’s alarm-ringing on China comes as she seeks to distinguish herself in the Republican presidential primary, which has so far been dominated by former President Donald Trump.
Only one of Trump’s competitors, Florida Gov. Ron DeSantis, has consistently garnered double-digit support in national polls of the primary race. The rest of the field, including Haley, has struggled to gain traction with voters.
Haley took aim at DeSantis over his ongoing feud with Disney, which stemmed from the entertainment giant’s opposition to a controversial classroom bill in Florida. While she disagrees with Disney’s stance, “I also don’t think that governors should spend taxpayers dollars suing companies.”
Still, it is difficult to predict how forcefully criticizing China will help to set Haley, or any candidate, apart from the pack in the 2024 election cycle.
This is in large part because polls consistently show that a hawkish attitude toward Beijing is one of the few policy positions that enjoys broad support among both Democrats and Republicans.
CNBC Politics
Read more of CNBC’s politics coverage:
As President Joe Biden mounts a reelection campaign, his administration is taking a hard line against China that bears a strong similarity to those of Republicans like Haley.
FBI Director Christopher Wray testified this month that no other country presents a “more comprehensive threat to our ideas, our innovation [and] our economic security.”
Asked about the state of the Republican primary, Haley described it as a marathon, “not a sprint.”
She also said that she would support Trump if he is the eventual Republican nominee. “I’m not going to have a President Kamala Harris,” she said, a reference to the view held by many Republican voters that Biden, who turned 80 last year, is too old to be president.
LeBron James of the Los Angeles Lakers at a game against the LA Clippers at ESPN Wide World Of Sports Complex on July 30, 2020 in Lake Buena Vista, Florida.
Mike Ehrmann | Getty Images
As Disney considers a strategic partner for ESPN, Chief Executive Officer Bob Iger and ESPN head Jimmy Pitaro have held early talks about bringing professional sports leagues on as minority investors, including the National Football League, National Basketball Association and Major League Baseball, according to people familiar with the matter.
ESPN has held preliminary discussions with the NFL, NBA and MLB about a variety of new partnerships and investment structures, the people said. In a statement, an NBA spokesperson said, “We have a longstanding relationship with Disney and look forward to continuing the discussions around the future of our partnership.”
related investing news
Spokespeople for ESPN, the NFL and MLB declined to comment.
Talks with the NFL have occurred in conjunction with the league’s own desire for a company to take a stake in its media assets, including the NFL Network, NFL.com and RedZone, said the people, who asked not to be named because the talks have been private.
The NBA and Disney have broached many potential structures around a renewal of media rights, the people said. Disney and Warner Bros. Discovery have exclusive negotiating rights with the NBA until next year.
Iger said last week in an interview with CNBC’s David Faber that Disney is looking for a strategic partner for ESPN as it prepares to transition the sports network to streaming. He didn’t elaborate on what exactly that meant beyond saying a partner could bring additional value with distribution or content. He acknowledged selling a stake in the business was possible.
Disney owns 80% of ESPN. Hearst owns the other 20%.
“Our position in sports is very unique and we want to stay in that business,” Iger said to Faber. “We’re going to be open minded about looking for strategic partners that could either help us with distribution or content. I’m not going to get too detailed about it, but we’re bullish about sports as a media property.”
Theoretically, a jointly owned subscription streaming service among multiple leagues could eventually give consumers new packages of games and other innovative ways to take in content.
The move would be a logical one for Disney as it tries to move past the traditional cable subscriber model and underscores how badly the company wants to find a solution for the sports network as its linear subscribers decline. Still, ESPN ratings have climbed in recent years on major sporting events. There’s no better partner for sports content than the leagues, themselves.
Superficially, it may make less sense for the NBA, NFL and MLB which sign lucrative media rights deals with many media partners that fuel team revenue and player salaries with a range of media companies.
Professional sports leagues could face conflicts of interest if they take a minority stake in ESPN. Owning a stake in ESPN may irritate Disney’s competitors, such as Comcast‘s NBCUniversal, Fox, Amazon,Paramount Global and Apple, who help make the leagues billions of dollars by participating in bidding wars for sports rights. Taking an ownership stake in ESPN could give leagues the incentive to boost the value of that entity rather than striking deals with competitors.
There would also be hurdles for Disney. ESPN also employs hundreds of journalists that cover the major sports leagues. Selling an ownership stake to the leagues could cloud the perception of objectivity for ESPN’s reporting apparatus.
Still, the leagues are already business partners with ESPN. It’s possible ESPN could put measures in place to ensure reporters can continue to cover the leagues while minimizing conflicts, but it adds another layer of complexity to any deal.
ESPN is trying to forge a new path as a digital-first, streaming entity. Disney realizes ESPN won’t be able to make money like it previously has in a traditional TV model.
Selling a minority stake in ESPN to the leagues could mitigate future rights payments, allowing Disney to better compete with the big balance sheets of Apple, Google and Amazon. It would also guarantee ESPN a steady flow of premium content from the leagues.
Until last quarter, Disney’s bundle of linear TV networks still had revenue growth because affiliate fee increases to pay-TV providers — largely driven by ESPN — made up for the millions of Americans who cancel cable each year. That trend finally ended last quarter, according to people familiar with the matter. Accelerating cancellations have now overwhelmed fee increases, and linear TV revenue outside of advertising has begun to decline.
“A lot has been said about renting [sports right] versus owning,” Iger said last week in his CNBC interview. “If you can rent it and continue to be profitable from renting, which we have been and we believe we will continue to be, then there’s value in staying in it. We have great relationships with Major League Baseball, and the National Hockey League, and various college conferences, and of course the NFL and the NBA. It’s not just about the live sports coverage of those leagues, those teams, it’s also about all of the shoulder programming it throws off on ESPN and what you can do with it in a streaming world.”
ESPN would like to morph itself into a streaming hub for all live sports. Management would like to launch a feature allowing ESPN.com or the ESPN app to funnel users to games no matter where they stream, CNBC reported earlier this year.
While striking a deal with professional sports leagues wouldn’t be easy, Disney appears to be pushing the envelope on its thinking to prepare for a streaming-dominated world that includes its full portfolio of sports rights.
“If [a partner] comes to the table with value, whether it’s content value, distribution value, whether it’s capital, whether it just helps derisk the business — that wouldn’t be the primary driver — but if they come to the table with value that enables ESPN to make a transition to a direct-to-consumer offering, we’re going to be very open minded about that,” Iger said.
WATCH: Disney CEO Bob Iger talks to CNBC’s David Faber about ESPN and its future
U.S. stocks finished mostly lower Thursday, with the Nasdaq and S&P 500 dragged down by disappointing earnings, while the Dow Jones Industrial Average rose for a ninth straight day for its longest winning streak in nearly six years.
How stocks traded
The S&P 500 SPX, -0.68%
fell 30.85 points, or 0.7%, to close at 4,534.87.
The Dow DJIA, +0.47%
rose 163.97 points, or 0.5%, to finish at 35,225.18. The winning streak is its longest since a nine-day run that ended on Sept. 20, 2017, according to Dow Jones Market Data.
The Nasdaq Composite COMP, -2.05%
ended at 14,063.31, down 294.71 points, or 2.1%.
What drove markets
After lagging behind the S&P 500 and Nasdaq for most of the year, the Dow Jones Industrial Average has climbed over the past two weeks. The blue-chip gauge is now heading for its longest streak of daily gains since Sept. 20, 2017, according to Dow Jones Market Data.
It’s the latest milestone as value stocks and other lagging sectors of the market appear to be playing “catch up,” said Paul Nolte, senior wealth adviser and market strategist at Murphy & Sylvest Wealth Management, during a phone interview with MarketWatch. Although the Dow’s year-to-date gains are still well behind those of the S&P 500, with the blue-chip gauge up 6.6% since Jan. 1, FactSet data show.
On Wednesday, the S&P 500 and Nasdaq closed at their highest levels in nearly 16 months.
“We’re finally seeing the rotation to value,” he said. “The Dow is playing catch up with the S&P 500 and the Nasdaq.”
Technology stocks were lagging following earnings from Netflix Inc. NFLX, -8.41%
released late Wednesday, which showed that revenue fell short. Shares fell 8.4%.
“Netflix missed sales estimates and issued lower-than-expected Q3 guidance, while Tesla’s results showed shrinking profitability with squeeze on margins,” said Henry Allen, strategist at Deutsche Bank.
Semiconductor shares also took it on the chin, with the PHLX Semiconductor Index SOX, -3.62%
falling 3.6%. The drop came after Taiwan Semiconductor Manufacturing Co. TSM, -5.05% topped second-quarter earnings expectations but reported margins that contracted, while providing a somewhat downbeat outlook.
Meanwhile, shares of IBM Corp. IBM, +2.14%
and Johnson & Johnson JNJ, +6.07%
drove the Dow higher after both companies beat earnings expectations.
Bad news for Netflix seemed to infect other megacap technology names, as Alphabet Inc. Class A GOOGL, -2.32%
and Alphabet Inc. GOOG, -2.65%
retreated, as did shares of Apple Inc. AAPL, -1.01%
and Microsoft Corp. MSFT, -2.31%
after the latter hit a record this week.
Investors also digested earnings from American Airlines Group Inc. AAL, -6.24%
and Blackstone Inc. BX, -0.61%
which reported before the opening bell. After the close, investors will hear from Capital One Financial Corp. COF, -2.52%, CSX Corp. CSX, -0.27%
and First Financial Bancorp FFBC, -0.54%,
along with a few others.
IBM IBM, +2.14%
saw shares rise 2.1% after topping profit expectations for its latest quarter Wednesday, while sporting double-digit revenue growth in its two crucial business categories of Red Hat and data and artificial intelligence.
Johnson & Johnson JNJ, +6.07%
shares rose 6.1% after the healthcare bellwether posted better-than-expected earnings and raised its full-year guidance amid strong growth in its medical-technologies business.
