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    ‘Guardians of the Galaxy: Vol. 3’ had best second weekend box office hold for MCU in 5 years

    In its second week of release, “Guardians of the Galaxy: Vol. 3” proved there’s still a big appetite for superheroes on the big screen.
    The film had the lowest second week drop for a Marvel Cinematic Universe film since 2018’s “Black Panther.”
    The success shows that writer-director James Gunn has his finger on the pulse, and has the potential to deliver similar results at DC Studios.

    Still from Marvel Studio’s “Guardians of the Galaxy. Vol 3.”

    Did someone say superhero fatigue? Not with James Gunn at the helm.
    In its second week in theaters, the director’s “Guardians of the Galaxy: Vol. 3” proved that audiences are still willing to venture out to see costumed heroes on the big screen. Most blockbuster films’ ticket sales drop between 50% and 70% from the opening weekend to the second week. Gunn’s third tale about the Guardians of the Galaxy only dropped 47.6%, indicating that even casual fans think it’s a must-see movie.

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    This is the smallest second week drop for a Marvel Cinematic Universe film since 2018’s “Black Panther,” which dropped just 44.7%, according to data from Comscore. It is the third-best second week fall of any MCU film since 2008, just behind “Thor,” which slipped 47.2% during its second week in 2011.
    “Guardians of the Galaxy: Vol. 3” added $62 million in ticket sales domestically over Friday, Saturday and Sunday, bringing its total domestic haul to $214.7 million. Globally, the film has generated just under $530 million at the box office.
    For comparison, the first “Guardians of the Galaxy” film tallied $773.3 million globally during its run in 2014 and “Guardians of the Galaxy: Vol. 2” scored $863.6 million during its run in 2017.
    The strong box office for “Guardians of the Galaxy: Vol. 3” seems to quell fears about superhero fatigue at the box office, something even Disney CEO Bob Iger has worried about publicly. The executive has openly questioned whether Marvel should continue creating third and fourth films for established legacy characters, rather than exploring new heroes, antiheroes and villains.
    His comments, which were delivered in March during the Morgan Stanley Technology, Media and Telecom Conference, came on the heels of the disappointing box-office performance of “Ant-Man and the Wasp in Quantumania” and “Thor: Love and Thunder.”

    The third “Ant-Man” saw a 69.8% drop from its first week to its second, the largest fall of any MCU film. Meanwhile, the fourth “Thor” standalone saw a 67.6% drop, the third-highest of any film in the MCU, Comscore data show. 2021’s “Black Widow” holds the second-steepest drop with 67.8%, partially because the film was released in the middle of the pandemic and partially because it was delivered to theaters and Disney+ on the same day.
    Second week numbers are sometimes more important than the opening weekend data. Showbiz analysts often look to this drop as an indicator of whether a film will have longevity at the box office or will fizzle quickly.
    “It’s a win for Disney, Marvel, James Gunn, theaters and audiences across the board for such an important 2023 tentpole to showcase the power of quality blockbuster cinema and why opening weekends don’t always tell the full story,” said Shawn Robbins, chief analyst at BoxOffice.com.
    Major tentpole features from Disney’s Marvel Cinematic Universe often see box-office ticket sales fall more than 50% after reaching sky-high opening weekend numbers. While those kinds of films can continue on toward billion-dollar or higher theatrical runs, this metric can indicate whether word-of-mouth is bringing new audiences to theaters or whether interest is waning.
    “As a pure reflection of positive audience sentiment for a film, nothing says a movie is resonating strongly with audiences like a modest second weekend drop,” said Paul Dergarabedian, senior media analyst at Comscore.
    The release of Marvel’s “Guardians of the Galaxy Vol. 3” also marks the symbolic end of Gunn’s time with one comic book studio and the start of his reign at another. Gunn, alongside producer Peter Safran, was named co-CEO of Warner Bros. Discovery’s DC Studios last year.
    Because of this, the success of Marvel’s “Guardians of the Galaxy Vol. 3” actually bodes well for the future of DC. It shows that Gunn has his finger on the pulse, and has the potential to deliver similar results at his new studio.
    Of course, Gunn has already dipped a toe into the DC universe with 2021’s “The Suicide Squad.” The movie generated less than $200 million globally, as it was released simultaneously on HBO Max and in theaters during the thick of the pandemic, but was well-received by both critics and audiences.
    Gunn and Safran have developed a 10-year plan to reinvigorate its franchises across TV and film, including fresh spins on Superman and Batman. Gunn himself will write and direct “Superman: Legacy.” More

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    What America does after a debt-ceiling disaster

    America is once again in the throes of a debt-ceiling crisis. If Congress and the White House do not come to a deal, the government may run out of cash, and be on the brink of a sovereign default, in just a few weeks’ time. Most investors expect a last-minute compromise, thereby avoiding financial Armageddon, as during past crises. Yet positions on each side of the aisle look entrenched: Republicans want big spending cuts; Democrats are resisting. So the White House must consider its break-glass options. If there is no agreement, what would President Joe Biden do?There are two broad kinds of workarounds—one magical, the other messier and neither appealing—that the Biden administration could use to manage the fallout from a debt-ceiling disaster. Start with the actions that would render the debt ceiling moot—at least in theory. One that has captured the imagination of wonks, owing to its novelty, is a trillion-dollar coin. The Treasury can mint commemorative coins of any denomination. The suggestion, first advanced on a blog in 2010, is that it should mint a hugely valuable coin, deposit it in the government’s account at the Federal Reserve and draw on it to pay for everything from military salaries to scientific research. The government would no longer need borrowing approval from Congress. Indeed, it would no longer need to borrow from public markets.[embedded content]Another idea is that the White House could deploy the 14th Amendment of the Constitution, which states that the validity of American government debt “shall not be questioned”. The Biden administration could issue an executive order citing the 14th and directing the Treasury to resume issuing bonds. So long as upheld in court, the White House would, in effect, have branded the debt ceiling as unconstitutional, giving itself a free hand.A final magical solution would involve financial engineering. The debt ceiling specifically targets the face value of debt. At current yields, the Treasury can borrow money for two years at an annual rate of about 4%. But what if it offered bonds with coupons of, say, 100%? In this case it could issue a bond with a face value roughly 1/25th that of a bond with a 4% yield but raise the same amount of cash from investors (who would pay a giant premium to the face value, bringing the bond’s true yield in line with the market rate). As the Treasury rolled over existing debts into high-coupon, low face-value bonds, it would acquire plenty of room under the debt ceiling, allowing it to resume borrowing.These magical workarounds are all clever. Yet they also share the same basic defects. They are, to varying degrees, ruses and loopholes that do not seem befitting of American government bonds, the world’s most important financial asset. It would be unsettling to think that Treasuries—a benchmark for interest rates and a safe haven for investors the world over—could be underpinned by a commemorative coin. Janet Yellen, the treasury secretary, has dismissed the option as a “gimmick”.Although gimmickry would be better than the American government reneging on its debts, there is another objection to such magical solutions: each would be subject to legal challenge, sowing uncertainty in markets. Some experts think the administration could win a 14th Amendment case. But that is far from certain in a Supreme Court with a conservative majority. Legal proceedings could extend beyond the moment, perhaps early in June, when the government runs out of money. Stuck in litigation, the magical solutions would struggle to prevent market freak-outs.This would leave America with a messier, more painful workaround: the prioritisation of payments. The Treasury would set aside cash from its tax revenues to make interest payments. With whatever money is left over, it could meet some of its other obligations. Analysts at the Brookings Institution, a think-tank, estimate the result would be a cut of one-quarter in the government’s non-interest expenditures, which would represent a remarkably harsh dose of austerity. If the government were to aim for one additional layer of prioritisation—making social-security payments to retirees, plus covering its interest on bonds—it would have to cut other expenditures by about one-third.Officials at the Fed and the Treasury have already begun to plan for prioritisation, having drafted a blueprint during the debt-ceiling crisis in 2011. Even so, Treasury officials privately admit they are not confident prioritisation would function as intended. For the scheme to work, the government would have to continue to conduct regular bond sales, using the proceeds to pay off the principal from maturing bonds. This would require dealers showing up as frequently as four times a week to Treasury auctions, sometimes with billions of dollars on the line, and doing their part in the prioritisation tap-dance. What happens if they balk and deem that the environment is simply too uncertain?The politics would also be treacherous. Putting bondholders ahead of civil servants, pensioners and soldiers “might not prove to be sustainable”, as Bill Dudley, then president of the New York Fed, dryly noted during a planning discussion in 2011.Despite all the evident flaws, prioritisation will almost certainly be the initial fallback if Congress does not lift the debt ceiling in time. “A few days of prioritisation may be what is needed to get both sides to blink,” says Daleep Singh, a former economic adviser to the Biden administration. “It would have big costs and that would hopefully crystalise minds in dc, provoking a deal.” Whatever the outcome, one conclusion is clear: this is no way to manage the world’s biggest economy.■For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter. More

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    SpaceX hires former NASA human spaceflight official Kathy Lueders to help with Starship

    Kathy Lueders, the most recent top human spaceflight official at NASA, has joined Elon Musk’s SpaceX after retiring from the agency, CNBC has learned.
    Lueders will work out of the company’s “Starbase” facility in Texas, people familiar with the matter told CNBC, and report directly to SpaceX president and COO Gwynne Shotwell as general manager.
    She represents a key hire for SpaceX as it aims to make its massive Starship rocket safe to fly people in the coming years.

    Kathy Lueders, formerly NASA associate administrator of the Space Operations Mission Directorate, before speaking to the media on May 30, 2020, following SpaceX’s launch of the Demo-2 mission.
    Kim Shiflett / NASA

    Kathy Lueders, the most recent top human spaceflight official at NASA, has joined Elon Musk’s SpaceX after retiring from the agency a couple of weeks ago, CNBC has learned.
    Lueders’ role will be general manager, and she will work out of the company’s “Starbase” facility in Texas, reporting directly to SpaceX president and COO Gwynne Shotwell, people familiar with the matter told CNBC.

    It’s a key hire for SpaceX as the company aims to make its massive Starship rocket safe to fly people in the coming years. Lueders, a respected expert in the sector, is already familiar with the company’s human spaceflight work to date.

    The SpaceX Starship lifts off from the launchpad during a flight test from Starbase in Boca Chica, Texas, on April 20, 2023.
    Patrick T. Fallon | AFP | Getty Images

    SpaceX did not immediately respond to CNBC’s request for comment on Lueders’ hiring.

    Sign up here to receive weekly editions of CNBC’s Investing in Space newsletter.

    Lueders retired from NASA at the end of April, following a 31-year career with the agency. Before leading NASA’s human spaceflight program, she oversaw the culmination of its Commercial Crew program as manager, including the first SpaceX missions to carry NASA astronauts.
    Earlier this year and shortly before she retired, SpaceX completed its sixth operational NASA crew launch — completing its initial contract for the agency. The company has received additional awards for eight more crewed missions.
    Notably, Lueders follows in the footsteps of one of her recent NASA predecessors, William Gerstenmaier, who joined SpaceX in 2020 after more than a decade as the agency’s top human spaceflight official. Gerstenmaier is now SpaceX’s vice president of build and flight reliability.
    Correction: The headlines and a photo caption on this story have been updated to correct the spelling of Kathy Lueders’ name. More

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    Fed’s Bostic casts doubt on rate cuts this year even if there’s a recession

    Atlanta Fed President Raphael Bostic said Monday that he doesn’t foresee rate cuts at least through 2023, even if a widely forecast recession hits.
    “If there’s going to be a bias to action, for me it would be a bias to increase a little further as opposed to cut,” he told CNBC.
    Chicago Fed President Austan Goolsbee also spoke to CNBC, saying he is taking a cautious approach to policymaking.

    Atlanta Federal Reserve President Raphael Bostic said Monday that he doesn’t foresee rate cuts at least through 2023, even if there’s a recession.
    “For me, inflation is job No. 1. We’ve got to get back to our target,” he told CNBC’s Steve Liesman during a “Squawk Box” interview. “If there’s going to be some cost to that, we’ve got to be willing to do that.”

    His comments came as the Fed has raised rates 10 times since March 2022 in an effort to bring down inflation that a year ago was running at its highest levels since the early 1980s.
    Even though inflation is still running well ahead of the central bank’s 2% year-over-year target, market pricing is indicating that the Fed is done hiking and in fact will be cutting rates multiple times before the end of the year. That is based largely on expectations that the economy is headed for a sharp slowdown and a likely shallow recession, which has been predicted by the Fed’s own economists.
    But Bostic said he doesn’t see cuts coming anytime soon and in fact expects an increase would be more likely at this point.
    The consumer price index, released last week, showed headline inflation running at a 4.9% annual rate while core — which excludes food and energy and usually receives greater emphasis from Fed officials — was at 5.5%.
    “What we’ve seen is that inflation has been persistently high, consumers have been really resilient in terms of their spending, and labor markets remain extremely tight. All of those suggests that there’s still going to be upward pressure on prices,” he said. “If there’s going to be a bias to action, for me it would be a bias to increase a little further as opposed to cut.”

    Bostic spoke at the Atlanta Fed’s Financial Markets Conference.
    Chicago Fed President Austan Goolsbee also spoke to CNBC, saying he is taking a more cautious approach to policymaking amid at a time of elevated uncertainty.
    “When you have these big times of uncertainty, let’s be prudent and patient and watch a lot more data than we normally do,” Goolsbee said. “We’ve still got a few weeks before for the next meeting, but [we’re] watching the credit stresses, watching the craziness of the debt ceiling, and watching what’s happening in the labor market, and the prices.”
    On inflation, Bostic said he remains optimistic, while Goolsbee said, “Inflation is improving, but it’s not improving that rapidly.”
    Bostic noted that in the CPI report, which covers the prices consumers pay for a voluminous mixture of goods and services, fewer than half the items were above 5% on an annual basis.
    That at least provides some indication that things are moving in the right direction.
    “There’s still a lot of confidence that our policies are going to be able to get inflation back down to our 2% target,” Bostic said. “And to be fully clear, we’re going to do all that we need to make sure that that happens.” More

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    Paul Tudor Jones says the Fed is done raising rates, stocks to finish the year higher from here

    Paul Tudor Jones speaking at the World Economic Forum in Davos, Switzerland, January 21, 2020.
    Adam Galica | CNBC

    Billionaire hedge fund manager Paul Tudor Jones believes the Federal Reserve has finished raising interest rates in its fight against inflation, and the stock market could grind higher this year.
    “I definitely think they are done,” Jones said on CNBC’s “Squawk Box” of the Fed’s rate-hiking campaign. “They could probably declare victory now because if you look at CPI, it’s been declining 12 straight months… That’s never happened before in history.”

    The central bank has hiked interest rates 10 times since March 2022, taking the fed funds rate to a target range of 5%-5.25%, the highest since August 2007. The consumer price index has cooled considerably since peaking out around 9% in June 2022. The gauge eased to 4.9% in April.
    The longtime investor said the market setup right now is similar to mid-2006 before the Great Financial Crisis, where stocks moved higher for over a year after the Fed stopped tightening monetary policy.
    “Equity prices … I think they’re going to continue to go up this year,” Jones said. “I’m not rampantly bullish because I think it’ll be a slow grind.”
    For the near term, the investor said there would be some indigestion because of the fight to raise the U.S. debt ceiling, and he would buy the dip on the political volatility.
    Jones shot to fame after he predicted and profited from the 1987 stock market crash. He is also the chairman of nonprofit Just Capital, which ranks public U.S. companies based on social and environmental metrics.

    He believes that there’s plenty of dry powder that’s ready to be put to work after a particularly dull period for deal-making activities.
    “We have no IPOs, no calendar, no secondaries, valuations are at 19 but nobody’s rushing to offer so clearly, something is going on internally in the stock market,” Jones said. “From a flow standpoint, that’s constructive.” More

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    Hamptons rental prices fall for the summer as owners contend with oversupply

    A glut of rentals in one of America’s richest beach communities has started to lead to price cuts.
    At the start of the Covid pandemic, throngs of wealthy New Yorkers fled the city for the Hamptons and many bought homes. Now they want to find renters.
    At the same time, Wall Streeters and tech workers are cutting their summer spending in the face of market volatility and layoffs.

    Beach homes are seen on September 30, 2020 in Southampton, New York.
    Kena Betancur | AFP | Getty Images

    An oversupply of summer rentals in the Hamptons is spurring price cuts of 20% or more, as affluent Wall Streeters and tech workers cut back on their summer spending.
    There are now about 5,700 seasonal rentals available for this summer on the South Fork peninsula in New York, which includes most of the Hamptons, according to Judi Desiderio, CEO of Town & Country Real Estate in East Hampton. That’s twice the number of homes that would typically be available for a summer before the Covid pandemic shifting vacationing habits, she said.

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    “There’s just too much inventory, at every level,” she said.
    The glut of rentals in one of America’s richest beach communities has started to lead to price cuts. Brokers say many homeowners have started trimming prices for their rentals by 10% to 20%, and prices are likely to drop further as homeowners race to fill their rentals before the start of Memorial Day.
    “We’re choked with supply,” said Enzo Morabito, a Hamptons broker with Douglas Elliman. “And it’s throughout the Hamptons.”
    Granted, “bargains” are all relative in the Hamptons, where a typical 3-bedroom house rents for between $60,000 and $100,000 for the summer, depending on the location. Homes on the ocean can rent for over $1 million for a month.
    Yet the after-effects of the pandemic have led to a record number of available rentals, and brokers say it could take a few more summers for prices and demand to normalize. In the spring of 2020, throngs of wealthy New Yorkers fled the city for the Hamptons and many bought homes. That led to a sales boom where volume and prices soared. The median sales price jumped more than 40% to over $1.2 million.

    Now, many of those new homeowners are trying to rent their homes, either because they want to travel for part of the summer or because they want the income to help pay home expenses. The surge in supply has upended a market that traditionally had a limited number of rentals and consistently high prices.
    “We had a balanced market before Covid,” Desiderio said. “Demand wasn’t out of control and prices held for years.”
    Many of the new homeowners also decided to rent because they expected the boom-time rental prices of 2020 and 2021, which are now unrealistic, brokers say.
    “I get clients coming to me saying, ‘I want to rent my house for $250,000,'” said Gary DePersia of the Corcoran Group. “I tell them it’s not realistic anymore. The market has changed.”
    DePersia is advising his rental clients to offer more flexible leases — perhaps for two weeks or a month rather than the whole summer — and to lower prices.
    The other big problem is falling demand. Since the Hamptons is still highly dependent on the Manhattan economy — and specifically finance and tech — it’s starting to feel the chill of a falling stock market and shrinking IPO and capital markets. Wall Street bonuses fell 26% last and several of the large Wall Street firms and banks, including Morgan Stanley, Citigroup, Bank of America and Lazard, have announced job cuts.
    “The Hamptons is tied to Wall Street with an umbilical cord,” Desiderio said. “When Wall Street is doing well, we do well. When they pull back, we pull back.”
    The one bright spot in the rental market, at least for owners, is at the very high end, especially oceanfront. Brokers say one oceanfront home in the Hamptons has already rented for $2 million per month this summer, although the brokers declined to give details.
    There are at least three other homes being offered for rent at $2 million or more for the summer, they say.
    DePersia has a 12,000-square-foot oceanfront rental in Bridgehampton that’s being offered for $600,000 for two weeks. The newly built house, with 10 bedrooms, over a dozen bathrooms, multiple kitchens, a pool overlooking the ocean and a rooftop deck with a hot tub, has already attracted a number of potential renters.
    “When you talk about oceanfront, new build, all the amenities for entertaining and families, there just aren’t that many,” he said. “And the kind of people who would rent a place like that aren’t as affected by the stock market or job cuts.” More

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    Stocks making the biggest premarket moves: Shake Shack, Charles Schwab, H&R Block, DuPont and more

    Sopa Images | Lightrocket | Getty Images

    Check out the companies making the biggest moves in premarket trading:
    Shake Shack – The fast food chain saw its stock gain nearly 4% after the Wall Street Journal reported that activist investor Engaged Capital is planning a proxy fight for three board seats at the company. Engaged Capital acquired a 6.6% stake including swaps.

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    Charles Schwab — Stock in the brokerage firm added 2.4% in premarket trading. Raymond James said in a note on Monday that Schwab’s core banking business remains strong, which could help the stock gain as much as 30%. On Friday, the company said total client assets increased 1% from March to April to $7.63 billion.
    Magellan Midstream Partners, Oneok — Shares of Magellan Midstream Partners soared 15.5% following the announcement that pipeline operator Oneok is acquiring the company for about $18.8 billion. Oneok shares dropped 5.5%.
    H&R Block, Intuit — The tax preparers sank 9.3% and 4.3%, respectively, following a Wall Street Journal report on the Biden Administration’s potential creation of a government-run online tax filing program. The IRS is due to release the report this week, the paper said. The agency has been looking into it as part of the Inflation Reduction Act.
    SoFi Technologies — The stock sank nearly 6% in the premarket following a downgrade by Wedbush to underperform from neutral. The Wall Street firm said SoFi’s fee income may be reaching a tipping point and it may need to raise capital this year to support growth.
    Albemarle — Shares rose 2.7% following an upgrade to outperform by Baird. The firm said the lithium company can be a leader in both the near- and long-term.

    Dupont De Nemours– Shares added 2.7% in premarket trading after Deutsche Bank upgraded the chemical company to buy from hold. The Wall Street firm said the stock was trading at a 50% discount to its peers.
    — CNBC’s Yun Li, Alex Harring and Brian Evans contributed reporting. More

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    Here’s what media giants face as they try to charm advertisers this week

    Media companies, including NBCUniversal, Disney and Warner Bros. Discovery, will make their annual pitches to advertisers during their Upfront presentations this week.
    This year’s events come in the midst of a soft advertising market and the Hollywood writers’ strike, as well as accelerated cost-cutting by media companies.
    Advertisers will likely increase spending on ad-supported and so-called FAST options this year as cord-cutting accelerates. Franchise-related content will continue to take a big role.

    Los Angeles, CA – May 02: WGA members take a selfie before heading to the picket line on the first day of their strike in front of Paramount Studios in Hollywood on May 2, 2023. The union were unable to reach a last minute-accord with the major studios on a new three-year contract to replace one that expired Monday night. (Genaro Molina / Los Angeles Times via Getty Images)
    Genaro Molina | Los Angeles Times | Getty Images

    Media companies making their pitches to advertisers this week will have to do their best to overcome a lot of noise in the industry.
    The advertising market has been soft since last summer, and companies are also cutting costs as they look to make their streaming businesses profitable.

    Meanwhile, the Hollywood writers’ strike is sure to play a role in the conversation, especially if picketers show up this week outside the annual advertising sales events known as Upfronts. Some of them already did at the so-called Newfronts, which are similar events focused only on streaming.
    Kicking off the week will be Comcast’s NBCUniversal Upfront, which saw some last minute changes when global ad chief Linda Yaccarino resigned last week before Twitter hired her to replace owner Elon Musk as CEO.
    Fox Corp., Disney, Warner Bros. Discovery and newcomer Netflix will also hold events this week. Paramount Global opted out of the Upfronts this year in favor of intimate dinners with advertisers.
    Streaming remains a prime topic of discussion, especially as ad-supported tiers have taken on more importance in the face of slowing subscriber growth.
    And franchise content is likely to be a big presence as media companies have leaned into series and films with track records for keeping viewers around.

    Here’s a look at what’s in store for Upfronts.

    Writers’ strike worries

    Members of the Writers Guild of America stopped working and headed to the picket lines earlier this month, halting production on films and television shows.
    Media executives say the strike will have no immediate effect on programming slates, but that could change depending on how long the strike lasts.
    “There are certainly additional elements of fluidity this year, like the WGA strike, that are top of mind for advertisers and make flexibility even more critical in this year’s negotiations,” said Amy Leifer, chief advertising sales officer at DirecTV. “Even if there is a halt of scripted TV production due to the writer’s strike, we know that viewers are still going to consume TV content.”
    That will likely mean more emphasis on live content, such as sports and news, if the strike drags on. Fox CEO Lachlan Murdoch said he doesn’t expect his company to be affected by the writers’ strike given its sports and news-heavy slate.
    While this helps the traditional media companies like Fox, Warner Bros. Discovery and NBCUniversal, which all have robust sports and news offerings, it could weigh on the entertainment-only networks, as well as streaming services.

    A scene from Netflix’ “Stranger Things” Season 4.
    Courtesy: Netflix

    Already, a number of productions have been paused, including Netflix’s “Stranger Things,” Disney and Marvel’s “Blade,” AppleTV+’s “Severance” and Paramount’s “Evil.”
    The immediate concern for Upfronts, however, could be if picketers post up in front of the events. Many of Hollywood’s top talent, especially late-night talk show hosts who have already seen their shows halted, have shown support for the writers. Often, these comedians and talk show hosts take part in Upfronts.
    During the Newfronts recently, picketers stood out front of the events. Netflix, which is having its inaugural Upfront this week since it recently instituted an ad-supported tier, has reportedly opted to make its presentation virtual-only.

    Soft advertising market

    Media executives across the board aren’t as bullish on the advertising market as they were a year ago.
    “It feels like a party here,” then-NBCUniversal CEO Jeff Shell said at the Cannes Lions advertising conference last year, held a little more than a month after upfront presentations. “I don’t know if that’s because most of you are out for the first time in a long time or because we’re in the south of France in June, but no, it doesn’t feel like a down market.”
    By November, the advertising market collapsed amid surging interest rates and recession fears.
    “The advertising market is very weak,” Warner Bros. Discovery CEO David Zaslav in a November investor conference. “It’s weaker than it was during Covid.”
    In recent months, executives have noted a limited recovery.
    “The overall entertainment advertising marketplace has been challenging,” Disney Chief Financial Officer Christine McCarthy said last week during Disney’s second-quarter earnings conference call. “While the weakness has moderated somewhat, we anticipate that some softness may continue into the back half of the fiscal year.”
    NBCUniversal, Paramount Global, Warner Bros. Discovery and Disney all reported dips of between 6% and 15% in TV advertising revenue in the first quarter.
    Media executives’ messaging to advertisers could center around value this year, particularly as companies continue to offer more content on their streaming services. Warner Bros. Discovery will showcase Max, its new combined HBO Max-Discovery+ product that launches later this month. Disney announced last week it’s adding a feature to allow Hulu programming within Disney+, a change Chief Executive Bob Iger said “will provide greater opportunities for advertisers” when it rolls out later this year.

    Cost cutting

    While media executives will try to convince advertisers to maximize their spending, they’ll be pushing that narrative while making fewer shows. Disney said last week it plans to produce less content in the coming year. Warner Bros. Discovery has spent the past year eliminating content from Max to cut costs.
    “It’s critical we rationalize the volume of content we’re creating and what we’re spending to produce our content,” Disney’s Iger said.
    The cost-cutting efforts are driven by an urgent motivation to make streaming profitable. Paramount Global, NBCUniversal and Disney have all promised streaming will stop losing money by next year. Warner Bros. Discovery said earlier this month its U.S. streaming business will be profitable in 2023 — a year ahead of schedule.
    “The key here is our U.S. streaming business is no longer a bleeder,” Zaslav said. “It’s hard to run a business when you have a big bleeder.”
    Still, the upfronts are a time to showcase content. If the investor messaging is centered around cutting the fat, the ad buyer message will around showcasing the quality of existing franchises.

    Franchise frenzy

    If one thing is for certain, the media networks and their streaming counterparts will showcase slates with a heavy emphasis on franchises.
    It’s been a theme at Upfronts in recent years. During last year’s NBCUniversal Upfront, late-night host and “Saturday Night Live” alum Seth Meyers made jabs about the schedule of spinoffs and reboots being presented.
    “I don’t need to tell you that the last two years have been transformative not just for the TV business but across all industries. We needed to be inventive, agile, forward-facing, and yet and this is still how we are doing upfronts,” Meyers said last year. “That’s not to say that NBC is not embracing the future — this next year promises exciting new shows and ideas like ‘Law & Order,’ ‘The Fresh Prince of Bel-Air,’ ‘Night Court’ and ‘Quantum Leap.'”
    Franchises attract a large swath of audience demand for both Hollywood films – which are an important part of the programming slate for streamers like Disney+, Paramount+ and Peacock – as well as TV franchises, according to data from Parrot Analytics.
    “Hollywood has been recycling in the last 12 to 13 years as other content has failed to break out,” said Brandon Katz, an entertainment industry strategist at Parrot.

    The logo of the streaming service Paramount+ on a logo wall at the Paramount+ launch event. (recrop) The streaming service Paramount+ is now available in Germany.
    Jörg Carstensen | Picture Alliance | Getty Images

    Paramount, in particular, has seen a big reliance on franchises, especially for its Paramount+ streaming service. Star Trek series content accounted for 32.4% of Paramount+’s U.S. audience demand in 2022, while Yellowstone spinoffs made up 11.4%, according to Parrot.
    Last week, Paramount’s CBS broadcast network announced three new series for next season – one being “Matlock,” a reboot of the late 1980s-90s series that will star Academy Award-winning actress Kathy Bates, and the other, “Elisabeth,” which is based on a character from “The Good Wife” and “The Good Fight” franchise.
    Disney+ has heavily relied on series stemming from its Marvel and Star Wars libraries. However, Parrot Analytics found there was a downtick in U.S. demand for Marvel content in late 2022, likely due to the mixed reception its recent series have received.

    The shift to streaming

    Ad-supported streaming will be an even bigger part of the conversation this year.
    With cord-cutting accelerating – overall pay-TV subscribers were down 3% this past quarter, “universally worsening,” according to Wells Fargo analyst Steven Cahall – digital advertising is likely to take a bigger piece of the pie.
    “It’s a pretty unmistakable trend where linear TV continues to fall and digital video and connected TVs are rising to fill the gap,” said Paul Verna, a principal analyst at Insider Intelligence. Advertisers are expected to spend $12.48 billion on digital media during the Upfronts and Newfronts this year, a 28% increase over last year, Verna added.
    U.S. TV ad spending during the Upfronts is expected to drop by 3.6% to $18.64 billion for the 2023-24 season, according to Insider Intelligence, evidence the market has stopped growing on the traditional TV side while more dollars shift toward digital.
    Netflix and Disney+ launched ad-supported tiers for their services late last year. With subscriber growth stagnating for streaming, and companies pushing toward streaming profitability, executives hope the cheaper options will retain or bring in customers.
    Disney recently said it was relying on its ad-supported option to help make a profit with its streaming offerings. The company will be adding Hulu content to Disney+, which Iger said was “a logical progression of our DTC offerings that will provide greater opportunities for advertisers.”
    Price increases for ad-free options, to boost revenue for these businesses, could also push customers to cheaper options with ads.
    Paramount+ and NBCUniversal’s Peacock have offered ad-supported tiers since each launched. While Peacock held a Newfront presentation to showcase its content, the streaming service will be a key part of NBCUniversal’s Upfront on Monday.
    “Just a year ago, if you looked at the composition of Paramount’s ad revenue, about 25% went to digital,” said David Lawenda, Paramount’s chief digital advertising officer. “Now it’s about 40%. That’s 40 cents of every dollar going to digital.”
    Free, ad-supported platforms like Paramount’s Pluto and Fox’s Tubi will also see more advertising dollars come their way.
    “We’re looking forward to Tubi being a central part of our upfront negotiations,” Murdoch said recently during Fox earnings. “It’s clearly not only a strategic driver for us. It’s been an important driver going forward.”
    These free, ad-supported streaming television, or FAST, services have seen explosive growth. They also experienced an increase in viewership during the height of the pandemic, when productions were halted and there was a lack of new content. If the writers’ strike continues, that could be the case once again.
    Disclosure: NBCUniversal is the parent company of CNBC.
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