Raphael Stevens

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    With corners of the media industry in upheaval, Netflix makes clear it’s staying out of the fray

    Netflix added more than 8 million subscribers in the second quarter and now has more than 277 million global customers.
    The company emphasized it’s content to take market share from the traditional world of TV that’s not YouTube.
    Netflix’s focus on the status quo comes while smaller competitors Paramount Global and Warner Bros. Discovery grapple with major change.

    A couple sits in front of a television with the Netflix logo on it.
    Picture Alliance | Picture Alliance | Getty Images

    Netflix’s second-quarter earnings report contained no bombshells, and that’s just fine for the company and its investors.
    In recent weeks, Paramount Global has agreed to merge with Skydance Media. Warner Bros. Discovery is considering all options for its future and may lose broadcast rights to the NBA.

    While the media and entertainment landscape around Netflix is in a state of change, the world’s largest streamer is fine with the status quo.
    “If we execute well — better stories, easier discovery and more fandom — while also establishing ourselves in newer areas like live, games and advertising, we believe that we have a lot more room to grow,” Netflix said in its quarterly shareholder letter. “Because when we delight people with our entertainment, Netflix can drive higher engagement, revenue and profit than the competition. This in turn creates a more loved and valued entertainment company — for our members, creators and shareholders — that we can strengthen and grow over time.”
    Netflix classified the streaming, pay TV, film, gaming and branded advertising market as a $600 billion industry in terms of total annual sales, noting the company accounts for about 6% of that revenue.
    The streamer added more than 8 million subscribers in the quarter. It now has more than 277 million global customers, making it by far the largest subscription streaming service in the world. Netflix’s market valuation as of Thursday’s market close is $277 billion.
    Nielsen statistics show Netflix as the second most-watched streaming service in the U.S., trailing only YouTube. But rather than worry about YouTube’s competition, Netflix is content to focus on the other 80% of the TV market, the company reiterated.

    “Looking to the future, we believe our biggest opportunity is winning a larger share of the 80%+ of TV time (primarily linear and streaming) that neither Netflix nor YouTube has today,” the company said.
    While Warner and Disney announced a new cross-company bundle in May that will give consumers the ability to buy Max with Disney’s suite of streaming services for a discount, Netflix made a point to say it feels no need to engage with the competition.
    “We haven’t bundled Netflix solely with other streamers like Disney+ or Max because Netflix already operates as a go-to destination for entertainment thanks to the breadth and variety of our slate and superior product experience,” Netflix said. “This has driven industry leading penetration, engagement and retention for us, which limits the benefit to Netflix of bundling directly with other.”
    Netflix’s focus remains building its advertising business and adding streaming subscribers on the back of its strength of content.
    It’s not the most dramatic of narratives. It may not make for a great Netflix series.
    But as an investment, shareholders will happily take it.
    WATCH: Netflix has major beat on Q2 subscribers More

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    NBA sends media terms to Warner Bros. Discovery, officially starting five-day match period

    Warner Bros. Discovery received paperwork from the NBA on Wednesday night, starting a five-day window where it can use its matching rights on a package of NBA games.
    Warner Bros. Discovery intends to match Amazon’s package of games, which costs $1.8 billion per year.
    It’s unclear if the NBA can reject Warner Bros. Discovery’s matching rights, and the league has prepared for a potential lawsuit in recent months.

    Jaylen Brown, #7 of the Boston Celtics, shoots a three-point basket against the Dallas Mavericks during Game 5 of the 2024 NBA Finals at TD Garden in Boston on June 17, 2024.
    Nathaniel S. Butler | National Basketball Association | Getty Images

    With National Basketball Association media rights approaching final form, Warner Bros. Discovery is about to make its play.
    The league has sent official terms of its proposed new media rights contacts to Warner Bros. Discovery, starting a five-day period where the media company can choose to match a package of broadcasting rights.

    A TNT spokesperson confirmed the receipt of the documents and acknowledged the company is currently reviewing the terms. Warner Bros. Discovery received the contract framework on Wednesday night, according to people familiar with the matter, who asked not to be named because the details are private.
    The media rights deal, as currently constructed, includes deals with Disney, Comcast’s NBCUniversal and Amazon for three different packages of games, totaling $76 billion over 11 years, beginning with the 2025-26 season. It also includes WNBA games, which is worth $2.2 billion of the total sum.
    Warner Bros. Discovery intends to match a package of games that has been slotted for Amazon, as CNBC first reported in May, which includes both playoff games and the the in-season tournament, according to the people familiar. Amazon signed a deal with the NBA to pay $1.8 billion per year for its package, they said.

    Next steps unclear

    When Warner Bros. Discovery formally announces its intention to match, it’s unclear what will happen next. The NBA may or may not have the right to reject Warner Bros. Discovery’s matching rights, and the league has been working with its lawyers for months in preparation of a potential lawsuit, according to people familiar with the matter.
    Warner Bros. Discovery’s Turner Sports has been a broadcast partner of the NBA for almost 40 years. The company plans to argue that its matching rights — a holdover from its current media rights deal — applies to Amazon’s package of games, even though that package has been earmarked for a streaming-only service. Along with its cable network TNT, Warner Bros. Discovery owns Max, a competitor to Amazon’s Prime Video.

    Still, Max has fewer subscribers than Prime Video, at about 100 million versus Prime’s more than 200 million monthly global subscribers. The streaming rights that are part of the Amazon package are global in nature, one of the people said.
    TNT is also the home to “Inside the NBA,” the popular NBA studio show featuring Ernie Johnson, Charles Barkley, Kenny Smith and Shaquille O’Neal. Barkley has already said he plans to retire from the show after next season no matter the outcome of the media rights deal.

    “I don’t have a sense of that,” said NBA Commissioner Adam Silver earlier this week at a press conference when asked what may or may not happen with regard to Warner Bros. Discovery or the NBA’s own network, NBA TV, which is operated by TNT Sports. “We’ll see.”
    Losing the NBA would be a blow for Warner Bros. Discovery, which could lose about $600 million in profit from advertising and a potential decrease in cable affiliate fees if it loses the NBA, Wolfe Research media and entertainment analyst Peter Supino told MarketWatch earlier this week.
    Warner Bros. Discovery shares have fallen 23% this year.
    “I apologize that this has been a prolonged process, because I know they’re committed to their jobs,” Silver said last month of Warner Bros. Discovery employees who work on NBA programming. “I know people who work in this industry, it’s a large part of their identity and their family’s identity, and no one likes this uncertainty. I think it’s on the league office to bring these negotiations to a head and conclude them as quickly as we can.”
    Disclosure: Comcast’s NBCUniversal is the parent company of CNBC. More

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    Penn lays off about 100 employees as it focuses on ESPN Bet growth

    Penn Entertainment will lay off about 100 employees as it focuses on growth for ESPN Bet. The company employs about 20,000 people.
    CEO Jay Snowden told staff members in an internal email that it’s embarking on a new phase of growth in its interactive business, which includes ESPN Bet, a $2 billion branding partnership with Disney’s ESPN.
    Investors are impatient for Penn to demonstrate its muscle with the rebranded sportsbook, and activist investor Donerail Group has called on the board to sell the casino company.

    The ESPN Bet app on a smartphone arranged in New York, US, on Thursday, Feb. 22, 2024. 
    Gabby Jones | Bloomberg | Getty Images

    Penn Entertainment will lay off about 100 employees as it focuses on growth for ESPN Bet.
    CEO Jay Snowden told staff members in an internal email that the changes will enhance operational efficiencies following its 2021 acquisition of Canadian media and gaming powerhouse theScore.

    The company employs about 20,000 people.
    “When PENN acquired theScore, we hit the ground running with the build-out of our proprietary tech stack and the migration of our sportsbook to theScore’s best-in-class-platform,” Snowden wrote in the memo, which was seen by CNBC. “This led us to temporarily set aside any potential organizational changes that would typically follow a major acquisition.”
    Penn went on to say it’s embarking on a new phase of growth in its interactive business, which includes ESPN Bet, a $2 billion branding partnership with Disney’s ESPN. Snowden said the initiatives include product enhancements and deeper integration into ESPN’s ecosystem.
    Investors are impatient for Penn to demonstrate its muscle with the rebranded sportsbook, and activist investor Donerail Group has called on the board to sell the casino company.
    Rumors have swirled about the potential interest from many other online gaming and brick-and-mortar casino companies.

    Truist gaming analyst Barry Jonas wrote in a note Thursday that a sale is unlikely in the near term because of the complexity of a transaction that would likely involve major divestitures.
    Penn’s release of new ESPN Bet features this fall during football season should meaningfully improve its product, Jonas said, and a focus on costs indicate the company’s commitment to seeing its investment yield results.
    Penn shares have plummeted 25% year to date. It has missed earnings expectations the last two quarters and lowered guidance.
    “Investors continue to wonder what an ESPN Bet success could look like, and how much more investment (beyond what’s guided) it’ll take to reach,” Jonas notes.
    Truist has a buy rating on Penn and a price target of $25.

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    ‘Loophole’ may get you a $7,500 tax credit for leasing an EV, auto analysts say

    The Inflation Reduction Act has a few provisions related to tax credits for electric vehicles.
    Consumers can get a $7,500 tax credit for buying a new EV. It may be challenging for cars and/or buyers to qualify due to certain requirements.
    It may be easier to get a $7,500 credit by leasing an EV. Leases aren’t subject to the same rules.
    Automakers may pass along the tax credit by lowering monthly payments.

    Maskot | Maskot | Getty Images

    Buying a new electric vehicle isn’t the only way consumers can access a $7,500 federal EV tax credit. They may also be able to get the money by leasing a car.
    The Inflation Reduction Act, which President Joe Biden signed in 2022, contained various rules related to consumer tax breaks for EVs.

    Perhaps the best known of them — the “new clean vehicle” tax credit — is a $7,500 tax break for consumers who buy a new EV. Most qualifying buyers opt to get those funds directly from the car dealer at time of purchase.  
    But many auto dealers are also passing along a $7,500 tax break to lessees, via a different (and, experts say, lesser-known) mechanism called the “qualified commercial clean vehicles” tax credit.

    The upshot for consumers: It’s far easier to get than the credit for buyers of new EVs, since it doesn’t carry requirements tied to car manufacturing, sticker price or buyers’ income, for example, experts said.
    In other words, the $7,500 may be available for lessees but not for buyers.
    This EV tax credit “leasing loophole” has likely been a key driver of increased leasing uptake in 2024, Barclays auto analysts said in an equity research note published in June.

    About 35% of new EVs were leased in the first quarter of 2024, up from 12% in 2023, according to Experian.
    “Want a good deal on buying a car today? Your best bet may be leasing an EV,” Barclays said.

    What is the EV leasing loophole?

    Praetorianphoto | E+ | Getty Images

    Receipt of the full new clean vehicle credit — Section 30D of the tax code — is conditioned on certain requirements for vehicles and buyers.
    For example, final assembly of the EV must occur in North America. Battery components and minerals also carry various sourcing and manufacturing rules. Cars must not exceed a certain sticker price: $55,000 for sedans and $80,000 for SUVs, for example.
    As a result, not all EVs qualify for a tax credit. Some are eligible, but only for half ($3,750).
    More from Personal Finance:Are gas-powered or electric vehicles a better deal?States rolling out consumer rebates tied to energy efficiencyRent a car for a road trip, or drive your own?
    Thirteen manufacturers make models currently eligible for a tax break, according to the U.S. Energy Department. That list is expected to grow over time as automakers shift production to comply with the new rules.
    To qualify for the tax break, buyers’ annual income also can’t exceed certain thresholds: $300,000 for married couples filing a joint tax return or $150,000 for single filers, for example.
    But consumers can sidestep these requirements by leasing.

    That’s because leasing is qualified as a commercial sale under the Inflation Reduction Act, according to Barclays. With a lease, the carmaker technically sells the vehicle to a leasing partner, which is the one transacting with consumers.
    The U.S. Treasury Department issues the tax credit — offered via Section 45W of the tax code — to the leasing partner, which may then pass on the savings to lessees.

    Dealers aren’t obligated to pass on savings

    The catch is, they don’t have to pass on savings to drivers, experts said.
    It seems “a ton” are doing so at the moment, though, said Ingrid Malmgren, senior policy director at Plug In America.
    The $7,500 tax credit enables dealers to charge low monthly payments for leases, thereby helping “stoke demand” for EVs, Barclays wrote. In 2024, dealers have leaned more heavily on such leasing promotions, in the form of subsidized monthly payments, analysts said.  
    Foreign automakers that struggle to meet the Inflation Reduction Act’s domestic manufacturing requirements are among those doing so.

    “Greater EV ambitions from Asian [car manufacturers] such as Toyota and Hyundai Kia also heavily utilize the leasing loophole as their production outside of North America limits their ability to qualify for the consumer credit, but not the commercial credit,” Barclays wrote.
    Brian Moody, executive editor of Autotrader, a car shopping site, expects the majority, if not all dealers, to pass along tax break savings to remain competitive.
    “It’s unlikely you’d go lease one and not get the advantage,” Moody said.

    EV leasing considerations for consumers

    Consumers may consider doing the rough math on leasing versus buying before making an ultimate choice, including tallying potential tax breaks, interest costs, total car payments and resale value, experts said.
    While leases are generally (though not always) more expensive than buying, leasing carries nonfinancial benefits, too, Malmgren said.
    For example, leasing ensures car users always have a new vehicle, and also offers “a great glide path” for consumers to determine whether EVs are right for them, without much risk, she said.
    Buyers waiting for “next-generation EVs” from certain carmakers around 2026 to 2028 can “maintain flexibility,” while also providing a benefit to those “wary of technological obsolescence given the rapid pace of EV/software-defined vehicle development,” Barclays wrote.

    That said, it may be more complicated for consumers to untangle how dealers are passing along a tax credit to EV lessees relative to buyers, experts said.
    “I think leases are a little bit of a shell game,” Malmgren said. “There are many variables that factor into your payment” that dealers can tweak in a lease contract.
    She encourages consumers to get a printout of everything included in the lease to make sure the $7,500 tax credit is reflected in the pricing.
    “Quite frankly, I’d just ask upfront,” Moody said. “And it should be spelled out in the [lease] documents, too.”
    If it’s not easy to understand, consumers should consider moving on to another dealer, he added.

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    Ford to spend $3 billion to expand large truck production to a plant previously set for EVs

    Ford Motor will expand production of its large Super Duty trucks to a Canadian plant that was previously set to be converted into an all-electric vehicle hub.
    The new plans include investing about $3 billion to expand Super Duty production, including $2.3 billion at Ford’s Oakville Assembly Complex in Ontario, Canada, Ford said Thursday.
    Ford said the Canadian plant, which is expected to come online in 2026, will add annual capacity of roughly 100,000 units of the highly profitable pickups.

    2023 Ford Super Duty F-350 Limited

    DETROIT – Ford Motor will expand production of its large Super Duty trucks to a Canadian plant that was previously set to be converted into an all-electric vehicle hub.
    The new plans include investing about $3 billion to expand Super Duty production, including $2.3 billion at Ford’s Oakville Assembly Complex in Ontario, Canada, Ford said Thursday. The remaining investment will be used to increase production at supporting facilities in the U.S. and Canada, the company said.

    Ford currently produces Super Duty trucks – the larger siblings of the F-150 full-size pickup used largely by commercial and business customers – at plants in Ohio and Kentucky.
    Ford said the Canadian plant, which is expected to come online in 2026, will add capacity of roughly 100,000 units annually.
    “Super Duty is a vital tool for businesses and people around the world and, even with our Kentucky Truck Plant and Ohio Assembly Plant running flat out, we can’t meet the demand,” Ford CEO Jim Farley said in a release. “This move benefits our customers and supercharges our Ford Pro commercial business.”

    Stock chart icon

    Ford stock performance in 2024

    Ford had previously announced plans to invest $1.3 billion into the Canadian plant for EV production. Those plans included a new three-row SUV, which the company recently delayed until 2027.
    The announcement comes weeks after Farley said full electrification of “big, huge, enormous” vehicles such as Ford’s Super Duty trucks were “never going to make money.”

    Ford said it has plans to “electrify” the next-generation of its Super Duty trucks, however it declined Thursday to disclose additional details.
    The company said the move supports Farley’s Ford+ plan for profitable growth, including maximizing Ford’s manufacturing footprint. It’s the latest pullback for the restructuring plan involving EVs, however the automaker said it still plans to produce the three-row EV at an unspecified plant, starting in 2027.
    The Ford+ plan initially focused heavily on EVs when it was announced in May 2021 during the company’s first investor day under Farley, who took over the helm of the automaker in October 2020.
    At the time, there was significant optimism around all-electric vehicle adoption and potential profitability that have not materialized as quickly as many had expected.

    Ford CEO Jim Farley speaks with reporters outside the company’s world headquarters on May 19 in Dearborn, Michigan, following the debut of the electric F-150 Lightning pickup truck
    Michael Wayland / CNBC

    Ford’s initial plan called for almost half of its global sales to be electric by 2030, fueled by more than $30 billion in investments in EVs through 2025. It’s unclear how much capital the company has spent on EVs to date. Its plans have changed several times, and its “Model e” EV unit lost $4.7 billion in 2023.
    While Ford’s EV unit losses billions of dollars, its Ford Pro commercial business including its Super Duty trucks earned $7.2 billion before interest and taxes in 2023.
    The Ford+ plan also included a target of 8% earnings before interest and tax, or EBIT, profit margin for the EV unit by the end of 2026. Ford withdrew that target earlier this year. It was would have been a massive turnaround from a profit margin of roughly negative 40% in 2022.
    Ford said the new Super Duty assembly will initially secure approximately 1,800 Canadian jobs at the Oakville Assembly Complex, 400 more than would initially have been needed to produce the three-row EV. More

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    Watch: ECB President Christine Lagarde speaks after rate decision

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    European Central Bank President Christine Lagarde is giving a press conference following the bank’s latest monetary policy decision. The central bank left interest rates unchanged on Thursday, after implementing a cut in June.

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    Japan’s strength produces a weak yen

    It does not require a financial detective to work out what is going on. Three sudden surges in the value of the yen, on July 11th, 12th and 17th, have raised suspicions that the Bank of Japan (BoJ) is again intervening in currency markets (see chart). The bursts have left the currency, at ¥156 to the dollar, up by 4% against the greenback and marginally above the 37-year lows it reached earlier this month. More

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    At last, Wall Street has something to cheer

    Capital markets are twitchy. When interest rates spiked in 2022, their response was fast. Stocks plunged; bosses deferred plans to go public, issue stock and buy rivals. Sharp-suited bankers suddenly found their calls going unanswered. By contrast, the economy adapts slowly. As inflation climbed, people did not cut back much on spending, instead using their credit cards more. With the labour market healthy, they did not struggle to repay debt as rates rose. The result was a bonanza for consumer banks. They raked in ever more interest from resilient borrowers as defaults and delinquencies stayed low. More