Raphael Stevens

Netflix finds itself in an unusual place with slowing growth and an eye on advertisement: following legacy media.
Netflix announced Tuesday it’s exploring adding a lower-priced, advertising-based tier to its service.
Instead of legacy media shares soaring as they imitate Netflix, the industry has brought Netflix down to a degree.

Reed Hastings, co-CEO of Netflix, participates in the Milken Institute Global Conference on October 18, 2021 in Beverly Hills, California.
Patrick T. Fallon | AFP | Getty Images

We must be living in the Upside Down. Legacy media has disrupted Netflix.
Netflix announced Tuesday it’s exploring adding a lower-priced, advertising-based tier to its service. The decision has put the world’s largest streaming video service in a peculiar place: following legacy media’s lead.

Comcast and Disney-owned Hulu is the founding father of advertising-supported streaming. In recent years, Warner Bros. Discovery’s primary streaming services (HBO Max and Discovery+), NBCUniversal’s Peacock and Paramount Global’s Paramount+ all launched with ad-based tiers for a lower price than their commercial-free products. Disney said last month Disney+ will offer an advertising-supported product.
The legacy media industry has spent the past four years overhauling their businesses to compete with Netflix. All of legacy media decided Netflix’s streaming-only model was the future of entertainment consumption. The companies saw Netflix trade at sky-high multiples, leading to a soaring stock price, no matter how much it spent on content.
The result was a pack of enormous companies shifting focus to compete directly against Netflix instead of protecting the pay TV bundle, long the jewel of the industry.
In the streaming world, Netflix looks like the incumbent — struggling with saturation and an aging core service. That may not be good news for the entertainment companies striving to gain market share.
The optimistic goal for legacy media companies has been to attain the same type of trading multiples as Netflix — an “everybody wins” scenario. But, at least for now, it appears entertainment rivals have pulled down Netflix, which acknowledged during its first-quarter earnings update that growing competition has led to its slowing growth.

Netflix shares fell more than 35% on Wednesday, dragging its market capitalization to $100 billion for the first time since 2018.
When a company trades on subscriber gains, like Netflix, it’s inevitable the music will eventually stop. No company can sustain subscriber growth forever. Saturation kicks in.
That appears to have happened for Netflix, which lost subscribers for the first time in more than 10 years during the first quarter and is projecting a further loss of 2 million subscribers during the second quarter.
The situation is so dire, on the surface, that Netflix CFO Spencer Neumann jumped in just before the end of the company’s earnings conference call Tuesday to reassure investors that Netflix will still be up in terms of subscribers for the full year — a telling consolation when you consider that most analysts expected Netflix to add nearly 20 million net subscribers in 2022.
“There will be paid net add growth,” Neumann said. “I just want to make sure that that’s understood.”

What now?

A shrinking Netflix isn’t good for Hollywood, which has benefited not just from the streamer’s willingness to spend but also the subsequent arms race from competitors.
A version of Netflix that needs to tamp down spending because it no longer has a ballooning market value forces the entire industry to figure out what’s next. If Netflix is embracing ads after years of resisting them, will the company next get into live sports?
Co-CEO Ted Sarandos said he didn’t see a profitable path into sports on Tuesday’s conference call, but Netflix seems to be getting into the habit of changing long-held beliefs. Netflix ignored password sharing for many years — and that’s changing now too.
If Netflix looks and acts like all other entertainment companies, it sets itself up to be disrupted too. It’s unclear video gaming, which the company has repeatedly touted as an area for innovation, will be enough to separate Netflix from the pack.
The industry now seems a lot more unsettled than it did a year ago, when “trading like Netflix” was actually a goal. There’s rampant speculation the streaming wars will lead to more consolidation, but it’s unclear regulators would allow those deals to take place.
Media companies could have rallied around protecting the pay-TV bundle, but they risked ceding the future to Netflix and other giant technology companies. Whether that decision was right or not, that ship has sailed.
And following Netflix into streaming hasn’t led to the multiple expansion the legacy companies were hoping for. As Netflix falls, its newly defined peers do too. Paramount Global dropped more than 8% Wednesday. Warner Bros. Discovery dropped more than 6%. Disney fell 5.6%.
Legacy media may have brought down Netflix to a degree. But in doing so, it created an existential crisis for the entire entertainment industry. What do we do now?
WATCH: Netflix has not monetized 500 million viewers, says Jim Cramer

Disclosure: Comcast is the owner of NBCUniversal, parent company of CNBC.

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The U.S. Department of Justice announced criminal charges against two people in California in a scheme that allegedly made $144 million in false and fraudulent health claims to federal programs for unnecessary Covid-19 tests.
The DOJ also announced criminal cases against 19 other defendants, among them doctors, a nurse, medical business executives and others, for an additional $8 million in false Covid-related billings.
One man charged allegedly bragged about selling fake coronavirus vaccine cards to Olympic team members.

Signage is seen at the United States Department of Justice headquarters in Washington, D.C., August 29, 2020.
Andrew Kelly | Reuters

The U.S. Department of Justice on Wednesday announced criminal charges against two people in California in a scheme that allegedly made $144 million in false and fraudulent health claims to federal programs for unnecessary Covid-19 tests.
The DOJ also announced criminal cases against 19 other defendants, among them doctors, a nurse, medical business executives and others, for an additional $8 million in false Covid-related billings to federal health programs and theft from federally funded pandemic assistance programs. Prosecutors also allege some defendants sold fake vaccination cards and bogus coronavirus cures.

The cases span nine federal court districts.
“Throughout the pandemic, we have seen trusted medical professionals orchestrate and carry out egregious crimes against their patients all for financial gain,” said Luis Quesada, assistant director of the FBI’s Criminal Investigative Division.
“These health care fraud abuses erode the integrity and trust patients have with those in the health care industry, particularly during a vulnerable and worrisome time for many individuals,” Quesada said.
In the major California case, the owners of a clinical laboratory, Imran Shams and Lourdes Navarro, both age 63, of Glendale, were charged with a health-care fraud, kickback and money laundering scheme that involved the fraudulent billing of over $214 million for laboratory tests.
More than $125 million of those billings allegedly involved fraudulent claims for Covid and respiratory pathogen tests that “were submitted without regard to medical necessity,” according to prosecutors.

“Shams and Navarro fraudulently concealed Shams’s role in the lab and his prior health care-related criminal convictions,” according to the DOJ. Shams has been barred from participating in the federal Medicare program for decades.
“The indictment also alleges that Shams and Navarro paid kickbacks to marketers who obtained specimens and test orders, and laundered the proceeds of the scheme through shell companies Navarro controlled, including by making expenditures on real estate, luxury items, and personal goods and services,” the Justice Department said.
In Washington state, a 53-year-old Parker, Colorado, resident, Robert Van Camp, was accused of using blank Covid-19 vaccination cards to forge and sell hundreds of fake vaccine record cards, which he sold to buyers and distributors in at least a dozen states, according to the DOJ.
“Van Camp allegedly told an undercover agent that he had sold cards to ‘people that are going to the Olympics in Tokyo, three Olympians and their coach in Tokyo, Amsterdam, Hawaii, Costa Rica, Honduras,'” the DOJ said in a news release.
Van Camp also allegedly told that agent, “I’ve got a company, a veterinary company, has 30 people going to Canada every f—— day, Canada back. Mexico is big. And like I said, I’m in 12 or 13 states, so until I get caught and go to jail, f— it, I’m taking the money, (laughs)! I don’t care,” the DOJ said.

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Other defendants include a U.S. Postal Service worker, Lisa Hammell of Turnersville, New Jersey. Hammell is charged with creating fake Covid vaccine cards and printing them while at work.
Hammell, 39, is accused of selling at least 400 bogus vaccination cards to people who had not actually received Covid shots.
In separate cases in Maryland and Long Island, New York, owners of medical clinics are accused of obtaining confidential information from patients seeking coronavirus tests at drive-thru sites and in brief office visits, then submitting bogus claims to Medicare, Medicaid and other insurers for much longer office visits that did not actually happen.
In the Long Island case, Dr. Perry Frankel, 64, of Roslyn, N.Y., was charged with health-care fraud for more than $1.3 million in claims billed during the Covid pandemic.
Frankel’s lawyer Timothy Sini, in an emailed statement, called him a “respected cardiologist in the Long Island region who has saved lives by providing vital mobile medical screenings to law enforcement, school districts and many communities across Long Island and the five boroughs.”
“When the COVID-19 pandemic hit, Dr. Frankel stepped up and brought much needed COVID-19 testing to the community. He has been recognized for his service by many, including the White House,” Sini said.
“The Government, as part of a larger initiative, is targeting healthcare providers who supposedly took advantage of the pandemic to benefit themselves financially. Nothing could be further from the truth here,” the lawyer said. “Dr. Frankel provided a much needed service during a public health crisis and an extremely challenging time. It is unfortunate that the government’s claims seek to undermine the positive nature of Dr. Frankel’s work. We look forward to pursuing justice for Dr. Frankel and clearing his name in the medical community.”
In the Maryland case, Ron Elfenbein, a 47-year-old from Arnold, was charged with health care fraud related to more than $1.5 million in claims that were billed in connection with COVID-19 testing.
In Utah, a former employee of the preflight Covid testing service XpresCheck in the Salt Lake City International Airport terminal was charged with wire fraud for giving counterfeit negative test results to people traveling through that airport.
The worker, 28-year-old Linda Tufui Toli of Salt Lake City, “allegedly intercepted calls from travelers who were seeking COVID testing services from XpresCheck prior to traveling to destinations such as Hawaii, Israel, and other locations which required travelers to provide negative COVID test results prior to departure,” the DOJ said.
“Toli allegedly canceled the travelers COVID tests through XpresCheck and arranged for travelers to purchase counterfeit negative COVID tests directly from her, and accepted payment for the counterfeit test results using electronic mobile payment services,” according to the DOJ.

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President Joe Biden and Vice President Kamala Harris have released their 2021 tax returns, and there are a few key takeaways for the average American.
Their returns were similar to 2020, putting both couples in the top 1% of filers, according to IRS data.
“It seems like they’re conservative in the way they do their taxes,” said Sharif Muhammad, founder and CEO of Unlimited Financial Services.

President Joe Biden and Vice President Kamala Harris after Biden signed H.R. 55, the “Emmett Till Antilynching Act,” in Washingtonon March 29, 2022.
Samuel Corum | Bloomberg | Getty Images

President Joe Biden and Vice President Kamala Harris have released their 2021 tax returns, and there are a few key takeaways for the average American, experts say.
The president and first lady Jill Biden reported a joint adjusted gross income of $610,702, paying $150,439 in federal income tax at a 24.6% effective tax rate.

Vice President Kamala Harris and her husband, Douglas Emhoff, showed roughly $1.7 million in earnings, paying $523,371 in federal taxes at a 31.6% tax rate.   
Both returns were similar to 2020, putting them in the top 1% of filers, according to IRS data. By comparison, the average American paid a 13.3% tax rate in 2019, according to the Tax Foundation.
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“They’re both overpaying, particularly Kamala and her husband,” said Eric Pierre, an Austin, Texas-based certified public accountant, owner of Pierre Accounting and co-host of the CPA Huddle podcast.
For example, Harris earned more than $450,000 in gross earnings as a writer in 2021 and skipped the chance to save on payroll taxes by structuring her business as an S-corporation.

After paying employee shareholders reasonable compensation, owners may also take distributions without the combined 15.3% for Social Security and Medicare taxes.
“She’s probably going to make a lot more than her husband when she’s not in office,” he said, adding how an S-corporation may provide significant future savings.
There also may be missed opportunities for Emhoff, who received nearly $600,000 in partnership income in 2021, Pierre said.

The Bidens trimmed their self-employment tax bill by receiving some wages through their company structured as an S-corporation, which provided significant savings for the couple’s book deals and speaking gigs in 2017 and 2018.  
They could further reduce their bill by padding retirement savings with contributions to a solo 401(k) or SEP individual retirement account, said certified financial planner Sharif Muhammad, founder and CEO of Unlimited Financial Services in Somerset, New Jersey.
Overall, both returns show modest tax-reduction strategies compared to private citizens with similar earnings, Pierre said.
But they receive other perks, such as the president’s $50,000 annual expense account, housing, transportation and more. In the corporate world, these benefits may be taxable compensation, he explained.

It seems like they’re conservative in the way they do their taxes.

Sharif Muhammad
Founder and CEO of Unlimited Financial Services

“It seems like they’re conservative in the way they do their taxes,” said Muhammad.
What’s more, the Bidens have significant withholdings from their W-2 earnings in lieu of estimated tax payments for their self-employment income, he pointed out.  
“It’s kind of a set-it-and-forget-it type of approach,” Muhammad said. 
Both couples may also consider estate tax planning strategies, particularly with provisions from the Tax Cuts and Jobs Act scheduled to sunset in 2026, Pierre said. While the current exemption for federal estate taxes is more than $12 million per person for 2022, it will revert to an estimated $6 million. 

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Breeze Airways is planning eight new routes from Westchester County Airport in New York.
The airline is focusing Breeze on smaller cities in a bet on suburbanite travelers.
The announcement comes a month after the airline said it would double its network.

A Breeze Airways airplane on the tarmac at Tampa International Airport (TPA) in Tampa, Florida, U.S., on Thursday, May 27, 2021.
Matt May | Bloomberg | Getty Images

Breeze Airways plans to add eight flights, including service to California, from Westchester County Airport in New York, a bet that the start-up can win over suburbanites seeking to avoid a trip to the New York City area’s large hubs.
The airline, launched by JetBlue Airways founder David Neeleman, is offering nonstop routes from Westchester to Los Angeles; San Francisco; Charleston, South Carolina; Jacksonville, Florida; Savannah, Georgia; and Norfolk, Virginia. It will also offer a flight with one stop to New Orleans.

The announcement comes a month after Breeze Airways said it would nearly double its network this year. The Westchester flights are part of a strategy from upstarts like Breeze and Avelo Airlines to capitalize on demand from travelers in smaller cities.
“They want to go nonstop, and they want to do it more efficiently,” Breeze CEO Neeleman said in an interview.
Neeleman said the strategy is focused on leisure travelers, noting that many business travelers prioritize airlines that offer multiple frequencies as well as frequent flyer status.
Breeze Airways plans to use its Airbus A220-300s on the cross-country routes, which include 36 first-class seats.
The carrier is also adding service from Hartford’s Bradley International Airport to Las Vegas, its eighth route from the Connecticut airport.

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The Federal Aviation Administration is maintaining its zero tolerance policy for unruly passenger behavior.
A federal judge struck down the Biden administration’s mask requirements for public transportation this week.
Disputes over masks account for more than 70% of unruly passenger reports, the FAA says.

Passengers wearing protective masks masks board a Boeing Co. 737-800 operated by Avelo Airlines ahead of the airline’s inaugural flight at Hollywood Burbank Airport (BUR) in Burbank, California, U.S., on Wednesday, April 28, 2021.
Bing Guan | Bloomberg | Getty Images

The Federal Aviation Administration is maintaining its zero tolerance policy for unruly passenger behavior even after a federal judge struck down the Biden administration’s mask requirements for public transportation this week.
After the Transportation Security Administration said the mask-mandate policy would no longer be enforced, airlines announced masks would become optional, effective immediately.

Disputes over masks accounted for more than 70% of the record 5,981 reports of disruptive passengers the FAA received last year.
The FAA introduced the zero tolerance policy in January 2021 in response to a surge in reports of unruly travelers from airlines and flight attendants. That policy calls for hefty fines and potential criminal prosecution for such behavior that previously might have spurred warnings or counseling.
Flight attendants and their unions have reported a surge in verbal abuse and physical assault by passengers during the pandemic.
The agency has referred 80 cases to the FBI, it said.
“Behaving dangerously on a plane will cost you; that’s a promise,” acting FAA Administrator Bill Nolen said in a statement. “Unsafe behavior simply does not fly and keeping our Zero Tolerance policy will help us continue making progress to prevent and punish this behavior.” 

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Novavax’s vaccine targeting both Covid and the flu triggered a promising immune response comparable with its stand-alone shots against the viruses, according Chief Medical Officer Filip Dubovsky.
The company plans to move forward with a phase two trial this year to confirm the appropriate dosing levels, and launch a phase three trial on efficacy during the 2023 flu season at the earliest, Dubovsky said.
Novavax does not currently have an authorized vaccine in the U.S. Dubovsky said the FDA is still reviewing the application for its stand-alone Covid shot.

A health worker prepares a dose of the Novavax vaccine as the Dutch Health Service Organization starts with the Novavax vaccination program on March 21, 2022 in The Hague, Netherlands.
Patrick Van Katwijk | Getty Images

Novavax on Wednesday said its vaccine targeting both Covid-19 and the flu triggered an immune response similar to its stand-alone shots against each virus, in an early indication that a combination vaccine targeting both viruses could prove effective though further study is necessary.
Chief Medical Officer Filip Dubovsky, during a call with reporters, said the company’s early phase clinical trial found that up to 25 micrograms of the Covid formulation combined with up to 35 micrograms of the flu formulation triggered a promising level of protective antibodies.

“What we demonstrated in this study is we were able to get the immune responses really comparable to what the individual vaccines did prior to combination,” Dubovsky said.
Participants in the phase one trial had a median age of 59 and all of them had previously received Covid vaccines. Novavax is presenting the data at the World Vaccine Congress in Washington, D.C., on Wednesday.
Novavax plans to move forward with a phase two trial this year to confirm the appropriate dosing levels, and launch a phase three trial on efficacy during the 2023 flu season at the earliest, Dubovsky said.
Public health experts expect Covid to become a seasonal respiratory virus similar to the flu that will likely require annual vaccination because immunity from the shots wanes over time. The vaccine makers are racing to develop combination shots targeting both viruses to make it easier for people to get protected when Covid and the flu are circulating simultaneously.
“Combination vaccines are an attractive public health intervention,” Dubovsky said. “You are hitting two life-threatening diseases in one medical contact, giving a single vaccination.”

Novavax, an early participant in the U.S. government’s 2020 race to develop Covid shots, does not currently have an authorized vaccine in the U.S. The company asked the Food and Drug Administration to authorize its Covid vaccine in January. Dubovsky told reporters on Wednesday that the FDA is still reviewing Novavax’s application.
Novavax’s Covid vaccine uses different technology than Pfizer’s and Moderna’s shots, which rely on messenger RNA to turn human cells into factories that produce copies of the virus spike protein, inducing an immune response that fights Covid. The spike is the part of the virus that latches onto and invades human cells.
Novavax’s shots, on the other hand, fully synthesize the virus spike outside the human body. The genetic code for the spike is put into a baculovirus that infects insect cells, which then produce copies of the spike that are purified and extracted. The spike copy, which can’t replicate or cause Covid, is injected into people to induce an immune response against the virus.
The vaccine also uses an adjuvant that contains an extract purified from the bark of a tree in South America, to induce a broader immune response. The adjuvant has been used in licensed vaccines against malaria and shingles. Novavax’s stand-alone Covid shots consist of 5 micrograms of the spike copy and 50 micrograms of the adjuvant.
Novavax uses the same technology for its stand-alone flu vaccine candidate, which targets four strains of the virus.
While the up to 25 microgram Covid formulation in the combination vaccine is higher than the stand-alone shot, Dubovsky said it’s well within the range of the other FDA-licensed Covid vaccines, which have dosing levels between 50 and 100 micrograms.
The 25 microgram formulation tested in the combination vaccine trial was well tolerated and safe, Dubovsky said. The most common side effects were injection site pain, fatigue and headaches, he said.

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Options traders are making a ton of noise in Tesla’s stock as the company gears up to report earnings after the bell Wednesday.
The electric vehicle manufacturer headed up by Elon Musk — who continues to make a lot of noise himself — has struggled so far this year, but the options market is betting that Tesla could be back in positive territory for 2022 by the end of this week.

“[Tesla] was the fourth-busiest [single stock option] in contract terms today and the busiest in notional terms. Right now, the options market is implying a move of about 6% by the end of the week,” Optimize Advisors CIO Michael Khouw said Tuesday on CNBC’s “Fast Money.”
Bullish traders were largely responsible for the flood of trading volume Tesla’s options experienced Tuesday, though the most popular contract targeted a post-earnings move slightly smaller than the 6% predicted by the market as a whole.
“The most active options were the [April 22 weekly] 1,100 and 1,050-strike calls. The 1,050s, for example, saw nearly 30,000 trade at a price of $20 per contract,” said Khouw. “Buyers of those calls are risking a little under 2% of the current stock price to make a bullish bet that the stock is going to be up about 4.3% by the end of the week.”
Tesla was down more than 3% midday Wednesday.
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