Raphael Stevens

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    Disney earnings offer hope that streaming can successfully supplant linear TV

    For Disney’s fiscal 2025, streaming will generate enough operating income to offset the parallel decline in operating income from linear TV, CFO Hugh Johnston said in an interview.
    Disney projects entertainment direct-to-consumer operating income will increase by about $875 million next year over fiscal year 2024.
    Disney’s results suggest streaming may be a more robust business than some investors previously believed.

    The Disney+ website on a laptop computer in the Brooklyn borough of New York, US, on Monday, July 18, 2022.
    Gabby Jones | Bloomberg | Getty Images

    Disney might be proving the world’s most famous investor wrong.
    Last year, Warren Buffett, “The Oracle of Omaha,” told CNBC’s Becky Quick he had no faith in the business of streaming video.

    “Streaming … it’s not really a very good business,” Buffett said on April 12, 2023. “The shareholders really haven’t done that great over time.”
    Buffett wasn’t lying. Legacy media companies such as Comcast’s NBCUniversal, Disney, Paramount Global and Warner Bros. Discovery have all underperformed the S&P 500 since Jan. 1, 2022, largely due to billions of dollars lost while launching subscription streaming services.

    But Disney’s quarterly earnings results, released Thursday, indicate streaming is about to become a much better business.
    A combination of pulling back on content spending and steadily increasing Disney+, Hulu and ESPN+ subscribers hasn’t just turned streaming into a profitable business, it’s actually turned streaming into an even better business than traditional TV, according to Disney Chief Financial Officer Hugh Johnston.
    For Disney’s fiscal 2025, streaming will generate enough operating income to offset the parallel decline in operating income from linear TV, Johnston said in an interview.

    Disney projects entertainment direct-to-consumer operating income will increase by about $875 million next year over fiscal year 2024. That would put the division at over $1 billion in operating income for the coming fiscal year.
    “I think we’re well-positioned if [consumers] decide to stay in linear for longer, and I think we’re well-positioned if they decide to move over to the streaming side,” Johnston said during Disney’s earnings conference call.
    Those results are borne out in Disney’s earnings. Disney’s combined streaming businesses improved their profitability in the company’s fiscal fourth quarter, posting operating income of $321 million. For the year, Disney’s entertainment streaming platforms (Disney+ and Hulu) made $143 million in operating income. Last year, the entertainment platforms lost $2.5 billion.

    Streaming strikes back

    The bearishness toward traditional media hasn’t been isolated to streaming’s near-term losses.
    Investors have also largely bought into the premise that subscription streaming video won’t be able to replace the billions in profit from linear TV, cable and broadcast, that the companies have lived off for decades.
    The traditional pay-TV business has been phenomenal for many reasons, but two stand out: Media companies get paid monthly regardless of whether people actually watch, and churn rates for traditional pay TV were traditionally extremely low — at least, until the invention of streaming. In the last decade, tens of millions of Americans have canceled their cable TV subscriptions.
    In the new streaming era, it’s far easier to cancel a particular service at any given time. Instead of having to cancel TV entertainment in its entirety, a consumer can easily pick and choose from a handful of streaming services in any given month.
    Consequently, media companies no longer religiously get paid each month. Now, only consumers that want specific programming are paying, and only for as long as they want it.Still, Disney’s forecast suggests those headwinds don’t necessarily mean streaming will be unsuccessful as a long-term replacement product for cable. Future bundles or consolidation may help mitigate churn. As companies shift their best content to streaming, canceling services becomes less appealing.
    Disney’s results follows strong streaming results last week from Warner Bros. Discovery. The company’s direct-to-consumer division delivered profit of $289 million, driven by an increase in global subscribers, higher advertising revenue and global average revenue per user. Warner Bros. Discovery’s flagship streaming service Max added 7.2 million global customers during the third quarter, bringing its total subscriber base to 110.5 million.
    The end result may be a media industry that emerges from a rough few years stronger than investors feared. Disney shares rose 6.2% Thursday.
    Disclosure: Comcast’s NBCUniversal is the parent company of CNBC. More

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    China set to report retail sales and industrial production data for October

    Retail sales in October were forecast to have picked up to 3.8% year-on-year growth, according to analysts polled by Reuters, after rising by 3.2% in September.
    Industrial production was expected to have risen by 5.6%.
    Fixed-asset investment, reported on a year-to-date basis, was anticipated to post 3.5% growth from a year ago.

    Pictured here is a Shanghai development under construction on Nov. 4, 2024.
    Cfoto | Future Publishing | Getty Images

    BEIJING — China’s National Bureau of Statistics is scheduled Friday to release retail sales, industrial production and fixed-asset investment data for October.
    Retail sales are expected to have picked up to 3.8% year-on-year growth, according to analysts polled by Reuters, after rising by 3.2% in September.

    Industrial production was forecast to have risen by 5.6%, the poll showed, up from 5.4% the prior month.
    Fixed-asset investment, reported on a year-to-date basis, was anticipated to post 3.5% growth from a year ago, up from the 3.4% pace in September, according to the poll.
    Chinese authorities have ramped up stimulus announcements since late September, fueling a stock rally. The central bank has cut interest rates and extended existing real estate support.
    On the fiscal front, the Ministry of Finance last week announced a five-year 10 trillion yuan ($1.4 trillion) program to address local government debt problems, and hinted more fiscal support could come next year.

    Manufacturing surveys indicated a pickup in activity last month, while exports surged at their fastest pace in more than a year.

    Imports, however, fell as domestic demand remained soft. The core consumer price index that strips out more volatile food and energy prices rose by 0.2% in October from a year ago, modestly better than the 0.1% increase seen in September.
    Beyond a trade-in program to encourage car and home appliance sales, Beijing’s stimulus measures have not targeted consumers directly.
    China’s Golden Week holiday in early October affirmed a trend in more cautious consumer spending, but several consultants said that sales during the Singles Day shopping festival, which recently ended, had beat low expectations.
    The country’s gross domestic product in the first three quarters of the year grew by 4.8%. The country has set a target of around 5% growth for the year.
    This is a developing story. Please check back later for updates. More

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    Powell says the Fed doesn’t need to be ‘in a hurry’ to reduce interest rates

    Federal Reserve Chair Jerome Powell said Thursday that strong U.S. economic growth will allow policymakers to take their time in deciding how far and how fast to lower interest rates.
    “The economy is not sending any signals that we need to be in a hurry to lower rates,” Powell said in Dallas.

    Federal Reserve Chair Jerome Powell said Thursday that strong U.S. economic growth will allow policymakers to take their time in deciding how far and how fast to lower interest rates.
    “The economy is not sending any signals that we need to be in a hurry to lower rates,” Powell said in remarks for a speech to business leaders in Dallas. “The strength we are currently seeing in the economy gives us the ability to approach our decisions carefully.”

    (Watch Powell’s remarkets live here.)
    In an upbeat assessment of current conditions, the central bank leader called domestic growth “by far the best of any major economy in the world.”
    Specifically, he said the labor market is holding up well despite disappointing job growth in October that he largely attributed to storm damage in the Southeast and labor strikes. Nonfarm payrolls increased by just 12,000 for the period.
    Powell noted that the unemployment rate has been rising but has flattened out in recent months and remains low by historical standards.

    Federal Reserve Chair Jerome Powell delivers remarks in Dallas on Nov. 14, 2024.
    Ann Saphir | Reuters

    On the question of inflation, he cited progress that has been “broad based,” noting that Fed officials expect it to continue to drift back toward the central bank’s 2% goal. Inflation data this week, however, showed a slight uptick in both consumer and producer prices, with 12-month rates pulling further away from the Fed mandate.

    Still, Powell said the two indexes are indicating inflation by the Fed’s preferred measure at 2.3% in October, or 2.8% excluding food and energy.
    “Inflation is running much closer to our 2 percent longer-run goal, but it is not there yet. We are committed to finishing the job,” said Powell, who noted that getting there could be “on a sometimes-bumpy path.”
    Powell’s cautious view on rate cuts sent stocks lower and Treasury yields higher. Traders also lowered their expectations for a December rate cut.
    The remarks come a week after the Federal Open Market Committee lowered the central bank’s benchmark borrowing rate by a quarter percentage point, pushing it down into a range between 4.5% and 4.75%. That followed a half-point cut in September.
    Powell has called the moves a recalibration of monetary policy that no longer needs to be focused primarily on stomping out inflation and now has a balanced aim at sustaining the labor market as well. Markets still largely expect the Fed to continue with another quarter-point cut in December and then a few more in 2025.
    However, Powell was noncommittal when it came to providing his own forecast. The Fed is seeking to guide its key rate down to a neutral setting that neither boosts nor inhibits growth, but is not sure what the end point will be.
    “We are confident that with an appropriate recalibration of our policy stance, strength in the economy and the labor market can be maintained, with inflation moving sustainably down to 2 percent,” he said. “We are moving policy over time to a more neutral setting. But the path for getting there is not preset.”
    Powell added that the calculus of getting the move to neutral rate will be tricky.
    “We’re navigating between … the risk that we move too quickly and the risk that we move too slowly. We want to go down the middle and get it just right so that we’re providing support for the labor market but also helping enable inflation to come down,” he said. “So going a little slower, if the data let us go a little slower, that seems like a smart thing to do.”
    The Fed also has been allowing proceeds from its bond holdings to roll off its mammoth balance sheet each month. There have been no indications of when that process might end.

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    Landry CEO Fertitta becomes Wynn Resorts’ largest individual shareholder with nearly 10% stake

    Billionaire Tilman Fertitta has increased his ownership stake in Wynn Resorts to 9.9%, according to a filing with the U.S. Securities and Exchange Commission.
    The filing indicates a passive position, though multiple people familiar with the matter tell CNBC they suspect Fertitta will be demanding.
    Fertitta replaces co-founder Elaine Wynn as the company’s largest shareholder.

    The new Wynn Casino and Lisboa Casino in Macao, China.
    Bob Henry | Universal Images Group | Getty Images

    Billionaire Tilman Fertitta has increased his ownership stake in Wynn Resorts to 9.9%, according to a filing with the U.S. Securities and Exchange Commission.
    The filing indicates a passive position, though multiple people familiar with the matter tell CNBC they suspect Fertitta will be demanding.

    Wynn’s share price popped 9% Thursday on the news, in line with its 200-day moving average. Over 20 years, the stock has exhibited lots of volatility but not as much sustained growth.

    Stock chart icon

    Wynn stock against Marriott and Hilton.

    The stock is up roughly 57% over two decades, compared to Marriott’s 20-year gains of more than 950%. Hilton, which went public in 2013, is up more than 500% since its debut.
    Wynn Resorts and Fertitta declined to comment on his increased stake.
    Fertitta, CEO of Landry’s, is the owner of the Houston Rockets as well as eight Golden Nugget casinos across the U.S., including downtown Las Vegas. He is planning a new 43-story casino resort on the Las Vegas Strip.
    He is frequently outspoken about issues that affect Las Vegas, whether it is Formula One or historic union wage contracts. Wynn Las Vegas is the top-of-the-line, uber-luxurious resort on the Strip, and it owns two high-end resorts in Macao. Its customers are wealthier and generally shop and gamble more.

    But Wynn’s third-quarter earnings missed expectations for revenue and adjusted property EBITDA in both Macao and Las Vegas, which began to show some softening after a long, hot streak.
    Analysts occasionally question the company about plans to develop or sell 162 acres in Las Vegas, including a 128 acre golf course and a 38 acre parcel across from its resort complex on the Strip.
    In a June note, Jefferies analyst David Katz estimated the land was worth slightly more than $2 billion, but noted there is “no evident plan for development or sale.”
    Some investors have privately grumbled that Wynn is blowing its luxury brand power and best-in-class hospitality status domestically while it focuses on trying to establish a new gaming market in the Middle East.
    During the company’s third-quarter earnings call earlier this month, at an investor day in October and in an interview with CNBC, Wynn CEO Craig Billings kept the spotlight on the opportunities he sees in the United Arab Emirates.
    Wynn Resorts has a 40% stake in a new integrated casino resort being built in Ras Al Khaimah in the United Arab Emirates for a projected cost of $5.1 billion.
    Today the stock trades for roughly 70% more than when Fertitta bought 6.9 million shares at about $54 apiece in 2022. That position gave him a 6.2% stake in the company and made him the second-largest individual shareholder in Wynn, after co-founder Elaine Wynn.
    Now with his 9.9% stake, Fertitta supplants Elaine Wynn, who co-founded the company with her then-husband Steve Wynn and left its board of directors at the end of 2020.

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    Diamond Sports reaches key milestone toward exiting bankruptcy

    Diamond Sports, the owner of regional sports networks, moved closer to exiting bankruptcy on Thursday after a bankruptcy judge said he would sign off on its reorganization plan.
    The company sought bankruptcy protection in March 2023 as it was toppled by a heavy debt load and the proliferation of consumers leaving the pay TV bundle.
    Diamond’s reorganization plan slashes its nearly $9 billion debt load to $200 million.
    Recently, Diamond has reached various new agreements, including a deal with Amazon’s Prime Video to stream games.

    Jose Siri, #26 of Major League Baseball’s Houston Astros, steals second base as Dansby Swanson, #7 of the Atlanta Braves, is unable to handle the throw from Travis d’Arnaud, #16, in the eighth inning during Game 3 of the 2021 World Series at Truist Park in Atlanta on Oct. 29, 2021.
    Daniel Shirey | Major League Baseball | Getty Images

    Diamond Sports moved closer to exiting bankruptcy on Thursday after a bankruptcy judge approved its reorganization plan, which slashes the hefty debt load that toppled the company.
    The green light is a significant milestone for the owner of regional sports networks, which has been under bankruptcy protection since March 2023. During that time, the company has made dramatic changes to its deals with professional sports teams and leagues, as well as its business model, to prove it can be a viable company in the future.

    “This is a pretty significant day for this company. When we entered bankruptcy, I’d love to be able to tell you that I knew with confidence that we would reorganize this business. I thought we would, but couldn’t tell for certain that we could,” a Diamond Sports attorney said in court Thursday.
    “We took a pretty twisted journey to get here with potential wind-down as an option, but we are here today to reorganize this business,” he continued.
    In the weeks leading up to the hearing, Diamond inked various deals, including an agreement with Amazon’s Prime Video to stream games and a naming rights deal with Flutter’s FanDuel.
    Diamond faced recent opposition from Major League Baseball and the Atlanta Braves, but the company managed to resolve those issues prior to Thursday’s court hearing. It presented its reorganization plan to the court with a standing objection from the U.S. Trustee, a watchdog overseeing the case. The judge on Thursday overruled the objection and approved the plan.
    The reorganization plan that received court approval on Thursday will see Diamond’s debt load cut from nearly $9 billion to $200 million. The company will emerge from bankruptcy with more than $100 million in cash and cash equivalents on its balance sheet.

    “Today is a landmark day for Diamond, as we embark on a new path for our business. Diamond is now unencumbered by legacy debt, financially stable and enthusiastically supported by new ownership,” Diamond CEO David Preschlack said in a release Thursday.

    Diamond deals

    Throughout Diamond’s bankruptcy process over the past year and a half, the company has seen the status of teams across the MLB, the National Basketball Association and National Hockey League shift, as they decided to either remain on the pay TV networks or exit for new deals.
    On Thursday, attorneys for Diamond Sports said it now has the local rights to 13 NBA teams, eight NHL teams and six MLB teams.
    Its agreements with MLB have been in particular focus over the past few weeks. In an October court hearing, Diamond said it was planning to drop all of its MLB teams, except the Atlanta Braves, unless it could renegotiate its contracts with them.
    Since then, the MLB announced that three of the teams turned to MLB to produce their local games, and the Texas Rangers parted ways with Diamond. The Cincinnati Reds also ended their deal with Diamond and six MLB teams agreed to a deal to stay with Diamond, attorneys said during Thursday’s hearing.
    The Reds will also be turning to MLB to produce and air their local games for next season, MLB announced Thursday after the hearing. The league first did this last year when the San Diego Padres exited Diamond.
    Attorneys for Diamond on Thursday said there was one other team the company was in negotiations with. Based on CNBC’s earlier reporting that Diamond was working with 12 MLB teams, that leaves the Kansas City Royals as the unnamed team.
    The Kansas City Royals did not immediately respond to CNBC’s request for comment.
    “The reality is Diamond is a far smaller company than it was when it started this process,” said sports media consultant Lee Berke, noting the teams that have exited the networks.
    He added the regional sports network universe in general is getting smaller. Last year Warner Bros. Discovery walked away from the regional sports networks business.
    “This model doesn’t work anymore when it’s so dependent on the shrinking number of customers of pay TV distribution,” said Berke.
    For decades, the regional sports networks business has proven to be a lucrative business model for the teams and leagues, as the networks pay high fees to air local games that prop up team payrolls. But similar to their peers in the pay TV bundle, while the businesses are still profitable, they have heavily suffered in the wake of cord-cutting.
    In the wake of Diamond’s bankruptcy, some teams have opted out of their Diamond-owned networks, and signed deals with local broadcasters and various streaming platforms. While the deals with local broadcasters will expand the reach of the games, they are unlikely to replicate the fees generated by the regional sports network model since they are outside of the pay TV bundle.
    While Diamond was in negotiations with lenders and TV distributors, its key discussions took place with the leagues and teams. Some of those conversations are still ongoing, and a Diamond attorney said Thursday that the company is willing to renegotiate with the teams that have already departed.
    “Our door remains open, the phone lines remain up, and management is happy to engage those teams if they want to come back into the fold,” a Diamond attorney said in court Thursday.

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    Adidas signs first NIL deal with girls’ high school basketball player

    Adidas has locked in 16-year-old basketball star Kaleena Smith.
    The signing represents Adidas’ first signing of a high school female basketball player.
    Smith also represents Adidas’ first signing since the brand put Candace Parker in charge of women’s basketball.

    Adidas has signed Kaleena Smith as the bradn’s first NIL high school basketball player.
    Courtesy: Adidas

    Adidas has signed one of its youngest female athletes yet.
    The German sports apparel brand on Thursday announced the signing of Kaleena Smith as its first high school girl’s basketball partner under a name, image and likeness, or NIL, deal.

    Smith, a 16-year old sophomore in Ontario, California, is the highest-rated recruit in the class of 2027. She has already received nearly 20 college offers from programs including the University of Southern California, the University of Louisville, the University of Connecticut, the University of California, Los Angeles, Louisiana State University and the University of South Carolina.
    The young basketball phenomenon represents Candace Parker’s first signing since she took over as president of Adidas women’s basketball in May. Parker, a former first-round WNBA draft pick, played 16 seasons in the WNBA and is a three-time WNBA champion and seven-time WNBA All-Star.
    Adidas tapped her to help evolve the company’s women’s basketball business.

    Kaleena Smith is Candace Parker’s first signing since joining Adidas in May.
    Courtesy: Adidas

    “Signing Kaleena as our first high school NIL women’s basketball athlete is a pivotal moment for us as we lead in championing women’s sports and building greater access to and representation in the game that we all love,” Parker said.
    Adidas said Smith will represent the brand on the court during all her games with Ontario Christian High School, in addition to her AAU team. She represents one of Adidas’ youngest athletes. The brand signed its youngest current athlete, 15-year-old soccer star Chloe Ricketts, in March.

    “I’m blessed to be part of something Candace is creating, and to get to do that with a brand like Adidas who is taking a different approach to play a role to help grow the game for players like me,” Smith said.
    The 5-foot-6 point guard was the MaxPreps National Freshman of the Year, averaging 34.9 points, 6.5 assists and 4.2 steals per game.
    Smith said she’s looking forward to wearing James Harden’s Adidas sneakers this season.
    While Smith is the first girl’s high school athlete to represent Adidas, the brand has signed deals with a roster of women basketball players including Chelsea Gray, Kahleah Copper, Aliyah Boston, Aaliyah Edwards, Nneka Ogwumike, Betnijah Laney-Hamilton, Layshia Clarendon, Sophie Cunningham, Erica Wheeler, Zia Cooke, Alysha Clark and Janiah Barker.
    Adidas has been busy in the NIL space recently.
    The brand signed Miami quarterback Cam Ward last month to a deal. In August, it announced the signing of six Texas Tech athletes as part of Patrick Mahomes’ NIL initiative with Adidas. The brand also signed 15 female student-athletes to NIL deals in July 2022 to celebrate the 50th Anniversary of Title IX.

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    Gary Gensler says he was ‘proud to serve’ as SEC chair, defends his approach to crypto regulation

    U.S. Securities and Exchange Commission Chair Gary Gensler testifies before a House Financial Services Committee oversight hearing on Capitol Hill in Washington, D.C., on Sept. 27, 2023.
    Jonathan Ernst | Reuters

    Securities and Exchange Commission Chairman Gary Gensler spoke this morning at the Practising Law Institute’s 56th annual conference on securities regulation. 
    It sounded awfully close to a farewell speech. 

    “It’s a remarkable agency,” Gensler said of the SEC, which he has led since April 2021.
    “It’s been a great honor to serve with them, doing the people’s work, and ensuring that our capital markets remain the best in the world.” 
    Gensler reviews accomplishments 
    Gensler offered a review of what he has accomplished.  
    Most notably, Gensler highlighted the many disclosure rules the SEC has enacted, including disclosure on data breaches, executive pay versus performance and additional disclosures on those seeking to control and buy more than a 5% stake in a company. 
    Gensler made only passing reference to his most controversial disclosure rule, on climate change, which has been challenged in court. 

    “Congress put in place important provisions about disclosure because information about securities creates a public good,” he said. 
    On market structure, Gensler noted he had put in place new rules on central clearing of Treasuries and shortening of the settlement cycle for stocks from two days to one day, and had recently passed rules that allow stocks to be quoted in increments of less than a penny. 
    Defense of crypto stance 
    Gensler offered a full-throated defense of his approach to crypto. 
    Gensler repeated his assertion that while bitcoin is not a security, the SEC’s focus “has been on some of the 10,000 or so other digital assets, many of which courts have ruled were offered or sold as securities” and are therefore subject to the SEC’s purview. 
    He again asserted anyone offering to sell securities needs to register, and that intermediaries such as broker-dealers, exchanges and clearinghouses also need to be registered. 
    He said that the failure to properly police the crypto industry had resulted in “significant investor harm” and that “the vast majority of crypto assets have yet to prove out sustainable use cases.” 
    Proud to serve 
    Gensler did not say he was resigning, but the tone was clear.
    “I’ve been proud to serve with my colleagues at the SEC who, day in and day out, work to protect American families on the highways of finance,” he said at the end of his speech. More