Raphael Stevens

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    Disney doesn’t plan to change its TV networks portfolio anytime soon

    Disney CFO Hugh Johnston told CNBC on Thursday the company doesn’t plan to change its TV network portfolio anytime soon.
    The comments come more than a year after CEO Bob Iger opened the door to selling Disney’s linear TV assets, and weeks after Comcast said it was considering the separation of its cable networks.
    Disney reported earnings on Thursday, which highlighted significant growth in the streaming business while traditional TV networks’ metrics continue to detract.

    Scene from the FX series Shogun.
    Source: Disney | FX

    Disney has done the math on separating its TV networks business, and it appears too messy to be done — at least for now.
    The company’s chief financial officer, Hugh Johnston, said Thursday on CNBC’s “Squawk Box” that the “cost is probably more than the benefit” when it comes to separating its TV networks business, given the “operational complexity.”

    The future of the traditional TV network business has been top of mind in the media industry. In late October, Comcast executives said they were exploring a separation of the cable networks business. Executives said the process was in early stages and the outcome was unclear.
    The cable news bundle, despite still being a cash cow for companies, is losing customers at a fast clip. The industry overall lost 4 million traditional pay TV subscribers in the first six months of the year, according to estimates from analyst firm MoffettNathanson.
    Disney reported Thursday that revenue for its traditional TV networks was down 6% for its most recent quarter to $2.46 billion, while profit in the division sank 38% to $498 million.
    Its apparent commitment to the segment seems to be an about-face.

    Last summer CEO Bob Iger opened the door to the sale of its TV assets. Iger had recently returned to his post as chief executive, instituted a vast restructuring of the company and was facing down an activist investor.

    Johnston said during Thursday’s earnings call that soon after he joined Disney a year ago he began evaluating divestitures. He noted that after “playing around with spreadsheets” there was no clear path to value creation after divesting the networks or other businesses.
    “I like the portfolio the way it is right now. I wouldn’t change anything,” Johnston said Thursday on CNBC.
    Similarly, Fox Corp. CEO Lachlan Murdoch earlier this month noted the complexity of separating the company’s cable TV networks — albeit a much smaller group of networks than its peers.
    “From my perspective, I don’t see how we could ever do that. I think breaking apart part of the business would be very difficult, from both a cost point of view and from a revenue and a promotional synergy point of view,” Murdoch said on Fox’s earnings call.
    Warner Bros. Discovery CEO David Zaslav noted during that company’s earnings call last week that despite challenges of the bundle, it is “still an extraordinarily important part of our business.” He added it is “a core vehicle to deliver WBD storytelling.”
    Iger, on Thursday, echoed those comments, touting the content that stems from the traditional TV business and its integration with streaming, which remains front and center for Disney.
    Iger particularly highlighted Disney’s acquisition of Fox’s entertainment assets in 2019 as providing the content to help propel the streaming business. Activist investor Nelson Peltz slammed the deal last year, saying it contributed to eroding shareholder value.
    “We specifically mentioned that we were doing so through the lens of streaming, we saw a world where streaming was going to proliferate and we knew we needed not only more content but more distribution,” Iger said Thursday.
    He noted the 60 Emmy Awards Disney received this year for content including FX’s TV series “Shōgun,” “The Bear” and “Fargo,” which also appear on Hulu.
    Disclosure: Comcast owns NBCUniversal, the parent company of CNBC, and is a co-owner of Hulu.

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    Capri and Tapestry abandon plans to merge, citing regulatory hurdles

    Tapestry and Capri have mutually agreed to call of their merger.
    The parent companies behind Coach and Michael Kors saw their proposed merger blocked by the Federal Trade Commission.
    In October, Tapestry said it would appeal the ruling.

    Pedestrians walk past a Michael Kors store on August 10, 2023 in Chicago, Illinois. 
    Scott Olson | Getty Images

    Capri and Tapestry called off their merger on Thursday after the Federal Trade Commission successfully sued to block the megadeal.
    The two U.S.-based luxury houses “mutually agreed” that terminating the merger was in their best interests as they were unlikely to get regulatory approval before the deal was set to expire in February, according to a news release.

    “With the termination of the merger agreement, we are now focusing on the future of Capri and our three iconic luxury houses,” Capri CEO John Idol said in a statement. “Looking ahead, I remain confident in Capri’s long-term growth potential for numerous reasons.”
    The $8.5 billion acquisition, originally announced in August 2023, would have married America’s two largest luxury houses and put six fashion brands under one company: Tapestry’s Coach, Kate Spade and Stuart Weitzman with Capri’s Versace, Jimmy Choo and Michael Kors. 
    In April, the FTC sued to block the deal, saying the tie-up would disadvantage consumers and reduce benefits for the companies’ employees. Last month, a federal judge ruled in the FTC’s favor and granted its motion for a preliminary injunction to block the proposed merger.
    At the time, Tapestry said it would appeal the ruling.
    In its own news release Thursday, Tapestry said it doesn’t need Capri to continue growing and will use the cash it’s freed up to fund an additional $2 billion share repurchase authorization.

    “We have always had multiple paths to growth and our decision today clarifies the forward strategy. Building on our successful first quarter, we will move with speed and boldness to accelerate growth for our organic business,” CEO Joanne Crevoiserat said in a statement.
    Tapestry plans to fund the stock repurchase through a combination of cash on hand and debt. 
    The company said Thursday “there is no break fee associated with the transaction,” but under the terms of the merger agreement, Tapestry had agreed to pay Capri for its expenses if the deal failed to earn regulatory approval. Tapestry said it will reimburse Capri around $45 million.

    Jimmy Choo, Michael Kors, and Versace stores on Rodeo Drive in Beverly Hills, California, US, on Thursday, April 18, 2024. 
    Eric Thayer | Bloomberg | Getty Images

    Recently, Wall Street analysts had begun to sour on the merger, saying Tapestry was poised to overpay for Capri considering the lengthy approval process and how much Capri’s business had declined.
    In the initial aftermath of the judge’s ruling, shares of Capri plunged around 50% while Tapestry’s stock surged about 10%. On Thursday, Tapestry shares were more than 7% higher in premarket trading while Capri’s were down around more than 5%.
    Capri is slated to have a call with analysts at 11 a.m. ET to discuss the decision and its strategies to return to growth and fix its most important brand, Michael Kors, which has been grappling with a long decline in sales.
    “Given our Company’s performance over the past 18 months, we have recently started to implement a number of strategic initiatives to return our luxury houses to growth,” Idol said in a news release. “Across Versace, Jimmy Choo and Michael Kors, we are focused on brand desirability through exciting communication, compelling product and omni-channel consumer experience. While our strategies are tailored uniquely for each brand, our overarching goals are similar.”

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    Disney narrowly beats estimates as streaming boosts entertainment segment

    Disney reported its fiscal fourth-quarter earnings Thursday.
    Revenue for the entertainment segment – which includes the traditional TV networks,  direct-to-consumer streaming and films – increased 14% year over year.
    Revenue for Disney’s sports segment, made up primarily of ESPN, was flat.

    A statue of Walt Disney and Mickey Mouse stands in a garden in front of Cinderella’s Castle at the Magic Kingdom Park at Walt Disney World on May 31, 2024, in Orlando, Florida.
    Gary Hershorn | Corbis News | Getty Images

    Disney reported its fiscal fourth-quarter earnings Thursday, narrowly beating analyst estimates as streaming growth helped propel its entertainment segment. 
    Here is what Disney reported compared with what Wall Street expected, according to LSEG

    Earnings per share: $1.14 adjusted vs. $1.10 expected
    Revenue: $22.57 billion vs. $22.45 billion expected

    Disney’s net income increased to $460 million, or 25 cents per share, from $264 million, or 14 cents per share, during the same quarter last year. Adjusting for one-time items, including restructuring and impairment charges, Disney reported earnings per share of $1.14. 
    Total segment operating income increased 23% to $3.66 billion compared with the same period in 2023.  
    Revenue for the entertainment segment – which includes the traditional TV networks,  direct-to-consumer streaming and films – increased 14% year over year to $10.83 billion after a hot summer at the box office.
    Disney Pixar’s “Inside Out 2” became the highest-grossing animated movie of all time this summer, surpassing Disney’s “Frozen II” at the box office. Meanwhile, its “Deadpool & Wolverine” became the highest-grossing R-rated film of all time, surpassing Warner Bros. Discovery’s “Joker.”
    The films added $316 million of profit for the entertainment segment during the quarter. Overall, the entertainment segment reported nearly $1.1 billion in profit.

    Revenue for Disney’s sports segment, made up primarily of ESPN, was flat. ESPN’s profit fell 6% due in part to higher programming costs associated with U.S. college football rights as well as fewer customers in the cable bundle. 
    Disney’s combined streaming business, which includes Disney+, Hulu and ESPN+, saw profitability improve during the quarter after turning its first profit during the fiscal third quarter, three months earlier than expected. The division reported an operating income of $321 million for the September period compared with a loss of $387 million during the same period last year. 
    Disney joined its peers, including Warner Bros. Discovery, Netflix, Comcast and Paramount Global in adding streaming subscribers during the most recent quarter. 
    Disney+ Core subscribers – which excludes Disney+ Hotstar in India and other countries in the region – grew by 4.4 million, or 4%, to 122.7 million. Hulu subscribers grew 2% to 52 million. 
    Average revenue per user for domestic Disney+ customers dropped from $7.74 to $7.70, as the company had a higher mix of customers on its cheaper, ad-supported tier and wholesale offerings. 
    Meanwhile the company’s traditional TV networks business continued to decline as consumers leave pay TV bundles behind in favor of streaming. Revenue for the networks was down 6% to $2.46 billion. Profit for the segment sank 38% to $498 million. 
    The experiences segment, which includes Disney’s theme parks as well as consumer products, saw revenue grow 1% to $8.24 billion. 
    The domestic parks’ operating income rose 5% to $847 million, helped by higher guest spending at the parks and cruise lines. 
    Operating income at the international parks, however, fell 32% due to a decline in attendance and in guest spending as well as increased costs. 
    The company said Thursday it’s “confident in the long-term prospects for the business,” and provided an outlook that includes its fiscal 2025, 2026 and 2027.
    Disney expects a “modest decline” in Disney+ Core subscribers during the fiscal first quarter of 2025 compared with the prior quarter.
    Full-year profit in the entertainment streaming business, which excludes ESPN+, is expected to see an increase of roughly $875 million compared to the prior fiscal year and to increase by a double digit percentage in its fiscal 2026.
    Disney also anticipates double-digit percentage growth in fiscal 2025 for its entertainment segment.
    The experience segment, however, is expected to see just 6% to 8% profit growth in the coming fiscal year compared to the prior year. Disney noted the fiscal first quarter will see a $130 million hit due to the impact of Hurricanes Helene and Milton, as well as a $90 million impact from Disney Cruise Line pre-launch costs.
    During Disney’s fiscal 2025, the company expects high-single digit adjusted earnings growth compared to the prior fiscal year. The company expects double digit adjusted EPS growth in both fiscal 2026 and 2027.
    This story is developing. Please check back for updates. More

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    It’s ‘liquidity, stupid’: VCs say tech investing is tough amid IPO lull and ‘nuts’ AI hype

    Venture capitalists at Web Summit — one of Europe’s biggest tech events — say things have become more difficult for tech investors as they’re unable to cash out of long-term bets.
    “In the VC world, it’s really all about liquidity stupid,” Edith Yeung, general partner at Race Capital, said in a CNBC-moderated panel.
    Larry Aschebrook, founder and managing partner of G Squared, said the hunt for liquidity is getting harder, despite “nuts” funding rounds for AI firms like OpenAI.

    Edith Yeung, general partner at Race Capital, and Larry Aschebrook, founder and managing partner of G Squared, speak during a CNBC-moderated panel at Web Summit 2024 in Lisbon, Portugal.
    Rita Franca | Nurphoto | Getty Images

    LISBON, Portugal — It’s a tough time for the venture capital industry right now as a dearth of blockbuster initial public offerings and M&A activity has sucked liquidity from the market, while buzzy artificial intelligence startups dominate attention.
    At the Web Summit tech conference in Lisbon, two venture investors — whose portfolios include the likes of multibillion-dollar AI startups Databricks Anthropic and Groq — said things have become much more difficult as they’re unable to cash out of some of their long-term bets.

    “In the U.S., when you talk about the presidential election, it’s the economy stupid. And in the VC world, it’s really all about liquidity stupid,” Edith Yeung, general partner at Race Capital, an early-stage VC firm based in Silicon Valley, said in a CNBC-moderated panel earlier this week.
    Liquidity is the holy grail for VCs, startup founders and early employees as it gives them a chance to realize gains — or, if things turn south, losses — on their investments.
    When a VC makes an equity investment and the value of their stake increases, it’s only a gain on paper. But when a startup IPOs or sells to another company, their equity stake gets converted into hard cash — enabling them to make new investments.
    Yeung said the lack of IPOs over the last couple of years had created a “really tough” environment for venture capital.
    At the same, however, there’s been a rush from investors to get into buzzy AI firms.

    “What’s really crazy is in the last few years, OpenAI’s domination has really been determined by Big Techs, the Microsofts of the world,” said Yeung, referring to ChatGPT-creator OpenAI’s seismic $157 billion valuation. OpenAI is backed by Microsoft, which has made a multibillion-dollar investment in the firm.

    ‘The IPO market is not happening’

    Larry Aschebrook, founder and managing partner at late-stage VC firm G Squared, agreed that the hunt for liquidity is getting harder — even though the likes of OpenAI are seeing blockbuster funding rounds, which he called “a bit nuts.”
    “You have funds and founders and employees searching for liquidity because the IPO market is not happening. And then you have funding rounds taking place of generational types of businesses,” Aschebrook said on the panel.
    As important as these deals are, Aschebrook suggested they aren’t helping investors because even more money is getting tied up in illiquid, privately owned shares. G Squared itself an early backer of Anthropic, a foundational AI model startup competing with Microsoft-backed OpenAI.
    Using a cooking analogy, Aschebrook suggested that venture capitalists are being starved of lucrative share sales which would lead to them realizing returns. “If you want to cook some dinner, you better sell some stock, ” he added.

    Looking for opportunities beyond OpenAI

    Yeung and Aschebrook both said they’re excited about opportunities beyond artificial intelligence, such as cybersecurity, enterprise software and crypto.
    At Race Capital, Yeung said she sees opportunities to make money from investments in sectors including enterprise and infrastructure — not necessarily always AI.
    “The key thing for us is not thinking about what’s going to happen, not necessarily in terms of exit in two or three years, we’re really, really long term,” Yeung said.
    “I think for 2025, if President [Donald] Trump can make a comeback, there’s a few other industries I think that are quite interesting. For sure, crypto is definitely making a comeback already.”
    At G Squared, meanwhile, cybersecurity firm Wiz is a key portfolio investment that’s seen OpenAI-levels of growth, according to Aschebrook.
    The startup, which turned down a $23 billion acquisition bid from Google, hit the $500 million annual recurring revenue (ARR) milestone just four years after it was founded.
    Wiz is now looking to reach $1 billion of ARR in 2025, doubling from this year, Roy Reznik, the company’s co-founder and vice president of research and development, told CNBC last month.
    “I think that there’s many logos … that aren’t in the press raising $5 billion in two weeks, that do well in our portfolios, that are the stars of tomorrow, today,” Aschebrook said. More

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    Economists need new indicators of economic misery

    WHEN JIMMY Carter, the Democratic candidate for American president in 1976, wanted to criticise the record of the incumbent Gerald Ford, he reached for a number invented by the economist Arthur Okun. A rough-and-ready indicator of the state of the economy, what Okun called the economic discomfort index added together the unemployment rate with the level of inflation. Four years later Ronald Reagan, the Republican candidate, renamed the indicator to the pithier misery index and used it against Mr Carter, who had presided over rising inflation and unemployment. Reagan went on to win the election and the subsequent one, in 1984, as the index fell on his watch. More

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    Why financial markets are so oddly calm

    One thing nobody thinks of Donald Trump’s return to the White House is that it will herald four years of quiet, predictable government. Here, then, is a puzzle for readers interested in the more abstract bits of finance. Why was Mr Trump’s re-election greeted by resounding drops in volatility all across the world’s most important markets? More

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    How to pay for the poor world to go green

    The trickiest issue facing the climate negotiations at COP29, which began in Baku on November 11th, goes by the opaque name of the “new collective quantified goal” (NCQG), mainly because that is more dignified than “bigger pile of money”. The NCQG is meant to replace the longstanding goal of an annual $100bn a year in climate finance from richer countries to poorer ones. It is supposed to be in place by next year, when all countries are expected to say what they are going to do to cut emissions in the next ten years. More

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    China, Europe, Mexico: the biggest losers from Trumponomics

    ACROSS CABINET tables, boardrooms and diplomatic missions this week, one topic of discussion has overshadowed all others. The sweeping victory of Donald Trump and the Republican Party in America’s elections will give huge powers to an impulsive president with unorthodox economic beliefs and a belligerent approach to negotiation. Bigwigs in government and business all over are scrambling to analyse the consequences—for America and for the rest of the world. More