Raphael Stevens

Investors may cheer Disney’s decision to consider selling some legacy media businesses even if the deal price doesn’t break the bank.
Divesting legacy businesses, which have lower growth profiles, is symbolically more important to Disney and its shareholders than the purchase price of the assets.
Disney has held early talks with Nexstar to sell ABC and its owned local affiliates, although no deal is assured.

Chief executive officer of The Walt Disney Company Bob Iger and Mickey Mouse look on before ringing the opening bell at the New York Stock Exchange (NYSE), November 27, 2017 in New York City.
Getty Images

Usually when a person or company sells something, the primary motivation is getting back as much money as possible.
Disney’s motivation to potentially sell ABC and its owned affiliates, linear cable networks and a minority stake in ESPN isn’t predicated on what these assets will fetch in a sale. It’s about signaling to investors the time has come to stop thinking about Disney as old media.

Disney’s market capitalization is about $156 billion. The company has about $45 billion in debt. Selling assets can help the entertainment giant lower its leverage ratio while buffering the continued losses from its streaming businesses.
Still, that’s not the prime rationale for why Disney Chief Executive Bob Iger told CNBC in July he’s contemplating selling off media assets — something he’s long resisted. Rather, a sale of ABC and linear cable networks would be a message to the investment community: The era of traditional TV is over. Disney is ready for its next chapter.
“Disney almost has a good bank and a bad bank at this point,” Wells Fargo analyst Steven Cahall said in a CNBC interview. “Streaming is its future. It’s its strongest asset, next to the parks. The linear business is something Disney has clearly signaled is going to be in decline. They’re not looking to necessarily protect it. If they can move some of that lower, negative-growth business off of the books and to a better, more logical operator, we think that’s good for the stock.”
Nexstar has held preliminary conversations with Disney to acquire ABC and its owned and operated affiliates, Bloomberg reported Thursday. Media mogul Byron Allen has made a preliminary offer to pay $10 billion for ABC and its affiliates along with cable networks FX and National Geographic, according to a person familiar with the matter.
Disney released a statement Thursday saying “while we are open to considering a variety of strategic options for our linear businesses, at this time The Walt Disney Company has made no decision with respect to the divestiture of ABC or any other property and any report to that effect is unfounded.”

Declining values

The value of broadcast and cable networks has significantly declined from the 1990s and early 2000s as tens of millions of Americans have canceled cable in recent years.
Cahall values ABC and Disney’s eight owned affiliate networks at about $4.5 billion. That’s a far cry from the $19 billion Disney paid for Capital Cities/ABC in 1995 — the deal that brought Iger to the company.
ESPN has a valuation of about $30 billion, according KeyBanc Capital Markets analyst Brandon Nispel, “though we view it as a melting iceberg,” he added in a September note to clients. LightShed analyst Rich Greenfield values ESPN at closer to $20 billion.
Disney would like to keep a majority stake in ESPN, Iger told CNBC. It currently owns 80% of the sports media business, and Hearst owns the other 20%.
About 10 years ago, analysts valued ESPN at around $50 billion.

SportsCenter at ESPN Headquarters.
The Washington Post | The Washington Post | Getty Images

Selling ABC

Disney’s most interesting decision may be deciding what to do with the ABC network. The company can easily sell off its eight owned and operated affiliate stations — located in markets including Chicago, New York and Los Angeles — without changing the trajectory of the media industry.
But divesting the ABC network would be a bold statement by Disney that it sees no future in the broadcast cable world of content distribution.
Selling ABC would be particularly jarring given Iger’s comments both to CNBC and in Disney’s last earnings conference call that he wants the company to stay in the sports business.
“The sports business stands tall and remains a good value proposition,” Iger said last month during Disney’s third-quarter earnings conference call. “We believe in the power of sports and the unique ability to convene and engage audiences.”
There’s clear value, at least for the next few years, in keeping a large broadcast network for major sports leagues. NBCUniversal executives hope ownership of the NBC network will convince the NBA that it should be cut into a new rights agreement to carry NBA games. NBC is a free over-the-air service and can increase the league’s reach, they plan to argue. Even if the world is transitioning to streaming, millions of Americans still use digital antennas to watch TV.
Currently, ESPN and ABC split sports rights. Selling ABC may trigger certain change-of-control provisions that force existing deals with pay TV operators or the leagues to be rewritten, according to people familiar with typical language around such deals.
Moving on from the network also may obstruct ESPN’s ability to land future sports rights deals. Without ownership of ABC, leagues may choose to sell rights to other companies, thus further weakening ESPN.
If Iger is true to his word and Disney stays in the sports broadcasting business, the company will have to weigh the negative externalities of losing ABC with the positive gains of showing investors it’s serious about shedding declining assets.
“Obviously, there’s complexity as it relates to decoupling the linear nets from ESPN, but nothing that we feel we can’t contend with if we were to ultimately create strategic realignment,” Iger said last month.

The way forward

If Disney does land a deal to sell ABC, and investors cheer the move, it may also function as a catalyst for other large legacy media companies to sell their declining assets. NBCUniversal, Paramount Global and Warner Bros. Discovery all have legacy broadcast and cable networks in addition to their flagship streaming services.
Disney may become the leader in pushing the industry forward.
“We see this as a real bullish sign at Disney.” said Cahall. “There’s a lot going on now at Disney, between ESPN and partnerships and divesting some of this stuff. Disney is suddenly feeling a little more catalyst-rich than it was recently.”
– CNBC’s Lillian Rizzo contributed to this article.
Disclosure: Comcast owns NBCUniversal, the parent company of CNBC.
WATCH: Nexstar could ‘no doubt’ take ABC and monetize it really well, says Wells Fargo analyst More

In the last decade the media industry model has been upended by the consumer shift to streaming, and legacy media giants are in the midst of figuring out how to make it work.
The recent dispute between cable company Charter Communications and Disney highlights how companies are clinging to that old model.
This issue is at the forefront of the writers and actors strikes, which have halted Hollywood productions, putting media companies at a further disadvantage.

People carry signs as SAG-AFTRA members walk the picket line in solidarity with striking WGA workers outside Netflix offices in Los Angeles, July 11, 2023.
Mario Tama | Getty Images News | Getty Images

Picket signs have lined the gates of Hollywood’s studios for nearly five months, as the industry’s writers and actors rally for AI protections, better wages and a cut of streaming profits.
The problem is streaming isn’t yet profitable for many studios.

Sparked by the creation of Netflix’s direct-to-consumer platform in 2007, streaming has upended the economics of the media industry. Yet, it’s still unclear whether it’s a sustainable business model for the future.
“Without sounding hyperbolic, the change in the economics of the North American media industry in the last five years has been breathtaking,” said Steven Schiffman, an adjunct professor at Georgetown University.
Legacy media companies like Disney, Warner Bros. Discovery, Paramount and NBCUniversal scrambled to compete with Netflix when it began creating original content in 2013 and slowly pulled market share over the next five years. The studios padded their platforms with massive content libraries and the promise of new original shows and films for consumers.
However, the subscription-based streaming model proves vastly different than the ad-revenue-fueled traditional TV bundle. High licensing costs and low revenues per subscriber quickly caught up with studios, which had previously placated shareholders with massive subscription growth.
Netflix was the first streamer to report a loss in subscribers in 2022, sending its stock and other media companies spiraling. Disney has followed suit. Since then, both have set subscription numbers aside in favor of advertising, a password-sharing crackdown and raising prices.

Media companies also have begun slashing content spending budgets. Disney CEO Bob Iger has promised the company will focus on quality over quantity when it comes to both its streaming and theatrical businesses, pointing to Marvel as an example of too much content.
Yet streaming remains the focus for all of these companies as consumers rapidly cut the cord and opt for streaming. To make up for the losses, media organizations are now relying on methods that once made the traditional bundle so successful.
“What’s the fundamental solution? In some way, shape or form, it’s everything brought together,” said CEO Ken Solomon of the Tennis Channel, owned by Sinclair, of the various business models in media. “It’s about understanding where to put a little more resources and how they all are glued together to satisfy the consumer.”

A broken model

Two strategies media companies long relied upon — windowing content to various platforms and creating more cable channels to reap higher fees from the bundle — proved lucrative and still reap profits.
“This gun has been cocking itself for decades,” said Solomon, noting that the pay TV bundle was a good value proposition until it became too expensive for consumers. That gave Netflix an opening to upend how the entertainment industry makes and spends money.
Legacy media companies scrambled to follow suit, unsure if the model actually worked. But they were desperate to keep up with changing consumer demand, and in the process they depleted other revenue streams.
Now turmoil rules the industry. Companies like Disney and Warner Bros. Discovery are in the midst of reorganizations — slashing jobs and content costs while trying various ways to piece together profits.

An image from Netflix’s “Stranger Things.”
Source: Netflix

“All of these companies spent more money than they likely should have,” said Marc DeBevoise, CEO and board director of Brightcove, a streaming technology company.
Netflix, with a considerable head start, is the only company to make a profit off of streaming. “For everyone else, it’s still dictated by linear TV,” said UBS analyst John Hodulik. “That’s a problem as the decline in customers accelerates and streaming is not a big enough opportunity to offset that.”
Although subscriber growth initially ramped up streaming subscriber growth and bolstered many media stocks, it was short-lived. Fears of a recession, inflation and rising interest rates led Wall Street to reassess these companies and focus on profitability as subscriber growth slowed.

A content arms race

Netflix’s entrance into media signaled the beginning of a content arms race that, ultimately, hasn’t paid off for any media company.
Content spending ballooned across the industry, with each company spending tens of billions of dollars for new shows and films in an effort to lure in new subscribers — and keep the ones they already had.
“The networks had aligned with their streaming services and taken all the elasticity out of it. They were throwing money at a problem and hoping that it was going to solve itself,” said Solomon. “There was no economics behind it.”

Race to launch

Netflix — launched streaming service in January 2007, first original content launched February 2013
Hulu — launched streaming service in March 2008
Paramount+ — launched as CBS All Access in October 2014, rebranded as Paramount+ in March 2021
Disney+ — launched streaming service in November 2019
Peacock — launched streaming service in April 2020
Max — launched as HBO Max in May 2020, rebranded as Max in May 2023

There were also massive one-off licensing deals for shows like “The Office,” “Friends” and “Seinfeld,” which viewers were actively watching on repeat.
Studios even struck exclusive contracts with some of Hollywood’s biggest writer-producers — Ryan Murphy, Shonda Rhimes, J.J. Abrams, Kenya Barris and the duo of David Benioff and D.B. Weiss — in the hope that they could create new projects that could capture the attention of audiences.
Show budgets draw a lot of attention these days. But Jonathan Miller, a former Hulu board member and current CEO of Integrated Media, doesn’t recall that being a focus when it was just the four major broadcast networks creating all of the content.
DeBevoise, a former ViacomCBS (now Paramount) executive, said he doesn’t remember greenlighting a show, including “Star Trek Discovery,” in the mid-2010s at CBS for more than $10 million an episode, noting many were “much, much less expensive.”
Meanwhile, Solomon, who once ran Universal Studios Television, recalled when his budgets for top TV shows like “Law & Order” were below $2 million an episode. “I thought budgets were out of control back then,” he said.

Shonda Rhimes attends 2018 Vanity Fair Oscar Party on March 4, 2018 in Beverly Hills, CA. 
Presley Ann | Patrick McMullan | Getty Images

Disney sought to capitalize on the success of its Marvel Cinematic Universe by developing more than a dozen superhero shows for its Disney+ platform. Although the seasons were shortened, often only six to 10 episodes, each episode cost around $25 million. Similar production budgets were seen for the company’s foray into the new live-action Star Wars TV series.
Netflix has poured money into multiple seasons of political drama “The Crown,” science fiction darling “Stranger Things” and a series based on The Witcher video game franchise. Production costs per episode for these series ranged from $11 million to $30 million.
And Warner Bros. Discovery is adding more Game of Thrones series to its catalog of direct-to-consumer offerings with “House of the Dragon,” which cost around $20 million per episode, and the upcoming “A Knight of the Seven Kingdoms: The Hedge Knight,” which has not begun filming.
Meanwhile, e-commerce giant Amazon shelled out a record $465 million on its first season of a Lord of the Rings prequel series, which was met with tepid responses from critics and fans alike.
“The price of content isn’t always determinant of success. ‘The Simpsons’ were crudely animated initially, right? So, it’s not necessarily that if you go spend a lot of money, it works,” Solomon said.

Bart Simpson plays esports in an episode of “The Simpsons” that aired on March 17, 2019.

At the same time the economics for actors, writers and the industry as a whole changed.
“The problem is that the cost increases don’t make sense given the revenue models. Something got broken in this part of the business if that kind of increase happened and actors and writers don’t feel like they got their fair share,” DeBevoise said.

A growing disconnect

While many of Hollywood’s biggest studios are publicly traded and must share quarterly financial reports, there are no rules about providing streaming-viewership data. This lack of transparency has made recent contract negotiations between studios and the industry’s writers and actors especially contentious.
“There’s a frustration about how these people can get together and share this information and come up with something that is reasonable for both sides,” said Schiffman, the Georgetown professor. “But until that happens, in my view, this thing goes on until next year.”
Streaming studios, in particular, have long been reluctant to share data around viewership and don’t want compensation to be tied to the popularity of shows, including those that have been licensed from other studios.

This is in stark contrast to how linear television has handled popular shows. Traditionally, studios pay residuals, long-term payments, to those who worked on film and television shows after their initial release. Actors and writers get paid every time an episode or film runs on broadcast or cable television or when someone buys a DVD or Blu-ray Disc.
When it comes to streaming, there are no residual payments. Studios that get a licensing fee pass on a small sum to actors and writers, but no additional compensation is given if the show performs well on the platform. Actors, in particular, are looking to change this.
“Why I think the streaming model has been a difficult model for the actors and writers, and I was part of helping that model, is that there was a fundamental shift of long-term versus short-term economics that likely wasn’t properly understood or explained,” said DeBevoise.

Back to the future

Media companies’ effort to make streaming profitable is drawing out many of the old business models that were successful in the past.
The subscription streaming model is being subsidized now by tried and true models like advertising, licensing content to other platforms, cracking down on password sharing, and windowing content to different platforms with longer stretches of time in between.
“Netflix understood finally, because of the Street, that subscriber numbers don’t mean jack, if the economics don’t pencil out,” said Peter Csathy, founder and chair of advisory firm Creative Media.
Even the pay TV bundle, despite rampant cord cutting by consumers, remains a reliable source of revenue.
The recent dispute between Charter Communications and Disney highlighted this fact, and led to Disney+ and ESPN+ being bundled with some pay TV subscriptions.

“We, the distributors, are funding the streaming experience. And it’s frankly a better content experience on streaming than what is provided to us on linear TV,” said Rob Thun, chief content officer at DirecTV. “These companies will cease to exist without the funding of distributors’ licensing fees. Perhaps this is a moment of awakening.”
Disney and even Netflix, which long resisted ads, are among the companies relying more on ad-supported offerings to boost subscriber growth and bring in another revenue stream, even as the ad market has been soft.
This is especially true as free, ad-supported streaming services like Fox Corp.’s Tubi and Paramount’s Pluto — which are likened to broadcast networks — have also exploded. Besides the parent companies leaning on the ad revenue from these platforms, other media companies, like Warner Bros. Discovery, are funneling content there for licensing fees.
“In terms of the business models, they all ‘work,'” said DeBevoise. He noted paid tiers for the more expensive, timely content will remain, while free and options with commercials will support the older library shows and movie. “There are going to be hybrid models that reincarnate the dual-revenue cable TV model with both a subscription fee and ads. It’s all going to be about price-to-value and time-to-value for the consumer.”
Disclosure: Comcast is the parent company of NBCUniversal and CNBC. More

MALIBU, California – The most amazing thing about the $2.1 million Rimac Nevera is how easy it is to just get in and drive.
The Nevera is an electric hypercar from Croatia. It sits low — very low — to the ground, and at first glance it looks like the simple act of getting into it could be complicated. But the doors, which lift up and out sort of like a Lamborghini’s, cut into the roof just enough to ensure that I don’t bump my head as I drop myself into the driver’s seat.

Getting underway does take a little bit of learning. Gears are shifted with a big knob to the left of the steering wheel, the power seat’s adjustments are hidden in a touchscreen, and switches for the turn signals and headlights are mounted directly on the steering wheel. But once you’ve got that down, it’s simple to operate.
The whole car is like that — simple to operate — its 1,914 horsepower notwithstanding.
One of the first things I noticed as we got underway is that it’s easy to see out of the Nevera. That’s not a given with cars like this. For example, in Ferraris and Lamborghinis and other low-slung highway rockets, it’s often a challenge to see what’s behind you. But while the Nevera is definitely low slung, there’s just enough of a rear window to make it easy to drive in highway traffic. Good side mirrors certainly help with that.
There’s also just enough mechanical noise to remind you that you’re in a hypercar. There may not be an engine, but there are four electric motors and they make mellifluous mechanical sounds as the car moves down the road. Not so loud that I couldn’t converse with my passenger, Rimac’s Ryan Lanteigne, in a reasonable talking voice. It is just loud enough to remind us that we’re driving in something special.
And the Nevera is very special indeed — as it should be for its just over $2 million asking price. You’ll see why in the video.

The Rimac story

Rimac — pronounced REE-mahtz, roughly — is Croatia’s first and only automaker. Its 35-year-old founder, Mate (MAH-ta) Rimac, started tinkering with electric vehicles after he blew the engine in an old BMW he raced as a teenager. After rebuilding it with an electric drivetrain — and winning some races, besides — he founded Rimac Automobili in 2009, hoping to one day build an electric supercar in his home country.
Although Rimac the company’s first years were a struggle, Mate’s timing turned out to be excellent in retrospect, with automakers around the world moving to electrify their fleets.

Rimac Nevera

Rimac’s early prototypes were impressive enough to attract significant investments from Hyundai and Porsche, and it raised another 500 million euros (or about $534 million) last year. Those served as the foundation of what is now a thriving business consulting to traditional automakers eager to build high-performance EVs. Aston Martin and Swedish supercar maker Koenigsegg are among Rimac’s clients, along with a number of others that the company says it can’t yet disclose.
The Nevera is named for the fierce summer storms that roll into Croatia from the Adriatic Sea. (Rimac employees like to say that neveras — the storms — are “extremely powerful and charged by lightning,” just like their car.)
The Nevera (the car) serves both as a rolling display of Rimac’s EV expertise and as the supercar that Mate Rimac has long dreamed of building. It’s a four-motor design — one for each wheel — with a 120 kilowatt-hour battery pack, enough for about 300 miles of range under normal driving conditions.

Four motors and a cravat

But there’s nothing normal about the Nevera’s power output. Those four motors give it a total of 1,914 horsepower, and 2,360 newton-meters of torque — enough for a top speed of 258 miles per hour. Zero to 60 miles per hour takes just 1.74 seconds, according to Rimac.
I didn’t verify that time with any great accuracy, but I can attest that such a power thrust is plausible. As friendly as it is to drive in traffic, the Nevera is almost unbelievably quick when fully uncorked. But it never feels uncontrollable, and that’s a significant engineering achievement.
Even more impressive, albeit more subtle, is the way those four motors work together. The car’s systems adjust each motor’s power output 100 times a second to ensure optimum handling moment to moment. Or, put another way, the Nevera blasts through and out of tight corners without hesitation. That’s a trick that other supercars can only emulate with braking.
It’s an even more impressive trick given the car’s weight, around 5,100 pounds. But as hard as it might be to believe, that weight is so well packaged, with the batteries mounted low and close to the Nevera’s center, that it’s hardly noticeable. (Of course, the tremendous power on tap helps.)
It’s a good-looking car, too, low and radical but not over the top. Civilized. It’s well-made, with flawless carbon fiber on the outside and comfortable leather throughout the interior. Croatia doesn’t have a tradition of car making, but the Nevera does reflect some national pride: In addition to the car’s name, the intakes on its sides are styled to resemble a cravat, the ancestor of the modern necktie — a Croatian invention dating to the 16th century.
The Nevera starts at 2 million euros, or just over $2.1 million. If that’s in your price range, speak up soon. Rimac says it plans to build just 150 of them. More

The United Auto Workers strike is bringing a blue-collar versus billionaire battle to the Motor City, just as UAW President Shawn Fain wanted.
Fain has meticulously brought the UAW back into the national spotlight after decades of near national irrelevance, with a goal of representing the deteriorating middle class.
Automakers have argued the current union demands such as 40% pay increases, cost-of-living adjustments and other enhanced benefits would cripple the companies.

DETROIT — The United Auto Workers strike is bringing a blue-collar versus billionaire battle to the Motor City, just as UAW President Shawn Fain wanted.
The outspoken union leader has weaponized striking — historically a last resort for the union — after less than 24 hours into a work stoppage arguably better than any UAW president has in modern times.

It wasn’t by accident.
Fain, a quirky yet emboldened leader, has meticulously brought the UAW back into the national spotlight after decades of near irrelevance. He wants to represent not just union members but also America’s embattled middle class, which UAW helped create.

United Auto Workers union President Shawn Fain joins UAW members who are on a strike, on the picket line at the Ford Michigan Assembly Plant in Wayne, Michigan, September 15, 2023.
Rebecca Cook | Reuters

To do so, he has leveraged a yearslong national labor movement and a growing disgust for wealthy individuals and corporations among many Americans — starting with his first time addressing the union’s more than 400,000 members during his inauguration speech in March.
“We’re here to come together to ready ourselves for the war against our only one and only true enemy, multibillion-dollar corporations and employers who refuse to give our members their fair share,” Fain said at the time. “It’s a new day in the UAW.”

Fain’s comments Friday morning as he joined UAW members and supporters picketing outside a Ford plant in Michigan — one of three facilities the company is currently striking — echoed everything he said during that first speech.
“We got to do what we got to do to get our share of economic and social justice in this strike,” Fain said outside the Ford Bronco SUV and Ranger pickup plant. “We’re going to be out here until we get our share of economic justice. And it doesn’t matter how long it takes.”
Fain’s upbringing plays into his strong unionism and religious beliefs, which he has growingly talked about with members as he emphasizes “faith” in the UAW’s cause. Two of his grandparents were UAW GM retirees, and one grandfather started at Chrysler in 1937, the year the workers joined the union. Fain, who joined the UAW in 1994, even keeps one of his grandfather’s pay stubs in his wallet as “a reminder” of where he came from. 
National media and others really started paying attention to Fain when he said the union would withhold a reelection endorsement of President Joe Biden, who has called himself the “most pro-union president in history.” Fain and Biden have spoken and met, but the union leader has not shown much support for the president. In response to comments by the president Friday, Fain said: “Working people are not afraid. You know who’s afraid? The corporate media is afraid. The White House is afraid. The companies are afraid.”
While many past union leaders have talked such talk, Fain has thus far delivered on his promises to members without batting an eye — causing General Motors, Ford Motor and Stellantis to go into crisis mode this week as the UAW follows through on that promise to members.
“We’ve never seen anything like this; it’s frustrating,” Ford CEO Jim Farley told CNBC’s Phil LeBeau Thursday as he criticized Fain and the union for what he said was a lack of communication and counteroffers. “I don’t know what Shawn Fain is doing, but he’s not negotiating this contract with us, as it expires.”
In a statement Friday, Ford said that the UAW’s partial strike at its Michigan Assembly Plant has forced it to lay off about 600 workers.
“This is not a lockout,” Ford said. “This layoff is a consequence of the strike at Michigan Assembly Plant’s final assembly and paint departments, because the components built by these 600 employees use materials that must be e-coated for protection. E-coating is completed in the paint department, which is on strike.”
GM CEO Mary Barra echoed Farley’s feelings Friday morning on CNBC’s “Squawk Box.”
“I’m extremely frustrated and disappointed,” she said. “We don’t need to be on strike right now.”
Both CEOs said everything they could to indicate they believe Fain may not be bargaining in good faith without using those exact words, which could justify a complaint with the National Labor Relations Board.
The UAW in late August filed unfair labor practice charges against GM and Stellantis with the NLRB, alleging they did not bargain with the union in good faith or a timely manner. It did not file a complaint against Ford. GM and Stellantis have denied those allegations.

Several past union leaders and company bargainers who spoke to CNBC hailed the way Fain has been able to propel the UAW into the national spotlight, including pausing bargaining for a Friday rally and march with Sen. Bernie Sanders, the progressive lawmaker from Vermont. Sanders, whose surprise 2016 Democratic presidential primary win in Michigan helped cement his national prominence, has lent support to numerous labor movements around the country as he rails against the billionaire class.
“I think they’re just doing an outstanding job,” said respected former UAW President Bob King, who cited growing support for the union among the public and the union’s own members. “Both those measurements say that UAW communications has been outstanding.”
UAW members have taken notice — especially after many of them disdained union leadership during and after a yearslong federal corruption investigation that landed two past UAW presidents and more than a dozen others in prison.
“For all the years that I’ve worked here, it’s never been this strong,” said Anthony Dobbins, a 27-year autoworker, early Friday morning while picketing the Ford plant in Michigan. “This is going to make history right here because we are trying to get what we deserve.”
Dobbins, a UAW Local 600 union representative, balked at current record offers by the automakers that have included roughly 20% pay increases, thousands of dollars in bonuses, retention of the union’s platinum health care and other sweetened benefits.
“That’s not working for us. Give us what we asked for,” Dobbins said. “That’s what we want. We have to work seven days, overtime, just to make ends meet.”

United Auto Workers President Shawn Fain, center, poses with Anthony Dobbins, right, a 27-year autoworker, and others as the union pickets a Ford plant in Wayne, Michigan, Sept. 15, 2023.
Michael Wayland / CNBC

Key demands from the union have included 40% hourly pay increases; a reduced, 32-hour, workweek; a shift back to traditional pensions; the elimination of compensation tiers; and a restoration of cost-of-living adjustments. Other items on the table include enhanced retiree benefits and better vacation and family leave benefits.
Automakers have argued such demands would cripple the companies. Farley even said the company would have “gone bankrupt by now” under the union’s current proposals and members would not have benefited from $75,000 in average profit-sharing over the last decade.
Ford sources said the automaker would have lost $14.4 billion over the last four years if the current demands had been in effect, instead of recording nearly $30 billion in profits.
Such profits are exactly what Fain has said UAW members deserve to share in. But his strategy to get workers a larger piece of the pie carries great risks.
“This is not going to be positive from an industry perspective or for GM,” Barra said Friday.
Many outside the union believe if Fain pushes too hard, it could lead to long-term job losses for the union. A former high-ranking bargainer for one of the automakers told CNBC that it’s nearly guaranteed the companies cut union jobs through product allocation, plant closures or other means to offset increased labor costs.
“They’re going to have to pay up. The question is how much,” said the longtime bargainer, who agreed to speak on the condition of anonymity. “This ends up with fewer jobs. That’s how the automakers cut costs.”
Fain and other union leaders have argued that meeting the companies in the middle has led to dozens of plant closures, fewer union members and a growing divide between blue-collar workers and the wealthy.
So why not fight?
“This is about us doing what we got to do to take care of the working class,” Fain said Friday. “This isn’t just about the UAW. This is about working people everywhere in this country. No matter what you do for a living, you deserve your fair share of equity.” More

Planet Fitness’ board ousted CEO Chris Rondeau.
The company’s stock fell after the news, hitting a 52-week low.
The move stunned Planet Fitness employees, a source told CNBC.

Chris Rondeau, CEO of Planet Fitness
Adam Jeffery | CNBC

In a move that stunned investors and employees alike, Planet Fitness ousted company veteran Chris Rondeau from his post as CEO, the workout chain said Friday in a press release.
Shares closed nearly 16% lower in the wake of the announcement, hitting a 52 week low.

Planet Fitness said it is searching for its next chief both internally and externally. Craig Benson, a former governor of New Hampshire and a member of the company’s board, will serve as the interim CEO. He’s a franchisee of both Planet Fitness and Dunkin’ Donuts and has been on Planet’s board for six years.
Rondeau’s departure appears sudden, and it’s not clear what triggered the decision, especially after a stronger-than-expected second-quarter earnings report last month. Some staff close to Rondeau learned about his departure around the time the news was announced publicly, leaving them shocked, according to a person familiar with the matter. The person spoke on the condition of anonymity because they’re not authorized to speak on the matter publicly.
In a research note, William Blair analyst Sharon Zackfia called the news “abrupt” and said it didn’t “appear planned” because the company canceled two scheduled investor conference presentations this week.
“The decision was characterized as the board’s and not Rondeau’s,” Zackfia wrote.
Planet Fitness Chairman Stephen Spinelli Jr. said in a press release that the board “felt that now was the right time to transition leadership.”

“In today’s evolving environment, Planet Fitness is continuing to enhance our competitive advantage, capitalize on our size and scale, and drive further shareholder value,” he added.
Planet Fitness declined further comment. Rondeau couldn’t be reached.
Rondeau is a longtime veteran of the company, working his way up from a front desk position nearly 30 years ago at the gym’s first location in Dover, New Hampshire, when it was owned by founders Michael and Marc Grondahl. Rondeau has served as CEO since 2013 and previously held the role of chief operating officer. He will continue as a member as of the board of directors and will stay on in an advisory role “to help ensure a smooth transition,” the company said.
“My 30-year career at Planet Fitness has been an incredible ride, and it’s been an honor to lead this Company and serve our employees, franchisees and members, all of whom have played a key role in our tremendous growth and success,” Rondeau said in a statement. “I am grateful for and look forward to supporting the management team in an advisory capacity, and have confidence in the long-term potential of Planet Fitness.”
During his time as CEO, Rondeau led Planet Fitness’ IPO and tripled its club base from about 700 to about 2,400 locations. When he started in the position, the company was doing about $200 million in annual revenue and is now projected to do more than $1 billion this year, Zackfia said.

Scaled-back goals

Planet Fitness CEO Chris Rondeau at the New York Stock Exchange, May 17, 2022.
Source: NYSE

While the company recently posted strong sales and profit growth, investors have grown wary over its plans for equipment and new franchises, which are both key revenue drivers for the business.
In August, Rondeau announced that Planet Fitness was reducing its 2023 outlook for placements of equipment in new franchisee stores to about 140, down from a previous range of 160. Planet makes about a quarter of its revenue from selling its branded fitness equipment to franchisees.
At the time, Rondeau chalked up the trimmed forecast to “higher new store construction costs and increased interest rates.”
During a call with analysts, finance chief Thomas Fitzgerald noted the company’s plans to open 600 new stores by 2025 may no longer be possible. He said the goal was still “achievable in the relative near term” but it may take longer than three years.
“While our new store returns are still strong, they are not back to their pre-Covid levels due primarily to higher construction costs that have stubbornly remained up 25%,” Fitzgerald said at the time.
“To put it in perspective, the amount of CapEx required to build six stores per year in 2019 will now only build four or five depending on the situation. … Additionally, the rapid increase in interest rates over the past year has had a cumulative impact on our franchisees’ ability to invest in new store growth.”
Further, vacancy rates for 15,000- to 25,000-square-foot locations that are suitable for Planet Fitness’ gyms are down about 16% compared with pre-Covid levels, making it harder for the company to secure new leases, Fitzgerald said.
During its most recent quarter ended June 30, Planet opened 26 new stores compared with 34 in the year ago period.
“[Planet Fitness] has presented multiple reasons why franchise unit openings have slowed, without giving investors confidence about what the growth rate is likely to be, which we think is the key factor that has impacted stock performance,” DA Davidson wrote in a research note Friday.
The company’s stock is down about 36% this year, giving it a market value of about $4.4 billion. More

After California lawmakers passed a landmark fast-food bill, an independent advocacy group of McDonald’s owners is pushing back against what it says will be a “devastating financial blow” to its franchisees in the state, according to a memo viewed by CNBC.
The bill, AB 1228, was passed by the state Senate late Thursday and heads to Gov. Gavin Newsom’s desk for signature. He has pledged to sign it into law.
It includes a wage floor of $20 for California workers at fast-food chains with at least 60 locations nationwide, starting April 1.

A McDonald’s fast food restaurant is seen in Belmont, United States on April 03, 2023.
Tayfun Coskun | Anadolu Agency | Getty Images

After California lawmakers passed a landmark fast-food bill, an independent advocacy group of McDonald’s owners is pushing back against what it says will be a “devastating financial blow” to its franchisees in the state, according to a memo to its membership viewed by CNBC.
The bill, AB 1228, was passed by the state Senate late Thursday and heads to Gov. Gavin Newsom’s desk for signature. He has already pledged to sign the bill into law. It includes a wage floor of $20 for California workers at fast-food chains with at least 60 locations nationwide, starting April 1.

Labor groups pushed for even higher wages in previous legislation, but the resulting $20 an hour floor prevailed. Even in a state where the minimum wage is $15.50 and the pay floor is even higher in some municipalities, the deal will bring a significant raise for many workers. But despite support from franchisee and restaurant advocacy groups, some owners are concerned about what the bill means for operations in a challenging labor market and during a period of high inflation.
The National Owners Association, an independent advocacy group of more than 1,000 McDonald’s owners, projects in the memo the bill will cost each restaurant in the state $250,000 annually. The group said the costs “simply cannot be absorbed by the business model.” It also warned similar legislation will follow in other states.
Further, the organization claimed in the letter that “a small coalition of franchisors, including McDonald’s, the National Restaurant Association (NRA) and the International Franchise Association (IFA) independently w/o franchisee involvement, negotiated a deal with the [Service Employees International Union]; causing the legislative outcome to now become certain.”
McDonald’s sent its own letter to its restaurant system on Monday, which was viewed by CNBC. Responding to the bill, the company said it and other franchisee groups “worked tirelessly over the past year to fight these policies and protect Owner/Operators’ ability to make decisions for their businesses locally and protect their restaurants and their crew.”
“This included forming a coalition of brands to refer [an earlier version of the bill] to California voters in November 2024 — while expensive and unexpected we felt we had no other choice. We also significantly increased our political engagement in the state. This included a newly established North America Impact Team to work horizontally, new lobbyists and campaign consultants, and a dramatic step-change in our political activity,” it wrote.

The company declined to comment further on the NOA’s letter or position.
Roger Delph, a McDonald’s franchisee from California who served on the state’s owner/operator task force, said in a statement to CNBC that he worked with McDonald’s, other franchisees and separate companies to “protect” the business model from what he called “an all-out attack.”
“That involved countless conversations and meetings, and a discussion with the Governor’s office directly,” he said. “Anyone who is suggesting this was not a collaborative and successful effort to protect the franchised business model in California, or that franchisee involvement was absent, was either not involved or is contorting the facts.” 
In its systemwide letter, the fast-food giant also outlined changes made to the final version of the bill that are considered better for owners than the initial proposed legislation. The new legislation eliminated the threat of joint franchisor-franchisee liability, which McDonald’s said would “destroy the franchise model in California and strip thousands of restaurant owners of the right to run their business.”
In addition, it said the bill unwinds the reconstitution of the Industrial Welfare Commission, which would have “sweeping powers” over decisions on wages and workplace requirements for restaurants. The letter said the commission would have been able to make immediate and unchecked decisions on wages and working conditions in the state.

Other franchise and restaurant groups had a more positive outlook on the compromise.
The International Franchise Association CEO Matt Haller said in a statement that the bill “creates the best possible outcome for workers, local restaurant owners and brands, while protecting the franchise business model in California.” He added in an interview with CNBC, that “franchise brands that were involved in the negotiations had their franchisees first and foremost in front of minds as they were considering deal terms.”
The National Restaurant Association’s EVP of Public Affairs, Sean Kennedy, added in a statement, “This agreement provides a predictable future for California restaurant operators and includes a tremendous investment in the [quick-service restaurant] workforce, while eliminating regulatory and legislative threats endangering their businesses. We recognize the work from all sides that went into getting this legislation written and appreciate the legislature’s support to get it passed.” 
Both Kennedy and Haller are co-chairs of the Save Local Restaurants coalition that worked on the negotiations.
Some critics of the deal have said costs will fall solely on small business owners in the state. In its letter, the NOA outlined ways for members, suppliers and McDonald’s corporate office to support owners in the state of California. It said anticipated menu prices hikes will create a “significant revenue windfall” for the company, and said the projected $80 million rent and service fees collected from those sales directly tied to price hikes should be reinvested in California restaurants. It asked that any and all requests for financial support made by owners in the state be considered.
“Everyone has a stake in this and nobody can afford to stand on the sidelines,” the NOA letter said.
Meanwhile, worker advocates — who won wage hikes but not increases as large as they first sought — said their work is just getting started.
“Fast-food workers’ fight in California isn’t close to over — it has only just begun as they prepare to take their seat at the table and help transform their industry for the better,” Service Employees International Union President Mary Kay Henry said in a statement to CNBC.
She added, “California’s Fast Food Council brings together every stakeholder in this industry, including franchisees. At this table, workers and franchisees alike will be heard by global franchisors and will have a direct role in shaping improved standards in the industry. This groundbreaking, sector-wide approach is the path to making fast-food jobs safer and the industry more sustainable for everyone.”
— CNBC’s Amelia Lucas contributed to this report. More