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During the 2010s, Sri Lanka had one of the fastest-growing economies in Asia. 
Things took a 180-degree turn at the end of the decade as the country’s economy stumbled. In May 2022, the government defaulted on its debt for the first time in history. 

As inflation continued to spiral out of control, with a massive shortage of food, fuel and medicine for the country’s 22 million people, Sri Lankans took to the street, forcing the president, Gotabaya Rajapaksa, to resign and flee the country. 
Even though Sri Lanka has a new president, Ranil Wickremesinghe, protests continue. Inflation has risen past 50% — and could hit 70% — making it harder for people to survive. 
Many experts believe that Sri Lanka’s story is a warning sign for emerging markets. 
“Sri Lanka is facing its worst economic collapse in its modern history,” said Sumudu W. Watugala, assistant professor of finance at the Kelley School of Business at Indiana University. “This is due to long-standing structural weaknesses exacerbated by a series of idiosyncratic shocks. Sri Lanka’s crisis can be a warning sign to other developing nations because it’s a classic emerging market crisis in many ways.”
So what does Sri Lanka’s economic crisis signal about similar economies and emerging markets? Watch the video to learn about more risks involved in emerging markets, how Sri Lanka’s economy collapsed and the country’s path forward. 

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Experts say luxury brands are often insulated in economic slowdowns because most their sales come from the super wealthy.
LVMH, Ferrari and Capri are among the luxury companies reporting strong sales.
Other companies including Walmart and Gap have slashed financial forecasts.

A pedestrian carries a Louis Vuitton shopping bag, from a store operated by LVMH Moet Hennessy Louis Vuitton SE, on New Bond Street in London, U.K., on Wednesday, Oct. 21, 2020.
Hollie Adams | Bloomberg | Getty Images

Prices for food, gas and travel have soared over the past year –  but the rich appear to be shrugging it off and are still fueling sales at luxury companies, where sneakers can go for $1,200 and sports cars easily top $300,000.
Companies that cater to the ultra-rich, including Ferrari and the parent companies of Dior, Louis Vuitton and Versace, are reporting strong sales or hiking their profit forecasts. The upbeat results come even as recessionary fears hang over the economy, with Walmart, Best Buy, Gap and others slashing their financial outlooks, citing a pullback in spending among lower-income consumers squeezed by inflation.

The unflagging strength in the luxury category is in line with past economic slowdowns, experts say, with the rich often being the last to feel the effects because of the cushion their extreme wealth provides. Among the jet set, the continued spending also signals how pricey purchases often serve as status symbols.
“Having symbols of power within your tribe is a powerful thing,” said Milton Pedraza, founder and CEO of Luxury Institute, a market research and business management firm. “Those symbols of power still matter tremendously within the tribes of the ultra-wealthy.”
Louis Vuitton, for example, offers a pair of sneakers for $1,230, as well as a bag that costs $2,370. The high-fashion brand’s parent company LVMH, which also owns Christian Dior, Fendi and Givenchy, reported organic revenue growth of 21% to 36.7 billion euros ($37.8 billion) in the first half of 2022 compared to a year ago.
At Versace, where the price tag for a pair of shoes or collared shirt can easily top $1,000, quarterly revenue rose nearly 30% to $275 million from a year ago when stripping out the effect of currency movements. Its parent company Capri Holdings, which also owns Michael Kors and Jimmy Choo, said overall revenue rose 15% to $1.36 billion for the period.
Despite the broader economic uncertainties, Capri CEO John Idol said the company remains confident in its long-term goals because of the “the proven resilience of the luxury industry.”

“None of us know what’s going to happen in the back half of the year with the consumer, but it appears that the luxury industry is quite robust and quite healthy,” Capri said during an earnings call this week.
Earlier this month, Italian supercar maker Ferrari also boosted its guidance for the year after revenue hit a record 1.29 billion euros ($1.33 billion) in its second quarter. The 75-year-old automaker’s 2022 Ferrari 296 GTB, which has plug-in hybrid capabilities, starts at $322,000, according to Car and Driver, while its 2022 Ferrari 812 GTS starts at around $600,000. Even used Ferraris are selling for hundreds of thousands of dollars.
Outside the luxury world, some companies are also noting strength in more expensive options. Delta Air Lines, for example, cited stronger revenue recovery for offerings such as business class and premium economy, compared with its other coach tickets.
Though the luxury industry has always had a degree of resiliency, the growing wealth disparity fueled by the pandemic is adding to the sector’s current strength, said Amrita Banta, managing director of Agility Research & Strategy, which specializes in affluent consumers.
“The disposable income of most affluent and HNW (high net-worth) consumers has increased because less was spent on travel,” she said.
Additionally, she said there’s been a cultural shift since the recession in 2008 and that high net worth consumers today are less guilty about spending in a slowdown, and “feel entitled to spend their wealth.” She said that’s partly a reflection of people in developing countries, where wealth is growing.
Luxury companies might be noticing a spending slowdown among the 80% of their customers who are “nearly affluent,” said Pedraza of the Luxury Institute. But he said those consumers typically account for about 30% of sales.
Instead, he said luxury brands often count on just 20% of its clientele − the ultra-wealthy and very wealthy — for the majority of their sales. And since that cadre is far more inflation and recession-resistant, luxury companies tend to experience a slowdown last, he said.
“The type of clients and the amount of sales they account for in true luxury brands makes them super resilient,” he said. “Not immune, but super resilient.”

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New York State Health Commissioner Dr. Mary Bassett called the detection of polio in New York City alarming.
Bassett said local and federal health officials are aggressively assessing how far polio has spread in the city and in New York state.
Polio can result in permanent paralysis of the arms and legs and death in some cases.
Health officials are calling on people who are not vaccinated to get their shots immediately.

Polio has been detected in New York City wastewater, suggesting local circulation of the virus, health officials said Friday.
New York State Health Commissioner Dr. Mary Bassett called the findings alarming. Bassett said local and federal health officials are aggressively assessing how far polio has spread in the city and in New York state.

“For every one case of paralytic polio identified, hundreds more may be undetected,” Bassett said. “The best way to keep adults and children polio-free is through safe and effective immunization.”
Polio can result in permanent paralysis of the arms and legs and death in some cases. Health officials are calling on people who are not vaccinated to get their shots immediately.

NYC commissioner for health Dr Mary T. Bassett
Andy Katz | Pacific Press | Lightrocket | Getty Images

Routine vaccinations among children have declined in New York City since 2019, which has increased the risk of outbreaks, according to health officials. About 14% of New York City children ages 6 months to 5 years old have not completed their vaccination series against polio, which means they are not fully protected against the virus.
Overall, 86% of children ages 5 and under in New York City have received three doses of the polio vaccine, according to health officials. But there are some neighborhoods in the city where less than 70% of children are up to date on their polio vaccines, which puts kids in these communities at risk of catching polio.
New York state health officials confirmed last month that an unvaccinated adult in Rockland County, a suburb of New York City, caught polio and suffered paralysis. Polio was subsequently detected in sewage in Rockland County and neighboring Orange County.

The strain that the unvaccinated adult caught is genetically linked to the sewage samples in Rockland and Orange counties. It’s unclear where the chain of transmission began, but health officials have said the sewage samples indicate there’s local spread of the virus in the New York City metropolitan area.
One in 25 people who catch polio develop viral meningitis and 1 in 200 will become paralyzed, according to health officials. Most people who catch polio do not develop symptoms, though some have symptoms similar to the flu such as sore throat, fever, fatigue, nausea and stomach pain. There is no cure for the disease, but it can be prevented through vaccination.
“The risk to New Yorkers is real but the defense is so simple – get vaccinated against polio,” said New York City Health Commissioner Dr. Ashwin Vasan.
Children should receive four doses of the vaccine: One dose at 6 weeks through 2 months, a second dose at 4 months, a third at 6 months through 18 months, and a fourth at ages 4 to 6 years old, according to New York state health officials.
People who are unvaccinated and older than age 4 should receive three doses of the vaccine. Adults who have received only one or two should get another one or two, no matter how long it has been since the earlier doses.

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The U.S. was declared polio free in 1979, though travelers have occasionally brought the virus into the country, according to the Centers for Disease Control and Prevention. New York state last confirmed a case in 1990 and the U.S. previously confirmed a case in 2013.
Polio struck fear into parents’ hearts in the 1940s before vaccines were available. More than 35,000 people became paralyzed from polio every year during that period, according to the CDC.
But a successful vaccination campaign in the 1950s and 1960s dramatically reduced the number of infections.

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Medicare is gaining the power to negotiate prices for certain drugs and punish pharmaceutical companies that don’t play by the rules.
The legislation represents a historic expansion of Medicare’s power that was fiercely opposed by the pharmaceutical industry.
But the negotiation powers are limited in scope, and some lawmakers argue that legislation doesn’t go far enough.

A pharmacist collects medications for prescriptions at a pharmacy.
Simon Dawson | Bloomberg | Getty Images

Medicare is poised to renegotiate the prices of some of its most expensive drugs through a historic expansion of its power, which could reduce costs for many seniors as well as federal spending on its prescription drug plan.
The changes are tucked inside a massive spending-and-tax bill in Congress that includes $433 billion in investments in health-care and clean energy. House Democrats passed the Inflation Reduction Act on Friday in a 220 to 207 vote along party lines, ending a tortured legislative process that took more than a year.

The bill empowers the Health and Human Services Secretary to negotiate prices for certain drugs covered under two different parts of Medicare and punish pharmaceutical companies that don’t play by the rules. The legislation also caps out-of-pocket costs at $2,000 starting in 2025 for people who participate in Medicare Part D, the prescription drug plan for seniors.

Democrats have been fighting for decades to give Medicare the power to cajole drugmakers into lowering prices. But the powerful pharmaceutical lobby and Republican opposition shot down past efforts. Medicare Part D currently bars HHS from negotiating prices with the industry.
But HHS is now on the cusp of gaining the power to negotiate. President Joe Biden is expected soon to sign the bill into law.
The American Association of Retired Persons, which represents 38 million people, described the legislation as a historic victory for older adults. AARP CEO Jo Ann Jenkins said the group has fought for nearly two decades to allow Medicare to negotiate drug prices. Millions of older adults are now “one step closer to real relief from out-of-control prescription drug prices,” Jenkins said earlier this week.
Though the legislation is historic, the negotiation provisions are “very narrow” in design, according to Andrew Mulcahy, an expert on prescription drug prices at the RAND Corporation. And the negotiations won’t provide relief until 2026 when the renegotiated prices on ten of the program’s most expensive drugs take effect.

Lawmakers on the left such as Sen. Bernie Sanders, I-VT, have criticized the legislation for leaving out the overwhelming majority of Americans who are not on Medicare. For the pharmaceutical industry, on the other hand, even the limited scope of the bill is a bridge too far.

Timeline for negotiations

Under the legislation, the HHS can negotiate prices for some of the most expensive drugs covered under Medicare Part B and Medicare Part D. The former covers specialized drugs administered by health-care providers, while the latter covers drugs that are filled at retail pharmacies.
The program is phased in through four stages over several years. Here’s how it works:

Phase 1: HHS negotiates 10 Medicare Part D drugs. Prices take effect in 2026.
Phase 2: HHS negotiates 15 Part D drugs. Prices take effect in 2027.
Phase 3: HHS can negotiate 15 Medicare Part B or D drugs. Prices take effect in 2028.
Phase 4: HHS negotiates 20 Part B or D drugs. Prices take effect in 2029. The secretary can negotiate 20 drugs in all subsequent years.

Possible drug candidates

How many seniors will benefit from the negotiations depends in large part on which drugs the HHS secretary decides to target. More than 63 million Americans are insured through Medicare overall and about 49 million are enrolled in Medicare Part D.
Before the Inflation Reduction Act was set to be enacted into law, Medicare Part D was estimated to cost just over $1.6 trillion over the next decade, according to the non-partisan Congressional Budget Office. Medicare Part B had an estimated cost of $6.5 trillion over the next decade. The CBO projects the drug price negotiations alone will save taxpayers an estimated $102 billion through 2031.
HHS can only negotiate prices for drugs that Medicare Parts B and D spend the most money on and have been on the market for years without any generic or other competitors, according Mulcahy. “The focus is on these older drugs that for one reason or another don’t have competition,” he said.
There is no official, publicly available list of drugs that HHS plans to target for negotiations. But Bank of America highlighted some potential Medicare D candidates based on how much Medicare spent on them in 2020:

Bristol-Myers’ Eliquis, $9.9 billion. It is an anticoagulant to prevent blood clotting to reduce the risk of stroke.
J&J’s Xarelto, $4.7 billion. It is another blood thinner.
Merck’s Januvia, $3.8 billion. It is a pill to lower blood sugar for people with type 2 diabetes.
Abbvie’s Imbruvica, $2.9 billion. It is a pill for different types of blood cancers.

And Bank of America views these Medicare B drugs as possibly impacted by negotiations. Here are their costs to Medicare in 2020:

Merck’s Keytruda, $3.5 billion. It is an immune therapy for certain cancers.
Regeneron’s Eylea, $3 billion. It is an injection for macular degeneration.
Amgen’s Prolia, $1.6 billion. It is an injection for osteoporosis.
Bristol Myers’ Opdivo, $1.5 billion. It is an immune therapy treatment certain cancers.
Roche’s Rituxan, $1.3 billion. It is an immune therapy for certain cancers and inflammatory disorders.

But it’s difficult to determine which drugs HHS will really target. The list of drugs that would qualify for negotiations will change substantially by the time the bill’s provisions go into effect because many lose their patent protections by then, according to a Bank of America research note.
Still, negotiations through Medicare could cut prices by 25% for the 25 drugs the program spends the most on in 2026 and beyond, according to Bank of America.
How much prices are reduced ultimately depends on whether HHS really leans into negotiations with the drug companies, Mulcahy said. Bill Sweeney, head of government affairs at AARP, said proper implementation of the bill is crucial. AARP wants to make sure HHS fights hard for the best price for seniors and there aren’t loopholes the industry can exploit, Sweeney said.
Industry could game the system by authorizing limited competition for their drugs to avoid price controls, according to an analyst note from SVB Securities.
HHS will have enforcement power. Companies face hefty financial penalties for not abiding by negotiated prices, $1 million fines for violating agreement terms, and $100 million fines for providing false information.

Inflation rebate

Although seniors won’t see the lower prices until 2026, the legislation would penalize drug companies for raising Medicare drug prices faster than the rate of inflation later this year. If a drug’s price increases more than inflation, the company must pay the government the difference between the price charged and the inflation rate for all Medicare sales of that drug, according to AARP.
Prices rose faster than inflation in 2020 for the overwhelming majority of the 25 drugs Medicare Parts B and D spent the most money on, according to the Kaiser Family Foundation.
The U.S. spent more than $1,000 per capita on prescription drugs in 2019, double the $552 that other high-income nations spent per capita on average, according to KFF and the Peterson Institute on Healthcare. U.S. spending on prescription drugs surged 69% from 2004 to 2019, compared to a 41% increase in comparable countries.
‘Baby step forward’
Sanders has called the negotiation powers given to the HHS secretary a “baby step forward.” The senator pointed out that the first round of price reductions won’t go into effect for four years, and people who aren’t on Medicare – the overwhelming majority of people are under age 65 – are completely left out.
“If anybody thinks that as a result of this bill we’re suddenly going to see lower prices for Medicare you are mistaken,” Sanders said during a speech in the Senate earlier this week. “If you’re under 65, this bill will not impact you at all and the drug companies will be able to continue on their merry way and raise prices to any level they want.”
The pharmaceutical industry, on other hand, has argued that the bill goes too far. Stephen Ubl, CEO of the Pharmaceutical Research and Manufacturers of America, said the legislation will slow innovation and lead to fewer new cures and treatments for diseases.
Bank of America doesn’t view the bill as a major negative for industry growth, according to a research note from August. Analysts at UBS said the Medicare negotiation provisions, which are limited in scope, are far from the worst case scenario for industry. The legislation would provide clarity for the market and takes the threat of even tougher drug pricing off the table, according to UBS.
“We think the ultimate passage of the current drug pricing reforms represents a clarifying event in terms of future industry earnings, removing the risk of more onerous drug pricing that has weighed on biopharma valuations since the drug pricing issue first rose to political prominence in 2015,” UBS analysts wrote in a research note earlier this week.

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Salman Rushdie was attacked at a Chautauqua Institution panel in western New York on Friday.
The New York State Police said Rushdie suffered an apparent stab wound to the neck and said his condition is not yet known.

Author Salman Rushdie was attacked while on stage for a panel in Chautauqua in western New York on Friday.
State troopers confirmed in a press conference Friday afternoon that Rushdie was stabbed at least once in the neck and at least once in the abdomen. Rushdie is still undergoing surgery, according to a statement from state police.

Staff and audience members rushed to the stage and pinned the assailant to the ground following the attack, state troopers said. A state trooper who was present took the suspect into custody with the assistance of a local sheriff’s deputy.
Rushdie was treated by a doctor who was in the audience before emergency medical services arrived and airlifted him to a local trauma center.

Author Salman Rushdie is tended to after he was attacked during a lecture, Friday, Aug. 12, 2022, at the Chautauqua Institution in Chautauqua, NY.
Joshua Goodman | AP

The state police department identified the suspect as Hadi Matar, age 24, from Fairview, NJ. The New York State Police is collaborating with the FBI and local police for the investigation.
A preliminary review of Matar’s social media accounts by law enforcement showed him to be sympathetic to Shia extremism and the causes of the Islamic Revolutionary Guard Corps, a law enforcement person with direct knowledge of the investigation told NBC News. Law enforcement officers reportedly found images of Solemani and an Iraqi extremist sympathetic to the Iranian regime in a cell phone messaging app belonging to Matar, according to NBC News.
There are no definitive links to the IRGC but the initial assessment indicates he is sympathetic to the Iranian government group, the official said.

The New York State Police released a statement immediately following the incident:
“On August 12, 2022, at about 11 a.m., a male suspect ran up onto the stage and attacked Rushdie and an interviewer,” the statement read. “Rushdie suffered an apparent stab wound to the neck, and was transported by helicopter to an area hospital. His condition is not yet known. The interviewer suffered a minor head injury. A State Trooper assigned to the event immediately took the suspect into custody.”
A spokesperson from the Chautauqua Institution, where the panel was being held, told CNBC that the organization was coordinating with emergency officials on a public response after the attack.
The Wylie Agency, which represents Rushdie, did not immediately respond to a request for comment.
Rushdie’s book “The Satanic Verses” forced him into hiding after it was banned in Iran and a $3 million bounty was put on his head. The Iranian government has distanced itself from the bounty, according to The Associated Press, but the fatwa has been continued by a semiofficial religious organization, which raised the bounty to $3.3 million.
Rushdie has been awarded many of the top literary prizes, including two Whitbread Prizes for best novel. He was knighted in 2007 while Tony Blair was prime minister. Blair released a statement on the attack.

Author Salman Rushdie at the Blue Sofa at the 2017 Frankfurt Book Fair on October 12, 2017 in Frankfurt am Main, Germany.
Hannelore Foerster | Getty Images

“My thoughts are with Salman and all his family,” Blair wrote on Friday. “A horrible and utterly unjustified attack on someone exercising their right to speak, to write and to be true to their convictions in their life and in their art.”
Rushdie was scheduled to sit on a panel alongside Henry Reese, president of City of Asylum in Pittsburgh, an organization that provides sanctuary to writers exiled under threat of persecution.
“We ask for your prayers for Salman Rushdie and Henry Reese, and patience as we fully focus on coordinating with police officials following a tragic incident at the Amphitheater today,” the Chautauqua Institution said in a tweet Friday. “All programs are canceled for the remainder of the day. Please consult the NYS Police statement.”
The institution’s website described the panel as “A discussion of the United States as asylum for writers and other artists in exile and as a home for freedom of creative expression.”
Rushdie was the former president of PEN America, a nonprofit that defends freedom of expression and supports persecuted writers. PEN America CEO Suzanne Nossel released a statement in the wake of the attack.
“Just hours before the attack, on Friday morning, Salman had emailed me to help with placements for Ukrainian writers in need of safe refuge from the grave perils they face,” Nossel wrote. “Salman Rushdie has been targeted for his words for decades but has never flinched nor faltered. He has devoted tireless energy to assisting others who are vulnerable and menaced.”
New York Gov. Kathy Hochul thanked the New York State Police for their response to the attack on Rushdie.
“Our thoughts are with Salman & his loved ones following this horrific event,” wrote the governor. “I have directed State Police to further assist however needed in the investigation.”
Hochul later said Rushdie is alive.
“It was a state police officer that stood up and saved his life,” the governor said during an event about gun violence, adding that the event moderator was also attacked. “We’re monitoring the situation, but he’s getting the care he needs at the local hospital.”
This is the latest in a series of onstage attacks against public figures, including Rep. Lee Zeldin, R-N.Y., in a town near Rochester, New York, earlier this summer, Dave Chappelle at the Hollywood Bowl, and Chris Rock during the Oscars.
NBC News contributed to this report
Correction: Rep. Lee Zeldin, R-N.Y., was attacked in a town near Rochester, New York, earlier this summer. An earlier version misspelled his name and misstated the location.

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Blumhouse and Universal’s “The Black Phone” has surpassed $150 million at the global box office.
The film had a production budget of $16 million.
In passing this box office milestone, “The Black Phone” is the third-biggest horror film released since 2020.
The film also shows the importance of lower-budget features at the box office.

Ethan Hawke stars in Blumhouse and Universal’s “The Black Phone.”

Any apprehension Jason Blum had about the future of the box office has been quelled now that “The Black Phone” has surpassed $150 million at the global box office.
Blum was one of many that worried lower-budget films might not have a place at cinemas in the wake of pandemic theater closures. However, the film, a collaboration between his production company Blumhouse and Universal, has proven to Blum and the greater industry that there is still space for features with smaller budgets at the box office.

In passing the $150 million global ticket sales mark, “The Black Phone” is the third-biggest horror film released since 2020, behind Paramount’s “A Quiet Place: Part 2,” which snared $299 million, and Warner Bros.’ “Conjuring: The Devil Made Me Do It,” which tallied $206 million.
Blum told CNBC that “The Black Phone” has yet to be released in South Korea and is expected to add another $10 million in global ticket sales when it does in September.
The significance of the film’s box office performance is in part due to its low budget, just $16 million, and the fact that it is original IP. 
“Before the opening, you know, I was apprehensive because in our sort of post-Covid theatrical world, it’s kind of anybody’s guess what people are willing to go back to the movie theater to go see and what they’re not willing to go back and go see,” Blum said.
Many worried that audiences would only gravitate toward big spectacle features or franchise-based films. 

“I think it’s tremendous,” said Abhijay Prakash, president of Blumhouse. “I think it’s really noteworthy for us and for the industry. It’s obviously part of theatrical recovery, what’s happening. I know the big boys get all the attention, like ‘Top Gun’ and ‘Jurassic.’ But what this movie has done for what it is, it’s really remarkable.”
Blum, too, said he was encouraged by “The Black Phone’s” performance.
“In the 20 years I’ve been doing this, it’s one of the most profitable movies the company’s ever had,” he said.
While low- and midtier budget films don’t often make headlines for their box office grosses, they contribute significantly to the overall industry both domestically and worldwide. 
The 2022 box office has generated around $5.05 billion through August 11, down 31% compared to 2019, according to data from Comscore. It’s also seen about 31% fewer releases, with only 52 wide releases, films released in more than 1,000 theaters, compared to 75 during the same time frame in 2019. 
It’s become clear that not having as many low- and midbudget films appear in theaters has resulted in fewer ticket sales across the board. Adding these kinds of films to the slate, particularly those in the horror genre, can also entice audiences that have been slower to return. 
“If you talk to any of our exhibitor friends, they absolutely love the horror genre, because it brings out a dependable audience that often skews younger,” Prakash said. 
Blumhouse has set a new standard for horror production in the 21st century, churning out quality feature films on lower budgets. The studio is probably best known for films like “Paranormal Activity” and the Academy Award-winning “Get Out” and for its ability to take these small budget films and turn them into huge box office successes.
“Get Out,” for example, had a budget of around $4.5 million, minus marketing costs, and snared more than $250 million globally during its run in theaters in 2017.
Still to come from Blumhouse is “Halloween Ends,” which arrives in theaters in October and “M3GAN” in January. The studio is also developing a “Spawn” film and one based on popular game series “Five Nights at Freddy’s.”
“There’s a very vibrant business, and it’s not just comic book movies, not just tentpole movies, but great original storytelling in the movie theaters,” Blum said. “And, and that’s, that’s really, really important.”
Disclosure: Comcast is the parent company of NBCUniversal and CNBC. Blumhouse has a first-look deal with Universal.

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Blumhouse, known for producing highly profitable horror films, is no longer producing Mattel’s Magic 8 Ball movie.
Producer Jason Blum told CNBC the studio did work to develop the film for a time, but is no longer attached.
Magic 8 Ball is one of around a dozen projects in development in Mattel’s film division, including Hot Wheels, Rock ‘Em Sock ‘Em Robots, Uno and Barney. A Barbie film is on the way next year.

Magic 8 Ball by Mattel
Source: Amazon

Blumhouse is no longer a producing partner of Mattel’s planned Magic 8 Ball film.
On Friday, co-founder and producer Jason Blum told CNBC that the horror production power house was no longer attached to the toymaker’s project.

“We developed it for a while, but we are no longer attached,” he said. “I think they are developing it with someone else. I wish them the best of luck.”
Blum didn’t go into details about why Blumhouse exited the project. Representatives for Mattel did not immediately respond to CNBC’s request for comment.
The Magic 8 Ball movie was first announced in 2019 and is one of many projects in development under Mattel Films. 
The company recently completed production on its Barbie film with Warner Bros and also has a Masters of the Universe film slated with Netflix. There are a dozen more projects in development, including films based on Hot Wheels, Major Matt Mason, Rock ‘Em Sock ‘Em Robots, Uno and Barney.
Turning Magic 8 Ball into a horror story may have been a surprise, but Mattel’s decision to partner with Blumhouse wasn’t. 

The studio has set a new standard for horror production in the 21st century, which is lifting the entire category. Blumhouse is best known for films like “Paranormal Activity” and the Academy Award-winning “Get Out” and its strategy of taking small-budget films and turning them into huge box office successes.
For example, Blumhouse partnered with Hasbro to create a movie based on the Ouija board. The film, released in 2014, cost just $5 million to make and went on to earn more than $103 million at the global box office. The sequel “Ouija: Origin of Evil,” which came out in 2016, cost $9 million for production and went on to earn $81.7 million.
As Mattel seeks to keep its margins in check and expand into theatrical entertainment, producing films cheaply that can go on to multimillion dollar success will be key. In working with third-party studios and distributors to bring its toys to life on the big and small screen, but minimize financial risk.
Disclosure: Comcast is the parent company of NBCUniversal and CNBC. NBCUniversal distributed “Get Out.”

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Peloton told employees it is slashing roughly 780 jobs, closing a significant number of its stores and hiking prices on some equipment. 
The company didn’t specify how many of its 86 retail locations it plans to shutter. 
It said it will exit last-mile logistics, close its remaining warehouses and shift delivery work to third-party providers.

Peloton told employees Friday that it is slashing roughly 780 jobs, closing a significant number of its retail stores and hiking prices on some equipment in a bid to cut costs and become profitable. 
The company did not specify how many of its 86 retail locations it plans to shutter, but said an “aggressive” reduction will begin in 2023. The pace of closures will depend on how quickly Peloton can negotiate getting out of leases.

Peloton said it will exit last-mile logistics by closing its remaining warehouses and shift delivery work to third-party providers, resulting in a portion of the job cuts. It is also cutting a number of positions in its in-house support team, which are mainly located in Tempe, Arizona, and Plano, Texas, and instead will rely on third parties. 
The sweeping changes are part of recently installed Chief Executive Officer Barry McCarthy’s plan to steer the connected fitness equipment maker in a new direction. Peloton’s business boomed to unthinkable highs after the onset of the Covid pandemic, sending shares surging alongside other so-called stay-at-home stocks like Zoom. But under then-CEO and Peloton founder John Foley, demand began to slow almost as quickly as it shot up, as people started going out again.
McCarthy’s biggest tasks now include getting rid of fixed costs and finding more ways to cash in on its loyal base of customers.
“The shift of our final mile delivery to 3PLs will reduce our per-product delivery costs by up to 50% and will enable us to meet our delivery commitments in the most cost-efficient way possible,” McCarthy wrote in a memo to employees seen by CNBC.
“These expanded partnerships mean we can ensure we have the ability to scale up and down as volume fluctuates,” he added. 

Peloton, which had just lowered the prices for its products earlier this year, is raising the price of its Bike+ by $500 to $2,495 in the United States. The price of its Tread machine is going up by $800 to $3,495. The price of Peloton’s original Bike and its strength-training product known as Guide will remain unchanged.
McCarthy acknowledged the about-face on pricing, saying that the equipment price reductions made sense for the company back in April, as Peloton tried to get rid of inventory quickly.
Investors sent Peloton shares up 13.6% on Friday.
The stock has tumbled more than 60% so far this year, with the company’s share price hitting an all-time low of $8.22 in mid-July. Shares had traded as high as $120.62 apiece roughly a year ago.
Under McCarthy, who took the reins from Foley in February, the business has focused on ways to grow subscription revenue over hardware sales. Earlier this year, for example, Peloton raised the price of its all-access subscription plan in the United States to $44 per month from $39.
In July, Peloton had also announced it would stop all its in-house manufacturing and instead expand its relationship with Taiwanese manufacturer Rexon Industrial. That resulted in about 570 job cuts. The company also suspended operations at its Tonic Fitness facility, which it acquired in 2019, through the remainder of the year.
When McCarthy became CEO, Peloton announced it was slashing roughly $800 million in annual costs. That included cutting 2,800 jobs, or about 20% of corporate positions. The company also said it would be walking away from plans to build a sprawling production facility in Ohio.
CNBC reported in January, ahead of Foley stepping down, that Peloton planned to temporarily halt production of its equipment, according to internal documents detailing those plans, as a way to control costs with demand dropping. 
Foley’s missteps included making long-term bets on Peloton’s supply chain during the peak of the coronavirus pandemic that would later prove to be a drag on its business as sales of its Bikes and Tread machines slowed. 
Peloton’s losses in the three-month period ended March 31 widened to $757.1 million from $8.6 million a year earlier. Revenue dropped to $964.3 million from $1.26 billion. 
The company ended the quarter with 2.96 million connected fitness subscribers, which are people who own one of the company’s products and pay for a membership to its live and on-demand workout classes. 
“We have to make our revenues stop shrinking and start growing again,” McCarthy, a former Spotify and Netflix executive, said in Friday’s memo. “Cash is oxygen. Oxygen is life.”
McCarthy said the company is continuing to hire in certain areas, including software and engineering. “I share this so you won’t think we’re driving with our foot on the gas and the brake at the same time,” he said.
McCarthy is also asking all of Peloton’s office-based employees to return to the office three days per week starting on Sept. 6. As of Nov. 14, that will be considered mandatory, he said.
Peloton is expected to report its fiscal fourth-quarter results on August 25. 
Read the full memo that Peloton CEO Barry McCarthy sent to employees on Friday: 

Team –
I’m writing to update all of you on Peloton’s ongoing transformation. The past few months we’ve made considerable progress on our journey. We continue to define and lead the global Connected Fitness category, even as we work to make Peloton more efficient, cost effective, innovative, and to best position ourselves for the future. Thank you for your hard work. 
We have a clear strategy to drive the long-term, sustainable future of this company. Job one is generating free cash flow by right-sizing our inventory commitments and converting many of our fixed costs to variable costs because that cost structure better aligns with the seasonal revenue of the business. Second, we are also focused on innovation across our hardware and software to strengthen our Member experience. And, finally, we’re focused on growth and expanding the ways consumers can experience the magic of Peloton. 
We are making several additional changes to the business to improve our performance.
Maintaining Our Premium Brand Positioning
For several months we’ve been running the business to maximize cash flow. In April, we lowered prices on our original Bike, Bike+ and Tread to make the entry point for new Members more accessible and to accelerate the sale of inventory to generate much needed cash flow. At the time, we were still in the early days of our $800 million restructuring plan. We were under considerable cash flow pressure, and we were in the process of (but had not yet completed) securing a $750 million bank loan.
Because of our success managing our inventory and supply chain issues, and because of the bank financing, we have the opportunity to adopt a more nuanced pricing strategy targeting “value” and Premium Members alike by increasing prices on our Bike+ and Tread models – which contain distinctive, superior design elements, while keeping the price of Bike v1 and Guide the same.  
Specifically, in the U.S., our new price structure will be as follows:

Bike+ will increase by $500 to $2,495
Tread will increase by $800 to $3,495

This pricing change achieves three objectives – we maintain an attractive entry point for new Members; we continue to sell down excess Bike v1 inventory, creating a financial tailwind on investments already made; and we maintain our position as the undisputed premium brand in the Connected Fitness category. 
Optimizing our Operations and Workforce
We continue to make strategic changes to our operations and workforce. Following last month’s exit from owned-manufacturing in Taiwan, we are now restructuring our final mile delivery capabilities by expanding our work with our third party logistics (3PLs) providers. As a result, we are eliminating our North American Field Ops warehouses, resulting in a significant reduction in our delivery workforce teams.
Unfortunately, this means a number of team members will be departing the company. We know changes of this nature are never easy.
The shift of our final mile delivery to 3PLs will reduce our per-product delivery costs by up to 50% and will enable us to meet our delivery commitments in the most cost-efficient way possible. I also want to highlight that we have been actively working with our 3PLs to dramatically improve the Member experience, and we are seeing positive momentum in those CSAT scores. This has been a challenge. We won’t fix it overnight, but we have no choice but to make it work, so we’re leaning into it and proactively managing our 3PL relationships. We are confident in the plan we’ve put in place and we’re encouraged by the progress we’re making.  
After re-examining the resources required to provide our Members best-in-class support, we have also decided to reduce fixed costs by eliminating a significant number of roles on the in-house North America Member Support Team. In-bound Member support volume has been lower than forecasted, and like other parts of the business, we are going to expand our work with our third party partners. These expanded partnerships mean we can ensure we have the ability to scale up and down as volume fluctuates while still continuing to provide the level of service our Members have come to expect.
These are hard choices because we are impacting people’s lives. These changes are essential if Peloton is ever going to become cash flow positive. Cash is oxygen. Oxygen is life. We simply must become self-sustaining on a cash flow basis.  
I want to take this opportunity to express my gratitude to those delivery team and Member Support colleagues who have been impacted by this decision. 
Investing in Talent to Innovate and Grow
In the past you have heard me say we cannot cost cut our way to success. We have to make our revenues stop shrinking and start growing again. We do that with investments in marketing and R&D to drive innovative products.  We must also develop new features and functionality for existing CF platforms that delight Members and drive word-of-mouth which drives organic growth.  And, we double-down on our existing strengths, particularly our world-class, Instructor-led content that motivates and inspires Members daily. 
While we’re reducing our workforce in certain areas of the business, we continue to fill roles on key teams to drive the business forward. This includes further commitment to recruiting top talent in key areas of need such as our software engineering team. I share this so you won’t think we’re driving with our foot on the gas and the brake at the same time. Success is about making the right investments to drive growth while managing to a cost structure the business can afford.
I’ve also long-believed hands-on, shoulder-to-shoulder collaboration is essential for fast, efficient teamwork and innovation. To that end, we’ll be asking all office-based employees to return to their office three days per week starting on Tuesday, September 6th. We know some of you will need more time to sort out related details, and we are asking that you do so, working with your manager, with a deadline of  Monday, November 14th for all of us to be back in the office (if your PeloTeam designation is office-based) every Tuesday, Wednesday and Thursday. You also are welcome to come in more often, if you’d like, and take full advantage of the office amenities and gym. 
As of November 14th, return to office for office-based workers (not you if you were hired to be remote) will be mandatory. There are many successful businesses, like Airbnb and Spotify, who have chosen to operate remotely.  There are also many successful companies who have opted to collaborate in the office in person, like Nike and Google. The culture you choose to work in should be compatible with your personal preference. For those of you who don’t want to return to the office, we respect your choice. We hope you choose to stay, but we understand not everyone will.
Balancing e-Commerce and Retail 
Lastly, we need to rebalance our e-Commerce and retail mix to drive efficiencies, which means we will reduce our retail presence across North America. This decision will result in a significant and aggressive reduction of Peloton’s retail footprint. 
Data tells us that in the post-COVID economy, consumers want a mix of virtual and in-person engagement with the brands they love, meaning a hybrid model of e-commerce as well as limited physical retail touchpoints. We have to meet our prospective Members where they are. 
We will provide future updates on which retail operations will be impacted by this decision in the coming months. We do not anticipate closing retail locations in calendar 2022, but the timing is uncertain as we begin negotiations to exit our store leases.
Forward Focused
In closing, I want to reiterate that I know some of this news is difficult to hear as it has a real impact on people’s lives who believe in the mission and our ability to manage the business for success. 
Today’s news reminds us it was never more important that we be successful in managing our turnaround. That’s the reason we’re making the hard choices to shift our cost structure from fixed to variable and to right size our spending in retail stores. As we face economic uncertainty in the global macroeconomic outlook, we will continue to analyze our workforce and expenditures. Change is constant, and we need to embrace it and make it one of our super powers.
Overall, I continue to be optimistic about the future of Peloton. That doesn’t mean there won’t be challenges ahead. There will be, and there will be unforeseen setbacks. That’s the nature of turnarounds. But I’m confident we can overcome the challenges because we’ve come so far in just the last four months, which feeds my optimism about our ability to engineer our long-term success. No one’s gonna give it to us, least of all our competitors. We’re going to have to step up and make it happen. The future of connected fitness is Peloton’s to own. 
Me to you. You to me. You to each other. And all of us to our Members.-Barry

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