Business

For espionage of the cloak-and-dagger variety, it is hard to beat the pages of John le Carré or Ian Fleming. But the world of corporate spying has plenty of drama of its own. Take the alleged skulduggery in a recent court case involving two American software firms. In May a jury awarded Appian, whose headquarters are in McLean, Virginia, a whopping $2bn in damages after it had accused Massachusetts-based Pegasystems of illegally snooping on it to gain a competitive edge. The trial revealed that Pegasystems executives had referred to a contractor hired to obtain some of the ingredients of Appian’s secret sauce as “our spy” in internal documents, and had dubbed the overall spying effort “Project Crush”. Pegasystems, whose stock plummeted after the ruling, and which is set to face a barrage of class-action suits from disgruntled investors, has vowed to appeal against the “unjust” decision.The episode illustrates how interest in business espionage, and learning how to foil it, has broadened. Snooping is no longer mostly centred on a few “sensitive” industries that have long been vulnerable, such as defence and pharmaceuticals. It is increasingly used to target smaller companies in surprising sectors, including education and agriculture. It has, in short, become more of a general business risk. Just as the cold war may have been the heyday of great-power spookery, at least in the popular imagination, corporate espionage may now be entering its golden age. There are two, closely intertwined reasons for this. The first is the inexorable growth of the intangible economy; intellectual property (ip) is increasingly the currency of business. The second is the growing sophistication of online hackers. ceos should be worried when they see their firms’ secrets being hawked on the dark web: one new marketplace, Industrial Spy, flogs stolen data and documents to “legitimate” businesses. Information is sold in packets ranging from a few dollars to millions. Keeping ip safely locked in the digital vault can be devilishly difficult.When they hear about ip, most people think of patents. Securing patents can reduce the risk, but this has become more difficult, in America at least, since a pair of Supreme Court rulings in the past decade chipped away at, respectively, protection for “business methods” and “abstract ideas” (which many software-based inventions are). This has left companies more reliant on developing and safeguarding an equally valuable type of ip: trade secrets. These can be anything from algorithms and client lists to chemical processes and marketing plans. Among the most famous trade secrets are Coca-Cola’s recipe and the formulation for wd-40. Most are more mundane: recent legal battles have involved industrial-baking agents and floor-resin formulas. Patents offer stronger protections, but trade secrets last for ever—if they are well kept. Snoopers’ grand adventureChristine Streatfeild of Baker McKenzie, a law firm, talks of a “pivot” in the past five years, as more companies in more industries wake up to the need to protect their secrets. She points to stepped-up efforts in consumer goods, steel and even cannabis. Baker McKenzie has advised legal marijuana-growers in America on steps they can take to curb rivals’ access to information about their cultivation techniques, soil recipes, extract flavouring and so on. Digitisation is making the problem thornier. As more established industries, from carmaking to education, increase investment in software-related technologies, they have more bits and bytes worth stealing. Industries with lots of startups are particularly vulnerable, says Sidhardha Kamaraju of Pryor Cashman, another law firm, because they combine lots of new tech with mobile employees who hop between up-and-coming firms. In 2018 Alphabet’s Waymo self-driving unit won a $245m settlement from Uber after alleging that one of Waymo’s former engineers took trade secrets along with his office bric-a-brac when he left for the ride-hailing firm.The good news for firms is that legislative protections for trade secrets have grown stronger. A turning point in America was the Defend Trade Secrets Act, passed in 2016, which greatly expanded the type and number of secrets covered by federal law—and whose passage led to a 30% jump in cases filed, says Tim Londergan of Tangibly, an ip-management firm.The bad news is that many firms are surprisingly poor managers of such secrets. It is not enough to make reasonable efforts to keep the information confidential. The secret also has to be clearly articulated. Failure to do this has been exposed in a number of cases that have gone to trial in recent years. In one, Mallet, a baking-products firm, failed to block an upstart rival from using release agents (which allow loaves and buns to be more easily removed from pans) similar to its own, after an American appeals court ruled, in effect, that Mallet hadn’t adequately described and documented its secret formula. Such rulings have encouraged more corporate leaders to demand “ip audits” and use the results to improve their safeguarding of valuable secrets. This, in turn, has fuelled the growth of a cottage industry of trade-secrets consultants and software-solutions firms. Lawyers, too, are in demand. “There are plenty of patent lawyers, but not enough who really understand trade secrets, and they tend to focus on litigation, once the problem has already arisen,” says Mr Londergan. “Companies need help earlier.” They also need to focus more on risks emanating from corporate partners, for instance in joint ventures. This is often “an afterthought” even among multinationals, Mr Londergan suggests. He points to tsmc, a Taiwanese chipmaker, as one of the few globally active companies that come close to best practice in how they articulate and manage their trade secrets.tsmc has good reason to want to get it right. It operates in a highly sensitive industry chock-full of proprietary information that rivals would love to get hold of. On its doorstep is China, which bears Taiwan ill will and is widely acknowledged as the world leader in ip theft (having been its victim in the 18th century, when Jesuit priests were sent from Europe to nick Chinese trade secrets in porcelain-making). Taiwanese authorities say that in recent months they have uncovered several attempts by China to poach semiconductor engineers using Chinese firms that registered on the island unlawfully by obfuscating their origins. In May Taiwan’s parliament passed a law that punishes anyone who obtains or uses designated “core” technologies for the benefit of “external entities” with up to 12 years in prison. America, too, has cracked down with China in mind. According to America’s Department of Justice, roughly four-fifths of all economic-spying cases it brings “allege conduct that would benefit the Chinese state”. The best-known case of suspected espionage by China, involving Huawei, a telecoms-gear maker, is the tip of a large iceberg.As big a threat as China is, it is not alone. Ostensibly friendly states spy, too. Israel has been known to snoop on American firms for the benefit of its tech and military industries. And it is not always helpful to think of the threats posed by different kinds of actors—company insiders, corporate rivals or governments—as discrete. Sometimes several of them are at work simultaneously. Take the recent sentencing of You Xiaorong, a former chemist at Coca-Cola, to 14 years at Uncle Sam’s pleasure. Ms You was convicted of stealing trade secrets relating to coatings on the inside of beverage cans. She used the filched formula to set up her own company in China, with backing from a local partner. Their venture was backed with grants from the Chinese government. Whether or not Chinese officials were aware of the theft is unclear.The case highlights another challenge for companies trying to keep a lid on secrets. They can spend as much as they like on beefing up their it systems, but they still need to watch out for older, more analogue forms of exfiltration. Operatives for Procter & Gamble (p&g) were once caught diving in dumpsters outside a Unilever office in Chicago in search of information about its consumer-goods rival’s marketing strategy. Ms You apparently used her phone to take pictures of sensitive documents to bypass Coke’s security measures. People use smartphones in offices all the time. How to tell if it is for nefarious reasons?Moreover, much corporate spying can be—from the point of view of those being spied on—frustratingly fuzzy. Some snooping is perfectly legal. Many hedge funds specialise in watching activity in factories, using foot-soldiers or satellite imagery, to gauge output and bet accordingly on stocks. At the other extreme is stuff that no ceo in their right mind would countenance: p&g’s top brass were so appalled when they learned of their lower-downs’ trash-rummaging at Unilever that they shopped their own company, resulting in a $10m fine.Corporate BondsIn between is a large grey area in which operatives “ride the ragged edge” of morality and the law, according to Eamon Javers in his book on corporate spying, “Broker, Trader, Lawyer, Spy”. Many of these work for outfits hired by companies to do their dirty work, sometimes to give them plausible deniability. The corporate-intelligence industry came of age in the vicious takeover battles of the 1980s and has since grown at breakneck speed. Its well-known names, such as Kroll and Control Risks, are at the top of a pyramid containing thousands of mostly small firms. Most such work is legal and quite dull—for instance, performing due diligence on clients’ prospective business partners. But there are cases of firms undertaking dubious activity, from wiretapping to impersonation. In the 19th century, the grandfather of the industry, Allan Pinkerton, laid out (and largely followed) a strict code of conduct. Mr Javers worries that some of Pinkerton’s modern day counterparts routinely violate many of his gentlemanly commandments.None of this is going away. Employee mobility is at or near an all-time high. Companies, and the tactics they use, get more desperate in downturns. And the geopolitical backdrop is growing frostier, increasing incentives for underhand activity by states or their proxies. “Casino Royale” it may not be, but the spectre of surging economic espionage is real. ■ More

The WHO said Monday it is too soon to tell whether a recent monkeypox outbreak could lead to a global pandemic, but noted that there is a “window” of opportunity to curb rising cases.
The public health body said there are “still many unknowns” related to the spike in cases in non-endemic countries, but said the risks to the general public remain low.
“We don’t want people to panic or be afraid and think that it’s like Covid,” the WHO’s Sylvie Briand said during a briefing.

The World Health Organization has said that there is a “window” of opportunity to contain a recent monkeypox outbreak which has seen cases spread across Europe, the U.S. and Australia.
Nurphoto | Nurphoto | Getty Images

The World Health Organization said Monday that it is too soon to tell whether a recent monkeypox outbreak could lead to a global pandemic, but noted that there is currently a window of opportunity to curb rising cases.
The public health body said there are “still many unknowns” related to the spike in cases in non-endemic countries outside of Africa. The WHO said the virus should not be mistaken for Covid-19 and that the risks to the general public remain low.

“We don’t want people to panic or be afraid and think that it’s like Covid or maybe worse,” Sylvie Briand, the WHO’s director of epidemic and pandemic preparedness and prevention, said during a briefing on the outbreak.
“This monkeypox disease is not Covid-19, it is a different virus,” she added.
Monkeypox is a rare but generally mild viral infection that can cause flu-like symptoms including rashes, fever, headaches, muscle ache, swelling and backpain. Typically it is transmitted through lesions, bodily fluids or materials that have been in contact with an infected person or animal.
Though sporadic monkeypox outbreaks are not unusual in Central and West African countries where the virus is endemic, health experts have been puzzled by a recent surge in cases across Europe, North America and Australia, raising fears of community spread.
As of Sunday, there were 435 confirmed and suspected cases in 24 countries outside of Africa, according to Our World in Data. There have not yet been any recorded fatalities from the current outbreak.

A ‘window’ of opportunity for containment

Asked Monday whether the recent outbreak could escalate into a pandemic, the WHO’s technical lead for monkeypox, Rosamund Lewis, said: “The answer is we don’t know, but we don’t think so.”
Monkeypox is a DNA virus, meaning it contains DNA in its genetic material. Health experts don’t yet know a lot more about its genetic makeup, but current data suggests that it doesn’t transmit or mutate as easily as other viruses like Covid-19, an RNA virus.
“At the moment, we are not concerned about a global pandemic,” Lewis said.
However, she noted that rising individual cases were a cause for concern as it could allow the virus to “exploit a niche” and transmit more easily between people.

Collectively, the world has an opportunity to stop this outbreak. There is a window.

Rosamund Lewis
Technical lead for monkeypox at the WHO

Lewis urged individuals and health professionals to be alive to the rising risks of the virus and keep an eye out for symptoms. She added that gay and bisexual men should be especially aware of the virus, which has so far demonstrated a particular concentration among men who have sex with other men, though it is not defined as a sexually transmitted disease.
“Collectively, the world has an opportunity to stop this outbreak. There is a window,” Lewis said.
Alongside the U.S. Centers for Disease Control and Prevention and the U.K.’s National Health Service, the WHO has outlined a number of ways people can protect themselves against the virus, including practicing good hygiene and safe sex.
Once a suspected case has been identified, they should be isolated until their lesions have crusted and scabs fallen off, and contact tracing should be initiated. Contacts of infected patients should be monitored for the onset of symptoms for a period of 21 days and should not donate blood, cells, tissue, organs, breast milk or semen while under symptom surveillance, the WHO said.
“Any one case should be manageable through contact tracing and isolation,” Lewis added.

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Siemens Mobility has signed a contract to develop a new high-speed rail line in Egypt, linking 60 cities across the country.
The fully-electrified line will see trains with a top speed of 230 kilometers per hour travel from the from the Red Sea to the Mediterranean, among other destinations.
According to Siemens Mobility, the electrification of the network will reduce carbon emissions by 70% when compared to trips by bus or car.

A train passes through a station in Egypt. The project involving Siemens Mobility will use trains that can reach a top speed of 230 kilometers per hour, and the line will be fully electrified.
Paulvinten | Istock | Getty Images

A new high-speed rail line is coming to Egypt, with developer Siemens Mobility saying it will link 60 cities across the country.
The fully-electrified lines will see trains with a top speed of 230 kilometers per hour and travel from the Red Sea to the Mediterranean, among other destinations.

According to Siemens Mobility, the electrification of the network will reduce carbon emissions by 70% when compared to making trips by bus or car. It added that the project would result in the world’s “sixth largest high-speed rail system.”
Siemens Mobility — a separately managed company of industrial giant Siemens — signed the contract to develop the rail line with the Egyptian National Authority for Tunnels, as well as consortium partners The Arab Contractors and Orascom Construction.
In a statement Saturday, Siemens Mobility said its share of the combined contract would amount to 8.1 billion euros, or around $8.7 billion. This figure includes a 2.7 billion euro contract signed in Sept. 2021 for the project’s initial line.

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The new network in Egypt will be made up of three parts: a previously announced 660-kilometer line linking Ain Sokhna, on the Red Sea, to Alexandria and Marsa Matrouh on Egypt’s Mediterranean coast; a roughly 1,100 kilometer line between Cairo and Abu Simbel, close to the border with Sudan; and a 225 kilometer stretch between Luxor and Hurghada on the Red Sea.
“Together with our partners, we will develop from scratch a complete and state of the art rail network that will offer a blueprint for the region on how to install an integrated, sustainable, and modern transportation system,” Michael Peter, the CEO of Siemens Mobility, said.

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The International Energy Agency has described rail as being “one of the most energy-efficient transport modes.” It is responsible for 9% of worldwide motorized passenger movement and 7% of freight, the IEA says, but only accounts for 3% of transport energy use.
It does, however, rely heavily on oil, which represented 55% of the sector’s total energy consumption in 2020. Under the IEA’s scenario for a net-zero energy system by the year 2050, oil use in rail would have to drop to “almost zero” by the middle of the century, being replaced by electricity — for the vast majority of rail energy needs — and hydrogen.
On the hydrogen front, Siemens Mobility is one of several companies that has been working on hydrogen trains. Others include East Japan Railway and European railway manufacturer Alstom, which has already carried passengers in Germany and Austria on hydrogen trains. More

After two years of strong demand and soaring prices, the supply of rentals in the Hamptons is surging, leading to a wave of last-minute price cuts.
Brokers say weaker demand is partly the result of increased travel elsewhere.
The Hamptons may also be feeling the flipside of recent price increases and a strong home sales market.

The rental market in the Hamptons is facing an unexpected chill this summer.
After two years of strong demand and soaring prices, the supply of rentals in the Hamptons is surging, leading to a wave of last-minute price cuts. Median rental prices in the first quarter fell 26%, according to Jonathan Miller, CEO of Miller Samuel. Brokers say some owners are slashing prices by 30% or more just to fill their properties.

“There is a tremendous amount of inventory and people are not renting it,” said Enzo Morabito of Douglas Elliman. “And it’s across all segments, from the very low to the very top of the market.”
The weakness marks a dramatic and rapid reversal for one of the country’s highest-priced and most sought-after real-estate markets. In 2020 and 2021, renters were scrambling to find summer rentals and paying record prices months before the season for fear of missing out. Now, brokers say there are hundreds of rentals still available for the summer.
Morabito said he represented one waterfront rental that was asking $70,000 a month, but a potential renter offered just $45,000.
“We were hoping the renter would split the difference, but it’s a different market right now,” he said.

Living Room, 277 Surfside Dr., Bridgehampton, NY.
Source: 277 Surfside LLC Bridgehampton 11932

Brokers say weaker demand is partly the result of increased travel. Wealthy New Yorkers who spent the past two summers cloistered in the Hamptons are planning to travel to European and other countries this summer as Covid recedes. Europeans and other international renters, however, have not returned to the Hamptons.

The war in Ukraine, rising inflation and a falling stock market may also be weighing on the summer spending plans of the elite — especially since the Hamptons market is so closely tied to the fortunes of Wall Street.
“There are a lot of questions in the air, about the economy, both locally and nationally,” said Harald Grant with Sotheby’s International Realty. “It all effects the market.”
The Hamptons may also be feeling the flipside of recent price increases: Median rents for May were up 46% from May of 2019, before the pandemic. While the wealthy still have plenty of money to spend, they may be balking at the high rental prices, especially given the economic outlook.
“The assumption that rents would be sustainable at these elevated levels has been proven to be false,” Miller said.

Pool, 277 Surfside Dr., Bridgehampton, NY.
Source: 277 Surfside LLC Bridgehampton 11932

And, strong home sales in the Hamptons during the pandemic may now be hurting rentals.
Vacationers who used to rent in the Hamptons wound up buying in 2020 and 2021 to have a more permanent getaway. The average sales price topped $2.6 million in the first quarter of this year, up 25% over the same quarter last year, according to Miller Samuel and Douglas Elliman. More buyers means fewer renters.
“The buyers removed themselves from the rental market,” Morabito said. “Now, all of the sudden the people who bought want to rent it and the renters aren’t there. So you have this huge surplus.”
Some brokers say they have seen signs of a pickup, as more last-minute renters start looking for deals.
“We had a lull from February to April, but now it’s picking up again,” said Gary DePersia of Corcoran. “The inventory we had is going.”
One of DePersia’s top rentals, however, is still on the market. The ultra-modern, 11,000-square-foot beachside property on Surfside Drive in Bridgehampton has nine bedrooms, a Gunite pool and spa, outdoor living room pavilion, pool house, gym and media room.

View from roof, 277 Surfside Dr., Bridgehampton, NY.
Source: 277 Surfside LLC Bridgehampton 11932

The roof deck features couches, a hot tub and retractable pergola. The rental price: $300,000 per week, or $1.25 million for the month of August.
“It’s a great house,” DePersia said. “We already have it rented for a week in June and we got what we needed to get.”

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Airlines cancelled hundreds of flights at the start of Memorial Day weekend.
Bad weather contributed to many of the delays, with Delta posting the most disruptions as of Sunday morning.
Airfare has jumped as bookings rise and airlines offer limited options to travelers.

A Delta Airlines commercial aircraft approaches to land at John Wayne Airport in Santa Ana, California January 18, 2022.
Mike Blake | Reuters

Flight disruptions continued Sunday but eased from the rocky start to Memorial Day weekend, a test for carriers as they gear up for a busy summer travel season after more than two years of the Covid pandemic.
Delta Air Lines led cancellations, disruptions it attributed to bad weather and “air traffic control actions” on Saturday. Hundreds of flights operated by Republic Airways, United Airlines, JetBlue Airways and American Airlines were also delayed Saturday.

Delta canceled 254 mainline flights, or 9% of its Saturday schedule, and 530 were delayed, almost a fifth of its schedule, according to flight-tracking site FlightAware. On Sunday, it canceled 159 flights, or 6%, while its delayed flights totaled 203, or 7% of the schedule.
Delta said that 87% of customers were rebooked on flights that departed within around 11 hours of their original time.
The Atlanta-based carrier last week said it would trim its schedule by 100 flights a day between July 1 through Aug. 7, around 2%, to give itself more wiggle room to handle disruptions.
Other carriers, including Alaska Airlines, JetBlue Airways and Spirit Airlines have also pared back schedules to better handle disruptions like bad weather and staffing shortages.
Getting the balance right is key for carriers as bookings recently jumped despite airfares that have surpassed pre-pandemic levels.

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“Top Gun: Maverick” soared to $124 million during its opening weekend, earning Tom Cruise his highest domestic debut.
The Paramount and Skydance film also generated $124 million internationally, bringing its total opening weekend haul to $248 million.
According to data from Paramount, 55% of moviegoers were over the age of 35.

Tom Cruise in “Top Gun: Maverick”
Source: Paramount

LOS ANGELES – “Top Gun: Maverick” soared to $124 million during its opening weekend, earning Tom Cruise his highest domestic debut.
The prolific actor, who has made a name for himself as a fearless stuntman, has generated more than $4.2 billion at the domestic box office since 1981 but had previously never had a film open to more than $65 million.

The Paramount and Skydance film also generated $124 million internationally, bringing its total opening weekend haul to $248 million. The studio expects the film to reach $151 million for the four-day Memorial Day weekend. The film could have a strong hold over the next few weeks as it faces limited box office competition until the June 10 release of Universal’s “Jurassic World: Dominion.”
“The summer movie season is back,” said Paul Dergarabedian, senior media analyst at Comscore. “The performance of ‘Top Gun: Maverick’ is a stunning reminder that when you combine one of the last genuine movie stars with great old fashioned story telling, audiences of all ages will rush out to the theater to be a part of the communal bigger than life moviegoing experience.”
The big opening for “Top Gun: Maverick” is a positive sign for the box office, which is still recovering from the ongoing pandemic. The film drew in older audiences, a coveted demographic that has been slower to return to cinemas since they began to reopen in mid-2020.
Around 29% of tickets sold during the weekend were for showings before 3 p.m. and 35% were were for screenings between 3 p.m. and 7 p.m., according to EntTelligence. This indicates that a significant chunk of ticket sales were for matinee shows, a time period that older moviegoers gravitate towards.
Only 11% of tickets were sold for showings held after 9 p.m. According to data from Paramount, 55% of moviegoers were over the age of 35.

Around 9 million moviegoers are expected to see “Top Gun: Maverick” over its first three days in theaters, according to EntTelligence. This is more than four times the two million patrons that saw the original “Top Gun” in theaters during its debut in 1986.
Not including Thursday preview screenings, 32% of tickets were sold for premium format showings, with the average ticket price hitting $16.32. Non-premium tickets averaged at around $12.86 a piece, EntTelligence reported.
The film’s strong performance also comes just weeks after Warren Buffett’s Berkshire Hathaway revealed it had bought 68.9 million shares of Paramount to build a stake worth $2.6 billion as of the end of March.
Paramount was Berkshire’s 18th largest holding at the end of the first quarter. The new stake adds another streaming property to Berkshire’s portfolio, whose top holding is Apple.
Disclosure: Comcast is the parent company of NBCUniversal and CNBC. NBCUniversal is the distributor of “Jurassic World: Dominion.”

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Former Disney CEO Bob Iger has made an investment in Australian graphic design company Canva.
Canva announced a $40 billion valuation in September.
Iger has made several investments with his own money since stepping down from Disney’s board in December, including delivery company GoPuff and toy maker Funko.

Bob Iger poses with Mickey Mouse attends Mickey’s 90th Spectacular at The Shrine Auditorium on October 6, 2018 in Los Angeles.
Valerie Macon | AFP | Getty Images

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Reed Hastings, Co-CEO, Netflix speaks at the 2021 Milken Institute Global Conference in Beverly Hills, California, U.S. October 18, 2021.
David Swanson | Reuters

The media and entertainment industry prides itself on its mastery of classical storytelling’s three acts: the setup, the conflict and the resolution.
It’s safe to declare the first act of the streaming video wars over. Barring a surprise late entrant, every major media and technology company that wants to be in the streaming game has planted a flag. Disney+, Apple TV+, Paramount+, Peacock and other new streaming services are spreading around the globe.

“Act one was the land grab phase,” said Chris Marangi, a media investor and portfolio manager at Gamco Investors. “Now we’re in the middle act.”
Last month, the central conflict of the streaming wars came into focus. The industry was thrust into the tumultuous stage after Netflix disclosed its first quarterly drop in subscribers in more than a decade and warned subscriber losses would continue in the near term.

Second act problems

Netflix’s rapid decline after a pandemic-fueled boom has investors questioning the value of investing in media companies.
Streaming is the future of the business, regardless of recent problems, as consumers have gotten used to the flexibility the services offer.
There could be more consolidation to come, and streamers are increasingly embracing cheaper, ad-supported tiers.

That news set off worries about streaming’s future and cast doubt on whether the growing number of platforms could become profitable. At stake are the valuations of the world’s largest media and entertainment companies — Disney, Comcast, Netflix and Warner Bros. Discovery — and the tens of billions of dollars being spent each year on new original streaming content.
As recently as October, Netflix, whose hit series “Stranger Things” returned Friday, had a market capitalization more than $300 billion, topping Disney’s at $290 billion. But its shares are down over 67% from the start of the year, slashing the company’s worth to around $86 billion. 
Legacy media companies that followed Netflix’s lead and pivoted to streaming video have suffered, too.

Disney shares are among the worst performing stocks on the Dow Jones industrials this year, down about 30%. That’s even though series such as “The Book of Boba Fett” and “Moon Knight” helped Disney+ add 20 million subscribers in the past two quarters. The highly anticipated “Obi-Wan Kenobi” premiered on Friday.
Warner Bros. Discovery’s HBO and HBO Max services also added 12.8 million subscribers over the past year, bringing total subscribers to 76.8 million globally. But shares are down more than 20% since the company’s stock began trading in April following the merger of WarnerMedia and Discovery.
Nobody knows whether streaming’s final act will reveal a path to profitability or which players might emerge dominant. Not that long ago, the formula for streaming success seemed straightforward: Add subscribers, see stock prices climb. But Netflix’s shocking freefall has forced executives to rethink their next moves. 
“The pandemic created a boom, with all these new subscribers efficiently stuck at home, and now a bust,” said Michael Nathanson, a MoffettNathanson media analyst. “Now all these companies need to make a decision. Do you keep chasing Netflix around the globe, or do you stop the fight?”

David Zaslav
Bloomberg | Bloomberg | Getty Images

Stick with streaming

The simplest path for companies could be to wait and see whether their big money bets on exclusive streaming content will pay off with renewed investor enthusiasm.
Disney said late last year it would spend $33 billion on content in 2022, while Comcast CEO Brian Roberts pledged $3 billion for NBCUniversal’s Peacock this year and $5 billion for the streaming service in 2023.
The efforts aren’t profitable yet, and losses are piling up. Disney reported an operating loss of $887 million related to its streaming services this past quarter — widening on a loss of $290 million a year ago. Comcast has estimated Peacock would lose $2.5 billion this year, after losing $1.7 billion in 2021.
Media executives knew it would take time for streaming to start making money. Disney estimated Disney+, its signature streaming service, will become profitable in 2024. Warner Bros. Discovery’s HBO Max, Paramount Global’s Paramount+ and Comcast’s Peacock forecast the same profitability timeline.
What’s changing, though, is that chasing Netflix no longer appears like a winning strategy. While the company assured investors last quarter that growth will accelerate again in the second half of the year, the precipitous fall in its shares suggests investors no longer view the total addressable market of streaming subscribers as 700 million to 1 billion homes, as CFO Spencer Neumann has said, but rather a number far closer to Netflix’s total global tally of 222 million.
That sets up a major question for legacy media chief executives: Does it make sense to keep throwing money at streaming, or is it smarter to hold back to cut costs?
“We’re going to spend more on content — but you’re not going to see us come in and go, ‘All right, we’re going to spend $5 billion more,'” said Warner Bros. Discovery CEO David Zaslav during an investor call in February, after Netflix had begun its slide but before it nose-dived. “We’re going to be measured, we’re going to be smart and we’re going to be careful.”
Ironically, Zaslav’s philosophy may echo that of former HBO chief Richard Plepler, whose streaming strategy was rejected by former WarnerMedia CEO John Stankey. Plepler generally argued “more is not better, better is better,” choosing to focus on prestige rather than volume.
While Zaslav has preliminarily outlined a streaming strategy of putting HBO Max together with Discovery+, and then adding CNN news and Turner sports on top of that, he’s now faced with a market that doesn’t appear to support streaming growth at all costs. That may or may not slow down his efforts to push all of his best content into his new flagship streaming product.
That has long been Disney’s choice of approach; it has purposefully held ESPN’s live sports outside of streaming to support the viability of the traditional pay TV bundle — a proven moneymaker for Disney.
Holding back content from streaming services could have downsides. Simply slowing down the inevitable deterioration of cable TV probably isn’t an achievement many shareholders would celebrate. Investors typically flock to growth, not less rapid decline.

Brian Roberts, chief executive officer of Comcast, arrives for the annual Allen & Company Sun Valley Conference, July 9, 2019 in Sun Valley, Idaho.
Drew Angerer | Getty Images

Traditional TV also lacks the flexibility of streaming, which many viewers have come to prefer. Digital viewing allows for mobile watching on multiple devices at any time. A la carte pricing gives consumers more choices, compared with having to spend nearly $100 a month on a bundle of cable networks, most of which they don’t watch.

More deals

Consolidation is another prospect, given the growing number of players vying for viewers. As it stands, Amazon Prime Video, Apple TV+, Disney+, HBO Max/Discovery+, Netflix, Paramount+ and Peacock all have global ambitions as profitable streaming services.
Media executives largely agree that some of those services will need to combine, quibbling only about how many will survive.
One major acquisition could alter how investors view the industry’s potential, said Gamco’s Marangi. “Hopefully the final act is growth again,” he said. “The reason to stay invested is you don’t know when act three will begin.”
U.S. regulators may make any deal among the largest streamers difficult. Amazon bought MGM, the studio behind the James Bond franchise, for $8.5 billion, but it’s unclear whether it would want to buy anything much larger.
Government restrictions around broadcast station ownership would almost certainly doom a deal that put, say, NBC and CBS together. That likely eliminates a straight merger between parent companies NBCUniversal and Paramount Global without divesting one of the two broadcast networks, and its owned affiliates, in a separate, messier transaction.
But if streaming continues to take over as the dominant form of viewership, it’s possible regulators will eventually soften to the idea that broadcast network ownership is anachronistic. New presidential administrations may be open to deals current regulators may try to deny.

Warren Buffett and Charlie Munger press conference at the Berkshire Hathaway Annual Shareholders Meeting, April 30, 2022.

Warren Buffett’s Berkshire Hathaway said this month it bought 69 million shares of Paramount Global — a sign Buffett and his colleagues either believe the company’s business prospects will improve or the company will get acquired with an M&A premium to boost shares.

Advertising hopes

Evan Spiegel, CEO of SNAP Inc.
Stephen Desaulniers | CNBC

“Advertising is an inherently volatile business,” said Patrick Steel, former CEO of Politico, the political digital media company. “The slowdown which started in the fall has accelerated in the last few months. We are now in a down cycle.”
Offering cheaper, ad-supported subscription won’t matter unless Netflix and Disney give consumers a reason to sign up with consistently good shows, said Bill Smead, chief investment officer at Smead Capital Management, whose funds own shares of Warner Bros. Discovery.
The shift in the second act of the streaming wars could see investors rewarding the best content rather than the most powerful model of distribution.
“Netflix broke the moat of traditional pay TV, which was a very good, profitable business, and investors followed,” said Smead. “But Netflix may have underestimated how hard it is to consistently come up with great content, especially when capital markets stop supporting you and the Fed stops giving away free money.”

Try something else

The major problem with staying the course is it’s not an exciting new opportunity for investors who have soured on the streaming wars.
“The days of getting a tech multiple on these companies are probably over,” said Andrew Walker, a portfolio manager at Rangeley Capital, who also owns Warner Bros. Discovery. “But maybe you don’t need a tech multiple to do well at these prices? That’s what we’re all trying to figure out right now.”
Offering a new storyline is one way to change the stale investment narrative. Media analyst Rich Greenfield advocates Disney acquire Roblox, a gaming company based on digital multiplayer interactive worlds, to show investors it’s leaning into creating experiential entertainment.
“I just keep thinking about Bob Iger,” Greenfield said of the former Disney CEO, who departed the company in December. “When he came in, he made his mark by buying Pixar. That transformative transaction was doing something big and bold early on.”

Bob Chapek, Disney CEO at the Boston College Chief Executives Club, November 15, 2021.
Charles Krupa | AP

Given the extreme pullback on Roblox shares, Greenfield noted Disney CEO Bob Chapek has an opportunity to make a transformative deal that could alter the way investors view his company. Roblox’s enterprise value is about $18 billion, down from about $60 billion at the start of the year.
But media companies have historically shied away from gaming and other out-of-the-box acquisitions. Under Iger, Disney shut down its game development division in 2016. Acquisitions can help companies diversify and help them plant a flag in another industry, but they can also lead to mismanagement, culture clash, and poor decision making (see: AOL-Time Warner, AT&T-DirecTV, AT&T-Time Warner). Comcast recently rejected a deal to merge NBCUniversal with video game company EA, according to a person familiar with the matter. Puck was first to report the discussions.
Yet big media companies are no longer compelling products on their own, said Eric Jackson, founder and president of EMJ Capital, who focuses on media and technology investing.
Apple and Amazon have developed streaming services to bolster their services offerings around their primary businesses. Apple TV+ is compelling as an added reason for consumers to buy Apple phones and tablets, Jackson said, but it’s not special as an individual stand-alone service. Amazon Prime Video amounts to a benefit making a Prime subscription more compelling, though the primary reason to subscribe to Prime continues to be free shipping for Amazon’s enormous e-commerce business.
There’s no obvious reason the business will suddenly be valued differently, Jackson said. The era of the stand-alone pure-play media company may be over, he said.
“Media/streaming is now the parsley on the meal — not the meal,” he said.
Disclosure: CNBC is part of NBCUniversal, which is owned by Comcast.
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