Business

ELON MUSK, the world’s richest man, has described Twitter as the “de facto public town square”. On April 25th he struck a deal to take it private in what will be one of the largest leveraged buy-outs in history. Mr Musk, the boss of companies including Tesla, a carmaker, and SpaceX, an aerospace firm, put together an all-cash offer worth about $44bn. He is stumping up the bulk of the financing himself, in the form of $21bn in equity and a $12.5bn loan against his shares in Tesla. If it is a big deal in business terms, it could be bigger still in what it means for the regulation of online speech.Twitter isn’t an obviously attractive business. With 217m daily users it is an order of magnitude smaller than Facebook, the world’s largest social network, and has slipped well behind the likes of Instagram, TikTok and Snapchat. Its share price has bumped along for years: last month it was lower than at its flotation in 2013. It is like a modern-day Craigslist, writes Benedict Evans, a tech analyst: “Coasting on network effects, building nothing much, and getting unbundled piece by piece.”But Mr Musk isn’t interested in Twitter as a business. “I don’t care about the economics at all,” he told a TED conference earlier this month. “This is just my strong, intuitive sense that having a public platform that is maximally trusted and broadly inclusive is extremely important to the future of civilisation.”His willingness to spend a big chunk of his fortune on making Twitter more “inclusive” follows a period in which it has tightened its content moderation. A decade ago Twitter executives joked that the company was “the free-speech wing of the free-speech party”. But the presidency of Donald Trump and the covid-19 pandemic persuaded the company (and most other social networks) that free speech had some drawbacks. Mr Trump was eventually banned from Twitter, as well as Facebook, YouTube and others, following the Capitol riot of January 2021. Misinformation about covid and other subjects was labelled and blocked. In the first half of 2021, Twitter removed 5.9m pieces of content, up from 1.9m two years earlier. In the same period 1.2m accounts were suspended, an increase from 700,000.How might Mr Musk change things? He has said that he will publish Twitter’s code, including its recommendation algorithm, in a bid to be more transparent. He proposes to authenticate all users and to “defeat the spam bots”. And he will be “very cautious with permanent bans”, preferring “time-outs”, he told TED. This suggests a reprieve for Mr Trump and other banned politicians, as advocated by groups including the American Civil Liberties Union, which counts Mr Musk as one of its largest donors. The spectre of reinstating the tweeter-in-chief appals many on the left. So does Mr Musk’s impatience with what he describes as “woke” culture (“The woke mind virus is making Netflix unwatchable,” he tweeted earlier this month, following the video-streamer’s loss of subscribers). A poll in America by YouGov this month found that whereas 54% of Republicans thought that Mr Musk buying Twitter would be good for society, only 7% of Democrats agreed.Since Twitter users lean Democratic, his plan could prove unpopular. Even apolitical users may not like the look of Twitter with freer speech. Moderation weeds out bullying, abuse and other forms of speech that are legal but make for an unpleasant experience online. Social networks that began life with the aim of allowing anything legal, such as Parler and Gettr, eventually tightened up their censorship after being deluged with racism and porn.If Twitter were to take a purist line on free speech, the immediate winners might therefore be its more censorious rivals, suggests Evelyn Douek, an expert on online speech at Harvard Law School. Until now, the main social networks have set roughly similar content-moderation policies, each reluctant to be an outlier. “You can imagine a Twitter with Trump back on its platform just being in the headlines all day, every day, while the other platforms sat back and ate their popcorn,” she says.Mr Musk has never seemed to mind being in the headlines. Even so, he may find it harder than he expects to do away with moderation. Boycotts by advertisers, who provide nearly all of Twitter’s revenue, may not bother him. But Twitter’s app relies on distribution by Apple’s and Google’s app stores; both suspended Parler after the Capitol riot. Governments are also tightening their laws on online speech. On April 23rd the European Union announced that it had agreed on the outline of a new Digital Services Act, which will oblige social networks to police speech on their platforms more closely. Britain is cooking up a still-stricter Online Safety Bill. Twitter fielded 43,000 content-removal requests based on local laws in first half of 2021, more than double the number two years earlier.Another question is whether Mr Musk will manage to stick to his own principles. Social networks face a conflict of interest when the people setting moderation policies are also in charge of growth, notes Ms Douek. Would Mr Musk’s approach to free speech be swayed by his many other interests? Tesla, for instance, hopes to expand in China, whose state media are given prominent warning labels by Twitter. As a Twitter user, Mr Musk has a record of using the platform in a vindictive way. He was sued (unsuccessfully) after labelling one online enemy a “pedo guy”; last week, after a spat with Bill Gates, he posted an unflattering picture of the Microsoft founder with the caption “in case u need to lose a boner fast”.Mr Musk insists that as the platform’s owner he will be even-handed. “I hope that even my worst critics remain on Twitter, because that is what free speech means,” he tweeted on April 25th, shortly before the company’s board accepted his offer. Some users had other ideas: on the same day, one trending topic was “Trump’s Twitter”.For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter. More

Executive producer Chris Licht of the television show Our Cartoon President speaks onstage during the CBS/Showtime portion of the 2018 Winter Television Critics Association Press Tour at The Langham Huntington, Pasadena on January 6, 2018 in Pasadena, California.
Frederick M. Brown | Getty Images

Chris Licht wasn’t supposed to start his new job as CNN’s chief until May.
But on Thursday he found himself addressing about 400 full-time CNN+ staffers, some in person and some through a remote video feed. Hundreds of other CNN employees had gotten hold of the remote link, which was passed around from person to person, to hear what their new boss had to say.

The purpose of Licht’s introductory speech to many employees wasn’t what he’d expected when he agreed to take over for Jeff Zucker earlier this year. Licht told employees the project they’d been working on for the past six to nine months, the subscription streaming service CNN+, was ending April 30, about a month after its launch. He acknowledged that many would lose their jobs.
Licht, who officially starts May 2, quit his job as the executive producer of “The Late Show With Stephen Colbert” to run CNN. On Thursday, he came across as passionate and empathetic, according to people who listened to him speak.

The CNN+ debacle

CNN+ will only end up lasting a few weeks. Several factors led to its demise. Here are some key takeaways:

Before their merger, Discovery and WarnerMedia executives couldn’t discuss planning operations. Discovery’s leaders were already skeptical of CNN+.
WarnerMedia executives expected CNN+ reach 2 million subscribers after a year, but the new leadership saw the service’s early numbers as weak.
David Zaslav, CEO of the new Warner Bros. Discovery, has another streaming strategy in mind that focuses on bundling, not standalones.

For some CNN+ employees, it was the first time they’d heard from Licht. But, awkwardly, for scores of others, it wasn’t — they had met Licht just two days earlier, when he toured CNN’s New York headquarters. Licht made a point to stop by the 16th floor, which had recently been converted from a Turner Broadcasting floor to the home of CNN+.
He shook hands with employees — whoever happened to be in the office that day — with no hint that two days later, he’d tell them the standalone streaming service would be shuttered. CNN+ staffers will be allowed to reapply to other roles at CNN. Axios reported about half, or 350 employees, will likely be laid off.
“This is a uniquely shitty situation,” Licht said more than once on Thursday, according to people in attendance.

What led to CNN+’s launch on March 29 and its rapid demise is an unusual mix of corporate deal-making, leadership disagreement, unexpected resignations and legal restrictions.
“It will be a Harvard case study,” said one Warner Bros. Discovery executive.
CNBC spoke with a dozen people directly involved with CNN+ about why it folded so quickly — and why it ever launched in the first place.

CNN+ is born

Zucker and deputy Andrew Morse, CNN’s head of global digital business who eventually became CNN+’s chief, initially discussed launched a streaming service in early 2020, months before Jason Kilar joined WarnerMedia as chief executive, according to people familiar with the matter.

Jason Kilar
Phil McCarten | Reuters

In Kilar, Zucker and Morse found a digital evangelist. He was brought on to transform WarnerMedia into a company that revolved around streaming video rather than one that centered around distributing content to cable networks and movie theaters.
The CNN leadership envisioned CNN+ as something akin to The New York Times – a subscription news product that would eventually house video, podcasts, and all of CNN’s interview and entertainment programming. CNN also felt it had a global branding advantage over the Times, which is known more in the U.S. than abroad. Kilar believed CNN needed a digital subscription strategy, having seen scores of advertising-based digital media properties suffer from low valuations and volatile ad markets.
Over time, as millions of households cancel their cable subscriptions each year, CNN+ would become the landing spot for CNN’s linear network. Similar to ESPN.com, executives planned on CNN.com populating with more and more paywalled content and pushing CNN+ subscriptions. Executives researched potentially making all of CNN.com part of a subscription, but decided the content wasn’t strong enough to merit a full paywall. CNN.com is already profitable and is the most viewed news website, frequently generating more than 200 million unique visitors globally each month.
CNN hired consulting firm McKinsey to help with the operations of CNN+, but Kilar, Zucker and Morse handled the strategy. Based on months of research, they believed CNN+ would get to 2 million subscribers at the end of year one. Kilar believed that figure was a “layup” and a conservative estimate. The goal was to compete with The New York Times, which crossed the 10 million subscriber mark this year after acquiring digital sports website The Athletic.
WarnerMedia executives had a plan to meet their goal: They would use HBO Max, CNN.com and CNN’s linear channel as a constant marketing presence – a “funnel” – to push subscribers. The strategy was to launch CNN+ in the beginning of this year and then bundle it with HBO Max in September. This “would you like fries with that” approach for the millions of subscribers that sign up for HBO Max (HBO and HBO Max had 3 million new net adds last quarter) would ultimately lead to a robust, globally scaled news service.

A series of unexpected events

Both Zucker and Kilar were caught off guard by AT&T’s decision to spin off WarnerMedia and merge it with Discovery Communications — a deal announced in May 2021. Neither were involved in the merger discussions, which were primarily held in secret between AT&T Chief Executive John Stankey and Discovery CEO David Zaslav.
The merger gave Zucker a second wind. He was longtime friends with Zaslav, who would be replacing Kilar as CEO of the new company. Instead of reporting to AT&T’s suits, Zucker seemed in line for a big role under Zaslav.
As CNBC reported, Zucker decided that summer he wouldn’t leave at the end of the year after all. With a refreshed career outlook, Zucker began digging into CNN+. Kilar entrusted him with setting its strategy and programming.

Chairman, WarnerMedia Jeff Zucker attends CNN Heroes at American Museum of Natural History on December 08, 2019 in New York City.
Mike Coppola | Getty Images

Zucker set a launch date in the first quarter of 2022 and began hiring hundreds of people as producers, software engineers and marketing support.
CNN Worldwide Chief Marketing Officer Allison Gollust was in charge of promoting the new service. Morse ran the day-to-day operations. Zucker had the greenlight from Kilar to spend hundreds of millions on the new service to give CNN a jumpstart into the digital era.
“We are going to take a pretty big swing here, and the company’s behind it,” Morse said in July 2021, when CNN formally announced it would build the new service.
The plan was to premiere with eight to 12 hours of live programming a day on the service. Zucker began signing up outside talent to anchor shows, including Kasie Hunt, who departed NBC News to take the job, and longtime Fox News anchor Chris Wallace.
When the merger was announced, AT&T said the deal would likely close in the middle of 2022.
Given that timeline, the CNN team set a launch date for CNN+ for the first quarter of 2022. That would give the service a few months of breathing space before Zaslav’s leadership team took over for Kilar, who already knew he wasn’t staying on at the company post merger. Zucker wanted to launch the service in January but ran into technical trouble. CNN was making a product from scratch with a brand new tech stack, rather than simply building on top of HBO Max. That took time, and CNN didn’t want to launch a buggy product. Zucker and Morse recalibrated to launch at the end of March.
As the months passed, regulators got through the approval process more quickly than initially expected. By February, AT&T and Discovery were targeting a close date of around April 11 – months earlier than anticipated.
That put the launch of CNN+ just weeks before the merger’s close date.
And then, on February 2, Zucker suddenly resigned.

Impact of Zucker’s resignation

Superficially, Zucker’s departure over an undisclosed relationship with Gollust didn’t change the trajectory of the product. Staffers say the day-to-day activity around the division wasn’t particularly interrupted by the sudden absences, because Morse remained and continued to steer the ship forward. If anything, CNN+ became a unifying mission for staffers. While CNN may have lacked a clear forward strategy with interim leadership and a merger about to happen, launching CNN+ on time was a clear goal for employees.
In that sense, the primary effect of Zucker and Gollust’s resignations wasn’t necessarily harm for the CNN+ product. Rather, their exits firmed the resolve of remaining employees to launch it on time. The CNN+ that launched on March 29 looked quite a bit like Zucker’s vision. There were fewer live programming hours than the eight to 12 stated in July, which may have hurt the product given demand for news and content regarding the war in Ukraine, but it launched more or less as designed.
But without Gollust, internal sources said marketing of the product wasn’t as strong in the key weeks before launch. Staffers said Morse was working overtime by that point, trying to wear multiple hats by running the service and getting support from corporate — previously the jobs of Zucker and Gollust.
As a result, the internal marketing of CNN+ — how CNN executives viewed the product compared with Discovery’s incoming leadership — helped lead to its demise.

Different strategies

By early this year, Zaslav had settled on a streaming strategy for Warner Bros. Discovery.
He wanted to bundle together HBO Max and Discovery+ and use news and live sports from WarnerMedia to make the streaming bundle even more attractive. The collection of assets, he thought, could take on Netflix as a global streaming behemoth. CNN will ultimately be a tab within the larger HBO Max-Discovery+ service.

David Zaslav, President & CEO of Discovery Inc.
Anjali Sundaram | CNBC

That made the existence of CNN+ antithetical to his strategy.
If Warner Bros. Discovery was spending hundreds of millions of dollars making programming for CNN+, Zaslav felt the company was misallocating resources. Wall Street tends to judge media companies on their main streaming product. Disney largely trades on Disney+ subscriber numbers. The Warner Bros. Discovery share price will likely move on the bundled number of HBO Max-Discovery+ customers.
CNN+ would be a sideshow niche product. Even if it showed growth, taking subscribers away from the larger bundle with the promise of a cheaper option in CNN+ would hurt Warner Bros. Discovery and represent a waste of resources.
One particularly irritating trait of CNN+’s pricing plan to Discovery executives was its “Deal of a Lifetime” plan — offering a 50% discount (initially $2.99 per month instead of $5.99) for as long a consumer remains a subscriber to CNN+. While that may be a great perk for a CNN+ subscriber, it was a strategic misfit for Zaslav. For anyone who would have signed up to the larger bundle because of CNN content, they now had a “forever” reason not to do so.
Discovery had also already tried niche subscription streaming products, having rolled out GolfTV, cycling streaming network GCN+ and Food Network Kitchen in 2020 and 2021. None of those products moved the needle for Discovery. Zaslav and other members of the Discovery leadership, including JB Perrette, who was taking over as Warner Bros. Discovery’s head of streaming, didn’t want to waste time plowing ahead with a strategy they’d already decided didn’t work.
Kilar, Zucker and Morse fundamentally disagreed with the strategy of using CNN as an HBO Max supporter. By giving CNN its own separate home, consumers enter a world of news and don’t leave when they see the variety of content CNN offers. If CNN is part of the larger HBO Max-Discovery+ world, they feared viewers will decide they’d rather watch a reality TV show or HBO drama. The effect would be to substantially diminish the value of CNN over time.
But Zaslav’s team thought the New York Times comparison was silly. The New York Times turned digital users into paying subscribers by putting their content offering behind a paywall. CNN wasn’t doing that. Instead, CNN would be trying to convince an existing user base already getting content for free from CNN.com and watching CNN on cable TV to pay $6 more per month for programming Discovery saw as unnecessary.
Instead, Zaslav’s team felt the correct comparison was Fox’s streaming service Fox Nation, which hasn’t reached 2 million subscribers since launching in 2018.

The launch

In the weeks before the launch, Morse began begging Kilar and other AT&T executives to see if there was a way he could speak with the Discovery leaders. Staffers described it as Morse “shouting from the rooftops” for a meeting.
CNBC reported the day after Zucker left in February that Discovery wasn’t enamored with CNN+ and disagreed with the strategy. The next day, Zaslav told CNBC he “hadn’t gotten a business review on what CNN+ is going to be and how it’s going to be offered,” which was an ominous statement for its future.
Morse wanted to find out directly from Discovery what Zaslav wanted. But AT&T told CNN’s team it couldn’t have any discussions with Discovery because of so-called gun-jumping laws which don’t allow the two sides to discuss future strategy until a merger closes. Kilar never spoke with Zaslav about CNN+, and he wasn’t going to make decisions about what he thought was best for CNN+ based on media reports.
Zaslav did meet with CNN executives in early March in a so-called “parlor” meeting with Michael Bass, Amy Entelis, and Ken Jautz, who were running CNN after Zucker left, as first reported by Puck’s Dylan Byers. In that meeting, Zaslav asked about CNN+ and its go-forward strategy, but lawyers in attendance told him he wasn’t allowed ask about it.
So Morse pushed ahead. In the first two weeks after CNN+ launched, 150,000 subscribers paid for CNN+. Yet, as CNBC reported, fewer than 10,000 watched on a daily basis. That number was actually closer to 4,000, a source has since told CNBC.
WarnerMedia executives were actually excited about the start. They viewed the daily active user, or DAU, statistic as pointless. The key metric for all digital services has always been number of subscribers. But Discovery executives felt the 150,000 subscribers wasn’t nearly enough of a foundation to reach 2 million within a year. They knew there wasn’t a hit show coming to CNN+. They saw subscriber numbers declining day after day after an initial pop. And they viewed the daily active user number as significant.
But, they also weren’t going to make a decision about CNN+ when its new leader, Licht, hadn’t even started. So Discovery asked Licht to start work early, behind the scenes, so he could make a determination about what to do with the service.
At 8 a.m. ET on April 11 — the first day Warner Bros. Discovery began trading as a combined company — Licht and Perrette told Morse and his team that CNN+’s marketing budget was immediately going to zero. It was Licht’s first meeting at CNN.
CNN+ staffers left that meeting knowing the product wasn’t going to continue as is. They hoped it wouldn’t be shut down completely, although they feared a decision had already been made. Morse and his team argued the product was just 12 days old. They said DAUs were a silly statistic. They tried to make the point that Alex MacCallum, CNN+’s head of product, had come from The New York Times and The Washington Post. CNN was a news service, and it shouldn’t be judged against niche entertainment streaming services.
They argued 150,000 subscribers is far more than The New York Times, The Washington Post or The Wall Street Journal got in their first two weeks after they launched their digital subscription products.
But Discovery had never thought that comparison was relevant. The April 11 discussion never got heated, but there was clear resignation from the CNN+ side. It was an hour-long meeting to go over two years of work.
Ten days later, Licht announced he’d decided to kill the product. Morse said last week he’s leaving the company after a transition period.

CNN+’s legacy

CNN staffers roundly share frustration that Discovery didn’t backchannel information to delay the CNN+ launch if they were that unhappy with the strategy.
They wonder whether the reason Discovery chose not to relay information in the months leading up to CNN+’s launch was so Discovery can count the hundreds of layoffs and saved operation costs from the service’s shutdown as part of the $3 billion in synergies Zaslav has promised Wall Street as part of the merger rationale.
Kilar has been very public about his belief in CNN+. On its launch day on March 29, he wrote a series of tweets touting its importance.
“In my opinion, CNN+ is likely to be as important to the mission of CNN as the linear channel service has been these past 42 years. It would be hard to overstate how important this moment is for CNN,” he tweeted, adding: “CNN+ is also important b/c it is CNN unmistakably embracing a scalable, robust paid digital business model.”
Some at CNN wonder whether Zucker could have saved the product, given his relationship with Zaslav. But it’s also possible his surprise exit allowed the Warner Bros. Discovery CEO to dodge a bullet. He wouldn’t have to tell his friend that the pet project he’d spent the past year on didn’t have a home at Warner Bros. Discovery. Zucker and Zaslav haven’t spoken since Zucker’s resignation. Whoever is to blame for Zucker leaving, his departure made CNN a less stable asset and one that has given Zaslav his first major headache as CEO of the combined company.
Several past and present CNN staffers told CNBC they believe the CNN+ debacle may speak to a new era of CNN.
While many WarnerMedia employees have complained about working under the ownership of a phone company that didn’t understand entertainment, AT&T largely left CNN and Zucker alone. Zucker wielded a lot of power at WarnerMedia and had full backing for his vision at CNN. Axios reported WarnerMedia planned to spend $1 billion on CNN+ in the next four years.
Zaslav’s swift ax to CNN+, in combination with Warner Bros. Discovery board member John Malone’s comments to CNBC about returning CNN to hard news, signal a more active corporate hand over the organization’s future.
From now on, CNN’s strategy will have to align with its parent company. There’s fear among CNN staffers that if the news organization is only seen as a companion piece for a streaming bundle, it won’t be able to flourish as a brand as linear TV subscribers melt away.
The ramifications of that shift are still unknown. But it will be a culture change for a cable news network whose leadership has gotten used to getting what it asks for.
With CNN+, they clearly didn’t.

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Blockbuster titles like “The Batman,” “Sonic 2” and “Spider-Man: No Way Home” have led to a 365% increase in ticket sales from 2021, reaching $1.85 billion.
Movie theater owners tell CNBC they are hopeful that ticket sales will continue to pick up in the coming weeks.
CinemaCon, a convention for Hollywood studios and movie theater owners in Las Vegas, kicks off Monday, and exhibitors are expressing cautious optimism ahead of the summer movie season.

Still from “Doctor Strange in the Multiverse of Madness.”

Superhero flicks have kept the box office afloat this year, spurring movie theater operators to think that audiences might finally be ready to return to cinemas en masse.
Domestic ticket sales for the first four months of the year are still down around 40% compared with 2019 pre-pandemic levels, but cinemas are seeing significant gains over last year.

Blockbuster titles like Warner Bros.’ “The Batman,” Paramount’s “Sonic 2” and the Marvel-Sony’s “Spider-Man: No Way Home” have led to a 365% increase in ticket sales from 2021, reaching $1.85 billion, according to data from Comscore.
Movie theater owners tell CNBC they’re hopeful ticket sales will continue to pick up in the coming weeks, particularly after the release of Marvel’s “Doctor Strange in the Multiverse of Madness,” which kicks off the summer blockbuster season.
The last two years have suffered from lackluster summer movie slates, as lockdowns shut down theaters and coronavirus variants kept many potential moviegoers at home.
Studios had been reluctant to release films, fearing that their new movies wouldn’t turn a profit and many opted to postpone titles until 2022. Now, with many health and safety mandates repealed and consumers seemingly more comfortable venturing back out to cinemas, studios have stuck to their release dates.
Theaters will see a steady stream of hotly anticipated films following the May 6 release of “Doctor Strange.” “Top Gun: Maverick,” “Jurassic World: Dominion,” “Lightyear,” “Minions: The Rise of Gru” and “Thor: Love and Thunder” will arrive on the big screen in quick succession over a nine-week period.

“It’s entirely fitting that a Marvel movie will kick off the summer movie season of 2022 and along with it set in motion what looks to be the first ‘normal’ May through Labor Day corridor we’ve seen in almost three years,” said Paul Dergarabedian, senior media analyst at Comscore.
Dergarabedian noted that the industry’s summer, spanning an 18-week period, is traditionally responsible for about 40% of the domestic box office.

CinemaCon, a convention for Hollywood studios and movie theater owners in Las Vegas, kicks off Monday, and exhibitors are expressing cautious optimism about the summer movie season and the rest of the year.
The success of “The Batman” and “Spider-Man: No Way Home,” which showed that adult audiences will return for franchise features, helps stir that optimism. The turnout for “Sonic 2,” which has generated more than $145.8 million domestically since its April 8 release, also gives theaters hope that the “Toy Story” follow-up “Lightyear,” and the next movie in the Minions franchise will be able to lure in families.
What’s more, cinema returnees in the past year have also boosted the concession business, according to a new report released Thursday by movie ticketing site Fandango. A survey of 6,000 moviegoers who bought a ticket on Fandango determined that 93% bought concessions at the theater in the past year, up from 84% in the prior year.
Additionally, 67% of those surveyed said they spent $20 or more on popcorn, candy, soda and other concessions. That spending report bodes well for theater owners, who don’t split concession sales with studios like they do with movie ticket sales.
Next week at CinemaCon, exhibitors will discuss ways to lure back moviegoers who have been slow to return to theaters as well as how to improve the experience of going to the movies.
Theater owners got creative during the pandemic, offering unique food and beverage options, adding more mobile options for advanced ordering and payment, and diversifying the content available on the big screen.
The current consensus among box office analysts and movie theater owners is that 2022 won’t be able to surpass the $11.4 billion generated in 2019, but say they could ring in almost double the $4.4 billion collected last year. Most are estimating around $8 billion in ticket sales, with franchise films acting as the catalyst.
Disclosure: Comcast is the parent company of NBCUniversal and CNBC. NBCUniversal owns Fandango.

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Pickleball is the fastest-growing sport in America and continues to attract new players.
Marc Lasry, Gary Vaynerchuk and Tom Dundon have recently made sizable investments in the sport.
Life Time health clubs are building 700 new courts across the country and hosting tournaments.

Two men play pickleball. 
Seth McConnell | Denver Post | Getty Images

About eight years ago, when brothers Rob Barnes, then 19, and Mike Barnes, then 21, founded a pickleball paddle-maker, they encountered a lot of skeptical glances.
“We mentioned the word ‘pickleball’ — people would say, ‘What is that?’ No one knew about the sport then, but now when we talk about pickleball almost everybody has heard of it and wants to try it,” said Mike Barnes.

The name of the sport, whimsical and nondescript, may invoke an image of a slow-moving game played by retirees in Florida. But the paddle sport — a cross between tennis, badminton and table tennis — is now America’s fastest-growing sport and is attracting major interest and financial investments.
“It’s really just so easy to learn,” Rob Barnes said. “With pickleball, you can go out there with your grandparents, your parents, be at different levels, and really still enjoy the game. So we think that’s contributing to this massive growth and this addiction that people are having with this sport.”
Today, the two brothers from Idaho are co-CEOs of paddle-maker Selkirk, one of the new sport’s top equipment makers. They’ve recently signed a deal with big-box retailer Costco to sell their gear across the country.
“It’s really exciting to see them invest in the sport,” Rob Barnes said.
Pickleball boasted 4.8 million players last year in the U.S., a participation growth rate of 39.3% since 2019, according to the Sports & Fitness Industry Association’s 2022 Topline Participation Report. And from 2020 to 2021, growth was fastest among young players; participation among 6- to 17-year-olds and 18- to 24-year-olds each surged 21%.

The new craze is hard to miss. Tennis courts all across the country are being converted into pickleball courts. The “pop” sound that a pickleball makes when it hits a paddle is dividing towns and driving nonplayers crazy. Major broadcast networks like CBS, Fox Sports and the Tennis Channel now air pickleball matches. Retailers like Sketchers are also signing pickleball athletes to represent their brands.
Financially, professional pickleball has expanded across the country and is drawing big names. Milwaukee Bucks co-owner Marc Lasry and entrepreneur Gary Vaynerchuk have both made investments in Major League Pickleball. Private equity is also buying in: Carolina Hurricanes owner and private equity investor Tom Dundon recently purchased the Pro Pickleball Association and Pickleball Central.
Talking about his investment in the sport in 2021, Lasry told Sports Business Journal: “I think you’re going to be shocked [by] where it is five years from now.”
And then there are the players — former athletes from other sports like tennis player Andre Agassi, billionaires like Melinda Gates and celebrities like Ellen DeGeneres, Leonardo DiCaprio and the Kardashians all call themselves pickleball players.
For many, playing pickleball during the pandemic offered a way to get some fresh air and meet people in a new community at a time when that was difficult to do. The sport draws people of all ages and athletic backgrounds. (In fact, the club champion where I play is a 75-year-old who reminds me daily how much work I still have to do).
According to statistics provided by SFIA and USA Pickleball, about 60% of pickleball participants are men, but female players are arriving at the sport at a faster rate. Players’ average age continues to drop, to 38.1 years of age last year from 41 in 2020.

Tyson McGuffin, one of the top pickleball players in the world, is sponsored by Selkirk
Source: Selkirk

Its sudden popularity has spiked sales at Pickleball Central, the largest pickleball retailer in the U.S., which reports a 30% to 40% increase in unit sales year to date. And Barnes-owned Selkirk is on track to sell more than a million paddles by the end of 2023. The co-CEOs said the company has tripled in size since 2020.
“The pandemic was very good to pickleball,” said Mike Barnes. “Across the industry, nets were sold out, paddles, especially new-entry paddles, picked up very quickly and we’ve seen that growth continue since then.”
The pickleball wave also has washed up on foreign shores.
Terri Graham, one of the co-founders of the 2022 Minto US Open Pickleball Championship, saw a business opportunity in the sport’s early days. In 2015, she and her business partner, Chris Evon, quit their jobs at Wilson Sporting Goods, where they had worked for about two decades.
“I realized there was about to be this huge explosion [with pickleball],” she said. “So we just decided to go all in.”
Together, they trademarked “US Open Pickleball” and started what they call “the biggest pickleball tournament and party in the world” in Naples, Florida. In the process, they helped turn East Naples Community Park into a 64-court pickleball mecca.
This year’s tournament kicked off Friday, with competition play set to start Sunday and run nearly a full week. Almost 3,000 players — both amateur and pro, ranging in age from 8 to 87 — will compete for $100,000 in prize money.
The championship will air on CBS Sports Network in front of an estimated 25,000 in tournament spectators. Graham says the tournament now has more than 40 sponsors and contributes more than $9 million to the local Naples economy, with people flying to the event from all over the world.
“Getting into pickleball was the best move we’ve made professionally in our lives by far,” Graham said.
The high-end health club group Life Time, with its more than 160 locations in 41 markets, is adding courts and getting in on the ground floor of tournament play, as well.

Life Time founder and CEO Bahram Akradi said that since October the company has added 84 permanent courts at 30 clubs. Last month, he said, 7,000 new players picked up the sport at Life Time clubs, a 1,100% year-over-year surge.
Akradi says he plays pickleball daily (adding he’s lost 10 to 15 pounds in the process) and that plans big investments in the sport for the company he founded nearly 30 years ago.
“I love the sport because it’s the first sport I see bringing all of America together. It is accessible to everybody and easy to learn,” he said.
The health clubs have partnered with the Professional Pickleball Association to hold tournaments. In February, Life Time hosted more than 700 players at its Minnesota facility.
But Akradi says he’s only getting started.
“By the end of next year, our plan is to deliver 600 to 700 dedicated pickleball courts across the country. So a Life Time member can participate in events even if they’re traveling,” he said, adding the company will invest $50 million to $75 million and build out the additional courts by the end of the year.
“In my 40-plus years doing sports fitness, I’ve seen all kinds of stuff come and go — get the momentum and then lose it,” he said. “This sport, I don’t see [that happening]. It’s just easier and it’s more broad. It brings people together, and there’s really no reason for people not to be able to do it.”

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“I think this is it, it might be the final curtain for The Gypsy King and what a way to go out,” says Tyson Fury after flooring Dillian Whyte in sixth round to retain WBC heavyweight title.
Fury backs Whyte to be world champion one day but says he came up against “best man on the planet.”

LONDON, ENGLAND – APRIL 23: Tyson Fury celebrates victory as referee Mark Lyson checks on Dillian Whyte after the WBC World Heavyweight Title Fight between Tyson Fury and Dillian Whyte at Wembley Stadium on April 23, 2022 in London, England. (Photo by Warren Little/Getty Images)
Warren Little | Getty Images Sport | Getty Images

Tyson Fury has suggested he will retire after retaining his WBC heavyweight title and undefeated record with a devastating sixth-round knockout of Dillian Whyte at Wembley Stadium.
Fury, who has now won 32 and drawn one of his 33 bouts, floored Whyte with a stunning right uppercut in front of 94,000 fans in the capital.

The 33-year-old then said “I think this is it” when asked in the ring whether he would fight again.
Fury told BT Sport: “I promised my lovely wife Paris that after the third fight with Deontay Wilder that would be it and I meant it.
“I then got offered to fight at Wembley and I thought I owed it to the fans, to every person in the United Kingdom, to come here and fight.
“Now it’s all done I have to be a man of my word. I think this is it, it might be the final curtain for The Gypsy King and what a way to go out!”
Fury’s promoter, Frank Warren, told BT Sport: “If it was going to be the last fight, it’ll be the last fight. That’s his decision, he’s the guy getting in the ring. If it is his last fight, he has gone out on such a high.”

Fury outboxed challenger Whyte before flattening him, with referee Mark Lyson waving off the fight with one second remaining in the sixth round.
However, the champion showed Whyte respect afterwards, saying he believes the Brixton-based boxer will be a world champion one day.

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He added: “Dillian Whyte is a warrior and I believe he will be world champion but tonight he met a great in the sport, one of the greatest heavyweights of all time.
“There is no disgrace. He is a tough, game man. He is as strong as a bull and has the heart of a lion.
“But he was not messing with a mediocre heavyweight. He was messing with the best man on the planet.”
On the punch that knocked Whyte out, Fury added: “Lennox Lewis would have been proud of that.”

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AMERICA’S TECH giants make ungodly amounts of money. In 2021 the combined revenue of Alphabet, Amazon, Apple, Meta and Microsoft reached $1.4trn. These riches come from a wide and constantly expanding set of sources: from phones and pharmaceuticals to video-streaming and virtual assistants. Analysts expect the tech quintet’s combined sales to have surpassed $340bn in the first three months of 2022, up by 7% compared with the same period last year. In a quarterly ritual that kicks off on April 26th, when the big five start reporting their latest earnings, the staggering headline numbers will once again turn into headline news.Big tech firms are understandably eager to trumpet these impressive figures, as well as their diverse offerings. They are considerably more coy about how much many of their products and services actually make. Annual reports and other public disclosures tend to lump large revenue streams together and describe them in the vaguest terms. Last year, for example, the five giants’ sales were split out into 32 business segments in total. That compares with 56 segments for America’s five highest-earning non-tech firms. Apple breaks its sales into five slices; Meta into only three (see chart 1). The category that Alphabet labels as “Google Other” made $28bn in revenue last year. It includes Google’s app store, sales of its smartphones and other devices, and subscriptions from YouTube, a subsidiary. Last year YouTube’s advertising revenue, which Alphabet first revealed only in 2020, reached $29bn. That means that in 2021 Google Other and YouTube’s ad business each generated more money than four-fifths of the companies in the S&P 500 index of the biggest American firms.The opacity makes business sense. Keeping rivals in the dark helps ensure that they will not try to replicate a prized business unit and eat into its margins. Andy Jassy, Amazon’s boss, has lamented at the prospect of breaking out his firm’s financials because they contain “useful competitive information”. Annoyingly for Mr Jassy and his fellow tech barons, the veil of secrecy is getting thinner. Regulators, lawmakers and investors see it as a problem, and are calling for more transparency about everything from how big tech’s payments platforms work to the amount of carbon emissions the companies belch out. And new sources of information are emerging, from brokers’ reports, hedge-fund analyses and, most revealing, antitrust court cases brought by would-be competitors and competition regulators around the world. All these are bringing to light details about the inner workings of big tech. To understand it all, The Economist has rifled through court documents, internal emails, analyst notes and leaked files about Alphabet, Amazon, Apple and Meta (Microsoft has managed to avoid antitrust scrutiny this time around, so secret information about its finances is scarcer). What emerges is a picture of big tech in which the titans appear more vulnerable than their superficial omnipotence suggests. Their secretive profit pools are indeed deep. But the firms’ finance secrets betray weaknesses, too. Three stand out: a high concentration of profits, waning customer loyalty and the sheer sums at risk from assorted antitrust actions.Start with the profit pools. The biggest of these tend to be transparent. The iPhone remains Apple’s profit engine, Amazon rakes in most of its money from cloud computing and Alphabet and Meta couldn’t survive without online advertising. The firms are considerably more coy over disclosing details about their smaller but fast-growing units.Perhaps the biggest untrumpeted sources of profits for Alphabet and Apple are their app stores. The firms take a commission on all in-app spending on these platforms, usually of around 30% (though in a bid to appease regulators, they are increasingly offering lower rates for small developers and those whose apps rely on subscriptions). The revenue streams are middling. In 2019 they were around $11bn for Google, according to one case brought against it in America by a group of state attorneys-general. Analysts estimate that for Apple’s store it was $25bn last year.Because the costs of maintaining the app stores are low, however, the profit margins are vast. The operating margin for Apple’s app store has been estimated at 78%, according to one case brought against the firm by Epic Games, a video-games maker. For Google the figure is 62%. That compares with an operating margin of 35% for Apple’s overall business and of 31% for Alphabet’s business as a whole (which continues to rely on advertising for revenues).The app stores are booming. Revenues from related commissions for Google and Apple has roughly doubled between 2017 and 2020, according to the Competition and Markets Authority (CMA), Britain’s trustbusting agency. In 2020 Google’s store had 800,000-900,000 developers offering 2.5m-3m apps. That made it slightly bigger than Apple’s, which was home to 500,000-600,000 developers and 1.8m apps. There is no sign of the growth slowing down or margins shrinking, according to Apple’s Epic case and the CMA probe. The gross margin on Google’s app store has ticked up by a few percentage points in recent years.In Apple’s annual report its app store revenues fall into a category called “services”, which made $68bn in sales last year, or 19% of Apple’s total. But the app store is not the most profitable subset of Apple’s services. Though the exact figure is unknown, the gross margin on Apple’s search-advertising segment is even larger than on its app emporium, the CMA reckons. That, according to the regulator, is down to a deal struck between Apple and Google. The terms mean that Google search is the default option on most Apple devices. In exchange, Google gives Apple somewhere between $8bn and $12bn a year (2-3% of Apple’s total revenue). This arrangement costs Apple close to nothing, so it is nearly all pure profit.Amazon and Meta are (a bit) less secretive about the sources of their revenues and profits. Despite its rebranding and pivot to the virtual-reality “metaverse”, Meta isn’t shy about admitting that it continues to make 97% of revenues from online advertising. Amazon is even happy to disclose revenues of its controversial Marketplace, where third-party vendors sell their wares, paying the equivalent of 19% of those sales for the privilege (up from 11% in 2017) and competing with Amazon’s own retail business. Marketplace contributed $103bn to Amazon’s top line in 2021, a six-fold increase from 2015 and 22% of the company’s total. But it took digging by analysts to estimate that Instagram accounted for $42bn of Meta’s revenues last year, nearly two-fifths of the total and up from a reported $20bn, or a quarter of the total, in 2019. The photo-sharing app’s role in the social-media empire’s prospects has risen dramatically, in other words. And it was a lawsuit brought by the attorney-general of the District of Columbia that revealed Marketplace’s profit margins to be 20%, four times higher than those of Amazon’s own retail business (the case does not specify whether the margins in question were gross, net or operating). All this makes for plenty of deep profit pools. Look closer, though, and they also turn out to be surprisingly narrow. In Apple’s app store, for example, games account for 70% of all revenues, according to documents uncovered during the Epic court battle. Most of this comes from in-app purchases, such as wacky accessories for avatars or virtual currencies. In 2017, 6% of app-store game customers accounted for 88% of the store’s game sales. Those heavy users spent, on average, more than $750 each year.The Epic trial also revealed that the biggest spenders, who made up 1% of Apple gamers, generated 64% of sales and splurged an average of $2,694 annually. Internally these super-spenders were known as “whales”, like their casino equivalents. An investigation by the CMA found a similar pattern at Google’s app store. In 2020 around 90% of the store’s British sales came from less than 5% of its apps. Once again spending on in-app features in games made up the vast majority of revenue.Spending is concentrated in the online ad industry, too. Another CMA probe looked at data on British advertisers who spent a combined £7bn ($8.9bn) in 2019 on Google Ads, an ad-buying tool aimed at small businesses. The top 5-10% of advertisers by spending made up more than 85% of revenue for Google Ads. The highest-spending sectors were retail, finance and travel. A similar exercise showed an even greater concentration at Facebook. The top 5-10% of the social network’s advertisers made up more than 90% (see chart 2). In terms of sectors, retail, entertainment and consumer goods splurged most.Concentration is also present at the level of “impressions”, as each incident of an advert appearing on a user’s screen is known in the business. That was one finding of internal research by Google, which was unearthed as part of a case bought against the tech giant by another group of American state attorneys-general. The study found that in America 20% of all impressions produce 80% of web publishers’ ad revenue. High-value impressions are ones aimed at users likely to make a purchase. Google referred to this phenomenon internally as “cookie concentration”.Besides a heavy reliance on a few big profit generators, another undisclosed weakness is customer churn. Tech giants’ customers are often assumed to be devoted to their products and services—or even hooked. The companies do not challenge this assumption in public, since it conveys the sense of captive markets, which are beloved of investors. In fact, their markets may not be quite so captive. The Epic case revealed that roughly 20% of iPhone users switched to another smartphone in 2019 and 2020. Leaked documents from Meta show that fewer teenagers are signing up to Facebook, its largest network, and those that do are spending less time on it. Even Instagram, Meta’s youth-friendlier platform, is losing out to rivals. A leaked internal report from March last year found that teenagers were spending more than twice as much time on TikTok, a hip short-video app that has since grown hipper. Young people are not the only group of customers beginning to retreat from the platforms. Another are young companies. Last year was a bonanza for startups. Global venture-capital funding reached $621bn, more than double the previous year’s total. According to a report by Bridgewater Associates, the world’s largest hedge fund, of all the money invested in early stage companies about a fifth is spent on the cloud, a market dominated by Alphabet, Amazon and Microsoft. Another two-fifths goes on marketing, which in the digital realm is dominated by Alphabet, Meta and, increasingly, Amazon. Bridgewater estimates that, all told, around 10% of total revenue of Alphabet, Amazon and Meta is derived from the startup ecosystem. That is the equivalent of $84bn each year. That flow of money may be ebbing. Fears about rising inflation, Russia’s war in Ukraine and the chance of a recession has sent the share prices of tech firms tumbling. The NASDAQ, a tech-heavy index, has fallen by 20% from its peak in November. The falling public markets are filtering down to the startup world. On March 24th Instacart, a grocery-delivery firm, cut its own valuation by 38%. Lower valuations will in turn make it harder for firms to raise capital. Investors say they expect to see startups tightening their belts in the coming months. That means less spending on the cloud and ads.What do all these vulnerabilities add up to? In the worst-case scenario, where the toughest-talking regulators in America, Britain and the EU get their way, the answer is an awful lot. Europe poses the biggest threat. The Digital Markets Act (DMA) is a sweeping new set of EU rules designed to rein in big tech that was finalised last month. It will only affect some business units and is targeted at tech’s European operations. Bernstein, a broker, finds that Alphabet, Apple, Amazon and Meta make $267bn of revenue, about a fifth of their combined total, in Europe. A back-of-the-envelope calculation by The Economist suggests the DMA puts perhaps 40% of the four firms’ European sales at risk. Globally, Alphabet is the most exposed, with nearly 90% of European revenues in danger, equivalent to 27% of the company’s global sales. In America Google’s search monopoly is being targeted in a case brought by a team of state attorneys-general. The Department of Justice is thinking about following suit. That puts American search revenue of $70bn, a quarter of Alphabet’s total, at risk of antitrust action. If Alphabet reduced its commission on in-app payments from 30% to 11%—the share agreed in a deal between Google and Spotify on March 23rd—American app-store revenues would plummet from $11bn to $4bn. Together these actions could imperil perhaps $150bn of Alphabet’s revenue, or about 60% of its global total. Apple’s worst-case exposure is smaller but still significant. If trustbusters put a stop to its sweetheart search deal with Google, that would imperil $12bn-15bn a year. Should Apple follow Alphabet’s lead and slash app-store commissions, or be forced to do so by new laws, its app-related earnings would also drop, from about $25bn to $9bn. Apple’s total exposure would be roughly $35bn, or a tenth of global revenue. Amazon stands to lose up to $77bn per year, or 16% of its global revenue, if it is barred from mixing its own retail operations with those of third parties on Marketplace. Some lawmakers and regulators have been murmuring about breaking up Amazon altogether, into a retailer and a cloud-computing provider, for example. The rump Amazon would either be deprived of its e-commerce sales (about 70% of current revenues) or its cloud profits (about three-quarters of its bottom line). The same voices are calling to split Meta. If America’s Federal Trade Commission got its way and forced the social-media conglomerate to hive off Instagram and WhatsApp, the company could lose $42bn in revenues from Instagram and another $2bn from WhatsApp—or two-fifths of its total.All told, if everything went against big tech, perhaps $330bn in revenues would be at risk. That is about a quarter of the total for Alphabet, Amazon, Apple and Meta. That is before including the two antitrust bills making their way through America’s Congress. Among other things, these aim to stop platform owners, such as app stores and search engines, giving preferential treatments to their own products. The financial impact of such rules is hazy but could, as in Europe, be substantial.This catastrophic case for big tech is unlikely to materialise. Many attempts to check the power of the platforms have gone nowhere. The current crop is likely to be watered down and could take years to take effect. But just a few successful tech-bashing efforts could make a meaningful dent in the firms’ prospects. And by lifting the veil on tech titans’ secret finances, they are already alerting challengers to where exactly margins are ripest for eating into. More

U.S. labor officials are petitioning a federal court to force Starbucks to bring back activist employees who they say were removed for their union campaigning, according to a Friday filing.
The National Labor Relations Board’s Phoenix chief is seeking an injunction against Starbucks that would require it to reinstate three employees that were allegedly illegally discharged, forced out or placed on unpaid leave.
The filing marks the latest in what’s expected to be a lengthy and expensive legal battle between a union campaign and the global coffee chain.

Members react during Starbucks union vote in Buffalo, New York, U.S., December 9, 2021.
Lindsay DeDario | Reuters

U.S. labor officials are petitioning a federal court to force Starbucks to bring back activist employees who they say were removed for their union campaigning, according to a Friday filing.
The National Labor Relations Board’s Phoenix chief is seeking an injunction against Starbucks that would require it to reinstate three employees that were allegedly illegally discharged, forced out or placed on unpaid leave.

The filing marks the latest in what’s expected to be a lengthy and expensive legal battle between a union campaign and the global coffee chain.
Since August, more than 200 Starbucks locations have filed paperwork to unionize under Workers United, an affiliate of the Service Employees International Union. So far, 24 stores have voted to unionize, with only two locations so far voting against.
But tension has escalated between the two sides, with each accusing the other of lawbreaking activity. Workers United has filed dozens of complaints of its own with the NLRB against Starbucks, alleging that the company has illegally retaliated against, harassed and fired organizers in cafes across the country. The government agency has also issued complaints against Starbucks.
For its part, Starbucks this week filed two complaints with the NLRB, alleging that the union organizing its baristas broke federal labor law. Starbucks did not immediately respond to a request for comment.
Friday’s filing argues that Starbucks retaliated against the three employees after learning its employees were involved in pro-union activity. “Immediate injunctive relief is necessary to ensure that the Employer does not profit nationwide from its illegal conduct,” NLRB Director Cornele Overstreet said in a statement.
— CNBC’s Amelia Lucas contributed to this report.

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Following Moscow’s invasion of Ukraine, multinational companies have withdrawn from Russia in staggering numbers.  
As of April 22, more than 700 U.S. companies have scaled back, suspended or exited their Russian businesses, including Starbucks, McDonald’s and Pepsi, according to the Yale School of Management.

Russia is Pepsi’s second-largest international market, after Mexico. The company generated $3.4 billion in Russia in 2021, about 4% of its $79 billion in revenue. 
But not every company is scaling back its operations in Russia. Over 190 companies including International Paper, Koch Industries and Emirates are still operating normally in the country.
So what led to Pepsi’s decision to pull back in Russia, and how likely is it for the soft-drink maker to resume normal operations after the conflict is no longer in the spotlight?Watch the video to learn more.

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