Business

For a preview of what lies wrapped beneath the Christmas tree, log in to Facebook. The social network tracks its users’ behaviour so intimately that it is able to personalise ads with a precision that sometimes verges on mind-reading. Its ad-stuffed newsfeed at this time of year embodies the internet’s great trade-off: consumers enjoy free services, but must submit to bombardment with commercials from companies that know who has been naughty or nice.Yet increasingly, those with deep enough pockets are getting the chance to escape the online admen. Last month Facebook’s owner, Meta, began offering customers in Europe ad-free subscriptions to Facebook and its sister network, Instagram, for €9.99 ($10.85) a month. In October X (formerly Twitter) launched an ad-free option. In the same month TikTok, a fast-growing Chinese-owned video app, announced that it was testing an ad-free subscription. The following month Snapchat, another social-media rival, said it was doing the same.Social networks are not the only medium allowing the group that advertisers most covet—the better-off with money to splurge—to wriggle beyond their reach. From video and audio to news and gaming, a combination of regulation and technological change is encouraging media companies to offer alternatives. “We are in a world where it will be increasingly possible to avoid ads,” says Brian Wieser of Madison and Wall, an advertising consultancy. As the rich opt out of commercials on some platforms, advertisers are therefore looking for new places to catch them.image: The EconomistGrabbing the attention of well-heeled consumers via old media has been getting harder for some time. As the internet has eroded the value of their ads, newspapers and magazines have made a decade-long pivot to other sources of revenue. Whereas in 2014 only 5% of adults in rich countries paid for a subscription to an online news site, this year 13% did, according to Oxford University’s Reuters Institute. During the same period ad-supported radio has been giving way to streamed music and podcasts on platforms like Spotify, 40% of whose 575m users cough up $10.99 a month to listen ad-free.
And now, for a break from commercialsTelevision, on which ads are worth $160bn a year, is well into its own digital transition. Last year streaming overtook cable and broadcast to become the most-watched TV in America, according to Nielsen, a firm which tracks viewership. Whereas linear TV is stuffed with ads, three-quarters of American streaming customers pay to skip ads, estimates Antenna, another data firm. Streamers such as Netflix and Disney+ have launched ad-supported tiers in the past year or so; Amazon’s Prime Video will follow suit shortly. But they show only about four minutes of commercials per hour, compared with more like 15 on American broadcast TV. As viewers drift to streaming, television’s ad inventory in America will fall by a quarter in the next four years, estimates Mr Wieser.image: The EconomistSocial media seemed like a safer space for ads. For years Facebook promised it was “free and always will be”. Two things have changed that. One is regulation. Meta’s ad-free plan in Europe follows a series of court rulings establishing that, under regional data-protection rules, tech firms must get users’ consent before showing them personalised ads. Rather than making its ads less effective, Meta is offering the alternative of no ads, for a price. (Privacy campaigners say that the price is so high as to be prohibitive; expect more legal battles in the new year.) Meta will not launch the plan elsewhere unless it has to: “We will always advocate for an internet funded by ads,” it said on December 4th. But other countries may get ideas. Britain and India are sharpening their digital-privacy laws. Tech firms are also watching Brazil, Indonesia and Australia (where Snapchat is testing its ad-free option).The other change comes from the tech platforms. Since 2021 Apple has let customers opt out of being tracked by apps, crippling the ability to personalise ads and triggering a rush to alternative methods of monetisation. Snapchat launched a $3.99-per-month subscription last year offering extra features; this September it had 5m subscribers. Mobile games, which often rely on ads, have moved towards alternatives such as in-app purchases and subscriptions, says Tianyi Gu of Newzoo, a firm of analysts. Apple and Netflix are among those to have launched ad-free game subscriptions.The existence of ad-free options does not guarantee take-up. Few Europeans will pay for Facebook or Instagram, believes Eric Seufert, author of the “Mobile Dev Memo” newsletter. “Meta will use the low adoption rate to champion the ad-supported business model as a consumer preference,” he predicts. However, as Meta’s networks deal increasingly in video, switching off their ads may become more tempting. YouTube Premium, which charges $13.99 per month to go ad-free, had 80m subscribers last year (the latest figure available), behind only Netflix, Disney+ and Amazon Prime among Western platforms.Children in particular are increasingly off-limits to ads by default. Snapchat said in August that most of its ad-targeting tools would no longer be available to use on under-18s in the EU and Britain, to comply with new privacy rules. Meta has made Facebook and Instagram entirely ad-free for European youngsters while it works out its legal position.Whoever pays to opt out of ads tends for now to be wealthier than those who sit through them. Among those paying for news online, eight out of ten are from medium- or high-income households, according to the Reuters Institute. As well as having more money, the wealthy tend to be more privacy-conscious: the richest users are likeliest to decline to be tracked on their iPhones, says Mr Seufert.Still, early indications are that, in TV at least, the difference may not be big. In America the highest-earning households make up 9% of ad-supported subscribers and 11% of ad-free ones, finds Antenna. Mr Wieser suggests that, as consumers are squeezed and spend less on nights out, they may in fact be more inclined to pay for ad-free TV.Either way, admen are confident that they have other ways to reach valuable consumers. Worldwide ad spending (excluding American political spots) will reach $889bn in 2023 and grow by 5-6% annually for the next five years, led by digital ads, forecasts GroupM, which places ads on behalf of brands. The number of ads seen on television may fall, but streamers’ ability to target the commercials will make them much more effective than conventional TV spots, argues Mark Read, head of WPP, the world’s largest ad company and GroupM’s parent firm. Streamers’ shorter ad breaks will be better at holding viewers’ attention. “Our clients understand that a two- to three-minute ad load is more valuable than a nine-minute ad load,” says Mr Read. In addition, streamers are eating into the time spent watching ad-free public-service broadcasters such as Britain’s BBC.Advertisers can also fall back on platforms from which the rich have no escape. Spending on out-of-home media—billboards and the like—has grown by 7% this year, and is now above its pre-pandemic level, according to Magna, a research arm of Interpublic, another big ad agency. Sponsorship of sports events and the like remains immune to digital disruption. And other kinds of corporate persuasion, such as public relations, may benefit as it gets harder to reach people via old-school ads, says Mr Wieser.Perhaps the biggest new advertising opportunity is in areas that never previously showed ads at all. Amazon’s ruse of selling ads alongside search results on its retail site—something it began doing little more than a decade ago—will earn around $45bn this year, more than the entire global newspaper industry did. Last year Uber started selling ads in its ride-hailing and delivery apps, personalising them using its own data on its customers (something Apple’s anti-tracking changes do not affect). It expects to make $1bn next year from this new sideline. Marriott hotels launched an ad network last year to send targeted messages to guests on their in-room TVs. United Airlines is said to be planning to show personalised ads to passengers during their in-flight entertainment. GroupM predicts that this kind of “retail media” will be worth more than TV advertising by 2028.Even on social networks there will be ways for brands to reach people who pay to go ad-free. Advertisers increasingly rope in charismatic “influencers”, who promote products to users who follow them and share their content by choice. WPP recently took a group of them to Lapland to visit Santa’s home, as part of a promotion for Coca-Cola. Users who pay to block ads in some areas are still likely to find them popping up in new ones. ■ More

Altice USA is in discussions to sell Cheddar News to Los Angeles private equity firm Regent LP.
Altice could be compensated through an earn-out structure in one structure being discussed, sources said.
Cheddar sold itself to Altice USA in 2019 for $200 million.

Igor Golovniov | Lightrocket | Getty Images

Altice USA is in talks to sell the financial news streaming service Cheddar News to LA-based private equity firm Regent LP, according to people familiar with the matter.
No deal is assured and discussions around structure are still fluid, said the people, who asked not to be named because the talks are private.

In one iteration of a potential transaction, Altice USA and Regent have discussed a deal where no money will initially exchange hands, one of the people said. Instead, Altice USA would participate in Cheddar’s future performance as part of a so-called “earn out” structure. If Cheddar meets certain performance targets, Altice USA would collect proceeds in future years that could amount to about $50 million based on internal projections, the person said.
Cheddar was founded in 2016 by Jon Steinberg, who built the company as a business news streaming service aimed at millennials. Altice USA acquired Cheddar for $200 million in 2019. At the time, CEO Dexter Goei told CNBC he made the deal because he was impressed with Steinberg’s ability to grow the business and its advertising revenue. Steinberg stayed with Altice USA through the deal before departing the company in early 2022. Goei stepped down as Altice USA’s CEO later that year.
Since then, Altice USA, the fourth-largest U.S. cable provider, behind Comcast, Charter and Cox, has looked to shed assets as its stock price has plummeted. Shares have fallen nearly 60% this year amid profit and revenue declines driven by high-speed broadband losses. Altice USA has also considered selling U.S. cable asset Suddenlink but dropped those plans in late 2022.
Regent specializes in transactions with “creative and legal structures combined with pragmatic seller friendly contractual terms,” according to its website. The private equity fund has experience owning and operating assets in the media sector, acquiring publishing company Sightline Media Group from Tegna in 2016 and Sunset Magazine from Time Inc. in 2017. Regent makes investments in many sectors and acquired the Club Monaco brand from Ralph Lauren in 2021.
A representative from Altice USA declined to comment. Regent didn’t immediately respond to CNBC’s request for comment.

The New York Times reported Altice USA was considering selling Cheddar earlier this year.
Disclosure: Comcast owns NBCUniversal, the parent company of CNBC.
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Counterfeiting lifesaving medications is a lucrative criminal enterprise, part of a $431 billion worldwide fraud, according to an estimate from the World Health Organization.
Gilead Sciences and Johnson & Johnson sued pharmacies, wholesale pharmaceutical distributors and others over a counterfeiting operation that targeted the companies’ HIV drugs. The suits are pending.
Criminals are targeting other lifesaving drugs, as well, and law enforcement officials say investigations are ongoing.

In Las Vegas, Lazaro Hernandez was a flamboyant, jet-setting poker player shown in televised tournaments with stacks of colorful chips. But the casually dressed gambler spotted on security cameras with wads of cash at the casino cage was hiding a secret life.
And federal investigators say he was gambling with people’s lives. Hernandez, they say, oversaw a nationwide $230 million scheme to counterfeit prescription medications, particularly lifesaving HIV drugs, in which pill bottles were altered and sold back to pharmacies at a huge discount.

Hernandez’s operation altered bottles for Biktarvy, the No. 1 prescribed drug for HIV, as well as Descovy, another HIV medication, and other pharmaceuticals, according to court records. In some cases, the records show, the pills in the bottles were swapped for Seroquel, an antipsychotic drug.
Hernandez, based in south Florida, gambled with proceeds from the counterfeiting operation, taking private jets to Las Vegas and appearing in numerous poker tournaments, authorities say.
The drug counterfeiting scheme was part of what the World Health Organization estimates is up to $431 billion in drugs counterfeited worldwide annually. In the U.S., there were 2,121 incidents of counterfeiting in 2022, up 17% from the prior year, according to the Pharmaceutical Security Institute, which tracks industry trends.
It’s a huge concern for Gilead Sciences, which has made it a priority to find and fight prescription drug diversion and counterfeiting more broadly.
The company filed a lawsuit in July 2021 against 161 defendants, including pharmacies and wholesale pharmaceutical distributors, accusing them of participating in the scheme to alter the company’s medications Biktarvy and Descovy. Johnson & Johnson filed a similar lawsuit against 27 defendants over its HIV medication Symtuza in April 2022. Other lifesaving drugs have been counterfeited over the past several years, including cancer medications, according to industry experts and law enforcement officials. The suits are pending.

“These criminals are preying on the most vulnerable,” said Lori Mayall, Gilead’s head of anti-counterfeiting and product security.

What makes a counterfeit medicine?

Lori Mayall, Gilead Sciences’ head of anti-counterfeiting and product security.
Source: CNBC

In an interview at Gilead’s headquarters in Foster City, California, Mayall explained what constitutes a counterfeit: Altered packaging, a bottle with the wrong tablets, the wrong cap or label and even the leaflet attached which contains important information about the medication.
Here’s how drug diversion works: A patient fills a prescription for a medication that is worth several thousand dollars but is paid for by Medicare, Medicaid or insurance. The patient then sells it for a fraction of the list price in cash. The buyer, known as an aggregator, removes the patient information, alters the bottle and sells it to the wholesale distributor, who sells it back to the pharmacy.
Biktarvy has a package list price of $3,795, although most patients’ copays are typically far less or they may obtain significant discounts through the company’s patient assistance programs, according to Gilead.
In the Gilead counterfeiting operation, which authorities say was overseen by Hernandez, the company discovered it had a potential problem in August 2020. That’s when an independent pharmacy reported that a patient had received a sealed bottle of Biktarvy with Excedrin pills inside, according to the lawsuit.
The bottle and label appeared to be authentic. Over the next several months, the company received more complaints from patients and pharmacies that other sealed bottles of Biktarvy contained other medications, primarily Seroquel, the antipsychotic. Mayall said counterfeiters had obtained authentic empty bottles, filled them with the wrong pills and packaged them with a counterfeit seal. In one case, she said, a patient temporarily could not walk or talk after taking the Seroquel, but soon recovered.
“What we’ve seen is our bottles reused,” Mayall said. “They’re cleaned and repackaged to look like genuine Gilead products.”
Every sale of a prescription medication is supposed to be tracked to provide a chain of custody back to the manufacturer under the federal Drug Supply Chain Security Act. But that hasn’t stopped criminals such as Hernandez from circumventing the process by altering the labels and prescription paperwork and counterfeiting the supply chain documentation, according to law enforcement officials interviewed by CNBC.
Typically, the crime starts at the street level, where patients are approached outside a homeless shelter or clinic, Mayall said. They’re induced to sell their month’s supply of Biktarvy, for example, for several hundred dollars or less.
“It’s kind of the reverse of drug dealing on the streets,” Mayall said. “They go to these locations where they know there are patients who receive medicine that’s been dispensed from a pharmacy, and oftentimes these medications are given to the patients through government insurance or through other free drug programs, and they will pay the patients for their medicine and the bottles that come with the medicine.”

Gilead’s war room

A “war room” at Gilead Sciences contains thousands of confiscated pill bottles.
Source: CNBC

Behind a locked door marked “war room” at Gilead headquarters are tens of thousands of pills and bottles. All were confiscated as counterfeits, Mayall said as she took CNBC on a recent tour. Some of the fakes are obvious because the paperwork contains numerous misspellings.
Legitimate Gilead medicines are manufactured at the company and then sold to a licensed Gilead distributor, who then sells them to a pharmacy. The counterfeit medications in the war room, most of which were connected to the Hernandez case, were repackaged to look like Gilead products, Mayall said.
The Gilead lawsuit includes four licensed distributors: Safe Chain Solutions, Scripts Wholesale, ProPharma Distribution and ProVen.
Of the four, only Safe Chain Solutions, through its attorneys, responded to CNBC’s request for comment.
Safe Chain Solutions denied claims by Gilead in the suit that it sold or bought counterfeit pills.
“Safe Chain is a family-owned, full-service wholesale pharmaceutical company that provides a wide range of pharmaceuticals and other health care products to retail pharmacies and other healthcare facilities nationwide,” the statement said. “Independent wholesalers like Safe Chain play a vital role in supplying independent pharmacies, surgical centers, and other retailers with prescription drugs at prices and in volumes they could not obtain from larger wholesalers.”
The company said it “has never knowingly sold inauthentic drugs or drugs with falsified pedigree documentation, whether manufactured by Gilead or otherwise. It has never altered or fabricated drug transaction histories. Safe Chain and its owners were, at most, victims of this conspiracy.” It said it has shipped more than 100,000 orders with about 2 million units since its founding in 2011 and deals only with licensed suppliers.

Authorities are investigating schemes in which pill bottles containing prescription drugs are altered and then resold to pharmacies.
Source: HHS-OIG

“Safe Chain also communicated extensively with Gilead to investigate concerns about HIV drugs. Indeed, Gilead itself learned about several of these incidents directly from Safe Chain. Safe Chain provided documentation about hundreds of bottles that it sold and further documentation showing what transaction history it had received from its own suppliers. Safe Chain even invited Gilead to inspect its facilities to assure Gilead of its commitment to patient safety and to work collaboratively in investigating these serious issues. These are not the actions of knowing and willful counterfeiters,” the statement said.
ProPharma Distribution settled the Gilead suit for $3.3 million and agreed to be permanently prohibited from selling Gilead medications, court records show. Details of the full settlement are confidential, according to Gilead attorneys.
Johnson & Johnson, in a statement to CNBC, said it learned in November 2020 that counterfeit versions of its HIV medication Symtuza were being distributed to three pharmacies in the U.S. The company said it then reported that to the Food and Drug Administration.
“Counterfeiting of life-saving medications is a criminal act that puts patient lives at risk,” Dr. Dave Anderson, a company vice president, said in the statement. “In addition to the anti-counterfeiting measures and legal action we have taken, we want to remind all stakeholders about the situation and provide specific guidance on how to identify HIV medicines.”

Criminal schemes

Geoffrey Potter, a partner with the New York City-based law firm Patterson Belknap Webb & Tyler, represents both Gilead and Johnson & Johnson.
“We don’t know how much counterfeit medication is in the system because there is no good way of measuring it. But when we do find these schemes, they are very large,” he said.
In the Hernandez case, which involved distributors throughout the country, Potter said, there was no easy way to determine whether a pill bottle was real or fake just by looking at it.
“Virtually nobody inspects their medication before taking it, so they wouldn’t be able to tell,” he said.
Potter said counterfeiters such as Hernandez use sophisticated methods similar to those favored by drug traffickers. That isn’t surprising, since a number of them have been convicted of narcotics-related crimes, he added.
Stephen Mahmood, assistant special agent in charge at the U.S. Department of Health and Human Services’ Office of Inspector General, or HHS-OIG, said the extent of drug diversion fraud is alarming.

Stephen Mahmood, assistant special agent in charge at the U.S. Department of Health and Human Services’ Office of Inspector General.
Source: CNBC

“I’m saddened and disheartened that the schemes cross the entire United States and territories, but I’m not surprised. Fraud is always evolving,” Mahmood said.
Depending on the scheme, he said, a pharmacy may or may not know that it is getting a counterfeit drug.
“Some of the pharmacies are involved with the fraudulent wholesalers. They know exactly what they’re doing,” he said. “Some are unwitting, and they may get a fax from a wholesaler saying, ‘Hey, we have a discounted drug.’ And due to competition and trying to make money, they may buy the drug.”
In a 2014 case handled by HHS-OIG in Miami, agents used an informant wearing a hidden camera to film a woman, her husband and her adult son in a South Florida apartment altering medication bottles. The video, obtained by CNBC, shows how they used lighter fluid to remove the patient information affixed to the bottle.
“Because obviously no one is going to sell a drug with someone else’s name on it. And they’re cleaning it to make it look new again,” said Mahmood, describing the video as a “drug diversion in progress.”
The three were convicted of charges related to the unlicensed distribution of prescription drugs in 2015 and served prison time. All have since been released, and their attorneys did not respond to a request for comment.
A convicted felon who spoke to CNBC on the condition his identity would not be disclosed and who asked to be referred to as “Julio” said altering medication bottles was his life for about 10 years in South Florida.

“Julio” says he made millions from the drug counterfeiting business.
Source: CNBC

“I was in the pill business. I used to have dealers in the road. The pharmacies buying pills from me, wholesale price,” he said.
He said patients desperate for cash willingly forgo their essential medication.
“They will bring it to me. I’ll pay them. I’ll pack it up. I’ll clean it, make it look nice. Then I had a wholesaler who will buy it from me,” he said. He said the wholesaler would then sell the medications back to pharmacies.
Describing how he cleaned the bottles, he said, “When I get them from the dealer, they come with the label over, with the person’s name. I have a thing that I put — it’s like a liquid that we put on it and we clean it, and we make it look brand new again. It’s got to be brand new so we can resell it.”
Eventually, he was caught and went to prison.  
The FDA told CNBC it had no one available to discuss counterfeit drugs, but sent a statement: “The FDA urges the public to obtain prescription drugs only from state-licensed U.S. pharmacies or physicians that are located in the United States, where the FDA and state authorities can assure the quality of drug manufacturing, packaging, distribution and labeling. Non-FDA approved drugs may contain the wrong ingredients, contain too little, too much, or no active ingredient at all, contain other harmful ingredients, or be shipped and/or stored outside of approved conditions.”
For Lazaro Hernandez, his high-flying days ended abruptly earlier this year. He pleaded guilty in April to conspiracy charges related to distributing adulterated and misbranded drugs and money laundering in connection with a $230 million fraud ring. In June, he was sentenced to 15 years in prison.
In court documents, one of his attorneys said his “gambling addiction” was a “driving force behind his participation in the criminal conspiracy,” and said Hernandez regularly took cash from his sales of diverted drugs to casinos.
A different attorney for Hernandez said in an email that she had no comment on the case.
None of the distributors in the Gilead case have been criminally charged.
However, Steven Diamanstein, the owner of Scripts Wholesale, based in the Brooklyn borough of New York City, was indicted in June on charges of buying more than $150 million worth of illegally diverted prescription HIV medication and reselling it to pharmacies, according to the indictment and a Justice Department news release. He pleaded not guilty, and his attorney had no comment.
Other investigations into more counterfeit schemes are pending, law enforcement officials told CNBC, adding that altering pill bottles and the drugs themselves is too lucrative for criminals to slow down.
“We need to put locks on all the doors and windows to keep the criminals out,” Mayall said. “Right now, it is way too easy for these bottles that have been previously dispensed to patients to make their way back into the supply chain.” More

A consortium of investors led by Fenway Sports Group have been chosen for talks to become co-investors in a potential deal between the PGA Tour and Saudi Arabia’s Public Investment Fund.
The PGA Tour and the Saudi PIF set a deadline of Dec. 31 to finish the deal.
The PGA Tour said it had received a number of strong investor proposals before narrowing in on the Fenway-led group.

Tiger Woods wipes his driver grip on the 18th tee box during the first round of the PGA TOUR Champions PNC Championship at The Ritz-Carlton Golf Club on December 17, 2022 in Orlando, Florida.
Ben Jared | PGA Tour | Getty Images

A coalition of U.S. sports investors led by Fenway Sports Group have entered the final round of negotiations to become co-investors in a potential deal between the PGA Tour and Saudi Arabia’s Public Investment Fund, the PGA Tour announced on Sunday.
The Fenway-led consortium, named Strategic Sports Group, includes a variety of investor and private equity names like Celtics majority stake owner Wyc Grousbeck, Chicago Cubs Chairman Tom Ricketts and Cohen Private Ventures, a venture capital firm of New York Mets owner Steve Cohen.

The investor list also includes Milwaukee Brewers owner Mark Attanasio, Home Depot co-founder Arthur Blank, Liverpool Football Club owner John Henry and Boston Red Sox owner Tom Werner among others.
The announcement noted that Strategic Sports Group had been selected after a rigorous review of other outside investor offers. The PGA Tour had previously turned down a proposal from TKO majority owner Endeavor Group Holdings.
As it narrows down its investor pool, the PGA Tour said it would aim to further negotiations with the Saudi PIF in the coming weeks.
The news comes as time is running out for the PGA Tour to secure the long-awaited deal with the PIF, which owns the DP World Tour and LIV Golf. PGA Tour Commissioner Jay Monahan previously said that the parties would aim to finish the deal by Dec. 31.
The PGA Tour and the PIF agreed to the merger in June but have gone back and forth on the specific deal terms due partially to resistance from big-name PGA Tour players like Rory McIlroy. The deal also faced probing from lawmakers who are skeptical of Saudi Arabia’s intentions, claiming that the country might be trying to gain influence in the U.S. via sports investment.
– CNBC’s Jessica Golden contributed to this report. More

McDonald’s investor day focused on the company’s long-term future, but the near term could bring more turbulence.
Low-income consumers are spending less, hurting companies such as McDonald’s and Walmart.
McDonald’s revealed aggressive expansion plans, which historically haven’t worked out well for the company.

The Ronald McDonald balloon floats down Central Park West during the Macy’s Thanksgiving Day Parade on November 23, 2023, in New York City.
Gary Hershorn | Corbis News | Getty Images

McDonald’s executives painted a rosy portrait of the fast-food giant’s strength and ability to achieve long-term goals at its investor day, but the company faces some potential road bumps heading into 2024.
The event, held Wednesday, featured few surprises and some new long-term targets, and Wall Street’s reaction has been muted. Shares of McDonald’s have been roughly flat since the investor day presentations. Hit by concerns about the broader economy and fears over weight-loss drugs, McDonald’s stock has risen just 8.7% this year, trailing the S&P 500’s gains of 19%.

Those fears about the business have not stopped the fast-food powerhouse from setting ambitious goals.
McDonald’s plans to open nearly 9,000 new restaurants by 2027, including 900 locations in the U.S. Its larger global footprint will boost the company’s sales and help meet higher demand for its Big Macs and McNuggets, according to executives.
But those ambitious plans intersect with an uncertain global economy. China, McDonald’s second-largest market by number of locations, is still struggling to bounce back from the pandemic. Turmoil in the Middle East has hurt McDonald’s sales in that region — and some markets outside of it. And in its home market, recession predictions haven’t panned out yet, but some economists think a downturn may still come.
Here are the three top risks facing McDonald’s heading into 2024:

1) Weakened low-income consumer

In late January, CEO Chris Kempczinski said the company was predicting a “mild to moderate” recession in the U.S. and a “deeper and longer” downturn in Europe in 2023. But his predictions haven’t come true.

“Here we are a year later, and, boy, was I wrong,” Kempczinski said at the investor day. “So I’m a little leery to make any predictions about next year because I think we’re continuing to see that the consumer has been very resilient.”
Though a recession hasn’t hit, Kempczinski also reminded investors that McDonald’s saw low-income consumers pulling back on their spending last quarter. Other companies, such as Walmart, have also called out that trend.
While McDonald’s benefits from high- and middle-income consumers trading down to its Big Macs and french fries, low-income diners are still an important part of its business.
“We walked away from the investor day more concerned than before on the state of low income consumer,” Bernstein analyst Danilo Gargiulo wrote in a note to clients.

2) Rivals’ promotional spending

Ever since the pandemic, McDonald’s has shifted away from using limited-time menu items to draw in customers. Instead, its marketing has centered on the brand itself, like selling core menu items through promotions based on celebrities’ favorite orders. That approach has fueled strong same-store sales growth in recent years, even as inflation stretched diners’ wallets.
In general, the fast-food giant spends a lot of money on marketing and advertising to maintain its brand recognizability and affinity. McDonald’s spends over $4 billion every year on marketing investments, three to four times more than its nearest competitor, Kempczinski told investors on Wednesday.
But McDonald’s might find some of its competitors stepping up their promotional spending next year. Low-income consumers visiting restaurants less frequently means some fast-food chains will lean into deals and limited-time menu items to drive traffic.
McDonald’s may have to decide if boosting its short-term traffic is worth the potential long-term consequences.
“It will be interesting to see how [McDonald’s] adapts to a potentially more promotional environment, and if it is willing to sacrifice the short term to continue to drive the [long-term] brand positioning,” Citi Research analyst Jon Tower wrote in a note to clients.

3) Accelerated expansion plans

Much of Wednesday’s investor presentations focused on McDonald’s plans to accelerate new restaurant openings. The company aims to have a global footprint of at least 50,000 locations by 2027 in its fastest expansion ever.
But history shows that aggressive expansion typically doesn’t end well for McDonald’s. Sales often slide after new restaurants cannibalize existing locations’ customers, hurt franchisees’ profitability and distract from other parts of the business, such as menu innovation.
Investors are largely skeptical of restaurants with plans to expand in 2024 and beyond, given ongoing economic uncertainty and the shaky consumer, Barclays analyst Jeffrey Bernstein said in a note to clients. But he also noted that McDonald’s is coming from a position of strength and has spent recent years remodeling locations rather than building new ones.
Bernstein isn’t the only analyst with an optimistic view on McDonald’s expansion strategy.
“Growing units off of an already remodeled existing unit base, where core menu is driving high profitability, and towards only the best franchisees is a change vs prior regimes,” J.P. Morgan Securities analyst John Ivankoe wrote in a research note.
And executives reassured investors Wednesday.
“We’ve learned the lessons of quantity over quality … We’ve spent the last year, country by country, literally city by city, making sure we were confident about where we saw the growth opportunities and how we could actually have the teams out in the field to be able to go execute it,” Kempczinski said. More

As sales of all-electric vehicles grow more slowly than expected, major automakers are increasingly meeting their customers in the middle with hybrid vehicles.
Automakers are reconsidering the viability of hybrid cars and trucks to appease consumer demand and avoid costly penalties related to federal fuel economy and emissions standards.
Hybrids accounted for 8.3% of U.S. car sales, about 1.2 million vehicles sold, through November of this year. That share is up 2.8 percentage points compared with total sales last year.

2023 Prius Prime on display, April 6, 2023.
Scott Mlyn | CNBC

DETROIT — As sales of all-electric vehicles grow more slowly than expected, major automakers are increasingly meeting their customers in the middle.
More and more companies are reconsidering the viability of hybrid cars and trucks to appease consumer demand and avoid costly penalties related to federal fuel economy and emissions standards.

The shifting strategies run counterintuitively to industrywide EV messaging of recent years. Many auto companies have begun to invest billions of dollars in all-electric vehicles, and the Biden administration has made a push to get more EVs on U.S. roadways as quickly as possible.
But hybrid vehicles — those with traditional internal combustion engines combined with EV battery technologies — could help the automotive industry lower fuel consumption and emissions in the short-term, while easing consumers into vehicle electrification.
Sales of traditional hybrid electric vehicles, or HEVs, such as the Toyota Prius, are outpacing those of all-electric vehicles in 2023, according to Edmunds. HEVs accounted for 8.3% of U.S. car sales, about 1.2 million vehicles sold, through November of this year. That share is up 2.8 percentage points compared with total sales last year.
EVs made up 6.9% of sales heading into December, or roughly 976,560 units, up 1.7 percentage points compared with total sales last year. Sales of plug-in hybrid electric vehicles, or PHEVs, accounted for only 1% of U.S. sales through November.

“There’s been so much talk over the past few years about the move toward electrification and sort of forgoing hybrids, but … hybrids are not dead,” said Jessica Caldwell, Edmunds executive director of insights. “There’s a lot of consumers out there that are interested in electrification, maybe not ready to go fully electric.”

Hybrids can also cost less and relieve many concerns typically associated with EVs such as range anxiety and lack of charging infrastructure. The average hybrid this year cost $42,381, according to Edmunds. That’s below the roughly $59,400 average for an EV; $60,700 for a PHEV; and $44,800 for a traditional vehicle.

Morgan Stanley earlier this month said Toyota Motor, Honda Motor and Hyundai Motor, including Kia, account for 9 out of 10 hybrid sales in the U.S. Representatives for those automakers said they are actively attempting to increase production and sales of hybrid vehicles in the U.S.
“While the transition to full battery electric transportation will take time, hybrids and plug-in hybrids will play an equally important role in Kia America’s near and mid-term goals,” Eric Watson, vice president of Kia America sales, said in a statement to CNBC.
And other companies, such as the Detroit automakers, are following suit.

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Detroit Three automakers

The Detroit automakers have varying strategies for hybrid vehicles.
Ford Motor offers PHEVs but is leaning into HEVs, announcing plans in September to double sales of the V-6 hybrid model during the 2024 model year to roughly 20% in the U.S. It’s part of Ford CEO Jim Farley’s plans to quadruple the company’s production of gas-electric hybrids.
Ford’s hybrid sales through November of this year are up 23% over the same period in 2022 to more than 121,000 units, or 6.8% of its total sales through that point. In comparison, Ford’s EV sales are up 16.2% to roughly 62,500 units, accounting for 3.5% of its total sales.

Battery breakdown

Both hybrids and plug-in hybrids have a traditional engine combined with EV technologies. A traditional hybrid such as the Toyota Prius has electrified parts, including a small battery, to provide better fuel economy to assist the engine. PHEVs typically have a larger battery to provide for all-electric driving for a certain number of miles until an engine is needed to power the vehicle or electric motors.

Chrysler parent Stellantis, for its part, is leaning on PHEVs for its electrification strategy, before introducing a host of EVs starting next year. The company is the top seller of plug-in hybrid electric vehicles in the U.S., and the vehicles accounted for about 10% of the company’s third-quarter sales, led by Jeep Wrangler and Grand Cherokee SUVs.
But General Motors isn’t ready just yet to alter its EV plans, which include a goal to exclusively offer all-electric vehicles by 2035.
GM led the way for plug-in electric vehicles with the Chevrolet Volt during the 2010s. The company discontinued the vehicle in early 2019, citing demand and cost concerns.
Since then, the automaker has not offered another hybrid vehicle in the U.S. other than the recently launched Chevrolet Corvette E-Ray, a hybrid version of the famed sports car. GM does offer hybrids, including PHEVs, in China.

2024 Chevrolet Corvette E-Ray hybrid sports car

“We still have a plan in place that allows us to be all light-duty vehicles EV by 2035,” GM CEO Mary Barra said Monday during an Automotive Press Association meeting in Detroit. “We’ll adjust based on where the customer is and where demand is. It’s not going to be ‘if we build it they will come.’ We’re going to be led by the customer.”
Her comments come after GM President Mark Reuss told CNBC in August that he was “flexible” regarding hybrids as a way of meeting federal regulations.
“If it means we have to do that by law, then we have to do that by law,” he said. “If there’s regulations that get dealt on us, then we’re going to look at everything in our toolbox to meet them.”

Federal regulations

Major auto companies, including the Detroit automakers, were counting on EVs to assist in offsetting the emissions and low fuel economies of larger SUVs and trucks that can cost them hundreds of millions of dollars in fines by the federal government.
GM and Stellantis were forced to pay a combined $363.8 million in penalties for failing to meet federal fuel-economy standards for cars and trucks they produced in previous years, according to information published by the National Highway Traffic Safety Administration in June.
Such fines would significantly increase under current proposals by the Biden administration to improve fuel efficiency of vehicles and move toward EVs, according to automaker lobbying groups.
The American Automotive Policy Council, a group representing the Detroit Three, earlier this year said the automakers would face more than $14 billion in noncompliance penalties between 2027 and 2032 barring significant changes to their fleets’ overall fuel efficiency. U.S. automakers have separately warned the fines would cost $6.5 billion for GM, $3 billion at Stellantis and $1 billion at Ford, according to Reuters.
NHTSA in July proposed boosting fuel efficiency requirements by 2% per year for passenger cars and 4% per year for pickup trucks and SUVs from 2027 through 2032, resulting in a fleetwide average fuel efficiency of 58 mpg.
With EVs playing a lesser role than anticipated to boost those fleetwide averages, hybrids could save automakers millions.
“Even without electric vehicles, there’s an expectation that electrification of an internal combustion engine is going to be necessary to meet regulations anyway,” said Stephanie Brinley, principal automotive analyst at S&P Global Mobility.

Industry leader

The resurgence of hybrids is especially important for Toyota. The world’s largest automaker is considered the pioneer of traditional hybrids, with the Prius.
The company ironically became a target of environmental groups last year for its strategy to move forward with a mix of hybrids, PHEVs and EVs, which critics viewed as a lack of commitment to an all-electric future.
Toyota’s argument at the time, and still, is that it’s meeting consumer needs and planning for a more gradual global adoption that will naturally include some markets shifting to EVs sooner than others.
The company further says it takes into account the entire environmental impact of producing EVs compared with hybrid electrified vehicles, arguing it can produce eight 40-mile plug-in hybrids for every one 320-mile battery electric vehicle and save up to eight times the carbon emitted into the atmosphere.
“People are finally seeing reality,” Toyota Chairman and former CEO Akio Toyoda, who has been heavily criticized for the slower approach on EVs, said in October regarding EVs, according to The Wall Street Journal.

Toyota CEO Akio Toyoda speaks during a small media roundtable on Sept. 29, 2022 in Las Vegas. More

Paramount shares surged following reports that RedBird and Skydance were exploring a potential takeover.
Paramount’s controlling shareholder, Shari Redstone, has been in the market for a deal.

The Paramount logo is seen on a building in Los Angeles on Nov. 13, 2023.
Nurphoto| Getty Images

Paramount Global shares surged Friday following reports from Deadline and Puck News that Skydance and RedBird Capital were exploring potentially taking over the media giant.
Paramount shares closed up more than 12% Friday. The company has a market cap of about $10.4 billion and its year to date share price is virtually flat, lagging the S&P 500’s 20% gain.

Paramount’s controlling shareholder, Shari Redstone, has been open to making big deals, especially as the company weathers the storms of declining revenue and streaming losses.
RedBird, controlled by longtime former Goldman Sachs partner Gerry Cardinale, is invested in a variety of media and sports assets, including David Ellison’s Skydance, which helped produce Paramount’s 2022 blockbuster “Top Gun: Maverick,” among other hits.
Paramount has a long-term debt load of $15.6 billion, and investors have speculated about how the company will be able to forge a path in 2024. TV ad revenue was also a weak spot for the company in its most recent quarterly report.
Meanwhile, the company is reportedly considering bundling its Paramount+ streaming service with Apple TV+.
Paramount, RedBird Capital and Skydance did not immediately respond to CNBC’s requests for comment.

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Paramount Global’s year-to-date stock performance

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The U.S. Food and Drug Administration has approved Casgevy, the first gene-editing treatment to be marketed in the country.
Casgevy uses Nobel Prize-winning technology CRISPR to treat sickle cell disease, a blood disorder that affects about 100,000 Americans.
Vertex Pharmaceuticals and CRISPR Therapeutics co-developed the one-time treatment that will cost $2.2 million per patient.

The U.S. Food and Drug Administration on Friday approved the country’s first gene-editing treatment, Casgevy, for use in patients with sickle cell disease.The approval comes about a decade after the discovery of CRISPR technology for editing human DNA, representing a significant scientific advancement. Yet reaching the tens of thousands of people who could benefit from the treatment could be challenging given the potential hurdles — including cost, at $2.2 million per patient — of administering the complex therapy.
Casgevy, co-developed by Vertex Pharmaceuticals and CRISPR Therapeutics, uses Nobel Prize-winning technology CRISPR to edit a person’s genes to treat disease. The treatment was approved by U.K. regulators last month.

Shares of Vertex fell 1% Friday, while shares of CRISPR fell 8%.
Sickle cell, an inherited blood disorder, causes red blood cells to become misshapen half moons that get stuck inside blood vessels, restricting blood flow and causing what are known as pain crises. About 100,000 Americans are estimated to have the disease.

This microscope photo provided on Oct. 25, 2023, by the Centers for Disease Control and Prevention shows crescent-shaped red blood cells from a sickle cell disease patient in 1972. Britain’s medicines regulator has authorized the world’s first gene therapy treatment for sickle cell disease, in a move that could offer relief to thousands of people with the crippling disease in the U.K.
Dr. F. Gilbert/CDC via AP, File

Casgevy uses CRISPR to make an edit to a person’s DNA that turns on fetal hemoglobin, a protein that normally shuts off shortly after birth, to help red blood cells keep their healthy full-moon shape. In clinical trials, Casgevy eliminated pain crises in most patients.
The FDA approved the treatment for people 12 years and older.
“Sickle cell disease is a rare, debilitating and life-threatening blood disorder with significant unmet need, and we are excited to advance the field especially for individuals whose lives have been severely disrupted by the disease,” said Dr. Nicole Verdun, director of the Office of Therapeutic Products within the FDA’s Center for Biologics Evaluation and Research, in a statement.

“Gene therapy holds the promise of delivering more targeted and effective treatments, especially for individuals with rare diseases where the current treatment options are limited,” Verdun added.
While the treatment itself is administered only once, the whole process takes months. Blood stem cells are extracted and isolated before being sent to Vertex’s lab, where they’re genetically modified. Once ready, patients receive chemotherapy for a few days to clear out the old cells and make room for the new ones. After the new cells are infused, recipients spend weeks in the hospital recovering. 
Vertex will take the lead on launching the drug and estimates about 16,000 people with severe cases of sickle cell will be eligible.
Even among the people who could benefit the most, analysts worry few will clamor for a treatment that takes months to complete, carries the risk of infertility and could be cost prohibitive. Vertex said in a regulatory filing Friday it will charge $2.2 million per patient for the treatment.
“We believe the price of medicine to reflect the value that it brings, and the value that this brings is a one-time therapy for potentially a lifetime of cure,” Vertex CEO Dr. Reshma Kewalramani said Friday in an interview with CNBC.
Vertex is seeing “unanimous enthusiasm” from payers, patients and physicians, because people with sickle cell have been marginalized, Kewalramani said, and the field hasn’t seen much innovation.
Because the procedure is so complex, it will be limited to certain health facilities like academic medical centers. Nine health-care facilities are ready to start administering Casgevy, Vertex said in a release, with more facilities added in the coming weeks.

Bluebird’s Lyfgenia 

The FDA also on Friday approved a separate gene therapy by Bluebird Bio, called Lyfgenia that works differently than Casgevy but is administered similarly and is also intended to eliminate pain crises. That therapy was similarly approved for the treatment of sickle cell disease in people 12 years and older.
Bluebird will charge $3.1 million per patient for Lyfgenia. Shares of that company, which has a market value of just about $300 million, fell 40% Friday.
Dr. Peter Marks, director of the FDA’s Center for Biologics Evaluation and Research, estimated during a call with reporters Friday that across the two therapies approved Friday, close to 20,000 patients will be eligible for treatment.
But the FDA included a black-box warning – the strongest safety warning label –  to Bluebird Bio’s Lyfgenia, noting that in rare cases the therapy can cause certain blood cancers. 
The FDA added that warning after two patients who received Lyfgenia in a clinical trial died from a form of leukemia, Verdun told reporters Friday. 
The agency said it’s still unclear whether Lyfgenia itself or another part of the treatment process, such as the chemotherapy, caused the cancer.
But Marks said that the FDA wants patients to be aware of all potential side effects of the entire treatment process: “It’s about the totality of the therapy that’s given,” he told reporters.
Vertex did not see similar blood cancer cases in its clinical trial, which is why it did not receive a black-box warning on its label, Verdun noted.
Both Bluebird Bio and Vertex will follow patients who receive the treatments for 15 years as part of a post-approval study. The FDA has encouraged the companies to specifically monitor for malignancies, or the presence of cancerous cells that can spread to other sites of the body. More