Business

“TODAY WE SEE the birth of a new species,” declared Julio Friedmann, gazing across the bleak landscape. Along with several hundred grandees, the renowned energy technologist had travelled to a remote corner of Texas’s oil patch called Notrees at the end of April at the invitation of 1PointFive, a division of Occidental Petroleum, an American oil firm, and of Carbon Engineering, a Canadian technology startup backed by Bill Gates. The species in question is in some ways akin to a tree—but not the biological sort, nowhere to be seen on the barren terrain. Rather, it is an arboreal artifice: the first commercial-scale “direct air capture” (DAC) plant in the world. Like a tree, DAC sucks carbon dioxide from the air, concentrates it and makes it available for some use. In the natural case, that use is creating organic molecules through photosynthesis. For DAC, it can be things for which humans already use CO2, like adding fizz to drinks, encouraging faster plant growth in greenhouses or, in Occidental’s case, injecting it into underground oil reservoirs to squeeze more drops of crude from the nooks and crannies.Yet some of the 500,000 tonnes of CO2 that the Notrees plant will capture each year once fully operational in 2025 will be pumped beneath the Texas plains in the service of a grander goal: fighting climate change. For unlike the carbon stored in biological plants, which can be released when they are cut down or burned, CO2 artificially sequestered may well stay sequestered indefinitely. Companies that want to net out some of their own carbon emissions but do not trust biology-based offsets will pay the project’s managers per stashed tonne. That makes the Notrees launch the green shoot of a something else, too: a real industry.Carbon Engineering and its rivals, such as ClimeWorks, a Swiss firm, Global Thermostat, a Californian one, and myriad startups worldwide, are attracting private capital. Occidental plans to build 100 large-scale DAC facilities by 2035. Others are trying to mop up carbon dioxide produced by power plants and industrial processes before it even enters the atmosphere, an approach known as carbon capture and storage (CCS). In April ExxonMobil unveiled ambitious plans for its newish low-carbon division, whose long-term goal is to offer such decarbonisation as a service for industrial customers in sectors, like steel and cement, whose emissions are otherwise hard to abate. The oil giant thinks this sector could be raking in annual revenues of $6trn globally by 2050.The boom in carbon removal, be it from the atmosphere or from industrial point sources, cannot come fast enough. The UN-backed Intergovernmental Panel on Climate Change assumes that if the world is to have a chance of limiting global warming to 2°C above pre-industrial levels, in line with the Paris climate agreement, renewables, electric vehicles and other decarbonisation technologies are not enough. CCS and sources of “negative emissions” such as DAC will need to play a part. America’s Department of Energy calculates that the country’s climate targets require capturing and storing between 400m and 1.8bn tonnes of CO2 annually by 2050, up from 20m tonnes today. Wood Mackenzie, an energy consultancy, reckons that globally various forms of carbon removal account for a fifth of the emissions reductions required to reach net-zero greenhouse-gas emissions by 2050. If Wood Mackenzie is right, and given that humanity belches more than 40bn tonnes a year, this would be equivalent to sucking up more than 8bn tonnes of CO2 annually. And that requires an awful lot of industrial-scale carbon-removal ventures (see chart 1).For years such projects were regarded as technically plausible, perhaps, but uneconomical. An influential estimate by the American Physical Society in 2011 put the cost of DAC at $600 per tonne of CO2 captured. By comparison, permits to emit one tonne currently trade at around $100 in the EU’s emissions-trading system. CCS has been a perennial disappointment. Simon Flowers of Wood Mackenzie notes that the power sector has spent some $10bn over the years trying to get the technology to work without much to show for it.Backers of the new crop of carbon-removal projects think this time is different. One reason for their optimism is better and, crucially, cheaper technology (see chart 2). The cost of sequestering a tonne of CO2 beneath Notrees has not been disclosed but a paper from 2018 published in the journal Joule put the price tag for Carbon Engineering’s DAC system at between $94 and $232 per tonne when operating at scale. That is much less than $600 and not a world away from the EU’s carbon price. CcS, which should be considerably cheaper than DAC, is also showing a bit more promise. Svante, a Canadian startup, uses inexpensive materials to capture CO2 from dirty industrial flue gas for around $50 a tonne (though that price tag excludes transport and storage). Other companies are converting the captured carbon into products which they then hope to sell at a profit. CarbonFree, which works with US Steel and BP, a British oil-and-gas company, takes CO2 from industrial processes and turns it into speciality chemicals. LanzaTech, which has a commercial-scale partnership with ArcelorMittal, a European steel giant, and several Chinese industrial firms, builds bioreactors that convert industrial carbon emissions into useful materials. Some make their way into portable carbon stores, such as Lululemon yoga pants.All told, carbon capture, utilisation and storage (CCUS in the field’s acronym-rich jargon) is set to attract $150bn in investments globally this decade, predicts Wood Mackenzie. Assessing current and proposed projects, the consultancy reckons that global CCUS capacity—which on its definition includes cCS, the sundry ways to put the captured carbon to use, as well as DAC—will rise more than seven-fold by 2030. The second—possibly bigger—factor behind the recent flurry of carbon-removal activity is government action. One obvious way to promote the industry would be to make carbon polluters pay a high-enough fee for every tonne of carbon they emit that it would be in their interest to pay carbon removers to mop it all up, either at the source or from the atmosphere. A reasonable carbon price like the EU’s current one may, just about, make CCS viable. For DAC to be a profitable enterprise, though, the tax would probably need to be a fair bit higher, which could smother economies still dependent on hydrocarbons. That, plus the dim prospects for a global carbon tax, means that state support is needed to bridge the gap between the current price of carbon and the cost of extracting it. The emerging view among technologists, investors and buyers is that carbon capture will develop in the way that waste management did decades ago—as an initially costly but necessary endeavour that needs public support to get off the ground but can in time become profitable. That view is increasingly also held by policymakers.Some of the hundreds of billions of dollars in America’s recently approved climate handouts are aimed at bootstrapping the carbon-removal industry into existence. An enhanced tax credit included in one of the laws, the Inflation Reduction Act, provides up to $85 per tonne of CO2 permanently stored (as well as $60 per tonne of CO2 used for enhanced oil recovery, which also sequesters CO2 albeit in order to produce more hydrocarbons). Clio Crespy of Guggenheim Securities, an investment firm, calculates that this credit increases the volume of emissions in America that are “in the money” for carbon removal more than ten-fold. The EU’s response to America’s climate bonanza is likely to promote carbon removal, too. Earlier this year the EU and Norway announced a “green alliance” to boost regional carbon-capture plans.With the price of scrubbing a tonne of CO2 no longer completely otherworldly, buyers are beginning to line up. Big tech, with deep pockets and a progressive image to burnish, is particularly keen. On May 15th Microsoft unveiled plans to purchase (for an undisclosed sum) more than 2.7m tonnes of carbon captured over a decade from biomass-burning power plants in Denmark run by Orsted, a big Danish clean-energy firm, and transported for underground sequestration in the North Sea by a consortium involving Equinor, Shell and TotalEnergies, three European oil giants. Three days later Frontier, a buyers’ club with a $1bn pot for carbon-removal investments bankrolled mainly by Alphabet, Meta, Stripe and Shopify, announced a $53m deal with Charm Industrial. The firm will remove 112,000 tonnes of CO2 between 2024 and 2030 by converting agricultural waste, which would otherwise emit carbon as it decomposes, into an oil that can be stored underground. Carbon middlemen are emerging to connect projects and buyers. NextGen, a joint venture between Mitsubishi Corporation, a Japanese conglomerate, and South Pole, a Swiss developer of carbon-removal and -management projects, intends to acquire over 1m tonnes in certified carbon-removal credits by 2025, and has lined up big buyers. It has just announced the purchase of nearly 200,000 tonnes’ worth of carbon credits from 1PointFive and two other ventures. The end buyers include SwissRe and UBS, two Swiss financial giants, Mitsui OSK Lines, a Japanese shipping company, and Boston Consulting Group. Maybe the biggest sign that the carbon-removal business has legs is its embrace by the oil industry. Occidental is keen on DAC. ExxonMobil says it will spend $17bn from 2022 to 2027 on “lower-emissions investments”, with a big slug going to ccs. Chevron, ExxonMobil’s main American rival, is hosting Svante at one of its Californian oilfields. As the Microsoft deal shows, their European counterparts want to convert parts of the North Sea floor into a giant carbon sink. Equinor and Wintershall, a German oil-and-gas firm, have already secured licences to stash carbon captured from German industry in North Sea sites. Hugo Dijkgraaf, Wintershall’s technology chief, thinks his firm can abate up to 30m tonnes of CO2 per year by 2040. The idea, he says, is to turn “from an oil-and-gas company into a gas-and-carbon-management company”. Saudi Arabia, home to Saudi Aramco, the world’s oil colossus, has set itself a goal of increasing its CCS capacity five-fold in the next 12 years. Its mega-storage facility at Jubail Industrial City is expected to be operational by 2027. ADNOC, the United Arab Emirates’ national oil company, wants to ramp up its capacity six-fold by 2030, to 5m tonnes per year. The oilmen’s critics allege that their enthusiasm for carbon removal is mainly about improving their reputations in the eyes of increasingly climate-conscious consumers, while pumping more crude for longer. There is surely some truth to this. But given the urgent need to both capture carbon at source and achieve voluminous negative emissions, the willing involvement of giant oil firms, with their vast capital budgets and useful expertise in engineering and geology, is to be welcomed. ■To stay on top of the biggest stories in business and technology, sign up to the Bottom Line, our weekly subscriber-only newsletter. More

Ford on Monday will host a “Delivering Ford+” capital markets day in which it has promised to provide details of how it expects to achieve previously stated targets.
The company will have to win over Wall Street analysts who have called its EV targets “ambitious” and “crazy high.”
The automaker is targeting an 8% EBIT margin for its electric vehicle unit and a 2 million EV production runrate by 2026, up from an expected 600,000 by the end of the year.

Jim Farley, Ford CEO

DETROIT — Ford Motor on Monday will attempt to turn skeptics of its electric vehicle growth plans, which some Wall Street analysts have called “ambitious” and “crazy high,” into believers.
The Detroit automaker will host its capital markets day, during which it has promised to provide details of how Ford expects to achieve previously stated targets for 8% EBIT margin on its electric vehicle unit and a 2 million EV production runrate by 2026, up from an expected 600,000 by year-end.

“We will take you through why we believe that 8% margin is totally realistic despite all the pricing pressure that we will absolutely get because everyone wants to grow,” CEO Jim Farley said during the company’s first-quarter earnings call earlier this month.
The event is called “Delivering Ford+,” a reference to Farley’s turnaround and restructuring efforts that some have criticized for not being executed quickly enough. Farley announced the plan seven months into his tenure, in May 2021.
The automaker’s CEO described the capital markets day as an opportunity to demonstrate how the strategy is “coming to life.” The company is expected to run through its profit walks for its traditional “Ford Blue” and “Ford Pro” commercial businesses in addition to its “Model e” electric vehicle unit.
Ford also is expected to preview its second-generation battery products and technology, which the company has said will be crucial to achieving that 8% EBIT margin. The EV business is expected to lose about $3 billion this year.

Ford previously said it expects to hit that profit margin largely through scale, EV battery improvements and efficiencies in design and engineering.

“There’s definitely some analysts that are skeptical,” Morningstar analyst David Whiston told CNBC. “I think Monday is an opportunity to try and convince some of those skeptics that it can happen. I’m personally willing to give them the benefit of the doubt on that … you’ve got to win people over.”
Whiston described the timeline for the targets as “tight.” Others have been more critical.
Morgan Stanley analyst Adam Jonas during Ford’s first-quarter earnings call described the EV production increase as “crazy high.” Barclays analyst Dan Levy in a note to investors this week called it “ambitious.”
“Currently, we are skeptical as to Ford’s ability to meet both targets, as we expect it to opt for a balance of volumes with profit opportunities,” Levy said.
Analysts don’t expect much movement in the stock from the event, unless Ford surprises with a new product or change in previously announced plans.
“Overall, we think Ford’s key targets are unlikely to be different from its recent teach-in session, but management will attempt to give investors more comfort around them,” Deutsche Bank analyst Emmanuel Rosner said Wednesday in an investor note, reiterating the firm’s sell rating on the stock.
Ford stock is rated “hold” with an average target price of $13.63 per share, according to analyst ratings and estimates compiled by FactSet.
Shares of Ford are up by about 75% since Farley became CEO in October 2020. The stock closed Friday at $11.65 per share.
– CNBC’s Michael Bloom contributed to this report. More

Biomilq, a North Carolina-based startup, is working to recreate breast milk outside of the body, a breakthrough that could change the way infant nutrition is understood in America.
The company’s seemingly niche innovation took on new resonance amid the infant-formula shortage, which demonstrated the frailty of that essential product.
Before the company can fully take off, it’ll have to find its place in a contentious industry, navigate startup woes and clear regulatory hurdles. 

Mother holding a newborn in a hospital bed.
Svetikd | E+ | Getty Images

In 2020, in a nondescript office building in Durham, North Carolina, a team of scientists used cells to recreate sugar and protein found in breast milk.
The seemingly niche development could years later change the way infant nutrition is understood and distributed in America. 

Biomilq, the company behind the breakthrough, had been working for nearly a decade to replicate the process of making human milk — but outside of the body. Its advancement was made possible by hundreds of volunteers, who donated samples of their milk so the company could build a large enough cell bank to launch its process for replicating milk at scale.
Just two years after Biomilq’s lightbulb moment, the invention’s potential benefits came into focus when several major baby formula brands were recalled, sending the entire industry into a tailspin, jacking up prices and putting new parents in a desperate bind. 
More than a year after supply first ran low, a former Food and Drug Administration official said in late March that the American infant-formula supply is still vulnerable to disruptions and safety issues. 
The formula shortage has laid bare the frailty of the infant-nutrition supply, which only underscored the importance of Biomilq’s vision and its potential to fill a need, according to its co-founder and CEO Leila Strickland. 
“The infant-formula shortage was an inevitability because of the way we produce it in this country,” Strickland said. “When we are making all of the food, to feed all of the babies, and it’s such a small number of plants … there’s going to eventually be an event like this.” 

While the crisis has highlighted the importance of a resilient formula supply, human milk experts, milk bank advocates and Biomilq all stress the same message: Breast milk is best. But many U.S. policies, including a lack of paid parental leave, make that an unfeasible option for many parents.
If Biomilq can get its breakthrough science to market and keep prices down, it has “the potential to be a game-changer,” according to Maryanne Perrin, a professor who studies human milk at the University of North Carolina Greensboro.  
There’s also an upside for the climate: Many infant formulas rely on powdered cow’s milk, production of which exacts a major environmental toll. On the strength of its climate-friendly potential, Biomilq received $3.5 million in 2020 from Bill Gates’ Breakthrough Energy Ventures, an investment firm focused on climate solutions. 
Once all of Biomilq’s technology is in place, Perrin thinks it could extend to other, bigger markets, like producing cow’s milk in a cell-culture model.
“The technology has the potential to impact a ton of industries,” she said. 
But before Biomilq can do any of that, it will have to find its place within a historically contentious industry, navigate startup challenges and clear significant regulatory hurdles. 

Where does Biomilq fit in?

It is unclear what share Biomilq will take in the global infant-formula market, which is expected to be valued at over $100 billion by 2032, particularly given debates over breastfeeding alternatives.
Biomilq does not aim to replace breastfeeding or infant formula, but supporters of both methods have opposed alternatives in the past. In order to carve out a space in the industry, Biomilq will have to make it clear that its products are meant to fit into the existing ecosystem of infant nutrition, said Perrin and Lindsay Groff, executive director of the Human Milk Banking Association of America. 
Strickland acknowledges that Biomilq falls “in this valley” between breastfeeding and formula — a reality that complicates its path to the market. She said she ultimately wants to support access to all infant-nutrition options. 
Strickland said she has spoken with infant-formula companies that want to know how Biomilq’s technologies could improve their existing formulas. The startup will likely take a “gradual approach” to introducing its science via “an early-life nutrition product in partnership with one of these bigger companies,” Strickland explained.
With time, she hopes to eventually create a product that has “a complete profile of macronutrients” like human milk, while meeting the “functional definition of milk from a composition standpoint.” 
Still, don’t expect to see Biomilq next to Gerber products anytime soon. Even “simpler prototype iterations” of its product, like collaborations with infant-formula companies, will take somewhere between three and five years to come to fruition, while a complete human milk product “is probably even further out,” Strickland said.
She also hopes to use Biomilq’s platform to bring visibility to the institutional and physiological barriers to breastfeeding. Other breast milk experts want to see the same thing.
“What would be great is if there was investment in breastfeeding support, because if there was more breastfeeding, the need for formula, the need for donor milk, or any other options being brought up now would be lessened,” Groff said. “That’s what we all want: healthy babies.”
Unlike the infant-formula industry, which includes heavyweights like Gerber and Nestle, Perrin noted there’s “no company behind breast milk.” That’s made enshrining protections for breastfeeding particularly difficult, despite the efforts of breastfeeding advocacy groups. 
Amid this complicated landscape, Biomilq also will have to convince consumers to get on board with a groundbreaking product in an industry that lacks research and public understanding. Breast milk is woefully understudied — to the point that it’s difficult “to even say what human milk is from a nutritional standpoint,” Perrin explained. 
It’s such a problem that Strickland said one of her common “stumper interview questions” for new hires is simply: “What is milk?” 
Fittingly, Biomilq’s research will also fill existing gaps in our understanding of human milk. The company is researching which aspects of human milk its system is best suited to produce. 
“There are no two samples of milk ever, anywhere on the planet that are the same from a composition standpoint,” Strickland said. To create a full milk product, rather than a formula hybrid, Biomilq will have to create a production process that can make its product “consistently and stably every batch,” she added. 

A tough time for startups

In addition to entering a challenging and under-researched industry, Biomilq also has to grapple with growing pains common to startups. Strickland founded Biomilq alongside food scientist Michelle Egger, who left the company in March. Strickland, who was previously chief scientific officer, took over as CEO. 
Strickland would not comment on any specifics regarding Egger’s departure, beyond citing “some shifts in thinking about the direction of the company and the strategy overall.”
Egger told CNBC she has been advised not to comment further about Biomilq because she left the company.
Prior to the departure, Strickland’s partnership with Egger seemed like a fortuitous one. Strickland, who completed a postdoctoral fellowship in cell biology at Stanford University, could handle the science, while Egger, who started her career at General Mills and helped develop Lärabar and Go-Gurt, had solid experience introducing innovative food products. 
As CEO, Strickland will likely bring an even deeper emphasis on Biomilq’s science. She wants the company to use its research as “a community exercise,” by publishing, sharing and seeking peer review for its findings, as well as engaging with the scientific community.  
To be sure, Biomilq faces startup-specific challenges. The company emerged in the heyday of investor interest in lab-grown alternatives to common consumer products: In 2013, the first lab-grown burger was developed and publicly tasted by a scientist, sparking wider interest in cell-oriented products.
For a time, funding flowed: In addition to the cash received from Bill Gates’ investment firm, Biomilq also raised $21 million in its Series A rounds in 2021, Strickland said. 
Now, the tide might be turning.
“Right now, we’re in this weird swirl in biotech where there’s a lot of anxiety about venture capital-backed initiatives like Biomilq,” she said, adding that Biomilq is increasingly focused on ensuring it has “enough operating capital to endure what’s looking like a more difficult funding environment in the immediate future.” 
Biotech funding reached a record high of $77 billion in 2021, per Crunchbase data, but it then dipped 38.6% between 2021 and 2022. That decline will likely only be made worse by the collapse of Silicon Valley Bank, where a wide swath of U.S. biotech companies banked. Though the collapse only directly impacted a handful of biotech companies, small biotech firms might be hard-pressed to find another lender. 
“It’s been a grow fast phase, and now the whole ecosystem is shifting to a survival phase,” Strickland added. 

Convincing parents will be no small feat

For all of Biomilq’s challenges, Strickland said its path forward still looks “pretty similar” to other companies in the food tech space “developing foods from a totally novel technology.” One of its biggest hurdles in bringing a product to market is government regulation, which will likely be even more stringent than the oversight other companies face, because Biomilq is in the business of feeding infants.
Though it is still years away from getting a product to market, Biomilq has started talks with the Food and Drug Administration, which will ultimately regulate the company, Strickland said.
“Mostly at this stage, it’s about being upfront and transparent about: ‘What do we envision this becoming?'” she said. “Within the FDA in particular, they’ve been really affected by the formula shortage and recognize the need for innovation in this space.” 
Groff added that even if Biomilq surmounts the “huge challenge” of FDA approval, the company will face an uphill battle convincing new parents to feed their babies an unfamiliar product.
“It’s such a novel concept that it’s not exactly clear how consumers are going to respond when they have this option available that’s produced in such an unusual way,” Strickland added. 
But none of that makes Biomilq’s potential any less exciting to those like Groff and Perrin, who study infant nutrition. Strickland said she is ready for any challenges ahead, because the payoff feels worth it. 
“It really could change the way we think about feeding infants,” she said. “It’s really exciting to be a part of that conversation — even at this stage.” More

Media companies looking to make their streaming businesses profitable are leaning heavily on advertising.
NBCUniversal, Fox and Warner Bros. Discovery were among the companies to highlight ad-supported streaming at their annual pitches to advertisers this past week.
Free, ad-supported streaming is playing a big role in the conversation, too.

This film image released by Universal Pictures shows Mark Wahlberg, left with the character Ted, voiced by Seth MacFarlane in a scene from “Ted.” (AP Photo/Universal Pictures)
Photo Credit: Universal Pictures/Tippett Studio

After spending years amassing streaming subscribers at great cost, media companies now need to make some profits. And they’re increasingly leaning on advertising as the answer.
Look no further for proof of that than the most recent annual Upfronts, the events where media companies like Fox Corp., Warner Bros. Discovery, Disney and Comcast’s NBCUniversal, made their pitches to advertisers.

With the absence of stars and talent due to the ongoing Hollywood writers’ strike, NBCUniversal kicked off its event with an animated video of Ted, the foul-mouthed teddy bear created by Seth MacFarlane who has landed a series on the company’s Peacock streaming service, singing and dancing to a tune that included the refrain “We need ads.”
“We were all dreamers to think that the streamers were anything but fads,” the animated teddy bear sang to the audience. “Now, we’re all begging for ads.”
The ad push comes not only as subscriber growth slows and customers drop in and out of services — commonly known as churn in the media business — but as the advertising market has softened and been slow to recover.
During Disney’s earnings call earlier this month, CEO Bob Iger put new emphasis on ad-supported streaming. And Paramount Global and NBCUniversal have touted that they’ve had cheaper ad tiers since the get-go. Warner Bros. Discovery also has added such options for consumers.
“Despite the near-term macro headwinds of the overall marketplace today, the advertising potential of this combined platform is incredibly exciting,” Iger said after announcing Hulu content would join Disney+, a move that would be a positive for advertisers.

Even Netflix, which was against advertising for years, entered the game. The 800-pound gorilla in the streaming room for the first time this past week held a virtual presentation for advertisers, unveiling information about its ad-supported tier that gave a boost to its stock.
Still, it’s early in the game, and it’s unclear whether advertising will fill the gaps of unstable subscriber growth for streaming.

‘We need ads’

There’s been an uptick of consumers signing up for ad-supported streaming subscriptions. In the U.S., they grew nearly 25% year over year to 55.2 million in the first quarter of this year from 44.3 million in the year-earlier period, according to data firm Antenna. Growth in ad-supported tiers was on the rise last year, too. Ad-supported plan tiers accounted for 32% sign-ups in 2022, up from 18% in 2020.
When Netflix said it lost subscribers earlier last year, it sent the streaming world into a spiral, weighing on stock prices and pushing executives to find other ways to bring in revenue. By the end of the year, Netflix had launched a cheaper, ad-supported tier. Rival Disney+ did as well.
Media companies are returning to the initial business models that long propped up their businesses — generating revenue off of content in multiple ways rather than relying on one route, a subscription business.
Netflix, while noting it was still “in early days,” said this week it had 5 million monthly active users for its cheaper, ad-supported option and 25% of its new subscribers were signing up for the tier in areas where it’s available.
But media companies are struggling with the question of whether ad-tier subscriptions make up for other losses.
“I don’t think we know that answer fully yet,” said Jonathan Miller, a former Hulu board member and current CEO of Integrated Media, which specializes in digital media investments. “But I think we’ll learn that a [subscription, ad-free] customer that doesn’t churn will be the most valuable. There’s math to be learned over time as the playing field settles.”
Disney, which is also the majority owner of Hulu, has the greatest number of ad-supported subscriptions, followed by Peacock, Paramount+, Warner Bros. Discovery — which has the soon-to-be-merged Max and Discovery+ — and Netflix, according to Antenna. Hulu and Peacock are the two streamers with a majority of subscribers on ad-supported tiers, the data provider said.

FAST lane

Another way of padding streaming businesses with revenue is through free, ad-supported, or FAST, channels.
The new streaming model is looking more like the previous TV model. FAST channels are like broadcast TV; cheaper ad-supported streaming tiers are akin to cable-TV networks; and the premium, ad-free options are similar to HBO and Showtime.
“I see FAST as a replacement for the old syndication business. There are multiple ways to monetize television,” said Bill Rouhana, CEO of Chicken Soup for the Soul Entertainment, which owns ad-supported streaming services including Crackle and Redbox, as well as FAST channels.

In this photo illustration, the Paramount Global logo is displayed on a smartphone screen.
Rafael Henrique | SOPA Images | Lightrocket | Getty Images

The free streaming services, which offer both a library of content on demand and a guide of curated channels, have seen explosive growth in recent years. Fox and Paramount acquired Tubi and Pluto, respectively, not long before the surge in viewership occurred. The deals became a badge of honor in the companies’ earnings calls.
For these larger media companies, they’ve also become a place for their own libraries. Pluto shows earlier episodes of the lucrative “Yellowstone” series, which has also seen multiple spinoffs boost Paramount+.
“It really was in the last year that we saw a seismic shift,” said Adam Lewinson, Tubi’s chief content officer. “With the overarching challenges in terms of the pay streaming model and then layer in subscription fatigue. This is where in tougher economic times people look more closely at their spending. On top of that, now nearly 1 in 3 streamers are reducing their spending on streaming.”
For Fox, which is focused on sports and news on traditional TV channels, Tubi is its answer to streaming. As CEO Lachlan Murdoch had earlier noted in an earnings call, Tubi was a focal point at Fox’s Upfront presentation last week. Executives cheered Tubi for making measurement firm Nielsen’s streaming gauge report for the first time ever recently.
Paramount has similarly emphasized Pluto’s growth. During the company’s Upfront dinners with advertisers, Pluto was a key part of the conversation, said David Lawenda, Paramount’s chief digital advertising officer.
Warner Bros. Discovery has said it plans to create its own FAST channels. In the meantime, it has pulled content from HBO Max and licensed it to Tubi and Roku.
“To also syndicate your content through FAST channels, that’s probably wisest. It could create strategic value in addition to just cash,” said Rouhana, of Chicken Soup for the Soul Entertainment. “In a world where churn is a fact, having the ability to show those lost subscribers content again and get money while doing it can only be good.”

Price check

Companies also are jacking up streaming prices to make up for losses. A combination of price hikes and advertising revenue make up the planned path to profitability, Iger said during Disney’s earnings call earlier this month.
Executives at media companies including Warner Bros. Discovery, Paramount and Disney have said in previous investor calls that there remains room to grow on ad-free streaming options.
During the Disney earnings call, Iger said that while the company didn’t intend to increase prices for ad-supported customers, people who pay for content without commercials could expect an increase later this year.

Disney Executive Chairman Bob Iger attends the Exclusive 100-Minute Sneak Peek of Peter Jackson’s The Beatles: Get Back at El Capitan Theatre on November 18, 2021 in Hollywood, California. (Photo by Charley Gallay/Getty Images for Disney)
Charley Gallay | Getty Images

“Meanwhile, the pricing changes we’ve already implemented have proven successful, and we plan to set a higher price for our ad-free tier later this year, to better reflect the value of our content offerings,” he said. “As we look to the future, we will continue optimizing our pricing model to reward loyalty and reduce churn, to increase subscriber revenue for the premium ad-free tier and drive growth of subscribers who offer the lower-cost ad supported option.”
HBO Max, Disney and Paramount have all stepped up pricing on their streaming services in the last year, all while consumers have been contending with inflation in food and other essential goods.
“It’s not clear to me that you can continue to raise prices on the subscription side given the nature of the macro economy,” said Miller of Integrated Media. “To me, it’s having the combination of things right that will optimize the business.”
Disclosure: CNBC is part of NBCUniversal, which is owned by Comcast. More

Ford, General Motors and Toyota are among those increasingly looking to capitalize on the growing midsize pickup truck segment.
The small pickups have evolved from entry-level work trucks to pricey, capable and highly profitable models that can cost more than $60,000.
The trucks have become more capable, larger and pricier, with an influx of new luxury and off-road variants, and special features.

2024 Toyota Tacoma Trailhunter

DETROIT — Size matters. Just ask America’s largest automakers.
Ford, General Motors and Toyota are among those increasingly looking to capitalize on the growing midsize pickup truck segment: vehicles big enough to command high price tags but small enough to protect profit margins.

The small pickups have evolved from entry-level work trucks into pricey, capable and highly profitable models that can cost more than $60,000 — in line with luxury vehicles from BMW, Cadillac and others.
“It’s just not aimed at people on a budget, because I think that’s what the segment was for a long time,” said Jessica Caldwell, executive director of insights at auto research firm Edmunds. “The trucks are getting nicer with more amenities, more features and more emphasis on design.”
Midsize pickup trucks are following the lead of their larger, full-size counterparts such as the Ford F-150, Chevrolet Silverado and Toyota Tundra. They’ve become more capable, larger and pricier, with an influx of new luxury and off-road variants, and special features.
Sales of midsize vehicles have topped 600,000 vehicles since 2019, as consumer interest has moved away from traditional sedans to utility vehicles such as crossovers, SUVs and, of course, pickup trucks.
Over the past decade, traditional midsize pickup truck sales have more than doubled to represent 4.4% of U.S. vehicle sales last year — up from a minuscule 1.6% in 2013, and the highest level since 2005, according to Edmunds.

S&P Global Mobility expects sales of midsize pickups to continue to grow in the coming years but top out as a percentage of U.S. market share at 4.6% in 2026.

The average price paid for one of the vehicles is likewise rising: During the past decade, the average price increased 53% from about $28,100 to more than $42,000, Edmunds reports. That price growth is 3 percentage points stronger than the overall industry.

Competition increasing

The midsize pickup segment has grown from three vehicles in production a decade ago to now seven gas-powered pickups from the likes of Chevrolet, Ford, GMC, Honda, Jeep, Nissan and Toyota. Half the brands have announced redesigned vehicles this year, which is expected to boost interest and competition in the segment.
Toyota this week revealed its fourth-generation Tacoma pickup, a week after Ford Motor unveiled its redesigned Ranger for the U.S. General Motors also has redesigned versions of its Chevrolet Colorado and GMC Canyon pickups arriving in dealerships.

2023 GMC Canyon AT4X Edition 1

“It’s really hotter than it’s ever been in terms of midsize truck,” Patrick Finnegan, senior manager of GMC trucks and full-size SUVs, told CNBC. “There’s a lot more effort, energy and enthusiasm [and] momentum building in this segment than we’ve ever seen.”
While the Detroit automakers dominate large pickup truck sales, Toyota Motor is the clear leader in midsize pickup truck sales with its Tacoma.
Toyota has commanded a roughly 40% share of the American midsize pickup truck segment since 2019, when Ford and Jeep reentered the market, Edmunds reports. That’s down from a more than 60% market share a decade ago — despite Tacoma sales that surged roughly 150% since then — as rival automakers have released new trucks.

It’s a position Toyota has no plans of relinquishing: “[Tacoma] is the No. 1 selling vehicle in the segment … our intention is for that to remain,” said Joseph Moses, Toyota North America general manager of trucks and SUVs.
Trailing Toyota is GM. Edmunds reports the Detroit automaker’s share of the U.S. midsize pickup segment last year was about 19%, followed by Stellantis’ Jeep Gladiator at 12.8% and the Nissan Frontier at 12.5%. Ford’s Ranger was at 9.4%, down from roughly 15% market share the previous year.
“I don’t see any reason or way Toyota’s dominance in this segment doesn’t hold,” said Stephanie Brinley, principal automotive analyst at S&P Global. “It has gone down since 2017 … but they’re still well over 200,000 units [annually]. No one else is even close.”

Varying strategies

Automakers’ sales volumes speak to their diverging strategies in the midsize pickup truck segment.
Toyota promotes what it calls “a Tacoma for everyone,” offering several variations of its standard model, including a two-door version of the Tacoma, two different bed lengths, and a new high-end, off-road “Trailhunter” model. It’s also offering the Tacoma with a manual transmission — a rarity in today’s automotive industry.
Meanwhile, its competitors have limited the number of cab and pickup box configurations they offer, shifting to exclusively four-door midsize pickups with one bed option to reduce complexity.
Much of the midsize optionality tends to be a profit play. Ford CEO Jim Farley last month told investors that special variants — such as a new performance Raptor model in Ford’s Ranger lineup — share roughly 80% of their parts with regular models but have 30% higher contribution margins.
The Raptor will start at $56,960. That’s nearly $23,000 more than the entry-level Ranger model.

2024 Ford Ranger Raptor

“The Raptor’s going to be at the top end of our Ranger offering,” said Gretchen Sauer, Ford’s marketing manager of the pickup. “It’s going to extend up our overall transaction price for Ranger.”
GM counts Chevrolet as its mainstream brand for the midsize pickup segment, while GMC specializes on higher-end models.
GMC’s Finnegan said the brand expects to increase new customers with its redesigned Canyon. Much of that draw is expected at the high end of the market with GMC’s off-road AT4 and AT4X models, which can top both top $60,000.
“It’s a priority for us in terms of getting into that segment and growing our share,” Finnegan said. “I think it’s probably safe to say that with all the new entries in the segment, we think that the segment will grow.” More

A federal judge Friday ordered American Airlines and JetBlue Airways to end their partnership in the Northeast.
The Department of Justice sued to undo the alliance arguing it was anti-competitive.
Undoing the partnership would be difficult, especially during the peak summer travel season, which airlines have already sold tickets for.

An American Airlines plane takes off near a parked JetBlue plane at the Fort Lauderdale-Hollywood International Airport on July 16, 2020 in Fort Lauderdale, Florida.
Joe Raedle | Getty Images

A federal judge Friday ordered American Airlines and JetBlue Airways to end their partnership in the Northeast, a win for the Justice Department after it sued to undo the alliance arguing it was anti-competitive.The lawsuit, filed in September 2021, alleged that the airlines’ alliance was effectively a merger that would hurt consumers by driving up fares. The trial began a year later in Boston and wrapped up in December.Both airlines expressed disappointment with the decision and said they were considering next steps.
“It makes the two airlines partners, each having a substantial interest in the success of their joint and individual efforts, instead of vigorous, arms-length rivals regularly challenging each other in the marketplace of competition,” U.S. District Judge Leo Sorokin said in his ruling.

Fort Worth, Texas-based American Airlines and New York-based JetBlue Airways argued they needed the so-called Northeast Alliance to better compete with other large carriers Delta Air Lines and United Airlines in congested airports in the region.
“Whatever the benefits to American and JetBlue of becoming more powerful — in the northeast generally or in their shared rivalry with Delta — such benefits arise from a naked agreement not to compete with one another,” Sorokin wrote. “Such a pact is just the sort of ‘unreasonable restraint on trade’ the Sherman Act was designed to prevent.”
He ordered the airlines to end the partnership 30 days after the ruling. The carriers are likely to challenge the decision. A JetBlue spokeswoman said the carrier is studying the decision and evaluating next steps. 
“We are disappointed in the decision,” the spokesperson said. “We made it clear at trial that the Northeast Alliance has been a huge win for customers. Through the NEA, JetBlue has been able to significantly grow in constrained northeast airports, bringing the airline’s low fares and great service to more routes than would have been possible otherwise.”
“The Court’s legal analysis is plainly incorrect and unprecedented for a joint venture like the Northeast Alliance,” an American Airlines spokesman said in a statement. “There was no evidence in the record of any consumer harm from the partnership, and there is no legal basis for inferring harm simply from the fact of collaboration.”

Undoing the partnership would be difficult, especially during the peak summer travel season, which airlines have already sold tickets for.
JetBlue and American are not allowed to coordinate fares under the partnership, which was approved in the final days of the Trump administration in 2021 and has since expanded.
JetBlue had previously warned in a securities filing a ruling against the NEA “could have an adverse impact on our business, financial condition, and results of operations.
“Additionally, we are incurring costs associated with implementing operational and marketing elements of the NEA, which would not be recoverable if we were required to unwind all or a portion of the NEA,” the company said.
The Justice Department didn’t immediately respond to a request for comment.
The department separately in March filed an antitrust lawsuit to block JetBlue’s proposed acquisition of budget carrier Spirit Airlines, arguing the deal would drive up fares, “harming cost-conscious fliers most acutely.”
That combination faces a high hurdle for approval by the Biden administration, which has vowed to take a hard line against what it views as anti-competitive deals. More

Florida Gov. Ron DeSantis moved to disqualify the federal judge overseeing Disney’s political retaliation lawsuit.
The Republican’s lawyers argued that the judge’s previous comments cast doubt on his impartiality.
DeSantis is gearing up to launch his expected 2024 presidential campaign next week.

Florida Gov. Ron DeSantis gives remarks at the Heritage Foundation’s 50th Anniversary Leadership Summit at the Gaylord National Resort & Convention Center on April 21, 2023 in National Harbor, Maryland.
Anna Moneymaker | Getty Images

Florida Gov. Ron DeSantis moved Friday to disqualify the federal judge overseeing Disney’s political retaliation lawsuit, alleging the judge’s comments in previous cases raise doubts about his impartiality.
Judge Mark Walker had in two separate cases “offered ‘Disney’ as an example of state retaliation” without being prompted, lawyers for DeSantis said in a court filing.

Those remarks “could reasonably imply that the Court has prejudged the retaliation question” in Disney’s case, they argued. That’s because Disney’s lawsuit alleges that DeSantis led a campaign of political retribution against the company after it criticized his controversial classroom bill, labeled “Don’t Say Gay” by critics.
“Because that question is now before this Court, and because that question involves highly publicized matters of great interest to Florida’s citizens, the Court should disqualify itself to prevent even the appearance of impropriety,” DeSantis’ legal team wrote.
A Disney spokesman did not immediately respond to CNBC’s request for comment.
Disney filed a civil lawsuit in U.S. District Court in Tallahassee, Florida, after the company’s development deals were nullified by a board of supervisors that DeSantis had picked to oversee the district that includes Walt Disney World. The board claimed Disney had struck the deals to thwart its power, but the entertainment giant says they were crafted to secure future investments in its Florida parks.
DeSantis had replaced the board with his preferred picks after he and his allies targeted Disney’s special tax district. The focus on the district, which had been in place since the 1960s, began just weeks after then-Disney CEO Bob Chapek criticized the classroom bill.

DeSantis’ legal team pointed to Walker’s remarks from the past year in two separate court hearings as evidence to support his recusal.
In an April 1, 2022, hearing, Walker had asked, “is there anything in the record that says we are now going to take away Disney’s special status because they’re woke?”
In doing so, the judge had “used the State’s contemplated dissolution of Disney’s special district as an example of retaliatory conduct,” DeSantis’ lawyers argued.
The other alleged example came in a June 21, 2022, hearing in a case accusing DeSantis of chilling speech in schools. Walker had suggested in that hearing that Florida’s moves against Disney were punitive actions, when he said that the company was going to lose its special status because it made a statement that arguably “ran afoul of state policy of the controlling party.”
The lawyers for DeSantis argued that Walker’s “unprompted suggestion, on two separate occasions, that the State punished Disney by eliminating its ‘special status’ gives an appearance of partiality.”
“The Court’s comments seemingly reflect its opinion on whether the State punished Disney’s speech by revoking Disney’s ‘special status,'” they wrote.
A spokesman for the board, whose members are also named as defendants in Disney’s lawsuit, declined to comment on the latest court filing.

DeSantis battles Disney – and Trump

The feud between DeSantis and one of his state’s top employers has gone on for more than a year. The two sides have only grown more entrenched as the governor gears up to launch his expected 2024 presidential campaign next week.
DeSantis has made a name for himself by engaging in divisive culture-war battles, including his fight against Disney, which the governor has slammed as a “Magic Kingdom of Woke Corporatism.”
But his drawn-out clash with the House of Mouse has exposed him to criticism from even some Republicans — and especially former President Donald Trump, who has repeatedly ripped DeSantis.

After Disney announced on Thursday that it has abandoned plans to open up a new employee campus in Lake Nona, Florida, located 20 miles from Walt Disney World Resort, Trump crowed on social media that DeSantis was getting “destroyed.”
Josh D’Amaro, chairman of Disney’s parks, experiences and products division, cited “changing business conditions” and the return of CEO Bob Iger as reasons for the cancellation. Additionally, the company will no longer be asking more than 2,000 California-based employees to relocate to Florida.
D’Amaro reiterated in his memo that the company still plans to invest $17 billion in Florida over the next 10 years, including the addition of around 13,000 jobs. The company currently employs more than 75,000 people in the state.
Disney declined to provide specific updates on that investment, but has previously announced plans to update park attractions, expand existing parks and add more cruise ships to its fleet in Florida. More

Slow sales at Foot Locker prompted it to lower its guidance just two months after it was introduced.
The athletic apparel retailer missed on the top and bottom lines.
The company said promotions and retail theft led to a 4 percentage point year-over-year drop in gross margins.

A sign hangs above the entrance of a Foot Locker store on August 02, 2021 in Chicago, Illinois.
Scott Olson | Getty Images

Foot Locker’s stock plummeted more than 27% Friday after a worse-than-expected consumer slowdown led to a double-digit sales drop, prompting the company to slash its outlook just two months after introducing it. 
Following a string of better-than-expected earnings from major retailers like Target, TJ Maxx and Walmart this week, Foot Locker’s poor report could signal trouble ahead for other names in the sector, as a range of companies announce earnings over the next few weeks.

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Foot locker missed on both the top and bottom lines and said it had to aggressively promote merchandise to clear steep inventory levels and convince shoppers to use their discretionary dollars on shoes and clothes. 
Here’s how the athletic apparel retailer did in its first fiscal quarter compared with what Wall Street was anticipating, based on a survey of analysts by Refinitiv:

Earnings per share: 70 cents adjusted vs. 81 cents expected
Revenue: $1.93 billion vs. $1.99 billion expected

The company’s reported net income for the three-month period that ended April 29 was $36 million, or 38 cents a share, compared with roughly $132 million, or $1.37 per share, a year earlier. 
Sales dropped to $1.93 billion, down 11.4% from $2.18 billion a year earlier.
Shares closed 27% lower Friday, giving the company a market cap of $2.82 billion.

Foot Locker now expects sales to be down 6.5% to 8% for the year, compared with a prior range of down 3.5% to 5.5%. It expects comparable sales to fall 7.5% to 9%, compared with a prior range of down 3.5% to 5.5%.
Foot Locker expects non-GAAP earnings per share to be between $2 and $2.25, compared to its previous outlook of $3.35 to $3.65.
The company anticipates gross margins will be between 28.6% to 28.8%, compared with a prior range of 30.8% to 31%.
“Consumer demand, you know, has softened since investor day [earlier this year] and you know, signals are that we think that pressure will continue,” CEO Mary Dillon said during an analyst call. “As we came into this year, though, we knew there was some pressure because of the lower tax refund. We had hoped that things would snap back post that and what we saw is that it really hasn’t to the extent that we were forecasting or hoping for.”
The company’s shoppers, which skew middle to lower income, face pressure on discretionary spending from persistent inflation in household necessities like gas, rent and groceries, Dillon said. She added that the company has seen “an increase in usage of credit,” as consumer debt reaches a new high in the U.S.
During back to school and holiday, Foot Locker shoppers “rallied” but also became accustomed to higher-than-usual promotions, the company said. Shoppers were “resistant” to full prices come February and combined with macroeconomic factors, it created “headwinds” for the company’s key running brands, said Frank Bracken, Foot Locker’s chief commercial officer and executive vice president. 
Foot Locker’s poor report could be a harbinger of what’s to come, especially as retailers like Kohl’s, American Eagle, Abercrombie & Fitch, Ralph Lauren and Gap get ready to report earnings next week. 
While key retailers posted better-than-expected earnings this week, 45% of the sector has yet to report, the Bank of America trading desk noted. The companies still to come aren’t as high quality as the ones that reported this week, the bank said. 
“I think FL commentary punishes the sector today and adds to folks’ pre-existing nervousness re: the results still to come over the next few weeks,” the trading desk told clients. 
Foot Locker began aggressively promoting merchandise in April to drive sales but the heavy discounting – combined with an uptick in retail theft – shaved four percentage points off of its margins in the first quarter compared to the prior-year period. The company expects promotions will pressure margins moving forward.
Other soft-line retailers, or those that sell soft goods like apparel and shoes, could also report a margin squeeze in the coming weeks due to an uptick in promotions across the sector to cater to price-conscious consumers, analysts told CNBC previously. 

Nike ‘reset’ contributes to slow sales

The earnings come eight months into Dillon’s tenure with Foot Locker and just two months after she unveiled the company’s new strategy at an upbeat investor day in March. 
Dillon touted the company’s “renewed” partnership with Nike – it’s most prominent and largest vendor – and said she had spent a “great deal of time … revitalizing” Foot Locker’s relationship with the sneaker giant since taking over. 
During the investor day, the company said Nike will continue to lead its brand portfolio, accounting for 55% to 60% of its mix. But on Friday, it said its “reset” with the business contributed to slow comparable sales. It also noted a “constrained supply” of Nike products, which have long been one of its biggest sales drivers. 
“The mix outside of Nike was 35% this quarter, that was up a couple of points so we do feel like we are making progress and diversifying the brand portfolio,” said Robert Higginbotham, the company’s outgoing chief financial officer and senior vice president of investor relations. “We haven’t given targets for the Nike or vendor mix penetration by year. We still very much expect to, over time, by 2026, reach over 40% in our mix with other vendors.” 
While Nike has long been a crucial part of Foot Locker’s business, at times accounting for the majority of its sales, the sneaker giant is in the process of its own internal reset. It has forced Foot Locker to become less reliant on it. 
Nike has called out Foot Locker as an important partner, but it has also spent the last several years boosting its direct-to-consumer business and cutting ties with wholesalers. Over the last several quarters, its wholesale revenues were up, but that was largely because Nike was leaning on those partners to clear out excess inventory. 
During an earnings call in March, the company said it expects wholesale revenue to “moderate” for the next few quarters, which could signal even more trouble for Foot Locker ahead.  More