Disney+ reaches 116 million subscribers, and its parks division returns to profitability.

Daily Business Briefing Aug. 12, 2021Updated  Aug. 16, 2021, 8:58 a.m. ET Aug. 16, 2021, 8:58 a.m. ET Disney’s chief executive, Bob Chapek, with Emma Stone, the star of “Cruella,” which proved popular on Disney+.Credit…Mario Anzuoni/Reuters LOS ANGELES — An adolescent sea monster, Marvel’s god of mischief and Cruella de […]

Daily Business Briefing

Aug. 16, 2021, 8:58 a.m. ET

Aug. 16, 2021, 8:58 a.m. ET

Credit…Mario Anzuoni/Reuters

LOS ANGELES — An adolescent sea monster, Marvel’s god of mischief and Cruella de Vil helped Disney’s flagship streaming service attract 12.4 million new subscribers between April and June, more than Wall Street had expected.

The Disney+ service ended the quarter with 116 million subscribers worldwide, the company reported on Thursday. Analysts had been hoping for 112 million to 115 million. The most popular offerings on Disney+ were “Luca,” an original Pixar film; the superhero series “Loki,” starring Tom Hiddleston; and the live-action movie “Cruella,” with Emma Stone taking over as the classic Disney villain.

The quarter, the third in Disney’s fiscal year, was notable for another reason: Disney Parks, Experiences and Products swung to a profit ($356 million) after four consecutive money-losing quarters ($3.6 billion in total). The availability of coronavirus vaccines prompted families to return in large numbers to Walt Disney World in Florida. Disneyland in California reopened on April 30 for the first time in 14 months, although state regulators initially limited capacity to 25 percent, a restriction that has since been lifted. (Masks are still required.)

Bob Chapek, Disney’s chief executive, told analysts on a conference call that theme park bookings remained “really strong” despite a new surge of coronavirus infections around the world, the result of the Delta variant. Christine M. McCarthy, Disney’s chief financial officer, added that spending on hotel rooms, merchandise and food had been “exceptionally strong.” Ms. McCarthy said that, unless the coronavirus situation changed, Disney planned to increase capacity at its theme park resorts for the coming holidays.

Disney is the world’s largest entertainment company, with operations that include the ABC broadcast network, ESPN, cruise vacations, stage musicals, book publishing and the Disney Store chain. But investor excitement about streaming has in some ways made Disney a one-business enterprise: At least for the time being, as Disney+ goes, so goes the entire company.

Credit…Getty Images

Disney+ surpassed its five-year subscriber goal in just its first nine months. The pandemic was one accelerant, as families looked for ways to entertain themselves at home. But growth slowed between January and March — Disney+ added 8.7 million subscribers in that period, and Wall Street had hoped for more than 14 million — prompting worries about streaming-service fatigue and leading to a slide in Disney shares.

The company’s stock price rose more than 5 percent in after-hours trading on Thursday.

Like other media companies, Disney has turned to streaming because cable television has conked out as a growth engine. Operating profit at Disney’s traditional TV business — ESPN, ABC, Disney Channel, FX, Freeform, National Geographic and other cable networks — totaled $2.2 billion in the quarter, a sharp 33 percent decline. Disney attributed the drop to higher programming costs, including the return of live sports on ESPN and the pandemic-delayed Academy Awards, which ran on ABC. Higher advertising revenue and cable subscriber fees only partly offset the rise in expenses.

Even so, traditional television remains a huge business for Disney, generating $6.96 billion in revenue in the quarter, an increase of 16 percent.

Disney logged $4.3 billion in total streaming revenue, up 57 percent from a year earlier. The monthly price for a Disney+ subscription in the United States rose $1 in late March, to $8. Disney+ also generated tens of millions of dollars from “Cruella,” which was made available to subscribers in May — at the same time the film arrived in theaters — for a $30 surcharge. Hulu, which Disney took over in 2019, benefited from higher advertising revenue and subscriber growth.

Disney said Hulu had about 42.8 million subscribers, a 21 percent increase from last year. About 15 million people pay for access to the company’s ESPN+ platform, up 75 percent from a year earlier.

But building a portfolio of streaming services is mighty expensive. A variety of costs (content production, marketing, technology infrastructure) contributed to losses of roughly $300 million for Disney’s streaming unit. Still, the division lost twice that amount in the same period a year ago.

Citing the pandemic, which has ravaged the movie theater business, Disney has recently changed its film distribution methods. Some films that were originally supposed to play in theaters — animated films, in particular — have been rerouted to Disney+ entirely. Others have been made available on Disney+ when they open in theaters, a practice that has put the company on war footing with at least one major star and her agents.

Scarlett Johansson, who has played the superassassin Black Widow in eight films, sued Disney this month, contending that making “Black Widow” available on Disney+ when it opened in theaters “dramatically” lowered box office revenue, which cost her tens of millions of dollars in bonus compensation. Her lawsuit drew a blistering “no merit whatsoever” response from Disney.

Mr. Chapek commented only indirectly on Thursday on Ms. Johansson’s complaint.

“Certainly this is a time of anxiety in the marketplace,” he said in response to an analyst question about Disney’s movie release strategy. “These films that we are releasing right now were imagined under a completely different environment than unfortunately fate has delivered us. But we’re trying to do the best thing for all our constituents and make sure that everybody who is in the value chain, if you will, feels like they’re having their contractual commitments honored both from a distribution and a compensation standpoint.”

The company will continue to decide “film by film” how movies will be released, Mr. Chapek said. “We value flexibility,” he said.

Profit in the quarter totaled $923 million, compared with a loss of $4.8 billion a year earlier, when the world was still in the throes of the prevaccine pandemic. Excluding one-time items, the company had per-share profit of 80 cents, up from 8 cents. (Analysts had expected about 56 cents.)

Revenue was $17 billion, a 45 percent increase from a year earlier. (Analysts had predicted $16.8 billion.)

Ms. McCarthy announced on the call with analysts that Disney would not restart dividend payments to investors “until we return to a more normalized operating environment.” Disney last paid its semiannual dividend in January 2020.

“We’ve had our sights set on Reebok for many years,” Jamie Salter, the chief executive of Authentic Brands Group, said in a statement.
Credit…Mark Sommerfeld for The New York Times

Sixteen years after acquiring Reebok for $4 billion, the German sportswear giant Adidas is selling it for a little more than half that to Authentic Brands Group, the voracious acquirer of struggling brands.

In the past few years, Authentic has acquired Brooks Brothers and Forever 21, adding to a stable that includes Sports Illustrated. The acquisition of Reebok for 2.1 billion euros, or $2.5 billion, comes as Authentic is preparing to go public.

“We’ve had our sights set on Reebok for many years,” the chief executive of Authentic, Jamie Salter, said in a statement. “Reebok not only holds a special place in the minds and hearts of consumers around the world, but the brand also has expansive global distribution.”

Reebok operates in 80 countries, with roughly 70 percent of its business outside the United States and Canada. Its world headquarters will remain Boston.

When Adidas acquired Reebok in 2005, it hoped Reebok could recapture the glory of its 1980s heyday and create a formidable rival to Nike. But the brand got lost inside the broader Adidas empire and struggled to connect with consumers. Sales of Reebok fell 19 percent in 2020 to 1.41 billion euros, from 1.75 billion euros the year before.

“For a given period of time, the brand was probably stronger than the products,” Kasper Rorsted, the Adidas chief executive, said of Reebok in 2016. “Right now, I would argue that our products are stronger than the brand, and we need to make sure that we reconnect our consumers with the brand that we have.”

Adidas is no stranger to selling off struggling businesses, deals that have been met with varying degrees of success. Its sale of the golf gear brand TaylorMade proved a win for the buyer, the private equity firm KPS Partners, strengthened in part by its deal with Tiger Woods. (KPS has since sold the brand.) But the shoe brand Rockport, which Adidas sold to Berkshire Partners, filed for bankruptcy, blaming its former parent for a sale process that “took meaningfully longer and was significantly more expensive than planned.”

Shaquille O’Neal, whose shoe line with Reebok was introduced in 1992 and who sold a stake in his own brand to Authentic Brands in 2015, celebrated the sale. “It’s a dream come true to welcome this legendary brand to the family,” he said in the statement from Authentic.

Last year, Mr. O’Neal told CNBC that he was intent on owning Reebok, arguing that Adidas had “diluted” it so much “to where it’s almost gone.”

Facebook said Thursday that it was pushing back the date by which it would require employees to return to its offices from October to January 2022.

The company has already reopened some of its offices at limited capacity to people who want to come in voluntarily, and it previously said that employees working in its U.S. offices would need to be vaccinated and wear masks.

A rise in coronavirus cases brought on by the spread of the highly contagious Delta variant has pushed companies to grapple with vaccine mandates and delayed returns to the office.

McDonald’s said Wednesday that it would require U.S.-based office workers to be vaccinated against the coronavirus. The requirement does not apply to employees of McDonald’s restaurants, whether corporate-owned or franchised.

The company said it would push back its official office reopening to Oct. 11 from Sept. 7 to allow time for vaccinations. In addition, the company said U.S.-based office workers must wear masks when they are not eating, drinking or alone in an enclosed room.

Capital One also said that it would require all employees returning to the office to prove that they are vaccinated, and pushed back its return-to-office date to Nov. 2 from early September.

The new funding will go toward improving Reddit’s features, said Steve Huffman, the chief executive.
Credit…Jason Henry for The New York Times

Reddit, the virtual town square of the consumer internet, has raised a fresh $410 million in funding, valuing it at more than $10 billion, the company said on Thursday.

The financing, which was led by Fidelity Investments, increases Reddit’s valuation from the $6 billion it achieved six months ago, when it raised $250 million. Reddit said it expected existing investors to participate in the latest financing as well, so the round is likely to grow and close out at around $700 million.

The latest funding wasn’t planned, but “Fidelity made us an offer that we couldn’t refuse,” Steve Huffman, Reddit’s co-founder and chief executive, said in an interview.

The company then decided the capital would give it more time to decide on when — and how — to go public. “We are still planning on going public, but we don’t have a firm timeline there yet,” Mr. Huffman said. “All good companies should go public when they can.”

The move gives Reddit more of a war chest to build its business and attract new users. The company makes most of its money selling advertising, which appears in the feeds of users who browse the many “subreddits,” or topic-focused forums, across the site.

But Reddit must compete against digital advertising giants like Google, Facebook and Amazon, as well as other ad-based social networking sites, including Twitter, Snap and Pinterest.

“We’ve grown up in the shadow of Facebook and Google, and pretty much every dollar we make we’ve had to fight for,” Mr. Huffman said.

Still, he said, the company’s advertising products have begun to work better. Reddit surpassed $100 million in quarterly revenue for the first time in the second quarter this year, up 192 percent from the same period in 2020.

More than 50 million people now visit Reddit daily, and the site has more than 100,000 active subreddits. While it previously had a laissez-faire approach to free speech, regardless of toxicity, Mr. Huffman has spent the past few years overhauling Reddit’s policies and making it more difficult for trolls to overrun the forums.

The company will use the new funds to improve product features, focusing on how to make it easier for newcomers to explore and quickly understand the site, Mr. Huffman said. Reddit is also enhancing its video products with an eye toward more advertising. And the company is building its self-service advertising system, which could help appeal to small and medium-size business marketers.

Reddit is also focused on expanding internationally. Most of the site is U.S.-centric, Mr. Huffman said — something he hopes to change.

“The first priority on the product is just making Reddit awesome,” he said. “We want to build what is best for new users, because over time it will be best for everyone.”

Lunching in London in June. Consumers spent heavily on restaurants, hotels and transport.
Credit…Tom Jamieson for The New York Times

The British economy grew 4.8 percent in the three months through June, from the previous quarter, as the vast majority of the country’s lockdown restrictions were lifted, the Office for National Statistics said on Thursday.

The economy swung back into growth after a strict winter lockdown, as consumers spent heavily on restaurants, hotels and transport. Retail sales also grew as shops deemed nonessential were allowed to reopen, the statistics agency said. At the end of the quarter, the recovery benefited from the euphoric mood that swept across the country as England’s national soccer team progressed through the European Championship tournament, eventually making it to the final in July.

The education sector was also a major contributor to growth as in-school attendance rates increased. The production of cars was a drag on the economy for a second consecutive quarter because the industry is still hampered by a shortage of semiconductors. But demand for cars went up when showrooms reopened, raising the price of used cars instead.

In June, gross domestic product edged up 1 percent, the statistics office said. But the overall size of the economy was still 2 percent smaller than it was before the pandemic in February 2020. The recovery briefly went into reverse in the first three months of 2021, when the economy contracted by 1.6 percent.

Recently, there has been evidence that some of this growth momentum has been lost. In mid-July, remaining social distancing restrictions were abandoned in England, but the change was unlikely to have added much fuel to the economic recovery because, at the same time, the number of coronavirus cases was rising rapidly as the Delta variant spread. This kept most people working from home instead of offices. Economic indicators that seek to measure the pace of the recovery in real time, using restaurant reservations, credit card spending and retail footfall, have plateaued.

The Bank of England predicted this month that in the third quarter the economy would grow by about 3 percent, slightly lower than its previous forecast, as people reduced how much time and money they spent shopping, dining and socializing, either because they were forced to self-isolate or because they were acting more cautiously.

But these factors will only temporarily alter the shape of the recovery. By the end of the year, the economy will have recovered to its prepandemic size, the central bank said.

Vice President Kamala Harris met with business leaders to build support for child care, part of the Biden administration’s budget proposal.
Credit…Alex Wong/Getty Images

The day after Senate Democrats passed their “big, bold” $3.5 trillion budget blueprint, Vice President Kamala Harris convened business leaders on Thursday to build corporate support for one of the plan’s pillars: child care.

“Affordable child care, we know, relates to both a business’s ability to recruit talent and retain talent,” Ms. Harris told a group of business leaders in her ceremonial office.

Attendees included Mark Breitbard, chief executive of the Global Gap Brand; Jenna Johnson, the president of Patagonia; Josh Silverman, the chief executive of Etsy; Alison Whritenour, the chief executive of Seventh Generation; and Hami Ulukaya, the chief executive of the yogurt brand Chobani, among others.

“We know that it directly impacts worker productivity and the bottom lines of your businesses,” Ms. Harris said.

The budget, which aims to transform social policy in the United States, is still far from official, and the challenges to passing it became clear almost immediately, with Senator Joe Manchin III, Democrat of West Virginia, saying he had “serious concerns” about spending so much. The Biden administration’s agenda on child care includes extending the enhanced tax credit to parents offered as part of the American Rescue Plan, which Columbia University researchers say could cut child poverty by 45 percent. It also calls for expanding various forms of paid leave, up to 12 weeks per year for parental, family care and medical leave, as well as three days of bereavement per year.

The meeting on Thursday underscored the administration’s efforts to get business on board, particularly on issues not traditionally viewed as business matters, though increasingly discussed as such. More than two million women have left the work force since the beginning of the pandemic, and companies, already scrambling to fill open positions, have struggled to bring them back. The share of women in paid work is at the lowest level since 1986.

The White House selected the executives because of their companies’ policies on child care and paid leave, a senior administration official said. In the meeting, Ms. Harris emphasized the importance of child care as both a personal and a business matter.

The United States is the only member of the Organization for Economic Cooperation and Development that does not have statutory paid leave for new parents. On Thursday, roughly 300 business leaders from companies including Salesforce and Spotify called for federal paid family leave. In a letter, they said paid leave “leads to better retention, personal health and improved morale, which contributes to greater stability and viability for our businesses, ultimately helping our bottom line.”

Elon Musk, the chief executive of Telsa, has been a longtime target of Carson Block, a short-seller who runs  the investment firm Muddy Waters.
Credit…Brendan Smialowski/Agence France-Presse — Getty Images

Much has been written about Carson Block, the short-seller who runs Muddy Waters, an investment firm that publishes research and bets against companies it thinks are overvalued. Now, Mr. Block is penning some words of his own, the DealBook newsletter reports.

Mr. Block just sent clients his first shareholder letter since starting a hedge fund in 2015. In the letter, obtained by DealBook from a source familiar with the fund, Mr. Block, a longtime critic of Elon Musk, Tesla’s chief executive, said his firm’s multiyear bet against the electric carmaker had been sent to “heaven,” with no plans to revive it.

Mr. Block said Mr. Musk’s “narcissism” drew his disdain and stoked the belief that Tesla’s business would crater. But Mr. Block added that he underestimated Mr. Musk’s ability to raise capital in huge amounts, reinvent himself and captivate shareholders.

“The market cap, the luster, the élan of Elon, is still there,” Mr. Block wrote, in explaining why his bets against Tesla have gone away.

“Tesla is here not because it has scale in terms of manufacturing base or unit sales,” Mr. Block wrote. “It has scale because of its capital base,” he said of Tesla’s $700 billion market cap. He added:

One could look at Tesla’s market cap and think it’s fragile — that reality will shatter it. However, Tesla should be able to raise many billions before its cap becomes sub-scale — and keep in mind that Tesla equity raises tend to push the stock higher. (Those “dumb money” investors actually knew that capital base scale is what mattered all along.)

Negative publicity about short-sellers during the meme stock rally has cost hedge funds, Mr. Block wrote. His firm’s latest fund, which opened in February, raised only $30 million, or less than half of what he expected, because the “carnage spooked some investors.” Funds that bet against GameStop, AMC Entertainment and other so-called meme stocks were hit with large losses when the shares of those companies soared.

Nonetheless, Mr. Block’s fund is up nearly 11 percent since it started even as markets have been rising, a condition that isn’t conducive for outspoken short-sellers.

The New York Times said on Thursday that it would make a slate of newsletters available only to subscribers, including new offerings from John McWhorter, Kara Swisher and other writers.

The Times, which has produced free newsletters for 20 years, now has about 50 newsletters, which are read by 15 million people each week. Eleven of those will become subscriber-only, alongside seven new newsletters, said Alex Hardiman, The Times’s chief product officer.

“We have to make sure that we’re adding much more distinctive value to what it means to feel like you are a subscriber,” she said in an interview. “So a lot of the work now is about making sure that every single time you experience The Times as a subscriber, you know it and you feel it.”

The Times has been devoting more resources to converting readers of its apps and website into paying subscribers. The company has eight million subscriptions and 100 million registered users, who provide their email address but do not pay for a subscription, it reported in its most recent financial results.

Ms. Hardiman said Times readers who are not subscribers will still be able to read dozens of free newsletters, including The Morning and DealBook.

Existing newsletters that will become available only to subscribers include On Politics, Well, On Tech With Shira Ovide and Parenting, as well as newsletters from Opinion columnists. The change will start rolling out in early September, a Times spokeswoman said.

The seven new newsletters will be written by Peter Coy, a former Bloomberg Businessweek journalist; Ms. Swisher, a tech journalist who writes and hosts a podcast for The Times’s Opinion section; Jane Coaston, the host of “The Argument,” a Times Opinion podcast; Tressie McMillan Cottom, a sociologist and writer; the cultural critic Jay Caspian Kang; Tish Harrison Warren, an Anglican priest; and Mr. McWhorter, an author and Columbia University linguist.

Kathleen Kingsbury, the editor of The Times’s Opinion section, said she had brought on board writers who would expand on the current expertise and coverage from Opinion columnists.

“We looked for diversity in all forms to round out the offering, so that readers found something that either touched upon one of their interests, was a voice that would intrigue them and surprise them, would offer challenging arguments,” she said.

Newsletters are experiencing renewed interest. Substack, a newsletter platform, has enticed big-name writers with six-figure deals to start their own subscription newsletters through the service. Facebook started its own newsletter subscription service, Bulletin, in June. Twitter acquired the newsletter company Revue earlier this year.

  • Stocks on Wall Street rose on Thursday after the Labor Department reported that initial claims for state jobless benefits continued to fall last week. The weekly figure was about 375,000, down 12,000 from the previous week.

  • The S&P 500 ticked up 0.3 percent.

  • The yield on 10-year U.S. Treasury notes rose to 1.36 percent from 1.35 percent.

  • European stocks were little changed, with the Stoxx Europe 600 gaining 0.1 percent. The British economy grew 4.8 percent in the three months through June, from the previous quarter, the Office for National Statistics said. The gains capture a time when the vast majority of the country’s lockdown restrictions were lifted.

  • Lordstown Motors rose 2.9 percent after the company released its latest financial report on Wednesday. It had $366 million in cash on hand at the end of June and expected to have no more than $275 million available by the end of September.

  • Lordstown said that it would begin only “limited production” by the end of September and that it expected that to be the situation through the rest of this year.


CreditCredit…Ruru Kuo

Today in the On Tech newsletter, Shira Ovide writes that smartphones are now normal and for everyone, which means we can ignore the hoopla around new models.

Elva Zachman

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