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Tom Brady’s broadcasting future presents new challenge for the ultimate champion
CNN
—
Tom Brady was the ultimate winner on the field but that success does not guarantee the seven-time Super Bowl champion will make a seamless transition when he steps into the TV booth to begin his new role as a lead NFL analyst.
The 45-year-old Brady, who retired from the National Football League earlier on Wednesday after an illustrious 23-year career, agreed last May to join Fox Sports when his age-defying career as a quarterback came to an end.
Brady, whose intense preparation for games has been well-chronicled, has an unmatched knowledge of the sport. If he can translate what he sees on the field as quickly as he processed plays as a quarterback, he could prove to be one of the best analysts around.
But making the switch from the field to the TV booth is not always easy, and being relaxed, laughing at himself and not clamoring for attention could take time.
“It’s going to be a challenge. Tom is a pretty serious guy, at least in terms of his public persona,” Neal Pilson, the former president of CBS Sports who now runs his own sports television consulting company, told Reuters.
“He’s going to be getting a tremendous amount of money from Fox and I think he’s going to feel the pressure of entertaining people, and up to now Tom’s method of entertaining people was to play quarterback, show how good he is.”
The terms of Brady’s deal with Fox Sports were never disclosed but media reports said the former quarterback for the Tampa Bay Buccaneers and New England Patriots agreed to a 10-year contract worth $375 million.
Fox will be broadcasting the February 12 Super Bowl between the Philadelphia Eagles and Kansas City Chiefs but the network did not immediately reply when asked by Reuters whether Brady would be part of the lineup.
In pictures: NFL legend Tom Brady
Pilson suggests it would be better for Brady if his analyst debut did not come at the Super Bowl as that would expose him right away during the most-watched NFL game of the year.
There have been no shortage of players who went on to become football analysts after their NFL careers, including Hall of Fame members Terry Bradshaw, Troy Aikman, Emmitt Smith and Shannon Sharpe.
Rob Ninkovich, who won two Super Bowl titles with Brady in New England and now works as an NFL analyst for ESPN, told Reuters a job talking football on television can help ease some of the hardest parts of retirement.
“Michael Jordan could go play a pickup game of three-on-three somewhere and still, you know, still shoot a basket and get his feel of playing basketball,” said Ninkovich. “Football players, unfortunately, you hang it up and you’ll never ever put on a helmet, shoulder pads.
“It’s trying to fill that void with other activities, maybe a business or, you know, entrepreneurship or even television, still talking about football and being involved in football – but you’re not taking the beating.”
20 dividend stocks with high yields that have become more attractive right now
Income-seeking investors are looking at an opportunity to scoop up shares of real estate investment trusts. Stocks in that asset class have become more attractive as prices have fallen and cash flow is improving.
Below is a broad screen of REITs that have high dividend yields and are also expected to generate enough excess cash in 2023 to enable increases in dividend payouts.
REIT prices may turn a corner in 2023
REITs distribute most of their income to shareholders to maintain their tax-advantaged status. But the group is cyclical, with pressure on share prices when interest rates rise, as they have this year at an unprecedented scale. A slowing growth rate for the group may have also placed a drag on the stocks.
And now, with talk that the Federal Reserve may begin to temper its cycle of interest-rate increases, we may be nearing the time when REIT prices rise in anticipation of an eventual decline in interest rates. The market always looks ahead, which means long-term investors who have been waiting on the sidelines to buy higher-yielding income-oriented investments may have to make a move soon.
During an interview on Nov 28, James Bullard, president of the Federal Reserve Bank of St. Louis and a member of the Federal Open Market Committee, discussed the central bank’s cycle of interest-rate increases meant to reduce inflation.
When asked about the potential timing of the Fed’s “terminal rate” (the peak federal funds rate for this cycle), Bullard said: “Generally speaking, I have advocated that sooner is better, that you do want to get to the right level of the policy rate for the current data and the current situation.”
In August we published this guide to investing in REITs for income. Since the data for that article was pulled on Aug. 24, the S&P 500
SPX,
-0.50%
has declined 4% (despite a 10% rally from its 2022 closing low on Oct. 12), but the benchmark index’s real estate sector has declined 13%.
REITs can be placed broadly into two categories. Mortgage REITs lend money to commercial or residential borrowers and/or invest in mortgage-backed securities, while equity REITs own property and lease it out.
The pressure on share prices can be greater for mortgage REITs, because the mortgage-lending business slows as interest rates rise. In this article we are focusing on equity REITs.
Industry numbers
The National Association of Real Estate Investment Trusts (Nareit) reported that third-quarter funds from operations (FFO) for U.S.-listed equity REITs were up 14% from a year earlier. To put that number in context, the year-over-year growth rate of quarterly FFO has been slowing — it was 35% a year ago. And the third-quarter FFO increase compares to a 23% increase in earnings per share for the S&P 500 from a year earlier, according to FactSet.
The NAREIT report breaks out numbers for 12 categories of equity REITs, and there is great variance in the growth numbers, as you can see here.
FFO is a non-GAAP measure that is commonly used to gauge REITs’ capacity for paying dividends. It adds amortization and depreciation (noncash items) back to earnings, while excluding gains on the sale of property. Adjusted funds from operations (AFFO) goes further, netting out expected capital expenditures to maintain the quality of property investments.
The slowing FFO growth numbers point to the importance of looking at REITs individually, to see if expected cash flow is sufficient to cover dividend payments.
Screen of high-yielding equity REITs
For 2022 through Nov. 28, the S&P 500 has declined 17%, while the real estate sector has fallen 27%, excluding dividends.
Over the very long term, through interest-rate cycles and the liquidity-driven bull market that ended this year, equity REITs have fared well, with an average annual return of 9.3% for 20 years, compared to an average return of 9.6% for the S&P 500, both with dividends reinvested, according to FactSet.
This performance might surprise some investors, when considering the REITs’ income focus and the S&P 500’s heavy weighting for rapidly growing technology companies.
For a broad screen of equity REITs, we began with the Russell 3000 Index
RUA,
-0.18%,
which represents 98% of U.S. companies by market capitalization.
We then narrowed the list to 119 equity REITs that are followed by at least five analysts covered by FactSet for which AFFO estimates are available.
If we divide the expected 2023 AFFO by the current share price, we have an estimated AFFO yield, which can be compared with the current dividend yield to see if there is expected “headroom” for dividend increases.
For example, if we look at Vornado Realty Trust
VNO,
+1.01%,
the current dividend yield is 8.56%. Based on the consensus 2023 AFFO estimate among analysts polled by FactSet, the expected AFFO yield is only 7.25%. This doesn’t mean that Vornado will cut its dividend and it doesn’t even mean the company won’t raise its payout next year. But it might make it less likely to do so.
Among the 119 equity REITs, 104 have expected 2023 AFFO headroom of at least 1.00%.
Here are the 20 equity REITs from our screen with the highest current dividend yields that have at least 1% expected AFFO headroom:
| Company | Ticker | Dividend yield | Estimated 2023 AFFO yield | Estimated “headroom” | Market cap. ($mil) | Main concentration |
| Brandywine Realty Trust |
BDN, +1.82% |
11.52% | 12.82% | 1.30% | $1,132 | Offices |
| Sabra Health Care REIT Inc. |
SBRA, +2.02% |
9.70% | 12.04% | 2.34% | $2,857 | Health care |
| Medical Properties Trust Inc. |
MPW, +1.90% |
9.18% | 11.46% | 2.29% | $7,559 | Health care |
| SL Green Realty Corp. |
SLG, +2.18% |
9.16% | 10.43% | 1.28% | $2,619 | Offices |
| Hudson Pacific Properties Inc. |
HPP, +1.55% |
9.12% | 12.69% | 3.57% | $1,546 | Offices |
| Omega Healthcare Investors Inc. |
OHI, +1.30% |
9.05% | 10.13% | 1.08% | $6,936 | Health care |
| Global Medical REIT Inc. |
GMRE, +2.03% |
8.75% | 10.59% | 1.84% | $629 | Health care |
| Uniti Group Inc. |
UNIT, +0.28% |
8.30% | 25.00% | 16.70% | $1,715 | Communications infrastructure |
| EPR Properties |
EPR, +0.62% |
8.19% | 12.24% | 4.05% | $3,023 | Leisure properties |
| CTO Realty Growth Inc. |
CTO, +1.58% |
7.51% | 9.34% | 1.83% | $381 | Retail |
| Highwoods Properties Inc. |
HIW, +0.76% |
6.95% | 8.82% | 1.86% | $3,025 | Offices |
| National Health Investors Inc. |
NHI, +1.90% |
6.75% | 8.32% | 1.57% | $2,313 | Senior housing |
| Douglas Emmett Inc. |
DEI, +0.33% |
6.74% | 10.30% | 3.55% | $2,920 | Offices |
| Outfront Media Inc. |
OUT, +0.70% |
6.68% | 11.74% | 5.06% | $2,950 | Billboards |
| Spirit Realty Capital Inc. |
SRC, +0.72% |
6.62% | 9.07% | 2.45% | $5,595 | Retail |
| Broadstone Net Lease Inc. |
BNL, -0.93% |
6.61% | 8.70% | 2.08% | $2,879 | Industial |
| Armada Hoffler Properties Inc. |
AHH, -0.08% |
6.38% | 7.78% | 1.41% | $807 | Offices |
| Innovative Industrial Properties Inc. |
IIPR, +1.09% |
6.24% | 7.53% | 1.29% | $3,226 | Health care |
| Simon Property Group Inc. |
SPG, +0.95% |
6.22% | 9.55% | 3.33% | $37,847 | Retail |
| LTC Properties Inc. |
LTC, +1.09% |
5.99% | 7.60% | 1.60% | $1,541 | Senior housing |
| Source: FactSet | ||||||
Click on the tickers for more about each company. You should read Tomi Kilgore’s detailed guide to the wealth of information for free on the MarketWatch quote page.
The list includes each REIT’s main property investment type. However, many REITs are highly diversified. The simplified categories on the table may not cover all of their investment properties.
Knowing what a REIT invests in is part of the research you should do on your own before buying any individual stock. For arbitrary examples, some investors may wish to steer clear of exposure to certain areas of retail or hotels, or they may favor health-care properties.
Largest REITs
Several of the REITs that passed the screen have relatively small market capitalizations. You might be curious to see how the most widely held REITs fared in the screen. So here’s another list of the 20 largest U.S. REITs among the 119 that passed the first cut, sorted by market cap as of Nov. 28:
| Company | Ticker | Dividend yield | Estimated 2023 AFFO yield | Estimated “headroom” | Market cap. ($mil) | Main concentration |
| Prologis Inc. |
PLD, +1.29% |
2.84% | 4.36% | 1.52% | $102,886 | Warehouses and logistics |
| American Tower Corp. |
AMT, +0.68% |
2.66% | 4.82% | 2.16% | $99,593 | Communications infrastructure |
| Equinix Inc. |
EQIX, +0.62% |
1.87% | 4.79% | 2.91% | $61,317 | Data centers |
| Crown Castle Inc. |
CCI, +1.03% |
4.55% | 5.42% | 0.86% | $59,553 | Wireless Infrastructure |
| Public Storage |
PSA, +0.11% |
2.77% | 5.35% | 2.57% | $50,680 | Self-storage |
| Realty Income Corp. |
O, +0.26% |
4.82% | 6.46% | 1.64% | $38,720 | Retail |
| Simon Property Group Inc. |
SPG, +0.95% |
6.22% | 9.55% | 3.33% | $37,847 | Retail |
| VICI Properties Inc. |
VICI, +0.41% |
4.69% | 6.21% | 1.52% | $32,013 | Leisure properties |
| SBA Communications Corp. Class A |
SBAC, +0.59% |
0.97% | 4.33% | 3.36% | $31,662 | Communications infrastructure |
| Welltower Inc. |
WELL, +2.37% |
3.66% | 4.76% | 1.10% | $31,489 | Health care |
| Digital Realty Trust Inc. |
DLR, +0.69% |
4.54% | 6.18% | 1.64% | $30,903 | Data centers |
| Alexandria Real Estate Equities Inc. |
ARE, +1.38% |
3.17% | 4.87% | 1.70% | $24,451 | Offices |
| AvalonBay Communities Inc. |
AVB, +0.89% |
3.78% | 5.69% | 1.90% | $23,513 | Multifamily residential |
| Equity Residential |
EQR, +1.10% |
4.02% | 5.36% | 1.34% | $23,503 | Multifamily residential |
| Extra Space Storage Inc. |
EXR, +0.29% |
3.93% | 5.83% | 1.90% | $20,430 | Self-storage |
| Invitation Homes Inc. |
INVH, +1.58% |
2.84% | 5.12% | 2.28% | $18,948 | Single-family residental |
| Mid-America Apartment Communities Inc. |
MAA, +1.46% |
3.16% | 5.18% | 2.02% | $18,260 | Multifamily residential |
| Ventas Inc. |
VTR, +1.63% |
4.07% | 5.95% | 1.88% | $17,660 | Senior housing |
| Sun Communities Inc. |
SUI, +2.09% |
2.51% | 4.81% | 2.30% | $17,346 | Multifamily residential |
| Source: FactSet | ||||||
Simon Property Group Inc.
SPG,
+0.95%
is the only REIT to make both lists.
Disney’s ‘Avatar: The Way of Water’ Cleared for December Release in China
Chinese authorities have notified
Walt Disney Co.
DIS -1.40%
that “Avatar: The Way Of Water” will be released in China on Dec. 16, the same day it is slated to be released globally, according to people familiar with the matter.
Executives at Disney and at movie-theater chains had been closely watching for a decision from Chinese censors on the movie, director
James Cameron
‘s sequel to the 2009 science- fiction epic. It will be distributed by Disney-owned 20th Century Studios.
“This is fantastic news for Disney, for
James Cameron
and for the movie, because the potential box office from China is enormous,” Paul Dergarabedian, senior media analyst at Comscore, said in an interview. “This may be the pivotal moment that indicates that ‘Way of Water’ will earn enough money to justify further installments of the Avatar franchise.”
The last seven superhero films produced by Marvel Studios, Disney’s most-profitable film studio over the past decade, haven’t received release dates in the crucial China market, denting the global box-office gross.
In July, for example, Disney cited the lack of a China release for “Thor: Love and Thunder,” the fourth solo film featuring Chris Hemsworth’s Thor character from the popular Avengers superhero team, as one reason the movie underperformed at the international box office.
Disney and other Hollywood studios have run up against Chinese censors in recent years, especially when their movies deal with sensitive political themes or when actors or directors make statements that Chinese authorities find objectionable.
Two recent Marvel films were blocked from release in China after comments that the Chinese government viewed as insulting, made by the director of one movie and a star actor of the other, were unearthed and circulated in the country.
While Disney hasn’t revealed the “Avatar” sequel’s budget, Mr. Cameron, the director, said in a recent interview in GQ magazine that the “Avatar” sequel was “the worst business case in movie history” and that it would have to be the third- or fourth-highest-grossing film in history just to break even. Disney has said that it plans to make five Avatar movies in total.
The first Avatar movie from 2009 grossed nearly $2.9 billion worldwide, with $259 million of that total coming from China, making it the highest-grossing movie of all time. It narrowly edged out Marvel’s “Avengers: Endgame” after a September 2022 rerelease of the movie added $73 million in ticket sales, according to Comscore, a box-office tracker.
It sparked a boom in multiplex construction in China, as Chinese audiences flocked to see the film in 3-D and government authorities sought to encourage consumers to spend more money in shopping centers.
Theaters saw lines for the first “Avatar” up to six hours long, and scalpers sold tickets for $100 apiece, according to
Richard Gelfond,
chief executive of the movie technology company
IMAX Corp.
In Beijing, Chinese authorities closed an IMAX theater so high- ranking party members could watch it at a private screening, he said. Before the 2009 movie, IMAX had 14 screens in China, but now has 800, with 200 more contracted to be built.
“Everything changed after ‘Avatar,’” Mr. Gelfond said. “It was really the match that lit the entire movie industry” in China.
Write to Robbie Whelan at robbie.whelan@wsj.com
Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
Rupert Murdoch Explores Reuniting His Media Empire by Recombining Fox and News Corp
Rupert Murdoch
has proposed a recombination of
Fox Corp.
FOX -0.75%
and
News Corp,
NWSA -2.13%
the two wings of his media empire, nearly a decade after they split, according to people familiar with the situation.
Special board committees have recently been established by both companies to study a possible deal and evaluate potential financial terms, the people said. The discussions are at an early stage, they added.
Reuniting the companies would bring Mr. Murdoch’s highest-profile properties back under one roof. Fox Corp. owns Fox News and the Fox broadcast network, along with local TV stations and the Tubi streaming service. News Corp is the parent company of Dow Jones, publisher of The Wall Street Journal, as well as other assets including HarperCollins Publishers and news organizations in the U.K. and Australia.
Mr. Murdoch is executive chairman of News Corp and chairman of Fox Corp. His son
Lachlan Murdoch
is co-chairman of News Corp and executive chairman and chief executive of Fox.
The Murdoch family trust has a roughly 39% voting stake in News Corp and about a 42% voting stake in Fox Corp., according to securities filings from the companies. The trust’s ownership of the combined company would be expected to stay roughly around those levels, some of the people said.
The merger would likely be structured as a stock deal, some of the people said. The exchange ratio, reflecting the relative value of each company, would be negotiated by the board committees, they said. Fox had a market value of about $17 billion as of the close of trading Friday, while News Corp’s was about $9 billion.
It is possible a combination of the companies won’t occur. Other strategic alternatives also could be considered, some of the people said.
The elder Mr. Murdoch, 91 years old, built an empire over several decades, turning an Australian newspaper company into a global business spanning publishing, entertainment and TV news, as he acquired or created iconic brands.
In 2013, he split up his holdings. The publishing assets went into a new publicly traded company, which took on the company’s legacy name, News Corp. The other business, including TV and film assets, was named 21st Century Fox and eventually became Fox Corp.
Write to Cara Lombardo at cara.lombardo@wsj.com, Dana Cimilluca at dana.cimilluca@wsj.com and Jeffrey A. Trachtenberg at jeffrey.trachtenberg@wsj.com
Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
Pokimane, Twitch Streamers May Strike After $200k Gambling Scam
On Saturday, a Twitch streamer named Abraham Mohammed, better known to viewers as Sliker, admitted that he had scammed fans and other content creators out of at least $200,000 to fund his Counter-Strike: Global Offensive gambling addiction. In response, big-name streamers such as Imane “Pokimane” Anys, Matthew “Mizkif” Rinaudo, and Devin Nash have been coordinating a boycott of Twitch during the week of Christmas to protest the platform’s lax policies on gambling streams.
CS:GO contains weapon skins that have real-money value on Valve’s marketplace. Because the rarest skins can be worth thousands of dollars, third-party sites use them as “casino chips” for betting on the outcome of CS:GO matches. As of 2016, the skin-betting market had an estimated worth of $7 billion. Sliker received money from fans and other streamers under the false pretense that his bank account was locked and that he needed to borrow money to prevent his credit score from taking a hit. Streamer Hasan “HasanAbi” Piker was among those who gave Sliker cash after he reached out and asked for help, falsely saying that, among other financial woes and complications, his payments from Twitch hadn’t come through for that month. Piker later said, “I thought he was in need, I thought he legit needed money.” But in Saturday’s video, Sliker admitted that telling people he was simply hard up for cash had been a ruse.
In a tearful confession video, Sliker told his viewers that he’d started gambling with CS:GO skins, but eventually moved on to betting with real money. He initially used money from his first job and “all” of his Twitch income, but it wasn’t enough for him. He started borrowing money from other streamers, lying to them about why he needed the money and what the funds would be used for. In the video, he promised that he would eventually pay all his creditors back.
“I deserve punishment. Whatever happens, happens,” he said. “I don’t know what to say to the people I borrowed from…this is the epitome of gambling. I want to say don’t touch it.”
Popular streamers Pokimane, Mizkif, and Devin Nash have been discussing the responsibility of Twitch itself to take action against gambling streams, which some feel are manipulative to viewers and perhaps particularly harmful to young viewers. In a joint stream, they mentioned that some streamers made money from promoting gambling, and that gambling was one of Twitch’s most popular categories. Mizkif, attributing the idea to his acquaintance, the politics streamer Destiny, suggested that 10-20 content creators with large followings should send a joint statement to Twitch. Either the platform should take a stance against gambling streams and sponsorships, or they will go on strike during the week of Christmas. Kotaku reached out to Twitch, but did not receive a comment in time for publication. While some streamers await an answer, others are already mobilizing. Top creators like xQc and Ludwig say they’re going to pay back some of the people who were scammed, provided they have proof their money was taken. “Some of the stories are terrible,” xqc tweeted. “There’s no way we we’re gonna sit there and watch/listen. I’m done tweeting about the optics of this. I don’t give no fuck about what people think about it.”
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Of course, not all streamers engaged in the conversation share the point of view that gambling is an issue on the platform. Tyler Faraz “Trainwreck” Niknam, himself a slots streamer, tweeted that “the real problem” was the people blaming slots, blackjack, and roulette rather than the individual. He argued that sports betting is normalized, but conceded that the practice of streamers conducting giveaways by using codes that require viewers to engage in gambling is “predatory,” as is highlighting gambling wins while hiding losses on stream. However, he pulls in significant amounts of money with his own lucrative gambling streams and sponsorships. Trainwreck had previously lent Sliker $100,000.
Meanwhile, some content creators, seeing the mobilization from influential streamers around gambling, are disappointed that some of Twitch’s biggest names have been much more silent on other issues. “Where was this energy during hate raids?” asked Tanya DePass (Cypheroftyr), a content creator and activist. “Where is it for the constant racism, homophobia, transphobia & misogyny on the platform?”
Indeed, content creators seem to be much quicker to attribute the misfortune to systemic problems this time. “[Gambling] is a platform problem, not a people problem,” tweeted Devin Nash. “Create the environment for [unaccountable streamers] to thrive and they will appear.”
Update 9/20/22 7:28 p.m ET.: Twitch announced that in October, the platform will enact rules pertaining to gambling streams that ban major sites like Stake.com, with more details to follow.
Walmart Reaches Video-Streaming Deal to Offer Paramount+ to Members
Walmart Inc.
WMT 0.29%
said it has agreed to a deal with
Paramount Global
PARA 1.41%
to offer the entertainment company’s Paramount+ streaming service to subscribers of Walmart’s membership program.
Walmart has been exploring a subscription video-streaming deal to draw more people to Walmart+ as it seeks to challenge
Amazon.com Inc.,
which has grown its own Prime membership program to about 200 million global members.
The companies agreed to a 12-month exclusivity agreement and a two-year deal that would give Walmart+ members access to Paramount’s ad-supported streaming service, according to people familiar with the deal. The perk will be available starting in September, Walmart said.
Walmart’s announcement on Monday came after The Wall Street Journal reported the two companies had reached an agreement. Walmart is scheduled to announce quarterly earnings on Tuesday.
The deal is the latest tie-up in the fast-changing streaming industry, where a growing group of companies are looking to bundle content to draw viewers or customers. YouTube is planning to launch an online store for streaming video services and has renewed talks with entertainment companies about participating in the platform. YouTube, which is owned by
Alphabet Inc.,
would join
Apple Inc.,
Roku Inc.
and Amazon, which all have hubs to sell streaming video services.
Walmart executives have held talks in recent weeks to discuss a streaming deal with executives at
Walt Disney Co.
,
Comcast Corp.
and Paramount Global, according to people familiar with the matter.
While this partnership is new, Paramount and Walmart have worked together for years. Paramount has had an office in Bentonville, Ark., dedicated to Walmart, which historically has been a big seller of its consumer products and home entertainment.
Paramount Global runs the Paramount+ service, which has shows such as “Halo,” the “Star Trek” series and “Paw Patrol.” The company said this month that Paramount+ had more than 43 million subscribers at the end of its latest quarter.
Walmart introduced Walmart+ in 2020 and aims to use the service to add new streams of revenue beyond selling goods, as well rival the success Amazon has had with its Prime membership services. A subscription to Walmart+ costs $12.95 a month or $98 a year and includes free shipping on online orders and discounts on gasoline. The retailer has added perks to build interest, such as six months of the
Spotify
music-streaming service.
Walmart said Monday that Walmart+ has had positive membership growth every month since its launch, without specifying membership numbers. A Morgan Stanley survey in May said the service has about 16 million members, compared with about 15 million the previous November.
Amazon has invested heavily to ramp up its own Prime Video service, adding original programming and live sports. Prime Video is included along with free shipping and other perks in its Prime membership, which costs $14.99 a month or $139 a year in the U.S. Amazon also recently added a year of Grubhub’s restaurant delivery services for Prime subscribers.
The deal would give Paramount+ a new avenue for growth in an increasingly competitive streaming market now that all of the major entertainment companies have streaming offerings and growth in the U.S. among many services, such as
Netflix Inc.,
has started to slow.
Write to Sarah Nassauer at sarah.nassauer@wsj.com
Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
Dan Loeb’s Third Point Calls for Disney to Spin Off ESPN, Refresh Board
Activist investor
Dan Loeb’s
Third Point LLC has bought a new stake in Walt
Disney Co.
DIS 2.57%
and is calling on the media company to buy the rest of Hulu, explore spinning off ESPN and refresh its board.
Mr. Loeb on Monday said his firm, which liquidated a large Disney stake earlier this year, has repurchased a “significant stake” in the company and sent a letter to Disney Chief Executive
Bob Chapek
urging the company to engage with Third Point on a number of issues.
Mr. Loeb praised growth in Disney’s streaming subscriber base, but also wanted Disney to more aggressively cut costs and consider a number of steps to shake up its portfolio.
The investor’s calls come at an inflection point for Disney and the streaming industry at large, which enjoyed torrential growth during Covid-19 but now face headwinds that include financial losses, domestic subscriber saturation and the introduction of new ad-supported tiers.
Mr. Loeb also now represents a fresh challenge for Mr. Chapek, who assumed the CEO job in February 2020, one month before Covid-19 shut down his company’s theme parks and the nation’s movie theaters. Earlier this year, Mr. Chapek found himself under fire from his own employees and Florida Gov.
Ron DeSantis
over his response to the state’s bill known by opponents as the “Don’t Say Gay” legislation.
Mr. Chapek was renewed to a three-year contract this summer, and recent subscriber growth in Disney’s flagship service, Disney+, has shown the company is advancing on the streaming industry’s dominant player,
Netflix Inc.
A spinoff of ESPN—itself a source of paying subscribers through its ESPN+ offering—would radically alter Disney’s presence in the streaming ecosystem.
“We welcome the views of all our investors,” Disney said in response to Third Point’s letter. The company said its board has been continuously refreshed, “with an average tenure of four years.”
Third Point is pushing Disney to “make every attempt” to buy up
Comcast Corp.’s
CMCSA 1.26%
remaining minority stake in the streaming giant Hulu before its contractual deadline in early 2024. Under a 2019 agreement, Comcast can require Disney to purchase its NBCUniversal subsidiary’s one-third stake in Hulu by that deadline for at least $9 billion, assuming the streaming service has an equity value greater than $27.5 billion.
“We believe that it would even be prudent for Disney to pay a modest premium to accelerate the integration but are cognizant that the seller may have an unreasonable price expectation at this time,” Mr. Loeb’s letter says.
Disney and Comcast have been in a dispute over the value of Hulu, The Wall Street Journal previously reported. When Disney took majority control of Hulu in 2019, the service was valued at a minimum of $27.5 billion. Comcast believes the value of Hulu is now closer to $70 billion, people familiar with the matter have said.
The two companies have already started to unwind some aspects of their partnership. Comcast’s NBCUniversal earlier this year exercised an option to exit its content-sharing agreement with Disney, the Journal reported. Content from NBCUniversal that previously would have gone to Hulu after airing on NBC and NBC-owned cable channels will now go directly to Peacock, NBCU’s streaming service.
Mr. Loeb’s letter also states that there is a “strong case to be made” that Disney should spin off its ESPN business to shareholders to alleviate leverage at the parent company, despite ESPN’s centrality to the company’s streaming offerings and the significant free cash flow it generates.
Mr. Loeb suggests that synergies between Disney and ESPN could be replicated through contractual arrangements. A spinoff would drive better long-term value for Disney shareholders and result in a business “no longer haunted by the specter of cord-cutting,” the letter says.
Cord-cutting has driven Disney to make drastic changes to its business model in the past. In the summer of 2015, former Disney CEO
Robert Iger
acknowledged that the company was seeing “some subscriber losses” to ESPN. One year later, ESPN lost two million subscribers, dropping to its lowest count since 2005.
That steady decline became an albatross on Disney’s stock price, which fell as investors feared a future in which ESPN—once a top moneymaker—fell in relevance and revenue.
ESPN’s troubles—and Wall Street’s response to them—were one reason Mr. Iger would decide to launch his own streaming service. Disney+ premiered in the fall of 2019, and its rocketing growth in its first 18 months caused Disney shares to rise even as Covid-19 wrecked other parts of the business.
Hollywood has been rampant with rumors about the future of ESPN since those first indications of subscriber losses, with rivals speculating that a spinoff or sale was in its future. Today, the sports network is one of three core components of Disney’s streaming bundle, along with Disney+ and Hulu.
Disney+ has 152.1 million subscribers as of the most recent quarter, ESPN+ has 22.8 million and Hulu has 46.2 million.
Mr. Loeb’s letter also urges the company to rethink the makeup of its board and consider a list of potential new members that Third Point has compiled. It also advocates for a wide-ranging cost-cutting program and the continuation of Disney’s pandemic-era suspension of cash dividend payments.
Mr. Loeb has been a thorn in the side of studio chiefs before. In 2013, he bought a stake in
Sony Group Corp.
and publicly criticized the company’s movie arm, Sony Pictures Entertainment. He called on the company to make cuts to the division and introduce “discipline and accountability.”
Soon after Mr. Loeb’s disclosure of a 7% stake, Sony Pictures’ then-CEO pledged to find at least $350 million in annual savings. Mr. Loeb sold his stake about a year later, but has called on Sony to make changes to its entertainment division in the years since.
Last week, Disney reported better-than-expected earnings and added 14.4 million new subscribers to its Disney+ streaming service, many of which came to the service amid its expansion internationally.
The company’s new customer additions brought its total at all of its streaming services, including Disney+, Hulu and ESPN+, to 221.1 million subscribers, which puts Disney’s streaming total narrowly ahead of rival Netflix Inc., which last month reported it had 220.67 million subscribers.
Disney’s share price is up more than 12% in the past week, but remains down about 20% since the start of the year, amid a broad pullback in technology and media stocks.
Last week, Disney also announced price increases to its streaming services, including for its planned ad-supported tier of Disney+, a move that industry executives and analysts said is intended to help drive profitability at its streamers.
Disney, whose direct-to-consumer segment has lost more than $7 billion since Disney+ launched in late 2019, predicts that Disney+ will achieve profitability by September 2024.
“We have plenty of room on price value,” Mr. Chapek said last week.
Third Point previously held 4.1 million shares of Disney and successfully pushed the company to suspend its $3 billion annual dividend and plow the funds instead into the streaming business.
But by the first quarter of this year, the hedge fund had completely exited its position. Mr. Loeb had become worried that it would take years for Disney’s streaming business to reap the profits needed to boost the company’s share price, a person familiar with his thinking told The Wall Street Journal in May.
Write to Dean Seal at dean.seal@wsj.com and Erich Schwartzel at erich.schwartzel@wsj.com
Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
Disney+ Price Increase Shows Limits of Subscriber-Growth Push
The growth-at-all-costs phase of the streaming wars is over; now, profits are the priority.
Faced with slowing subscriber growth in their core domestic markets, some streaming services are shifting their focus from adding users to increasing their bottom line. The result is that streamers such as
Walt Disney Co.
DIS 4.68%
,
Netflix Inc.
NFLX -0.58%
and
Warner Bros. Discovery Inc.
WBD 4.43%
are each doing some combination of reducing costs, raising prices and creating new ad-supported tiers that offer content at lower prices to consumers but also establish a new revenue stream for the companies.
The streaming providers said the price increases are warranted because of the amount of content offered. “We have plenty of room on price value,” Disney Chief Executive Officer
Bob Chapek
said Wednesday.
The price increases come as growth has stalled domestically, usually the most-profitable market for streamers. Just 100,000 of the 14.4 million net new subscriptions to its flagship Disney+ service in the most recent quarter came from the U.S. and Canada. Of the rest, about eight million came from India, while about six million came from other countries, including 52 new markets where Disney+ has launched since May.
“Domestically, Disney+ is tapped out,” said analyst Rich Greenfield of LightShed Partners. “Disney is operating under the belief that, just as in their theme parks, they can raise prices dramatically and count on customers not dropping the service.”
Disney said that in early December it will raise the price of its ad-free, stand-alone Disney+ service in the U.S., to $10.99 a month from $7.99, and the company will begin offering an ad-supported tier for Disney+, starting at $7.99. The company also announced increases to one of its bundle packages.
In addition, the company scaled back its projections for total global subscribers to Disney+, largely in response to lower anticipated growth in India, where Disney recently was outbid for the right to stream matches from a popular cricket league.
Markets welcomed news of the price increases and the company’s better-than-expected quarterly results. Shares of Disney rose 4.7% on Thursday to close at $117.69.
Investors and analysts expect higher subscription costs and the introduction of ads to Disney+ to result in higher profits from the streaming segment, but add that price increases risk alienating some customers and increasing the platform’s churn rate, or the percentage of users who cancel the service each month. The U.S. churn rate for Disney+ is already on the rise, increasing to 4% in the second quarter from 3.1% a year earlier, according to the media analytics firm Antenna.
“We do not believe that there’s going to be any meaningful long-term impact on our churn,” Mr. Chapek said about the price increases. He said Disney+ was one of the lowest-priced streaming services when it launched, and has become more valuable over time as it has added more popular shows and movies.
Other companies that focus on streaming video are making similar moves. Warner Bros. Discovery, the newly formed media giant that owns the premium television service HBO and the streaming services HBO Max and Discovery+, reported last week that it had added 1.7 million new subscriptions. As with Disney, about all of Warner Bros. Discovery’s subscription growth came from overseas—its direct-to-consumer segment lost 300,000 domestic subscribers in the quarter.
David Zaslav,
the newly formed company’s CEO, has taken an ax to Warner Bros. Discovery’s spending, scrapping multiple high-budget movies that were in production or near completion and destined for release on HBO Max, including “Batgirl” and “Wonder Twins,” after deciding that the best return on capital for them was a tax writeoff.
“Our focus is on shaping a real business with significant global ambition but not one that solely chases the subscribers at any cost or blindly seeks to win the content spending wars,” said JB Perrette, Warner Bros. Discovery’s head of streaming, on a call with analysts last week.
Warner Bros. Discovery said it expects losses in its streaming business to peak this year, and expects profitability for the segment in 2024. Similarly, Disney, whose direct-to-consumer segment has lost more than $7 billion since Disney+ launched in late 2019, predicts that Disney+ will achieve profitability by September 2024.
Warner Bros. Discovery has signaled it will launch an ad-supported tier of HBO Max next year. The company has alluded to a new pricing strategy focused on the goal of streaming profitability, but it hasn’t revealed pricing details.
“We will shift away from heavily discounted promotions,” Mr. Perrette said.
At Netflix, customer defections jumped after it raised the price of U.S. plans by $1 to $2 a month earlier this year. In the U.S. and Canada, the company lost 1.3 million subscribers during the second quarter, more than twice the 640,000 it lost in the region in the first quarter. Like Disney+, Netflix is now looking to increase the revenue per user that they draw by selling ads.
Doing so helps streaming services make more money from their existing customer bases, while offering an alternative to price hikes, according to industry analysts.
Existing subscribers to Disney+ will be automatically put into the ad-supported tier unless they elect the higher-priced ad-free version, and some shows, such as “Dancing with the Stars,” will stream with no ads on any tier, a Disney executive said. Disney said that in general, the ad load on Disney+ will be lighter than that of other services, and will benefit from consumers who cancel cable subscriptions and replace them with streaming services.
Netflix said in July that it expected some loss of customers following a price hike and that customer departures are returning to the levels where they were before the increase.
The Los Gatos, Calif.-based company has said its coming ad-supported tier of service is likely to appeal to more-price-conscious customers who are willing to pay less in exchange for viewing ads. Netflix hasn’t said how much its ad-backed tier will cost, but it is expected to charge less than the most basic plan that is currently available, which costs $9.99 a month for a single viewer with the lowest video-resolution quality.
While there has been an overall slowdown in net subscriber growth in the U.S. and more consumers jumping between streaming services, the amount of time people spend watching streaming content continues to grow, said Marc DeBevoise, CEO of the video technology company
Brightcove.
That trend makes selling ads a more attractive strategy for streaming services, he said.
“There aren’t more people to get to subscribe, but there are more hours to capture,” he said. “It is still a growing pie of total viewership.”
Write to Robbie Whelan at robbie.whelan@wsj.com and Sarah Krouse at sarah.krouse+1@wsj.com
Corrections & Amplifications
JB Perrette is Warner Bros. Discovery’s head of streaming. An earlier version of this article incorrectly said J.B. Perette. (Corrected on Aug. 11)
Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8