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Neal Stephenson on ‘Termination Shock,’ geoengineering, metaverse

Neal Stephenson

Source: Mercatus Center at George Mason University

Author Neal Stephenson shot to fame almost 30 years ago with the science-fiction novel “Snow Crash,” which envisioned a future dominated by mega-corporations and organized crime, competing for dominance in both the real world and the “metaverse,” a computer-generated world accessible through virtual reality headsets.

Since then, he’s written several more novels encompassing technology and history, including a trilogy set at the dawn of the scientific revolution, and has done work for various technology companies including Jeff Bezos’ space travel company, Blue Origin, and augmented reality company Magic Leap.

His new novel, “Termination Shock,” out Nov. 16, focuses on the looming issue of our age — human-generated climate change, projecting a near future of extreme weather and social chaos. Against this setting, a maverick oilman decides to take matters into his own hands and builds the world’s biggest gun to shoot canisters of sulfur dioxide into the air, echoing the effects of a volcanic eruption and temporarily cooling parts of the globe. Geopolitics, social media and Dutch royalty all play a part.

Stephenson acknowledges that geoengineering is a radical step, but suggests as the effects of climate change grow more destructive, the demand for radical solutions will grow.

But if geoengineering does happen, it probably won’t be because a billionaire took matters into their own hands.

“In real life, somebody like that would probably get shut down,” he told CNBC in an interview.

“By far, the more plausible scenario is that some government somewhere just makes the calculation at some point that doing this would be fairly cheap and easy. And better than not doing it, as far as [their] selfish purposes are concerned.”

Personally, he favors an all-of-the-above set of solutions to climate change, including more clean energy sources, decarbonizing the economy and carbon capture to take some of the CO2 we’ve emitted over the last 150 years out of the atmosphere. The trouble is convincing large numbers of people that this kind of action is necessary.

He points to two factors that he expects will convince more people that climate change can no longer be ignored. One is rising sea levels.

“You can be as ideological as you want. But you can’t argue with the fact that your house is full of water,” he says.

“And the other one is these possible so-called wet-bulb events, where some areas become so hot and humid that everyone who’s outdoors will just die.” Stephenson points to the “heat dome” that descended over the Pacific Northwest last summer, causing temperatures to skyrocket for a few days and killing hundreds of people.

He does not necessarily believe governments will come together and agree on solutions, although he says the recent 2021 United Nations Climate Change Conference, or COP 26, was a necessary and useful event. “We have to have those conferences. And we have to hope and pray that their strongest and most optimistic recommendations are put into effect.”

But even if they can’t agree, governments will be forced to respond.

“I think we’ll see the big governments, the Indias and Chinas of the world, charting their own path,” he says. “At the end of the day, most politicians want to retain their power. And they’re going to do what it takes to keep getting votes or to maintain their grip on on the political system. And if they’re seen as having presided over huge apocalyptic disasters and not taking effective action, then they’re in trouble.”

Although he was one of the first writers to popularize the idea of virtual reality, he does not necessarily believe that people will retreat into artificial worlds as the real world becomes harder to live in.

“I don’t hate VR,” he says. “But the reality has been so far that most people don’t like to hang out there for more than a short period of time. That may change as the technology gets better, but there’s just inherent limitations on things like the problem of getting motion sickness, the problem of how do you move around?”

He’s more bullish on augmented reality — the idea pioneered by Magic Leap and currently being developed by Microsoft, Apple, and others, where computer-generated images are blended with the real world. But he agrees it won’t take off until there’s a good reason for people to wear headsets or glasses for long periods of time. “It’ll probably have something to do with making it even smaller, more compact, and less of an intrusive experience to wear around.”

As far as the metaverse goes, Stephenson has stood back and watched as the tech and business worlds have claimed the term for themselves, most notably the company formerly known as Facebook, which renamed itself Meta to emphasize its interest in building a computer-generated universe.

“All I can do is kind of sit back and watch it in amazement,” he said. But, as many have noticed, “There’s a pretty big gap between what Facebook is actually doing, like running Facebook and WhatsApp and Instagram, and the visions that they’re talking about for the metaverse.”

Here’s a transcript of the complete interview, lightly edited for clarity and length.

Matt Rosoff, CNBC: The plot of your new novel “Termination Shock” is essentially about a maverick businessperson using geoengineering to reverse climate change. For CNBC readers who may not be familiar with the concept of geoengineering, can you tell us a little bit about it?

Neal Stephenson, author: The first point to emphasize is that it doesn’t fix the actual problem, which is too much carbon dioxide in the atmosphere. But it’s thought that it could be a stopgap way to slow down the rate at which the climate gets hotter.

And it’s basically imitating the effects of large volcanic eruptions by putting sulfur dioxide or something else into the atmosphere, right?

Exactly. There have been many cases throughout history where a big volcano — most recently, Pinatubo in the Philippines — does exactly this. And it puts particles or droplets of sulfates into the stratosphere, and those sort of act as a veil that bounces back a little bit of the sun’s radiation back into space so that it never reaches our planet and doesn’t warm us up. So we know that this cools the planet down because it’s happened a bunch of times throughout history. And we also know that the sulfates will kind of naturally wash out of the atmosphere in a couple of years. And you go back to where you were before.

The eruption of Mt. Pinatubo in the Philippines, 1991.

Thomson Reuters

So you almost need a constant infusion of them. While you decarbonize.

Exactly. The only sane way to use this, if it’s done at all, is as a way to buy time for decarbonization, which is what we really need to do.

How did you get interested in this subject and become fascinated with it enough to base a novel on it?

I’ve been hearing about the idea for a number of years. I’m interested in history. I’m interested in science and the physics of the planet. And so, the idea that a volcano could erupt somewhere and affect temperatures all over the planet is a natural, fascinating topic for me. Over the last decade or two, it’s become increasingly clear that the CO2 content in the atmosphere is a huge problem, and that it’s getting worse fast, and we’re not really being very effective. Despite efforts by a number of people to draw attention to the problem and and push for emissions reductions, that number is still climbing rather rapidly and probably will keep climbing for a while. So rolling that together in the brain of the science fiction novelist, that looks like the basis for a story that that’s got that technical angle to it, but that’s also got a strong geopolitical and personal storytelling basis.

Do you think it’s a realistic likelihood that this could happen in 10 to 15 years? Maybe a maverick individual, but more likely a government that doesn’t particularly care much about world opinion will take it into their own hands?

I agree. In this book, it’s the maverick billionaire because it makes for a good story. But I have to do a lot of explaining as to how he’s able to get away with it, because in real life, somebody like that would probably get shut down. By far, the more plausible scenario is that some government somewhere just makes the calculation at some point that doing this would be fairly cheap and easy. And better than not doing it as far as [their] selfish purposes are concerned.

It’s considered a pretty radical out-there idea. If you look at the overall landscape and what you’ve been seeing over the last few years, what do you think the likelihood of countries in industry and individuals voluntarily taking steps to reduce emissions enough to keep global warming to a minimum? Or how do you think it’s likely to play out over the next 10 to 15 years?

The number that matters is the CO2 in the atmosphere, which is above 400 parts per million and climbing, That’s higher than it’s been in millions of years. So when we talk about emissions reductions, all we’re saying is that the rate at which that number grows, will slow down. But it’s still growing, the numbers still get higher every year. It’s just not climbing as fast because we reduced our emissions. If we could get to zero emissions, which might happen in a few decades — like China’s saying maybe by 2060, it might get to zero emissions. That just means that that number stays wherever it is, for about a million years, which is how long it takes natural processes to remove it. So emissions reductions are great and zero emissions would be better than than not doing that, but still leaves us stuck with the number at a dangerously high level until we take active measures to remove that carbon dioxide from the atmosphere.

What do you think of carbon capture as a technology? Have you followed it at all?

I know an increasing number of people who are techies who are altering their careers to think about this and work on this. There’s a bunch of ways that it could be done. We have to do it. It will be the biggest engineering project by far in human history. We have to do it. We have to succeed. And it’ll take many decades.

Did you follow the COP26 conference at all? What did you think of it?

I followed it. Not super closely. But all of that stuff is great. We have to have those conferences. And we have to hope and pray that their strongest and most optimistic recommendations are put into effect. For sure. It’s just while we’re doing that, we can’t lose sight of what I said before, which is that reducing emissions or taking emissions to zero still doesn’t begin to solve the problem. It just means that we’re not making the problem worse.

What about other forms of energy? Nuclear energy in particular is one that draws a lot of interest from from readers. It’s zero carbon, but there’s fear about it, and some of that fear is grounded. What about that and other energy forms?

Nuclear, I think during the Cold War it kind of got rushed into service, too soon. And before the whole picture was was fully understood. So it’s not where where the engineering resources have been going in the last few decades. And with more resources, more engineers, more money, maybe we can find ways to do it that are that are safer. There are still intractable problems around what to do with nuclear waste, and and so on that need attention. But we’re entering into this phase in our history where we have to start thinking in terms of relative risks. If you’re talking about a particular new technology, they have to compare its risk to the risk of not using it.

There’s a lot going on that’s promising. Beyond just nuclear, there’s geothermal and the usual suspects, wind, solar, etc. And we need it all.

A lot of these discussions get bogged down by ideological purity tests. So one one side you’ve got activists who say if you even talk about adaptation, that’s wrong. Because you’re giving up on reduction. And if you even talk about carbon capture, you’re just giving the current economy and the current fossil fuel industry more more leeway to keep burning. Then you’ve got other people, the Bjorn Lomborgs of the world, who say, “Oh, we’re focusing way too much on the risks and not talking about the costs enough, and growth is the only way out.” How do you think about this? How do you parse this when you’re looking at all of these different, really strong ideological beliefs?

Yeah, a whole separate dimension to the problem that we’re facing is weird, weird polarization of everything. It’s incredibly obstructive. There was just an article in The New York Times about Republicans who are furious at other Republicans who voted for the infrastructure bill. Like, how dare you vote for bridges?

It’s really disheartening and seems like it’s definitely this partisan shift by bad actors who think they’re gaining something from it.

I personally can look at something like carbon capture, and I can make an argument that convinces me that we should be doing it, so it’s not hard for me to formulate my own opinion on that. Much harder is getting millions and millions of other people to agree.

What do you think will be the tipping point? I’ve noticed a lot more people coming around to the idea that we need a multifaceted, throw-everything-at-it solution. And I think some of that comes as the effects become harder and harder to ignore, so it’s harder to presume that this is just happening somewhere else. Do you imagine some kind of event, or series of events, that can break this logjam?

So here’s an example. We had this heat dome event in Seattle over the summer, where out of nowhere, from a normal summer’s day, just suddenly, it was 115 degrees. Much hotter than it has ever been in Seattle.

I grew up there, and lived there for 10 years as an adult as well. So yeah, that was staggering.

So that happened overnight, and after three days of that, overnight, the temperature dropped by 50 degrees. A bunch of people died. So I think an event like that might convince a bunch of people who live in Seattle.

But I think one is going to be rising sea levels, which is something you can’t argue with. You can be as ideological as you want. But you can’t argue with the fact that your house is full of water.

And the other one is these possible so-called wet-bulb events, where some areas become so hot and humid that everyone who’s outdoors will just die.

How can people come together to ensure that solutions help the broadest number of people, rather than pulling up the drawbridges — let’s just escape into space or our compound in New Zealand or something like that? Or do you think it’s inevitable that the people with the means are going to run?

Of course, some people are going to do that. And other parts of the world are going to be depopulated one way or the other. But I think we’ll see the big governments, the Indias and Chinas of the world, charting their own path, going their own way, doing what they think they need to do, in order to basically prevent their their governments from falling. At the end of the day, most politicians want to retain their power. And they’re going to do what it takes to keep getting votes or to maintain their grip on on the political system. And if they’re seen as having presided over huge apocalyptic disasters and not taking effective action, then they’re in trouble.

I have to ask about the metaverse, a term that you coined in the book “Snow Crash” in 1992. Now it’s everywhere in tech. It was on Disney‘s earnings call! Everybody in the tech world is suddenly using the term, probably not the way you intended it or originally envisioned it. What are your thoughts on that?

I have to assume that some of this is pre-emptive. Making sure that one company — that Facebook — doesn’t establish a trademarkable position. If they begin to throw the term around, and nobody else does, then they might be able to later prevent other people from from using the term. So that might be part of why they’re doing this.

I don’t know. All I can do is kind of sit back and watch it in amazement.

There’s a pretty big gap between what Facebook is actually doing, like running Facebook and WhatsApp and Instagram, and the visions that they’re talking about for the metaverse. They’re two very different things. That’s important to keep in mind.

I had a conversation with a VC maybe six or seven years ago, and he was sort of a pessimist in general about the course of humanity and where things are going. He said, “Hey, you know, if you’re a pessimist, VR seems like a great bet. Because everybody’s going to want to escape from their real world conditions.” Do you see things that way at all?

I’m personally more interested in AR than in VR. I mean, I don’t hate VR. But the reality has been so far that most people don’t like to hang out there for more than a short period of time. That may change as the technology gets better, but there’s just inherent limitations on things like the problem of getting motion sickness, the problem of how do you move around? I mean, while I’m talking to you, I’m just kind of wandering around my house. And that’s a normal human thing to do, to want to get up and move around. That’s a difficult thing to do in a VR environment because you’ll step on your cat.

I know you were involved with Magic Leap, and that seems to have gone in a different direction with Peggy Johnson in charge, focusing on enterprise a lot, like Microsoft has, but what’s it going to take for for AR to really take off? What are the technological barriers? I look at how mobile was with Windows Mobile and Palm and some of those things, and then all of a sudden, the iPhone had enough new things in it, the capacitive touch screen and the idea of apps, that it was 18 months ahead of everybody else. And that was enough for it to take off. Is there something like that, that would have to happen for AR to take off?

I think that’s a good analogy. Somewhere out there is that tipping point. And nobody knows where it is until they’ve found it. And so timing is tricky. I think what Magic Leap accomplished in the way of hardware is impressive. I mean, they’re shipping a headset with a 6D controller and a whole system that tracks the room around you. And it makes it possible for applications to interact with things that it sees in your environment. And there’s a lot of engineering that has to happen to make those things all work together in a package that doesn’t immediately catch on fire or run out of batteries.

I actually saw [former Oculus CTO John] Carmack tweeted, not about Magic Leap, but he was saying maybe what VR headsets need is a big heat exchanger that would sit on top of your head.

So engineering-wise, I think it’s been going pretty well. The question is what will prompt people to want to wear something like this all day long and make it just a routine thing to carry around. And it’ll probably have something to do with making it even smaller, more compact, and less of an intrusive experience to wear around.

You’ve been writing about technology for about three decades now. When you look back at when you started this, when the internet was young, what has surprised you and what do you think you’ve been right about? What did you anticipate, and what did you not anticipate?

The popularity early on of relatively simple forms of the internet, just simple web browsers with words and pictures, and how catchy that was, how rapidly people adopted it. That was a surprise to me because as a techie, I wanted to have more splashy kinds of technologies like full 3D immersive experiences. Who knew that reading a few words on a webpage and maybe seeing a grainy JPEG would be so transformative?

On the not-so-happy side, the speed with which and the completeness with which it was taken over by bad actors. I remember when Obama was elected. People were saying, ‘Well, you know, Obama’s team, they understood the internet, they understood how to use the internet. And Republicans, they’re old. And they don’t get it. So they’ve been left in the dust.’ And then eight years later, not only did they get it, but they got way in a way deeper, and much more kind of cynical way than the Democrats had.

I know that there’s an HBO adaptation of “Snow Crash” in the works, maybe coming out this year. I haven’t heard much about it recently, can you talk about that?

The reason you haven’t heard about it is because they passed on it in June. So it’s no longer an HBO Max project. It’s reverted to Paramount. And Kennedy/Marshall.

Are we going to see it soon?

All I can say is stay tuned. A lot of people want it to happen.



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5 things to know before the stock market opens Friday, Nov. 12

Here are the most important news, trends and analysis that investors need to start their trading day:

1. Dow set to bounce, helped by gains in J&J shares on split plans

Traders on the floor of the NYSE, October 28, 2012.

Source: NYSE

U.S. stock futures rose Friday, helped by premarket strength in Dow component Johnson & Johnson on plans to split into two companies. The U.S. bond market opened back up Friday after the Veterans Day holiday, with the 10-year Treasury yield flat, following this week’s gains after hot inflation data. The government is out with its Job Openings and Labor Turnover Survey at 10 a.m. ET. JOLTS in September is expected to show employment vacancies dropping to 10.2 million after the prior month’s 10.4 million, fueled by record quits. The Nasdaq and the S&P 500 rebounded Thursday. But the Dow Jones Industrial Average fell for a third straight session, pulled down by Disney’s 7% decline on disappointing quarterly results. Dow stock Disney was modestly higher in Friday’s premarket.

2. J&J to separate into two companies: Consumer products, medical

Johnson & Johnson logo

SOPA Images | LightRocket | Getty Images

J&J shares rose roughly 3% in the premarket after the health-care giant announced Friday it’s splitting into two publicly traded companies: one focused on consumer products, such as Band-Aid bandages and baby powder, and the other focused on medical devices and pharmaceuticals, including its Covid vaccine. Johnson & Johnson was already undergoing a major transition, as CEO Alex Gorsky has previously announced that he will step down in January. Joaquin Duato, who was tapped as Gorsky’s successor, will lead the new J&J following the separation of the consumer unit. The announcement is the second time this week that a major U.S. company has revealed intentions to split itself. General Electric on Tuesday said it plans to break up into three companies, focusing on aviation, health care and energy.

3. Rivian founder R.J. Scaringe now worth over $2 billion since IPO

RJ Scaringe, founder and chief executive officer of Rivian Automotive, speaks after unveiling the R1S electric sports utility vehicle (SUV).

Bloomberg | Bloomberg | Getty Images

Shares of Rivian Automotive rose nearly 4% in Friday’s premarket, a move that would add to the newly public electric vehicle maker’s two-day gain of 57%. Since Wednesday’s debut, Rivian’s market value has climbed to $105 billion and CEO R.J. Scaringe’s stake in the company he founded in 2009 was valued at $2.2 billion. Rivian, which has Amazon and Ford as backers, pales in comparison to Tesla’s more than $1 trillion market value. Elon Musk, worth more than $275 billion, took a shot at his rival Thursday, saying high production and break-even cash flow will be the true test for Rivian.

4. Singles Day, while muted by China’s crackdowns, still saw record sales

Delivery workers sort parcels at a makeshift logistics station near the Central Business District (CBD) during Singles’ Day shopping festival in Beijing, China November 11, 2021.

Tingshu Wang | Reuters

Alibaba and JD.com racked up around $139 billion of sales across their platforms on China’s Singles Day shopping event, setting a record. Singles Day used to just be a 24-hour affair, but it has transformed into a multiday extravaganza, ending at midnight on Nov. 11. The all-time high sales come despite worries about the strength of the Chinese consumer and the impact of Beijing’s crackdown on technology companies. Singles Day was slightly more muted this year as Chinese tech companies continued to face scrutiny from regulators and Chinese President Xi Jinping’s push for so-called common prosperity.

5. Chinese President Xi further solidifies leadership of No. 2 economy

Xi Jinping, general secretary of the Communist Party of China CPC Central Committee, Chinese president and chairman of the Central Military Commission, delivers an important speech at a ceremony marking the 100th anniversary of the founding of the CPC in Beijing, capital of China, July 1, 2021.

Ju Peng | Xinhua News Agency | Getty Images

Xi took another step to solidify his hold on China, the world’s second-largest economy, and to advance his vision for a strong Chinese Communist Party-dominated system. On Thursday, he joined the ranks of Mao Zedong and Deng Xiaoping as the country’s third leader to oversee a “historical resolution” at the close of the widely watched meeting of the CCP. Party officials called Xi a “helmsman” and a “people’s leader” on Friday, in a show of support for his continuing leadership. Those terms were descriptions used more than 50 years ago during the cult of personality surrounding Mao. Xi and U.S. President Joe Biden are expected to hold a virtual meeting Monday.

— Reuters contributed to this report. Follow all the market action like a pro on CNBC Pro. Get the latest on the pandemic with CNBC’s coronavirus coverage.

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What are the best cruises in the world? Viking, Disney are big winners

U.S. News & World Report on Tuesday published its ranking of the “best” cruise lines of 2022.

The publication evaluated 17 cruise lines through a combination of expert evaluations (30%), traveler reviews (50%) and health ratings published by the U.S. Centers for Disease Control and Prevention’s Vessel Sanitation Program (20%).

Scores were then analyzed by category to determine winners, ranked highest to lowest, in six areas.

Best cruise lines for the money

The 2022 rankings for best valued cruises are:  

  1. Celebrity Cruises — “Gold Award”
  2. Holland America Line — “Silver Award”
  3. Royal Caribbean International — “Silver Award”
  4. Norwegian Cruise Line
  5. Carnival Cruise Line

Here, average daily rates accounted for 60% of scores, while expert, traveler and health ratings accounted for the other 40%. Cruise lines with average daily rates of $300 or more did not qualify for this category.

The Celebrity Edge cruise ship, the first revenue-earning cruise to depart from the U.S. after a pandemic-induced hiatus, docks during a stop in Costa Maya, Mexico on Tuesday, June 29, 2021.

Eva Marie Uzcategui | Bloomberg | Bloomberg | Getty Images

Celebrity Cruises was named the best cruise for the money. It’s part of the Royal Caribbean Group, which also operates Royal Caribbean International, which took home a “Silver Award” in this category.

Wi-Fi, tips and drinks — like cocktails, wine and specialty coffees — are included in most Celebrity cruise bookings, however the cheapest rates can be purchased without them. Right now, a four-day cruise from Miami to the Bahamas is around $440 per person, including taxes, for an inside state room.

Also on the list: Princess Cruises (No. 6), Costa Cruises (No. 7) and MSC Cruises (No. 8).

Best cruise lines for luxury

Smaller cruise lines — with ships that fit hundreds rather than thousands of guests — dominated U.S. News’ luxury rankings list.

  1. Viking Ocean Cruises — “Gold Award”
  2. Seabourn Cruise Line — “Silver Award”
  3. Regent Seven Seas Cruises — “Silver Award”
  4. Azamara
  5. Crystal Cruises

The Viking Sea cruise ship arrives at Bodrum Cruise Port in Mugla, Turkey on March 13, 2021.

Ali Balli | Anadolu Agency | Anadolu Agency | Getty Images

Viking, a cruise line based in Basel, Switzerland, is no stranger to accolades. It topped U.S. News’ luxury list last year too — despite Chairman Torstein Hagen indicating he isn’t a fan of the word.

“I have outlawed the use of the word ‘luxury’ … I think we are elegant, we are … understated and hopefully timeless,” he said at a naming celebration for seven new river boats in March 2019, according to cruising website QuirkyCruises.com.

Also on the list: Silversea Cruises (No. 6) and Oceania Cruises (No. 7).

Best cruise lines for couples

Awards for the best cruises for those traveling in twos are:  

  1. Viking Ocean Cruises — “Gold Award”
  2. Seabourn Cruise Line — “Silver Award”
  3. Azamara — “Silver Award”
  4. Crystal Cruises
  5. Regent Seven Seas Cruises

Viking dominates this category due to its “adult-focused environment and luxurious and romantic amenities, such as fireplaces in each ship’s common area and private verandas in every stateroom,” according to a U.S. News & World Report’s press release.  

To qualify for this category, at least 62% of a cruise line’s online traveler reviews must be made by couples.

Most luxury cruise lines allow kids, though they often don’t cater to them the way the larger lines do. Viking, however, doesn’t allow children at all. 

The company previously welcomed kids aged 12 and older to cruise, but as of 2018, all guests must be 18 or older to board.

Also on the list: Celebrity Cruises (No. 6), Oceania Cruises (No. 7), Silversea Cruises (No. 8), Cunard Line (No. 9) and Holland America Line (No. 10).

Best cruise lines for families

The top-ranking cruises for families for 2022 are:

  1. Disney Cruise Line — “Gold Award”
  2. Royal Caribbean International — “Silver Award”
  3. Carnival Cruise Line — “Silver Award”
  4. Norwegian Cruise Line
  5. MSC Cruises

Disney dominates the family cruise category, as it has every year since U.S. News started ranking cruises in 2013.  

Disney cruises have translucent water slides, pirate-themed deck parties and live performances of classic Disney movies, but also adult-only pools, spas and bars for parents.

Marjie Lambert | Miami Herald | Tribune News Service | Getty Images

The company has five ships: Magic, Wonder, Dream, Fantasy and its latest, Disney Wish, which is scheduled to launch in summer 2022. The ship is also set to introduce Disney’s first “attraction at sea” — 760 feet of water slide tubes with Mickey Mouse-themed music, lighting and special effects.

Also on the list: Costa Cruises (No. 6).

Best cruise lines in the Caribbean

  1. Disney Cruise Line — “Gold Award”
  2. Celebrity Cruises — “Silver Award”
  3. Seabourn Cruise Line — “Silver Award”
  4. Royal Caribbean International
  5. Crystal Cruises

It’s a clean sweep for Disney in this category too. Disney has been named the top cruise line in the Caribbean for the past eight years, according to U.S. News & World Report.

The Disney Magic cruise ship sails past Manhattan with the Empire State Building in the background.

Gary Hershorn | Corbis News | Getty Images

Living up to its name, the Miami-based Celebrity Cruises partners with well-known names in the arts and entertainment industry. It’s newest ship, Celebrity Beyond, has Gwyneth Paltrow as its “wellbeing advisor” and a restaurant created by Michelin-starred chef Daniel Boulud, according to its website.  

Also on this list: Regent Seven Seas Cruises (No. 6), Holland America Line (No. 7), Carnival Cruise Line (No. 8), Norwegian Cruise Line (No. 9), Oceania Cruises (No. 10), Princess Cruises (No. 11) and MSC Cruises (No. 12).

Best cruise lines in the Mediterranean

  1. Viking Ocean Cruises — “Gold Award”
  2. Seabourn Cruise Line — “Silver Award”
  3. Azamara — “Silver Award”
  4. Regent Seven Seas Cruises
  5. Celebrity Cruises

With another win, Viking tops three of U.S. News’ six categories, this time for its presence in the Mediterranean. In every instance, it is followed by Seattle-based Seabourn Cruise Line, Carnival Corporation’s ultra-luxury brand.

The spa in the luxury Seabourn Sojourn cruise ship.

Peter Macdiarmid | Getty Images News | Getty Images

Seabourn has five ships, which hold between 450-600 passengers and cruise to more than 400 destinations. As part of a multi-year agreement, the cruise line has contributed more than $1.5 million to support UNESCO, which grants its guests “unique access” to more than 170 World Heritage Sites, according to its website.   

Also on the list: Oceania Cruises (No. 6), Crystal Cruises (No. 7), Costa Cruises (No. 8), MSC Cruises (No. 9), Silversea Cruises (No. 10), Holland America Line (No. 11), Norwegian Cruise Line (No. 12), Princess Cruises (No. 12), Royal Caribbean International (No. 13) and Cunard Line (No. 14).

Cruising on the comeback?  

Though mass Covid-19 outbreaks early in the pandemic exposed health concerns surrounding cruising, a new survey indicates travelers may not abandon ship travel after all.  

Before the pandemic, 2% of prior cruisers said they wouldn’t cruise again, while as of August 2021, 4% said the same, according to an ongoing survey conducted by U.S. News & Report.

The pandemic hasn’t scared off non-cruisers either. Pre-pandemic, 62% of people who had never cruised indicated they wanted to try it. Now, 61% of people say the same.

Sentiments may be softening with time too. Before the pandemic, about 10% of people that had never cruised said they “never” would. According to the survey, this number rose to 17% in June 2021, but fell to 14% by August.

Click here to read the full report from U.S. News & World Report.

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Dow futures are little changed after a record close on Friday

Traders work on the floor of the New York Stock Exchange (NYSE) on October 25, 2021 in New York City.

Spencer Platt | Getty Images

Stock futures idled in overnight trading after the major U.S. market indexes reached record highs on Friday following a better-than-expected October jobs report.

Futures on the Dow Jones Industrial Average were nearly flat. S&P 500 futures were little changed and Nasdaq 100 futures dipped 0.3%.

The moves in futures trading came after the U.S. House of Representatives late Friday passed a more than $1 trillion infrastructure bill, sending the legislation to President Joe Biden for his signature. The package passed by the Senate in August would provide new funding for transportation, utilities and broadband, among other infrastructure projects.

The three major U.S. stock averages each closed at record highs Friday to cap off a winning week. The Dow rose 203.72 points, or nearly 0.6%, in its sixth-straight position day. The S&P 500 gained 0.4% for its seventh winning session in a row. The Nasdaq Composite added 0.2% to post its tenth consecutive positive session.

The rally came after the October jobs report came in better than economists had expected. U.S. payrolls added 531,000 jobs last month, according to the Labor Department. Friday’s report also revised up September and August payroll numbers.

“The economy is certainly picking up some momentum,” JPMorgan’s David Lebovitz said Friday on CNBC’s “Squawk on the Street.” “We are expecting economic growth to accelerate here into the end of 2021 and the beginning of 2022.”

The Federal Reserve earlier last week announced a plan to begin tapering its pandemic-era economic aid by the end of November, putting the central bank on track to end its asset purchase program by the middle of next year.

Investors await fresh inflation readings in the week ahead. The producer price index and consumer price index are slated for release on Tuesday and Wednesday, respectively. Economists expect both reports to remain hot for October.

Companies including PayPal, Palantir and Disney report quarterly earnings this week.

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Disney shift to streaming puts ESPN in position of clinging to past

In this still image from video provided by the NFL, NFL Commissioner Roger Goodell speaks from his home in Bronxville, New York during the first round of the 2020 NFL Draft on April 23, 2020. (Photo by NFL via Getty Images)

Photo by NFL via Getty Images

At last month’s Communacopia conference held by Goldman Sachs, Disney CEO Bob Chapek was asked about the importance of ESPN and sports broadcasting to his company’s streaming strategy. His answer sounded like a throw-away line.

“The number one most-viewed thing every year tends to be sports, something like nine out of 10 of the top viewership events in television are sporting events,” Chapek said in a virtual session on Sept. 21. “Who knows what the future will bring, but it’s certainly an important part of our consumer offerings at the Walt Disney company.”

Chapek’s generic response about the future for one of Disney’s most valuable assets inspired no follow-up questions or headlines. But Chapek was addressing an existential threat facing the media industry, and an issue that may one day rock the foundation of his media empire, which includes some of the most valuable studios and film franchises in the world alongside the dominant network for live sports.

Disney’s big dilemma for ESPN is whether and when to fully embrace a future without cable.

Broadcast and cable networks still make billions of dollars per year from the traditional TV model. ESPN is a huge beneficiary, because media companies earn monthly subscriber fees from pay-TV providers regardless of how many people watch their programming. Niche channels make just a few cents a month per subscriber, while sports networks charge several dollars.

Disney makes more money from cable subscribers than any other company, and that’s solely because of ESPN. ESPN and sister network ESPN2 charge nearly $10 per month combined, according to research firm Kagan, a unit of S&P Global Market Intelligence. That’s at least four times more than almost every other national broadcast or cable network, according to Kagan.

Disney requires pay-TV providers to include ESPN as part of their most popular cable packages. It’s a no-brainer for TV providers, who wouldn’t dare drop ESPN.

Meanwhile, the non-sports world is cutting the cord. More than 6 million people ditched pay TV in 2020, according to research firm eMarketer — the highest annual total ever. About 25 million Americans have dropped linear TV bundles in the past decade.

That creates a struggle within Disney that’s poised to escalate. Disney wants people to sign up for its streaming entertainment products, Disney+ and Hulu. Wall Street wants this too. Streaming video is a growth business. Traditional pay TV is a declining one.

It’s also a wise financial swap for Chapek. While Disney makes more than $10 a month per subscriber for sports, it makes far less for entertainment networks such as Disney Channel and FX, which draw lower audiences and don’t command high advertising rates.

If Disney can get a cord cutter to pay $8 per month for Disney+ and $6 for Hulu, it’s a huge win for the company.

The reverse is true for ESPN. Swapping an ESPN subscriber for an ESPN+ customer, who contributes average revenue of less than $5 per month, is a significant loss for Disney. ESPN+ is a streaming service with limited content.

Bob Iger, left, and Bob Chapek of Disney

Charley Gallay | Getty Images; Patrick T. Fallon | Bloomberg | Getty Images

Disney Chairman Bob Iger, who was CEO until last year, told investors when he launched Disney+ that Disney was “all in” on streaming video.

But ESPN isn’t. ESPN’s strategy is to cling to the cable bundle for as long as possible, knowing it can draw potentially billions of dollars from U.S. households that are each paying $120 for the network even if they never watch it.

Some analysts have even questioned whether Disney should spin off ESPN, allowing Chapek to focus more clearly on streaming. An ex-Disney executive, who recently left the company and asked not to be named, said there’s “strategic misalignment” between the parent company and ESPN, and the businesses no longer belong together because Wall Street doesn’t look kindly on declining assets. The executive said having ties to the legacy bundle will weigh down a company’s stock multiple.

ESPN’s fit within Disney

Whether or not the fit still make sense, Disney has a huge financial incentive, at least in the short term, to keep the marriage going.

At $10 per month, or $120 per year, multiplied by about 75 million U.S. homes, Disney earns roughly $9 billion annually in domestic carriage fees from ESPN and its associated networks. Advertising that comes with broadcasting sports brings in billions of additional dollars.

That cash allows ESPN to spend big on sports rights, continuing a virtuous cycle. Disney agreed to spend $2.7 billion for “Monday Night Football” in a deal that runs all the way until 2033. ESPN pays $1.4 billion annually for NBA games and will likely pay more when those rights will need to be renewed after the 2024-25 season. The network owns media rights to every major U.S. sport in some capacity.

It also allows Disney to pay up for original streaming content, bolstering the quality of Disney+ and Hulu as the company competes with Netflix and Amazon.

“We’re successfully navigating the evolution of consumer choice,” said Jimmy Pitaro, chairman of ESPN, which is majority-owned and controlled by Disney, in an interview with CNBC in April. “We believe we can be multiple things at the same time. As consumers continue to gravitate toward direct to consumer, we have the optionality that we need.”

Chairman of Disney Consumer Products and Interactive Media Jimmy Pitaro.

Steve Zak Photography | FilmMagic | Getty Images

ESPN’s role as cash machine works nicely for the time being. But if 25 million U.S. households ditch cable in the next four or five years, as some predict, the math will no longer add up, said LightShed media analyst Rich Greenfield.

“If we’re going to 40 to 50 million, the question is, ‘Is there any economic model that justifies the level of spending that we’re currently at?'” said Greenfield.

ESPN has to figure out how to make up $3 billion in annual lost pay-TV subscription revenue that’s coming in the next few years as cord-cutting continues, a decline that Disney executives are anticipating, according to people familiar with the matter.

Disney’s plan is to incrementally raise the price of ESPN+ as it adds more valuable content while maintaining contractual obligations for exclusive programming to pay-TV distributors, the people said. An early example is Eli and Peyton Manning’s alternative broadcast of “Monday Night Football,” which will air 10 times this season on ESPN+ and ESPN2.

Should the number of pay-TV bundle subscribers drop to a level well under 50 million U.S. households, Disney would likely take ESPN to consumers in a more complete streaming package, said two people with knowledge of the company’s plans. At that point, the economics would flip, as most of the people paying for linear TV would be sports fans. Disney could likely make more from a full-service sports streaming service than it would make in a wholesale pay-TV distribution model.

In the near term, selling ESPN separate from the linear bundle isn’t feasible. Disney has negotiated digital rights flexibility in almost every major rights renewal in the past few years. But the company is currently restricted by its linear pay-TV obligations, which require certain premium programming to stay exclusive to the cable bundle, according to people familiar with the matter.

What to charge for streaming ESPN

David Levy, the former president of WarnerMedia’s Turner Broadcasting, said that Disney will have plenty of leverage with consumers when the time comes to bypass the bundle.

This is a May 16, 2018, file photo showing then-Turner Broadcasting President David Levy attending the Turner Networks 2018 Upfront in New York.

Evan Agostini | Invision | AP

Levy, who’s now chairman of data firm Genius Sports, said he thinks Disney can get 30 million customers to pay $30 a month for streaming ESPN, or more than double the cost for a standard Netflix subscription. That would bring in $10.8 billion annually — more than Disney makes today from pay-TV affiliate revenue.

“With sports, there’s a guaranteed built-in audience,” Levy said. “It’s much different than entertainment. With entertainment, every show is hit or miss, and you always have to market content. You never know what will succeed and what won’t. That’s why sports is the best content to invest in, and it will be no matter what the distribution model is.”

But Levy’s estimate may be optimistic. A top executive at one of the largest U.S. pay-TV operators told CNBC that about 15% of video subscribers are heavy sports viewers. That would equal just over 11 million U.S. households. Even if ESPN could double that number for a streaming app at $30, the service would make less than the $9 billion ESPN takes in today.

The uncertainty of how many subscribers will pay for sports in an à la carte streaming world isn’t lost on the leagues. The NFL built in early out-clauses to its most recent 11-year deals with the networks, according to people familiar with the matter, allowing the league to bail if the business model stops working. The NFL can end its agreement after seven years with CBS, NBC and Fox and after eight years with ESPN, said the people, who asked not to be named because the negotiations were private.

That’s why Disney and other networks with live sports want to keep the linear bundle around until they have to let it go. It’s difficult to make up the lost revenue in a reliable way.

“We believe strongly that the traditional pay TV bundle will remain intact for a long time,” said
Sean McManus, chairman of ViacomCBS’s CBS Sports. “I don’t think it ever whittles away to zero. And while it’s certainly possible the amount of subscribers will continue to decline, I don’t think the decline ever reaches a point in the coming years that it won’t support the current rights deals that we have, both for NFL football and our other sports.”

Churn baby churn

A streaming-only world would also subject ESPN to a challenge that it’s never had to worry about: Churn.

People who cancel ESPN unsubscribe from the whole linear bundle. In the direct-to-consumer market, it would be easy for football fanatics to only subscribe during the few months when games are played.

A globe stands at the entrance to the ESPN Wide World of Sports complex in Lake Buena Vista, Fla.

Phelan M. Ebenhack via AP

ESPN executives have been playing with ways to incentivize annual membership on the existing ESPN+ service to reduce month-to-month volatility. Several times this year, ESPN has sold a pay-per-view UFC fight for $69.99 on ESPN+, and at the same time offered a full-year membership, that would include the match, for $89.99, a 35% discount.

Packaging ESPN+ with Hulu and Disney+ is another churn buster, as the combined offering is 33% cheaper than buying all three individually.

However, a more complete ESPN offering combined with another streaming service would have to cost more, a proposition that would likely scare away the non-sports fans, who are used to paying much less. Disney already packages sports in some of its foreign streaming services, such as India’s Disney+ Hotstar and Latin America’s Star+. But the economics internationally aren’t the same as in the U.S.

“If you put sports into Hulu or Disney+, instead of charging $5 or $7, now you’re charging $30?” Greenfield said. “And then you’re trying to compete against Netflix at $15. There is no model I see that works. There’s no easy answer.”

Threats and saviors

Then there are the technology risks.

ESPN executives are hesitant about moving their prized programming to directly to consumers because of rampant password sharing among young users, according to people familiar with the matter.

“Watching a pirated stream or sharing a streaming service password seems like a victimless crime,” said John Kosner, who led digital media at ESPN from 2003 to 2017 and is now president of media consulting firm Kosner Media. “But it really impacts the business model of sports on streaming services.”

Whether younger audiences even want live sports is another issue for Disney. Other entertainment options, such as social media, mobile games and on-demand entertainment services may be eroding the cultural grip of televised sports. Americans age 13 to 23 are half as likely as millennials to watch live sports regularly and twice as likely to never watch, according to a 2020 Morning Consult survey.

“The overall relevance of sports is an open question for the younger generation,” said Kosner.

One potential model that could save Disney a lot of future heartburn is a new streaming bundle that effectively replicates pay TV but with more options. If that becomes the winning form of distribution, media companies may be in a familiar position, making money from their most-popular services even if not everyone is watching them.

Dexter Goei, CEO of cable TV provider Altice USA, said in May that such a product offering could work well for the sustainability of the media industry.

It “would allow us to focus primarily on our broadband product” and “be a partner for content on a direct-to-consumer basis as opposed to a partner on a linear basis,” Goei said at JPMorgan’s Technology, Media & Communications conference. It “will dramatically improve the economic trends of our business from a cash-flow standpoint,” he said.

FanDuel betting booths

Source: FanDuel

The growing popularity of sports betting could also help. Betting by mobile app, which is slowly being legalized around the country, boosts viewership, because “if you place a bet on a game, you’re much more likely to watch that game,” Levy said.

Kosner added that augmented reality devices that create new viewing experiences and innovative products like non-fungible tokens (NFTs), which are digital collectibles, also have the potential to lure younger fans to watch games.

Add it all up, and media executives can find plenty of reasons to be optimistic despite the uncertainty that lies ahead for live sports.

“The value of sports continues to be more and more important every single year,” CBS’s McManus said. “Advertisers are going to continue to want to reach the largest possible audiences. The way to do that is with sports. I don’t see a cliff coming. Our roadways are clear.”

(Disclosure: Comcast’s NBCUniversal is the parent company of CNBC.)

WATCH: ESPN chairman Jimmy Pitaro on ESPN+ and new NFL deal

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How Peloton builds a community around health and wellness

Cari Gundee rides her Peloton exercise bike at her home on April 06, 2020 in San Anselmo, California.

Ezra Shaw | Getty Images

Peloton wants to be known as a health and wellness company, not a fitness business, according to its chief marketing executive.

“We definitely want to make sure that we are reflecting the communities that we serve,” Peloton’s Chief Marketing Officer Dara Treseder told Julia Boorstin on Thursday during CNBC’s CMO Exchange virtual event.

“One of the things I do with my marketing team is we debate … and some people are like, ‘We’re a fitness company, and this is what it means to be fit.’ And I have to be like, ‘No, no, no. We are actually a health and wellness company, and that comes in different shapes and sizes.'”

Peloton has recently added “mood rides,” which are geared to different emotions such as being happy, sad or calm. These rides as well as guided meditation classes are examples of how Peloton is trying to raise awareness around the importance of mental health, in addition to keeping in shape.

Treseder went on to say that Peloton’s rampant growth during the pandemic largely stemmed from its loyal user base sharing their personal experiences with the brand. Peloton counts 2.33 million connected fitness subscribers — people who own a Peloton product and also pay a monthly fee for access to the company’s digital workout content. 

“The reality is when you try to force something, it just doesn’t work,” she said. “So for us, that intentional cultivation of community is really focused on finding where there are organic sparks of connection within our member base, and then kind of pouring fuel on that … shining a spotlight on those things.”

Peloton has said it plans to soon ramp up spending on paid marketing, in order to advertise both its lower-priced Bike and its updated Tread machine.

But Peloton also uses its now-famous team of instructors to connect with members. The trainers are active across social media platforms and frequently interact with members online.

“We want them to be superstars,” Treseder explained. “They’re employees, and so they’re invested in the success of the company. And we are invested in their success.”

One instructor, Cody Rigsby, is competing on ABC’s “Dancing with the Stars.” Another, Alex Toussaint, was recently signed by the athletic apparel brand Puma.

“I give so much credit to John [Foley] because that’s a very hard thing to do. … The natural thing to do is to say let’s control them, let’s brand them,” Treseder said about Peloton’s CEO and how he thinks about the instructors. “The fact is, that actually doesn’t work, and people can see right through that.”

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Stocks making the biggest moves midday: Merck, Moderna and more

Check out the companies making headlines in midday trading.

Merck — Shares surged more than 9% after it announced its new antiviral pill cut the risk of death or hospitalization by 50% for Covid patients. The pharmaceutical company plans to file for emergency use authorization.

Moderna, Regeneron — Companies with other Covid-19 drugs fell after Merck’s oral pill showed positive data in a clinical trial. Moderna’s stock fell nearly 13%, while shares of Regeneron dropped more than 5%.

United Airlines, Delta Air Lines, American Airlines, Southwest Airlines — Airline stocks rallied as Merck’s oral Covid drug showed promising results. United Airlines rose nearly 6%, Delta Air Lines gained more than 5% and American Airlines rallied roughly 4%. Southwest Airlines jumped more than 4% as well following an upgrade on the stock by JPMorgan.

Penn National Gaming, Hilton Worldwide, Norwegian Cruise Line — Travel and entertainment stocks jumped following the positive results from Merck’s Covid pill. Penn National Gaming rallied more than 6%, Live Nation Entertainment added about 5%, Hilton Worldwide gained more than 4% and Norwegian Cruise Line rose nearly 4.8%.

Lordstown Motors — Lordstown Motors saw its stock sink more than 15% after it announced an agreement to sell its Ohio assembly plant to iPhone maker Foxconn for $230 million. Shares of Lordstown Motors had rallied by as much as 21% by Thursday as reports indicated the deal was in the works.

Zoom Video Communications — Zoom and Five9 terminated what would have been a $14.7 billion deal. Five9 shareholders rejected the proposed acquisition by Zoom. Zoom shares gained 2.2% and Five9 shares rose 3.2%.

Walt Disney — Shares of the media giant popped 3% on news that Disney and Scarlett Johansson settled a lawsuit involving the “Black Widow” movie. Johansson had sued Disney over the release of the movie on the Disney+ streaming service at the same time it was debuting in theaters.

Exxon Mobil – The oil giant advanced more than 2% after the company updated Wall Street on its expected third-quarter results. In a filing with the Securities and Exchange Commission, Exxon said that higher oil and gas prices could lift earnings by as much as $1.5 billion. Analysts at Bank of America said the company is on track for its highest earnings per share since the third quarter of 2014.

International Flavors & Fragrances – Shares of International Flavors popped more than 6% after the company announced its chief executive Andreas Fibig plans to retire. The company said Fibig will remain at the helm of the company until a successor is found.

— CNBC’s Jesse Pound and Maggie Fitzgerald contributed reporting

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Merck, Lordstown Motors, Coty, Zoom and others

Check out the companies making headlines before the bell:

Merck (MRK) – Merck shares surged 7.5% in the premarket after it announced that its experimental Covid-19 pill cut the risk of death and hospitalization by 50% in a late-stage study. Merck plans to file for emergency use authorization as soon as possible.

Lordstown Motors (RIDE) – Lordstown struck a deal to sell its Ohio plant to Taiwan’s Foxconn for $230 million, with Foxconn taking over the manufacturing of Lordstown’s full-sized electric pickup truck. It was reported earlier this week that a deal between the two sides was near. Lordstown rallied 6.3% in premarket trading.

Coty (COTY) – The cosmetics company’s stock gained 2% in the premarket as it announced a deal to sell another 9% stake in its Wella beauty business to private equity firm KKR (KKR). In return, KKR will redeem about half its remaining convertible preferred shares in Wella, reducing Coty’s stake to about 30.6%. Coty had sold a 60% stake in Wella to KKR last December.

Zoom Video Communications (ZM) – Zoom and Five9 (FIVN) have terminated a nearly $15 billion deal by mutual consent. Zoom had struck a deal to buy the contact center operator, but it was rejected by Five9 shareholders. The two sides will continue a partnership that had been in place prior to the proposed transaction. Zoom jumped 4% in the premarket while Five9 slid 1.4%.

Walt Disney (DIS) – Disney and Scarlett Johansson have settled a lawsuit involving the “Black Widow” movie. Johansson had sued Disney over the release of the movie on the Disney+ streaming service at the same time it was debuting in theaters. Terms of the settlement weren’t disclosed.

Wells Fargo (WFC) – Wells Fargo will have to face a shareholder fraud lawsuit involving its attempt to rebound from years of scandals. A judge rejected the bank’s moved to have the suit dismissed, saying it was plausible that statements by various Wells Fargo officials about the recovery were false or misleading.

Exxon Mobil (XOM) – Exxon Mobil said in an SEC filing that higher oil and gas prices could boost third-quarter earnings by as much as $1.5 billion. Exxon profits have been improving amid the rising prices as well as cost cuts by the energy giant.

Nio (NIO) – Nio reported deliveries of 10,628 vehicles in September, a 126% increase over a year ago for the China-based electric vehicle maker. Nio added 1.8% in the premarket.

International Flavors (IFF) – The maker of food flavoring and cosmetic ingredients said Chairman and Chief Executive Officer Andreas Fibig plans to retire, although he’ll remain at the helm of the company until a successor is found. Shares added 2.5% in premarket action.

Jefferies Financial Group (JEF) – Jefferies reported a quarterly profit of $1.50 per share, beating the 99-cent consensus estimate, with the financial services company’s revenue also topping Wall Street forecasts. Jefferies saw its results boosted by a strong performance in its investment banking business. Jefferies gained 1.4% in the premarket.

MGM Resorts (MGM) – Susquehanna Financial downgraded MGM to “negative” from “neutral,” saying the DraftKings (DKNG) bid for British gambling company Entain weakens MGM’s prospects in the digital gaming and betting market.

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Apple told a showbiz union it had less than 20 million TV+ subscribers

Tim Cook, chief executive officer of Apple Inc., smiles while speaking about Apple TV+ during an event at the Steve Jobs Theater in Cupertino, California, U.S., on Tuesday, Sept. 10, 2019.

David Paul Morris | Bloomberg | Getty Images

Apple claimed its TV+ service had less than 20 million subscribers in the U.S. and Canada as of July, allowing it to pay behind-the-scenes production crew lower rates than streamers with more subscriptions, according to the International Alliance of Theatrical Stage Employees, a union that represents TV and movie workers who perform jobs like operating cameras and building sets.

Apple has never revealed subscriber numbers for its Apple TV+ streaming service, which launched in the fall of 2019. Analysts are reluctant to offer estimates, but many say that its scale pales in comparison to services like Netflix, which claimed 209 million subscribers as of Q2, and Disney+, which claimed 116 million.

The fact that Apple can pay a discounted rate despite being the most valuable publicly traded company in the world highlights some of the issues facing Hollywood workers as streaming supplants linear TV and movies, and is raising ire among union members who are deciding whether to strike for better pay and working conditions.

Under the current contract, high-budget productions intended for streaming can offer lower rates to workers if the streaming service has less than 20 million subscribers in the U.S. and Canada, which is determined on July 1 every year. Apple told IATSE that it had less than 20 million subscribers, a union spokesman said.

The union is currently in negotiations with the Alliance of Motion Picture and Television Producers over a new contract. Apple is a member of the alliance, but the alliance negotiates for all of its members, and doesn’t create carve-outs for specific companies, according to a spokesperson for the industry group.

An Apple spokesperson declined to comment on subscriber numbers but said the company pays rates in line with leading streaming services.

Under the current contract, productions made for streaming services are governed under less strict labor terms than traditional TV shows or movies because streaming profitability is “presently uncertain” and productions needed greater flexibility, according to a copy of the contract reviewed by CNBC.

But union leaders argue that streaming is no longer a particularly new form of media, and companies that bankroll streaming productions should pay rates closer to traditional media productions.

“Workers on certain ‘new media’ streaming projects get paid less, even on productions with budgets that rival or exceed those of traditionally released blockbusters,” an IATSE press release said this week, noting that negotiations had stalled.

IATSE is gearing up for a strike, its spokesman said, and ballots allowing the union’s 150,000 members to authorize a strike will be sent out on October 1.

While new media pay rates are one of the issues currently under negotiation, the most pressing issue is working conditions on set, including long working hours, which have gotten worse during the Covid-19 pandemic, the union spokesperson said. Celebrities and actors have started to post messages on social media supporting the IATSE union and potential strike.

Apple has reportedly spent up to $15 million per episode of shows like “The Morning Show” to try and bulk up its service with premium content. Apple also bundled free trials with the purchase of new phones or tablets, and those trials started expiring in July, forcing many users to decide whether it was worth $4.99 per month. Apple sold an estimated 206 million iPhones globally in 2020, which would amount to a lot of free trials.

NBCUniversal’s Peacock and ViacomCBS’ Paramount+ also have under 20 million subscribers, allowing them to ask for discounts on labor, the union spokesman said.

A ViacomCBS spokesperson said the company doesn’t break out Paramount+ streaming numbers. NBCUniversal didn’t have a comment by publication time.

Disclosure: NBCUniversal, which owns and operates Peacock, is also the parent company of CNBC.

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Disney CEO projects lower fourth-quarter subscriber growth than estimates

Tom Hiddleston stars as Loki in the Disney+ series “Loki.”

Disney

Disney’s CEO Bob Chapek said Tuesday that his company’s streaming service growth has “hit some headwinds” related to coronavirus, causing shares to close down more than 4% for the day.

Disney expects to add “low single-digit millions” of streaming subscribers in the fourth quarter, Chapek said. Disney shares closed down 4.09% after Chapek’s comments at the virtual Goldman Sachs Communacopia Conference.

Chapek said “mobilizing partners” in Latin America to push Disney’s new Star+ streaming service, the Covid-related suspension of the India Premier League, whose games air on Disney’s Hotstar, and production delays from the delta variant have all hurt subscriber numbers in the fourth quarter.

“We are going to see a little bit more noise than maybe the Street projects quarter to quarter,” Chapek said. “The resurgence of Covid and delta did impact some of our productions.”

Chapek’s forecast is significantly lower than some analyst estimates. Deutsche Bank analyst Bryan Kraft had projected Disney+ net adds of about 13 million in the quarter.

Global production delays will be “very short term,” Chapek said. But he acknowledged there won’t be as much new programming in the fourth quarter “than we might have expected,” which will affect subscriber growth.

Disney has projected 230 million to 260 million Disney+ subscribers by 2024. Disney said in August it had 116 million Disney+ subscribers.

Chapek cautioned investors that quarter-to-quarter growth “is not linear” and some choppiness is expected. Still, he remained confident in Disney’s long-term growth outlook.

Correction: This story has been updated to reflect the correct timing of when Disney shares fell.

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