Disney Shows Streaming War Is Shifting. Why Viewers aren’t the Key Metric.

But, actually, Disney’s move says a lot more about the state the streaming wars.

In the beginning, the battle was for eyeballs and the metric was subscriber growth. For that, original and exclusive content was needed. Disney went big on new Star Wars material to get a foot in the door. Apple TV created Ted Lasso. Way back in 2020, before the Covid-19 pandemic started, actor Ricky Gervais joked at the Golden Globes that no one was going to theaters anymore because they’re all at home watching Netflix.

Now, all the streaming services are raising prices, introducing advertisements, and cracking down on password sharing.

The drive to increase revenue from streaming isn’t to cover higher costs—if anything, costs have gone down amid a bitter Hollywood strike—spending on content is down by $3 billion. The focus is on making streaming more profitable, rather than making more shows for viewers.

And there’s the rub—after a spell of inflation across the board, it seems a big ask to get people to pay more to watch television, especially if it feels like it’s not as good as it used to be. Each price increase is an opportunity to re-evaluate which services you want to keep, and which ones you can drop.

Eventually, investors will have to look at more than just a streaming channel’s current profitability. They’ll also have to judge which ones will survive the beauty contest when consumers pull back.

—Brian Swint

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Monthly Streaming Costs Hiked Amid Mixed Results

Disney
reported mixed quarterly results but jacked up prices for its streaming services and foreshadowed a Netflix-like crackdown on password sharing. The move, which raises prices as much as 27% for an ad-free Disney+, is part of a drive to make the business profitable.

• The entertainment giant’s flagship streaming platform ended June with 105.7 million subscribers, up 1% from a year ago. Total subscribers were 154 million, up slightly from a year ago. CEO Bob Iger said 3.3 million have signed up for the ad-supported Disney+.

• The monthly price for the ad-free version of Disney+ rises $3 to $13.99, and ad-free Hulu rises $3 a month to $17.99. By comparison,
  Netflix’s
  standard ad-free tier is $15.59 a month, and
  Warner Bros. Discovery’s
  Max is $15.99.

• Disney’s revenue rose 4% in the fiscal third quarter to $22.3 billion, below expectations, while adjusted profit of $1.03 a share beat estimates. Revenue in the business that includes streaming was up 9%, to $5.5 billion, missing expectations.

• Iger also said Disney’s sports network ESPN will eventually roll out a direct-to-consumer option, too, but the company is still considering pricing and timing. Total domestic sports ad revenue is up about 10% from a year ago.

What’s Next: Disney is focused on a future driven by films, parks, and streaming and is considering strategic options for its traditional television channels. It sees $27 billion in content spending this year, down from about $30 billion in fiscal 2022.

—Eric J. Savitz and Liz Moyer

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Biden Restricts Private Equity, Venture Investing in Chinese Tech

President Joe Biden signed an executive order restricting U.S. venture capital and private equity investment in high-tech Chinese industries such as quantum computing, semiconductors, and artificial intelligence. It would also require American firms to disclose more when they invest in a broad range of Chinese companies.

• Officials said the new rules are to protect national security, not disrupt cross-border investments. There could be an exemption for publicly traded Chinese securities, senior administration officials told reporters. The rules aim to limit the transfer of American expertise.

• China isn’t mentioned in the order except in an “annex” to it, where it is named once along with its territories Macau and Hong Kong. The order could raise tensions between the U.S. and China at a time when they have been trying to re-establish contact.

• The Biden administration already had export restrictions on American technology. China has banned its companies from buying products from American memory chip maker
  Micron Technology
  and set export restrictions on two minerals that are critical to making semiconductors and solar panels.

• China’s economy became deflationary in July, with consumer prices falling for the first time in more than two years. Its post-Covid economic recovery has been stalled by a drop in exports, high unemployment among the young, and a housing market downturn.

What’s Next: Senior Biden administration officials told reporters on Wednesday that officials had been in direct conversations with members of the Group of Seven nations as well as China about the executive order. The European Union is also looking at certain investment restrictions.

—Liz Moyer

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Coach Goes Shopping for Versace Parent Capri

Coach parent Tapestry was nearing a deal to buy Capri, the owner of Michael Kors and Jimmy Choo, which The Wall Street Journal reported could get announced early Thursday.

• A merger would leave the combined company better placed to compete with the likes of LVMH Moët Hennessy Louis Vuitton and Gucci parent Kering. Capri, which also owns fashion brand Versace, was due to report fiscal first-quarter earnings Tuesday but rescheduled to Thursday with a day’s notice.

• Fashion deals have been in vogue in recent years, most notably as French luxury giant LVMH acquired Tiffany & Co. in 2021. Tiffany was a key contributor to the 10% profit growth posted by the group’s Watches & Jewelry segment in the first half of 2023, LVMH said when it reported earnings last month.

• Rival European fashion group Kering announced a deal to buy a 30% stake in Italian luxury fashion house Valentino for 1.7 billion euros ($1.87 billion) in July. It includes an option to buy 100% of Valentino by 2028.

What’s Next: A potential Tapestry and Coach tie-up would bring together some of the best-known fashion names in the U.S. at a time when European rivals have been busy snapping up big brands. Such deals tend to bring about cost savings and enhanced marketing power– which would further boost the companies after the latest data showed U.S. retail sales are rising as inflation eases.

—Callum Keown and Rupert Steiner

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Natural Catastrophes Cost $50 Billion in Insured Losses in First Half

The insurance industry took on $50 billion in global insured losses in the first half of 2023, the second-highest amount since 2011 after a series of natural catastrophes. Stung by years of catastrophe-related losses, insurers are raising rates and limiting coverage.

• Swiss Re
  said a series of widespread thunderstorms that lashed the U.S. this year accounted for 68% of insured natural catastrophe losses, or about $35 billion. An earthquake in Turkey and Syria in February was the single-costliest disaster.

• Overall, economic losses from natural disasters were $120 billion globally, 46% above the 10-year average, Swiss Re said. Rising population density in disaster-prone regions such as the Florida coast and California raises the cost of recovery.

• Martin Bertogg, head of catastrophe perils at Swiss Re, said the above-average losses this year reaffirm a 5% to 7% annual growth trend in insured losses driven by a warming climate and rising economic values in urban areas.

• The world just sweltered through its hottest July on record, passing the global monthly average temperature record set in July 2019, according to data from the Copernicus Climate Change Service. That was after the hottest June on record.

What’s Next: In Hawaii a massive wildfire killed at least six people and caused widespread destruction on Maui Wednesday. Homeland Security Sec. Alejandro Mayorkas said the Coast Guard is helping with search and rescue and federal disaster agencies are responding.

—Lauren Foster and Liz Moyer

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UAW and Detroit’s Big Auto Makers Are Talking. Costs Could Rise.

Detroit’s Big Three auto makers are in talks with the United Auto Workers (UAW) ahead of a contract deadline in September. The union’s demands could raise costs by a cumulative $80 billion over the life of the contract, which would run through September 2027.

• Together,
  Ford Motor,

  General Motors,
  and Chrysler maker
  Stellantis
  generated 2022 sales of almost $500 billion. They had a combined operating profit of almost $50 billion from selling more than 13 million cars.

• The union’s requested wage increase is about 10% a year on average through the life of the contract, but that’s a negotiating point. Prior deals between UAW and auto makers increased pay 2% a year on average. Teamsters at
  United Parcel Service
  got 6% to 7% pay increases for their new five-year agreement.

• The UAW request would raise the price of a new vehicle by roughly 4% on average, Barron’s calculations indicate. Prices for new cars are already up about 25% since late 2019 because of higher costs and a lower supply of vehicles.

• That price-increase estimate is based on the idea that sales have to rise by as much as the cost of labor. It also assumes that the auto makers raise prices by equal percentages in all markets, rather than adjusting them for competitive pressures such as
  Tesla’s
  price cuts.

What’s Next: GM, Ford, and Stellantis made 2022 operating profit of roughly $3,500 a car, while wage increases could cost almost $1,500 a vehicle. The $80 billion figure could take roughly 45% off the operating profit Wall Street expects the auto makers to bring in over the four-year contract.

—Al Root

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Why is a home energy audit the best place to start in understanding where you can make energy efficient and solar energy improvements to your home and save more money?

Read more here.

—by The Wall Street Journal

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—Newsletter edited by Liz Moyer, Patrick O’Donnell, Rupert Steiner