Tag: Comcast Corp

Universal banks on ‘Migration’ to expand its animation lead over Disney

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Universal and Illuminations latest animated film centers on a family of ducks who decides to leave the safety of a New England pond for an adventurous trip to Jamaica. However, their well-laid plans quickly go awry when they get lost and wind up in New York City.

Universal

Disney dropped the animation crown. Universal has picked it up.

And, with “Migration” opening Friday, the studio is looking to strengthen its grip.

“Migration,” a comic tale about a family of New England ducks that leave their pond for Jamaica, but end up in New York City, is expected to tally $25 million during its domestic debut. Universal has more conservative expectations, forecasting between $10 million and $15 million in ticket sales for the film’s opening.

While that pales in comparison to the $100 million-plus debuts of Illumination/Universal’s “The Super Mario Bros. Movie” and the latest “Minions” film, it’s comparable to the studio and DreamWorks Animation’s “Puss in Boots: The Last Wish,” which ran in theaters for several months, securing nearly $500 million globally.

“‘Migration,’ with solid word-of-mouth and strong reviews, will have to be judged more on its long-term results than the opening weekend splash,” said Paul Dergarabedian, senior media analyst at Comscore.

Disney’s most recent animated film “Wish” failed to connect with audiences. After generating $31.6 million domestically over the five-day Thanksgiving holiday, the film has grossed a total of $55.2 million in the U.S. and Canada. Globally, the film has reached $127.1 million. The film had a budget of $200 million, not including marketing costs.

For comparison, “Trolls Band Together,” which was released the week before Thanksgiving, secured $30 million for its three-day debut and nearly $180 million worldwide. The film had a budget of $95 million, not including marketing costs.

Representatives from Disney did not immediately respond to CNBC’s request for comment.

How Disney lost the crown

Ariana DeBose stars as Asha in Disney’s new animated film “Wish.”

Disney

Disney established its animated feature empire in the early 20th century with 1937’s “Snow White and the Seven Dwarfs” and continued to dominate, more or less, into the 1980s and 1990s with “The Little Mermaid” and “Beauty and the Beast.”

Later, it acquired Pixar, which together with Walt Disney Animation, generated billions in box-office receipts for the company.

“The world of feature animation has been dominated for decades by Disney and for good reason,” said Dergarabedian. “They set the gold standard.”

Then came the Covid pandemic. While theaters closed, Disney sought to pad its fledgling streaming service Disney+ with content, stretching its creative teams thin, and sending theatrical movies during the pandemic straight to digital.

The decision trained parents to seek out new Disney titles on streaming, not theaters, even when Disney opted to return its films to the big screen. Compounding Disney’s woes was a general sense from audiences that the company’s content had grown overly existential and too concerned with social issues beyond the reach of children.

As a result, no Disney animated feature from Pixar or Walt Disney Animation has generated more than $480 million at the global box office since 2019.

“I think what’s changed is that Disney doesn’t get the benefit of the doubt,” said Josh Brown, CEO at Ritholtz Wealth Management and a CNBC contributor. “And people will not go to a movie just because it’s the latest Disney movie in the way that previous generations did.”

Universal appeal

Meanwhile, Universal’s two animation arms — Illumination and DreamWorks — have thrived.

Illumination’s “Minions: The Rise of Gru,” which opened in 2022, tallied $942 million worldwide, DreamWorks’ “Puss in Boots: The Last Wish” capped at $485 million after its holiday 2022 opening, and Illumination’s “The Super Mario Bros. Movie” soared to more than $1.3 billion in 2023.

Even the Magic Kingdom was impressed with the box office of “Super Mario.” Disney CEO Bob Iger praised the rival studio back in May during the company’s fiscal second-quarter earnings call.

But as moviegoers have returned to cinemas in the wake of the pandemic, more are gravitating toward Universal’s fare.

“Simply put, Illumination Animation’s only agenda is entertainment,” said Jeff Bock, senior box-office analyst at Exhibitor Relations. “Their animated films are sweet and simple and family audiences appreciate that. Disney sometimes attempts to pack too much into their animated features, and lately have been losing sight of the simplicity of the genre.”

Not to mention, Universal has been revisiting tried and true fan-favorite stories and characters. In fact, Illumination hasn’t released a nonfranchise film since 2016, and only three of the last 10 DreamWorks features have been original stories.

For comparison, of the last eight films released by a Disney animation studio, seven have been original films with just 2022’s “Lightyear,” a “Toy Story” spinoff, tied to an existing franchise. Previously, Disney has thrived bringing new animated material to audiences, but in the post-pandemic world, it has struggled.

It is the exact opposite strategy of Disney’s live-action theatrical releases, which have relied heavily on established franchises. Think “Indiana Jones and the Dial of Destiny,” “The Little Mermaid,” Marvel franchise films and “Haunted Mansion.”

Iger has said that Disney will continue to make sequels, without apology, but admitted that the company needs to be more selective in which franchises it revisits.

“I think there has to be a reason to make them, you have to have a good story,” Iger said during The New York Times’ DealBook Summit in late November.

“Minions: The Rise of Gru” is the sequel to the 2015 film, “Minions,” and spin-off/prequel to the main “Despicable Me” film series.

Universal

In animation, returning to popular characters and worlds is an easy way to capture the attention of parents and kids.

“Because they have seen these characters and related stories before, they have high confidence that they will be high quality, entertaining and ‘brand safe’ for their kids,” said Peter Csathy, founder and chair of advisory firm Creative Media. “And they may even anticipate franchise animated films as much as their kids.”

In developing consistent franchise content like Minions and Trolls, Universal is now able to introduce a new film like “Migration” with a sense of clout. Parents who see that the film is from the same studio that brought other fan favorites to the big screen are then more likely to come out to see it.

It’s what Pixar was able to do so well for nearly three decades.

“With ‘Minions,’ ‘Secret Life of Pets’ and ‘Sing,’ I think Illumination is a brand people are aware of by now,” said Bock. “And that awareness will boost ‘Migration’s’ flight pattern, likely extending its box-office run. That’s key. The long play.”

So far, “Migration” has generally favorable reviews from critics. If audiences respond well, and spread the word, the film could see a solid run, adding to the prestige of Universal’s animation brand.

“The kids animation market opportunity will never grow old, so those playing at the top of the game – as is Illumination – hold the promise and possibility of becoming the next go-to brand for quality animation after Pixar,” said Csathy.

Next year, Disney and Pixar are set to release “Inside Out 2” in June, while Universal and Illumination’s “Despicable Me 4” is scheduled to hit theaters weeks later in July.

Disclosure: NBCUniversal is the parent company of Universal Pictures and CNBC.

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Friday’s S&P 500 and Nasdaq-100 rebalance may reflect concerns over concentration risk

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It’s arguably the biggest stock story of 2023: a small number of giant technology companies now make up a very large part of big indexes like the S&P 500 and the Nasdaq-100. 

Five companies (Apple, Microsoft, Amazon, Nvidia and Alphabet) make up about 25% of the S&P 500. Six companies (Apple, Microsoft, Amazon, Nvidia, Alphabet and Broadcom) make up about 40% of the Nasdaq-100. 

The S&P 500 and the Nasdaq are rebalancing their respective indexes this Friday. While this is a routine event, some of the changes may reflect the concerns over concentration risk. 

A ton of money is pegged to a few indexes 

Now that the CPI and the Fed meeting are out of the way, these rebalances are the last major “liquidity events” of the year, corresponding with another notable trading event: triple witching, or the quarterly expiration of stock options, index options and index futures. 

This is an opportunity for the trading community to move large blocks of stock for the last gasps of tax loss harvesting or to position for the new year. Trading volume will typically drop 30%-40% in the final two weeks of the year after triple witching, with only the final trading day showing significant volume.

All of this might appear of only academic interest, but the big move to passive index investing in the past 20 years has made these events more important to investors. 

When these indexes are adjusted, either because of additions or deletions, or because share counts change, or because the weightings are changed to reduce the influence of the largest companies, it means a lot of money moves in and out of mutual funds and ETFs that are directly or indirectly tied to the indexes. 

Standard & Poor’s estimates that nearly $13 trillion is directly or indirectly indexed to the S&P 500. The three largest ETFs (SPDR S&P 500 ETF Trust, iShares Core S&P 500 ETF, and Vanguard S&P 500 ETF) are all directly indexed to the S&P 500 and collectively have nearly $1.2 trillion in assets under management. 

Linked to the Nasdaq-100 — the 100 largest nonfinancial companies listed on Nasdaq — the Invesco QQQ Trust (QQQ) is the fifth-largest ETF, with roughly $220 billion in assets under management. 

S&P 500: Apple and others will be for sale. Uber going in 

For the S&P 500, Standard & Poor’s will adjust the weighting of each stock to account for changes in share count. Share counts typically change because many companies have large buyback programs that reduce share count. 

This quarter, Apple, Alphabet, Comcast, Exxon Mobil, Visa and Marathon Petroleum will all see their share counts reduced, so funds indexed to the S&P will have to reduce their weighting. 

S&P 500: Companies with share count reduction

(% of share count reduction)

  • Apple        0.5%
  • Alphabet   1.3%
  • Comcast    2.4%
  • Exxon Mobil  1.0%
  • Visa                0.8%
  • Marathon Petroleum  2.6%

Source: S&P Global

Other companies (Nasdaq, EQT, and Amazon among them) will see their share counts increased, so funds indexed to the S&P 500 will have to increase their weighting. 

In addition, three companies are being added to the S&P 500: Uber, Jabil, and Builders FirstSource.  I wrote about the effect that being added to the S&P was having on Uber‘s stock price last week.  

Three other companies are being deleted and will go from the S&P 500 to the S&P SmallCap 600 index: Sealed Air, Alaska Air and SolarEdge Technologies. 

Nasdaq-100 changes: DoorDash, MongoDB, Splunk are in 

The Nasdaq-100 is rebalanced four times a year; however, the annual reconstitution, where stocks are added or deleted, happens only in December. 

Last Friday, Nasdaq announced that six companies would be added to the Nasdaq-100: CDW Corporation (CDW), Coca-Cola Europacific Partners (CCEP), DoorDash (DASH), MongoDB (MDB), Roper Technologies (ROP), and Splunk (SPLK). 

Six others will be deleted: Align Technology (ALGN), eBay (EBAY), Enphase Energy (ENPH), JD.com (JD), Lucid Group (LCID), and Zoom Video Communications (ZM).

Concentration risk: The rules

Under federal law, a diversified investment fund (mutual funds, exchange-traded funds), even if it just mimics an index like the S&P 500, has to satisfy certain diversification requirements. This includes requirements that: 1) no single issuer can account for more than 25% of the total assets of the portfolio, and 2) securities that represent more than 5% of the total assets cannot exceed 50% of the total portfolio. 

Most of the major indexes have similar requirements in their rules. 

For example, there are 11 S&P sector indexes that are the underlying indexes for widely traded ETFs such as the Technology Select SPDR ETF (XLK). The rules for these sector indexes are similar to the rules on diversification requirements for investment funds discussed above. For example, the S&P sector indexes say that a single stock cannot exceed 24% of the float-adjusted market capitalization of that sector index and that the sum of the companies with weights greater than 4.8% cannot exceed 50% of the total index weight. 

At the end of last week, three companies had weights greater than 4.8% in the Technology Select Sector (Microsoft at 23.5%, Apple at 22.8%, and Broadcom at 4.9%) and their combined market weight was 51.2%, so if those same prices hold at the close on Friday, there should be a small reduction in Apple and Microsoft in that index. 

S&P will announce if there are changes in the sector indexes after the close on Friday. 

The Nasdaq-100 also uses a “modified” market-capitalization weighting scheme, which can constrain the size of the weighting for any given stock to address overconcentration risk. This rebalancing may reduce the weighting in some of the largest stocks, including Apple, Microsoft, Amazon, Nvidia and Alphabet. 

The move up in these large tech stocks was so rapid in the first half of the year that Nasdaq took the unusual step of initiating a special rebalance in the Nasdaq-100 in July to address the overconcentration of the biggest names. As a result, Microsoft, Apple, Nvidia, Amazon and Tesla all saw their weightings reduced. 

Market concentration is nothing new

Whether the rules around market concentration should be tightened is open for debate, but the issue has been around for decades.

For example, Phil Mackintosh and Robert Jankiewicz from Nasdaq recently noted that the weight of the five largest companies in the S&P 500 was also around 25% back in the 1970s.

Disclosure: Comcast is the corporate parent of NBCUniversal and CNBC.

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What’s Warner Bros. Discovery’s next move? David Zaslav and John Malone offer clues

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David Zaslav, CEO and president of Warner Bros. Discovery (L), and John Malone, chairman of Liberty Media, Liberty Global, and Qurate Retail Group.

CNBC | Reuters

Warner Bros. Discovery‘s next step to gain scale may be looking at distressed assets.

Chief Executive David Zaslav and board member John Malone both made comments this week suggesting the company is paying down debt and building up free cash flow to set up acquisitions in the next two years of media businesses suffering from diminished valuations.

The targets could be companies flirting with or filing for bankruptcy, Malone said in an exclusive interview with CNBC on Thursday. While U.S. regulators may frown at large media companies coming together because of overlaps with studio, cable or broadcasting assets, they’ll be much more forgiving if the companies are struggling to survive, Malone told David Faber.

“I think we’re going to see very serious distress in our industry,” Malone said. “There is an exemption to the antitrust laws on a failing business. At some point of distress, right, then some of the restrictions, they look the other way.”

Media company valuations have been plummeting amid streaming video losses, traditional TV subscriber defections, and a down advertising market. This has affected Warner Bros. Discovery as much as its peers. The company’s market valuation recently fell below $23 billion, its lowest point since WarnerMedia and Discovery merged last year. The company ended the third quarter with about $43 billion in net debt.

Warner Bros. Discovery is trying to position itself to be an acquirer, rather than a distressed asset, itself, by paying down debt and increasing cash flow, Zaslav said during his company’s earnings conference call this week. Warner Bros. Discovery has paid down $12 billion and expects to generate at least $5 billion in free cash flow this year, the company said.

“We’re surrounded by a lot of companies that are – don’t have the geographic diversity that we have, aren’t generating real free cash flow, have debt that are presenting issues,” Zaslav said Thursday. “We’re de-levering at a time when our peers are levering up, at a time when our peers are unstable, and there is a lot of excess competitive – excess players in the market. So, this will give us a chance not only to fight to grow in the next year, but to have the kind of balance sheet and the kind of stability … that we could be really opportunistic over the next 12 to 24 months.”

Still, Warner Bros. Discovery also acknowledged it will miss its own year-end leverage target of 2.5 to 3 times adjusted earnings as the TV ad market struggles and linear TV subscription revenue declines.

Buying from distress

Malone has some experience with profiting from times of distress.

His Liberty Media acquired a 40% stake in Sirius XM over several years more than a decade ago, saving it from bankruptcy. Since then, the equity value of the satellite radio company has bounced back from nearly zero to about $5 per share. Sirius XM currently has a market capitalization of about $18 billion.

“It made us a lot of money with Sirius,” Malone told Faber.

While Malone didn’t name a specific company as a target for Warner Bros. Discovery, he discussed Paramount Global as an example of a company whose prospects seem shaky. Paramount Global’s market valuation has slumped below $8 billion while carrying about $16 billion in debt.

Malone noted that Paramount’s debt was recently downgraded. “I think that they’re running probably negative free cash flow,” he said.

Paramount Global’s third-quarter cash flow was $377 million, and the company has forecast a return to positive free cash flow in 2024.

While Paramount Global shares have fallen precipitously since Viacom and CBS merged in 2019, there are signs the company is shoring up its balance sheet. CEO Bob Bakish said earlier this month Paramount Global’s streaming losses will be lower in 2023 than 2022, and the company expects further improvement to losses in 2024. The company closed a sale for book publisher Simon & Schuster for $1.6 billion and will use the proceeds to pay down debt.

Paramount Global’s fate

Shari Redstone, chair of Paramount Global, attends the Allen & Co. Media and Technology Conference in Sun Valley, Idaho, on Tuesday, July 11, 2023.

David A. Grogan | CNBC

Paramount Global is one of the few assets that logically fits Malone’s vision of a media asset that would have regulatory issues as an acquisition with potential distress concerns. Comcast‘s NBCUniversal, another potential merger partner, will lose more than $2 billion this year on its streaming service, Peacock, but the media giant is shielded by its parent company, the largest U.S. broadband provider.

“Warner Bros. [Discovery] now is making money. Not a lot, but they’re making money,” Malone said. “Peacock is losing a lot of money. Paramount is losing a ton of money that they can’t afford. At least [Comcast CEO] Brian [Roberts] can afford to lose the money.”

Paramount Global’s controlling shareholder Shari Redstone is open to a transformative transaction, CNBC reported last month. Puck’s Dylan Byers recently reported that industry insiders have speculated Warner Bros. Discovery might pursue an acquisition of Paramount Global after the 2024 U.S. presidential election.

A combination of NBCUniversal and Paramount Global also has strategic logic, but the combination of two national broadcast networks — Comcast’s NBC and Paramount Global’s CBS — would present a significant regulatory hurdle. Warner Bros. Discovery doesn’t own a broadcast network, making an acquisition of CBS easier.

Spokespeople for Paramount Global and Warner Bros. Discovery declined to comment.

While Malone said all legacy media companies should be talking to each other about merger synergies, he acknowledged valuations may have to fall farther to get regulators on board with further consolidation. Malone predicted that could happen in the same timeline Zaslav gave — within the next two years.

“Eventually maybe there’ll be regulatory relief,” Malone said. “Out of distress usually comes the reduction in competition, increased pricing power, and the opportunity to buy assets at a deep discount.”

Disclosure: Comcast owns NBCUniversal, the parent company of CNBC.

Tune in: CNBC’s full interview with John Malone will air 8 p.m. ET Thursday.

Liberty Media's John Malone on interest rates, media outlook and the streaming landscape

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Paramount’s Shari Redstone is open for business, but business may not be open for her

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Shari Redstone, president of National Amusements and controlling shareholder of Paramount Global, walks to a morning session at the Allen & Company Sun Valley Conference in Sun Valley, Idaho, July 12, 2023.

David A. Grogan | CNBC

Shari Redstone may have missed her window.

Paramount Global‘s controlling shareholder is open to a merger or selling the company at the right price, according to people familiar with her thinking. And she has been open to it for several years, said the people, who asked not to speak publicly because the discussions have been private.

Spokespeople for Redstone and Paramount Global declined to comment.

The problem has been finding the right deal for shareholders. Market conditions have made a transformative transaction difficult at best and highly unlikely at worst.

“The market is crying out for reshaping media company portfolios and consolidation,” said Jon Miller, chief executive at Integrated Media and a senior advisor at venture firm Advancit Capital, which Redstone co-founded. “But the deck is stacked against large-scale transactions now because of both immediate concerns in terms of ad sales, subscription video numbers and the cost of debt. No one wants to transact at the current market valuations that these companies are given.”

Paramount Global is an archetype for the media industry’s consolidation conundrum. The company consists of Paramount Pictures, the CBS broadcast network, 28 owned-and-operated local CBS stations, the streaming service Paramount+, free advertising-supported Pluto TV, “Star Trek,” “SpongeBob SquarePants,” MTV, Nickelodeon, Comedy Central, BET and Showtime. It also owns the physical Paramount studio lot in Los Angeles, California.

From a sum-of-the-parts perspective, the company holds a strong hand. Many of Paramount Global’s assets would fit nicely within larger media companies.

“Paramount has a tremendous amount of assets in its content library and they own some pretty powerful sports rights in the form of the NFL contract, Champions League soccer and March Madness,” Guggenheim analyst Michael Morris told CNBC last week.

“But, they are still losing money on their streaming service,” Morris said. “They need to pull these things together, right-size the content, super charge that topline through pricing and penetration, and then we can see investors get excited about this idea again.”

Declining revenue from the acceleration of pay-TV cord-cutting, continued streaming losses and rising interest rates have put Redstone in a bind. The company’s market capitalization has slumped to $7.7 billion, nearly the company’s lowest valuation since Redstone merged CBS and Viacom in 2019. At the time, that transaction gave the combined company a market valuation of about $30 billion.

It’s unclear whether staying the course will help turn investor sentiment. Warren Buffett, CEO of Berkshire Hathaway, one of Paramount Global’s biggest shareholders, told CNBC in April that streaming “is not really a very good business.” He also noted that shareholders in entertainment companies “really haven’t done that great over time.”

Paramount Global’s direct-to-consumer businesses lost $424 million in the second quarter and $511 million in the first quarter. The company reports third-quarter earnings Nov. 2.

CEO Bob Bakish said 2023 will be the peak loss year for streaming. Paramount Global cut its dividend to 5 cents per share from 24 cents per share to “further enhance our ability to deliver long-term value for our shareholders as we move toward streaming profitability,” Bakish said in May.

Wells Fargo analyst Steven Cahall suggested earlier this year that Bakish should shut down the company’s streaming business entirely, despite the fact that Paramount+ has accumulated more than 60 million subscribers.

“We believe Paramount Global is worth a lot more either as a content arms dealer or as a break-up for sale story,” Cahall wrote in a note to clients in May. “Great content, misguided strategy.”

Big Tech lifeline

Bob Bakish, CEO of Paramount, speaks with CNBC’s David Faber on Sept. 6, 2023.

CNBC

Executives at Paramount Global continue to hold out hope that a large technology company, such as Apple, Amazon or Alphabet, will view the collection of assets as a way to bolster their content aspirations, according to people familiar with the matter.

Paramount+’s 61 million subscribers could help supersize an existing streaming service such as Apple TV+ or Amazon’s Prime Video, or give Alphabet’s YouTube a bigger foothold into subscription streaming beyond the National Football League’s Sunday Ticket and YouTube TV.

While Federal Trade Commission Chairman Lina Khan has been particularly focused on limiting the power of Big Tech companies, Apple, Amazon and Alphabet may actually be better buyers than legacy media companies from a regulatory standpoint. They don’t own a broadcast TV network, unlike Comcast (NBC), Fox or Disney (ABC). It’s highly unlikely U.S. regulators would allow one company to own two broadcast networks. Divesting CBS is possible, but it’s so intertwined with Paramount+ that separating the network from the streaming service would be messy.

“We believe Paramount Global is too small to win the streaming wars, but it is bite-size enough to be acquired by a larger streaming competitor for its deep library of film and TV content, as well as its sports rights and news assets,” Laura Martin, an analyst at Needham & Co., wrote in an Oct. 9 research note to clients.

Acquiring Paramount Global would be a relative drop in the bucket for a Big Tech company. Paramount Global’s market value was below $8 billion as of Friday. It also has about $16 billion in long-term debt.

Still, even with huge balance sheets and trillion-dollar valuations, there’s no evidence technology companies want to own declining legacy media assets such as cable and broadcast networks. Netflix has built its business specifically on the premise that these assets will ultimately die. Paramount’s lot and studio may be appealing for content creation and library programming, but that would leave Redstone holding a less desirable basket of legacy media assets.

Breakup difficulties

It’s possible Redstone could break up the company and sell off legacy media assets to a private equity firm that could milk them for cash. But Paramount Global’s diminished market valuation, relative to its debt, likely makes a leveraged buyout less appealing for a potential private equity firm.

Moreover, rising interest rates have generally slowed down take-private deals in all industries, as the cost of paying debt interest has soared. Globally, buyout fund deal volume in the first half of 2023 is down 58% from the same period a year ago, according to a Bain & Co. study.

If a full sale to Big Tech and a partial sale to private equity won’t happen, another option for Redstone is to merge or sell to another legacy media company. Warner Bros. Discovery could merge with Paramount Global, though putting together Warner Bros. and Paramount Pictures may hold up deal approval with U.S. regulators.

Beyond regulatory issues, recent history suggests big media mergers haven’t worked well for shareholders. Tens of billions of dollars in shareholder value have been lost in recent media mergers, including WarnerMedia and Discovery, Disney and the majority of Fox, Comcast/NBCUniversal and Sky, Viacom and CBS, and Scripps and Discovery.

Merger partners such as Warner Bros. Discovery also may prefer to sell or merge with a different company, such as Comcast’s NBCUniversal, if regulators allow a big media combination.

Redstone has recently dabbled around the edges, shedding some assets, such as book publisher Simon & Schuster, and engaging in talks to sell a majority stake in cable network BET.

But Paramount Global shelved the idea of selling a stake in BET in August after deciding sale offers were too low to outweigh the value of keeping the network in its cable network portfolio. With the total company’s market valuation below $8 billion, it’s difficult to convince buyers to pay big prices for parts. A change in broader investment sentiment that pushes the company’s valuation higher may help Redstone and other Paramount Global executives get more comfortable with divesting assets.

Selling National Amusements

If Redstone can’t find a deal to her liking, she could also sell National Amusements, the holding company founded by her father, Sumner Redstone, that owns the bulk of the company’s voting shares. National Amusements owns 77.3% of Paramount Global’s Class A (voting) common stock and 5.2% of the Class B common stock, constituting about 10% of the overall equity of the company.

Redstone took a $125 million strategic investment from merchant bank BDT & MSD Partners earlier this year to pay down debt, reiterating her belief in Paramount Global’s inherent value.

“Paramount has the best assets in the media industry, with an incredible content library and IP spanning all genres and demographics, as well as the No. 1 broadcast network, the leading free ad-supported streaming television service and the fastest-growing pay streaming platform in the U.S.,” Redstone said in a statement in May. “NAI has conviction in Paramount’s strategy and execution, and we remain committed to supporting Paramount as it takes the necessary steps to build on its success and capitalize on the strategic opportunities in our industry.”

Selling National Amusements wouldn’t alter Paramount Global’s long-term future. But it is a way out for Redstone if she can’t find a deal beneficial to shareholders.

Paramount Global isn’t actively working with an investment bank on a sale, according to people familiar with the matter. The company is content to wait for a shift in market conditions or regulatory officials before getting more aggressive on a transformational deal, said the people.

Still, Redstone’s predicament aptly sums up legacy media’s current problems. The industry is counting on a turn in market sentiment, while executives privately grumble that in the near term there’s little they can do about it.

WATCH: Mad Money host Jim Cramer weighs in on Paramount Global

Lightning Round: Paramount Global might drop another two to three points lower, says Jim Cramer

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

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Comcast beats estimates despite slowing broadband growth, higher Peacock losses

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Comcast topped analyst expectations with its first-quarter earnings report Thursday, despite the cable and media giant’s residential broadband business’s slowing growth and mounting Peacock losses.

Shares of the company rose more than 7%.

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Here’s how Comcast performed, compared with estimates from analysts surveyed by Refinitiv:

  • Earnings per share: 92 cents adjusted vs. 82 cents expected
  • Revenue: $29.69 billion vs. $29.3 billion expected

For the quarter ended March 31, Comcast reported earnings of $3.83 billion, or 91 cents per share, compared with $3.55 billion, or 78 cents per share, a year earlier. Adjusting for one-time items, Comcast posted earnings per share of 92 cents for the most recent period.

Revenue dropped 4% to $29.69 billion from $31.01 billion in the prior-year period, with the company noting that last year it had broadcast both the Super Bowl and Beijing Olympics during the first quarter. 

The Philadelphia company said its first-quarter adjusted earnings before interest, taxes, depreciation and amortization grew 3% to $9.42 billion during the first quarter. 

Comcast said it returned $3.2 billion to shareholders in the quarter through a mix of $1.2 billion in dividend payments and $2 billion in share repurchases. 

Comcast had 21,000 fewer residential broadband customers year-over-year at the end of the three-month period, adding just 3,000 during the quarter. It received a slight boost from its business customers. Company executives had warned earlier this year that Comcast was likely to lose broadband subscribers in the first quarter. 

Still, it was a sign that Comcast, like its peers, continues to face slowing growth in the broadband business. Executives have said that, while the loss rate of customers is very low, growth has stagnated – especially since the early days of the Covid pandemic – as they face heightened competition from telecom and wireless providers. 

Comcast executives said on Thursday’s earnings call that the company expects adding subscribers to likely be a challenge in the near term, but will focus on average revenue per user to grow revenue for the segment.

The Xfinity mobile business grew to nearly 5.67 million customers during the quarter, a sign that its wireless service – which is provided in conjunction with an agreement to use Verizon‘s network – remains a bright spot. 

Cable TV customers continued their exodus from the traditional bundle, with Comcast losing 614,000 subscribers during the quarter. 

Last month, Comcast announced it was changing how it reported its segments, now grouping its Xfinity-branded broadband, cable TV and wireless services with its U.K.-based Sky, which includes pay TV services and Sky-branded entertainment TV channels to form the “connectivity and platforms” segment. Total revenue for the segment was about $20.15 billion, a slight drop from the last quarter due to the impact of foreign currency. 

The second segment, content and experiences, includes all of NBCUniversal’s TV and streaming business, the international networks and Sky Sports channels, as well as its film studios and theme parks units. Overall revenue for the segment was down nearly 10% to $10.26 billion in the quarter.

The media business’ revenue took a dip in the first quarter, with it dropping about 20% to $6.15 billion, due to its comparison last year, when NBC aired the Super Bowl and had the rights to the Beijing Olympics for its TV networks and Peacock. Still, Comcast said excluding the $1.5 billion incremental revenue from these two major sporting events, media revenue was still down about 2%. 

The tightening ad market showed on Comcast’s balance sheet this quarter, as it has for peers like Paramount Global and Warner Bros. Discovery. Excluding the Olympics and Super Bowl – two events that generate a lot of ad revenue – domestic advertising during the quarter was down about 6% driven by lower TV network revenue and a TV ratings decline. 

Domestic TV distribution revenue was up, excluding the Olympics, which Comcast noted was primarily due to higher revenue at Peacock, which had more paid subscribers. 

Comcast said Peacock subscribers grew more than 60% year over year to 22 million, and revenue was up 45% to $685 million. Peacock had $704 million in losses, compared with losses of $456 million in the same period last year. 

Last quarter, the company noted Peacock losses would amount to about $3 billion this year. The streaming service’s costs continued to weigh on the media segment’s earnings. Executives said Thursday they were “encouraged” by Peacock’s results, and following the expected peak losses this year will see a steady improvement. Comcast President Mike Cavanagh said the company had the confidence Peacock would “break even and grow from there.”

NBCUniversal’s film segment got a boost from the animated “Shrek” spinoff “Puss in Boots: The Last Wish” and horror flick “M3GAN,” during the quarter, with revenue up nearly 2% to $2.96 billion. 

Both Comcast CEO Brian Roberts and Cavanagh touted NBCUniversal’s animation film business on Thursday’s call, with the success of “The Super Mario Bros. Movie,” which was released earlier this month. This week it surpassed $900 million at the global box office, including $444 million domestically.

“We’ve had tremendous success creating franchises,” Roberts said on Thursday’s call, noting the “Despicable Me” and “Shrek” franchises. “These are the results of the strategic decisions we made years ago to become a leader in animation and the conviction to invest in the business in the pandemic.”

Cavanagh noted that NBCUniversal’s “Jurassic Park,” “Minions” and “Halloween” installments last year helped boost its box office.

“We’re really proud of our animation business,” Cavanagh said Thursday.

NBCUniversal’s upcoming film slate includes next month’s “Fast X,” the next installment in the popular “Fast and Furious” franchise, as well as Christopher Nolan’s next epic, “Oppenheimer,” about the scientist who led the development of the atomic bomb during World War II. It will be released in July.

The company’s theme park segment kept on rolling higher, especially since the shutdowns of parks during the height of the pandemic, with revenue up 25% to $1.95 billion. Revenue was boosted by international parks, which were still weighed down by pandemic restrictions last year. The opening of Super Nintendo World helped boost revenue, too. 

Earlier this week, NBCUniversal faced a shake-up with the ouster of CEO Jeff Shell due to a sexual harassment and discrimination complaint filed by an employee. Roberts addressed the matter at the start of Thursday’s call, saying it was “obviously a tough moment” for the company but noting his confidence in NBCUniversal’s leadership team, which will now report to Cavanagh.

“Think of me as being here for awhile,” Cavanagh said regarding his future as overseeing the NBCUniversal team. He noted during the call he’s been close to the business since joining Comcast nearly eight years ago and has been “deeply involved for a long time.”

Investors also shouldn’t expect to see NBCUniversal “revisiting strategy” as a result of Shell’s departure alone, and instead would react “as the environment changes.”

Disclosure: Comcast owns NBCUniversal, the parent company of CNBC.

Correction: Comcast’s total media revenue was down more than 20%. An earlier version misstated that figure.

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Want to watch MLB games? Making sense of the confusing TV and streaming landscape

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Seattle Mariners shortstop J.P. Crawford (3) slides into third to advance on a sacrifice fly against the Oakland Athletics during the third inning at T-Mobile Park, Sept. 28, 2021..

Joe Nicholson | USA TODAY Sports | Reuters

Buy me some peanuts and Cracker Jack – and a bunch of streaming and TV subscriptions, too.

Major League Baseball‘s season opens Thursday, and fans have to navigate various outlets to find their home team’s games this season. This might create some confusion, while causing some viewers to beef up their baseball budgets.

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MLB teams play 162 games during the regular season, giving the league a lot of runway to sign media rights deals with various outlets in a bid to broaden its reach and audience. In recent years, the focus has been on placing more games on streaming services, while traditional cable TV is needed for a bulk of game viewing.

Here’s a breakdown of how the landscape looks, for now.

Home base plan

For the baseball fan looking to watch as many games as possible, a traditional pay TV service is still the go-to place.

Regional sports networks air the majority of local games during the season. In addition, national networks like Disney unit ESPN and Warner Bros. Discovery’s TBS, as well as Fox Corp.‘s broadcast and pay TV networks, take up a decent chunk of the schedule.

There are a few internet-TV bundle competitors that are an option, too. DirecTV’s DirecTV Stream and FuboTV carry most, if not all, regional sports networks. Other providers like Google‘s YouTube TV and Disney’s Hulu Live TV+ carry few, if any, of these networks.

The reason for that? The high fees networks charge pay TV operators. A “regional sports network” fee is broken out on pay TV bills. It varies by the market.

The fate of the regional sports networks has been brought into question. Recently, Diamond Sports, which operates a portfolio of regional sports networks, filed for bankruptcy protection, toppled by a debt load and the loss of pay TV subscribers.

The networks and the streaming services haven’t gone dark and are still expected to show games this season.

Similarly, Warner Bros. Discovery has been looking to exit the regional sports networks it inherited from the acquisition of Warner from AT&T last year, The Wall Street Journal recently reported. While Warner Bros. sent a notice to the teams looking to transition the network rights over to them, the league and Warner Bros. have been in negotiations to keep the networks running normally for the foreseeable future, people familiar with the matter said.

Streaming options

As the traditional TV audience shrinks, the league and the networks have been looking to streaming services to grow MLB’s audience there. However, as more options are introduced, regional sports networks are getting fewer games and fans have to pay more to watch all games.

“From baseball’s perspective there is not only a need to find new audiences but different demographics,” said Will Mao, senior vice president of media rights consulting at Octagon. “It’s been a longtime narrative the baseball audience is getting older. To find the next generation of fans you need to go where more content is consumed, which is digital streaming platforms.”

With a higher rate of consumers dropping pay TV bundles and opting for streaming services, many networks have created direct-to-consumer streaming app options. Few offset the pay TV losses, but at least provide an option for fans wanting to stream.

New England Sports Network, home of Boston Red Sox games, has a streaming option for fans in its region. Diamond Sports’ Bally Sports+ launched last year, but only offers Detroit Tigers, Kansas City Royals, Miami Marlins, Milwaukee Brewers and Tampa Bay Rays games as the company negotiates with the league for streaming rights on a team-by-team basis.

New York Yankees right fielder Aaron Judge (99) rounds the bases after hitting home run number sixty-two to break the American League home run record in the first inning against the Texas Rangers at Globe Life Field.

Tim Heitman | USA TODAY Sports | Reuters

The New York Yankees’ YES Network launched its own option the day before Opening Day, priced at $25 a month. Still, for Yankees fans, it can be particularly confusing. Since last year, 20 of its local games have been on Amazon‘s Prime Video rather than YES or a local broadcast network, stemming from Amazon taking a piece of ownership in the network.

This will mark the second season that Apple‘s Apple TV+ will air two games every Friday night. However this year “Friday Night Baseball” will come at an extra cost – a $6.99 subscription to Apple TV+ – as opposed to when it was free last year.

A set of 19 games will once again air on Sundays on Comcast‘s Peacock beginning April 23 of this year, a bit earlier than its May 8 start last year. Peacock, which costs $4.99 a month, will soon have more information about its announcers for the Sunday broadcasts, many of which air at 11:35 a.m. ET or 12:05 p.m. ET, a bit earlier than the typical MLB start time of 1:05 p.m.

Since 2021, ESPN has begun simultaneously airing games on its streaming service ESPN+, which costs $9.99 a month, and also streams a local RSN game most days throughout the season.

“I do empathize now with the rose-colored glasses many have for the traditional cable bundle. There’s value to bundling we’ve learned not just across media but other industries,” said Mao.

These additional streaming bills come as the cost of pay TV subscriptions from satellite and cable providers varies across the U.S. A recent U.S. News report found that an average cable bill costs more than $200 a month, but that could include bundled services, likely broadband service. The Federal Communications Commission’s most recent report from 2018 shows the average of basic cable at $25.40 a month, with the expanded package averaging $71.31. The former is unlikely to include national sports networks.

Disclosure: Comcast owns NBCUniversal, the parent company of Peacock and CNBC.

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‘M3gan’ box office success sets the stage for a scary good year in horror

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A lifelike doll programmed to be a child’s greatest companion and a parent’s greatest ally turns murderous in Universal Studios and Blumhouse’s “M3GAN.”

Universal

A fashion-forward, murderous doll is ringing up big bucks at the box office.

“M3gan,” the newest release from the Universal Studios and Blumhouse collaboration, will end up with more than $100 million globally. It’s the latest success in a string of lucrative theatrical runs for the horror genre.

While Hollywood’s big-budget blockbusters typically get the most attention, the consistently strong performance of scary movies at movie theaters is good news for the cinema industry.

The pandemic fundamentally altered how and where consumers view entertainment. To be sure, people have returned to theaters, but not in the same volume as pre-pandemic times. Additionally, fewer theatrical releases have resulted in a smaller overall box office in the last year. The domestic box office reached $7.5 billion in 2022, better than $4.58 billion collected in 2021, but down around 34% compared to 2019.

Films like “M3gan” collectively add incremental value to the box office. In 2022, the horror genre accounted for around $700 million in domestic ticket sales, according to data from Comscore. While that figure is down compared to pre-pandemic levels, it indicates persistent demand for spooky entertainment as the theater business rebounds.

Horrifying but good

Paramount and Universal were the top contributors of horror content last year. Paramount’s “Smile” sold $105 million in tickets domestically and $217 million globally. Its newest installment in the Scream franchise took in $81 million in the U.S. and Canada and $137 million worldwide.

Universal’s “Nope” generated $123 million domestically and $171 million globally, while “The Black Phone” scored $90 million stateside and $160 million worldwide. The studio also released “Halloween Ends,” leading to $64 million in domestic ticket sales and $104 million globally, even though it hit streaming service Peacock the same day.

Ethan Hawke stars in Blumhouse and Universal’s “The Black Phone.”

Universal

Additionally, Disney‘s Searchlight Pictures released “The Menu,” which snared $38 million domestically and $70 million worldwide.

Notably, Disney and Marvel Studios’ “Doctor Strange in the Multiverse of Madness,” which features horror elements, was not included in the tally. The film generated $411 million during its run in the U.S. and Canada and nearly $1 billion worldwide.

“We’re in the middle of horror’s new golden age,” said Shawn Robbins, chief analyst at BoxOffice.com. “It’s a genre that has ebbed and flowed in past decades but one that’s always evolved, maintained commercial appeal, and helped introduce new filmmakers to the world.” 

Here are several titles to expect from the horror genre in 2023:

  • Universal’s “Knock at the Cabin” — Feb. 3
  • Paramount’s “Scream VI” — March 10
  • Sony’s “Insidious: Chapter 5” — July 7
  • Warner Bros.’ “The Nun 2” — Sept. 8
  • Neon’s “Cuckoo” — Sept. 29
  • Universal’s “The Exorcist” — Oct. 13
  • Lionsgate’s “Saw X” — Oct. 27

Scaring up dollars

Blumhouse, a producer of “M3gan,” has revolutionized the horror genre in the last decade, turning small budget flicks into huge box-office returns. The studio has been responsible for the profitable and popular “Paranormal Activity” films as well as the Academy Award-winning “Get Out.”

“Paranormal Activity,” which was released in 2009, had a budget of just $15,000 and went on to make more than $107 million in the U.S. and nearly $200 million worldwide

Following that model, “M3gan” was made for just $12 million and is on its way past $100 million. Already, Universal and Blumhouse have greenlighted a sequel due out in 2025.

Still from Universal and Blumhouse’s “M3GAN.”

Universal

Last year, most wide-released horror films had a budget of between $16 million and $35 million. The only outlier was “Get Out” director Jordan Peele’s “Nope,” which carried a $68 million production budget. Films with smaller budgets mean don’t have to generate blockbuster-size ticket sales in order to turn a profit. Those economics also help to make horror films one of the most consistently well-performing genre of all time.

For example, consider “Skinamarink,” an experimental horror film out of Canada, which cost $15,000 to make and has gone on to generate more than $1 million at the box office.

“At the heart of its sustainability has been a generational turnover of young audiences that drive many of these movies at the box office, a pre-pandemic constant that’s picked up right where it left off as post-pandemic moviegoing has rebounded,” Robbins said.

Unlike fans of comic book films, who can be easily turned off by an unfaithful adaptation of their favorite character, horror fans don’t seem to mind if the film isn’t totally up to par. So long as the movie had some good scares and was seen as a fun experience, they’ll be back for the next installment.

Additionally, in the last two decades, the quality of the horror genre has greatly improved, due in large part to support from indie companies such as A24 and Neon, as well as distribution from streaming services such as Netflix, Hulu and Peacock.

“A systematic, incremental increase in the quality of horror films, a genre that was once considered the smash and grab, take the money and run, open on Friday, close on Sunday genre, has now, with the creative vision of amazing production companies and brilliant filmmakers, earned respect of critics and audiences alike,” said Paul Dergarabedian, senior media analyst, at Comscore.

“M3gan,” for example, currently holds a 95% “Fresh” rating on Rotten Tomatoes.

“The genre and its audience are invaluable to the industry ecosphere, and 2023’s promising release slate looks to help maintain that status quo,” Robbins said.

Disclosure: Comcast is the parent company of NBCUniversal and CNBC. NBCUniversal has a partnership with Blumhouse and owns Rotten Tomatoes.

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