TheChek News Flow

Big Entertainment Has Good and Bad News

But as CEOs like to do, Disney’s Bob Iger and WBD’s David Zaslav emphasized the positive. On separate calls with analysts—before the strike news—both talked about all the work they’d done over the past year overhauling and cutting costs, and how they’re now able to pivot to expansion. Iger called it moving from “a period of fixing to a new era of building,” while Zaslav talked about WBD having the chance to “fight to grow in the next year.” Still, the overall picture for the two companies remains bleak. WBD eked out top-line growth of just 1%, while Disney’s entertainment businesses did only marginally better with an increase of 1.8%, both due in large part to price increases on streaming. Revenue from the old-school TV business, their biggest source of profits, declined for both, reflecting continued cord cutting and the advertising slump.

As for streaming, the picture is better than it was, although that’s not saying a whole lot. WBD generated $111 million in earnings before various expenses in the quarter, emboldening Zaslav to take thinly veiled shots at his rivals over the money they’re blowing on streaming. Not to rain on his parade, but that profit came as the streaming business lost subscribers for the second quarter in a row. Also, WBD’s streaming segment includes the contribution of its old-fashioned HBO cable business, which undoubtedly makes it look healthier than it would otherwise. Disney, meanwhile, has a reasonable story to tell on this front. Its streaming losses plunged to $387 million in the quarter, down from $1.47 billion a year earlier, even as subscribers continued to grow. That’s arguably a better result than making money off a shrinking subscriber base.

The biggest worry for the industry right now may be the parlous state of TV ad sales, one that is industrywide, as earnings results from CBS parent Paramount Global and NBCUniversal in recent weeks also showed. What’s striking is that the TV folks are struggling even as Meta Platforms and Google reported decent ad growth. Notably, while the TV companies are trying to sell ads on their streaming services to capture some dollars moving to digital, the amount they’re generating doesn’t come close to offsetting what they’re losing. The big beneficiary of the TV ad shift seems to be Google’s YouTube, which gained $881 million in ad dollars in the third quarter, an increase of 12.5% over the year-earlier period. Back-of-the-envelope math suggests the big four TV companies lost around $670 million in ad dollars in the quarter. TV executives sound nervous—WBD’s finance chief, Gunnar Wiedenfels, today called the state of the traditional TV ad market in the second half “disappointing” and added that it was difficult to predict the timing of a recovery. That’s not a picture likely to instill confidence in investors.

Instacart’s Buybacks

The most interesting part of Instacart’s third-quarter results this evening—its first ever as a public company—really weren’t the results at all. Sure, the company said that revenue grew 14% year-over-year and that it expects gross transaction volume to grow up to 6%, the same rate as in this latest quarter. But Instacart also dropped news that it plans to spend $500 million buying back shares.

That’s ironic because it just sold 14.1 million shares, raising $423 million, when it went public less than eight weeks ago. In other words, Instacart is saying it could buy back more than it sold. What gives? Well, Instacart is likely to do the buyback over time, and before too long, more stock will become available as restrictions on longstanding shareholders and employees selling their shares lapse. That should prevent the buyback from soaking up too much of the existing float.

As for the reasons for the buyback, well, the company has a pile of cash totaling more than $2 billion, which is more than one-fifth Instacart’s entire enterprise value, according to S&P Global Market Intelligence, and is getting bigger thanks to the company’s positive cash flow. There is certainly a case to be made that returning some of that to shareholders is a good idea, as Warren Buffett has famously preached.

And in theory, a buyback should increase a company’s stock price by reducing the number of shares outstanding. That couldn’t hurt, given that Instacart’s IPO price was $30 and the stock closed trading today roughly 10% below that (see our story today breaking down that lackluster stock performance).

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Japanese tech investor held an approximately 50% stake in the office-leasing company that announced bankruptcy on Tuesday

TOKYO—SoftBank 9984 1.07%increase; green up pointing triangle Group sank deeper into the red in the July-September period as it reported write-downs related to the bankruptcy of office-sharing company WeWork and technology shares stayed under pressure amid rising interest rates in the U.S.

The Japanese technology investor posted a net loss of 931.1 billion yen, equivalent to $6.2 billion, for the quarter ended Sept. 30. That is compared with a 477.6 billion yen loss in the April-June quarter and 3.034 trillion yen profit a year earlier, when it unwound its stake in Alibaba Group Holding.

Its Vision Funds investment unit posted a 258.9 billion yen loss after it returned to profitability in the April-June period for the first time in six quarters. The loss reflects softness in technology shares in the July-September quarter. The MSCI World Information Technology Index fell about 6% during the quarter.

SoftBank also said it has recorded a total of 234.4 billion yen in losses related to WeWork WEWKQ 91.96%increase; green up pointing triangle, which earlier this week filed for chapter 11 protection in the U.S. because of weakness in the office market. SoftBank holds about a 50% stake in WeWork.

SoftBank has been WeWork’s biggest backer since it started investing in 2017. The Japanese company stepped in with a $9.5 billion bailout in 2019, following WeWork’s failed attempt to go public and spiraling losses.

At an annual shareholder meeting held in June, Masayoshi Son, the billionaire founder of SoftBank Group, said his judgment on WeWork was “a stain on my life.”

SoftBank had been defensive in making new investments because of mounting losses. But Son has said the company was getting ready to go on the counteroffensive.

Declining birthrates and higher death rates are making the U.S. more reliant on immigration for growth

America’s long streak of population growth is expected to come to an end.

Census Bureau projections released Thursday show that, under the most likely scenario, the U.S. will stop growing by 2080 and shrink slightly by 2100.

It is the first time that the bureau has projected a population decline as part of its main outlook for the coming decades. The only time the U.S. has recorded a population decline was in 1918, when the flu pandemic and deployment abroad of more than one million troops produced a small drop in the estimated population.

Slowing growth would produce a peak U.S. population of almost 370 million before an ebb to 366 million in the final years of the century, according to the bureau. The projections—the first issued since 2018—reflect years of declining birthrates, higher death rates because of an aging population, and increased reliance on immigration for population growth.

The shift will weigh on the U.S. economy and its geopolitical standing. With fewer young workers to support the elderly, entitlement programs such as Social Security and Medicare would face greater strains. Population decline could broadly reorient a society that grew explosively well into the 20th century.

The projections outline a nation growing slowly compared with recent decades. Annual growth rates have fallen from 1.2% in the 1990s to 0.5% today and would fall to 0.2% by 2040. Small differences add up through compounding: The projected U.S. population in 2040 is 355 million, 25 million fewer than projected for that date in 2015. The difference is more than the current population of Florida.

In 2022, preliminary data showed the U.S. birthrate was about 19% lower than in 2007. Death rates remain about 9% higher than 2019, the last year before the pandemic. By 2038, deaths would exceed births under the most likely scenario.

The convergence of birth and death rates has boosted the role of immigration, and with it uncertainty about population growth. Immigration is affected by changing laws, wars, natural disasters and economic shifts.

After slowing during the pandemic, immigration has rebounded, according to government estimates. The Congressional Budget Office estimated in January that 1.3 million people, 500,000 of them lacking legal status, became U.S. immigrants or were here and became legal permanent residents last year. Over the five years that preceded the pandemic, it estimated that immigration averaged 1.1 million people a year. By comparison, about 490,000 more Americans were born than died in the year that ended with June, according to the National Center for Health Statistics.

The Census projections show that the share of the population born abroad will grow from current near-record levels. Projections include all immigrants and were calculated from other countries’ own growth trends and recent net migration rates with the U.S. Those rates in turn were based on responses to the American Community Survey, the bureau’s annual survey of two million U.S. households.

To account for the uncertainty, the bureau produced three alternate immigration scenarios. Only the one with the high immigration rate—50% higher than the most likely scenario—would keep the population rising until 2100 if birth and death rates continue as envisioned.

By 2060, the scenarios envision a population—now 335 million—that could range from 299 million to 397 million. Another measure of the uncertainty around such efforts: The United Nations projects that the U.S. will grow slowly through the century, reaching 394 million.

The projections anticipate that the aging of the population will accelerate with historically low birthrates and movement of the large millennial generation into old age. Rising life expectancy at birth—from 79.8 now to 87.8 by 2100—would also contribute to the aging trend.

The prime working-age population—ages 25 to 54—would begin to shrink by the mid-2040s as millennials age out of that bracket. Economists and demographers track this group because its members have high rates of employment and pay, the source of payroll taxes that fund much of Social Security and Medicare. In its own projection this year, the Congressional Budget Office estimated that this group would grow 0.2% a year, a quarter of its growth rate since the mid-1980s.

The census projections show that the racial makeup of the country would continue to diversify. By one measure of race and ethnicity, no group will form a majority by the late 2040s. By a more holistic measure, the transition won’t occur until a decade later.

Unlike many developed nations, the U.S. is expected to continue growing at least until midcentury. A 2022 United Nations projection shows some have already begun losing population, and more will do so in the next generation. It says even some developing nations such as Mexico will see their populations peak by midcentury.

Although it is expected to grow, the U.S. could be topped by Nigeria and Pakistan by midcentury as the third-largest nation, behind India and China, according to recent projections by the U.N. As the world’s population climbs toward 10 billion by midcentury, growth is shifting to the global south. Africa’s population is expected to more than double by 2060, reaching almost three billion.

Deal, which still has to be ratified by members, would restart entertainment industry’s content engine

Striking Hollywood actors reached a tentative agreement with major studios and streamers Wednesday that could clear the way for the entertainment industry to restart its content factory after six months of labor strife.

The Screen Actors Guild-American Federation of Television and Radio Artists said its TV and theatrical committee approved a tentative agreement with the Alliance of Motion Picture and Television Producers in a unanimous vote Wednesday afternoon. The strike is set to end at 12:01 a.m. Thursday.

The end of the 118-day standoff means work can restart on new TV shows and films, restocking the pipeline of new fare headed to streaming platforms and the big screen. Actors can return to promoting their upcoming projects online and on the red carpet, bringing Hollywood glitz back to premieres.

The agreement follows weeks of tense negotiations between the union and the coalition representing studios and streamers such as Netflix, Disney, Warner Bros. Discovery WBD -19.04%decrease; red down pointing triangle and Amazon.com.

The tentative deal “represents a new paradigm,” the coalition of studios and streamers said Wednesday. It includes the largest increase in minimum wages in 40 years, a new residual for streaming programs, and “extensive consent and compensation protections” from the use of artificial intelligence, the AMPTP said.

Terms of the actors’ agreement weren’t immediately available, though the union said the contract is valued at more than $1 billion and includes the creation of a “streaming participation bonus” as well as other wins such as “outsize compensation increases for background performers.” SAG’s national board is scheduled to review the tentative deal Nov. 10, and the union said additional details will be released following that meeting.

“We have arrived at a contract that will enable SAG-AFTRA members from every category to build sustainable careers,” the union told members Wednesday evening.

Television and movie writers, who began picketing in May, ended their own strike against entertainment industry giants in September. The dual strikes halted production of films and TV shows such as “Stranger Things” and “Abbott Elementary,” disrupting fall TV schedules, and postponing planned releases of major motion pictures from Warner Bros.’ “Dune: Part Two” to the next installment of “Mission: Impossible” from Paramount.

The strikes meant months without work for many of the crews, costume designers, hair stylists and others involved in productions and took a toll on the Los Angeles economy. Other states such as Georgia and New Mexico that are home to major productions also felt the pinch.

The Hollywood labor disputes were the culmination of years of frustration among writers and actors about the direction of the entertainment business amid a frenetic transition to streaming. That shift created new opportunities for talent and offered plenty of artistic freedom, but for many didn’t provide the same financial security as the traditional TV and movie businesses. Eventually, the workers decided Hollywood needed new labor rules to go with its new economics.

Among the actors’ demands were higher pay, more financial upside from shows and films that are successful on streaming platforms and protections from the use of artificial intelligence in the creative process.

As the labor dispute dragged on, major movie releases including Sony Pictures’ “Kraven the Hunter” were pushed from a 2023 release to next year. Disney’s much anticipated new take on Snow White has also been bumped to 2025 from next year.

In television, the broadcast networks have been relying on unscripted fare and acquisitions from overseas to fill the void left by the strike. CBS started to air old episodes of the Paramount Network hit “Yellowstone.”

The end of the strikes ushers in a new era for studios and streamers that were already ordering fewer TV shows and films. Many streamers are struggling with profitability and industry executives expect consolidation of studios in the coming years as well as continued price increases for subscribers.

When the writers union resolved its strike, there was broad optimism in the industry that a deal between actors and studios would be close behind.

Negotiations between the AMPTP and the actors union resumed in late September but fell apart soon after. The union’s demand for a share of streaming revenue for a bonus pool led to a stalemate with studios and the AMPTP walked away.

Some high-profile SAG members including George Clooney, Ben Affleck and Emma Stone have pressured the union’s leaders in recent weeks to come to an agreement with AMPTP that would let the industry return to work. Both sides resumed talks later in October.

The AMPTP previously indicated that if an agreement wasn’t reached by the end of October there would be little chance of salvaging a 2023 to 2024 television season.

Wednesday’s tentative deal—more than a week after that deadline—will likely result in fewer shows starting production, studio executives said. Some studios might give priority to new episodes of series already on air, while new shows might have to wait until the 2024-25 season.

The expected return to work could also create a rush on sound stages and crews, which will be a factor in determining which television shows will go into production and which ones will continue to be sidelined.