Good morning. In today's newsletter: what to watch for in Disney's latest earnings; a good night at the polls for Democrats; monetizing WhatsApp; and the Consumer Finance Protection Bureau wants to expand its regulatory power. (Was this newsletter forwarded to you? Sign up here.) |
 | | Bob Iger is set to deliver a consequential earnings report for Disney.Kevin Dietsch/Getty Images |
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Investors await news on deals, cuts and more |
Today, Bob Iger will deliver one of the most consequential earnings reports for Disney since returning as C.E.O. almost a year ago. He has had to confront many problems, including a slumping share price, strikes that have crippled much of Hollywood, the wrenching transformations wrought by streaming and renewed pressure from the activist investor Nelson Peltz. |
Here's what Wall Street, and Peltz, want to hear more about. |
Progress on potential deals and asset sales: Since Iger opened the door to selling Disney's declining but profitable traditional TV business and bringing in an investor for ESPN, investors have eagerly awaited what's next. (Disney, which last month began breaking out financial results for ESPN, has concluded that any deal should be with a sports league or leagues.) |
Disney has also said that it will pay at least $8.61 billion to buy out Comcast's 33 percent stake in the streaming platform Hulu, though the price tag will ultimately be determined by an appraisal process. |
Cost cuts: Months of Hollywood strikes — talks between studios and the actors' union will resume today — may have saved Disney money on production costs. But the company still sees the high-growth but money-losing streaming business as its future, and investors will be keen for insights into subscriber additions and how well efforts to grow an ad-supported tier are going. |
Helping Iger now is a new C.F.O., Hugh Johnston. During his 13 years at PepsiCo, Johnston showed an ability to cut costs at a sprawling business — and helped the food and beverage giant defend itself against efforts by Peltz to break it up. |
Theme parks: Live entertainment has been a bright spot, generating about $10 billion in profits this year, up fivefold from a decade ago. Disney plans to invest $60 billion in the division over the next 10 years, but the theme park business is highly sensitive to economic conditions — and the forecast for the American and the broader global economy look uncertain heading into 2024. |
Succession: This is one of Peltz's main critiques of Iger. In July, Iger extended his employment contract through 2026, though he and Disney's board have emphasized that they are working on finding the company's next chief. |
At a Yahoo Finance event yesterday, Kevin Mayer, a former heir apparent whom Iger brought back as an adviser, demurred on the topic. But he said of Iger's decision to return to Disney, after leaving on a high in 2020: "I think it pains him to see the company not live up to the standards he had set for it. Stepping back in was something he felt he just had to do." |
Expect to hear more from Iger, and others, at the DealBook Summit on Nov. 29. You can apply to attend here. |
Shein is said to aim for a valuation of at least $80 billion in an I.P.O. The Chinese-owned fast-fashion giant has told prospective investors that it was seeking to value its shares at more than 50 percent above where they currently trade in the private markets, according to Bloomberg. Shein, one of the world's most valuable start-ups, is preparing to list in the U.S., though the timing is uncertain. |
Ivanka Trump is set to testify in her father's New York fraud trial. Donald Trump's elder daughter will take the stand two days after he said he played a role in valuing the Trump Organization's properties, a process that state lawyers say was meant to defraud banks and insurers. |
Xi Jinping will reportedly meet with American business leaders in San Francisco. China's president will be the guest of honor at a dinner there next week, while he attends the Asia-Pacific Economic Cooperation conference, according to Bloomberg. Xi and President Biden are also expected to hold a face-to-face meeting at the summit, as the U.S. and China seek to stabilize relations. |
A rough night for Republicans |
Election night was disappointing for many Republicans, but especially for Glenn Youngkin, the governor of Virginia. Democrats took control of the state's legislature, scoring a big victory that may have extinguished the hopes of some right-wing donors who wanted Youngkin to enter the presidential race as an alternative to Donald Trump. |
Similarly strong results for the Democrats in Kentucky, Ohio and Pennsylvania are being viewed as good news for President Biden and his supporters as polls show him trailing Trump. |
The Virginia race was seen as a measure of Youngkin's star power. The former Carlyle Group C.E.O. threw his name and his political war chest — he had raised more than $18 million, including from several Republican billionaires like Ken Langone, Ron Lauder, Thomas Peterffy, Stephen Ross and Steve Wynn — into wresting control of the legislature. |
Democrats and proponents of progressive causes were the night's big victors. Ohio enshrined abortion rights in its constitution. Andy Beshear, the Democratic governor of Kentucky, who campaigned hard against his opponent's defense of the state's near-total abortion ban, cruised to re-election. And Daniel McCaffery, a Pennsylvania Supreme Court candidate who ran on abortion rights, also won. |
The president lauded the results, and made no secret that he's trying to move the conversation beyond his bad polling numbers. "Voters vote. Polls don't. Now let's go win next year," he said in a post on X. |
Meta's new cash cow: WhatsApp |
When Mark Zuckerberg snapped up WhatsApp for $19 billion in 2014, many (including DealBook) concluded that he was paying a steep price for the messaging app. After all, WhatsApp had paltry revenues and was widely used abroad, but it was somewhat under the radar in the U.S. |
WhatsApp has since become a messaging and commercial powerhouse. It has more than two billion monthly active users worldwide, including a growing roster of corporate clients who pay for a version to communicate with customers. A recently added Channels feature, akin to a social network inside the app, is proving popular, and news publishers are increasingly trying it out. |
WhatsApp has become increasingly crucial to Meta, the company that owns Facebook, Instagram and other apps. More than half of Americans ages 18 to 35 who own a cellphone have installed WhatsApp, according to the company's studies, making it one of Meta's fastest-growing services in its most mature market. Ads on WhatsApp and its sister messaging service, Messenger, are also growing so rapidly that they may reach $10 billion in revenue this year, the company recently said. "If you're envisioning what will be the private social platform of the future, starting from scratch, I think it would basically look like WhatsApp," Mr. Zuckerberg, 39, said in a recent interview. |
WhatsApp has plenty of competition, including Apple's iMessage, and Signal and Telegram. It's also being closely scrutinized by regulators, especially those concerned about its encrypted messaging features. |
Will Cathcart, the head of WhatsApp, said he would fight "tooth and nail" against any country seeking to weaken this security feature. Tech groups fear the British government will do just that. |
- In other Meta news: Employees clashed about how to recruit young users even after states had opened investigations into how the company was luring potentially vulnerable youth to its platforms. Also, the company will require all political advertisers on its platforms to disclose when they've used A.I. to create their ads, and will bar the use of its A.I.-powered software for such messaging.
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The C.F.P.B. takes on nonbanks |
The Consumer Financial Protection Bureau has faced a potentially existential crisis in the courts this year, and Republicans have accused it of overreach. |
But the agency isn't changing course from the aggressive approach of its director, Rohit Chopra. And yesterday it pushed to expand its powers to include the regulation of payment apps run by nonbanks like Apple, Google, PayPal and Block. |
The proposal would treat the payment processors like banks. Companies with more than five million financial transactions a year would be subject to the rule. It would apply to about 17 companies, which collectively process $13 billion in transactions a year and account for about 88 percent of the U.S. market. |
The banking industry welcomed the move. Lindsey Johnson, the C.E.O. of the Consumer Bankers Association, called the proposal "a step in the right direction." Banks have long pressed for tech competitors to face the same requirements that they do. |
But Republicans slammed the bureau's effort. Representative Patrick McHenry, Republican of North Carolina and the chairman of the House Financial Services Committee, called it "a step in the wrong direction." |
He accused the regulator of "stretching its supervisory authority to the detriment of the consumers the agency was created to protect." That echoed complaints from other lawmakers and some business groups, including the Chamber of Commerce. |
Regulators are increasingly facing legal challenges to their actions, with the Supreme Court considering a case on the bureau's previous rulings and constitutionality. Jodie Kelley, head of the Electronic Transactions Association, offered a muted response to the C.F.P.B.'s latest push, saying the payment industry group supported "robust consumer protections." |
But the proposal, which is open for public comment until at least January, could well face another case based on the payments rule. |
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- "The fight over return-to-office is getting dirty" (Insider)
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Thanks for reading! We'll see you tomorrow. |
| | | Andrew Ross Sorkin, Founder/Editor-at-Large, New York @andrewrsorkin | | Ravi Mattu, Managing Editor, London @ravmattu | | Bernhard Warner, Senior Editor, Rome @BernhardWarner | | Sarah Kessler, Deputy Editor, Chicago @sarahfkessler | | Michael J. de la Merced, Reporter, London @m_delamerced | | Lauren Hirsch, Reporter, New York @LaurenSHirsch | | Ephrat Livni, Reporter, Washington D.C. @el72champs | |
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