What will TV look like in three years? These industry insiders share their predictions
Still, the details of what’s about to happen to a transitioning industry are unclear. CNBC spoke with more than a dozen leaders who have been among the most influential decision-makers and thinkers in the TV industry over the past two decades to get a sense of what they think will happen in the next three years.
CNBC asked the same set of questions to each interviewee. The following is a sampling of their answers.
In three years, will legacy TV effectively die?
Peter Chernin, The Chernin Group chairman and CEO: It will continue to be in decline. It will be crappier. Budgets will get cut. More scripted programming will migrate away to streaming. There will be more repeats. But it will continue to exist. One of the really interesting questions here – this will be fascinating – the core of linear TV is sports rights. The NFL deal starts next season and is double the price of the previous one. That will suck even more money out of programming budgets. Then you’ve got the NBA deal, those renewal talks will happen this year. That will probably double in price. So you’ve got increasing prices of the most high-profile sports and declining number of homes watching. That will eat away at everything else.
Getty Images for Malaria No More 2013
Kevin Mayer, Candle Media co-CEO: It only has a few years left. It’s nearing the end. For entertainment that has no need to be viewed at any specific time, that’s already done. It’s already largely shifted to streaming. Next will be the end of scripted programming on broadcast networks. There’s zero need for that. That’s going to come to a close in the next two or three years. When ESPN finally pulls the plug, the bundle is effectively over. And that will happen relatively soon. Linear TV is in its final death throes.
Barry Diller, IAC chairman: It’s dying, but while syndication is around, even if its diminished, it will still be here. The tail end of these things lasts much longer than anyone predicts.
Ann Sarnoff, former Warner Bros. chairwoman and CEO: The linear bundle will definitely be around in three years, but the number of subscribers will continue to decline, and the average age of the viewers will continue to increase steadily. One big X factor regarding how the cable channel universe evolves will be sports and how big a role streaming services play in sports. The fragmentation of sports rights is good for the leagues but confusing for consumers. The most passionate sports fans will subscribe to everything and find their sport wherever it is, but fragmentation creates a delicate tightrope for the leagues to walk in terms of maintaining mass appeal and engagement, which have driven a stellar sports advertising business.
Bill Simmons, The Ringer founder: Three years feels way too short to me. I think it’s going to play out like it has with terrestrial radio and digital audio. Five years ago, you could have said radio would absolutely be dead soon, and nobody would have challenged you. But it’s still limping along even with much heavier competition from podcasts, streaming, TikTok and everyone else. Even with ad markets dwindling and the advertising being much more localized, it’s not close to being dead yet. It’s like when Michael Corleone says how Hyman Roth has been dying of the same heart attack for the last 20 years. That’s radio. And linear TV will be the same way. It will have a Hyman Roth death, not a Sonny Corleone death.
Bill Simmons at the 2017 Code Conference on May 31, 2017.
Asa Mathat for Vox Media
Jeff Zucker, former CNN president: It will continue to exist. Obviously it will have fewer subs than it does today. News and sports will keep it alive.
Richard Plepler, former HBO CEO: While linear is obviously not the wave of the future, cash flow is cash flow, which means it still hangs on to some form of life.
Bela Bajaria, Netflix chief content officer: Since I started in this business in 1996, people have always talked about linear TV dying. Definitely the pie will be smaller in three years. But there are so many people who watch linear TV, especially sports and news. It will be smaller, but not gone.
Kathleen Finch, Warner Bros. Discovery U.S. networks chief content officer: Linear TV will absolutely still be here. When you look at the size and scope of the linear TV business, it’s huge. People still like to sit down as a group in front of the TV. It’s very communal. And advertisers love it — whether they’re selling a new movie coming out or launching a car sale. The linear TV business will be healthy for a long time. Obviously people’s habits are changing, but as a business, it’s a large, robust, high-margin business. One of the other things so important about linear is it provides the financial ecosystem to feed a lot of streaming platforms. In our group at WBD, it makes about 4,000 hours a year of content, and it’s a huge amount of content that we make to feed the networks. A lot get a second life on streaming – or a first life based on what we determine. To fund the content just for streaming is a bit of a challenge. But because we really have a great margin with a dual revenue system, we super serve that audience on linear.
Byron Allen, founder, chairman, and CEO of Entertainment Studios and Allen Media Group, speaks during the Milken Institute Global Conference in Beverly Hills, California, on May 2, 2022.
Patrick T. Fallon | Afp | Getty Images
Byron Allen, Entertainment Studios founder and CEO: I think linear TV will exist for a very, very long time. I believe that all of these various platforms – they’re not instead of, they’re additive. Look at human behavior and how we consume content, we’ve only made a richer landscape. When there was the industrial revolution, it was fueled by oil and gas. This is the digital revolution, and it’s fueled by content. Local TV will still be here and much needed. You need local news. And let’s not forget the networks — ABC, CBS, Fox, NBC, the big four broadcasters — have locked up the true religion of America, the NFL, for the next 11 years. So you will be watching those networks for sports. Not just on streaming. I think that contract tells you the bundle is here for a while.
Wonya Lucas, Hallmark Media president and CEO: I don’t think this is the death of linear. I just don’t. I think that linear will still be alive and thriving. I do think there will be some shakeout in terms of which services survive and which ones don’t and which ones are bundled together, and there will be some consolidation. I don’t think everyone can have independence. But I think when we start bundling the cost of all the streaming services, you’re looking at the same cost of a cable package at some point.
Chris Winfrey, Charter Communications CEO: It won’t be effectively dead, but it will be significantly more expensive and have fewer subscribers. A lot of that has to do with the rising cost of sports rights. The new NFL rights extension deal will generate about twice as much cost per year starting in the 2023-24 season. That cost is now being distributed over an increasingly smaller base of subscribers, which is pushing up the overall cost of content. But in the next three years, there will still be customers who can afford it. It’ll just be much, much smaller and more expensive. Eventually there will have to be a restructuring of the business.
In three years, which major streaming services will definitely exist?
Ex-CNN boss Zucker: Netflix, Amazon Prime Video, Apple and the Disney suite [Hulu, ESPN+ and Disney+]. The fifth could be a combo of the remainders: HBO Max, Paramount+ and Peacock.
Jeff Bewkes, former Time Warner CEO: Netflix, Amazon, Disney, HBO Max. Maybe one more that doesn’t make much money or is about break even and hovers near death.
Chernin Group’s Chernin: All of them with the caveat that there may be some combination of Paramount, Peacock and HBO Max. The big guys don’t want to buy any of them with exception with HBO.
IAC’s Diller: There’s only one streaming service that’s dominant, now and forever, and that’s Netflix. But many others will exist.
Chairman and Senior Executive of IAC/InterActiveCorp and Expedia Group Barry Diller walks to a morning session at the Allen & Company Sun Valley Conference on July 07, 2021 in Sun Valley, Idaho.
Kevin Dietsch | Getty Images
Jeff Hirsch, Starz President and CEO: Disney, Netfilix, Warner Bros. Discovery, Amazon … and of course, Starz.
Candle Media’s Mayer: Apple TV+, Disney+, Netflix, Amazon Prime, Max, probably. Paramount+ will be folded in, Peacock will folded in. Maybe they’ll be combined with a smaller service like Starz.
The Ringer’s Simmons: You have Hulu, Peacock and Paramount out there as candidates to get swallowed up by a bigger streamer, but who’s doing it? Apple never does anything. Amazon doesn’t need to do anything. HBO/Discovery just went through two mergers in six years. Netflix never does anything. Disney/ESPN seems more likely to shed stuff than buy stuff. So unless Comcast goes on a crazy spending spree, I don’t see anything changing — I think everyone will still be around, just with less employees and way less original content.
Netflix’s Bajaria: Netflix, of course. Disney+ has such a strong library. Many of the others will be interesting. You’re already seeing Showtime and Paramount+ come together. Does Hulu stay in Disney, or does Comcast buy their share out? Does Warner Bros. Discovery stay with Discovery+ and HBO Max, or does it merge with another company? There will be a lot of movement and changes in the streaming landscape.
Will there be a cable-like bundle of several major streaming services?
Candle Media’s Mayer: Yes, I think so. I don’t know if we’ll see bundles between entertainment companies, but there will be some version of a bigger bundle of content you’ll be able to buy at your choice.
Aryeh Bourkoff, LionTree chairman and CEO: It’s more about self-bundling content and other offerings to generate platform and brand loyalty from the consumer. What I think you will also see is the eventual release of exclusive premium content to multiple platforms to better monetize the best content, but the most successful platform relationships will be self-bundled.
Ex-Time Warner boss Bewkes: I doubt it. I don’t see why you’d need it. Any aggregator’s role would be taking any of the leading streamers and attaching what are laggard, subscale channels. I’m not sure it’s compelling.
Randall Stephenson, then-chairman and chief executive officer of AT&T and Jeff Bewkes, then-chairman and chief executive officer of Time Warner, a few days after the AT&T acquisition of Warner was announced in October 2016.
Patrick T. Fallon | Bloomberg | Getty Images
IAC’s Diller: I do think there will probably be a more efficient way of buying more streaming services, but I don’t think it will be analogous to the cable bundle. One central warehouse who deals with all players and sends one bill — that I don’t think is going to happen. I think it will be somewhat chopped up. But there may be multiplicity, where there may be a much easier way to access a group of streamers than dealing with them individually.
Naveen Chopra, Paramount Global CFO: I think it’s very possible but not necessarily inevitable. On one hand, bundles have tremendous value in terms of increasing acquisition costs, lowering churn and the convenience for consumers. It’s something we definitely embrace. We’ve done a lot of bundles and partnerships that we’ve been very successful with, whether that’s with Sky in Europe or Walmart or T-Mobile in the U.S. A broader bundle that incorporates multiple streaming services could offer some of the same benefits. But there are two really big things you have to solve in trying to effectuate that kind of bundle. The economics is one dimension, and the other is the user interface and customer relationship. Today, streaming services have independent user interfaces and streamers like to own the relationship with the customer. So, you have to give up some economics to be part of that bundle and still have a way of sharing information and enough control over the UI to help build and maintain audiences around the content. There is some experimentation going on with all of these things, and with all sorts of challenges. But I definitely think there’s a possibility of a cable bundle with streaming. It takes time to evolve.
Ex-Warner Bros. boss Sarnoff: It’s hard to understand the economics of how that will work. Can there be an aggregator so people wouldn’t have to subscribe to a bunch of different offerings? The problem is always who goes in the middle. That’s the thing: most media companies have wanted to move away from someone controlling their audience, like cable operators, and determining the value of the programming. Bundling makes sense from a consumer perspective, but as a supplier, it’s much more complicated. Paying one rate is simpler, but there’s an imperfect value equation in there for the content supplier/programmer.
Ann Sarnoff attends the 32nd Annual WP Theater’s Women of Achievement Awards Gala at The Edison Ballroom on March 27, 2017 in New York City.
Mike Pont | WireImage | Getty Images
Chernin Group’s Chernin: I don’t know. A full-blown stand-alone bundle is hard to do. There’s not an obvious aggregator who is going to benefit. Whose best interest is it to subsidize losses to bundle these things together? It’s pretty tough to figure out the economics. The big guys won’t want to take a discount. It would take very complex negotiations.
Mark Lazarus, NBCUniversal Television and Streaming chairman: I think bundles are definitely in the future. It’s sort of already headed in that direction. What’s not there is the ability to replicate the cable bundle user experience. It’s cumbersome, to have to go in and out of every app. It’s buffering. You can’t flip between any two channels, which is instantaneous. It needs to get to a point where the user interface or user experience lets you seamlessly enter or exit content if we’re going to live up to consumer expectations.
Starz’s Hirsch: Yes. In 18 to 24 months, you’ll start to see a repackaging of the linear business into the digital business. The value of aggregation is really important. You’ll start to see more people partnering up. Right now, everyone is seen as a channel. Ultimately, the big folks will become platforms, much like Amazon is doing today. The big guys are going to become platforms. You’re seeing it now with Showtime as a tile within Paramount+. Other companies’ content will become branded tiles within the larger streaming platforms.
Starz CEO Jeffrey Hirsch
Which companies will dominate as the main hub of streaming?
The Ringer’s Simmons: I believe Apple will be the dominant platform because of its connectivity to user behavior through Apple TV and our phones. They make it so goddamn easy; their main page allows you to order movies, see all the new releases, see where you left off on any show or movie you were watching on every other platform … it’s amazing. That’s the only streamer that acts like a one-stop shop for everything I care about. And they will get better and better at perfecting that. Plus, you can keep logging into your different platforms on there through your iPhone. It’s really smart. All roads lead through Apple.
Chernin Group’s Chernin: YouTube, Amazon and Apple.
Candle Media’s Mayer: There will be three categories. The cable guys could repackage streaming offerings. They’re already doing that with their linear offerings. You’ve got the telcos (T-Mobile, AT&T and Verizon), and then you’ve got the big digital players — Google, Apple and Amazon.
Kevin Mayer, co-founder and co-chief executive officer of Candle Media, chairman of DAZN Group, speaks at the Milken Institute Asia Summit in Singapore, on Thursday, Sept. 29, 2022.
Bryan van der Beek | Bloomberg | Getty Images
Starz’s Hirsch: You’re seeing Amazon become a platform, and Warner is now starting to become a platform. In the next three years, we’ll also see compression technology that will allow wireless companies to be true aggregators of streaming services — T-Mobile, AT&T and Verizon. They’ll become real challengers.
Charter’s Winfrey: There are a number of platforms — Roku, Apple TV and Amazon Fire — that are trying to aggregate streaming content. But I think cable has a real advantage. It’s what Comcast and Charter are putting together with our joint venture, Xumo. We will take the voice remote from Comcast, the technology assets from Sky and Xfinity, the leading live video app in Spectrum TV — you combine all that with the fact that Comcast and Charter have a much broader array of programming relationships than anyone else in the market. We also have a powerful distribution channel to deliver this operating platform, both to existing customers who pay for broadband and TV and new sales from our different sales channels — stores, platforms — to put these boxes and smart TV sets in customers’ hands. I think we have the best set of assets and existing relationships to be able to put it together that none of these other platforms can do.
LionTree’s Bourkoff: There hasn’t yet been an aggregator that has incorporated all of video, audio and gaming content — and we don’t foresee one anytime soon. That would be the beacon for consumers in their search for entertainment, in the broadest sense. Absent that, any other aggregation tool would have a different definition for different customers. For example, younger demographics are increasingly moving towards short-form content on TikTok, YouTube and other platforms. Would that be included? The definition of content we want to consume and where we consume it is always changing, particularly in a mature, scarce environment.
Entertainment Studios’ Allen: I don’t know if there will be a primary aggregator of this content, but I do believe the consumer is very smart and resourceful and will figure out how to get their needs met at a very efficient price. The key here is to look at the world’s biggest streamer, which is YouTube, and how it is completely free. Good luck putting something in that search bar and it doesn’t come up.
What happens to cable entertainment networks? Will they be sold? Shut down? Or will it look the same?
Paramount’s Chopra: I do think there’s the potential for additional consolidation of cable networks over time. I think in the near term, we’re going to see an evolution of the type and mix of programming you see on cable networks, given the audience declines in that area. The economics of producing expensive original content isn’t going to work for every cable network. They will have to look at different formats, relying on more lower-cost content, library content, etc., but it will definitely evolve.
Ex-Time Warner boss Bewkes: If you’re a network with news and sports, those can last. General entertainment network subscribers and cash flow will decline. Some might get sold to private equity to harvest cash flow in the three or four years. It’s not like they’ll go bankrupt, but they’re not good for public equity ownership.
Warner Bros. Discovery’s Finch: It’s hard for me to say because things seem to change so quickly in this industry. One of the most valuable things is a brand that stands for something. Brands really, really matter. A more generic cable network that lives on older content doesn’t necessarily offer something to someone on a nightly consistent basis. People don’t surf the way they used to. That’s not really how people are wired to watch content anymore. They come to a decision based on how they feel. So it’s true it is more challenging if you’re more of a general entertainment network. You need highly specialized content. Without it, you can’t survive or drive the kind of ad revenue that we can. When you have a HGTV you have endemic advertisers. If you’re Home Depot or Lowe’s, you have to be on HGTV.
Charter’s Winfrey: The question comes down to what is the value of the content they’re providing? If they’re providing reruns but you can’t find it elsewhere, then it still provides value to the customer. But what you have today is programmers selling us content at increasingly higher prices and asking us to distribute that to largely all of our customers, and at the same time, selling that exact same content either into streaming platforms or creating a direct-to-consumer product themselves at a much lower cost. And many of those services have a much lower security threshold than cable, so customers are able to share passwords and access the same content for free. So, our willingness to continue to fund that for programmers when that content is available for free elsewhere is declining. That means within the linear video construct, you’ll see an increasing number of distributors deciding it no longer makes sense to carry certain content, because customers are already can access it either for free in a pirated fashion or just paying for it at a lower rate.
NBCUniversal’s Lazarus: I don’t think it’s a one-size-fits-all strategy in the future. I think we’ll see some networks combine, like we’ve done. Some will close down that don’t make meaningful contributions to the bottom line. There’s so many networks today. Even with the erosion of the pay-TV bundle down to 50 million, these networks are still a meaningful contributor of revenue and EBITDA to companies like ours. So closing them isn’t necessarily a great answer because you’re giving up profit. Even if it’s a declining profit, it’s still profit. I think that part gets lost a bit in the conversation now. Yes, we are managing a decline and streamers are there to make up for lost revenue and profitability, but those businesses still kick off, in many cases, hundreds of millions of dollars in profit. Companies just don’t give that up.
What’s one thing that will become a TV standard that doesn’t exist today?
Chernin Group’s Chernin: Windowing. That’s the most likely change. Right now, the current economic model is two things: pure vertical integration, where you produce and own everything, and long-term exclusive licenses. Neither make sense. You can’t produce enough good content and it’s wildly overexpensive. What’s the value of 5- to 10-year-old shows? Right now, a huge amount of money is spent for those shows. Media companies would be better off doing three-year licenses and saving 20% to 30% on the cost. Cable networks will be interested in buying old reruns from other streaming platforms. It’ll be brand-new programming to a different audience. What defines programming is what’s new. When “Sopranos” aired in syndication on A&E, it’s didn’t make HBO any weaker. You’ll see streamers start selling programming to cable and to one another, and it will produce value both to the company that owned it and the company that bought it in syndication.
The Ringer’s Simmons: I believe Apple, out of nowhere, will start making their own awesome televisions that have Apple TV embedded in them. It’s kind of incredible that this hasn’t happened yet. They have every other piece of the streaming puzzle in place — literally, all of it — except for the actual TV. Why would they want Samsung, LG and whomever else to keep innovating on their smart TVs and eventually cut Apple out of the entire ecosystem? They’ll just make a better TV and crush them. I wish I could bet on this.
Ex-Warner Bros. boss Sarnoff: A “metaverse” which offers commerce, gaming, social interaction, sports, news and entertainment is inevitable, but I think we’re quite a ways from that being the primary way people consume media. It will be interesting to watch the metaverse evolve in parallel to streaming and other direct entertainment offerings. The offering that best engages and entertains the consumer will win.
Chairman, WarnerMedia Jeff Zucker attends CNN Heroes at American Museum of Natural History on December 08, 2019 in New York City.
Mike Coppola | Getty Images
Ex-CNN boss Zucker: The ability to bet and/or gamble while you’re watching sports on TV will be much easier. You’ll be able to go through the TV to place a bet with a remote control, or your voice. It requires partnership from the betting companies, but that shouldn’t be a problem.
Starz’s Hirsch: Content without borders. Artificial intelligence technology will make subbing and dubbing of content simple. AI will allow you to watch content in your home language without a third-party dubbing it for you. The world shrinks that way from a content perspective.
Netflix’s Bajaria: More people will have access to incredible global stories on demand. The average person will gain access to more content than ever before.
Entertainment Studios’ Allen: I think we’re going to see more AI integrated into content, and it’s going to be more intuitive, so when people watch the content it’ll be far more advanced in recommending content for you. I think AI is going to help understand the touch points in content and how to make it better and more compelling and engaging.
Charter’s Winfrey: Unified search. You’ll have a discovery and recommendation engine combined with a voice remote that allows for a seamless experience for the customer living inside a single platform. That will allow a viewer to pick and choose what content they want month to month — either live video or streaming.
LionTree’s Bourkoff: Sports is being unlocked in a big way. It’s the last major bastion of content that must be watched live, which begs a different approach. As owners of valuable IP, professional sports leagues may increasingly go direct, either on their own or via a partnership model, and monetize in other ways — from advertising and sponsorships to commerce and experiences, including gaming and sports betting. We are witnessing early stages of this dynamic with deals like “NFL Sunday Ticket” on YouTube and the MLS deal with Apple TV.
Los Angeles Chargers running back Austin Ekeler, center, runs for extra yardage while Tennessee Titans linebacker Monty Rice, left, and safety Andrew Adams (47) attempt a tackle during the second half at SoFi Stadium on Sunday, Dec. 18, 2022 in Los Angeles, CA.
Allen J. Schaben | Los Angeles Times | Getty Images
Warner Bros. Discovery’s Finch: There is something that is beginning to exist now that I’m absolutely fascinated to see where it goes. It’s the technology that allows viewers to choose the content they watch as they are watching. Like the Netflix show “Kaleidoscope.” Handing the editorial decision-making to fans is so seductive. It’s an opportunity for a piece of content to be watched multiple times. There’s just a few pieces of content that’s tried this, but the technology is there, and it’s an exciting new development in content creation and consumption. It gives the audience an interactive way to view these things. It’s just beginning to be utilized and a lot of people are experimenting.
NBCUniversal’s Lazarus: Much of TV consumption is being done on the biggest, best screen in your home. It’s all coming through your living room flat-screen TV. What we see, and I think will change over the next three years, is the amount of customization people are able to have to curate their own abilities and to bundle themselves. How do you order your streaming apps? While it’s not a seamless user experience to go between Peacock and Netflix or something else, you can place them in whatever order you want on the screen. The degree of customization is there. That’s coming to the individual streamers, too. We’re working on a lot of customization for our consumers. Consumers would like to have that interactivity. If you’re on a live sports channel, you can curate your own replays and then bounce back to live. It’s the next iteration of interactivity.
WATCH: CNBC’s full interview with IAC Chairman Barry Diller
Disclosure: CNBC is part of NBCUniversal, which is owned by Comcast.
GameStop stock soars after retailer posts first quarterly profit in two years
Shares of the company soared more than 45% during after-hours trading.
For the quarter ended Jan. 28, net sales dropped slightly to $2.23 billion from $2.25 billion in last year’s fourth quarter. The video game retailer also posted a profit of $48.2 million, or 16 cents a share, compared to a loss of $147.5 million, or 49 cents, a year ago.
GameStop did not provide financial guidance and has not done so since the early days of the pandemic. Its results can’t be compared with Wall Street estimates because too few analysts cover the company.
The retailer had been working to steer itself back to profitability, and got there in part by cutting costs. Selling, general and administrative expenses came in at $453.4 million for the quarter, or 20.4% of sales, compared to $538.9 million, or 23.9% of sales, in the year-earlier period.
Scott Olson | Getty Images
CEO Matt Furlong said on an investor call the company is going into 2023 with further plans to cut excess costs including in European markets, where it has already exited and begun to pull out of some countries. He said that GameStop is also considering bolstering its business with higher margin categories such as toys.
GameStop had previously been riding some short-term, meme-stock momentum, but that has since leveled out and the company has made progress in right-sizing its business by cleaning up its inventory levels and reworking its cost structure.
The stock closed trading on Tuesday at around $18 per share, down dramatically from its 52-week high of nearly $50 about a year ago.
GameStop’s turnaround plan was reinvigorated by a leadership shake-up in 2021 that put Furlong, an Amazon veteran, at the helm and added Ryan Cohen, Chewy founder and former Bed Bath & Beyond activist investor, as board chair. The company also laid off staff and replaced its chief financial officer.
The retailer has been working to revamp its real estate portfolio and increase its online business as the video game industry heads in that direction.
For the full fiscal year, GameStop saw $5.93 billion in sales, down slightly from $6.01 billion in fiscal 2021, and saw increased revenues from its collectibles category, which the retailer is banking will promote long-term growth.
Like many retailers, GameStop experienced supply chain delays that left it with a backlog of inventory after it previously tried to meet high demand. The company is still hanging on to $682.9 million in inventory, which is down from $915 million a year ago, according to its fourth-quarter balance sheet.
As part of its revival strategy, GameStop also has been trying to improve its cash balance. This quarter, its cash and cash equivalents were $1.39 billion.
While managing the burdens of its brick-and-mortar presence, the company has also been working to find its digital identity. So far, those experiments have come with a few missteps.
In September, it launched an ill-fated partnership with the now-bankrupt crypto exchange FTX. The companies had planned to collaborate on e-commerce marketing and GameStop was going to sell FTX gift cards in its stores. Two months later, GameStop tweeted that it would be “winding down” the partnership and refunding anyone who had purchased an FTX gift card in its stores.
In addition, the company has been experimenting with an NFT marketplace since July. That launch came amid chatter of a “crypto winter” as cryptocurrencies experienced a widespread cooldown from their 2021 rallies. The marketplace saw an initial volume surge but has since leveled off and may not be the ticket to a stable digital presence the company had hoped it would be.
Still, Furlong said on a call with investors that compared to 2021, when many “predicted we were heading for bankruptcy,” the company is better positioned.
“GameStop is a much healthier business today than it was at the start of 2021,” he said.
Nike’s holiday quarter plagued by bloated inventory, weak China sales
Mike Segar | Reuters
Nike, like other retailers, has been in the process of offloading a glut of inventory brought on by supply chain disruptions and shifting consumer demands that’s been weighing on its margins.
Gross margins were down to 43.3% for the quarter, a decrease of 3.3 percentage points, due to higher markdowns and promotions its used to liquidate its inventory.
While Nike CEO John Donahoe told investors last quarter he believes the company is past its inventory peak, the company warned gross margins were expected to take a hit during the holiday quarter.
Inventories were up 16% compared with the year ago period at $8.9 billion, which the company attributed to higher product input costs and elevated freight expenses.
Here’s how the sneaker giant performed in its third fiscal quarter of 2023 compared with what Wall Street was anticipating, based on a survey of analysts by Refinitiv:
- Earnings per share: 79 cents vs. 55 cents expected
- Revenue: $12.39 billion vs. $11.47 billion expected
The company’s reported net income for the three-month period that ended Feb. 28 was $1.2 billion, or 79 cents per share, compared with $1.4 billion, or 87 cents per share, a year earlier.
Sales rose to $12.39 billion, up 14% from $10.87 billion a year earlier.
Nike has been looking to see a sales rebound in China, its third-biggest market by revenue, as the region recovers from the Covid pandemic. But those hopes failed to materialize. Sales were down 8% in the region during the third quarter to $1.99 billion, despite the end of China’s zero-Covid policy that had weighed on operations.
Wall Street analysts had anticipated sales in the region of $2.09 billion, according to StreetAccount estimates.
Sales in China have been soft as consumers contended with sweeping lockdowns and rising infections. While some activity has begun to pick back up, consumers aren’t back to pre-pandemic shopping levels just yet, according to a Citi research note.
Outside China, Nike saw double-digit sales increases in all of its other markets. Sales in North America were up 27% and in Europe, Middle East and Africa, revenue jumped 17% compared with the year-ago period. In Asia Pacific and Latin America, sales were up 10%.
For the last several years, Nike has been working to build out its direct-to-consumer sales and has invested heavily in the channel by building out experiential stores, developing its loyalty program and growing its e-commerce sales.
The investments into its DTC channel has come at a cost, but sales have continued to grow. Nike Direct sales were up 17% during the holiday quarter to $5.3 billion and Nike digital sales jumped 20%.
Selling and administrative expenses were up 15% to $4 billion, the bulk of which was related to wage-related expenses and Nike Direct costs.
As part of its efforts to focus on DTC, Nike has ties with a host of wholesalers, and over the last two quarters has relied on those partnerships to offload inventory. Wholesale revenues were up 12% in the quarter, following 19% growth during the previous quarter.
On Monday, Foot Locker CEO Mary Dillon touted a “renewed” and revitalized relationship with Nike, its biggest brand partner.
A lot of money is on the line for women’s pro soccer in the U.S.
Jeff Halstead | Icon Sportswire | Getty Images
Last year was transformative for women’s professional soccer, as Berman took the helm of an organization that had been plagued with problems ranging from accusations of emotional and sexual abuse and sexism, and an overall lack of confidence in the league.
The NWSL hired Berman, who was a labor lawyer at Proskauer Rose for 13 years, in March 2022, from her role as deputy commissioner of the Premier Lacrosse League. Her biggest priorities? Restore faith in women’s soccer and grow the business.
Since then, the commissioner has made changes to not only drastically transform the culture of the league but also supersize the business through its infrastructure, staffing and rules. Sports Business Journal named her the “Best Hire of the Year” for 2022.
It’s all led to a pivotal moment for the league, as it looks to add more teams and its media deal is up for grabs. Then, this summer, the FIFA Women’s World Cup will put the league’s talent on display – about 25% to 30% of NWSL’s players will travel to Australia and New Zealand for the tournament.
At the moment, the league has momentum. Berman told reporters Tuesday that business is strong and ticket sales are rising.
“Attendance and ticket sales are really the rocket fuel that will grow this league,” she said. “We’re up 20% in season ticket holders on a league-wide basis.”
Building on a strong year
More than 1 million fans attended matches last year, the league said, as nearly every market grew following the pandemic. Attendance was up about 80% in 2022, while ticketing revenue grew more than 125%, according to NWSL.
Sponsorship revenue also surged 87% last year, Berman said. The league averaged 37 sponsorship deals per team, which is more than any other women’s sport, according to sports data and intelligence platform Sponsor United. The league also plans to expand to 14 teams from 12 beginning next year.
The NWSL just signed a deal to bring soccer back to Utah with a new ownership group in a deal reportedly worth between $2 million and $5 million, a major bargain that had been part of a deal negotiated in 2020, before team valuations started to soar.
The league is also in advanced discussions to further expand in San Francisco for 2024, followed by Boston, which is launching “later,” both with a whopping $50 million franchise tag, according to The Wall Street Journal.
Women’s pro soccer valuations are also soaring. It used to take a few million dollars to get in on the league. Today, Angel City FC, based in Los Angeles, is valued at $100 million, according to Sportico.
NWSL commissioner Jessica Berman speaks during the 2023 NWSL Draft at the Pennsylvania Convention Center on January 12, 2023 in Philadelphia, Pennsylvania. (Photo by Tim Nwachukwu/Getty Images)
Tim Nwachukwu | Getty Images Sport | Getty Images
Athletes, celebrities and investors all want a piece of the action. Big name investors include everyone from Eli Manning, Kevin Durant, Sue Bird, Natalie Portman and Jennifer Garner.
“I think, if anything that we’ve learned in the last 11 months, which is that the market will tell us our value so long as we give it the appropriate opportunity to produce that value. And everything that I’ve seen, has validated that,” Berman said.
The league is busy looking for new ownership groups in Chicago and Portland after a yearlong investigation. Portland Thorns owner Merritt Paulson and Chicago Red Stars owner Arnim Whisler both announced in December, they would be selling their teams.
Berman said the vetting stages for new ownership groups in Chicago and Portland are in “advanced stages,” and they aren’t going to set an “artificial deadline.” She said it’s about putting the right person in place who is not just well resourced but also willing to invest in the club to provide a professional environment.
“The old ways of doing business are probably no longer applicable,” Berman said. “We’re not going to close deals in 30 to 60 days. We’re dealing with really sophisticated people who appropriately have questions,” she added.
Berman says they are not looking for the quick win when it comes to ownership, rather finding the right partner.
“We’re looking to go from a mentality of surviving to thriving,” she said. “I think all of that requires a changes in mentality, culture and expectations.”
As part of that transformation, Berman and the league are investing heavily.
The league recently moved its headquarters to Madison Avenue in New York from Chicago. It is also beefing up staff, doubling the number of people in the league office in order to support all the new initiatives they are working on. Berman said multiple teams have doubled or tripled their investment into staffing as well.
“These little things actually matter in terms of having people feel professional and valued,” she said.
In January, ahead of the NWSL draft, Berman outlined major updates to the salary cap. Each team will see a 25% increase from $1.1 million per year in 2022 to $1.375 million in 2023.
Media deal up for grabs
Viewership for NWSL matches also rose 30% last year on Paramount +.
Last year’s championship, which aired in primetime thanks to sponsor Ally Financial upping its financial commitment, was the most-watched game in league history, with a 71% increase in viewership. Paramount+ said it was the most streamed NWSL matched ever, even though it was up against Game 1 of the World Series and a college football game between rivals Michigan and Michigan State.
These metrics should come in handy as the league’s three-year, $4.5 million deal with Paramount Global, which also owns CBS, is set to expire at the end of the new season.
Berman said she’s had robust conversations about the rights, and said there are several interested parties.
“We think that there are some really interesting opportunities here and overseas to consider as we think about growing our brand globally and really claiming our space as the best league in the world,” she said.
The league also announced a recent partnership with EA Sports to feature NWSL players and clubs in EA Sports FIFA game for the first time ahead of a new season.
OL Reign forward Megan Rapinoe (15) scores on a penalty kick during the second half of the National Womens Soccer League game between NJ/NY Gotham FC and OL Reign on September 21, 2022 at Red Bull Arena in Harrison, New Jersey.
Rich Graessle | Icon Sportswire | Getty Images
The NWSL’s culture is under the microscope, as well.
The league is implementing major reforms – from new mandatory training sessions, the addition of anonymous hotlines, player surveys, safety officers, mental health benefits and more.
The league was involved in a yearlong investigation after two former players came forward and accused longtime coach Paul Riley of sexual harassment. Sally Yates, a former top Justice Department official, conducted her own investigation, as well. The reports confirmed the allegations of systemic abuse, sexual misconduct and found “widespread misconduct” in more than half of the league’s teams.
Berman took swift action following the findings, making changes in personnel, putting new infrastructure in place to prevent future problems and issuing massive fines to the offending teams. The NWSL permanently banned Riley and three other coaches who were accused of misconduct. Riley has denied the accusations.
“The teams are really welcoming of the increased focus and support in this area knowing that it is really sort of table stakes as we think about the growth of the league,” Berman said.
Berman spent much of her first year as commissioner on a “listening tour,” meeting with players, coaches and executives to hear “first-hand experiences” and what needs to change.
Today, Berman hopes the new changes and protections will position the league for success.
Berman said she’s heard from players that they are tired from the burdens of having to carry some of weight of culture challenges and reforms.
“I think it’s their hope that we the league and through ownership and management can really take on the burden and work behind the scenes to offer the playing environment that meets the standard that I’ve committed to, which is a place that makes the players proud to play,” Berman said.
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