Disney Works Magic With Cost Cutting, Epic Games Deal And ...
A quick request before we jump in: We're looking for your feedback on this newsletter in this brief reader survey. Thank you to everyone who has responded so far.
Disney is a company that counts magic as one of its foundational building blocks, and in the last week, it certainly concocted a lot of it. In quarterly earnings, The House of Mouse announced it was likely to meet or exceed its $7.5 billion cost-cutting goal by the end of the current fiscal year. Revenue for its experiences division, including theme parks, hit an all-time record of $9.1 billion. And increased projections show the company expects to have its most profitable fiscal year since 2019. Investors rewarded this news with an immediate boost to Disney’s stock price, giving the company its best day on the markets since 2020.
But this wasn’t the only big news coming out of Disney last week. The company announced the $1.5 billion purchase of an equity stake in Fortnite developer Epic Games. While Epic and Disney have collaborated before on visual effects and experiences, this deal represents a deeper commitment. The two companies plan to collaborate on a “games and entertainment universe that will further expand the reach of beloved Disney stories and experiences,” the release announcing the purchase says. This universe will interoperate with Fortnite, the wildly popular gaming universe that has seen more than 237 million players in the last 30 days, according to Active Player. But it also brings the Disney universe to a place where many members of Gen Z and Gen Alpha—not to mention people who are a bit older and don’t necessarily watch many traditional Disney-owned movies and shows—spend a lot of their time.
Disney also demonstrated that the company is in its streaming era, in more ways than one. Disney CEO Bob Iger announced Disney+ won the streaming rights for Taylor Swift | The Eras Tour (Taylor’s Version), which will be available on the platform on March 15. Disney-owned ESPN will also be joining forces with Fox and Warner Bros. Discovery to create a new sports streaming service to debut this fall. But without Taylor Swift and the powerhouse sports network, Disney reported promising growth in its streaming platforms. With the exception of India’s Disney+ Hotstar, numbers of Disney+ subscribers were slightly down year-over-year. Hulu subscribers were up 2% year-over-year, and Disney said in its earnings report that it expects to reach profitability in its streaming business by the end of fiscal year 2024.
“Our heads are spinning from the newsflow, nearly all positive,” Tim Nollen, senior media tech analyst at Macquarie, wrote in a research note quoted by Variety. And while there’s a lot for all investors to chew on, some speculate that there’s one big investor that Iger and Disney are trying to impress: activist Nelson Peltz’s Trian Fund Management, which owns about a $3 billion stake in the company and is trying to add more like-minded supporters to its board. Trian has a list of goals it wants Disney to achieve, including “Netflix-like” streaming margins by 2027, defined goals and clearer communication around ESPN’s streaming presence and high single-digit operating income growth for its parks. With last week’s announcements, it seems like Disney may be well on the path to achieving some of those.
FROM THE HEADLINESSuper Bowl LVIII signage outside of Allegiant Stadium. (Photo by Rob Carr/Getty Images)
Getty ImagesWhile the number of people who tuned in to see the Kansas City Chiefs beat the San Francisco 49ers in Super Bowl LVIII has not been released yet, some were betting it would be the most watched ever. Why? Because so many people bet on the game. A total of 38 states and Washington, D.C. have legalized sports betting. Before the game, the American Gaming Association estimated a record 68 million American adults—26% of the adult population—planned to bet on the Big Game. This represents a 35% increase in individual betters, and they were expected to wager a total of $23.1 billion, a monetary increase of 44% above last year.
The fact that the Big Game was actually in Las Vegas this year reinforces the new normal in sports gambling, Forbes contributor John Affleck wrote. With widespread sports betting and several states allowing casinos, Las Vegas isn’t the only place people can go to test their luck and skill, but it is still a mecca for the industry. According to the Nevada Gaming Control Board, casinos across Nevada brought in a record $15.5 billion in revenue in 2023. Most of the revenue growth—a total of 90%—came from the glittering and adrenaline-filled Las Vegas Strip. Likewise, U.S. sporting’s most glittering moment, the Super Bowl, is expected to take sports betting to new highs.
ECONOMIC INDICATORSChinese Consul General Huang Ping (center) and his wife Zhang Aiping participate in a closing bell ceremony to celebrate Chinese New Year, as markets rallied. (Photo by Liao Pan/China News Service/VCG via Getty Images)
China News Service via Getty ImagesConfidence in the economy remains strong. On Thursday, the S&P 500 topped 5,000 for the first time ever. It continued to grow on Friday. This marks a stunning turnaround for the index, which had fallen below 3,500 in October 2022 due to fears about the direction of interest rates amid high inflation. George Ball, chairman of Sanders Morris Harris, said in an email to Forbes this reflects “the confidence that investors have in corporate America's earnings power and the strength of the economy.” On Friday, the Nasdaq closed at its highest level since November 2021, posting its second highest close ever.
However, some experts believe the Federal Reserve is unlikely to cut interest rates at its meeting next month. Actual results, spending, inflation and job creation—and not just hope— should be what is truly driving the markets for now.
ARTIFICIAL INTELLIGENCESuggestions from Amazon's new AI chatbot, Rufus.
AmazonAmazon has created a new AI-powered chatbot to serve as a personal shopping assistant. Named Rufus, it’s intended to answer questions about specific products, find consumer reviews, raise questions and make comparisons and recommendations. Rufus, which is rolling out in beta mode to Amazon mobile app users, should be able to answer a variety of questions. A shopper can ask whether a pair of shoes is sturdy, or can ask which gardening supplies are needed now to start planning for a spring garden. It’s unclear at this point if advice will be influenced by anything behind-the-scenes, like whether products are Amazon-branded or sponsored. Amazon CEO Andy Jassy said on the company’s most recent earnings call that consumers asking Rufus for recommendations will “get thoughtful explanations for what matters and recommendations on products,” the New York Times reported.
BIG MOVESA WeWork location in Los Angeles, California. (Photo by Patrick T. Fallon / AFP via Getty Images)
AFP via Getty ImagesWeWork cofounder Adam Neumann has reportedly been trying to buy his former company back. WeWork filed for bankruptcy in November, following years of issues, including dwindling occupancy following the Covid-19 pandemic. Neumann, who started the company with Miguel McKelvey in 2008 as a coworking office space in Brooklyn, helped quickly expand the model to several coworking office spaces across the U.S. Under Neumann’s leadership, WeWork became one of the world’s most valuable startups, peaking at a $47 million valuation in early 2019. But his leadership style and potential conflicts of interest made him controversial, and he resigned as CEO that year. Neumann currently runs the real estate firm Flow, and is reportedly partnering with billionaire Dan Loeb’s hedge fund Third Point to make the purchase, the New York Times and Wall Street Journal reported. It is unknown how much money Neumann would pay for the WeWork, but a letter the newspapers obtained disclosed that Neumann offered $1 billion to the company as it struggled in 2022.
While there is a lot of business done online nowadays, brick-and-mortar locations are still in demand. Last week, JPMorgan Chase announced a big commitment to physical branches. In the next three years, it plans to open more than 500 new ones, renovate 1,700 existing locations and hire 3,500 employees to staff them. Chase Consumer Banking CEO Jennifer Roberts said in a press release that approximately 900,000 people walk into Chase locations to do business every day. “When we open a branch, we’re not only investing in the financial health of residents, we’re committed to the health and vitality of the entire community,” Marianne Lake, CEO of Consumer & Community Banking, said in the release.
DEEP DIVE Remember That CEO Whose Employee Sold Their Dog To Return To Office?Clearlink CEO James Clarke talks to former Forbes staff member Diane Brady.
ForbesIn 2021, few people had heard of Clearlink, a Utah-based digital marketing company. Then CEO James Clarke went viral with a video of an employee town hall that was posted online. Clarke had just announced a policy shift, requiring employees living within 50 miles of the corporate headquarters to return to the office to work four days a week, saying that about 30 staffers—all working remote—had not even opened their laptops in a month. The video, which had been edited before being posted, made Clarke look uncaring, seemingly praising a colleague who sold their family dog to facilitate working from the office. Former Forbes assistant managing editor Diane Brady talked with Clarke earlier this year about the viral video and all that has happened since then. This is an excerpt of her interview, which can be viewed in full here. It has been edited for clarity, continuity and length.
Brady: When you decided to do the video, there was a tone of frustration in your voice. …Were you angry at that point?
Clarke: It would be a fair assessment to say that there was real frustration in what we were doing and trying to accomplish. It’s certainly frustrating to see people that, for 30 days, hadn’t opened a laptop or done their work. We were struggling to bring people back, and I don’t think it was a sole frustration, certainly not within our company, with our managers and directors and others that were working. It was a shared frustration, because they were there, on the job doing their work. And just getting others back to do the same: carry their load and their water through this company was an important part of the theme of what was being shared. It was a serious moment. It was almost a heart attack moment for the business. You don’t ask someone who’s having a heart attack, ‘Please, may I give you chest compressions to bring you back to life.’
Brady: Were you talking to other CEOs and they were sharing similar frustrations with you?
Clarke: Absolutely, but not nearly as much as after this town hall went through the world. Because, again, I became in some ways the poster child of what a CEO looks like when they’re frustrated. And the reality is we were simply working toward turning this business around. And we have. And that’s the best part. That’s the untold story. Yes, we had a very, very difficult April and some of those subsequent weeks behind that, but the reality is this is a much better business today as we work together and in person than it was before. These are tried and true practices that we’ve used for hundreds of years.
Brady: You were feeling a frustration, and if you had to put your finger on it, was it just that people weren’t coming into the office, or do you think how the managers were managing those people was part of the challenge?
Clarke: I think we had a whole host of leadership challenges that we faced. Some of those were homegrown, that were our own challenges, that had taken place in the past decade or even since I started the business 20 plus years ago. So I own that. …Just the sense of what we do on a daily basis, how we go about that, how the organization is structured. But ultimately the things that we could do better. What are the best practices that we can incorporate from other places into our own? But it has to be bespoke. There’s no one-size-fits-all in any of this, especially in a post pandemic world. We can’t look and say, ‘Well, this organization is doing that,’ or look on the left hand side and say the same thing. It has to be bespoke to our organization.
That’s the flexibility that I’m talking about. And it’s what we went through as a company shortly thereafter. Countless exceptions to our “rule of coming back” came into place within our organization. That’s what doesn’t shine through in a video or a town hall like this is how customized this approach was. How we were working with our leaders.
Brady: [As] a tech company, you should be able to work from anywhere.
Clarke: That’s accurate. But it’s not the best practice, either. The best practice would be leveraging all the technologies that are out there. But live and in-person has always proven to be the best practice, if at all possible. You and I could speak on the phone, or I have a business partner that lives across the country. That’s worked for us because we then get together, solve problems.
But there are all these tactile elements of running a business, and it’s the ultimate contact sport. It doesn’t just apply to business. It’s higher education, it’s government. We’re all facing the same issue, and it shouldn't be looked upon as some sort of punishment. And I think that’s the fundamental shift that needs to take place. …I’ve had countless conversations with those who are probably the most resistant in coming back to our office. They said, ‘Oh, this just isn’t going to work for me.’ They come back to the office, they’re there for a week and they say, ‘My mental health is back. I’m back in a great place. I forgot how much I loved being with my coworkers and feeling elevated at the end of the day for a job well done.’ We’re seeing that over and over as a repeated theme in our organization. We’re just better together.
Brady: What made you decide to talk about this, [and] in some ways forced to relive it a little bit?
Clarke: It’s helpful to note the good that comes out of this. History is going to be on our side, I believe, on how this goes down. Bringing people back to work is the tried-and-true best practice. The new part of this that works is flexibility. And we’re going to be flexible. We’re going to make exceptions. And if you’re not doing this, you are the antiquated CEO stuck in the past. …This is why I’m honored to talk about it today: what we’ve learned. And I hope other CEOs and other companies, but mostly their employees, the people that are there on the front lines, will understand what good it brings to your life to be there live and in person.
You may not like it at first for a moment, and it stings because again, you’re trading away some parts of that freedom. But the connection that you gain with your coworkers and others make a huge difference in your life and what your career will look like.
FACTS + COMMENTSStarbucks illegally fired Buffalo-area employees for their unionization efforts and must pay back wages and reinstate them, ruled a National Labor Relations Board administrative law judge.
10: Employees who lost their jobs. Nine were fired for union activities, and one was forced to resign
385+: Starbucks stores currently unionized
‘I always knew that my firing was illegal’: Terminated employee Victoria Conklin told the Buffalo News
STRATEGIES + ADVICECustomer experience is extremely important. Here’s how to track its return on investment.
There’s a lot of uncertainty when a company is going through M&A. But there are things to look at that could help make the period easier.
QUIZTaylor Swift was in the stands for the Super Bowl to cheer on boyfriend Travis Kelce, the tight end for the Chiefs. According to a poll last week by Seton Hall, what percentage of people said they would watch the game to see her in the stands?
A. 10%
B. 87%
C. 21%
D. 6%
See if you got the answer right here.
