Disney’s Next Move

Streaming Strategy and Price Increases

Even though Bob Iger, Disney’s C.E.O, didn’t reveal much about big-ticket M&A, he did make news with the company’s quarterly earnings report. According to Mr. Iger, streaming is Disney’s future, but the era of pursuing breakneck growth in the business is over. The new strategy is to extract more money from subscribers through significant price increases for Disney+. However, the company hopes that these increases won’t drive away subscribers.

Streaming losses have been a major concern for Disney, with the division losing $512 million in the most recent quarter, bringing its total losses since 2019 to over $11 billion. While the latest figure was lower than expected, it is still unsustainable in the long term. Therefore, Mr. Iger has decided to follow Netflix’s example by raising prices for Disney+ and Hulu, particularly in the ad-free tiers. The monthly cost of Disney+ will double to $14, starting in October, in order to generate more revenue. However, Mr. Iger intends to keep the prices for the ad-supported tiers flat, as they generate more money per user.

Furthermore, Disney plans to crack down on password sharing, following in the footsteps of Netflix. Mr. Iger also highlighted the need for change at ESPN, which is facing challenges from cable cord-cutting and rising sports broadcast rights costs. He emphasized the sports network’s new online-betting venture with Penn Gaming as a way to increase subscriber engagement. However, he did not provide many details about finding a strategic partner for ESPN, other than mentioning that the process is ongoing and Disney is seeking content, distribution, and marketing support to help ESPN transition into a streaming business.

Potential Deals and Future Outlook

When asked about potential deals, including the sale of Disney’s legacy TV businesses like ABC, Mr. Iger stated that Disney is considering a variety of strategic options and intends to hold onto its TV production studios to continue producing content for streaming. Regarding speculation that Disney could be sold to Apple, Mr. Iger mentioned the need to consider the global regulatory environment. While investors seemed pleased with the earnings call, they are eagerly awaiting Mr. Iger’s endgame strategy.

Here’s What’s Happening

Wildfires in Maui and Their Causes

Wildfires have been burning across Maui, resulting in at least 36 deaths. The fast-moving blazes have led to thousands of evacuations and forced some residents to swim into the Pacific Ocean to escape. Climate change has increased the vulnerability of Hawaii to wildfires due to reduced rainfall.

Progress in U.S.-Saudi Arabia-Israel Relations

Saudi Arabia and the United States are reportedly nearing an agreement on recognizing Israel. The two countries have outlined a potential deal in which Saudi Arabia would establish diplomatic ties with Israel in exchange for aid to Palestinians. Further negotiations are expected in the coming months.

Increase in Coronavirus Hospitalizations

Hospital admissions for Covid-19 have been on the rise in the United States. In the last week of July, hospitalizations increased by 43% compared to the week ending on June 24. This increase may be attributed to the heat and waning protection from Covid vaccines. However, experts believe that the rise in infections is inevitable, and the introduction of updated vaccines this fall should help.

Special Counsel’s Investigation Focuses on Donald Trump’s Twitter Account

Donald Trump’s Twitter account has become a focus in the special counsel’s investigation. The special counsel obtained a search warrant for Trump’s now-inactive account earlier this year without notifying him. Additionally, Twitter was fined $350,000 for failing to comply with a Justice Department deadline regarding the search warrant.

What to Watch for in Today’s Inflation Report

Core Inflation and Its Impact on the Economy

The inflation data for July is set to be published today, with expectations of a slight increase compared to June in the Consumer Price Index (CPI). The focus will be on the core inflation number, which excludes volatile food and fuel prices, to determine whether the Federal Reserve will hold rates steady in September.

The core inflation reading is expected to be encouraging, with a forecasted 3.3% increase in July year-on-year. However, economists anticipate a 0.2% increase, the same as the previous month, in core inflation. These readings would be the lowest consecutive inflation figures since early 2021, suggesting that price rises are moderating and approaching pre-pandemic levels.

President Biden has been trying to reset the messaging around his management of the economy, aiming to convince voters that things are improving despite inflationary pressure and high interest rates. While recent inflation reports have shown overall cooling, there are some concerning signals, such as the increase in gas prices. The inflation data for next month is likely to reflect these sustained price rises.

Economists will be closely watching rental costs, airfares, and other services. Rental cost increases have been slowing, airfares cooled in the previous report, and used car prices have been declining. These factors indicate that core inflation pressures are cooling down, suggesting a positive direction for the economy.

Weighing the Impact of New Limits on China Investment

Executive Order Restricting Chinese Investments

President Biden recently issued an executive order that bans certain investments in key Chinese sectors related to sensitive technologies (such as artificial intelligence, quantum computing, and advanced chipmaking). The aim is to limit China’s efforts to advance technologies that could have military applications.

The Chinese government has expressed dissatisfaction with this move, but analysts believe that the impact of these restrictions may be relatively narrow. The measures primarily target private equity and venture capital firms, as well as investors involved in joint ventures with Chinese entities. The Treasury Department has stated that the executive order is narrowly targeted and complements existing export controls.

China’s response to these restrictions is awaited. Since Chinese investment in the United States is already low, a reciprocal move by Beijing may not have a significant impact. Analysts are uncertain about the potential actions China may take to respond to these limitations.