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Greetings! We got some good news from the poor old entertainment companies this earnings season. Video streaming is finally becoming a money-making business! Disney, for instance, reported today that its Disney+, Hulu and ESPN+ streaming operations made a profit of $321 million in the September quarter, quite the turnaround from losing a slightly bigger amount than that a year earlier. And it's not just Disney: Paramount Global and Warner Bros. Discovery reported their own streaming profits for the quarter last week. Disney, though, went one better by forecasting that Disney+ and Hulu would between them earn about $1 billion in fiscal 2025 and would achieve a 10% profit margin in 2026. Had they managed to eke out such a margin in fiscal 2024, it would have translated to a profit of $2.3 billion. Wowee! Just two years ago Disney's streaming business was bleeding billions! Wall Street celebrated, sending Disney stock up 6% to its highest point in six months. Hang on a second, though. Things aren't as good as they might appear. Let's not forget that as streaming has turned profitable, profits from Disney's TV networks—which include ABC and FX—have fallen. Disney's projections imply that profits from its entertainment networks at least—excluding ESPN—could decline again next year. Given how those TV network profits could shrink by at least another billion or two in the next few years, Disney has to lift streaming profits by the same amount just to stay even. That's why getting to a 10% margin is vital—but it won't be easy. Just to get streaming to be profitable has required successive price increases on services. The cost of the ad-free Disney+ service, for instance, is now double what it was two years ago. And Disney Chief Financial Officer Hugh Johnston said Thursday that to get to the 10% margin, Disney expects to "continue to increase pricing" over time, as well as add more subscribers and get people to stay subscribed once they sign up. But every time Disney raises prices, that makes signing and keeping new customers just a little bit harder—particularly as other video-streaming services are following the same playbook. And it's not just video streaming where inflation is the norm. Spotify reported a big jump in its profits, thanks in part to price increases it recently implemented. It's hardly news that Americans don't like rising prices (nobody does). One should look skeptically at profit projections based even partly on continued price rises. Direct-to-consumer health company Hims & Hers is one of the few companies that went public via blank-check company in 2021—when such deals were all the rage—and that hasn't completely crashed and burned since. That's due in large part to Hims' decision to diversify beyond its core business of selling erectile dysfunction and anti–hair loss medications, including by adding a knockoff version of the pricey weight loss drugs Ozempic and Wegovy in May. Amazon, it seems, noticed its success. On Thursday, Amazon launched a new Hims-like telehealth and prescription service offering medications for erectile dysfunction and hair growth, among other ailments. Hims closed down 24.5% at $20.84 on Thursday. But even after Thursday's slump, Hims shares have more than doubled in value this year. That's likely because the company still has the upper hand over Amazon in weight loss drugs—for now. While Amazon lists both Ozempic and Wegovy on its pharmacy site, most doses of the drugs are currently out of stock, part of a broader shortage. That's surely helping to boost the Hims knockoff version, which the Food and Drug Administration is allowing the company to sell while the original drugs are in short supply. If the makers of Ozempic and Wegovy resolve the shortage soon—which it looks like they're doing—the FDA could potentially stop Hims from selling its own weight-loss drug, and the company could be out of luck. In the meantime, here's an idea: Amazon Basics Ozempic.—Theo Wayt - The Federal Trade Commission is preparing to investigate whether Microsoft's cloud computing business engaged in anticompetitive practices, The Financial Times reported on Thursday.
- The Consumer Financial Protection Bureau has taken steps to place Google's financial services businesses, such as Google Wallet, under formal federal supervision, The Washington Post reported on Thursday.
- The European Commission has fined Meta Platforms €797.72 million (around $840 million) for breaching antitrust rules in tying its classified advertising service, Facebook Marketplace, to the Facebook app.
- The Onion, the venerable satirical media company purchased by Twilio founder Jeff Lawson last spring, is buying Infowars, the website formerly owned by conspiracy theorist Alex Jones.
- Amazon representatives met with Capitol Hill staffers earlier this year to answer questions about an advertising partnership the e-commerce giant struck with TikTok, Bloomberg reported Thursday.
- A Republican congressperson, John Moolenaar, introduced legislation Thursday that would end the use of a trade provision known as de minimis which allowed many shipments from China to be imported duty-free. Temu and Shein have relied heavily on the provision.
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