IP hell for Disney

Market scorecard

US markets gained yesterday despite the ongoing debt-ceiling fight between Republicans in Congress and the Democratic-controlled White House. Treasury Secretary Janet Yellen reiterated that her department may run out of cash as soon as the first day of June unless the federal debt limit is raised. This is a game of chicken, and we expect a resolution at the very last minute.

In company news, memory chip companies Kioxia Holdings (previously known as Toshiba) and Western Digital are said to be exploring a merger. Elsewhere, Activision Blizzard rose 1.2% after the EU antitrust watchdog approved the company's planned sale to Microsoft. Finally, Shake Shack jumped 7.8% after the Wall Street Journal reported that activist investor Engaged Capital is preparing for a proxy fight at the high-end burger chain.

Izolo, the JSE All-share was down a tiny 0.09%, the S&P 500 rose 0.30%, and the Nasdaq was a decent 0.66% higher.

One thing, from Paul

The New York Times is out with a major new article about intergenerational wealth. The key takeaway is that thanks to surging home and stock values, family wealth has soared, and it will all be inherited in the next decade or two.

In 1989, total family wealth in the US was about $38 trillion, adjusted for inflation. By 2022, that had more than tripled, reaching $140 trillion.

Of the $84 trillion projected to be passed down from older Americans to their heirs between now and 2045, $16 trillion will be transferred within the next decade. Here in South Africa we have a more unequal society than most, but similar trends will be playing out. So, there's never been a better time to have been born with rich parents.

It's strange that some people have the good fortune to be born into money while others suffer in poverty, but life has never been fair. If your parents were poor and you struggled, you should take steps now to ensure that your children and grandchildren have the benefit of an easier start in life.

There is a humorous conversation about this that I heard. Asked "how did that person get to be wealthy?". The answer was "the old-fashioned way". "Oh, what's that?". The comeback: "inheritance".

Byron's beats

I have looked at the shelter component of US inflation a few times in these newsletters. It is an important number because it represents more than one third of the overall inflation index (CPI). It has also remained painfully high due to the lag effects of 12-month leases.

I am happy to report that in last week's CPI release, we finally saw the shelter component drop from 8.2% to 8.1%. Hopefully this means that it has peaked and will now tumble month-by-month, resulting in an ongoing tailwind and helping overall inflation to continue dropping.

Charlie Bilello maps out the stubborn number in the graph below. The brown line represents shelter CPI and the blue line represents US rental prices in real-time.

Michael's musings

Multichoice (Dstv) recently had a fight with the new broadcaster of the cricket IPL. A deal to broadcast the event on Supersport was only struck on the morning of the first match. The standoff arose because the cost of the overall IPL broadcasting rights doubled compared to the previous auction five years ago.

In the previous 2017-2022 cycle, Star India (now owned by Disney (NYSE:DIS)) paid $2.2 billion for the rights package. This time around, the organisers decided to split the rights, with Disney paying $3 billion for the TV rights and someone else paying $2.6 billion for the streaming rights. Disney decided that the streaming rights were too expensive.

We now have an idea of what losing those streaming rights cost Disney+ Hotstar (Disney's streaming platform in India). In their results last week, the company announced that they lost 4 million Indian subscribers, which translates into about $15 million a month or $175 million a year in lost revenue. Over the next five years, that translates into about $900 million in lost revenue, which is a lot, but still lower than the $2.6 billion paid for the rights.

In truth, if Disney had entered a battle to win the streaming rights, a bidding war would have begun, and the eventual cost could have been much higher than that $2.6 billion paid.

Live sport is a challenge for streaming companies. The rights are very expensive, and customers are fickle. It's too easy to sign up and then unsubscribe later. For many companies, spending the money on binge-worthy reality shows and dramas is more profitable.

Bright's banter

Dior is planning to reaffirm its collaboration with Johnny Depp, in the largest men's fragrance partnership ever. The new three-year agreement is estimated to be worth over $20 million, surpassing previous deals with Robert Pattinson and Brad Pitt.

While most A-listers in fragrance deals earn around $2 million-$4 million annually, Depp's new contract reflects his marketability and improved image following his "successful" defamation trial against Amber Heard.

Dior Sauvage, featuring Depp as its face since 2015, witnessed a surge in sales, becoming the most-sold male fragrance with all-time sales north of $350 million. Bernard Arnault, CEO of Dior's parent company LVMH (EPA:LVMH), attributed the cologne's success to Depp's image.

This new collaboration coincides with Depp's upcoming appearance at the Cannes Film Festival and may help revive his career in major studio films, which had been uncertain prior to the outcome of that messy court case.

Signing off

Asian markets are choppy this morning. US-based hedge fund manager Michael Burry has placed bullish bets on e-commerce giants Alibaba (NYSE:BABA) and JD.com (NASDAQ:JD), sending the MSCI Asia-Pacific index higher.

US equity futures are on the back foot in early trade. April retail sales numbers from the US will be released today, and quarterly results are expected from Home Depot (NYSE:HD) before the opening bell. These data points will shed light on the mood of the irrepressible US consumer, and set the tone for the trading day ahead.

The Rand is taking a breather at just above R19 to the US Dollar. That's not great, at all, but what can we do?

Life is not easy. Hang in there.

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