The main takeaway from NetflixSecond quarter earnings are business… good.

correct. The core business of a large media and entertainment company is fine.

Netflix added 5.9 million subscribers in the quarter, a sign that its primary initiative for 2023 — cracking down on password sharing and launching a cheaper $6.99 per month ad category — is bringing in new subscribers. Netflix added 1.2 million subscribers in the US and Canada in the quarter — its biggest regional quarterly gain since 2021.

This is not the story for the rest of the media industry. Disney And Warner Bros. Discovery The year was spent cutting content from streaming services to avoid paying waste and saving on licensing fees. Both companies have laid off thousands of employees over the past 12 months to boost free cash flow. Paramount Global And ComcastBoth NBCUniversal affiliates said that 2023 would be the largest annual loss ever for their broadcast businesses.

Meanwhile, Netflix boosted its free cash flow estimate to $5 billion for the year. Previously, the company had estimated it would have $3.5 billion in revenue, but strikes by actors and writers would reduce spending on content. This means that Netflix will actually get more money than you previously thought.

In the next quarter, Netflix expects subscriber gains to be around 6 million again. The company said revenue will accelerate in the second half of the year as it sees the “full benefits” of its password-sharing campaign and steady growth in its ad-supported plan.

In the past year, Netflix’s rating has dropped 60% as subscriber counts have stalled. The company spent a significant amount of time on earnings conference calls focusing on and explaining its new video game business, which was introduced in mid-2021, to help kick-start a new growth narrative.

This quarter’s shareholder letter barely addresses video games.

Why? Because unlike the rest of the media industry, Netflix doesn’t need a new narrative. The old one still works. The flow is increasing. Stacks of liquidity are on the rise. The announcement excites investors. Netflix has a steady pipeline of international content and a deep library to outpace the extended writers and actors strike.

“The lack of references to video games in the shareholder letter suggests advertising is the shiny thing that dominates most of the company’s focus,” said Ross Bennis, an analyst with research firm Insider Intelligence.

Shares of Netflix fell 5% after hours. That’s more of a symptom of profit-taking after Netflix’s big gains this year (up more than 62% as of Wednesday’s close) than anything to chafe in its preliminary quarterly numbers.

After a sharp fall last year, the company is back on track. And you didn’t even need to switch trains.

Disclosure: Comcast’s NBCUniversal is the parent company of CNBC.

— CNBC’s Lillian Rizzo contributed to this article.

LOS ANGELES – It’s the billion-dollar question: Why are blockbusters in short supply this year?

universal The Super Mario Bros. movie. Movie is the only movie released in 2023 to so far pass the billion dollar mark at the global box office. It doesn’t look like there could be another, even with some big titles on the calendar.

“If you were to give 10 people a release schedule at the beginning of the year and say, ‘We’re only going to have one billion-dollar movie out of all these movies, and can you choose which movie that’s going to be? Mike Polidoros, CEO of film marketing firm PaperAirplane Media, said, “I don’t think anyone would have taken a Super Mario Bros. movie to the next level.”

The lack of billionaires marks a sea change in the industry. In the years leading up to the Covid-19 pandemic, and even last year, there were many megabytes that exceeded $1 billion of the global total.

The lack of these types of blockbusters in 2023 is especially evident Disney, which owns the Marvel, Star Wars, Pixar, and Legacy of Fairy Tale franchises. While the studio is well on its way to being the ruler of the box office this year, it’s had a series of missteps in recent months that have raised concerns that audience preferences are changing too quickly for Hollywood to adapt.

Ant-Man and the Wasp: Quantumania failed to draw audiences beyond Marvel’s die-hard fans in February, grossing just $214.5 million domestically and less than $500 million worldwide. “Elemental,” which was released just last month, currently holds the second-lowest domestic showing of any Pixar film in the studio’s history, narrowly eclipsing 2020’s “Onward,” which experienced a shortfall at the box office due to the pandemic.

At Disney’s Lucasfilm, “Indiana Jones and the Dial of Destiny,” which hits theaters June 30, is expected to struggle to make back its roughly $300 million production budget. To date, it has grossed $122.1 million at the domestic box office and $221.4 million worldwide.

“On the whole, I see Disney in a situation that was mostly expected to be emerging from the pandemic and going through yet another leadership change,” said Sean Robbins, a senior analyst at BoxOffice.com. “These two hugely influential players have reshaped the studio’s stature in many ways, especially at the box office when considering the past decade that has seen their best franchises and their brand on all cylinders. This kind of momentum just wouldn’t have been sustainable without occasional ebbs and flows.”

Disney CEO Bob Iger told CNBC’s David Faber Thursday that the company will cut Marvel and Star Wars content as it seeks to cut costs and revamp its brands.

A bright spot for Disney has come in the form of James Gunn’s final arc at Marvel Studios. Guardians of the Galaxy Vol. 3 is the third-highest-grossing domestic release so far this year, with $357.5 million. It follows behind Sony’s “Spider-Man: Across the Spider-Verse”. Gunn is now helping helm Warner Bros. Pictures. DC Discovery Studios.

The third Guardians movie has managed to secure $834.2 million worldwide since its May release, but it likely won’t reach the coveted $1 billion threshold.

Notably, Disney’s “Avatar: The Way of Water” generated more than $1 billion in global ticket sales in 2023, but since it was released in 2022, it’s not considered a billion-dollar movie of the year.

“The billion-dollar club seems to be getting more exclusive in 2023,” said Paul Dergarabedian, senior media analyst at comScore. “Despite many high-profile titles featuring some of the biggest movie brands and franchises, this year’s crop so far lacks the global footprint or sheer market dominance to cross the billion-dollar threshold in what has been a competitive global film market.”

The Chinese market, in particular, was a major driving force in its previous multibillion-dollar box office hit, but the region has been more selective about which Hollywood films are allowed to be shown in the country. China has also developed its own lucrative film market.

For example, most Marvel films released pre-pandemic saw 15% to 22% of all ticket sales from China. In the aftermath of the pandemic, only a few of these comic book movies have been released to screens in the country and those that have have seen significantly less revenue.

The first two Ant-Man movies, which were released in 2015 and 2018, brought in about 20% of ticket sales from China. Meanwhile, Ant-Man and the Wasp: Quantumania saw just 8% of tickets sold in China.

“Globally, China’s evolution into a market that can no longer be relied upon for massive offerings by some of the films and franchises that used to do so leaves a gap that may be too big to fill in the short term,” Robbins said.

Lower Chinese ticket sales coupled with slower-than-expected returns from domestic moviegoers have hampered big blockbusters in 2023, dragging down the number of multi-billion-dollar blockbusters.

In the past decade, the number of global multi-billion dollar earners has increased exponentially, with Disney responsible for the majority of the chart-topping titles. In fact, the studio earned at least $1 billion every year from 2014 through 2019, when it had seven billion dollars worth of movies.

He didn’t make a $1 billion movie in 2020 or 2021 due to pandemic restrictions, but the 2022 movie “Avatar: The Way of Water” crossed $2 billion.

“Because 2019 was an anomaly on the upside, I think 2023 can be viewed as an anomaly in the other direction,” said Polidoros of PaperAirplane. “As they say with auditioning, get rid of the high and the low and go from there. And I think the same theory applies to the box office as a whole.”

Several box office analysts who spoke with CNBC shared the same sentiment as Polidoros. They noted that while many of Disney’s releases fell short of expectations, the studio remains a strong competitor at the domestic and global box office.

“It’s very unlikely that Disney will get a global hit of $1 billion this year,” Dergarabedian said. But, to be fair, “Guardians of the Galaxy Vol. 3,” “The Little Mermaid,” “Ant-Man and the Wasp: Quantumania,” and “Elemental” have collectively earned more than $2 billion worldwide.

Despite tepid results from traditionally strong Disney, the studio has generated more domestic ticket sales than any other studio this year so far.

Through June, Disney releases account for 30% of all domestic ticket sales, or $1.3 billion, according to data from Comscore.

The studio also has four of the top 10 highest-grossing domestic films so far this year.

“As usual, it’s about the content,” said Polidoros.

It’s not yet clear if Disney’s upcoming releases, like “Haunted Mansion,” “The Marvels” or “Wish,” will be able to generate a record $1 billion, but a diverse slate bodes well for the company.

“2024 looks more promising on several fronts, and their original animated film, Wish, could be a big hit later this year if it lives up to its potential with the audiences that helped make the ‘Frozen’ series such a hit,” Robbins said.

Disclosure: Comcast is the parent company of NBCUniversal and CNBC.

Companies and industries have ups and downs. Old media industry in a valley.

The first half of 2023 was a huge disappointment for media executives who wanted this year to be a rebound from a terrible 2022, when a slowdown in subscriber flow slashed ratings. NetflixAnd DisneyAnd Warner Bros. Discovery And Paramount Global to almost half.

Instead, investors are once again excited about Netflix’s future prospects as it cracks down on password sharing, which could lead to tens of millions of new sign-ups. Shares of Netflix have soared in the past five months, outperforming the S&P 500.

Meanwhile, the old players couldn’t get out of their own way.

“When it rains, it rains,” said Rich Greenfield, media analyst at LightShed. “It just keeps getting worse.”

It’s been a bumpy ride for Disney CEO Bob Iger since he returned to lead the company late last year. Disney It recently finished laying off 7,000 employees. Chief Financial Officer Christine McCarthy stepped down last week. The company is pulling programming from streaming services to save money. Its animation business is in serious trouble, with its latest Pixar movie, “Elemental,” scoring the studio’s lowest opening weekend gross since the original “Toy Story” premiered in 1995. Stock has struggled in the past five months.

Paramount Global It cut its dividend last quarter as broadcast losses peaked this year and a weak advertising market exacerbated the ailing cable network business. Wells Fargo issued an analyst note Friday saying the company’s bull case and bear case are the same: selling for parts. Said Warren Buffett, perhaps the most famous investor in history CNBC said the Paramount streaming show “Basically, it’s not good for business.”

NBCUniversal weathered the storm better, shielded by its parent company, Comcast, which derives its revenue from its cable and wireless assets. The above errors have also been taken advantage of. MSNBC has become no. 1 cable news network this month for the first time in 120 weeks, ousting Fox News amid coverage of former President Donald Trump’s federal indictment. The Super Mario Bros. Universal’s Movie is the year’s biggest box office hit, yet stocks haven’t moved much.

All of this is happening with an expanding strike of Hollywood writers playing out in the background with no end in sight. Writers know that the longer the strike lasts, the greater the pain will be inflicted on the media companies, who will eventually run out of content already written. Zaslav recently gave a commencement speech at Boston University and was drowned out in boos and cheers of “pay your book.”

This week may bring more bad news. Film and TV actors are set to join the writers’ strike unless they reach an agreement with Hollywood studios by Friday.

Greenfield said the beneficiaries of shutting down work in Hollywood will likely be YouTube, TikTok and Netflix, which continue to produce international content not affected by the strike.

Legacy media may get a small respite if advertising jumps back up as the 2024 US presidential campaign heats up. But there is still little evidence that investors will reward media companies simply for cutting costs. There is currently no solid growth narrative for legacy media, and merger prospects are murky as regulators block media-adjacent deals like Microsoft’s acquisition of Activision and Simon & Schuster’s proposed Penguin Random House purchase.

The industry has just concluded its annual advertising gala in Cannes, France. Old media executives still shell out company dollars for a yacht lounging trip and rosé drinking. The background was as beautiful as ever.

But the scene is bleak.

Disclosure: Comcast owns NBCUniversal, which is the parent company of CNBC.

WATCH: Mark Reid, CEO of WPP, on the state of the advertising market, from Cannes Lions 2023

Disney On Tuesday, it revealed a change in the film’s release calendar, delaying several entries in the Avatar, Marvel, and Star Wars franchises.

The company hasn’t clarified the decisions behind the release date rearrangement, though studios often adjust their schedules for a variety of reasons. The moves come as a writers’ strike has crippled the film and television industry, causing production halts that could affect release schedules.

Many high-profile films and shows have halted production or ended prematurely since the start of the strike. These include Netflix“Stranger Things” for “Stranger Things”appleTV +, “Severance” and BasicCNBC reported in May that the series, “The Evil.”

Disney did not immediately respond to a request for comment.

James Cameron’s third “Avatar” movie has been moved from 2024 to December 2025, with the fourth film following in 2029. The company’s release calendar indicates that the fifth installment in the franchise is now set to be in 2031. “Avatar,” released in 2009, and “Avatar: Waterway,” released late last year, are two of the top three highest-grossing films worldwide.

In the Marvel Cinematic Universe, the recently retitled “Captain America: Brave New World” will be delayed from May to July next year, with “Thunderbolts” moving to December 2024, “Blade” moving to February 2025 and “Fantastic Four” now. specific. In May 2025.

The changes also affect the two upcoming Avengers movies in the MCU. “Avengers: The Kang Dynasty” has been delayed by a year to May 2026. “Avengers: Secret Wars” won’t be released until May 2027.

Actor Jonathan Majors, who played Kang in Marvel’s Ant-Man and the Wasp: Quantumania, was arrested on assault charges earlier this year and is said to face more abuse charges. Earlier reports said he denied the allegations through his lawyer, but he was dropped by his old management company. Marvel has been silent on Majors’ case.

After the box office disappointment of “Ant-Man and the Wasp: Quantumania,” Disney CEO Bob Iger pondered whether Marvel should prioritize more recent characters instead of continuing to create third and fourth films for established legacy characters.

Disney has also pushed back its planned “Star Wars” movie from December 2025 to May 2026. It’s also added another Star Wars movie to the schedule as well – set for December 2026. Disney has yet to release a Star Wars movie. Movie since “The Rise of Skywalker” in 2019.

Hollywood producers have a tentative deal with movie and TV directors, but that doesn’t mean we should expect surprising writers’ strike decisions or talks with the actors’ union.

On Sunday, the Directors Guild of America and the Motion Picture and Television Producers Alliance provisionally agreed to a three-year contract that would provide the 19,000-member union with pay and benefit gains, increased global broadcast residuals and protections against the use of artificial intelligence.

The DGA contract is set to expire on June 30. The union will present the proposal to its members on Tuesday.

Meanwhile, the Writers Guild of America is entering the second month of its strike. Likewise, the Screen Actors Guild and the American Federation of Television and Radio Artists are on the verge of authorizing a possible strike should negotiations falter. Those talks begin on Wednesday.

The WGA has been on strike since May 2, shutting down dozens of TV and film productions as talks with producers stall.

actually Netflix The start of production for the fifth and final season of Stranger Things has been postponed. Warner Bros. discovery “Game of Thrones” prequel “Knight of the Seven Kingdoms: Night of the Hedge” locked her writers’ room, and Disney And Marvel’s Thunderbolts and Blade films have paused production.

During the recent writers’ strike in 2007 and 2008, which lasted 100 days, the studio’s deal with the DGA pushed writers back to the negotiating table. That may not be the case this time around, though.

“We congratulate the DGA Negotiation Committee for obtaining a deal that they will recommend to their National Council for approval and which they will then presumably send to their members for ratification,” the WGA Negotiation Committee wrote in a note to members on Sunday.

The committee said it would not comment on the deal points of the new DGA contract and noted that its negotiating positions remain the same.

“Last week we sent out an email about how AMPTP’s divide-and-conquer strategy didn’t work this time,” the memo read. “AMPTP will not be able to negotiate a book deal with anyone but us.”

The committee also said it stands in solidarity with SAG-AFTRA during the completion of the strike vote on Monday.

Representatives for SAG-AFTRA did not immediately respond to CNBC’s request for comment.

The WGA memo mirrors comments made by WGA negotiator Chris Keyser on Friday, when he provided a public update a month after the strike via YouTube.

“Any agreement that puts this city back in business goes directly through the WGA, and there’s no way around that,” he said.

Keyser also expressed that the WGA strike was indeed “extremely effective in harming businesses”, noting that the work stoppage, along with the public picketing, demonstrated the union’s determination to get “the contract we deserve”.

In the DGA agreement, managers received pay increases starting at 5% in the first year, an increase in tailings from the flow and a guarantee that AI could not replace the duties performed by members.

Artificial intelligence has been a major concern for writers’ and actors’ unions, who see their jobs as particularly vulnerable to this new technology.

The WGA and SAG-AFTRA are both seeking protection against the use of artificial intelligence in their negotiations, as well as increased compensation for streaming content. The WGA is also seeking minimum staff for television writers’ rooms and more competitive minimum payments for the work.

WGA is less concerned about being replaced by AI systems and more concerned that production companies will exploit these technological tools to cut writers’ salaries.

SAG-AFTRA has acknowledged that AI technology can have its benefits in the industry, but wants to ensure that any use of AI to duplicate an actor or create a new performance is done with the consent and payment of the actor. The Syndicate has similar guardrails when it comes to taking computer-generated images.

Indeed, some performers, such as James Earl Jones, have already agreed to have their voices reproduced for posthumous use. Jones, 91, voiced Darth Vader in the Star Wars franchise and has sought to exit the role. Jones was compensated and technology was used to bring Vader’s iconic voice to Disney+’s “Obi-Wan Kenobi.”

The Actors Guild has also been vocal about its negotiations for the benefit of all of its members, not just the big stars. Health coverage, compensation and waste are top priorities for tens of thousands of workers.

SAG-AFTRA’s vote for permission to strike ends Monday at 8 p.m. ET.

Disclosure: Comcast is the parent company of NBCUniversal and CNBC. NBCUniversal is a member of the Motion Picture and Television Producers Alliance.

Disney He urged a federal court to deny a request from the Florida governor. Ron DeSantis disqualifies the judge presiding over the company’s lawsuit, accusing the governor and his allies of political retaliation.

DeSantis’ attorneys argued that Judge Mark Walker should recuse himself from the lawsuit because of his comments in two separate cases that indicated a clash between the governor and the entertainment giant.

Disney — which has been in a dispute with DeSantis since last year, when the company vetoed his bill that critics have dubbed “Don’t Say Jay” — responded that the defendants’ argument failed to meet legal criteria for disqualification.

“Judges are not precluded from accurately indicating widely reported news events during oral arguments, nor must they exclude themselves if cases involving those events come before them months later,” Disney attorneys argued in a lawsuit Thursday.

“Disqualification is only permitted if prior comments reveal a judge’s inability to consider the new case on its merits,” the lawyers wrote, adding that the judge’s comments in question “do not approach that standard.”

Disney’s lawsuit alleges that DeSantis “orchestrated at every step” a campaign to punish the company for speaking out against a Florida bill that limits classroom discussion of sexual orientation or gender identity. Disney claims this alleged scheme is now threatening the company’s business.

“The case we filed last month has made our position and the facts very clear,” Disney CEO Bob Iger said during the company’s earnings call earlier this month. “And that really this is about one thing and one thing only and that’s retaliation against us for taking a stand on pending legislation.”

The attempt to remove Walker as judge in Disney’s civil case in U.S. District Court in Tallahassee, Florida, came days before DeSantis launches his 2024 presidential campaign. The governor, seen as former President Donald Trump’s main competition for the Republican nomination, has gained ground Patriotic for his participation in many political battles.

The long-running fight between the aspiring politician and one of his state’s top employers spilled over into the courts after the governor’s hand-picked officials voted to cancel Disney’s development deals for its Orlando-area parks.

Disney filed its lawsuit in late April after the new board of directors for its own district voted to back out of development contracts the company said it entered into to secure its investment. The company has since updated that lawsuit to include newly passed legislation targeting the monorail system as further evidence of the governor’s retaliation.

DeSantis’ next goal was to move to replace Walker. Walker was nominated to serve as a judge of the United States District Court for the Northern District of Florida in 2012 by then-President Barack Obama.

In 2018, Walker ruled against the state and ordered then-governor Rick Scott to restore voting rights to felons after they are released from prison.

That same year, he ordered the Florida Department of Corrections to continue providing a transgender female prisoner with hormone therapy and to provide her with feminine underwear and personal care products. The prisoner, who was diagnosed with gender dysphoria, was placed in an all-male reformatory.

DeSantis’ representatives did not immediately respond to CNBC’s request for comment.

Nor does a political battle rage between the governor of Florida. Ron DeSantis W DisneyAnd Nike CEO John Donahue said it’s important for companies to pick their battles, but fight for the values ​​that are integral to their brands.

During a sitdown interview at CNBC’s inaugural CEO Council Summit in Santa Barbara, Calif., Monday night, CNBC’s Sarah Eisen touched on the DeSantis controversy and asked Donahue if he was concerned about Nike becoming a target.

“Aren’t you worried that if Ron DeSantis becomes president, he’ll go after you as a wake company?” Eisen asked Donahue about the Republican presidential nominee.

In response, Donahue said companies don’t need to influence every political row, but they do need to be a loud voice when their brand values ​​come under attack.

“I think Bob is doing a great job on this,” Donahue said of Disney CEO Bob Iger.

He said, “If it’s a foundation of who you are and your values, then no, you’re standing up for your values.” “If it’s commenting on some political issue that’s in someone else’s backyard, we might have that personal feeling, but we don’t comment on it on our brand and in public.”

Iger was not leading Disney when, in February 2022, he publicly criticized Florida Republicans’ controversial bill limiting classroom discussion of sexual orientation, which he and other critics dubbed “Don’t Say Like Me.”

hiss tweet The bill “would put LGBT youth at risk” further pressuring Disney’s CEO at the time, Bob Chapek, to break his silence on the legislation.

After Disney opposed the bill, DeSantis and his allies took aim at the special taxation district in the Orlando area that had allowed Walt Disney World to essentially run its operations for decades. The standoff dragged on for more than a year, continuing even after Egger returned as CEO in November after Šapek was ousted.

Donahue pointed to three values ​​that are integral to the Nike brand: racial and social justice, sustainability and youth participation in sports, especially for young girls.

When it comes to racial and social justice, Donahue said Nike has built its brand in partnership with some of the most famous black and brown athletes, like Michael Jordan, Serena Williams and LeBron James.

“In addition, our primary consumers of the Nike brand, the Jordan brand, the converse brand, are urban black-and-brown communities — that’s where the sneaker culture began,” Donahue explained. “And so, we listen to our athletes and our consumers about what they care about and they care about racial and social justice, and so we see that as the foundation of our identity…a little courage to speak up.”

Donahue said the company has focused on youth participation in sports as young girls are dropping out of athletics at an “alarming rate”.

“It turns out that one of the biggest reasons girls drop out is the lack of female coaches when they reach puberty,” Donahue said. “So, we’re trying to train 20,000 female coaches, mothers, and other former athletes to be youth enhancement coaches. So it’s a less controversial issue, but one that we care about as valuable.”

On sustainability, Donahue said as the “leader” in the industry, Nike must lead by example for change because if it doesn’t happen “it won’t happen.”

Disney World’s Star Wars: Galactic Starcruiser, a two-day hotel experience, is closing and will make its final voyage in September after being open for just over a year.

The experience blends elements from the company’s resorts, cruise lines and theme parks for a 48-hour journey into space. The Galactic Starcruiser first opened during the Disney D23 Expo in 2019 and will be located near the company’s Disney World Resort in Orlando, Florida in March 2022.

The cost of the trip is about $1,200 per person, per day, with family packages coming in at nearly $6,000 for the two-day trip. This can be a hard number to swallow, especially considering that a typical Disney vacation for a family of four can cost a lot for a weeklong trip, depending on hotel and restaurant options.

However, the Galactic Starcruiser has been lauded as a dream come true for fans looking for the ultimate Star Wars experience. The two-day trip includes a hotel room, all food and beverages except alcoholic and specialty drinks, a day trip to the Hollywood Studios theme park, Magic Band and valet parking on delivery.

However, the Galactic Starcruiser is more than just a hotel. It is an immersive experience. Travelers spend their time on Halcyon meeting new characters and aligning themselves with the light or dark side.

The main gist of the overarching story goes like this: You are a passenger on a Star Cruiser for a two-day cruise. During that voyage, an Officer First Class and several stormtroopers boarded the ship to root out Resistance spies. Alongside these bad guys are spies, musicians, rebels, and reluctant heroes, all of which make up a Star Wars story.

And of course, some familiar faces also appear, including Chewbacca, Rey, and Kylo Ren.

The experience has earned some of the highest guest satisfaction ratings in Walt Disney World history and earned Thea Award for Outstanding Achievement in Themed Entertainment.

However, the boutique hotel proved too pricey for the general Star Wars fan.

“Star Wars: Galactic Starcruiser is one of our most innovative projects ever and has been lauded by our guests and recognized for setting a new standard for innovation and immersive entertainment,” the company said in a statement. “This distinct, boutique experience has given us the opportunity to try new things on a smaller scale than 100 rooms, and as we prepare for its final journey, we will take what we have learned to create future experiences that can reach even more of our guests and fans.”

Disney reportedly spent $2 billion building the two Star Wars immersive parks in Florida and California — though it’s unclear if the cost of building the Starcruiser is included in the amount.

China is letting go of pandemic lockdowns, and American companies are loving it Procter & GambleAnd Starbucks And MGM Resorts International He says the country’s recovery is boosting their overall sales as consumers in their home markets watch their wallets.

With its large population and bloating middle class, China is a desirable market for many multinational companies that have seen their business grow in the United States. But the no-Covid policy, which imposed severe restrictions to stop the spread of the virus, has hurt the country’s economy — and the revenues of many American companies that sell their goods or services there.

After backtracking on policy in December, China’s economy grew 4.5% in the first quarter. US companies have reported a return to demand in China, boosting their sales at a time when many US consumers are cutting back on their spending.

However, the recovery has not been as quick or dramatic as many investors had hoped. Most companies are still waiting to surpass pre-epidemic sales in China. The travel retail sector is taking longer to bounce back. And apples Sales fell in the China region that includes the mainland, Hong Kong and the neighboring self-ruled island of Taiwan.

Morgan Stanley analyst Kelly Kim wrote in a research note that the consumer team in China expects the recovery to come in three phases: spring break in February through April, summer “revenge spending” in May through July, and a stable recovery starting in August. .

US-based restaurants were among the companies that saw demand return in China. But sales haven’t returned to 2019 levels yet.

Starbucks reported that its same-store sales in China rose 3% in the most recent quarter, reversing a decline. Some Wall Street analysts were still expecting same-store sales for the company’s second-largest market to shrink.

A year ago, the coffee giant shelved its outlook for the year, citing lockdowns in China as one of the reasons for the decision. In that quarter, Starbucks store sales in China fell 23%.

Yum ChinaAnd yum brands The master franchisor in China, also said same-store sales grew 8% in the first quarter. China is Kentucky Fried Chicken’s largest market and Pizza Hut’s second largest.

“We benefited from increased mobility and experienced 40% surplus growth in transit and in tourists. However, same-store sales in these locations in the first quarter remained 20% to 30% below 2019 levels,” Yum CEO says. China Joey Wat to analysts on the company’s phone call.

It also appears that Chinese consumers are traveling again as restrictions are lifted, visiting theme parks and casinos. A host of US companies were helped by an increase in spending on travel and leisure at the start of the year.

Disney It promoted “improving financial results” at its resorts in Shanghai and Hong Kong.

“It’s been really gratifying to see the recovery from the pandemic shutdowns that we’ve seen,” Christine McCarthy, Disney’s chief financial officer, told analysts Wednesday on the company’s conference call.

Macau, the world’s largest gambling hub, has seen a resurgence of tourists after testing requirements for inbound travelers from the mainland, Hong Kong and Taiwan were scrapped. Tourism peaks during the Lunar New Year holiday in late January.

MGM Resorts International operates MGM Cotai and MGM Macau locations in the region. Earlier this month, the casino giant reported a quick return to profitability as traffic at Chinese casinos reached pre-pandemic levels. In the first quarter, its China properties generated adjusted earnings of $169 million, or 88% of the division’s adjusted earnings four years ago.

Airbnb She said the Asia Pacific division last quarter saw its largest year-over-year growth in nights and experiences booked. The company shut down its domestic business in China in 2022, closing all property listings on the mainland to focus on helping Chinese consumers find housing abroad instead.

“We are encouraged by China’s recent lifting of travel restrictions although we expect the recovery to be gradual due to challenges with limited flight capabilities,” the company wrote in its quarterly letter to shareholders.

While many US-based companies are benefiting from China’s recovery, companies are still waiting to see the same recovery in travel retail.

SK-II, a luxury skincare brand owned by Procter & Gamble, has seen its sales rebound in China, with the notable exception of the travel retail segment. Overall, Procter & Gamble’s organic sales were up 2% in China. With consumer traffic picking up, the consumer packaged goods giant expects an even bigger rebound in revenue.

Scott Rowe, Chief Financial Officer, Inc textureCouch’s father, Kate Spade and Stuart Weitzman, said Thursday that the company has begun to see an uptick in domestic Chinese travel, including in Hong Kong and Macau. However, he added that global Chinese tourism is below pre-pandemic levels – and said the prospect of more travel could present opportunities in the future.

At its largest unit in China, Tapestry expects a mid-single-digit gain in revenue for the fiscal year, including an expected increase of about 50% in the next quarter. The company’s sales momentum in China is helping offset weakness in the United States, as North American consumers have become more cautious.

Although many companies are struggling with travel retail in China, at least one company is already seeing its sales bounce back at duty free and tourist destinations.

cosmetic giant cutie It said it has seen consumer traffic return to retailers, and noted more flights to the tropical island and Hainan shopping district, where it has dozens of stores. The French-American company owns Covergirl, Kylie Jenner’s beauty lines, and a wide range of perfume and cosmetic brands. Coty’s travel retail sales increased more than 30% in the quarter.

Inventory abundance affected Coty’s sales in China in its most recent quarter, but April sales were still higher than both the year-ago period and the two years prior.

Piper Sandler analyst Corinne Wolfmeyer called the company one of her favorite beauty stocks in a note to clients following Coty’s quarterly earnings report. It cited its performance in part in China.

“We remain cautiously optimistic about China in terms of the near-term cosmetics market, but for COTY specifically, we view the company’s strategic investments in the region and key product launches as a driver of outperforming market,” she wrote.

CNBC channel Melissa Rybko And Stephen Sykes Contribute to this story.

Magic Kingdom is a fan of the Mushroom Kingdom.

Disney CEO Bob Iger used part of his opening remarks during Wednesday’s earnings call to praise Universal Studios’ “Super Mario Bros.” movie and its success at the global box office.

Iger said, “Let me digress for a moment to congratulate Universal on the massive success of Super Mario Bros.” “It certainly proves people’s love of being entertained in theaters around the world, and gives us reason to be optimistic about the film industry.”

Universal did not immediately respond to a request for comment on Iger’s comments.

Super Mario Bros. More than $1.1 billion globally since its launch in early April, proving that family-friendly films, especially animated films, can succeed in the wake of the pandemic.

Disney’s theatrical animated content has lagged at the box office since the pandemic. Some analysts have blamed slowing ticket sales on market confusion over which Disney movies are streaming-only and which have wider theatrical releases. Others said Disney did a poor job of marketing its animated films to audiences.

Lightyear, the sequel to the highly profitable Toy Story series, grossed just over $200 million worldwide last summer, and “Strange World” flopped in the fall with less than $100 million in global ticket sales.

Meanwhile, Universal has been hugely successful at the box office, with Minions: The Rise of Gru grossing nearly $940 million worldwide and Puss in Boots: The Last Wish grossing nearly $500 million worldwide. .

The widespread success of the Super Mario Brothers movie could pave the way for upcoming Disney releases, which include the Pixar movie “Elemental” and the Thanksgiving release “Wish.” When parents and kids entered theaters to see the Nintendo flick, they were treated to advertisements for upcoming animated features, including Disney’s slate.

Disclosure: Comcast is the parent company of NBCUniversal and CNBC.