An American Airlines Boeing 787-9 Dreamliner approaches for a landing at the Miami International Airport on December 10, 2021 in Miami, Florida.
Joe Raedle | Getty Images
A glitch in a scheduling platform allowed American Airlines pilots to drop thousands of July assignments overnight Saturday, their union said, a headache for the airline as it tries to minimize flight disruptions during a booming travel season.
American said it didn’t expect the problem to affect its operation, including during the busy July Fourth holiday weekend. The union and airline are now discussing additional pay for pilots whose dropped trips the airline reinstated, the Allied Pilots Association said.
“As a result of this technical glitch, certain trip trading transactions were able to be processed when it shouldn’t have been permitted,” the airline said in a statement. “We already have restored the vast majority of the affected trips and do not anticipate any operational impact because of this issue.”
More than 12,000 July flights lacked either a captain, first officer, or both, after pilots dropped assignments, the Allied Pilots Association said Saturday. APA said the airline reinstated about 80% of the trips.
Pilots can routinely drop or pick up trips, but time off in the summer or holidays is hard to come by for airline employees as schedules peak to cater to strong demand.
On Saturday alone, American had more than 3,000 mainline flights scheduled and they were 93% full, according to an internal tally. Flights left unstaffed, however, are an additional strain on any airline.
The glitch occurred during a rocky start to the Fourth of July weekend when thunderstorms and staffing issues caused thousands of U.S. flight delays and hundreds of cancellations.
A similar issue occurred in 2017, when a technology problem let American’s pilots take vacation during the busy December holiday period. The carrier offered pilots 150% pay for pilots that picked up assignments.
American and its pilots’ union, whose relationship has been fraught, are in the middle of contract negotiations and the airline most recently offered nearly 17% raises through 2024.
Union president Capt. Ed Sicher, who started his term Friday, told American’s roughly 15,000 pilots Saturday night that American Airlines CEO Robert Isom said he is committed to paying an “inconvenience premium” to aviators whose trips American put back on their schedules after the glitch.
“To Mr. Isom’s credit, he called me four times today to commit to mitigating the damage from this debacle,” Sicher wrote late Saturday. “We started at a 200% override, although the details of this pay are still the subject of negotiations and there is no guarantee of the details or the amounts.”
American Airlines declined to comment on Sicher’s message to pilots.
American’s pilots have picketed recently against grueling schedules, something they want to be addressed in a new contract. Pilots at Delta and Southwest have picketed in recent weeks for similar reasons.
Sicher also struck an upbeat tone about contract talks with American, particularly about quality-of-life issues.
“Please understand that no firm commitments have yet been made, but I feel that we have, at least for the first time since negotiations began, received positive indications that management is motivated to achieve collaborative solutions to longstanding problems with our current contract that will greatly enhance our ability to trade our trips and consequently enhance our quality of life,” he wrote.
Allbirds ‘dramatically’ slows pace of new hires as loss widens
A woman walks past an Allbirds store in the Georgetown neighborhood of Washington, D.C., on Tuesday, Feb. 16, 2021.
Al Drago | Bloomberg | Getty Images
Allbirds on Monday trimmed its financial forecast for the year and announced a number of efforts to cut costs as the sustainable shoe maker reported a wider quarterly loss compared with a year earlier.
The company citied a slowdown in consumer spending toward the end of June and said it has “dramatically” slowed the pace of corporate new hires and backfills for departing employees. It said it has cut its global corporate workforce by about 8%, or 23 people.
Chief Financial Officer Mike Bufano said the retailer anticipates any external headwinds pressuring consumer spending in the United States will persist in the back half of 2022. “As a result, we continue to take a cautious outlook,” he said in a statement.
Allbirds shares fell more than 13% in after-hours trading on the news. The stock had tumbled more than 60% year to date, as of Monday’s market close, bringing Allbirds’ market cap to about $842 million.
Here’s how Allbirds did in its fiscal second quarter compared with what analysts were anticipating, based on Refinitiv estimates:
- Loss per share: 12 cents adjusted vs. 16 cents expected
- Revenue: $78.2 million vs. $77.8 million expected
Allbirds reported a net loss in the three-month period ended June 30 of $29.4 million, or 20 cents per share, compared with a loss of $7.6 million, or 14 cents a share, a year earlier. Excluding one-time items it lost 12 cents per share, better than the 16-cent loss that analysts were looking for.
Revenue grew 15% to $78.2 million compared with $67.9 million a year earlier. That topped estimates for sales of $77.8 million.
Allbirds reported both an increase in the number of orders and in average order value, which it said was due in part to price hikes amid inflation. The company is best known for its slip-on wool loafers but also entered the apparel business during the pandemic and has been launching a variety of shoes, including for running.
Sales in the United States grew 21% from year-ago levels, while it said international revenue was flat due to ongoing Covid-related restrictions in China and the war in Ukraine.
Retailers from Walmart to Gap in recent weeks have trimmed their expectations for future sales and profits as businesses attempt to gauge how consumers are responding to 40-year-high inflation. Companies say lower-income households have been particularly pressured by the higher prices and have started to tighten their budgets for discretionary items, including apparel.
For the year, Allbirds is now calling for adjusted net revenue to between $305 million and $315 million. It previously forecast net revenue of $335 million to $345 million.
It sees adjusted gross profits amounting to between $150 million and $157.5 million, compared with prior guidance for gross profit of $170 million to $177.5 million.
And it’s anticipating an adjusted EBITDA loss of $42.5 million to $37.5 million, compared with a prior forecast for a loss of $25 million to $21 million.
Along with the slower pace of hiring, Allbirds said it will look to trim logistics costs in the United States by transitioning to automated distribution centers and a dedicated returns processor. The company is also hoping to accelerate the scaling of its owned manufacturing base to slash product costs over time.
Bufano said the changes are expected to save the company between $13 million to $15 million on an annualized basis beginning in 2023.
“We will reinvest some of these savings into building brand momentum through product innovation, marketing, retail stores, and marquee third party partnerships,” he said.
Allbirds, which went public at a more than $4 billion valuation last November, recently inked a deal to sell its products in Nordstrom‘s department stores. The retailer has also been opening brick-and-mortar shops to reach more consumers, ending the second quarter with 46 locations globally.
Why creating a horror movie haven on Netflix may be a smart move for the streaming giant
A button for launching the Netflix application is seen on a remote control in this photo illustration in Warsaw, Poland on April 25, 2019.
Jaap Arriens | NurPhoto | Getty Images
There’s a big money question haunting Netflix.
In recent years, the streamer has spent big on flashy, blockbuster-style action movies like “The Gray Man” and “Red Notice,” which ran the company $200 million each. The films are the first steps in bids to spark event-level franchises. But they’re costly, and it’s unclear how impactful they have been for Netflix’s bottom line.
Meanwhile, the platform’s smash hit “Stranger Things,” a supernatural thriller with horror undertones, has become a clear cultural touchstone. The series, which just released its fourth season, has inspired Halloween costumes and videogame versions of the monster-filled alternative universe.
While the show has a similar budget to these high-octane action flicks — around $30 million per episode, or more than $200 million per season — its success has led some in the industry to question whether high-budget features are worth Netflix’s investment.
Netflix’s streaming rivals have begun to shift their own content strategies in order to spend less on direct-to-streaming film content. Warner Bros. Discovery CEO David Zaslav said Thursday his company has been unable to find an “economic value” in producing big-budget films for its streaming services.
“We’ve seen, luckily, by having access now to all the data, how direct-to-streaming movies perform,” Zaslav said during the company’s second-quarter earnings call. “And our conclusion is that expensive direct-to-streaming movies … is no comparison to what happens when you launch a film in the motion picture, in the theaters.”
Netflix doesn’t often release films in theaters, unless it’s seeking Academy Award eligibility, so it budgets for movies knowing that its only option for recouping spend is through subscription growth.
That’s why analysts have pointed to the horror genre as a potential avenue for Netflix.
The horror genre, in particular, typically comes with lower production costs, making these kinds of films ideal for the box office as they often rake in significantly more in ticket sales than they cost to make.
Blumhouse and Universal’s “Get Out” cost just $4.5 million to produce and went on to generate more than $250 million at the global box office.
And while “The Gray Man” is set to be developed into a franchise, Peter Csathy, founder and chairman of advisory firm Creative Media, suggested Netflix is overlooking franchise opportunities in horror that could save the company hundreds of millions per film.
“Scream,” “Insidious,” “Halloween” and other horror film series have won over fans of the genre, as low-budget alternatives to more expensive franchise endeavors like Fast and Furious, Star Wars, Marvel or Lord of the Rings.
“The production costs are a sliver, a fraction, a small fraction of what it is for these huge bets that are made,” he said. “And why not go for an inexpensive sure thing that hits your targeted demo? Why not put your money there, rather than doing these big prestige plays?”
Plus, Csathy added, the target audience for the horror genre also happens to be young — the demographic advertisers and streamers want to tap into.
Netflix has seen success from past horror releases including its “Fear Street” trilogy and has a number of Netflix Original releases in the genre including “No One Gets Out Alive” and “There’s Someone Inside Your House.”
Michael Pachter, an analyst at Wedbush, suggested Netflix could get more for its money by sticking with a lineup of horror and rom-com projects, both of which tend to be relatively low-budget. With more modest budgets, missteps aren’t as big of a deal.
“The cool thing about low budget is you can make mistakes,” he said. “Big budget, you just can’t make any. If you screw up, you’re screwed. So which is riskier, a $150 million movie or three $50 million movies?”
Part of the scrutiny on Netflix’s content spend stems from the lack of clear metrics around the financial performance of streaming-first shows and movies.
Box office tallies for theater releases and TV ad revenue are tried-and-true metrics. With streaming-only platforms, viewership data varies from service to service and paints an incomplete picture for analysts trying to determine how a film or television show has actually performed.
A bill upwards of $200 million for a film like “The Gray Man” is harder to explain when there’s no visible financial gain at the end of production, like studios see in box office ticket sales. Streaming subscribers pay flat monthly or annual fees to access all available content. Netflix argues its content keeps users on the platform and handing over subscriber fees.
For Netflix, the push into big-budget movies is a way to burnish its image and quiet criticisms that it churns out mediocre content. The company has shored up its balance sheet, is cash flow positive and has a three-year window before a significant portion of its debt matures, giving it some wiggle room to spend.
It’s unclear how much Netflix spent per film for its “Fear Street” trilogy, and there’s limited data around its performance on the platform. But Nielsen ratings estimated that “Fear Street 1994” generated 284 million viewing minutes during its first week on the service and “Fear Street 1978” tallied 229 million minutes. It is unclear how the third film, “Fear Street 1666” performed.
What’s more, the fourth season of “Stranger Things” has become just the second Netflix series to cross 1 billion hours viewed within the first 28 days of availability. Of course, comparing Netflix’s films to its television series is a bit like comparing apples to oranges, but it’s the best data analysts have access to as long as the company keeps quiet about content spend and success.
Many entertainment experts have tried to crunch the numbers on how streaming hours translate to revenue, retention and, ultimately, the strength of Netflix’s business. But much of how Netflix decides what to greenlight and what to cancel remains a mystery to analysts.
Based on Netflix’s own data, “The Gray Man” amassed more than 88 million hours in worldwide viewing during its opening weekend on the service, 60 million fewer hours than “Red Notice” pulled during the same period last November. “Red Notice” stayed in the top spot of Netflix’s top 10 list for 12 days, while “The Gray Man” was usurped after just eight days.
As of Friday, the film holds the fourth spot on the list behind “Purple Hearts,” “Tower Heist” and “Age of Adaline.”
So, was “The Gray Man” worth its $200 million price tag? It appears to have have hit some behind-the-curtain metric for Netflix, which is moving forward with a sequel and a spinoff.
“Netflix, obviously has the data and the methodology that they believe is accurate, to determine what is this success at Netflix and what isn’t,” said Dan Rayburn, a media and streaming analyst. “If [‘The Gray Man’] had bombed by their definition of bombing, whatever that is, we don’t know, they would not have announced an expanded deal.”
As for how Netflix makes its content choices, Rayburn says that while data is not currently widely available, that could change once the streamer enters the ad market.
“Whether they want to give us data or not, we’re gonna get more data as the years go on, because the advertising side,” he said. “That’s gonna help us better understand content.”
Disclosure: Comcast is the parent company of NBCUniversal and CNBC. Universal is the distributor of the Halloween franchise and “Get Out.”
Netflix is expanding its push into video games, but few subscribers are playing along
Dado Ruvic | Reuters
Netflix is accelerating its push into video games with plans to double its catalog of offerings by the end of the year, but for now, few of the streaming giant’s subscribers are playing.
Since last November, the company has been rolling out the games as a way to keep users engaged between show releases. The games are accessible only to subscribers, but have to be downloaded as separate apps.
The games have been downloaded a total of 23.3 million times and average 1.7 million daily users, according to Apptopia, an app analytics company. That’s less than 1% of Netflix’s 221 million subscribers.
The importance of games to Netflix’s overall strategy has arguably increased in recent months as the company faces intensifying competition for user attention. In the second quarter, Netflix lost nearly a million subscribers, after losing 200,000 subscribers during the first quarter — its first subscriber declines in more than a decade.
“One of the many advantages to Netflix in pursuing the strategy is the ability to drive engagement beyond when the show first comes out on the platform,” Prosek Partners analyst Tom Forte said.
Still, Netflix Chief Operating Officer Greg Peters said last year the company was “many months and really, frankly, years” into learning how games can keep customers on the service.
“We’re going to be experimental and try a bunch of things,” Peters said during the company’s fourth-quarter earnings conference call. “But I would say the eyes that we have on the long-term prize really center more around our ability to create properties that are connected to the universes, the characters, the stories that we’re building.”
The company’s current catalog of 24 game apps covers a variety of genres and Netflix shows, such as “Stranger Things: 1984.” Several are modeled after popular card games, such as “Mahjong Solitaire” and “Exploding Kittens.”
The catalog will grow to 50 games by the end of the year, including “Queen’s Gambit Chess,” based on the hit Netflix series, according a company representative.
Netflix has been cagey about how it plans to make video gaming a core part of the company’s strategy, rather than merely a side hobby.
“We’re still intentionally keeping things a little bit quiet because we’re still learning and experimenting and trying to figure out what things are going to actually resonate with our members, what games people want to play,” Leanne Loombe, Netflix’s head of external games, said during a panel at the Tribeca Film Festival in June.
Netflix hinted earlier this year that it will license popular intellectual property for its new gaming additions.
“We’re open to licensing, accessing large game IP that people will recognize,” Peters said in January. “And I think you will see some of that happen over the year to come.”
Netflix tapped outside developers for its current catalog, but has acquired three video game developers in the past year.
All of that adds up to growing investment. Netflix hasn’t disclosed how much it’s spending to develop its video game segment, but the efforts are capital-intensive. Netflix’s acquisition of Finnish developer Next Games cost the streamer about $72 million.
Forrester analyst Mike Proulx noted that Netflix has been investing in gaming slowly, and that it still appears to be what he would consider “more of a test and experiment at this stage.” He noted that most people don’t associate Netflix with games.
So far, download figures for Netflix games fall far short of the leading mobile games — Subway Surfers, Roblox and Among Us, for a few — which each have more than 100 million downloads, according to Apptopia. Still, downloads have slowly climbed since May, after a downward trend that started in December.
“We’ve got to please our members by having the absolute best in the category,” Netflix co-CEO and co-founder Reed Hastings said in January. “We have to be differentially great at it. There’s no point of just being in it.”
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