DVD block
Some apparently didn’t get the memo or study the classic case studies of competitive advantage. Redbox’s parent company, Chicken Soup for the Soul Entertainment (CSSE), filed for bankruptcy, with a nearly $1 billion bill owed to hundreds of creditors, including Sony, Warner Bros., Walgreens, and Walmart. In addition to a network of 24,000 DVD rental kiosks, CSSE owned television and streaming assets that never took off, including ad-supported video-on-demand services like Crackle and Popcornflix.
Sound familiar? Blockbuster went bankrupt in 2010 after failing to adapt to structural changes in the movie industry. Management failed to take seriously the threat of Netflix’s (NFLX) e-mail-based subscription video services, or the advent of video-on-demand, which would ultimately spark the streaming wars later in the decade. Several major players like Disney+ (DIS), Prime Video (AMZN) and Max (T) have competed for market share in recent years, but one thing is for sure: the era of optical discs is long gone and it’s not coming back anytime soon (except for Blu-ray, 4K or nostalgic fans).
Against this backdrop, Chicken Soup for the Soul Entertainment, which has never made a profit as a publicly traded company, acquired Redbox in 2022, taking on an additional $325 million in debt in the process. The acquisition was led by CEO and Chairman Bill Rouhana, who had previously founded and led Winstar Communications (which ended up being one of the most notable telecom bankruptcies of the dot-com era). Many Seeking Alpha analysts have been warning about Chicken Soup (CSSE) for years, including Hindenburg Research in 2018, and Arie Investment, Bill Maurer, and Chris DeMuth in 2022. fell by 40% at $0.12 following Monday’s latest news after diving to 83% over the past year.
No rewind: Redbox Entertainment is a product of the SPAC boom, having gone public through Apollo Global Management (APO) in 2021 via a merger with Seaport Global Acquisition. Within a year, the company was spun off to Chicken Soup for the Soul Entertainment just as the SPAC bubble burst. “We were bringing assets that were helpful in terms of debt, cleaning up the capital structure, and accessing new liquidity, and they were bringing these incredible assets, this larger revenue business, and the ability to generate a lot of cash flow,” Bill Rouhana, who has now been replaced, said at the time. “I’m glad we were able to break through and get it right.” (4 comments)
Are you my partner?
Speaking of the streaming wars, Paramount Global (PARA) is reportedly in talks to combine its loss-making Paramount+ offering with services from Warner Bros. Discovery and/or Comcast. Such a combination would give Paramount+ a stronger footing to compete with the bigger players, stabilize churn, and also reduce some streaming-related losses from the larger company’s balance sheet. increased by 3% AH published another report on Monday that media mogul Barry Diller and his company IAC (IAC) are considering a takeover of the entertainment giant. (90 comments)
Electric vehicle racing
Thanks to price cuts on most models, BYD (OTCPK:BYDDF) set a new sales record in the second quarter and moved closer to overtaking Tesla (TSLA) as the world’s top seller of electric vehicles. The Chinese automaker sold 426,039 pure electric vehicles in the second quarter, closely following Tesla, which likely sold around 440,000 units, according to analysts’ forecasts. Tesla is scheduled to report its second-quarter sales later in the day, but many have revised their estimates downward on concerns about demand, as well as registration data from Europe and China. BYD last overtook Tesla to become the world’s largest seller of electric vehicles in the fourth quarter of 2023. (10 comments)
The investigation reveals
Surprise, surprise. The AI rally appears to be here to stay, according to the latest Breakfast on Wall Street Poll. Nvidia (NVDA) came out on top when asked what the best-performing S&P 500 stock would be in the second half of 2024, garnering 31% of the 500+ survey responses. Other big names in AI also earned silver and bronze, with Microsoft (MSFT) and Apple (AAPL) receiving 8% and 6% of the total vote, respectively. Explore more SA articles covering recent surveys and sentiment rankings on market-related topics, as well as asset allocation and economics.
