The Update Issue: Trouble for Amazon, West Side Story Disappoints at the Box Office, COVID Keeps Coming for Broadway

The tragic tornadoes that hit five states last week have reopened the controversial topic of how tech giant Amazon (AMZN) treats its warehouse workers... At least six warehouse workers died at an Amazon facility in Edwardsville, Illinois when the building was hit by a tornado last Friday, causing a collapse. The working conditions in its […] Not rendering correctly? View this e-mail as a web page [here](. [Empire Financial Daily] The Update Issue: Trouble for Amazon, West Side Story Disappoints at the Box Office, COVID Keeps Coming for Broadway By Berna Barshay The tragic tornadoes that hit five states last week have reopened the controversial topic of how tech giant Amazon (AMZN) treats its warehouse workers... At least six warehouse workers died at an Amazon facility in Edwardsville, Illinois when the building was hit by a tornado last Friday, causing a collapse. The working conditions in its distribution centers ("DCs") are a PR issue that periodically bubbles up to the surface for Amazon. The issue grabbed headlines during [last April's unsuccessful attempt by workers in its Bessemer, Alabama warehouse to unionize](. Working conditions had also come under scrutiny during the early months of the pandemic when employees fell ill as they continued to fulfill orders at a time when much of the country had been locked down. Beyond these moments of crisis brought on by the pandemic or natural disasters, Amazon has come under more general scrutiny for some of its policies around bathroom breaks and productivity measurement. Amazon's rumored reinstatement of its no cellphone policy on the warehouse floor is coming under scrutiny now in the wake of the Illinois tragedy. Pre-pandemic, Amazon had banned fulfillment center workers from carrying cellphones but had relaxed the rules temporarily so families could keep in touch in an emergency during the pandemic. But the phone ban is reportedly being phased back in, and workers fear the lack of ability to communicate quickly in situations like a tornado could put them in harm's way. One worker told Bloomberg... After these deaths, there is no way in hell I am relying on Amazon to keep me safe. If they institute the no cellphone policy, I am resigning. Another echoed this sentiment... After this, everyone is definitely afraid of not being able to keep their phones on them. Most employees that I've talked to don't keep their phones on them for personal conversation throughout the day. It's genuinely for situations like this. Amazon representatives have denied that the phone ban is returning and expressed their sadness in the wake of the casualties. The company also defended its on-site practices, telling the BBC that the worker deaths were concentrated in a secondary location, not the primary designated location where workers were instructed to shelter in place. At the center of the controversy is when Amazon issued the warning for workers to shelter in place... There were two warnings ahead of the tornado that hit at 8:27 p.m. The first came at 8:06 p.m. and the second at 8:16 p.m. Amazon claims it warned employees promptly after the first tornado warning... but some employees and their families dispute this and said employees were only alerted after the second warning. The girlfriend of one worker who died told the New York Post that she received a text from her boyfriend saying Amazon would not let him leave as the tornado approached. Some news outlets are questioning why the facility was even open that day, given there had been warnings from the National Weather Service the day before of increased tornado risk. Another disturbing aspect of this tragedy: the need to modify the number of casualties with the words "at least." When the tornado hit, only seven people at the facility were full-time employees. But dozens of workers were there... The rest were overwhelmingly contractors not directly employed by Amazon. Amazon's contractor population swells at the DCs during peak holiday time (which is now), so managers don't even know definitively how many people were there. The Occupational Health and Safety Administration ("OSHA") has opened an investigation into these events. While many Amazon customers are sympathetic to the tough working conditions at these DCs, repeated events have proven that the convenience of shopping on Amazon means that very few consumers abandon the service over these business practices. So no matter how bad the press gets around this event, it won't hit Amazon's business. But the company may find itself facing new calls for unionization at various facilities. Director Steven Spielberg's reimagining of the musical classic West Side Story disappointed big time at the box office last weekend... The musical cost $100 million to make and even more money to market... but only took in $10.5 million domestically. According to reporting in Variety, "industry insiders estimate West Side Story needs to generate at least $300 million globally to break even in its theatrical run." It's likely the movie will generate sizable losses for its studio, 20th Century, and its corporate parent Disney (DIS). The tepid box office was a bit of a shock given the film's excellent reviews – some of the best of the year, great word of mouth, a big marketing campaign, Spielberg's incredible track record at the box office, and general familiarity of the source material. But musicals have always been a mixed bag at the box office... For every hit like Les Misérables, La La Land, The Greatest Showman, or Chicago... there have been many disappointments, including the musical adaptations of Broadway hits like Rent, The Producers, and Rock of Ages. But none of these flops had Spielberg or these rave reviews. So musicals are historically spotty at the box office generally... but things have been even worse during the pandemic. The extremely well-reviewed musical [In the Heights missed its box office targets earlier this year](. Dear Evan Hansen, which had a less warm critical reception but is the adaptation of a show with a cult-like Gen Z following, also disappointed at the box office this year. But all hope isn't lost for West Side Story... Disney used its muscle to get theater chains to commit to keeping the film on screens into the new year. Normally, theaters would yank West Side Story after the slow start to make room for upcoming films that may perform better. But this time they can't. Musicals often tend to enjoy longer runs than the average film and do what is so rare these days: open quietly, build momentum, and rack up the box office by not flaming out quickly. This is how 2017's The Greatest Showman became a hit that grossed $438 million globally after opening to a horrific sum of just $8.8 million, and Disney is surely hoping that the same could happen with West Side Story. --------------------------------------------------------------- Recommended Links: [The 2022 Altimetry Investment Summit airs TONIGHT at 8 P.M. Eastern Time]( Tonight, December 16 at 8 p.m. Eastern time, Joel Litman is going live to reveal why 2022 could be the best year for the stock market ever... why nearly two-dozen stocks he's found could be the biggest winners next year (and beyond)... and why you can score big on these stocks even before January 1, but major investors like Warren Buffett can't touch them. [Click here to register before it's too late](. --------------------------------------------------------------- [If you knew the future, how much would you invest?]( Investors always want to know – and put their money into – what's coming next. And that's exactly what I want to tell you today. I'm convinced that you'll look back in a few years and say, "Wow... that was so obvious, I wish I'd invested more before the entire world caught on." [Click here for my No. 1 pick](. --------------------------------------------------------------- The challenges facing West Side Story are a microcosm of what is happening at movie theaters more generally right now... First, some audiences aren't coming back. As Variety noted... The biggest obstacle facing West Side Story is – and will continue to be – convincing older audiences to go to theaters. Along with families, it's the main demographic that hasn't returned in full force since the pandemic, particularly at a time when a new COVID variant has emerged, though it's too soon to say how it will affect moviegoing... During the pandemic, people over the age of, say, 40 aren't making an effort at all. Getting those crowds back to the big screen will be key in the movie theater ecosystem's revival. You can see the reluctance of older adults and families to go to the movies when you look at the top five performers at the box office this year... Three were Disney films based on Marvel comics, which play best with teens and young adults: Shang-Chi and the Legend of the Ten Rings (No. 1), Black Widow (No. 3), and Eternals (No. 5). Sequels to a sci-fi franchise from Sony (SONY), Venom: Let There Be Carnage (No. 2), and an action franchise from Comcast's (CMCSA) Universal, F9: The Fast Saga (No. 4), round out the list and also skew young. While teens and young adults are always more frequent movie goers, in normal times you would expect to see a family-oriented animated or live action film crack into the top five. If you look back to 2019, Disney held all five top spots but only two were Marvel films, the other three were held by family-friendly animated hit sequels (Toy Story 4 and Frozen II) and one family-friendly live action remake (The Lion King). For theaters to thrive, they need families and adults over 40 to come back. The other challenge to theaters continues to be how little power they have versus the studios, which have always had the upper hand and are increasingly experimenting with the simultaneous release of films to streaming services and theaters, or just shortening the exclusivity window that theaters have before movies are released direct to consumers. It's clear to me that the movie theater business will never recover to what it once was before the pandemic. It was on this trajectory before COVID-19 emerged, and the crisis just sped up what was going to happen anyway. I would argue that the shares of all the major theater chains are still not pricing in this reality... but it's clear that shares of AMC Entertainment (AMC) are the most removed from reality, due to the cult-like mentality of its "Ape" shareholder base...  Stay away from all of these movie theater chains. If you want to play an eventual box office recovery, do it through shares of Disney or Comcast. I'm updating yesterday's story because things are moving fast... Last night, less than an hour before the curtain was supposed to go up, Broadway musical Hamilton had to cancel its performance...  Source: Twitter/@Hamilton Musical Hamilton performances for today and tomorrow have since been canceled as well. Around midday, the Michael Jackson musical MJ canceled its matinee, and musicals Mrs. Doubtfire and Tina – The Tina Turner Musical canceled tonight's performances. After filing [yesterday's essay]( I read that 12 shows playing in London's West End had to cancel performances yesterday because of breakthrough cases. The U.K. is a few weeks ahead of us on the omicron variant, so this seems to be an ominous sign for Broadway, which had been making such strides to getting back on its feet. There are also concerning signs with relation to in-person office work and colleges... Citigroup (C) sent its non-branch workers in New York City and Jersey City home today to work and many colleges, such as Cornell and Princeton, are sending students home for break early as well. I'm still cautiously optimistic that this latest variant will be a temporary disruption to economic activity and not more major than that, but it certainly bears watching. In the mailbag, more reactions to the piece on Peloton (PTON)... Do you think companies should send their employees home when tornado risk is elevated, or should they just invest more in emergency shelters at the facilities? Do you think that Amazon's historical policy of no cellphones on the warehouse floor is justified? If you have returned to the movies, are you going as much as you did before the pandemic? And if you haven't returned or are going less frequently, do you think you will return to your same movie theater frequency post-pandemic? Are you changing any holiday party or travel plans because of the omicron variant? Share your thoughts in an e-mail by clicking [here](mailto:feedback@empirefinancialresearch.com?subject=Feedback%20for%20Berna). Today, we hear from some Peloton fans... "Hi Berna – Thanks for your in-depth article! I was an early adopter of Peloton (bought from one of their first retail stores >7 years ago) and while my use of the bike has waxed and waned over the years, between my husband and I, we still use it regularly enough for the monthly subscription to be worth it and really love the product. I agree with you that right now people are settling back into a new fitness schedule balancing at-home and gym workouts. I also go to a boutique fitness studio twice a week. I think the bears are being too negative. Every single person who I have recommended the bike to over the years has loved it once they got it – some even obsessed about using it every day. "Once the bike is paid off, unless someone is losing a job or something major like that, I don't really see that people will run to sell their bike and cancel their subscription because of the demographics of the people who buy it – the monthly subscription is really not that much. "Their biggest strength in keeping people engaged is the quality of their instructors who have BIG personalities and over time, you almost feel like you know them – like they are an old friend. "While I don't think their growth will be like it was in the past, they have a great product, and their content is differentiated due to their instructors who have almost cult-like followings. Also, let's not underestimate management's ability to continue to innovate and launch new products/services and expand it footprint as this health and wellness market continues to explode. McKinsey's report this year projects this whole market to grow to $30 trillion from $1.5 trillion today by 2030!" – Kelly C. Berna comment: Kelly, I think you nailed it with your comment about the instructors. Whether it's a home fitness business like Peloton's or a boutique studio business – the instructors are the key to success! If you haven't used the service, it's hard to understand the connections that develop between users and instructors. There is something in the consistency and the coaching that is very comforting. This is a big reason why I think churn is low – and why the Peloton instructors are paid multiples of what their fitness peers who work elsewhere are. "Hey Berna, I bought my wife a Peloton cycle last Christmas. I tried to talk her into the competition at Costco for half the price, but to no avail. Both of my adult children received shoes as well as my wife, for Christmas. Since then, we've dutifully paid the king's ransom for the monthly sub, and all still use the machine regularly. "We have a home gym, which also has a treadmill, lots of free weights, and a great space for cardio workouts. With all of that, my wife uses the Peloton three times per week and my son uses it two times per week. My daughter has since moved out and purchased a used Peloton cycle. She has also signed up for the monthly king's ransom. She's using it three times per week. Me? No... I stick to a 5-mile run around Lake Miramar once a week, and a couple of shots at the weights during the week. I still do some P90X workouts as well. Nothing compares to P90X Plyometrics, imho. All the best." – Curtis C. Berna comment: Curtis, it sounds like your family is more than getting its money out of its home fitness investment in Peloton. And you sound like a very fit crew! Regards, Berna Barshay December 16, 2021 If someone forwarded you this e-mail and you would like to be added to my e-mail list to receive e-mails like this every weekday, simply [sign up here](. © 2021 Empire Financial Research. All rights reserved. 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