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Hollywood is ready to get back to work
After months of strikes that paralyzed most of Hollywood, the end seems to be in sight. The SAG-AFTRA union, which represents some 160,000 members, has tentatively agreed to a new contract with media giants that, if approved, would revive the $134 billion U.S. film and television industry.
Union members are hopeful the deal will yield significant financial concessions that have made SAG-AFTRA’s longest strike ever worth it. But Hollywood’s changing economics may temper some gains, echoing the dilemma facing emerging unions elsewhere in the country.
The actors’ union seemed to get most of what it wanted, after joining the Writers Guild of America by quitting its job and bringing film and TV production to a near standstill. Led by actress Fran Drescher of “The Nanny” fame, SAG-AFTRA took a maximalist negotiating approach that accused studios of plutocracy and denigrated their bosses.
The heads of the media companies eventually gave their opinions, including increases in compensation for streaming content, better healthcare funding and guardrails against the use of artificial intelligence.
SAG-AFTRA was under pressure to resolve its struggles. A-list members like George Clooney and Reese Witherspoon pressed Drescher and others for ways to bridge differences with the studios. Lesser-known actors and crew members grumbled privately about being out of work for so long. And local officials noted that California’s economy alone had lost about $5 billion.
SAG-AFTRA was denied one of its biggest demands: a percentage of streaming revenue, which studios negotiated into a new residual payment based on performance metrics.
Still, the outcome demonstrated the renewed strength of American unions. The Writers Guild of America, which ended its work stoppage in September, also received major financial concessions from Hollywood studios. And the United Automobile Workers, which employed a similarly tough bargaining strategy against Detroit’s major automakers, posted some of the biggest financial gains in years.
But economic realities can cloud these achievements. While Hollywood actors may get paid more for their roles, there may be less work to be done. Media companies, eager to absorb streaming-related losses, have reduced their spending on content: Disney’s Hulu, for example, will produce about a third fewer shows in 2024 than in 2022. (More on Disney below.)
That echoes warnings from Detroit automakers about the UAW’s demands for higher wages as their companies have invested heavily in the transition to electric vehicles. Saddling them with higher labor costs, they argued, could weaken their ability to compete with non-union rivals like Tesla.
Save the date: the DealBook Summit is on November 29th. Guests include David Zaslav of Warner Bros. Discovery; the television producer Shonda Rhimes; and Jay Monahan of the PGA Tour. You can apply here to attend.
HERE’S WHAT’S HAPPENING
Republican presidential candidates discuss Israel and Ukraine, but not Donald Trump. At last night’s Trump-less debate, challengers including Ron DeSantis, Nikki Haley and Vivek Ramaswamy largely united in support of Israel’s war against Hamas and were divided over aid to Ukraine. They also turned on each other, with Haley calling Ramaswamy “scum” for calling out her daughter in a point about TikTok.
Concerns about deflation hit China again. Consumer prices there fell for the second time in four months as businesses and households cut spending despite Beijing’s introduction of stimulus measures to revive growth.
Regulators approve Eli Lilly’s obesity drug. Shares in the drugmaker rose more than 3 percent yesterday after the FDA gave the green light to tirzepatide, which will compete with Wegovy and Novo Nordisk’s Ozempic. That rivalry could drive down the price of the blockbuster weight-loss treatments, analysts say.
GM’s Cruise recalls 950 robotaxis. The company said it found flaws in the vehicles’ automated driving software related to collision detection. Cruise suspended all driverless operations after its robotaxi fleet was removed from California roads last month, following a vehicle that struck a pedestrian.
Disney’s results give Iger a reprieve
The stakes were high for Bob Iger yesterday in Disney’s highly anticipated quarterly earnings reports. Wall Street, and especially activist investor Nelson Peltz, wanted to know how much more disruption was in store for the House of Mouse.
So Iger seemed relieved that the company reported results that pleased investors, including strong growth — and the possibility that Disney might not need a huge shakeup after all. Disney shares rose 4 percent in pre-market trading.
The numbers:
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Total profits more than doubled from a year ago, to $694 million. Revenue rose 5 percent to $21.2 billion, just below analyst expectations.
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ESPN’s operating income rose 16 percent year over year to $987 million, although revenue rose about 1 percent in the period.
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Speaking of which, quarterly streaming losses fell to $387 million as Disney+ added seven million subscribers, offsetting losses elsewhere.
Iger professed greater optimism about Disney’s traditional TV business. ‘Linear is better than many people thought’ he said. “Doesn’t mean it’s great,” he added, but “we’ve seen some improvement.” It was a striking contrast to comments he made over the summer suggesting that linear assets such as the ABC broadcast network may be “not core” to the business. Yesterday’s statements indicated that he is now open to keeping at least some of these operations.
Meanwhile, Iger reiterated that the company was in discussions to bring in partners for ESPN “who can add marketing support, technology support or potentially content support.” (That’s most likely one or more sports leagues.)
Iger also said the company was cutting more costs. The company plans to reduce spending by $7.5 billion, down from $5.5 billion expected at the start of the year. Streaming, which has lost nearly $11 billion since the end of 2019, is expected to turn a profit by the end of 2024.
The Disney chief briefly discussed Peltz: which threatens to resume the battle for seats on the company’s board of directors. “I got a call from him,” Iger said. “But I have to say I don’t have any details about what Nelson is really looking for, or what he will ask for.” (Peltz had no comment after the earnings report.)
SoftBank falls into the red again
Shares of SoftBank closed higher in Tokyo today, but there was little reason for investors to cheer. The Japanese conglomerate reported a $6.2 billion loss last quarter, including a 234.4 billion yen ($1.6 billion) writedown on WeWork, the bankrupt office-sharing company — an investment that Masa Son, the founder of the SoftBank billionaire has called “a stain on my body.” to live.”
Poor also disappointed. The IPO of the SoftBank-controlled chip designer has bolstered Son’s war chest this year, and the prolific investor is reportedly looking for artificial intelligence deals. But Arm’s shares fell as much as 8 percent in premarket trading after it yesterday gave a bleak outlook for the current quarter in its first earnings report since going public two months ago.
Arm’s IPO was one of the busiest of the year, with investors hoping to cash in on the enthusiasm for AI. But Arm’s market cap is roughly $55 billion; Before the IPO, SoftBank estimated its value at nearly $70 billion.
There were other misses too. The SoftBank division to which the two Vision Funds belong — Saudi Arabia backed the first — reported a quarterly loss of $1.7 billion, after a record $32 billion loss in the last fiscal year.
The unit has poured roughly $140 billion into technology startups since its founding in 2017. Some, like Uber, have taken off (the company has since sold that stock); others, like the dog walking app Wag, do not.
“It is difficult to be optimistic because there is some uncertainty about how things will develop in the near term,” Tomoaki Kawasaki, an analyst at Iwai Cosmo Securities, told Bloomberg. The hope is that AI will eventually reverse the losing streak, he added.
More on the soured WeWork bet:
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SoftBank poured more than $16 billion into WeWork, including $1.5 billion in payments to Goldman Sachs and other lenders, before filing for bankruptcy this week, according to The Financial Times.
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Adam Neumann, the WeWork founder who was forced out in 2019, is worth $1.7 billion, according to Bloomberg. WeWork’s market capitalization is now about $44 million.
How should CEOs handle the war between Israel and Hamas?
The war between Israel and Hamas has reopened a now familiar debate for business leaders: how should they respond to a controversial political issue and what approach should they take when employees want to discuss a potentially divisive topic?
This is not a new dilemma. But executives say this conflict is more complex than other crises, writes Emma Goldberg of The Times.
More than 200 American companies have issued statements condemning the Hamas attacks, according to a tracker by Jeffrey Sonnenfeld, a professor at the Yale School of Management. Meanwhile, 58 percent of Americans said companies should make a statement “condemning violence and loss of life” as a result of Hamas attacks; 62 percent believe that companies should make humanitarian donations, according to a Morning Consult poll.
Some companies are accused of double standards. Google is known for its open culture and employee activism, The Times’ Santul Nerkar and Mike Isaac report, but some employees say they faced hostility when they spoke out in support of the Palestinians. “In an open letter published yesterday, a group of employees said that Google “allowed freedom of speech for Israeli Googlers versus Arab, Muslim and Palestinian Googlers.” Google said the complaints were limited to a small portion of its thousands of employees.
But Sarmad Gilani, a software engineer, said that while taking a position on some issues, such as Black Lives Matter or Ukraine, was allowed, he was wary of openly discussing the treatment of Palestinians. “You have to be very, very, very careful, because any criticism of the Israeli state can easily be interpreted as anti-Semitism,” he said.
READING THE SPEED
Offers
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DraftKings was reportedly considering making a bid for 888, a rival gambling company owned by British-based William Hill. (FT)
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Investors pulled $667 million from Sculptor Capital Management last quarter as the hedge fund is embroiled in a merger battle. (Bloomberg)
Policy
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