The Economic Stakes in the Hollywood Shutdown

Trouble in Tinseltown

It’s happening: America’s $134 billion movie and TV industry has ground to a halt after the Hollywood actors’ union voted to strike, joining screenwriters and shutting down virtually all productions.

The move reflects the growing aggressiveness of the American labor movement, which has been battling against Starbucks, Amazon, UPS and others. Only in this case, the dispute involves one of the most visible industries around — and there’s no sign of a compromise in sight.

The actors’ union blasted studios for refusing to bend on key issues, including higher payouts from streaming titles and clear limits on the use of artificial intelligence. “How they plead poverty, that they’re losing money left and right when giving hundreds of millions of dollars to their C.E.O.s.,” Fran Drescher, the TV actor who now leads the SAG-AFTRA union, said yesterday. “It is disgusting. Shame on them!”

The studios argue that the unions’ demands are unrealistic, given the challenges the entertainment industry faces, from streaming to fallout from the pandemic. “This is the worst time in the world to add to that disruption,” Bob Iger, Disney’s C.E.O., said on CNBC yesterday. (More on him later.)

Expect more such comments next week on media company earnings calls.

Tinseltown’s glitz quickly went dim. Because actors are now forbidden from promoting their films, the cast of Christopher Nolan’s “Oppenheimer” walked out in the middle of the movie’s London premiere. And campaigning for shows nominated for Emmy awards, which were just announced on Wednesday, was suspended.

That will have consequences for other Hollywood industries, including advertising and talent agencies, celebrity and trade publications and film festivals. “The celebrity factory has shut down,” Janice Min, the head of the entertainment publication The Ankler, told Vanity Fair. “If this goes on for a long time, you will feel it across the whole internet.”

In some ways, the strike could actually benefit studios and streaming platforms. The lack of new shows and movies may allow them to back out of expensive production deals they signed during the content boom.

But the longer the strikes go on, the more audiences may grow restless with a lack of fresh scripted content. (Fall TV schedules are packed with reality and game shows.) Streaming giants with vast libraries might be OK, but lesser-stocked services may face a deluge of cancellations, and studios that sell to other platforms could be in increasingly dire straits.

HERE’S WHAT’S HAPPENING

The S.E.C.’s crypto crackdown suffers a setback. The regulator has argued that digital assets should be treated as securities, but ajudge ruled yesterday that the crypto company Ripple did not break securities law in selling its token, XRP, on public exchanges. Elsewhere, Alex Mashinsky, the founder of the bankrupt crypto lender Celsius, was arrested on charges of fraud and lying about the firm’s business model.

Aspartame is declared a potential cancer risk. The World Health Organization joined research agencies in saying that the widely used artificial sweetener is a possible carcinogen. Experts disagree on what constitutes an unsafe level of consumption, but Wall Street analysts say the warning could hurt the sale of diet sodas and other products.

Tucker Carlson reportedly plans to start a new media company. The former Fox News host and Neil Patel, a White House adviser under George W. Bush, are seeking to raise funding for a subscription-driven venture, according to The Wall Street Journal. Last month, Carlson returned to the public eye with a Twitter version of his popular Fox show, but its audience has been in steep decline.

A new era of dealmaking at Disney?

A day after Bob Iger extended his tenure as Disney’s C.E.O. by two years, the entertainment mogul suggested that he was weighing a bigger shake-up of the media giant, including potential deals for ESPN and other channels like ABC.

The remarks indicate that Iger, who oversaw some of Disney’s biggest acquisitions, may yet do more deals — albeit as a seller. The big question is: Whom will he do them with?

Iger is under pressure to turn Disney’s fortunes around, after laying off thousands and slashing costs. Though he has headed off a challenge by the activist investor Nelson Peltz, shareholders can’t be happy with Disney’s stagnating stock price.

Here’s what an Iger shake-up might look like:

• Disney may sell a stake in ESPN, which has suffered from a steep drop-off in cable subscriptions, to a partner that could help the sports network improve its online reach and pay for increasingly expensive broadcast rights. Likely candidates are tech titans with online video platforms, including Apple (an often-rumored buyer for Disney, antitrust concerns aside), Google and Amazon.

• Buyers for ABC and cable channels like FX are less obvious, since a deal with another media giant could draw opposition from antitrust regulators. The Wells Fargo analyst Steven Cahall speculated that private equity or hedge funds may jump in, tempted by the businesses’ steady cash flow and the opportunity to cut margins (as they’ve done with newspapers).

How serious is Iger about selling? His comments may have been meant to test investor reaction. (He previously hinted Disney might sell its majority stake in Hulu, before saying he would more likely buy out Comcast’s stake in the platform.) Disney shares barely budged yesterday after his remarks.

But Iger has been pessimistic about traditional TV for some time. “Linear TV is marching towards a great precipice and it will be pushed off,” he said at the Code Conference last year. “I can’t tell you when, but it goes away.”

• In other media M.&A. news: The French luxury billionaire Francois-Henri Pinault is reportedly in talks to buy the talent agency CAA.

Lina Khan’s unlikely fan club

A rough week for the F.T.C. chair Lina Khan ended with a grilling on Capitol Hill. On Tuesday, she lost a bid to block Microsoft’s $70 billion acquisition of Activision-Blizzard. The regulator appealed the ruling, but an effort to delay the deal while its challenge is heard was rejected.

But even as the F.T.C. faces a court battle over one fight, it started another by opening an investigation into the ChatGPT maker OpenAI over whether the chatbot was harming consumers.

The news meant all eyes were on Khan’s appearance before the Republican-led House Judiciary Committee, which had been billed as an examination of her “mismanagement” after a series of failed legal challenges. But the hearing revealed surprising support from some of her cross-examiners.

Republicans questioned her tactics. Khan was pressed about why the F.T.C. was appealing the Microsoft ruling when other jurisdictions, such as the European Union, had approved the deal. (She declined to comment.) Khan also faced accusations and threats. “Actions have consequences, Madam Chair,” warned Ben Cline, Republican of Virginia, who said the appropriations committee was considering the F.T.C.’s budget requests and earmarking less than she had sought in response to the agency’s “rank partisanship.” Khan was not offered the chance to respond.

But Khan found some unlikely fans. “I want to encourage your work,” Matt Gaetz, the conservative Republican from Florida and a fellow lawyer, told her. He lauded a crackdown on data brokers who sell sensitive information. Gaetz added that legal defeats were common when pressing new issues, and he urged Khan to seek help in Congress “if the laws are insufficient.”

Others praised Khan’s tough stance on Big Tech. Ken Buck, Republican of Colorado, pointed out that Khan had no financial links to tech companies — unlike some of his Congressional colleagues. “They spent $250 million against the bills that passed out of this committee last Congress,” he said of businesses like Google and Meta.

Buck said he and Khan were both aware of “the need to update the antitrust laws” for a new economy, giving Khan the chance to say that today’s rules were based on assumptions that aren’t right for the digital age.

• In other news: Britain’s antitrust regulator, which blocked the Microsoft deal in April only to reopen its investigation a day after the U.S. court ruling, will extend the deadline for its investigation by six weeks. The companies could reportedly sell some British cloud gaming rights to win approval.

The PGA Tour tosses its no-poach agreement

With regulatory scrutiny intensifying, the PGA Tour has ditched one of the binding provisions built into its tentative deal with the Saudi-backed LIV Golf league: a no-poach agreement that could have been legally problematic.

The provision, which would have covered players from the tour and LIV, was shelved to stave off the Justice Department’s ire, report The Times’s Alan Blinder and Kevin Draper and DealBook’s Lauren Hirsch.

The nonsolicitation clause was seen as a way to prevent an exodus of tour golfers to LIV, which had used huge prize payouts to entice top players to the breakaway league. (Rory McIlroy, one of the fiercest opponents of LIV Golf, said yesterday he would rather quit the game than play for the rival competition despite the riches on offer.) The White House has been taking on such agreements. The language appeared “to be right in the field of vision that the Department of Justice has staked out for its no-poaching enforcement program,” William E. Kovacic, a former F.T.C. chairman, told DealBook.

There was more problematic language in this week’s Senate hearing involving PGA Tour officials. Antitrust experts have zeroed in on comments made by Jimmy Dunne, the Piper Sandler vice chairman who is on the tour’s board. He testified before the Senate’s Permanent Subcommittee on Investigations that he feared the deep-pocketed LIV would “destroy the tour,” necessitating the negotiations for a tie-up.

Such statements may underline concerns that the deal was struck to solidify the tour’s lock on the market, Gerald Maatman, who heads the workplace class-action group at the law firm Duane Morris, told DealBook. “Loose lips can sink ships from an antitrust standpoint,” he said.

THE SPEED READ

Deals

• Exxon Mobil agreed to buy the carbon-collection company Denbury for $4.9 billion. (Reuters)

• Adobe’s $20 billion bid for Figma faces an in-depth investigation by Britain’s antitrust regulator. (The Verge)

• Silicon Valley start-ups are exploring sales to bigger companies as venture funding dries up. (FT)

Policy

• James Bullard, president of the St. Louis Fed, will step down to become dean of Purdue University’s business school. (Reuters)

• “Big Tech’s Love Affair With Low-Tax Nations Is Under Threat” (WSJ)

Best of the rest

• “‘An Act of War’: Inside America’s Silicon Blockade Against China” (NYT)

• Companies are leaving London’s Canary Wharf, reflecting a broader shift that is also hitting office districts in cities like New York and Chicago. (NYT)

• The winner of tomorrow’s Wimbledon women’s final will again be a first-time Grand Slam champion — a common occurrence since Serena Williams won her last major tournament in 2017. (WSJ)

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