Hollywood is poised to get back to work
After months of strikes that shut down most of Hollywood, the end appears in sight. The SAG-AFTRA union that represents some 160,000 members tentatively agreed to a new contract with media giants that, if approved, will reinvigorate the $134 billion American movie and television business.
Union members are hopeful that the deal will bring significant financial concessions that made SAG-AFTRA’s longest-ever strike worth it. But the changing economics of Hollywood may temper some gains, echoing the dilemma facing resurgent unions elsewhere in the country.
The actors’ union appeared to get most of what it wanted, after it joined the Writers Guild of America in walking off the job and bringing movie and TV production to a near-standstill. Led by the actress Fran Drescher, of “The Nanny” fame, SAG-AFTRA took a maximalist negotiating approach that involved accusing studios of plutocracy and belittling their bosses.
The heads of the media companies eventually gave some ground, including on increases in compensation for streaming content, better health care funding and guardrails on the use of artificial intelligence.
SAG-AFTRA faced pressure to resolve its fight. A-list members like George Clooney and Reese Witherspoon pushed Drescher and others for ways to bridge differences with the studios. Lesser-known actors and crew members privately grumbled about being out of work for so long. And local officials noted that California’s economy alone had lost some $5 billion.
SAG-AFTRA didn’t get one of its biggest asks: a percentage of streaming revenue, which studios bargained down to a new residual payment based on performance metrics.
Still, the outcome demonstrated the renewed strength of American labor unions. The Writers Guild of America, which ended its work stoppage in September, also won big financial concessions from Hollywood studios. And the United Automobile Workers, which adopted a similarly hard-nosed bargaining strategy against the big Detroit automakers, achieved some of its biggest financial gains in years.
But economic reality may cloud those accomplishments. While Hollywood actors may be paid more for their roles, there may be less work to go around. Media companies, eager to stanch streaming-related losses, have cut their spending on content: Disney’s Hulu, for instance, will produce about a third fewer shows in 2024 than it did in 2022. (More on Disney below.)
That echoes warnings from Detroit automakers about the U.A.W.’s demands for higher pay, given that their companies have been investing heavily in transitioning to electric vehicles. Saddling them with higher labor costs, they contended, could weaken their ability to compete with nonunionized rivals like Tesla.
Save the date: The DealBook Summit is on Nov. 29. Among the guests are David Zaslav of Warner Bros. Discovery; the television producer Shonda Rhimes; and Jay Monahan of the P.G.A. Tour. You can apply to attend here.
HERE’S WHAT’S HAPPENING
Republican presidential candidates argue about Israel and Ukraine, but not Donald Trump. At last night’s Trump-less debate, challengers including Ron DeSantis, Nikki Haley and Vivek Ramaswamy mostly united in support of Israel’s war against Hamas and split over aid to Ukraine. They also turned on one another, with Haley calling Ramaswamy “scum” for invoking her daughter in a point about TikTok.
Deflation concerns hit China again. Consumer prices there declined for the second time in four months as businesses and households pull back on spending, despite Beijing’s introduction of stimulus efforts to revive growth.
Regulators approve Eli Lilly’s obesity drug. Shares in the drugmaker rose more than 3 percent yesterday after the F.D.A. greenlit tirzepatide, which will compete with Novo Nordisk’s Wegovy and Ozempic. That rivalry could bring down the price of the blockbuster weight-loss treatments, analysts say.
G.M.’s Cruise recalls 950 robotaxis. The company said it had found defects in the vehicles’ automated driving software tied to collision detection. Cruise suspended all driverless operations after its robotaxi fleet had been pulled off California’s roads last month, prompted by a vehicle hitting a pedestrian.
Disney’s results give Iger a reprieve
A lot was at stake for Bob Iger yesterday in Disney’s hotly anticipated quarterly earnings report. Wall Street, and in particular the activist investor Nelson Peltz, wanted to know how much more disruption was in store for the House of Mouse.
So Iger appeared relieved that the company announced results that pleased investors, including strong growth — and the possibility that perhaps Disney didn’t need a huge shake-up after all. Shares in Disney were up 4 percent in premarket trading.
Overall profits more than doubled from a year ago, to $694 million. Revenue rose 5 percent, to $21.2 billion, just shy of analyst estimates.
ESPN’s operating income surged 16 percent year-on-year, to $987 million, though its revenue rose about 1 percent during that time.
Speaking of which, quarterly streaming losses narrowed to $387 million, while Disney+ added seven million subscribers, offsetting losses elsewhere.
Iger professed more optimism about Disney’s traditional TV business. “Linear is better than many people assumed it would be,” he said. “Doesn’t mean it’s great,” he added, but “we’ve seen some improvement.” It was a notable contrast from comments he made over the summer suggesting that linear assets like the ABC broadcast network may “not be core” to the company. Yesterday’s statements suggested that he was now open to keeping at least some of those operations.
Meanwhile, Iger reiterated that the company was in talks to bring in partners for ESPN “that can add either marketing support, technology support or possibly content support.” (That’s most likely one or more sports leagues.)
Iger also said that the company was cutting more costs. It’s seeking to trim $7.5 billion in expenses, up from a projected $5.5 billion at the beginning of the year. Streaming, which has lost nearly $11 billion since late 2019, is expected to turn a profit by ate 2024.
The Disney chief briefly discussed Peltz, who is threatening to renew a fight for seats on the company’s board. “I had a call from him,” Iger said. “But I must say, I don’t have specifics about what Nelson is really after, or what he will ask for.” (Peltz had no comment after the earnings report.)
SoftBank again falls into the red
Shares in SoftBank closed higher in Tokyo today, but there was little in its latest earnings for investors to cheer. The Japanese conglomerate reported a $6.2 billion loss last quarter, including a 234.4 billion yen ($1.6 billion) write-down on WeWork, the bankrupt office-sharing firm — an investment that Masa Son, SoftBank’s billionaire founder, has called “a stain on my life.”
Arm disappointed, too. The SoftBank-controlled chip designer’s I.P.O. has bolstered Son’s war chest this year, and the prolific investor is reportedly looking for deals in artificial intelligence. But Arm’s stock fell as much as 8 percent in premarket trading after it delivered a lackluster outlook for the current quarter yesterday in its first earnings report since going public two months ago.
Arm’s initial public offering was one of the buzziest of the year, with investors hoping to cash in on the enthusiasm for A.I. But Arm’s market capitalization stands at roughly $55 billion; pre-I.P.O., SoftBank estimated its value at closer to $70 billion.
There were other misses, too. The SoftBank division that includes its two Vision Funds — Saudi Arabia backed the first — reported a $1.7 billion quarter loss, after posting a record $32 billion loss in the last fiscal year.
The unit has plowed roughly $140 billion into tech start-ups since it was founded in 2017. Some, like Uber, have taken off (it’s since sold off that stake); others, like the dog-walking app Wag, haven’t.
“It’s hard to be optimistic, as there’s a bit of uncertainty over how things will develop in the near term,” Tomoaki Kawasaki, an analyst at Iwai Cosmo Securities, told Bloomberg. The hope is that A.I. will eventually reverse the losing streak, he added.
More on its soured WeWork bet:
SoftBank poured more than $16 billion into WeWork, according to The Financial Times, including $1.5 billion in payments to Goldman Sachs and other lenders before it filed for bankruptcy this week.
Adam Neumann, the WeWork founder who was forced out in 2019, has is worth $1.7 billion, according to Bloomberg. WeWork’s market cap now stands at about $44 million.
How should C.E.O.s address the Israel-Hamas War?
The Israel-Hamas war has reopened a now familiar debate for business leaders: How should they respond to a contentious political issue and what approach should they take when employees want to address a potentially divisive topic?
This isn’t a new dilemma. But executives say this conflict is more complex than other crises, writes The Times’s Emma Goldberg.
More than 200 American businesses have issued statements condemning the Hamas attacks, according to a tracker from Jeffrey Sonnenfeld, a professor at the Yale School of Management. Meanwhile, 58 percent of Americans said businesses should make a statement “condemning violence and loss of life” from Hamas’s attacks; 62 percent said companies should make humanitarian donations, a Morning Consult poll found.
Some companies are being accused of double standards. Google is well-known for its open culture and employee activism, report The Times’s Santul Nerkar and Mike Isaac, but some staff members say they have faced hostility when speaking out in support of Palestinians. “In an open letter published yesterday, a group of workers said Google permitted “freedom of expression for Israeli Googlers versus Arab, Muslim and Palestinian Googlers.” Google said the complaints were limited to a small proportion of its thousands of employees.
But Sarmad Gilani, a software engineer, said that while taking a position on some issues, like 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 sort of criticism toward the Israeli state can be easily taken as antisemitism,” he said.
THE SPEED READ
DraftKings reportedly considered bidding for 888, a rival betting firm owned by the Britain-based William Hill. (FT)
Investors withdrew $667 million from Sculptor Capital Management last quarter, as the hedge fund is embroiled in a merger battle. (Bloomberg)
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