The Costs of the Hollywood Actors’ Strike

Trouble in Tinseltown

It’s happening: America’s $134 billion film and television industry ground to a halt after the Hollywood actors’ union voted to strike, joining screenwriters and halting nearly all production.

The move reflects the growing aggressiveness of the US labor movement, which has fought 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 settlement in sight.

The actors’ union blamed studios for refusing to bend on key issues, including higher title streaming fees and clear limits on the use of artificial intelligence. “It’s like they’re advocating poverty that they’re losing money left and right when they’re giving hundreds of millions of dollars to their CEOs,” Fran Drescher, the TV actor who now heads the SAG-AFTRA union, said yesterday. “It’s disgusting. Shame on them!”

The studios argue that the demands of the unions are unrealistic, due to the challenges facing the entertainment industry, from the ebb and flow of the pandemic. “This is the worst time in the world to add to that disruption,” Bob Iger, the CEO of Disney, said on CNBC yesterday. (More on him later.)

Expect more such comments next week on earnings calls from the media.

Tinseltown’s glow was quickly fading. Because actors are now banned from promoting their films, the cast of Christopher Nolan’s “Oppenheimer” walked out in the middle of the film’s London premiere. And campaigning for shows nominated for Emmy awards, which were just announced on Wednesday, has been suspended.

This will have ramifications for other Hollywood industries, including advertising and talent agencies, celebrity and trade publications and film festivals. “The celebrity factory closed,” Janice Min, the head of the entertainment publication The Ankler, told Vanity Fair. “If this goes on for a long time, you’re going to feel it all over the internet.”

In some ways, the strike might actually profit 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 lawsuit.

But the longer the strikes go on, the more the public can get worried about a lack of fresh written content. (Fall TV schedules are packed with reality and game shows.) Streaming giants with vast libraries might be fine, but lesser-stocked services may face a deluge of cancellations, and studios that sell to other platforms could be in an increasingly difficult situation.

THIS IS WHAT IS HAPPENING

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

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

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

A new era of dealmaking at Disney?

A day after Bob Iger extended his tenure as Disney CEO by two years, the entertainment mogul hinted that he is weighing a bigger shakeup of the media giant, including possible agreements for ESPN and other channels like ABC.

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

Iger is under pressure to turn around Disney’s fortunes, after laying off thousands and cutting costs. Although he led a challenge from activist investor Nelson Peltz, shareholders cannot be happy with Disney’s stagnant share price.

Here’s what an Iger change might look like:

• Disney may sell a stake in ESPN, which has suffered from a steep decline 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 oft-rumored buyer for Disney, antitrust concerns aside), Google and Amazon.

• Buyers for ABC and cable channels like FX are less obvious, as 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 can jump in, tempted by the constant cash flow of the businesses and the opportunity to cut margins (as they did with newspapers).

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

But Iger has been pessimistic about traditional television for some time. “Linear TV is heading for a big cliff and it’s going to be pushed back,” he said at the Code Conference last year “I can’t tell you when, but it’s leaving.”

Lina Khan’s unlikely fan club

A rough week for FTC 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 postpone the deal while its challenge is being heard was rejected.

But even as the FTC faces a court battle over one battle, it has started another by opening an investigation into ChatGPT’s creator OpenAI over whether the chat is harming consumers.

The news meant all eyes were on Khan’s appearance before the Republican-led House Judiciary Committee, which was 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 on why the FTC appealed the Microsoft ruling when other jurisdictions, such as the European Union, approved the deal. (She declined to comment.) Khan has also faced accusations and threats. “Actions have consequences, Madam President,” warned Ben Cline, Republican of Virginia, who said the appropriations committee was considering the FTC’s budget requests and allocated less than she sought in response to the agency’s “rank partisanship.” Khan was not offered the opportunity to respond.

But Khan found some unlikely fans. “I want to encourage your work,” Matt Gaetz, the conservative Florida Republican and fellow attorney, told her. He praised removal of data brokers who sell sensitive information. Gaetz added that legal defeats were common when pushing 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 ties to technology 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 companies like Google and Meta.

Buck said he and Khan were both aware “the need to update the antitrust laws” for a new economy, giving Khan the opportunity to say that today’s rules were based on assumptions that are not suitable 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 US court, will extend the deadline for his investigation for six weeks. The companies could reportedly to sell some British cloud gaming to win approval.

The PGA Tour is tossing its no-poaching agreement

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

The provision, which would have covered players on the tour and LIV, was shelved to avoid the wrath of the Justice Department, report The Times’ Alan Blinder and DealBook’s Kevin Draper and Lauren Hirsch.

The non-solicitation clause was seen as a way to prevent an exodus of tour golfers to LIV, who used huge prize money to lure top players to the independence league. (Rory McIlroy, one of LIV Golf’s fiercest opponents, said yesterday that he would rather leave the game than play for the rival competition despite the riches on offer.) The White House has accepted such deals. The language appeared “to be right in the scope that the Justice Department has set for its no-poaching enforcement program,” William E. Kovacic, former FTC chairman, told DealBook.

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

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

THE SPEED OF READING

Agreements

• Exxon Mobil agreed to buy the coal gathering company Denbury for $4.9 billion. (Reuters)

• Adobe’s $20 billion bid for Figma faces deep research by the UK’s antitrust regulator. (The Edge)

• Silicon Valley startups are exploring sales to larger companies as project funding dries up. (FT)

Politics

• 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 wider shift that is also hitting office districts in cities such as New York and Chicago. (NYT)

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

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