Striking screenwriters and Hollywood studios have negotiated a tentative deal.Credit…Chris Pizzello/Associated Press
What we learned from the writers strike
One of the longest-running strikes of 2023 is near an end: The Writers Guild of America reached a tentative agreement on Sunday with Hollywood studios on a new contract, 146 days after its more than 11,000 screenwriters walked out of movie and television productions.
The work stoppage isn’t officially over yet, and actors remain on strike. But hints about what the W.G.A. attained suggest that as organized labor enjoys a surge in popularity across a variety of industries, its muscle-flexing is achieving results.
“We can say, with great pride, that this deal is exceptional,” the W.G.A. told its members on Sunday, though it hasn’t yet disclosed details. News reports suggest the deal includes provisions for residual payments from streaming, minimum staffing of shows and limits on the use of artificial intelligence.
Expect more particulars once the W.G.A. informs its membership ahead of a vote that’s expected on Tuesday. Until then, writers are still on strike, though they’re not actively picketing. Late-night talk shows, which don’t rely on striking actors, are likely to resume production first.
The W.G.A. appears to have won more than analysts initially believed possible. Studios suggested early on that they wouldn’t bend on issues like residuals or staffing, citing changes streaming has made to their industry.
But the strike — coupled with the SAG-AFTRA walkout — has crippled Hollywood, with studio owners like Warner Bros. Discovery predicting big hits to their earnings. Analysts have estimated that studios could lose as much as $1.6 billion in global ticket sales because of movie delays. Shares in Warner Bros. and Paramount Global jumped in premarket trading on Monday morning.
The W.G.A. also benefited from strong public support for unions. A Gallup poll last month found that two-thirds of Americans backed organized labor. Writers enjoyed even more support, at 72 percent. (Studios garnered just 19 percent.)
That could inspire other unions in their own negotiations with management. About 54 percent of Americans support the U.A.W. in its battle with big Detroit automakers, according to a recent Morning Consult poll. In a sign of the political stakes, President Biden will head to the U.A.W. picket line in Michigan tomorrow.
So far, the autoworkers’ group is holding strong, expanding its strike against General Motors and the Jeep owner Stellantis. (It has spared Ford from further walkouts, citing greater progress in talks with that company.)
The risk run by striking unions, of course, is that public sentiment could reverse if their walkouts drag on and economic pain mounts. Consider that California’s economy has lost over $5 billion from the Hollywood shutdown, according to Gov. Gavin Newsom, or that a protracted auto strike could potentially push the U.S. into a recession.
HERE’S WHAT’S HAPPENING
A top Nomura banker is said to be barred from leaving mainland China. Charles Wang Zhonghe, the Japanese bank’s chair of investment banking in China, has been hit by an exit ban in connection with an investigation into Bao Fan, one of China’s top tech dealmakers, according to The Financial Times. The apparent restrictions on Wang, who is based in Hong Kong, come as the confidence of Western businesses operating in China has plunged. Bao hasn’t been seen for months.
Poultry giants are under investigation over work done by migrant children. The Labor Department opened the investigation into Tyson Foods and Perdue Farms after The New York Times Magazine reported that contractors forced children as young as 13 to clean slaughterhouses. The investigation hinges on whether corporations can be considered employers in instances like these.
Sanctions on Russia’s oil exports are reportedly falling short. Russia has been able to sell about three-quarters of its oil above the $60-a-barrel cap set by the Group of Seven, according to The Financial Times, lifting revenues as crude prices soar. The Kremlin announced recently that it would significantly increase spending next year, with a big boost to defense.
The A.I. arms race heats up
Amazon has upped its bet on artificial intelligence, saying on Monday that it will invest up to $4 billion in Anthropic, a start-up founded two years ago that is one of a wave of young companies pulling in big money from big tech.
Amazon will initially invest $1.25 billion for a minority stake. The new valuation of Anthropic hasn’t been determined, according to The Wall Street Journal, but under the terms of the deal, Amazon’s investment could increase. Anthropic will also use the tech giant’s cloud computing platform and its A.I. chips to build its models. (That seems to be a shift, after the start-up said it would use Google’s services to do the same in February.)
Big Tech is piling into the sector. The Amazon-Anthropic deal has echoes of Microsoft’s relationship with OpenAI, the generative A.I. company behind ChatGPT, and big funding rounds have proliferated across the sector. Other deals include:
Anthropic raised $450 million in a funding round in May that included backing from Google and Salesforce at a valuation of $4 billion.
OpenAI got $1 billion from Microsoft in 2019, and the Windows maker plowed in another $10 billion in January, at a valuation of $29 billion.
Inflection AI, a year-old start-up, pulled in $1.3 billion from Microsoft and the chipmaker Nvidia in June at a valuation of $4 billion.
Databricks, a data analytics company, raised more than $500 million in a funding round that included Nvidia at a valuation of $43 billion this month.
Cohere, a generative A.I. start-up, raised $270 million from Nvidia and others in June at a valuation of $2 billion.
Hugging Face, a software company, raised $235 million last month at a valuation of $4.5 billion, in a round backed by Google, Amazon, IBM, Nvidia and Qualcomm, the chipmaker.
The relationships are about more than money. Mustafa Suleyman, a co-founder of Inflection AI and Google DeepMind, told DealBook this month that Inflection received early access to Nvidia chips, partly to help test and debug them. “In return for early access, we identify failure models, we stress-test them to the max,” he said.
Amazon is playing catch-up in generative A.I. The partnership with Anthropic was announced just days after the e-commerce behemoth said it would apply the latest tech to Alexa, its voice assistant. And all of this is happening as consumer tech giants race to bring A.I. to the masses.
Anticipating the damage from a government shutdown
With a Saturday deadline looming, it’s a make-or-break week in Washington on budget talks. Republicans are no closer to ending their civil war, making a government shutdown more likely and adding volatility to slumping stock and bond markets.
A round of talks over the weekend failed to move the needle. A group of far-right House Republicans are insisting on about $120 billion in budget cuts and plan to block any stopgap spending measures.
While Speaker Kevin McCarthy is weighing a 45-day extension of government spending, holdouts in his party say that’s a nonstarter. “Continuing resolutions don’t solve the problem,” Representative Tony Gonzales of Texas said on Sunday. “They just kick the can down the road.”
Growth fears persist. The Biden administration called on Republicans to resolve their differences, warning that a shutdown would mean federal employees, including members of the military, wouldn’t get paid and that travelers could face disruptions at airports. Goldman Sachs economists have forecast that a shutdown would cut G.D.P. by about 0.2 percentage points per week.
That potential headwind comes as the economy faces a triple threat of soaring oil prices, widespread labor strikes and the resumption of student-loan payments — all of which could sap consumers’ spending power.
Stocks look vulnerable. Equity analysts at RBC Capital Markets, who examined data going back to the 1970s, calculated that extended shutdowns tend to knock as much as 10 percent off the value of the S&P 500. A lengthy shutdown “would take the index a little north of 4,100,” according to Lori Calvasina, the bank’s head of U.S. equity strategy, implying a roughly 5 percent drop from Friday’s market close.
Investors are getting a dose of gridlock déjà vu. Washington barely avoided a federal default in June, but two months later Fitch downgraded the country’s long-term credit rating, citing its ballooning debt and brinkmanship politics. The downgrade took some market watchers by surprise, and added to the doubts hanging over a bond market that’s been hurt by elevated interest rates.
A sell-off in bonds last week pushed the yield on 10-year Treasury notes to a 16-year high, prompting the billionaire investors Bill Ackman and Bill Gross to warn that the rout could persist as the economy faces a host of uncertainties.
“The presidential pot is simmering, and he is happy to stir it.”
— A former colleague of Glenn Youngkin, the Republican governor of Virginia and a former top executive at the investment giant Carlyle, on speculation that Youngkin could run for president. A number of Republican megadonors have urged him to do so amid dissatisfaction with both President Biden and Donald Trump.
The week ahead
Inflation data, earnings and more corporate A.I. news: Here’s what to watch for this week.
Tuesday: The Conference Board’s latest survey on consumer confidence and the Case-Shiller report, which details housing affordability, are scheduled for release.
Wednesday: Micron Technology and H&M, the fashion retailer, are set to report earnings. Meta Connect, the annual developers conference held by Facebook’s parent, kicks off, with a focus on the company’s plans for A.I. and the metaverse.
Thursday: Nike and CarMax are set to deliver quarterly results, offering more insight into consumer spending.
Friday: The Commerce Department will publish data on personal consumption expenditures. The closely watched inflation measure is expected to show that “core” P.C.E., which excludes food and energy prices, rose 3.9 percent last month on an annual basis — a stark improvement from a year ago, but still well above the Fed’s target. Across the Atlantic, the latest report on consumer prices in the eurozone is scheduled for release.
THE SPEED READ
How Pentwater Capital, a hedge fund that bets on mergers’ outcomes, profited by betting against antitrust regulators’ efforts to block deals. (WSJ)
The European Commission blocked Booking Holdings’ 1.6 billion euro ($1.7 billion) takeover bid for Etraveli Group, an online travel company, saying it would be bad for consumers. (Bloomberg)
“Taxpayers Stuck Paying the Bills for Oligarchs’ Seized Yachts and Mansions” (WSJ)
Senator Bob Menendez, the New Jersey Democrat charged with bribery, now faces at least one primary opponent, with Democratic control of the Senate hanging in the balance. (NYT, Politico)
Best of the rest
The American nuclear energy has a new champion: the current Miss America. (WSJ)
Lego will stop selling toy bricks made from an oil-free formulation, saying it had a higher carbon footprint. (FT)
“Netflix Prepares to Send Its Final Red Envelope” (NYT)
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