Good morning,
Will the antitrust cops block Fox’s sale of most of its assets to Disney? Traditional antitrust analysis would argue this one is more problematic than AT&T’s merger with Time Warner, since Disney and Fox actually compete head to head in some markets—controlling 39% of movie theater releases, for instance. Blocking AT&T-Time Warner while permitting Disney-Fox would be hard to explain (unless you happen to think—shocked!—that politics influences such decisions. Time Warner includes President Trump’s nemesis, CNN, while Fox is run by his favorite mogul, Rupert Murdoch.)
But the real issue here is that the FANG companies—Facebook, Amazon, Netflix, Google—have made a joke of traditional antitrust enforcement, which is based on the notion of discreet marketplaces for different industries. Today’s digital giants, with their zero marginal cost economics, run roughshod over market borders. There’s hardly an industry left that doesn’t see Amazon as a threat. And who can blame Disney and Fox for combining in the face of Netflix’ voracious growth?
Today’s spate of mergers—whether Disney-Fox, AT&T-Time Warner, Aetna-CVS, or even Meredith-Time—serve to highlight the fact that digital economics have destroyed the economy’s equilibrium, and traditional regulators have no idea how to respond. They can choose to block Disney-Fox if they wish, but that won’t do much to solve the underlying problem. We need a new economic paradigm for the digital world.
More news below—and enjoy the weekend.
| Alan Murray | |
| @alansmurray | |
| [email protected] |
Top News
•Elliott Goes After Hess
Paul Singer’s Elliott Management has a new target. It has accumulated a 6.7% stake in Hess Corp., with a view to either removing CEO John B. Hess or getting him to sell all or part of the company. Hess’s stock has decoupled from crude prices this year, falling amid concerns that heavy investment needs will eat into the cash flow of a company that has traditionally also liked to pay out generous dividends (not least to its CEO and largest shareholder). WSJ, subscription required
•Two Jaw-Dropping Disney-Fox Numbers
Walt Disney CEO Bob Iger stands to collect $142 million in stock awards through 2021, under the contract extension he signed as part of the deal with Fox. In a regulatory filing, it said Iger could receive restricted stock units worth up to $27 million at the current share price in four annual instalments. Another eye-popping detail from the deal is the $2.5 billion break fee it will have to pay 21st Century Fox if the deal does get blocked by regulators. Coins2Day
•AirbusDrops the Pilot
Airbus said CEO Tom Enders will leave the company at the end of his contract in 2019, while COO Fabrice Brégier, who heads the group’s commercial division (its largest) will leave in February. The company admitted no causal link, but management has come under increasing pressure in recent months in connection will allegations of corruption in securing both commercial and defense orders. Bregier had long been considered as the likeliest successor to Enders, but the Financial Times reported that the company’s board had been keen to move beyond the automatic rotation of French and German candidates through its top positions. Coins2Day
•While Ryanair Has a Pilot Issue of its Own
Ryanair announced on Friday that it would recognize pilot unions for the first time in its 32-year history in a bid to stop its first pilot strike from taking place later in the day. Pilots in several countries threatened strike action in the busy run-up to Christmas. CEO Michael O’Leary’s refusal to recognize unions was at the heart of the ultra low-cost model he developed to turn a small Irish regional airline into Europe’s largest carrier by passenger numbers. O’Leary said he expects to agree new pay structures in the new year. Coins2Day
Around the Water Cooler
•Horrible & Menacing
It doesn’t seem so long since Swedish ‘fast-fashion’ group Hennes & Mauritz seemed to be the face of retail’s future, but these days it’s looking more like the ghost of retail past every week. The company’s stock fell 13% in Stockholm early Friday after it reported constant-currency sales down 2% in its fiscal fourth quarter, compared to expectations of a 2% increase. It was frank about a sharp drop in footfall at its stores owing to “the ongoing shift in the industry.” The company said it will accelerate store closures and start selling its core budget brand on the Tmall online platform in China as it wrestles with ongoing inventory issues. Coins2Day
•Easy Money, Tired Markets
The European Central Bank and Bank of England left their interest rates unchanged as expected. However, the ECB raised its growth forecast for the Eurozone next year to 2.3%, a full half-percent more than it expected only three months ago. It still wasn’t enough to support a tired-looking stock market, which sold off amid lingering doubts about the passage of the U.S. Tax plan. ECB bond-buying is set to be the biggest prop to global market liquidity next year, as the Fed tightens further. Its President Mario Draghi is determined not to be stampeded into an early tightening by a couple of quarters of above-trend growth. Bloomberg
•Regulatory Roll-Back Goes Beyond the Net
The administration did away with more than just Net Neutrality yesterday. The National Labor Relations Board overturned another Obama-era precedent that had made it easier for fast-food and hotel workers to challenge their employers over labor practices. The ruling means it will no longer be practice to hold companies responsible for labor law violations committed by a franchisee or contractor working for them. NYT
•From Generation Unto Generation
Arthur Ochs Sulzberger Jr. Will step down as publisher of the New York Times at the end of the year, making way for his son, Arthur Gregg Sulzberger. A.G., who became deputy publisher last year, will be the sixth member of the Ochs-Sulzberger clan to run the paper since the family bought it in 1896. The new publisher had been pivotal in gearing the paper more to digital subscriptions, which have blossomed since the 2016 election campaign, for reasons that don’t need to labored here. Coins2Day
Summaries by Geoffrey Smith; [email protected]
@geoffreytsmith
