There’s a New Media Giant in Town

Paramount closed today on its $81 billion takeover of Warner Bros. discovery, and we tell you what's next for the new media giant called Skydance. Plus, companies are telegraphing layoffs weeks or even months in advance. "To almost like there's this drip drip drip scenario, so there's this limbo and suspense of people sort of wondering, you know, am I next or should I be looking for another job?" And Germany's former spy chief was arrested on suspicion of espionage. It's Tuesday, October 6th. I'm Sabrina Sidiqi for the Wall Street Journal, filling in for Alex Osula. This is the PM edition of what's news, the top headlines, and business stories that move the world today. David Ellison's Skydance now controls the Paramount and Warner Bros. studios, Paramount Plus and HBO Max, and news operations, CNN, and CBS News. Joe Flint, the Wall Street Journal's media and entertainment reporter, says Ellison outlined his vision for the company today. The deal is closed, and David Ellison wrapped up his town hall remarks at the Warner Bros. Steven J. Ross Theatre on their lot in Urbank. He said that he believes that there is an even larger ambition now, and that this industry needs a company with the scale resources, technology, and creative firepower to go toe-to-toe with the biggest players in the world. Joe says the hard part begins now, as the company integrates the two organizations. There's lots of duplication, there's synergies they've promised Wall Street of $6 billion at least, and synergies is usually code for cuts, so they need to set their goals for their division heads on where everyone needs to be in terms of staffing budgets, all that sort of stuff. For both these companies, they've already been through a lot of this, remember, it's barely a year that Ellison acquired Paramount, and they went through this exercise. And then there's the business decisions that need to be made. How are they going to consolidate these two streaming services, Paramount Plus and HBO Max? And that is what is motivating this deal, to build a world-class streaming service to compete with Netflix, Amazon Prime, Disney Plus, Apple, you name it. Joe says many people in Hollywood, like actors, writers, and producers, still have reservations. They fear what it means for jobs, what it means for opportunities, Paramount did a lot of work to get the support at least of some of the unions of movie theater owners to get this deal through, but to the Hollywood working class, this is a great concern. And David Ellison knows he's got to convince the town and the people who work in this industry that this will be a good thing for them, and that's, you know, that's going to be a hard task. Skydan Stocks started trading today too, and the shares closed down 2.7%. The country's biggest banks are on pace to make more than $90 billion in profits this year. That's according to New York State Comptroller Thomas Denopoli, and that means that the bonus pool for New Yorkers in the industry is expected to get even bigger from last year's record, when the average bonus on Wall Street was close to $250,000. In markets today, the SNP and NASDAQ both closed at record highs. The Dow also gained today, adding half a percent. Enthusiasm about AI is driving Stocks higher, but the lopsided nature of the rally is starting to worry some investors. Over the last month, the SNP's tech and communication sectors are up the most, while seven of the other eight sectors are down. Meanwhile, Treasury yields are taking a breather after a punishing recent sell-off in U.S. government bonds, and international oil slipped slightly to under $101 a barrel. And in economic data, August was another volatile month for the trade deficit. The trade deficit jumped 14% to about $106 billion, it's widest gap in more than a year. The AI data center boom is driving a lot of that since it's causing a lot of chip and computer equipment imports. But for the year, the overall deficit is about 20% smaller. Speaking of the AI boom, Google and Power Company constellation energy have struck a 20-year nuclear energy deal. It includes upgrading 11 nuclear reactors in Illinois, Pennsylvania, and New Jersey, and doing that will add as much power to the grid as building a large new reactor. It's the latest sign of big-text hunger for nuclear power to run its data centers, as Amazon, Meta, and Microsoft have also made nuclear deals in recent months. Constellation stock rose more than 12%. The New York City Council held a hearing this week on potential regulation of AI. At the hearing, lawmakers grilled executives from OpenAI and Thropic, Meta, and Google, like City Council Speaker Julie Menon. No one is questioning that the incredible medical and scientific breakthroughs and innovation that AI has brought to this world. But why should the public accept that bad things should be happening? And why should AI companies get to decide what level of risk society must bear? Wall Street Journal reporter Kevin Dugan covered the hearing and spoke to our colleagues at the Tech News Briefing Podcast about how city laws could affect company operations. New York has a lot of capabilities to make companies do what they want. The city has the ability to create and enforce licenses for different companies, and can use regulation to withhold or threaten those licenses. The city can also regulate how whistleblowers are treated here. What they're trying to do is implement a kind of kill switch in case there is some sort of doomsday scenario that AI brings about. Well, all of these pasts, I don't know, and whether they're effective, I think that's a bigger question. But right now, in the absence of larger federal movement to regulate, New York wants to be a leader for other cities and other states to put in their own regulation. And this would create a kind of nightmare scenario for large companies because you have a lot of patchwork different rules. That was Wall Street Journal reporter Kevin Dugan. To hear more of his report from the hearing and what's on New York City's AI agenda, listen to tomorrow's Tech News Briefing. Coming up, why there's a new layoffs limple period for workers and how they feel about it. After the break, German police have arrested Germany's former spy chief August Henning on suspicion of espionage and attempted treason. It's one of the biggest scandals to hit the agency since it was created back in the 1950s, and it's the first time a former intelligence chief has ever been detained in the country. Here to walk us through the allegations and what they mean for Germany's spy agency is the Wall Street Journal's Germany bureau chief Bertrand Benoit. Bertrand, what is Henning actually been accused of doing? So Henning was running the German foreign intelligence agency. And after that, he created a business consulting firm and he's accused of organizing to acquire a very long period of time, classified information produced by the BND by the agency used to run in order to use this information for his business activities. According to the allegations by the prosecutors, he was mainly gathering the information to compile in what he was producing at his consulting firm, but in one instance, he's alleged to have passed information to an intelligence officer for a foreign government. He was also in regular contact with another intelligence officer working for another government. But it's not known if he passed a classified information to this person. And how big of a black eye is this for German intelligence? This is a big setback. The BND has had a number of leaks over the past. It has acquired a pretty bad reputation in terms of operational security. And the BND now is currently in the middle of a reform that should increase its powers. And the problem here is that it will sound like it's trying to run before it can work. Partners of Germany abroad will be asking whether it should focus instead on securing its own house and plugging all the holes in the leaks that it suffered from. Do you think this has any impact on Germany's relationship with the United States, especially as it pertains to intelligence sharing with U.S. by agencies? So the BND is quite dependent on information provided by friendly countries. The BND has quite limited powers compared to other agencies in other countries. And when something like that happens at such a high level, it really raises doubts among other agencies and in other countries of a way that they can trust that the information they give to the BND is going to be safely kept there, or if it's going to be sold for a profit or passed on to other governments. That was the Wall Street Journal's Bertrand Brannois. Bertrand, thank you so much. Thank you. We should note that a spokesman for the German government declined to comment, and that a lawyer for Henning couldn't be reached. And turning to Asia, India is facing a wave of protests over voting rights. The country's election authority has removed about 130 million names from India's voter roles in a massive clean-up effort. Opposition parties, students and a youth movement called the Cockroach Junta Party say the process is confusing and unfairly targeting young voters and Muslims. They pointed to issues like software, flagging people for having large families. Opposition lawmakers and protesters in Udeley today called out the election commissioner. "The most corrupt man in the country who is a blood-only democracy" and Indian Prime Minister Neurinder Modi's party, the BJP. The government says it's just clearing out dead or fraudulent voters. But the backlash is adding to pressure on Modi, months after another round of massive protests, had forced the resignation of his education minister. And finally, big employers like Nike, Starbucks, Metta and Disney have adopted a new approach to layoffs, announced that cuts are coming, then leave employees waiting, sometimes for months, to find out who's actually affected. Companies say it beats blind-sighting people all at once, but for workers, it can mean weeks of guessing games, quiet panic, and watching the Slack messages for clues. Ray Smith, the Wall Street Journal's reporter covering career and workplace issues, says that what companies are doing is sending a message to their investors. Some of the reasons why they're taking this approach is one, they want to signal to the stock market that they're serious about cutting costs. But another reason is that they're trying to sort of say, yes, we're aware that there are going to be some changes, but we just don't know where they're going to take place or what that's going to look like. Workers that I reached out to for this story were very upset at being told they will be layoffs, and then that's it, not knowing when and who it will affect. I talked with one engineering manager at Metta. They had forecast they were going to cut jobs in April, and then they didn't actually do it until May. And this engineering manager observed colleagues scrambling to try to finish projects in the hopes that they could save their jobs, and he told me that was the worst part of watching this go down. Designed a day after the layoffs, it's almost like there's this dripped, dripped scenario. For instance, with Starbucks, they told employees in January that they would be cutting jobs in March, and then it didn't really specify which roles would be impacted. Only that in store teams would be unaffected, and so there's this limbo and suspense of people sort of wondering, you know, am I next or should I be looking for another job? And that's what's news for this Tuesday afternoon. Today's show was produced by Anthony Bansi with supervising producer Tauly Arbel. I'm Sabrina Sidiqi for The Wall Street Journal. We'll be back with a new show tomorrow morning. Thanks for listening.