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DealBook Newsletter

A New Activist Playbook

Daniel Loeb wants Disney to spend more money on itself, not shareholders.Credit...Steve Marcus/Reuters

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It isn’t often that an activist investor wants a company to spend more money on itself and less on shareholder payouts. But that’s precisely what the hedge fund billionaire Dan Loeb is pushing Walt Disney to do with its Disney+ streaming service.

Mr. Loeb’s Third Point wants Disney to buy more content instead of paying dividends. The hedge fund first built a stake in Disney during the second quarter, believing that streaming could eventually bring the company some $500 billion in revenue. That belief only hardened as Disney’s theme parks remain shuttered or under-attended and release dates of blockbuster movies like “Black Widow” slide because of the pandemic. Yesterday, Mr. Loeb sent a letter to Disney’s C.E.O., Bob Chapek, outlining his plan.

It’s unusual for an activist to forego short-term payouts for long-term investments. Mr. Loeb noted that big spending now would put pressure on Disney’s earnings, and eliminating the dividend would displease some investors. He believes that Disney can build a streaming business that eventually generates more revenue than cable TV and box-office releases, “but only if the company leans into this opportunity and invests more aggressively,” he wrote.

Mr. Loeb’s math: By permanently cutting its dividend — worth about $3 billion a year — the company could more than double its Disney+ content budget of about $1 billion a year. Combined with raising the service’s monthly fee, currently $6 a month, and reducing so-called churn, or subscriber defections, the hedge fund thinks that the “lifetime value” of a Disney+ customer could rise to $500, from $100 today. (Third Point says the market values Netflix customers at about $1,200 apiece.)

• Disney already suspended its dividend payout in June and is expected by many analysts to halt its next one as well.

Would that be enough to compete with Netflix? The streaming king’s content spending this year alone is expected to surpass $17 billion, according to BMO Capital, and could grow to more than $26 billion by 2028. For comparison, AT&T’s WarnerMedia plans to spend up to $2 billion on content for HBO Max, while Comcast’s NBCUniversal has allocated $2 billion over two years for Peacock.

The episode makes us wonder what Nelson Peltz’s Trian has in mind for Comcast. To date, Trian hasn’t said publicly what it wants from the cable and entertainment giant after taking a stake. What if, instead of calling for asset sales, as many analysts expect, the activist firm takes a page from Mr. Loeb’s book?

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Today’s DealBook Briefing was written by Andrew Ross Sorkin and Lauren Hirsch in New York, Ephrat Livni in Washington and Michael J. de la Merced and Jason Karaian in London.

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“Boring” only in comparison to the first presidential debate, perhaps.Credit...Robyn Beck/Agence France-Presse — Getty Images

What you need to know about the vice-presidential debate. Vice President Mike Pence and Senator Kamala Harris faced off last night — from a distance, through Plexiglass — over health care, taxes, climate change and more. Here are The Times’s six big takeaways from the debate, which The Washington Post’s Alyssa Rosenberg called “boring” — and all the better for it.

JPMorgan Chase announces a $30 billion racial justice plan. The nation’s biggest bank said it would lend billions to Black and Latino home buyers and small-business owners over the next five years. “We can do more and do better to break down systems that have propagated racism and widespread economic inequality,” Jamie Dimon, the bank’s chief, said.

Regeneron asks for emergency approval of its coronavirus treatment. The company’s antibody cocktail was used to treat President Trump, who praised it in a video that sounded almost like an infomercial. (Its effectiveness remains unproven.) Regeneron says it has enough doses for 50,000 people.

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Facebook plans to widen a ban on political ads. The tech giant will suspend all political and issue-based advertising — not just new ads, as it announced before — after polls close on Nov. 3, and notify all users that no candidate has won until news outlets declare a winner. Critics say the plan still doesn’t go far enough.

Davos won’t be in Davos. The Swiss ski resort has become synonymous with the World Economic Forum. But the next annual gathering of the business and political elite will be moved to lower-altitude Lucerne; it will also be in May, delayed from January, and is expected to be far smaller than in years past. The theme is “The Great Reset.”

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The airline industry’s fate is up in the air.Credit...Joshua Roberts/Reuters

In a bitter election season, Democrats and Republicans have found common ground on at least one thing: saving an industry that many Americans love to hate. As stimulus talks stall, airlines are emerging as the sector most likely to get fresh aid before the election. House Speaker Nancy Pelosi spoke with Treasury Secretary Steven Mnuchin twice yesterday about a stand-alone airline aid bill, and they agreed to talk again today.

What gives? Although fliers love to gripe about them, airlines employ tens of thousands and are critical to U.S. infrastructure. They also have hubs across both blue and red states; they help shuttle lawmakers to and from Washington; and the industry’s dominant players allow their unions and lobbyists to flex their muscles with concentrated might.

Here a few of the D.C. power players (and strange bedfellows) pushing for airline aid:

President Trump: “The House & Senate should IMMEDIATELY Approve 25 Billion Dollars for Airline Payroll Support,” the president tweeted just hours after he declared an end to talks on a more comprehensive stimulus.

Speaker Nancy Pelosi: “Tens of thousands of airline workers stand on the brink of being fired, losing their certification requirements and seeing their livelihoods and financial security ripped away,” Ms. Pelosi warned recently, after a Democrat-sponsored bill offering $25 billion in aid for the industry failed to advance in the House last week.

Senator Roger Wicker, Republican of Mississippi: “Tens of thousands of airline workers have been involuntarily furloughed and some communities have lost air service because Congress did not fix this problem before Oct. 1,” Mr. Wicker said in a statement to DealBook. He and Susan Collins of Maine proposed a $25 billion bill in the Senate similar to one put forward in the House, though it repurposes some funds from the CARES Act. “I am working with my colleagues to find a path forward. A strong air transportation system is critical to our economy and recovery,” he said.

The White House chief of staff, Mark Meadows: “I never thought I’d say $25 billion was a small number, but compared to $1.5 trillion, it’s a rather small amount of additional assistance that could potentially keep 30,000 to 50,000 workers on the payroll,” Mr. Meadows said last month, after talks with airline executives.

Google and Oracle squared off in a Supreme Court copyright fight yesterday that has tech types divided on the details but agreed about the outcome: whichever way the ruling goes, it will have grave consequences for the software industry. That theme echoed throughout the phone hearing.

The fight is over elements of computer code that may or may not be copyrightable. Sun Microsystems, since acquired by Oracle, developed interfaces in the Java programming language. Google, hoping to encourage Java developers to create apps, used these for its Android mobile platform. Oracle is demanding $9 billion for copyright violations, saying Google should have licensed the interface code or come up with its own.

• If the justices side with Google, “all computer code is at risk of losing protection,” said Justice Samuel Alito.

Google says the interfaces were fair game because there was no other way. Google says that the interfaces are purely functional — not creative — and that it had to replicate them. Donning the mantle of liberator, the company argued that Oracle restricted economic opportunity by controlling code essential to a wide range of Java developers.

• “We’re told that if we agree with Oracle, we will ruin our tech industry in the United States,” said Chief Justice John Roberts.

It’s all about interoperability. Many on the bench accused Google of circular thinking — if Oracle’s interfaces are so critical, that might make them highly valuable intellectual property. But the justices also pushed back on Oracle’s claim that a win for Google would stunt tech development, asking what makes its expressions unique. There are standardized organization methods, like the layout of a QWERTY keyboard, that all manufacturers rely on and aren’t copyrighted. And continually reinventing the wheel isn’t good for companies or consumers.

What, if anything, makes computer code unique? The hearing ran 90 minutes instead of the scheduled 60, in part because copyrighting code is a more complicated business than it is with books or songs. Trying to understand the distinctions between this and other copyrightable forms, the justices asked if it’s OK to, say, “recreate” essential elements of court filings, or copy safecracking secrets? What about cribbing a winning football team’s playbook, an exceptionally elegant math proof, or the layout of a restaurant’s menu?

• It’s a technically complex and potentially consequential case: If the extended hearing was any indication, an opinion won’t arrive quickly.

American officials are considering restrictions on two huge Chinese fintech businesses — the Alibaba-affiliated Ant Group and Tencent’s payments arm, WeChat Pay — over national security concerns, according to Bloomberg.

The administration is worried that Chinese companies could dominate global digital payments, giving Beijing access to the financial data of hundreds of millions of people, Bloomberg reports. The discussions follow efforts by the White House to ban TikTok and WeChat in the U.S. over national security concerns. (We’ve previously reported on increased U.S. scrutiny of Tencent.)

It’s not clear what the U.S. government would do. Possible moves reportedly range from executive orders banning the services to putting Ant and Tencent on the Treasury Department’s specially designated national list, which would make it all but impossible for U.S. companies to work with them. Any actions would be likely to face legal challenges, as they have for TikTok and others.

Any action would invite retaliation. China is protective of its tech giants, and Alibaba and Tencent are two of the biggest success stories, with a combined market cap of around $1.5 trillion.

• There’s already concern that American action might hurt Ant’s forthcoming I.P.O. in Hong Kong, which is expected to be one of the largest ever. U.S. banks, including Morgan Stanley, JPMorgan Chase and Citigroup, are underwriters, while the U.S. investment firms Silver Lake, Warburg Pincus and Carlyle Group are already backers.

Deals

• Regulators fined Citigroup $400 million over “unsafe and unsound banking practices,” after it mistakenly wired $900 million to lenders of Revlon. (NYT)

• Ruby Tuesday, the fast-casual restaurant chain, filed for bankruptcy protection. (Bloomberg)

Politics and policy

• A federal appeals panel ruled that Manhattan’s district attorney, Cyrus Vance Jr., can enforce a subpoena seeking President Trump’s personal and corporate tax returns. (NYT)

Tech

• Etsy will drop all merchandise related to the QAnon conspiracy theory. (Business Insider)

• Triller, an American rival to TikTok, is trying to poach influencers with cash, cars and more. (NYT)

Best of the rest

• The Vatican reportedly invested donations meant for the poor in financial derivatives tied to the now-bankrupt car rental company Hertz. (FT)

• “Why Conspiracy Theories Are So Addictive Right Now.” (NYT)

• A profile of Matt Levine, the Bloomberg Opinion columnist who explains high finance in surprisingly writerly fashion (with lots of footnotes). (NYT)

We’d love your feedback. Please email thoughts and suggestions to dealbook@nytimes.com.

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