Morgan Stanley’s legal chief calls for its outside lawyers to return to the office.

Daily Business Briefing

July 20, 2021, 11:41 p.m. ET

July 20, 2021, 11:41 p.m. ET

Disney got a boost in attention to its streaming service from “The Falcon and the Winter Soldier,” a series based on the Marvel Cinematic Universe.
Credit…Julie Vrabelova

The cracks are showing in Netflix’s worldwide dominance.

Netflix is still king of streaming video, but audiences are slowly shifting toward new rivals, namely the Walt Disney Company’s Disney+, according to research from Parrot Analytics.

Netflix’s share of worldwide demand interest — a measure, created by Parrot, of the popularity of shows and a key barometer of how many new subscribers a streaming service is likely to attract — fell below 50 percent for the first time in the second quarter of the year.

The company’s “lack of new hit original programming and the increased competition from other streamers is going to ultimately have a negative impact on subscriber growth and retention,” Parrot said in a news release before Netflix announced its quarterly earnings on Tuesday.

Netflix said it had attracted 1.5 million new subscribers in the second quarter of the year, beating the low bar it had set when it told Wall Street that it anticipated adding just one million.

The company said it expected to add about 3.5 million new subscribers in the third quarter, lower than the approximately 5.5 million that investors were expecting. Netflix shares fell as much as 4 percent in after-hours trading on Tuesday before bouncing back a little.

The company now has 209 million subscribers, but it lost 430,000 in the United States and Canada, its most lucrative region, over the period. It now has 73.9 million subscribers in that market, with about 66 million in the United States.

In a letter to shareholders, Netflix said that “Covid-related production delays in 2020 have led to a lighter first-half-of-2021 slate.” Netflix relies on creating as many different shows and films for as many different audiences as possible, and the pandemic upset that formula, forcing the shutdown of productions around the world.

Traditional media players have started to consolidate, again, potentially setting off another race for talent, studio space and production resources. In May, Discovery announced that it would buy WarnerMedia from AT&T, creating the second-largest media giant, behind Disney and ahead of Netflix. Less than two weeks later, Amazon announced that it would buy Metro-Goldwyn-Mayer, home to the James Bond franchise, for $8.45 billion, a price many analysts considered rich.

In the earnings call after the report, Reed Hastings, Netflix’s co-chief executive, said he didn’t think it made sense for Netflix to jump into the consolidation game. He even offered his own analysis of some of the industry’s biggest deals, including Disney’s acquisition of the bulk of Rupert Murdoch’s 21st Century Fox.

“Certainly Disney buying Fox helps Disney become more of a general entertainment service rather than just a kids and family,” he said. “Time Warner-Discovery — if that goes through — that helps some, but it’s not as significant, I would say, as Disney-Fox.”

Mr. Hastings’s co-chief executive, Ted Sarandos, offered a sharper critique of these megadeals. “When are they one and one equals three? Or one and one equals four?” he asked. “Versus what most of them tend to be, which is one and one equals two.”

Netflix has downplayed competition concerns even as newer entrants have chipped away at its long-held grip. Disney+ more than doubled its share of demand interest in the second quarter compared with a year earlier, and Amazon Prime Video, AppleTV+ and HBO Max are also gaining, according to Parrot.

In its letter to shareholders, Netflix said the industry overall was “still very much in the early days” of the transition from traditional pay television to streaming.

“We are confident that we have a long runway for growth,” it said. “As we improve our service, our goal is to continue to increase our share of screen time in the U.S. and around the world.”

Mr. Hastings said competition would further stoke streaming across all companies.

“As you get new competition in, you get validation — more reasons to get a smart TV or unlimited broadband,” he said. “So for at least the next several years, the growth story of streaming as a whole is very intact.”

But Netflix hasn’t seen any impact from the “secular competition,” Mr. Hastings said, referring to Disney or HBO. “So that gives us comfort,” he added.

Netflix, he said, is really competing against traditional television, and the “shakeout” won’t happen until streaming makes up the majority of viewing. He cited the latest study from Nielsen, which showed that streaming accounts for about 26 percent of television viewing in the United States, with Netflix making up about 6 percent. Disney+ is far behind at 1 percent.

In other words: If Disney+ is hurting us, we haven’t seen it.

The argument that Netflix has been competing with regular television and other streamers for a long time overlooks the fact that new rivals like Disney+ and AppleTV+ are much cheaper than Netflix (and subscription television). And although those services produce far fewer originals than Netflix, they appear to be getting more bang for their buck.

In the second quarter, Disney+ got a big boost of demand interest from “The Falcon and the Winter Soldier,” a series based on the Marvel Cinematic Universe, which has thoroughly dominated the box office in recent years. “Loki,” another Marvel spinoff, also helped, according to Parrot.

Amazon Prime Video got a boost in the period with “Invincible,” an animated superhero series for adults. And AppleTV+ attracted new customers with three originals: “Mosquito Coast,” a drama based on the 1981 novel; “For All Mankind,” a sci-fi series; and “Mythic Quest,” a comedy series that takes place in a game developer studio.

Speaking of, Netflix said this month that it planned to jump into video games. It has hired a gaming executive, Mike Verdu, formerly of Electronic Arts and Facebook, to oversee its development of new games. It’s a potentially significant move for the company, which hasn’t strayed far from its formula of television series and films.

The company called gaming a “new content category” that will be a “multiyear effort” and said it would be included as part of a subscribers’ existing plans at no extra cost. Games will first appear on its mobile app, an environment that already allows for interactivity. The vast majority of Netflix’s customers watch on big-screen televisions.

Gaming isn’t meant to be a stand-alone or a separate element within Netflix. “Think of it as making the core service better,” Mr. Hastings said. “Really, we’re a one-product company with a bunch of supporting elements.”

Morgan Stanley has called most of its bankers back to the office. It wants its outside lawyers to do the same.

Late last week, Eric Grossman, the bank’s chief legal officer, sent a message urging the leading law firms it works with to bring employees back, according to a memo viewed by The New York Times. He expressed “grave concern” about the prospect of long-term remote working, and said in-office work provides better training, helps staff build relationships and provides an edge over competitors who are working from home.

“I feel the need to sound a warning in light of what I have generally observed about the lack of urgency to return lawyers to the office,” he said in the memo. “I firmly believe that the most productive meetings are those in person, and as we are already largely back in the office at Morgan Stanley, it is now clear to me that a hybrid meeting of live participants and Zoom participants is challenging at best.”

The message echoed that of Morgan Stanley’s chief executive, James P. Gorman, who has emphasized the face-to-face nature of finance. Many of the bank’s employees are already back on site, and most others are expected to report back by September. Banking giants like JPMorgan Chase and Goldman Sachs have been quicker to call back their workers, while Wells Fargo said it would allow more flexibility.

At least one recipient of the memo agreed with Mr. Grossman’s sentiments. “It’s a lot easier to be in a courtroom, in a negotiation, in a meeting, when you’re together,” said Richard Rosenbaum, executive chairman of Greenberg Traurig. “That’s where your most important work is done.”

Apple’s headquarters in Cupertino, Calif. The company  told employees that the return-to-office date could shift further depending on the spread of the virus.
Credit…Jim Wilson/The New York Times

Apple pushed back its return-to-office plans by at least a month in response to the recent surge in coronavirus cases, which has been fueled by the spread of the Delta variant.

The company told employees on Monday that they are now expected to return to the office as early as Oct. 1 instead of early September. The company said that the date could shift further depending on the spread of the virus, and that it would give employees at least a month’s notice before they are expected to return, according to an email Apple sent to employees, which was viewed by The New York Times.

“As the situation continues to evolve, we’re committed to the same measured approach that we have taken all along,” the email said.

Some employees, such as those who build hardware, have already returned to Apple’s offices. At the beginning of the pandemic, Apple closed many of its retail stores, but those have since reopened. Apple’s return-to-work policies apply to all of its offices, including those in California, Texas and New York.

Apple declined to comment further. The company had 147,000 full-time employees as of September. Bloomberg earlier reported the changed return-to-office date.

Like many companies, Apple has delayed its employees’ return date several times, but it is one of the first major corporations to respond to the Delta variant spread.

Throughout the pandemic, Silicon Valley has been at the forefront of the trend toward remote work, with tech companies like Twitter and Facebook among the first to order their employees to work from home in early 2020. Many tech companies also eventually decided to make remote work permanent.

But Apple has been more resistant to lose its in-person office culture, which has caused some friction among employees who want to continue working from home. An internal Slack channel called “Remote Work Advocates” has grown to about 6,500 employees from roughly 1,800 in June, according to Cher Scarlett, an Apple security engineer who has helped write letters to management from the group.

In June, about 1,800 workers signed a letter to Tim Cook, Apple’s chief executive, that said forcing employees back into the office would cause some people to leave the company. On Monday, some employees in the Slack group posted a second letter to send to management that proposed more flexible remote-work arrangements. Tech news sites The Verge and Recode previously reported on the letters.

“Basically, everybody wanted to feel heard and to have more transparency and flexibility, like we’re seeing in other companies of Apple’s size,” Ms. Scarlett said.

The filming of "The Ladder" in Alaska. Hollywood’s major unions agreed  on Monday night to a short-term plan to relax some pandemic protocols on production sets.
Credit…Dustin Safranek/Ketchikan Daily News, via Associated Press

Hollywood’s major unions agreed Monday night to a short-term plan that would allow studios to require everyone on a production set to be vaccinated.

The agreement, which will be in effect through the end of September, will also relax some pandemic protocols on production sets, even as the Delta variant climbs and Los Angeles County puts a mask mandate for indoor settings back in place. Studios will be able to decrease the rate of regular coronavirus testing and loosen mask mandates in outdoor settings.

The arrangement was agreed on by the Directors Guild of America, the International Alliance of Theatrical Stage Employees, International Brotherhood of Teamsters, the Screen Actors Guild-American Federation of Television and Radio Artists, along with the studios as represented by the Alliance of Motion Pictures and Television Producers.

The parties said they would continue monitoring Covid-19 developments and “will consider further modifications.”

Joseph Otting, President Trump’s appointee to be the Comptroller of the Currency, said his rewrite to an anti-redlining rule would streamline its requirements and make them easier for banks to follow.
Credit…Andrew Harrer/Bloomberg

One of the Trump administration’s signature changes to banking rules is being rescinded a little more than a year after it was put in place.

The rule was supposed to give banks a road map for adhering to the Community Reinvestment Act, a 40-year-old anti-redlining law that was created to force banks to do business in poor and minority communities that they normally avoid. On Tuesday, the agency that oversees the country’s biggest banks, the Office of the Comptroller of the Currency, announced it would kill the current version of the rule and start fresh on a new one.

In May 2020, President Trump’s appointee overseeing the regulator, Joseph Otting, finalized a rewrite of the rule that he said would streamline its requirements and make them easier for banks to follow.

But Mr. Otting’s changes had little support. Critics said they would weaken the rule and let banks fulfill their duties without helping as many poor people access loans and other services in the banking system. Leaders of the Federal Reserve and the Federal Deposit Insurance Corporation, two other major banking regulators who normally act in concert with the Office of the Comptroller of the Currency, declined to support the plan. Even big banks balked at the changes.

On Tuesday, the office’s acting head, Michael J. Hsu, called last year’s revision “a false start.” Agency officials said they planned to work with other bank regulators at the Fed and the F.D.I.C. to come up with a replacement.

Lael Brainard, a Fed governor who opposed Mr. Otting’s rule, said the Fed was “delighted” to work with the regulator on a new one.

Jesse Van Tol, the chief executive of the National Community Reinvestment Coalition, a nonprofit group that pressures banks to increase their activities in poorer neighborhoods, said he was pleased that the agency was “finally turning the page on this terrible rule.”

A spokesman for the American Bankers Association, the largest of the banking trade groups, had no immediate comment. Richard Hunt, the chief executive of the Consumer Bankers Association, another bank lobbying group, said that any rule the regulators proposed in the future “should be transparent, flexible and consistent across regulators.”

Jeanna Smialek contributed reporting.

United Airlines announced Tuesday that it lost $434 million during the three months that ended in June, but said that it fared better than anticipated during the quarter and that it expected to turn a profit in the second half of the year. The airline reported revenue of $5.5 billion in the quarter, about half of what it collected in the same quarter in 2019.

“Thanks to the professionalism and perseverance of the United employees who have worked so hard to take care of our customers through the pandemic, our airline has reached a meaningful turning point: We’re expecting to be back to making a profit once again,” Scott Kirby, the airline’s chief executive, said in a statement.

United said lucrative corporate and international travel was recovering faster than it had forecast. The airline expects a pretax profit in the third quarter, which would be its first since late 2019. United also projected that capacity in that quarter, which ends in September, would be down about 26 percent, compared with the same quarter two years ago.

The upbeat tone mirrors that of United’s peers. Last week, Delta Air Lines reported a profit of $652 million — lifted by federal stimulus funds — for the three months that ended in June, its first profitable quarter since the pandemic began. American Airlines, which is expected to report earnings on Thursday, previewed its financial results last week, saying it may report a slight profit for the quarter.

The industry has enjoyed a boom in summer travel within the United States, fueled by widespread coronavirus vaccinations in the spring. Airline stocks fell Monday on fears that the Delta variant threatened that recovery, but have since rebounded.

Stocks snapped back on Tuesday, rebounding from Wall Street’s worst day in months in a dramatic swing highlighting a divide among investors over the threat of the Delta variant to global growth.

The quickening spread of the coronavirus and the uncertain path of monetary policy have been a reminder that the economic recovery from the pandemic remains rocky, and introduced a bout of volatility into financial markets this week. The S&P 500’s 1.5 percent jump on Tuesday was its biggest daily gain since March. The index’s 1.6 percent drop on Monday was its sharpest decline since mid-May.

“Markets are clearly reassessing the risks posed by the new variant,” said Hugh Gimber, a strategist at JPMorgan Asset Management in London. “Nothing has changed in the data, the current vaccines still appear to be very effective at preventing severe illness, but the optimism around how smoothly and how quickly the global economy can reopen has faded this week.”

Trading in government bonds was volatile, with the yield on 10-year U.S. Treasury notes falling sharply before recovering to about 1.23 percent. On Monday, the yield had tumbled 10 basis points to 1.19 percent, its lowest point since February.

Stocks are taking their cue from the bond market at the moment, Mr. Gimber said. “Ultimately, a 10-year Treasury yield at 1.2 percent or even lower is not consistent with strength of the global economy today,” he said.

The Stoxx Europe 600, which tumbled 2.3 percent on Monday — its worst day this year — rose 0.5 percent on Tuesday. Oil prices, which had also fallen sharply on Monday, were higher as well.

Tuesday’s rally left some sectors on Wall Street higher than they were before Monday’s sell-off. United Airlines, for example, gained 6.6 percent ahead of its second-quarter financial report on Tuesday. It had fallen 5.4 percent on Monday.

After trading ended, United said it lost $434 million during the three months that ended in June but fared better than anticipated during that quarter and expects to return to profitability in the current quarter.

American Airlines rose 8.4 percent and Norwegian Cruise Lines climbed 8.3 percent after tumbling more than 5 percent the day before, even though rising infections from the Delta variant have prompted many governments to maintain or reintroduce travel restrictions, testing requirements and mask mandates. New cases of coronavirus also continue to overshadow the festivities of the Tokyo Olympics.

Banks also bounced back from a rocky session on Monday. JP Morgan was up 1.7 percent on Tuesday, while Morgan Stanley rose more than 3 percent.

The swings this week show that investors haven’t settled yet on how the resurgence in cases will impact bets on the economy’s reopening. There’s a strong argument to be made for growth to continue despite the rising number of cases, said Priya Misra, the head of strategy for global interest rate markets at TD Securities.

“The high levels of vaccinations in the U.S. will keep hospitalizations low,” Ms. Misra said. “Even if the Delta infections rise and it doesn’t impact mortality as much, the reopening trade can continue.”

Traders in particular will be paying close attention to Britain’s reopening as a test case that could “challenge the thesis that a widely vaccinated population can reopen without restrictions.” said Mr. Gimber of JPMorgan Asset Management.

On Monday, the British government lifted most of its coronavirus restrictions in England but still urged caution as the country reported nearly 40,000 new cases. The same day in the U.S., the State Department and Centers for Disease Control and Prevention told Americans to avoid traveling there. On Tuesday, the British pound fell 0.3 percent against the U.S. dollar, to its lowest level since January.

Jeff Bezos, third from left, with fellow astronauts Oliver Daemen, Mark Bezos and Wally Funk during a press conference following the flight.
Credit…Joe Raedle/Getty Images

From groceries and streaming subscriptions to web servers and Alexa, Amazon has become one of the most powerful economic forces in the world. And after Jeff Bezos returned from his brief flight to space on Tuesday in a rocket built by his private space company, Blue Origin, he made remarks that drew attention to the vast wealth the company had created for him.

“I also want to thank every Amazon employee and every Amazon customer because you guys paid for all of this,” Mr. Bezos said during a news conference after his spaceflight.

Mr. Bezos’ comment prompted swift critical reactions, including from a member of the House of Representatives who serves on the tax-writing Ways and Means Committee.

“Space travel isn’t a tax-free holiday for the wealthy,” said Representative Earl Blumenauer, Democrat of Oregon. “We pay taxes on plane tickets. Billionaires flying into space — producing no scientific value — should do the same, and then some!”

Mr. Blumenauer expressed concerns about the environmental effects of such space tourist flights. He said he had introduced legislation he called the Securing Protections Against Carbon Emissions (SPACE) Tax Act, aiming to make passengers on such flights pay a tax to offset their pollution impact.

He wasn’t alone in connecting Mr. Bezos’ spaceflight with concerns about how Amazon’s business practices have affected his company’s employees as well as small businesses.

“While Jeff Bezos is all over the news for paying to go to space, let’s not forget the reality he has created here on Earth,” Representative Nydia Velazquez, Democrat of New York, said on Twitter. She added the hashtag #WealthTaxNow on Tuesday morning and included a link to an article about how much Amazon’s employees had been paid.

While those congressional Democrats offered criticism, the message from the White House was more welcoming.

“This is a moment of American exceptionalism,” Jen Psaki, the White House press secretary, said when asked about the flight during a Tuesday news conference.

The New Shepard rocket lifting off from its launch pad on Tuesday.
Credit…Joe Raedle/Getty Images

Jeff Bezos, the billionaire founder of Amazon, strapped into a capsule built by his rocket company, Blue Origin, and successfully blasted off into space on Tuesday morning, reaching an altitude of more than 60 miles above West Texas before safely landing.

Last week, Richard Branson earning his astronaut wings after riding a space plane from Virgin Galactic, a company he founded 14 years ago, to an altitude of more than 50 miles above the skies of New Mexico.

Here’s what we know about Mr. Bezos’s trip:

  • New Shepard, the Blue Origin spacecraft, is named after Alan Shepard, the first American in space.

  • The New Shepard crew includes Mr. Bezos’s brother, Mark; Oliver Daemen, an 18-year-old student from the Netherlands; and Mary Wallace Funk, a pilot who in the 1960s was among a group of women who passed the same rigorous criteria that NASA used for selecting astronauts.

  • For the first flight, Blue Origin auctioned off one of the seats with the proceeds going to Mr. Bezos’ space-focused nonprofit, Club for the Future. The winning bid was $28 million.

  • Space start-up founders and investors see Mr. Bezos’s and Mr. Branson’s suborbital flights driving additional interest to the space industry.

Senator Ron Wyden of Oregon said Democrats were proposing changes to the “pass-through” tax deduction because “many Main Street small-business owners are excluded.”
Credit…Sarahbeth Maney/The New York Times

Senate Finance Committee Democrats moved on Tuesday to sharply limit the number of businesses eligible for a generous tax break in the 2017 tax cuts that congressional Republicans passed and that President Donald J. Trump signed into law.

They unveiled a measure that takes aim at “pass through” businesses like law firms, real estate trusts, family farms and other companies that are taxed at the owner’s individual income tax rate. The 2017 law granted those businesses a 20 percent deduction.

Democrats want that deduction limited to traditional small businesses and plan to include their effort in the $3.5 trillion economic bill that President Biden has proposed.

Though it was billed as a small-business break, Democrats on the Finance Committee say 61 percent of the 2017 benefit has gone to the top 1 percent of earners. Under the 2017 measure, a rich business partner at the highest income tax rate, 37 percent, saw a cut of 7.4 percentage points.

“Half the benefit of the pass-through deduction goes to millionaires, and because the benefit is so skewed toward the top, many Main Street small-business owners are excluded,” Senator Ron Wyden of Oregon, the Finance Committee chairman, said in a statement.

Under the revised tax break, complicated categories and calculations to determine which partnerships, limited liability companies and other pass-through businesses qualify would be ditched, opening the deduction potentially to more businesses. But the deduction would be phased out for individuals earning more than $400,000, the income under which Mr. Biden has vowed not to raise taxes.

The committee did not immediately say how much the income cap would save the Treasury, but it could be substantial — without greatly reducing the number of businesses claiming the deduction. By the panel’s estimate, small-business owners with incomes under $200,000 have made up 80 percent of taxpayers who claimed the deduction, but 52.4 percent of the revenue lost to the Treasury went to millionaires and billionaires.

Congress’s Joint Committee on Taxation estimated that tax savings under the existing break for taxpayers earning more than $500,000 would total around $36.9 billion in 2024 alone.

The measure is the first of what will be a slew of measures that would pay for social and environmental spending by raising taxes on the rich and on wealthy corporations. Because those measures will go through a budget process called reconciliation, they can pass the Senate without any Republican support — if all Democrats and their two independent allies stay united.

“It’s going to make the policy more fair and less complex for middle-class business owners, while also raising billions for priorities like child care, education and health care,” Mr. Wyden said.

Credit…Robert Neubecker

The pandemic has been receding as life returns to normal for many Americans. But the government relief programs that helped support Americans over the last year are now fading away.

The federal legislative packages were worth trillions of dollars, creating a temporary safety net that provided help for people dealing with lockdowns, job losses and worse. Many of the most far-reaching protections, including eviction moratoriums and expanded unemployment benefits, are about to expire. Provisions affecting student loans, food stamps and more are scheduled to follow in the coming months.

It’s not all bad: This month, millions of households are receiving the first of six monthly payments that are part of an expanded child tax credit. But if you rely on any of the programs that are going away, this is an anxious time.

Fortunately, there’s still help out there — and The New York Times’s Tara Siegel Bernard and Ron Lieber report on how you can find it.

Their report focuses on seven key areas: eviction protections; unemployment insurance; student loans; health insurance; mortgage forbearance; food assistance; and family and medical leave.

The headquarters of Dentsu, a Japanese advertising company, in Tokyo.
Credit…Eugene Hoshiko/Associated Press

TOKYO — While the Olympics may be celebrated as a showcase of athletic feats and global harmony, they have also become a multibillion-dollar marketing opportunity for the world’s most famous brands.

No company was better positioned to scoop up the immense profits from this bonanza than Dentsu, an advertising goliath hard-wired into nearly every major institution in Japan.

As a gatekeeper to the world’s third-largest economy, the company has become a major figure in international sports. It played a prominent role in Tokyo’s Olympic bid, then was named the Games’ exclusive advertising partner, bringing in a record-shattering $3.6 billion from Japanese sponsors.

But the pandemic has played havoc with the company’s plans, and presented a serious test of its skill at message control.

The advertising campaigns and promotional events that sponsors usually mount in the months before the Olympics have been canceled or pared down. And now, with the Games about to begin, Toyota said that it would not run Olympics-themed television ads in Japan during the event, reflecting its unpopularity in the host nation.

Still, even with its challenges, Dentsu remains an unparalleled force in Japan, an invisible hand behind an Olympics that would not have come to Tokyo without its efforts.

Dentsu was one of the first ad agencies to recognize how international sporting events could raise clients’ profiles abroad and help them break into new markets. Its ties to the Olympics stretch back to 1964, when it handled public relations for the first Tokyo Games. It led the bid for the 1998 Nagano Winter Games, and was the natural choice to spearhead the effort to bring the Olympics back to Tokyo.

“If you’re going to do sports marketing business in Japan, they’re kind of your first and last stop, to be honest. They hold a lot of the cards,” said Terrence Burns, a sports consultant and former International Olympic Committee executive.


CreditCredit…By Jaedoo Lee

Today in the On Tech newsletter, we look at the pros and cons of using Apple’s AirTag tracking device to find lost pets.

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