Welcome back to What I’m Hearing and greetings from New York, where I’m exposing my L.A. kid to the joys of Broadway theater and frigid temperatures.

Programming note: Thanks to Mediaite for including me in its annual Most Powerful People in Media list, I definitely agree with their No. 1 pick (hint: it’s a company, not a person). I was on CNBC’s Squawk Box this morning talking Paramount-Warner Discovery talks (clip here). And this week on The Town: Lucas Shaw and I revealed the Hollywood Debacles of the Year, and analyst Rich Greenfield begged David Zaslav not to merge WBD with Paramount. Subscribe here and here.

Reminder: I’ll be making my Tom Cruise cake all weekend, so I’m off Christmas Eve and back next Thursday. And, no, thanks for asking, it’s not too late to gift that special someone a Puck membership. We just hired John Ourand from Sports Business Journal to launch a sports vertical. Welcome, John! To subscribe, just click here.

Let’s begin…

• Warners, Paramount, and the allure of mutual desperation: My report two weeks ago on Shari Redstone’s talks with David Ellison’s Skydance and RedBird Capital seems to have sparked a feeding frenzy on Paramount Global and its parent, National Amusements, Inc. One or both of these companies almost certainly will be sold/merged in 2024, but it’s probably not worth getting especially worked up (yet!) about the Warner Bros. Discovery talks, first reported yesterday by Axios. I confirmed that a long meeting did take place between WBD’s David Zaslav and Paramount’s Bob Bakish. But Bakish can put on a little top hat and hawk his assets like a sidewalk salesman to anyone and everyone, the only thing that matters here is whether a deal passes the Shari test.

  Redstone controls nearly 80 percent of Paramount voting stock via NAI, and every indication is that she’s not gonna bless a deal that sends her to Siberia—or at least sends her to Siberia without the billions she believes the company is actually worth. And she believes it’s worth a lot more than the $10 billion market cap and $15 billion in debt. When Zaslav, his C.F.O. Gunnar Wiedenfels, and the bankers at Allen & Co. get under the Paramount hood, as is expected in the coming weeks, let’s see how much they think it’s all worth. Then the task will be for Bakish to sell Shari on this or another deal, all while Shari carries on her own talks for NAI. Shari and Bob can hopefully use all this bluster to lure other bidders, notably Brian Roberts at Comcast, who took a hard look at MGM before it ultimately sold to Amazon in 2021.

  So far, Shari’s been willing to part with pieces of her father’s empire, hence the Simon & Schuster sale and the recent resumption of talks to offload BET to a management-led group including C.E.O. Scott Mills. (Which, predictably, prompted Byron Allen to scream, Remember me? What about selling to me?) But all of Paramount or National Amusements? That will require a great pitch to Shari, despite the worsening financials and the increasing danger of a debt-bomb death spiral. That’s why one Paramount observer I trust surmises that the news leak of the Zaz overture may be Bakish trying to engineer something for Paramount before Shari can sell National Amusements—something that Shari and her adviser Byron Trott can live with, but that also benefits Bakish. Remember, Paramount just changed its compensation structure to reward Bob and his team if there’s a change in control.

• Why merge and why now?: Both Paramount and Warner Discovery stocks are down since the news broke, suggesting the market doesn’t believe there’s much to gain by smashing together two legacy film and TV studios, as well as linear networks HBO, CNN, and TNT with CBS and Nickelodeon, plus the streaming service Max with Paramount+ and Pluto TV. Synergies and cost efficiencies, yes. But it doesn’t solve the underlying problems plaguing the legacy studios: TV advertising likely won’t ever recover, and analysts expect cord-cutting to erase another 25 percent of cable subscribers in the next few years. Consolidation seems to be the only play these C.E.O.s have, or at least the only play they think they have. In addition to Zaslav, I’m told Bakish also sat down with Comcast’s Roberts after a recent media conference, and no wonder. No one wants to be the guy who throws in the towel, says Streaming is hard!, and retreats to the role of studio supplier for someone else’s business—even if that might be the most prudent path for a subscale player like Paramount.

• As for Zaz…: I also believe Zaslav would like the Paramount assets, not because a merger means a potentially bigger paycheck, or even because it makes all that much financial sense, given the more than $40 billion in debt the company still carries and the April horizon to do a deal without major tax implications. (John Malone, his investor and longtime patron, has intimated from the beginning of the WarnerMedia-Discovery transaction that this might be the first of several roll-ups.) Zaz probably doesn’t want to just offload this thing to Comcast, even if regulators allowed it. Maybe he’d run the combined NBCUniversal/WBD, but maybe not. Maybe he’d be forced to take more long walks on the beach with Nick Pileggi in the Hamptons. The guy wants legacy and notoriety, and the ability to go toe-to-toe with Disney and Universal as the last of the legacy Hollywood studios fighting Big Tech. Selling WBD or merging it with Comcast might end that quest; being the aggressor for Paramount and scaling up extends the Zaz dream, as long as his shareholders are on board for the ride.

• Marvel’s Majors headache: The uncomfortable truth about the Jonathan Majors situation: Disney probably preferred a guilty verdict. Not because executives wanted to replace him in the MCU; they didn’t, and the whole thing is a tragedy. But while Marvel would never say this publicly, the verdict made the decision to drop him easy. A “not guilty” would have been way thornier, given the stuff that came out at trial, especially his texts and the video of Majors throwing girlfriend Grace Jabbari into an SUV and her chasing him around New York. Now Marvel can recast and/or retool, which isn’t such a bad thing given the tepid response to recent movies.

• More Majors: For Magazine Dreams, Disney’s other Majors vehicle (Searchlight bought the $8 million-budgeted film out of Sundance), the situation is more complicated. I’m told that no decision has been made on a release, and there’s no urgency. It’s a tough one, especially because the film is so dark and violent, and even though filmmaker Elijah Bynum agreed to make some cuts after Sundance, it’s basically about a guy who can’t control his rage.

  If the movie is shelved, the question would be who’s on the hook. Searchlight has morals clauses for the principals in its distribution deal, so conceivably, Disney could enforce them against Jeffrey Soros’s Los Angeles Media Fund, which financed the movie, to avoid paying the $2 million minimum guarantee it promised. But I doubt Majors’ career is over. After all, he was acquitted on the counts that required a finding of intent to harm. He will likely serve his punishment (or win his appeal), apologize, and return to work, albeit probably not in big-budget studio fare, at least for a while. So Searchlight could just sit on the movie until the noise dies down, or put it on Hulu. Bottom line: Magazine Dreams will likely see the light of day at some point.

• Speaking of Disney: How bleak might the strike-hampered 2024 box office get? Disney, typically the industry leader, sent out a guide to its ’24 theatrical slate (not including Searchlight): The First Omen (April 5, 20th), Kingdom of the Planet of the Apes (May 24, 20th), Inside Out 2 (June 14, Pixar), Untitled Deadpool (July 26, Marvel), Untitled Alien (Aug. 16, 20th), The Amateur (Nov. 8, 20th), and Mufasa: The Lion King (Dec. 20, Disney). That’s it, though titles could be added. One Marvel, one Pixar, one Disney Studios, zero Lucasfilm, three midlevel 20th Century plays, and one Apes sequel. Remember, Disney released six movies that crossed $1 billion worldwide in 2019. It will end 2023 with zero billion-dollar grossers (Avatar: The Way of Water is a 2022 release), and 2024 will need amazing execution to avoid the same fate.

• Year of our Lourd: It’s been a big year for Bryan Lourd, including that $7 billion valuation on CAA when TPG sold its stake. But convincing Amazon to release George Clooney’s latest critical misfire, The Boys in the Boat, on more than 2,000 screens on Christmas Day (with awards ads too!) might be his biggest flex of 2023.

• Box office over/under: Aquaman and the Lost Kingdom leads a bunch of Christmas week cash grabs. The tracking is at just $40 million for the four-day weekend, and I’ll take the under. This thing has smelled fishy for months, and judging by the sad “fan screening” instead of a premiere this week—has that ever happened for a movie that cost more than $200 million?—everyone at Warner Bros. has already moved on.

I. Labor Rising: The evidence was everywhere, but the entertainment C.E.O.s ignored it: Labor in Hollywood—and across the U.S.—is on the move. From digital news shops to VFX workers, from UPS to the UAW, from Amazon and Starbucks to teachers and doctors and hotel workers, everywhere you look, someone is unionizing, and often striking. Polls have shown attitudes toward unions on the upswing, and even highly paid software engineers in Silicon Valley have been organizing and protesting, if not actually unionizing.

Closer to home, the WGA board elections over a year ago featured almost nothing but hardline talk that clearly foreshadowed a strike; the moderate faction of SAG-AFTRA began talking of a strike a year ago (and the union went into negotiations bearing a strike authorization); and the DGA, contra its typical practice, failed to reach an early deal. This was the backdrop against which 2023 unfolded, but the chief executives discarded the tea leaves, as did AMPTP president Carol Lombardini and the company labor V.P.s (or else they went unheard at the highest levels). Hence, corporate miscalculations and an aging labor-relations playbook that brought us dual strikes for the first time in 63 years.

III. The Incredible Shrinking AMPTP: With Shari Redstone’s Paramount Global now in play, the AMPTP may be one member smaller in a year. (In recent years it lost Fox but gained Netflix, Apple, and Amazon, the latter two of which are in filmed entertainment only as a sideline.) That’s bound to further disrupt the dynamics at an organization that seems engineered to say no. Reaching deals with the WGA and SAG-AFTRA took the direct involvement of key C.E.O.s—Disney’s Bob Iger, Netflix’s Ted Sarandos, WBD’s David Zaslav, and NBCU studio group chairman Donna Langley. The questions now are: Will every tough deal require top executive involvement? (Probably.) What is the relevance of the AMPTP? (Diminished.) And are the companies bold enough to reconceptualize their relationship to labor in a way that will reduce strife and strikes? (Don’t count on it.)

IV. The Guilds Won—and So Did Netflix: The studios and streamers try to avoid “rewarding” the guilds for actions the companies dislike, but they utterly failed this time. Whatever the strengths and weaknesses of the WGA and SAG-AFTRA agreements, there’s no disputing that the writers got a somewhat better deal than the DGA as a result of their strike, and the actors’ walkout likewise gained them improvements on the writers’ deal (and on their own past agreements).

Notably, SAG-AFTRA national executive director Duncan Crabtree-Ireland and president Fran Drescher set out to break the strictures of pattern bargaining—the phenomenon whereby studios and streamers seek to force all guilds to accept key provisions of the deal negotiated with the first union in each cycle (in recent years, usually the DGA). They succeeded, gaining higher basic wage increases and better streaming residuals than the DGA and WGA. Although sources close to the guilds insist that each of them focuses on its own needs, the result has been to transform pattern bargaining into stairstep bargaining, where each subsequent union builds, at least implicitly, on the preceding deal. That’s a clear guild victory—although, as usual with strikes, it came at a terrible cost for workers, the industry, and the larger economy. The WGA and SAG-AFTRA campaigns for transparency also helped lead to Netflix’s belated decision to release viewership data (the growth of ad-supported tiers and Netflix’s competitive advantage also influenced this development, of course).

Meanwhile, speaking of Netflix, it was the other winner of the strike year. The work stoppage put the theatrical and scripted linear segments of the industry on ice, allowing Netflix to consolidate its lead in streaming and pull farther ahead of the traditional studios in streaming.

Once again, generative A.I. may threaten numerous jobs, either by direct displacement (editors and production designers, for instance) or by replacing practical production with virtual (reducing the opportunities for grips, carpenters, drivers, and others). Plus, drivers are concerned about a different form of A.I.: self-driving vehicles, which are now beginning to ply the streets of Los Angeles as they have San Francisco, Silicon Valley, and Phoenix. After being idled for much of 2023, would IATSE and Teamsters members actually be willing to plunge the industry into another work stoppage? Time will tell.

Got a question, comment, complaint, or some Christmas cheer? Email me at Matt@puck.news or call/text me at 310-804-3198.