The Disney World Edition

Summary

Slate Money – The Disney World Edition

Date: August 12, 2017
Host: Felix Salmon (Fusion)
Co-hosts: Anna Shymansky, Jordan Weissman

Overview

This week’s Slate Money episode focuses on business and finance news with a particular emphasis on Disney—covering Disney's legal settlement with BPI (“pink slime” case), the company's move to launch its own streaming service (and pull content from Netflix), and broader media industry implications. The episode also explores trends in modern office workspaces, with Apple’s new headquarters as a focal point, and closes with the weekly “numbers round,” tackling global financial curiosities.

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Key Discussion Points & Insights

1. Disney’s $177M “Pink Slime” Legal Settlement

[02:05 – 17:54]

Background

• Disney and its subsidiary ABC settled a lawsuit with Beef Products Inc. (BPI) for at least $177 million after ABC aired reports about “pink slime” (lean finely textured beef).
• The ABC reports, while factually accurate, repeatedly used the term “pink slime,” causing public outcry and business losses for BPI.

Discussion Highlights

• Nature of the Product:

  • BPI’s product, a processed beef trimming treated with ammonia to kill bacteria, had been commonly used in ground beef but was not labeled as distinct in the marketplace.
  • “[It's] beef trimmings. It goes through a process…to remove the fat…then they figured out how to kill all the microbes by throwing ammonia all over.” – Anna Shymansky [04:53]

• Legal & Ethical Debate:

  • BPI’s lawsuit claimed that the ABC coverage caused major financial damage (seeking $5.4 billion).
  • Settlement occurred in North Dakota (BPI’s turf), where the media is less favored, possibly influencing Disney’s risk assessment.
  • ABC stands by the original story and never issued a correction, raising questions about why they settled.
  • “Truth really ought to be an absolute defense in these kind of cases…You put the true information out to the public, the public reacts…and then, you know, three cheers for journalism.” – Felix Salmon [07:25]
  • “To me, their decision to bow out of a case for a story they still stand by puts a huge target on the backs of basically all media.” – Anna Shymansky [08:45]

• Media Implications:

  • Large media corporations settling, even when their journalism is accurate, may set a dangerous precedent, encouraging lawsuit threats and chilling reporting.
  • The panel is united (albeit with misgivings about the journalistic tone) in criticizing Disney for not defending ABC’s reporting more robustly.
  • “Disney is not a news organization. It’s a large multinational entertainment conglomerate and doesn’t really care about journalism.” – Felix Salmon [15:46]

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2. Disney Pulls Content from Netflix to Create Its Own Streaming Service

[17:54 – 26:35]

Context & Business Strategy

• Disney announced the withdrawal of its properties (Disney, Marvel, Star Wars, ESPN, etc.) from Netflix to launch a proprietary streaming platform.
• This is seen as a move toward greater fragmentation in the streaming ecosystem, challenging Netflix’s previous content aggregation model.

Discussion Highlights

• Impact on Consumers:

  • Potential for “a la carte” selection – subscribers may pay for many different services, impacting the anticipated savings from cord-cutting.
  • “This is the beginning of not being able to save any money by cutting [the cable]…” – Anna Shymansky [19:39]
  • Felix argues that paying for what you watch is consumer utopia, versus cable bundles that include unwanted content.

• Netflix’s Business Model Under Threat:

  • Netflix expected this shift; hence, their push toward original content production (essentially trying to become HBO – or even Disney).
  • Building original content is expensive and fueling Netflix’s growing debt load.
  • “Making that type of original content is quite expensive. If you look at Netflix’s last earnings, they also are eating up their cash.” – Jordan Weissman [23:46]

• First Mover Advantage & Future Outlook:

  • Netflix’s early dominance may help it weather increased competition, but its sustainability as a stand-alone entity is debated.
  • “The idea that this is a sustainable business is now something which is believed…by many, many other companies as well.” – Felix Salmon [25:46]

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3. Open-Plan Offices and Apple’s New HQ

[27:13 – 35:29]

The Debate on Workplace Design

• Apple’s $5 billion new headquarters uses open-plan office design, which some employees reportedly dislike.
• Office layouts are discussed as both democratizing and potentially detrimental to productivity and morale.

Highlights & Opinions

• Open plans are said to increase camaraderie and information flow but can reduce privacy and concentration.
• “I've only known the world of cubicles and open floor plans…is it really [worse]? Is it really that horrific?” – Anna Shymansky [29:08]
• Examples from media and trading floors are discussed as both functional and problematic depending on worker needs.
• Employees try to create “bubbles of privacy”—e.g., using headphones, reducing screen sizes to maintain some discretion.
• “The headphone has become like the universal do not disturb sign.” – Felix Salmon [34:36]

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Notable Quotes & Memorable Moments

• On Journalism and Legal Settlements:

  • “You cannot say that every single piece of journalism needs to be found particularly responsible by a jury in North Dakota. Otherwise you should lose $177 million. That is not how freedom of speech and the Constitution works.” – Felix Salmon [12:08]
  • “If you are a company which commits journalism…and you have the size and the resources that Disney has, then you should totally defend that journalism rather than rolling over and settling cases.” – Felix Salmon [10:25]

• On Office Culture:

  • “It really does create a sense of camaraderie and you always have rooms you can go to…but it's also great for information flow. I actually wouldn't want to go back [to offices].” – Jordan Weissman [29:19]

• On Streaming Fragmentation:

  • “Now that streaming technology has improved…a lot of these content producers are going to say, ‘Why am I giving this to Netflix? Why don’t I just have my own service?’” – Jordan Weissman [20:01]

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Timestamps for Key Segments

| Segment | Start | End | |--------------------------------------------------|-----------|----------| | Disney/BPI (“Pink Slime”) Lawsuit | 02:05 | 17:54 | | Disney’s New Streaming Service, Future of Netflix| 17:54 | 26:35 | | Open Office Plans: Apple’s Headquarters, Trends | 27:13 | 35:29 | | Numbers Round (market cap, VIX, LIBOR, etc.) | 36:30 | 46:10 |

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“Numbers Round” Highlights

[36:30 – 46:10]

• $775 billion: The ostensible market cap of a Venezuelan bank due to artificial currency rates (Felix).
• 42: The VIX value during the 2011 debt ceiling crisis (Anna).
• $350 trillion: The notional value of derivatives tied to LIBOR, which is being phased out (Jordan).

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Tone and Style

The episode is spirited, conversational, and sometimes irreverent—marked by deep dives, disagreements, and industry-savvy perspectives. The panel isn’t afraid to critique media giants or debate the economic and cultural implications of new business models and office trends.

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Recommended For:
Anyone interested in the business of media, evolving workplace culture, and major legal developments impacting journalism.

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Listen to the episode for more:

• Spirited debate on the role of megacorporations in upholding (or undermining) journalistic freedoms
• The Netflix-Disney rift and the future of streaming consumption
• Whether open-plan offices are truly the workplaces of the future—according to both millennials and older generations

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Transcript

[Anna Shymansky]

The following podcast contains explicit language.

[Felix Salmon]

Hello, and welcome to the Disney World edition of Slate Money, your guide to the business and finance news of the week. I'm Felix Salmon of Fusion. Anna Shymansky.

[Jordan Weissman]

Hello.

[Felix Salmon]

Jordan Weissman of Slate is here.

[Anna Shymansky]

Yep.

[Felix Salmon]

Hello. And I wanted to do this thing where I was like, welcome to the business and finance news of 10 years ago. Because right now is one of those weeks where everyone. It's like it's 10 years since the beginning of the financial crisis, but there have been many beginnings of the financial crisis. And I feel like maybe BNP Paribas subprime Fund Freezing Redemptions is not the only or even main beginning of the financial crisis. So let us know on slate [e-mail] Number one, when do you think the financial crisis really happened? Like, when did it really kick into gear? When was the big day? And number two, is this something we should even be talking about 10 years later?

[Jordan Weissman]

Can I just say that September 15, the day Lehman Brothers fell, I had been on vacation for a week and. And I came back, I opened the door to the office and one of the guys I work with was on the floor throwing papers up in the air and was like, welcome back. That's true story.

[Anna Shymansky]

That's amazing.

[Felix Salmon]

I was. I was in Las Vegas at a blogging convention with Jim Ledbetter, who just launched this website for Slate called the Big Money. And we both kind of looked at each other and said, we should be anywhere except for in Vegas. Right. But, yes, we are not going to talk about the financial crisis this week. We will probably talk about it at some point in 2018 or possibly 2017, depending on when would make sense. We are going to talk about lots of Disney.

[Jordan Weissman]

Yes.

[Felix Salmon]

Because, yeah, there was a lawsuit. Disney settled. And there is. They have pulled their stuff from Netflix. And I am going to tell you a secret about. It's not very. It's not a very big secret about Disney hq, where I have been, because I briefly kind of sort of not really worked for Disney. But, yeah, I feel like the place to begin is $177 million.

[Anna Shymansky]

Yes.

[Felix Salmon]

Which is. Anna, what is $177 million we're gonna start with? It's not even a numbers round.

[Jordan Weissman]

It's just a number that appears to be the amount that Disney had to pay to settle the lawsuit with bpi.

[Anna Shymansky]

They paid.

[Felix Salmon]

Wait, so that's the amount that it cost Disney? We'll come to the total amount of the lawsuit in a minute. But what or who is bpi?

[Jordan Weissman]

It's Beef Products Inc.

[Anna Shymansky]

Yes.

[Felix Salmon]

Beef Products, Inc. And bpi. Beef Products, Inc. Does basically exactly what it says on the tin, and they make beef products. Beef products. Or what did they call it? Lean textured beef.

[Jordan Weissman]

Finely textured beef protein. Finally texted, which I had to write down because I couldn't remember.

[Felix Salmon]

AKA pink slime. Pink slime. And people have been writing about pink slime for a while, and abc, which is a television network, which is a subsidiary of Disney, did a whole story about this pink slime on the television series of stories.

[Anna Shymansky]

Yeah, they kind of went on a crusade about it and maybe went a little over the top.

[Felix Salmon]

And the bpi. And these stories were indubitably damaging to bpi. They were also indubitably factually correct. The stories are still up on the website. There has been no corrections, and no one, as far as I can tell, has been able to point to any statements of fact in these stories which have not stood up.

[Anna Shymansky]

Yeah, I mean, you know, I'm starting to vacillate on that a little bit. So the issue here is, again, so there's. We should actually explain what this product is. Right. Because I don't think everyone's been on, like, not everyone's been hanging on to every detail of this case, but. So it's basically beef trimmings. It is real meat. It's kind of the stuff leftovers from a cow.

[Felix Salmon]

Yeah. I wouldn't quite go so far as to call it real meat.

[Anna Shymansky]

I mean, it's meat. I mean, it's beef trimming.

[Felix Salmon]

Yeah, it's. It's ammoniated beef trimming.

[Anna Shymansky]

Yeah.

[Felix Salmon]

Which would.

[Jordan Weissman]

Which means they won't have bacteria.

[Anna Shymansky]

You know how much stuff in our. In our meat, like in our meat system that gets treated with ammonia? Like, that is pretty much everything. Yeah, I mean, chickens, like, all sorts of things, or I think chickens, maybe chlorine or some shit. But anyway, like, I mean, it is good. It is beef trimmings. And it goes through a process where they essentially throw it around a centrifuge. Thank you. A centrifuge. I had a moment there. They put in a centrifuge to remove the fat to make it leaner, and that's where you get the lean beef product, whatever. And so this. There, There. This was an. Okay. And then they figured out how to clean it, how to kill off all the microbes by throwing ammonia all over ammoniated gas. But it's to get rid of the E. Coli so you don't die from your hamburger. And so.

[Felix Salmon]

And then they put it into hamburgers.

[Anna Shymansky]

Yeah. So, like, a lot of ground beef that you were buying in a grocery store had this product in it that was, you know, lean, finely textured beef product. And so most people didn't know that because it wasn't labeled. And there was this one very angry USDA scientist who decided this stuff was not meat and it did not belong in ground beef. And he wrote a memo calling it pink slime so that it came from an actual USDA scientist with an axe to grind who really. He just had philosophical oppositions to this stuff. And ABC really took that and ran with it and used the phrase pink slime apparently 137 times. And then it created this, you know, it created sort of a consumers movement to get this stuff out of hamburgers and out of school lunches.

[Felix Salmon]

And the effect on BPI was certainly negative. Like, BPI wound up selling a lot less pink slime because people didn't want pink slime in their.

[Jordan Weissman]

Three of their plants closed. Like, 700 people lost their jobs. And also, it's important to point out there is not actually anything wrong with this product in the sense that it doesn't hurt you in any way.

[Felix Salmon]

Right. But then again, there was nothing in the ABC reports which said that it.

[Jordan Weissman]

Did, except to keep calling it pink slime over and over.

[Anna Shymansky]

This is the thing. Exactly. They called it slime has a meaning.

[Jordan Weissman]

Yeah. To say that people wouldn't assume your product is disgusting when you call it slime over and over and over again is ridiculous.

[Felix Salmon]

No, it is disgusting. It's just not unsafe. And they didn't say it was unsafe. They said it was pink slime, which is a thing that it was referred to as. And the upshot of all of this is that BPI loses a bunch of money and then sues ABC and Disney, saying, you put out these reports and we lost money. Now, for my. Like, for me, I would say, well, that is how journalism works. You know, you. You surface true information, you put the true information out to the public, the public reacts to the true information, the world changes according to the public reaction, and then, you know, three cheers for journalism. The bpi, on the other hand, is basically saying, you can't do journalism if it causes us any damage. And we want $5.4 billion, please.

[Anna Shymansky]

Yes. And they. So they. Well, okay. And so here is why. Like I say, I'm a little bit torn about this, because what they did is they went and sued in North Dakota because they're based there, 20 miles from where their plants were. And North Dakota's Trump country among Other things which we, you know, Trump wasn't an issue when they first sued, but they, you know, this is a part of the world or a part of the country. It's not particularly friendly to the media. They were very much on their home turf and they went to trial with it. And midway through the trial, I guess ABC saw the writing on the wall and decided it's time to settle for, you know, $177 million. At least that's what they're paying. And then probably their insurers are paying more, it appears. And so I'm a little frustrated because on the one hand, this is apparently a story that ABC still stands by. They have not taken it down. They have not taken it down, they have not corrected it, they've not done anything to it.

[Felix Salmon]

There is nothing wrong with the story.

[Anna Shymansky]

And yet they have decided to settle for $177 million again.

[Felix Salmon]

Then let's stop saying $177 million. They have settled for substantially more.

[Anna Shymansky]

At least, at least $177 million and probably more or definitely more than that. We just don't know exactly how much more. And so to me, their decision to, to bow out of a case for a story they still stand by puts a huge target on the backs of basically all media. I really hate the way ABC has handled this. I don't know if they, you know, it's hard. Again, I feel like their reporting was over the top. And using the phrase pink slime over and over again does. Yeah, I think to some extent, yeah, it kind of created a false impression that this wasn't beef. Like that's kind of fundamental.

[Jordan Weissman]

And they had someone in one of the episodes say, yeah, most people wouldn't consider this meat.

[Anna Shymansky]

Yes, exactly.

[Felix Salmon]

But me too, I'm part of most people.

[Anna Shymansky]

I don't know if, I don't know, maybe, but like it's still, they stood by it and then they settled the case for a ton of money. And so that sends a message to a lot. That sends a message to every would be litigant, every angry business that even that a deep pocketed entertainment company, even if it is a viable target for a lawsuit, can be intimidated, can be shook down. And even if they wrote a story that they think is true and so that is disturbing to me, that part of it.

[Felix Salmon]

And yeah, so number one, truth really ought to be an absolute defense in these kind of cases. Number two, as it should have been an absolute defense in the case which brought down Gorka Media Group, you know, when Hulk Hogan sued them for Saying something true about him. And then it basically destroyed the whole company and destroyed the whole company for some much lower than $177 million.

[Anna Shymansky]

Well, it wasn't a, that wasn't a defamation, so we can argue that was.

[Felix Salmon]

An invasion of privacy case. But the point was, in neither case was there any dispute over the facts of the matter. And if the facts are true, you should be able to report them. But much, much more importantly than that is that if you are a company which commits journalism, you should. And especially if you're a company which commits journalism and you have the size and the liquidity and the resources that Disney has, then you should totally defend that journalism rather than rolling over and settling cases. There was much talk before this case went to trial of it being appealed all the way up to the Supreme Court. There was a huge number of people who expected that the sort of anti media North Dakota jury would find against Disney and that Disney would appeal and then they might win on appeal and then it would get appealed by bpi. And there was, this was just the first step in a long series of appeals and cases and stuff. And so this idea that Disney settled because they suddenly thought that the jury was going to find against them, just. That doesn't ring true to me. That was never the idea that like the jury verdict was going to be the end of it.

[Jordan Weissman]

And also, perhaps in this instance they didn't have a great case. Like, I don't disagree with you that I do think this is disturbing in terms of what it could mean moving forward for journalism. I completely agree with that. Especially in this environment. Completely agree with that. Having said that, I don't think this story by ABC was particularly responsible journalism.

[Felix Salmon]

But that is not the bar. Okay? You cannot say that every single piece of journalism needs to be found particularly responsible by a jury in North Dakota. Otherwise you should lose $177 million. That is not how freedom of speech and the Constitution works. We have the right to say things even if they're not responsible.

[Anna Shymansky]

Well, actually at some point there is reckless disregard for the truth. Like that is. That is the standard.

[Felix Salmon]

That was not argued.

[Anna Shymansky]

Well, no, no one was arguing. No, they were arguing.

[Jordan Weissman]

They were arguing that they were.

[Anna Shymansky]

Yeah.

[Jordan Weissman]

And again, I don't, I don't fundamentally disagree, but I also do think this case, like if you look at the details of the reporting, for them to argue that they, that the ABC story didn't suggest that this was an unsafe product, that this was a product that no one should use, that is exactly what the, what it did, and it caused irreparable harm. And there wasn't anything unsafe about the product. I really. They didn't come out and explicitly say this product is unsafe, but when everything in the context of the show is to suggest that, that's. That's a little tough.

[Anna Shymansky]

Yeah.

[Felix Salmon]

I mean, number one, there was clearly not reckless disregard for the truth. This entire series was lawyered up to the eyeballs before it came out. There was nothing in there which anyone claimed to be untrue. The one thing which ABC clearly had was huge respect for the truth. And they wanted to make sure and nail down every single assertion that they made.

[Anna Shymansky]

Except they kept calling it slime. Why did.

[Jordan Weissman]

If really all they cared about was, was telling the public that this product is in their meat. Why didn't they just say finely textured beef protein, a like, ammoniated beef product is in your meat? Because the reason they didn't say that is because obviously no one's going to listen to that story. We all know that people will listen to a story that says pink slime.

[Anna Shymansky]

Yeah, I just. I.

[Felix Salmon]

So what's wrong with that? Why not make the story that people want to listen to if the story that people want to listen to is true?

[Anna Shymansky]

Well, because again, and this actually is part of the lawsuit is they're like. You describe something as slime that literally, the textbook definition is like a liquid. Like, like, when you say slime, you're imagining something like, that's sort of slimy. Ish. I mean, it's finely. It's like what you get if you put a fine ground sausage. It's probably.

[Jordan Weissman]

If you look at any type of processed meat, it's kind of gross.

[Anna Shymansky]

Yeah. I mean, it just like, to me, I feel like I'm angry.

[Felix Salmon]

The general public has a right to know that a lot of processed meat is kind of gross. This is a cheap.

[Jordan Weissman]

Do people not know that? Do people think that the meat that's in a lot of, like, these products is fantastic and doesn't include things?

[Felix Salmon]

I think a lot. I think Americans in general are good at not thinking about that kind of thing. And then when you force them to look at it, you're like. They're like, ooh, that's kind of gross. And that's good. We're learning things.

[Jordan Weissman]

But it looks gross. It wasn't. I didn't actually have any negative qualities in terms of safety.

[Felix Salmon]

Wait, but no one said it did.

[Anna Shymansky]

Felix, I'm trying to. I'm trying to figure out who you're mad at. Exactly.

[Felix Salmon]

I'm mad at Disney for settling the case.

[Anna Shymansky]

Yes, I'm mad at. Okay, I'm mad at Disney too. We agree on that. That especially because they stood by their story. If they hadn't stood by their story, then God knows. But it's bizarre to. What they have done in this case is very bizarre to me. Are you mad? But who are you mad at the way the law is structured. Are you mad at the company at.

[Felix Salmon]

We don't know how the law is structured because it never got appealed. We don't. We never heard the arguments. And yeah, I feel, I actually have faith in the American jurisprudence system. And I think that if they had had the courage of their convictions, they would have wound up having to pay nothing.

[Anna Shymansky]

Okay, okay, I see. So you're just pissed that Disney did not have the courage of its convictions to take this all the way.

[Felix Salmon]

And I think, and you know, ultimately I worry that Disney is not a news organization. It's a large multinational entertainment conglomerate and doesn't really care about journalism.

[Anna Shymansky]

Yeah, I think that's probably, that's probably true. Like it's not. And to them it was probably in the end, I am guessing they made a cost benefit or, you know, they made a risk assessment and said, what are the chances that we lose this case even on appeal and what are the chances as a result we get stuck with a billion plus judgment from a bunch of crazy North Dakota jurors. And they said that chance is worth. That probability is too high for us to continue this case rather, even, even if we support this story. I imagine that was the conversation. I don't know.

[Felix Salmon]

I mean, but I would, I would certainly imagine that the decision to settle the case was made over the objections of anyone at abc, that this was a decision made at like the Disney level. And they're saying, you know, we can settle for 177 million. We can bury this in a 10Q footnote. No one's going to notice it. Whoops.

[Jordan Weissman]

They notice it turns out.

[Felix Salmon]

And then, you know, if we do that, we have 100% chance of losing 177 million, but then we also have a 0% chance of losing a billion, and that's worth it. Which I just think is not the way that any respectable news organization should ever behave.

[Anna Shymansky]

I think I agree with. I'm just going to push back on that a tiny bit because in the case of a news organization that actually could face an existential threat from a billion dollar judgment, I do think that there is some responsibility to not go out of business. If you can afford to help it. Disney did not have that concern here. Disney, again, this is, and this is what pisses me off so much is even if it had been a billion dollar judgment, Disney could have survived it. Like, this is not a comp. Like, they, they are one of the few companies that should be in a position to defend journalistic ideals. And as you're saying, they clearly are not.

[Felix Salmon]

So let's stick with Disney, because they actually put out press releases rather than just burying things in the footnote of their earnings report. They're very big on streaming services all of a sudden. And one of the things which you don't really think about very much when you're on Netflix is trying to work out who the copyright owners are for all of the various different things.

[Jordan Weissman]

I know, that's all I'm thinking about.

[Felix Salmon]

That you're watching Netflix. You know, there's a bunch of movies, there's a bunch of TV show shows at the beginning of the movies and the TV shows, there's some long list of producers, most of whom you've never heard of, and none of which is actually relevant to who owns the copyright. And now what has happened is that Disney, who does own the copyright to a certain subset of that content, has decided that they are no longer going to license it to Netflix because they are going to set up their own rival streaming service and put it on that instead. And, like, my first reaction to this is like, oh, my God, do I really need to try and work out who the copyright owner is when I'm trying to watch something on my Apple tv? But it's not about me. It's trying to make money.

[Anna Shymansky]

Yeah. I mean, this is a little bit frightening. If you were the kind of person who was hoping you were going to be able to get away with, you know, cutting the cable cord, this is a big step towards just like the total fragmentation of not just cable, but of the streaming services themselves. I mean, you know, Disney is the world's biggest entertainment company. It's the Marvel movies, it's Star wars movies, it's the Disney Channel. It's just so much content.

[Felix Salmon]

It's espn.

[Anna Shymansky]

It's espn. Sorry, I forget. It's espn. And so, you know, the fact that they're saying, okay, we're going to have our own little gated, you know, net, you know, streaming service, you know, for our shows, for our movies, and you're only going to be getting it if you pay us directly. It, you know, it just, it seems like this is the beginning of basically not being able to Save any money by cutting. Right.

[Jordan Weissman]

I mean, it could eventually become much more expensive because now that streaming technology has improved and also now that consumers are used to watching television in this way, it makes total sense that a lot of these content producers are going to say, well, why am I giving this to Netflix? Why don't I just have my own service?

[Anna Shymansky]

And this is, you know, and this is one of the reasons why Netflix itself is banking so hard on its own original content because, and just turning itself into a streaming HBO because they, they know they might not be able to rely other content providers.

[Felix Salmon]

Okay, so this bit where like it could turn into something which theoretically perhaps might turn, might, might become more expensive than the cable bill is not something which worries me.

[Anna Shymansky]

Okay.

[Felix Salmon]

Because for most people it won't. Right? For most people you'll have one or two or three or four things which you're paying, you know, seven or eight or nine or $15 a month for. And even then you're still not up at cable bill levels. And the point is there that what you are doing is you're actually paying for stuff you want to watch, unlike cable where you are paying for a huge amount of stuff you don't want to watch. And I feel like everyone who's ever dreamed of an a la carte, you know, pay only for what you want to see system, like their utopia is arriving.

[Anna Shymansky]

Yeah, I don't know, Felix. Like, there's a lot of stuff on cable you don't think you want to watch. Like, but then you tune into Naked and Afraid for the first time and you're like, wait a second, they knew, they knew I wanted this before I knew I wanted it.

[Jordan Weissman]

I mean, I do think that the age of the big bundle is, is probably ending and essentially cable companies are just going to become Internet companies and then. But I do think the idea that you're only going to have one or two of these. I don't know. I think that. I don't, I mean, honestly, I have not paid a cable bill in a long time because I haven't had cable in many years. I don't even know what cable costs. But if you, if you start to add it up, I don't know. I guess to me though, the, what I think is also interesting is in terms of what this means for Netflix future, because I think Netflix is in a very bad position compared to many of its now competitors.

[Felix Salmon]

And I, I'm weirdly slightly more sanguine about this. The, the, the, the Netflix business model, when it first started streaming stuff never Made any sense to me because what you had was Netflix would pay a bunch of money to license content.

[Anna Shymansky]

Yeah.

[Felix Salmon]

And then it would sell subscriptions. And the only way it could sell subscriptions would be if it paid whatever the content copyright owners wanted to church. And ultimately they would always charge Netflix more than Netflix could make in subscriptions because there was nothing stopping them from just raising the price and raising the price. And Netflix had to pay whatever they were being asked to pay because they, that was the only place they were getting content. Now in the new world of Netflix buying, they just signed a big deal with the guy who did kick us, you know, Miller.

[Anna Shymansky]

Yeah. They actually bought a comic book.

[Felix Salmon]

Yeah. They've got a whole. They own a bunch of Marvel TV shows which they get to keep. Now even though Marvel, Marvel is part of Disney, they are making a bunch of original content. What that does is it gives them finally a little bit of negotiating leverage with the content, with the copyright owners and saying they can say, you know what, if you want to go off and put Star wars on its own streaming channel, you go ahead and do that because we have other places we can get content. In fact, we can just make it ourselves.

[Anna Shymansky]

People are still going to watch Jessica Jones.

[Jordan Weissman]

Is that making that type of original content is quite expensive. And if you look at Netflix's last earnings statements, everybody talked about the top line revenue growth or subscriber growth, but if you actually looked, they took on a lot more debt. They also are eating up their cash. They. And because they're taking on more debt, that means they're also paying more in interest payments. Their pre tax income is down. Their model doesn't make sense until at some point they can really increase prices because they have no other sources of revenue as opposed to some of these other more established companies that do.

[Felix Salmon]

Okay, so this is actually interesting because now they've bought a comics company and now they are making movies which have theatrical releases. They are beginning to branch out into alternative revenue sources. Like they are getting theatrical revenue from movies. They are get, they are selling comic books. They are doing, you know, other things which bring in revenue. These are very nascent. And you're absolutely right that if you're looking at, you know, this quarter's earnings or last quarter's earnings or the current balance sheet. Yeah, things don't look good for Netflix. But then again, they almost never have, like Netflix has never had amazing earnings. The question is whether they can get somewhere powerful and important in the future. You know, as the slogan has it, whether they can become HBO before HBO becomes Netflix. And, and I think that this announcement from Disney is weirdly a ratification of their model. And we are going to find ourselves increasingly in a world where ESPN has its own streaming channel. Disney is going to have a non ESPN channel, We're going to have the HBO Go, we're going to have Netflix, and people are going to pick and choose. And Netflix got there first. It has a first mover advantage. Is that going to make it? Is that going to justify its current crazy market cap? Now you can argue about not even.

[Jordan Weissman]

A little bit, but like, but I.

[Felix Salmon]

Think the, you know, the idea that on some level this is actually a sustainable business is now something which is believed not only by Disney, but by many, many other companies as well. I mean, not only by Netflix.

[Jordan Weissman]

Doing this as part of a larger business strategy is sustainable. Doing only this. We still don't know if that's.

[Anna Shymansky]

I think, yeah, say Felix's point, I think, is that they are, they are in the early stages of moving on beyond just having the streaming channel. They're, they are going, they're hoping to look a little bit more like Disney.

[Jordan Weissman]

Right?

[Anna Shymansky]

You know, a little. Yeah.

[Felix Salmon]

At one point people were saying they want to be hbo and now they're saying they want to be Disney.

[Jordan Weissman]

Right. But they're going to have to get there by taking on a lot more debt and spending a lot more money in a. In the way that their other competitors are not. And that's where I think they're not in the greatest position.

[Felix Salmon]

So, yeah, this show does not give investment advice.

[Jordan Weissman]

No.

[Felix Salmon]

But, yeah, no, we can agree that probably Netflix looks like a kind of terrifying equity play, but there's more to businesses than equity. There's also things like the broader stakeholder and employee experience that we talked a little bit about last week when we were talking about quite a segue. And there's also things like how happy are your employees when they come into work and do they have, you know, Stumptown, cold brew coffee on tap and this kind of thing.

[Anna Shymansky]

This is the key to Felix's happiness.

[Felix Salmon]

This is basically the key to Felix's happiness. What's one of the most interesting little baby stories which came up this week on Jon Gruber's podcast, is the experience of Apple's employees in their amazing new $5 billion headquarters in Cupertino, California, where the. Obviously, Apple is not trying to economize here in terms of like, spending less money. That's not trying to squeeze as many people as possible into a small office because the rents are so high. You know, money was basically no object on this hq. And yet. But what has happened is that a bunch of Apple employees have wound up in open plan offices which by all accounts they don't much like and in fact often are refusing to move into the new headquarters because they prefer the old offices.

[Anna Shymansky]

Yeah, they are just working at. These are just like highly, highly paid engineers working at long tables one after another which I kind of like. It's democratizing. They have to deal with like their annoying co workers the same way we bloggers do.

[Felix Salmon]

And we had this, you know, we saw this with Goldman Sachs when it moved its headquarters from Broad street over to west street in lower Manhattan that suddenly thousands of people who used to have offices no longer had offices and they were unhappy about this.

[Jordan Weissman]

But also the traditional trading floor model is also open seating.

[Anna Shymansky]

Yeah, I was going to say that made a little bit more sense with Goldman Sachs because that was like the image of the bond trading.

[Jordan Weissman]

Exactly.

[Felix Salmon]

No, but I think this is important. A trading floor needs to be big and open. A trading floor has always been big and open. And then you have a bunch of investment bankers who we have no need for big and open trading floors and who aren't traders and suddenly they find themselves in these like open plan offices with you know, phone booths you can go into when you need to make a private conversation and all of this kind of stuff that we're all living in these days. And they're like, no, this is horrible. It was much nicer when I had an office.

[Anna Shymansky]

You see I've never had an office. I've only known the world of cubicles and open floor plans. And so I just don't see it. I don't know, is it really? Felix, have you gone from an office to an open floor? Has you? Anna?

[Jordan Weissman]

Like so yeah, I mean I, I actually have. And I know like, cause my last job was the first job that I had that was again it was a trading floor setup. And I'll be perfectly honest, when I first went there I was kind of like, I'm not sure about this. Also the. We were in a little bit of an interim place. So my boss sat like four inches from me. And I'm not exaggerating. So that, that was a little, that was a little close. But when we moved into our better arrangement I actually liked it because it really does create a sense of camaraderie and you always have rooms you can go to. So if you have to do certain type of work, you can do it there. But it's also great for information flow. I actually wouldn't want to go back. I really liked it.

[Felix Salmon]

So to bring this back to Disney.

[Anna Shymansky]

Sorry.

[Felix Salmon]

The thing which fascinates me about Disney is I've been to Disney's headquarters in Burbank, California and I mean it's an amazing piece of architecture. It's this huge big colonnaded building with seven columns along the front and each column is in the shape of a dwarf, like Snow White and the Seven Dwarves. And you walk in and there's all of these amazing stills from Snow White and from Fantasia. There's, you know, Star wars bits and pieces. There's it and it is the classic sort of carpeted offices where secretaries have their own separate offices outside the other offices where you have to go through layers and layers of gatekeepers before you meet the important people. And just the amount of square feet per person is probably larger than the typical Manhattan apartment.

[Anna Shymansky]

But isn't that very much like entertainment industry? Right. Old school entertainment is about giving like creating an aura of authority and just like power around the executives. And like you can't do that if you're all in a bullpen together. Right? Like it just. That's not, I mean maybe you can, I don't know. But to me that seems like that's just a part of the culture industry that like is not going to ever have people, you know, producers are not gonna be working at long tables. You can't like curse wildly at someone on the phone while you're all sitting together in a room.

[Felix Salmon]

Well, I think you can and you do. And I've seen a bunch of like television production setups where that is exactly what happens. It's kind of interesting to me that Disney spent $7.4 billion buying Pixar from Steve Jobs. And when that happened, you basically had this very big lumbering old school entertainment company adopting the methods of this much more sort of Northern California tech based company. And it's an interesting fight. And I feel like in a weird way Apple has got out a little bit too far in front of its skis that when employees don't like working in a certain way, and I think most people who've had offices and have worked in open plan offices, ultimately they like the idea of having their own space. And every time that anyone's tried to create, you know, a cool, sexy, modern, hot desking situation, it never really works very well. The that if you want to really do well by your employees, which is clearly what the intention was, when in the new Apple campus, then you should listen to how they want to work and they don't. And they don't want to work this way.

[Jordan Weissman]

Although I don't know, like this report, I would also say, like, there weren't a lot of details in this, but it rings true. It rings true, but that doesn't.

[Anna Shymansky]

So this report said there were like certain teams certainly.

[Felix Salmon]

Exactly.

[Jordan Weissman]

But the vast majority of people, I imagine are working in the new setup, which would then suggest that they're okay with it.

[Felix Salmon]

No, that doesn't suggest that they're okay with it.

[Anna Shymansky]

It just means they couldn't get. They didn't have enough heft at the. To get their own building.

[Jordan Weissman]

Certainly possible. I just, I do think also everybody hates change. So you are almost always moving from what was older, which was cubicles and offices, into what is newer, which is open seating. And I agree there have been lots of studies that show that open seating isn't as great as everybody thinks it is. And I. And there's probably certainly some truth to that, but I do think for certain types of work it makes sense, for other types it doesn't.

[Anna Shymansky]

Wait, so I have a question. When I was reading this Is Apple's Headquarters, by open seating, are we talking about just like actually you sit down wherever the hell you want on any given day and stuff down?

[Felix Salmon]

No, no, you have pods. It's very convoluted. But like within pods, you know, you're working in close proximity in an open floor plan to other members of what is presumably your team.

[Anna Shymansky]

Okay, right.

[Jordan Weissman]

Because I do think it's important for people to have their own space. Yeah, I think that I do think is important, but I don't know. And I also think that. I believe there's also been some work done that shows that younger people are actually more okay with working in this way.

[Anna Shymansky]

I mean, that's because that's all we've known.

[Jordan Weissman]

Right.

[Anna Shymansky]

But that's.

[Jordan Weissman]

That goes back to my whole idea where I think some of this also has to do with just change.

[Felix Salmon]

And I mean, the thing which I've noticed is. Well, there are two big things that I've noticed in open seating systems. One is that you see a huge number of people who are just constantly working with headphones on. It's like this way of cutting yourself off from the people around you as much as you can. The headphone has become like the universal.

[Anna Shymansky]

Do not disturb sign.

[Felix Salmon]

Do not disturb sign. And that's not an efficient way of doing that, especially for people like me who don't actually like wearing headphones. And then the other thing that I've seen is a huge move from large amounts of screen real estate and people having like two or three monitors in front of them to people just working on laptops. And I think think that the reason for that again is like a privacy thing that if you have a whopping great big screen in front of you and you're part of an open plan office, everyone can see what you are working on which is also weirdly uncomfortable. And so people like hunch over their laptops again for privacy more than for convenience. I feel like people are trying to build little bits of privacy in where like they are well while the architects are trying to design them out. And I think it's important and it shouldn't be designed out.

[Jordan Weissman]

I again I think that the jury is still out on whether open seating is going to ultimately be a net positive or net negative. But I don't think it is as negative as you are making it out to be.

[Felix Salmon]

What's the argument for it being a net positive? I think the like there's a lot of utopian crap about how like it helps in terms of communication.

[Jordan Weissman]

It does, it really does. I'm sorry, there are certain like when you're. I worked very close to the trader and yeah, when you're working on a.

[Felix Salmon]

Trading floor we understand the trading flow.

[Jordan Weissman]

And I realize that that is unique example but I imagine that that is not the only example.

[Anna Shymansky]

Like you know, and you're shit. You're like shooting ideas back and forth with your co workers.

[Jordan Weissman]

And I've also been at other places where they do not have this set up and frankly people don't stay on task. You look at a lot of computers and you see a lot of online shopping. So I'm not saying that that is the, the only other thing that happens but I do think this. I realize you can be distracted on the one hand but it can also keep you on task on the other. Again I think there's a push and.

[Anna Shymansky]

Pull.

[Felix Salmon]

Numbers round Anna. I'm going to, I'm going to go first this week because this is my favorite. This is an Anna number and I want to make sure I get in there early so that you don't steal my number.

[Jordan Weissman]

Okay.

[Felix Salmon]

It's $775 billion which was earlier this week the official market capitalization of Mercantile Sufficios Financieros, which is a Venezuelan bank. Oh, the, the most valuable public company in the world was actually a Venezuelan bank. And the official stock market capitalization of the Venezuelan stock market was something like $3.4 trillion, which is more than the stock market capitalization of the entire German stock market. This all, of course, here's how they calculated that with the official exchange rate.

[Jordan Weissman]

I was going to say, like, I'm pretty sure I can see where this is going.

[Felix Salmon]

If you use the sort of unofficial black market exchange rate, then things start making a lot more sense. But that is what happens when you have like artificial exchange rates. You get weird artifacts like a $775 billion Venezuelan bank.

[Anna Shymansky]

Is it my turn?

[Felix Salmon]

Yes.

[Anna Shymansky]

My number is 42. That's how high the Vix rose during the 2011 debt ceiling crisis when it wasn't clear if Congress was going to actually pay its bills.

[Felix Salmon]

And the vix, remember, is a measure of stock market volatility. Has nothing really to do with the bond market.

[Anna Shymansky]

No. So the vix, it's often referred to as just the fear gauge. It's just like when people don't know what the fuck is going on in the world, the BIX goes up. Or that's supposed to be how it works. Currently it's at 15. And I've been just asking people why is just given how dysfunctional our politics are right now and the fact that in September Congress is going to have to try and raise the debt ceiling and we really don't know if they're going to be successful at it, why more people aren't betting on the VIX, just shooting the hell up. Given that we have very recently historical precedent for this.

[Felix Salmon]

We've had like entire segments on like, why is volatility level.

[Anna Shymansky]

No, but like this right now.

[Jordan Weissman]

But I'm wondering how long did the VIX stay at that elevated rate?

[Felix Salmon]

Number one, it wasn't there very long. And number two, of all the things to cause stock market volatility, I feel like a debt ceiling crisis is probably not it. Like, I can see why it would cause volatility in short dated treasury bills, but why would it affect how much you want to pay for Apple stock?

[Anna Shymansky]

Because the concern is that once the US breaches the debt ceiling, like no one knows what's true and what works anymore. All of a sudden the US Treasuries are no longer.

[Jordan Weissman]

It's just uncertain.

[Anna Shymansky]

Yeah. No longer is the good faith and credit of the US Government a certainty in this world.

[Felix Salmon]

Well, I see. And then again, I feel like we learned a lesson the last time around that what you had weirdly and people didn't expect this, but this is what happened and it kind of makes sense ex post is that you had a flight to quality trade, that people were afraid about what this meant for assets, and they wound up selling risky assets like stocks and buying safe assets like treasury bills. And this is the one thing which you have to remember about the debt ceiling, is that ultimately the United States is going to pay those bills. And even if. If it defaults, which it probably won't, it probably won't default on treasury bills. And even if it does default on treasury bills, it will still wind up paying all of that principal and interest, plus probably statutory interest at 7%, which is much higher than you could get normally. And there's no real risk of you losing any money if you buy treasury bills. And I feel like in that sense, the kind of, oh, my God, a US Government default would be the end of the world scenario is a little bit less scary than it used to be. Although it's still pretty scary.

[Anna Shymansky]

Yeah. I mean, I'm still scared shitless of.

[Felix Salmon]

It, since we're on this subject. You're the politics person here.

[Anna Shymansky]

Yeah.

[Felix Salmon]

I always thought the problem with the debt ceiling was that the Republicans mean things to the Democratic administration.

[Anna Shymansky]

Yeah.

[Felix Salmon]

If the government just brings forward a bill saying raise the debt ceiling, the Democrats will all vote for it. You'll have a handful of Republicans voting for it, and then it will pass. Why is this not going to happen?

[Anna Shymansky]

Because there are a lot of. There are still a lot of Republicans who want to attach it to cuts. And there are questions about the administration's position because the Office of Management and Budget Director Mick Mulvaney is someone who really likes. During the last debt ceiling crisis, he was agitating for not raising it without cuts. He really, really wants to attach, you know, reductions in mandatory spending to this bill. And from what some people have read, his view is kind of prevailing in the White House right now and weirdly, may even have the support of Gary Cohn, which is really unexpected to me. So the internal. Whereas Steve Mnuchin is sitting there going, just raise the goddamn debt ceiling. So the internal dynamics of what of the Trump administration are really bizarre here. No one really knows. And also, it's unclear, you know, if Paul Ryan is really going to want to have to rely on Democratic votes for this sort of thing. You know, John Boehner obviously was willing to do that back in. Back in the day. Ryan already feels his hold on power is sort of getting flimsy, so. Or it seems like he's worried about that. So it's, you know.

[Felix Salmon]

So are you saying that there's a lot of came to shove? Paul Ryan would not introduce a bill which could only get passed on the basis of having a lot of Democrats.

[Anna Shymansky]

I think he would. I think just the issue is that there are a lot of. There's even more uncertainty and like kind of potential disaster points, potential, you know, that are. Than in the past. There's especially given the giant question marking over what the hell the White House thinks.

[Jordan Weissman]

Right.

[Anna Shymansky]

Yeah.

[Jordan Weissman]

It's like there'll probably be a lot of sound and fury and then they'll eventually raise it. But again, we've in the past year just seen things we've never anticipated it's seeing. So that does raise concerns, but the market does not appear to have those concerns.

[Felix Salmon]

Not. Yeah. And my theory, as I say, is that even. Is that it's entirely possible that those concerns are priced in and that the effect of the, of a, you know, the debt ceiling not passing on the market would actually be much lower than people fear. But what's your number, Anna?

[Jordan Weissman]

My number is $350 trillion.

[Felix Salmon]

That's. That's possibly the largest dollar number we've ever had on.

[Jordan Weissman]

So that's the amount of money connected to derivatives.

[Felix Salmon]

Oh, it's a notional amount, yes. It's not a real amount.

[Jordan Weissman]

Fair enough. So this is the amount of money that's tied to, with derivatives loans and mortgages tied to Libor. And I'm bringing this up because I've been wanting to for a few weeks just mention the fact that Libor is going to be phased out, which I'll.

[Felix Salmon]

Believe it when they see it.

[Jordan Weissman]

Yeah, it's going to be a slow process and it's not like it's just going away in 2021. It's just they aren't required to post it. And we. But this is a huge part of the market and we at this point really don't know what's going to replace it. And it looks like there's also the possibility that we'll move into a much more fractured market in terms of multiple different reference rates. And I don't know if that's good or bad, but it's definitely going to be different.

[Anna Shymansky]

Felix has a allergy to Libor. I just like that right now I can see the hives slowly rising from. I don't blame him for. It's like, I don't know. Is Libor you've talked about.

[Jordan Weissman]

I mean, part of the reason that they're doing away with it is because it was based. I mean, it wasn't supposed to be based on these survey results. It was supposed to be based on like transactions. But then it, because it became based on survey results, it was so easy to manipulate. And, you know, we've obviously had a lot of those scans.

[Felix Salmon]

So. Yeah, I mean, if a libel goes away, that'll be great. If libel doesn't go away, nothing will change. If something else comes along, fine. Again, like, this is something I'm finding it difficult to really care.

[Anna Shymansky]

Well, yeah, I was gonna say, like, so for I, like, concretely, given that this rate was already sort of manipulated and wasn't real to begin with in a lot of. Like, what, as a homeowner, do I have to care about this?

[Felix Salmon]

No.

[Anna Shymansky]

No, you really don't.

[Jordan Weissman]

Probably not. I'll probably not. I'm just saying it's the end of an era. It's not necessarily a good era, but it's the end of an era.

[Felix Salmon]

Okay. Well, I think that's it for us this week. Thank you for listening to Slate Money. Listen also to trumpcast, which is hosted by Virginia Hefner and Jamelle Bouie and the chairman of Slate himself, Mr. Jacob Weisberg, three times a week, Monday, Wednesday and Friday. Apparently there's news about Trump. Who knew? So you can listen to that as often as you like. Find [e-mail] TRUMPCAST if you want more content about the President of the United States. For everyone else, subscribe to us. Listen to Trump Cast. Write to us on slatemoney.com thank Dan Schrader for producing because he does a great job. And we will talk to you next week on Slate Money. Hi ho, hi ho.

[Anna Shymansky]

It's home to Mercury Gold.

[Felix Salmon]

I hope, I hope, I hope, I hope.