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First Move with Julia Chatterley
Debt Ceiling Meeting Set for May 9th; AI Pioneer Quits Google to Warn of Technology's Dangers; Petrides: It Feels We're Through Worst of Tech Cuts; Hollywood Writers' Strike Halts Production on Many TV Shows; Germany Calls for Global Goals on Renewable Energy; Dueling Lawsuits in High Profile Disney Fight. Aired 9-10a ET
Aired May 02, 2023 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[09:00:00]
(COMMERCIAL BREAK)
RAHEL SOLOMON, CNN HOST: A warm welcome to "First Move", I'm Rahel Solomon in today for Julia Chatterley. And just to head on today's show, new
developments in the U.S. debt ceiling crisis, a source telling CNN that U.S. House Speaker Kevin McCarthy has agreed to meet with President Biden
on the issue next week.
This is significant news as the U.S. rapidly runs out of money to pay its bills. Treasury Secretary Janet Yellen saying Monday that the U.S. could
default on its debt for the first time in history as soon as June 1. That's without a congressional deal to raise the borrowing limit.
Now, so far, Republicans and Democrats are still really far apart on how to find a solution. A market reaction to the new debt ceiling dangers still
fairly new to it. U.S. futures under a bit of pressure there, after a mostly flat start to make trading. Europe's in the red as well after its
long holiday weekend.
Data today also showing inflation in the Eurozone on the rise again, although core prices did ease unexpectedly, a bit of good news there.
Global investors also bracing for the U.S. Federal Reserve's interest rate decision tomorrow. Now a quarter point hike is still expected the Fed
making clear that it can fight inflation while also keeping tabs on threats to financial stability, like the recent banking turmoil.
We're going to have much more on the Fed and the markets later in the show, but first to the latest on the debt ceiling. Arlette Saenz live in
Washington for us.
Arlette, good morning. So look, the two leaders haven't met since February, I want to say so this was a major development. But really how optimistic
can we be that this leads to any real breakthroughs?
ARLETTE SAENZ, CNN WHITE HOUSE CORRESPONDENT: Well, Rahel, that's the big question right now. President Biden and House Speaker Kevin McCarthy remain
far apart in their positions on how exactly to deal with the debt limit, but they are agreed on one thing, and that is to sit down here at the White
House one week from today to talk about the path forward relating to the debt limit.
Now, this will be the first time that the two leaders have met since early February they will be joined by the other congressional leaders on both the
Republican and Democratic side. But heading into this meeting next week. White House officials are insistent that President Biden's position remains
unchanged.
He wants to see a debt limit increase without any conditions attached to it. They do say that in this conversation, he is willing to start talking
about the way forward on the budget and appropriations process for next year. But this all runs counter to what you've heard how speaker Kevin
McCarthy and Republicans call for.
They still want those deep spending cuts tied to any debt limit increase and Republicans over in the Senate right now are really keeping the ball in
Kevin McCarthy's court saying that he is the one driving this process. Now this all comes as there is this real heightened sense of urgency after
Treasury Secretary Janet Yellen yesterday said that the U.S. could default on its debt by June 1 that is less than a month away.
And if that were to happen, it would have catastrophic consequences on the economy affecting millions of Americans cutting benefits for people like
veterans and senior citizens. So right now they're heading into this meeting with this heightened alarm surrounding that potential default.
And really what this whole situation represents is the highest stakes moment in the showdown that we've seen between President Biden and House
Speaker McCarthy in this era of divided government. The question is whether the two sides will be able to come together to try to avoid any potential
catastrophe for the economy if it were to default. Right now, both sides seem to be staying in their own quarters.
SOLOMON: A lot of ground to cover and really not a lot of time to get it done, at least according to Janet Yellen's estimations. Arlette, how about
the likelihood that we see perhaps an extension which doesn't really solve the problem, but at least buys everyone a few more months?
SAENZ: I mean, that could always be a possibility if once these leaders get into the room, and as that June 1 date, quickly approaches that could be an
option that the White House and Congress decide to go down. But when you've seen these types of debt limit fights in the past, even thinking back to
2011, when Biden was then Vice Presidents or they did try to have a longer term debt limit increase in order to avoid having this type of negotiation
come up again.
Let's not forget that next year, 2024 is also a political year as both President Biden is running for re-election and House Speaker Kevin McCarthy
is hoping to hold on to the Republican majority and Senator Republican to the White House. So any type of punting would just continue this fight into
that political year. But it's very clear at this moment that both of these sides are sticking to their positions and we'll see what comes together
over the course of the next few weeks.
SOLOMON: We sure will be watching and for now. At least the markets don't appear to be too concerned but time is ticking and so something to watch
for sure.
[09:05:00]
Arlette Saenz, thank you. Want to turn down to the worsening crisis in Sudan the U.N. estimating over 100,000 people have fled to neighboring
countries and three times as many have become refugees within their own country. This is fierce fighting between the two rival generals continues.
Larry Madowo is in Jeddah, Saudi Arabia. So Larry, you've been speaking with refugees, you've been witnessing the evacuations. What's the very
latest there?
LARRY MADOWO, CNN CORRESPONDENT: The evacuations continue we're expecting another ship to arrive here in Jeddah from Port Sudan in the next two or
three hours. This is the trend that we've seen since the conflict began. And the reason why Saudi Arabia has become the main landing point is the
closest people can get to safety Sudan is Port Sudan.
That is about usually in the best of times about 8 to 12 hours, because it's more than 830 kilometers over 500 miles. But during this war zone is
taking some as much as 30 hours one person told us it took them 36 hours. When they get there, they hope that they can be lucky to get on a Saudi
ship that's running the shuttle service between Port Sudan and Jeddah.
Or in the case of the U.S., they ran the first U.S. naval ship Brunswick that arrived here yesterday with about 105 Americans as well as other
nationalities. The number of people that need to be evacuated from Port Sudan is massive. And those who are getting shuttled across the Red Sea are
those with dual nationality, that foreigners or the Sudanese and German or British or American or another country that have residency here in Saudi
Arabia.
The vast majority of Sudanese people cannot use that route of evacuation. That is why you're seeing these numbers from the United Nations about the
number of people who are already displaced and 1000. And as this continues, the projection is that it could get to 800,000 people displaced and we're
only week three of this conflict.
The longer this runs on, the more people will have will have to leave because as we speak already, it's difficult to get food and water and
medicines. It's not safe for people with kids, for families to live in the middle of residential areas that constantly under gunfire and artillery,
and bombardment, and people will never -- in the fighting that try and go to neighboring states, or make that difficult journey across the country to
the east to Port Sudan, and hope that they can find a way out of the conflict.
So it's just going to be a need that's growing, as the conflict runs on that people want to either go to neighboring countries like Egypt, or South
Sudan, or Eritrea, or Ethiopia, or Chad, and those who can will go to Port Sudan and going across the Red Sea here, Rahel.
SOLOMON: Larry, it's a great point, just the 800,000 figure just really puts into context, at least right now how massive of a scale this conflict
is expected to create the humanitarian crisis we were seeing unfold. Larry Madowo, thank you. To Ukraine now where more than 100,000 Russian troops
have been killed or wounded in Ukraine and just the past five months.
That's according to the latest U.S. estimate. White House says that the fighting has exhausted Russia's Military stockpiles and its armed forces.
But the Kremlin has firmly rejected those U.S. numbers. Nick Paton Walsh joins us now from Zaporizhzhia.
So, Nick, those figures coming from White House Official John Kirby, who also said that this is a key sign that the Winter Offensive backfire. What
are you seeing on the ground there?
NICK PATON WALSH, CNN CHIEF INTERNATIONAL SECURITY CORRESPONDENT: Yes, there's no doubt at all that Russian Winter Offensive has been pretty much
disastrous, their initial goal of taking the symbolic but strategically not that useful City of Bakhmut. Well, they've not managed to do it and in
fact, as we speak now, Ukrainian Officials are suggesting that Russian troops are abandoning positions on its outskirts.
And Kharkiv Russian Official or I should say Russian figure, Yevgeny Prigozhin the Head of the Wagner mercenary group who spent the weekend
saying if he doesn't get more artillery shells quickly. He may have stopped pulling his mercenaries back from Bakhmut.
We've done a lot of the fighting for it. So Moscow sending out signals at this stage that they went through offensive simply hasn't gone how they
wanted. And that's being echoed by Ukraine who are themselves looming towards their own counter offensive. John Kirby's comments, it's important
to give the details here, that headline figure of 100,000 casualties since December is extraordinary.
I mean, bad math, it's about 1 in every 500 adult males in Russia between the ages of 15 and 64. So a lot of parsing has to be done as to how they
came to that number. He went on to say we took about 20,000 dead, so 80,000 of those by their estimation injured.
This is from what he referred to as downgraded intelligence, essentially something that has been classified differently to be able to make it
public. Half of those dead, though, are thought to be Wagner fighters who you can suggest pretty much were involved in the fight for Bakhmut.
So catastrophic numbers, certainly uncertainty as to where the United States got this, that's the nature of intelligence. But bear in mind,
there's no coincidence here that this extraordinary figure is emerging on the eve of Ukraine's counter offensive.
[09:10:00]
Washington keen to pump up to amplify the idea that Russia has had a very bad winter which is indeed the case and catastrophic casualties and what
we've been hearing about that offensive from the frontline itself even speaking to Russian soldiers or prisoners I should say recruited by the
Russian Ministry of Defense.
One spoke to me from his hospital bed a few months ago, injured, concerned he was about to get sent back to the front line. So it's been an absolutely
atrocious winter for Russia on the front lines is probably going to be a very bad spring, indeed and these numbers coming from Washington.
A clear sense of the information was certainly we're hearing from the United States backing up Ukraine where they've invested a lot of military
expertise, equipment and training, but probably to a reflection, really, of how awful things have been for Moscow on the front line. It does feel like
they're probably about to get worse, Rahel.
SOLOMON: Nick Paton Walsh live for us there in Zaporizhzhia, thank you. We want to turn to Israel now where we're getting reports of rocket fire from
Gaza. That's according to the Israeli Military 22 rockets were fired and 4 were intercepted the rest fall in open areas it's the second salvo since
the death of a Palestinian prisoner in an Israeli prison.
Khader Adnan died after an 87-day hunger strike. He was detained in February on suspicion of being a member of a terrorist organization.
Palestinian detainees in an Israeli prison in the West Bank. Well, they've now gone and begun a general hunger strike and protest. The Israel Defense
Forces say that several rockets fired from Gaza earlier had come down in open areas.
To business news, now he has been called the godfather of artificial intelligence. Now, Geoffrey Hinton says that he quit his job at Google to
warn about the dangers of the technology that he helped develop his decision to step down contests, alarm bells, about the risk of AI powered
Chatbots, to spread misinformation and also displace jobs really grows.
And March, several key figures in tech signed a letter calling for a pause in AI development for at least six months, citing "profound risks to
society and humanity". Now among those signing, the letter was Apple Co- Founder Steve Wozniak. And take a listen to what he told my colleague, Kaitlan Collins, a little earlier today.
(BEGIN VIDEOTAPE)
STEVE WOZNIAK, CO-FOUNDER OF APPLE: I'm not like worried, I believe in fear and living a life of fear. I just believe that when some powerful
technology is introduced, we should look that almost all technology brings some good things to us, and some bad things and we should be responsible.
And we should study these things and kind of prepare people for what's common. And take steps may be to keep it from being too horrible and bad,
for example, you know, look at how many bad people out there just hitting us with spam and trying to get our passwords and take over our accounts and
mess up our lives.
And, you know, and now AI is another more powerful tool, and it's going to be used by those people, you know, for basically, really evil purposes. And
I hate to see technology being used that way. It shouldn't be and probably some types of regulation are needed.
Regulation is telling parties that are producing things, you will obey, you will not do certain bad things. It's like our Bill of Rights, the Congress
will not pass certain types of laws. And you know, you call that regulation. It's not like stopping you from doing your business. It's just
saying, no, you've got to have some ethical concerns.
KAITLAN COLLINS, CNN ANCHOR, CNN THIS MORNING: I'm also curious how your thinking on AI has evolved since recent years in 2018, you did this
interview that I was watching yesterday, you said this about AI?
WOZNIAK: No machine sits down and says, what should I work on? Humans tell it what to work on? No machines can just do it well for us. So we're
building technology that will make life easier for us? And where's the lack of jobs at least where I come from the United States? You know, people have
jobs.
COLLINS: And now we see what you're saying and also talking about regulation. Can there -- global regulation, though, for something like this
technology?
WOZNIAK: No, they're never can be. It's one of the reasons that talk about technology has so many bad sides, I often say those that brought us this
digital world. You know, when I look back at some of the easier life days and less worries about the all this stuff and things work more.
I say, you know, those that protestants digital revolution should be executed, or worse yet, make them live in it. So how you cannot regulate
bad people very well, could AI be employed to spot all these little tricky little worded spams that are, you know, trying to get your passwords and
all that could they spot that it's never been used that way.
It's been used by people who want to make a name for themselves or make money for themselves and that never quite goes as well as it should.
(END VIDEOTAPE)
SOLOMON: Anna Stewart joins me now and it looks stunning to see this type of really about face from someone who, as we said, has been called the
godfather of AI. We heard a little bit there. He touched on it a bit there. But what's he most concerned about here?
ANNA STEWART, CNN REPORTER: It's interesting, isn't it? We're seeing almost a sort of growing chorus of tech experts now warning about artificial
intelligence.
[09:15:00]
You know, after we've had months of huge developments in this technology and it's all very exciting but Dr. Hinton, as you say, is one of the
pioneers of AI. He did lots of work on neural networks, that forms really the foundation of so much of the AI we see today, particularly CChatbots
that are being developed by these big tech companies.
And yet here he is leaving Google so that he can warn about the technology, and really had a few points to make. In this article, The New York Times he
says, when is something generated or manipulated by AI so short term? How are people going to know what's real and what's not?
And we see this, every single day we see it, whether it's in music, but there was that song that purportedly was drake in the weekend performing it
wasn't it was AI generated and got pulled off streaming platforms. There's the photos, you see, for instance, that one of the Pope seemingly wearing a
puffer coat.
It wasn't it was generated by AI, and when it gets to tax, you're looking at essays of students, and so on and so on. It's really hard. And as we
heard there from the Co-Founder of Apple, how do you regulate that? Lots of people question whether even can be regulated, then there's the issue of
the longer term issue of jobs and the disruption and we can get more into that.
And the third issue, and I thought this one was really interesting, it almost weird into sort of sci-fi fears is what happens if and when AI
becomes smarter than people. And in this article, Dr. Hinton said he worried that might be 30 to 50 years down the line.
He no longer thinks that and he goes as far as to say that he's concerned about the issue of potential autonomous weapons in the future. And at the
heart of all this, the reason we're seeing so many tech experts saying there should be some sort of hiatus in the development is because there is
something of an arms race when it comes to the big tech companies trying to race ahead trying to develop their AI platforms, and publish them very,
very quickly.
And so lots of people wanting to hit pause and all of that just to consider the implications on society on people. And I guess whether or not there can
be some sort of regulation in this space.
SOLOMON: Yes, it's a great point. Look, every time one of these founders does an interview that that is the big question, right? I mean, what's the
big brace? What's the big rush? Anna, before I let you go, you just sort of touched on it there in terms of job loss, IBM making some news about
operations and artificial intelligence, what are they saying?
STEWART: I mean, they see huge cost efficiency here and that's the beauty of AI. It is really efficient, because it can replace some human tasks. But
to this extent, I mean, this is really quite --, the CEO of IBM told Bloomberg. I could easily see 30 percent and this was the back office jobs
of IBM getting replaced by AI and automation over the next five years.
Now, they have about 26,000 back office jobs. So you're looking at nearly 8000 jobs that they believe could be replaced by AI jobs, like HR, for
example. Now, there is a fear of a job disruption and it's real. There's also the argument that AI will help create new jobs will make jobs more
efficient will complement jobs.
But there's no doubt that with any tech disruption that you see like this, whether it was the internet, whether we go all the way back to the
industrial revolution is a very painful part before then when people lose their jobs.
SOLOMON: Yes, it's interesting because IBM not necessarily related to AI but recently announced that it was cutting about 3900 jobs 1.5 percent of
its global workforce. So we're definitely going to see some structural changes in the workforce as you point out because of AI and because of
technology as we have already.
Anna Stewart, wonderful to have you, thank you. And straight ahead, it is a big week for the U.S. economy and U.S. economy watchers. We will discuss
what the latest numbers tell us about the Fed's next move. And IMAX celebrating a blockbuster quarter and gearing up for the summer box office.
We are already talking about summer My Oh My How Time Flies. We'll head to the movies with the CEO later in the show stay with us.
(COMMERCIAL BREAK)
[09:20:00]
SOLOMON: Welcome back to "First Move", U.S. investors are gearing up for a host of significant indicators on the economy this week. We have data on
job openings coming in a short time. The Federal Reserve's policy meeting with another rate decision due on Wednesday, fresh reading on jobless
claims on Thursday, all leading up to Friday's critical jobs report.
And let's not forget earnings season still in full swing. While fears about the state of the U.S. banking sector are not going away. We have lots to
chat about with my next guest. Joining me now is John Petrides. He is the Portfolio Manager at Tocqueville Asset Management. John, always wonderful
to see you. Welcome to the program.
JOHN PETRIDES, PORTFOLIO MANAGER AT TOCQUEVILLE ASSET MANAGEMENT: Thanks for having me on.
SOLOMON: So we still haven't heard from the major retailers a report in two weeks or so the Walmart's the targets the Home Depot's or so but what are
your thoughts about corporate earnings thus far?
PETRIDES: Surprisingly strong, you know, coming into yesterday, I think nearly half of the companies in the S&P 500 reported an 8 out of 10 have
beaten Wall Street analyst expectations. So you know, we've been waiting for this. Now, it doesn't mean that earnings aren't under pressure are
going down. They're just doing better than what Analysts had expected and that's really the name of the game here.
SOLOMON: Well, I wonder when you look under the hood of the car here, when we look at revenue, when we look at some of the strength, we're seeing how
much of this is pricing pressure and how much of this has actual volumes in terms of what we're seeing?
PETRIDES: Yes, great question. It depends on the industry. So if you look in the consumer staples industry, you know, the things that you buy in the
grocery store, it's not really being driven by volume, the consumer staples group, by and large, continue to pass through inflationary pricing on to
the consumer, and they're getting it.
So the pricing is making up for a drop in volume on that front. If you look at other sectors, like technology, sales have clearly slowed, but they are
doing massive cost cutting, and that's how they're supporting their earnings higher is because you're seeing as you read the headlines, massive
layoffs.
SOLOMON: Yes, and you have to wonder, though, in terms of the consumer being able to absorb these higher prices, how much longer that can last? I
mean, it has been really remarkable to see, despite the inflation, despite the higher borrowing costs that consumers have still been able to spend the
weight they have.
John, in terms of tech, which you just touched on there. Is the tech wreck behind us, have they done enough cost cutting? Have they cut enough fat? Is
that part of the cycle behind us?
PETRIDES: Well, we're definitely it feels like we're through the worst of it. You remember last year was really driven by two things. It was the fact
that interest rates spike. So far, so fast, and technology or long term stories. So when your cost to borrow money, aka interest rates are zero.
Well, you could throw the whole Hail Mary and invest in a long term story. But when you start earning something on your cash, all of a sudden you say
to yourself, well, I don't need to go out that long and buy that long term thesis anymore. So that was one of the major issues last year for
technology companies.
The second issue that tech faced last year was expectations were so high coming into 2021, that the analyst community thought that what ultimately
turned out to be the COVID bump, they thought it was going to be long term demand. So I think we've worked through that expectation that the COVID
bump expectations have clearly been reset.
We do seem to be at the end of the Fed tightening cycle. And I think that's a big reason of why you're seeing growth in tech stocks rallied strongly
out of the gate this year.
SOLOMON: Well, John, speaking of the Fed the last time you and I spoke on the program in February, you told me you thought markets were getting a
little complacent and maybe prematurely expecting the Fed to cut.
[09:25:00]
Markets have continued to rally. Do you still believe that?
PETRIDES: So the answer is, well, it depends how about that. I'm hoping that the Fed does not raise interest rates at the next meeting, I think the
inflationary data is slowing sufficient enough and we're going to roll off really difficult comparisons. Remember this time last year, when Russia
started its war with Ukraine, you had this massive spike in commodity prices, and you had the supply chain really still gunked up, you're going
to roll off of that, all of that.
So come June, July, August, you should really start to see a big decline in the inflationary data. And there is a disconnect here for sure and that is
going to determine in my opinion, part of the future of where stocks headed. The Fed does not think that they need to cut interest rates before
year end.
And the market is pricing in after a potential rate increase that the federal have to cut half of 1 percent before year end. And the question is
who's going to be right and to be honest with you, the Fed has doesn't have a really good track record over the past two years on signaling where
inflation is headed or not headed and the market has proven to be right and the Fed wrong.
SOLOMON: Yes, in terms of signaling, it'll be curious to see if tomorrow we hear the signals or messaging from Powell that they will begin to at least
pause, because they have signaled so much thus far. John, before I let you go, what names or sectors do you like right now? What areas of opportunity
do you see?
PETRIDES: Yes, despite the rally, you know, we always have an allocation of gold and client portfolios. And we added to that gold during the year or
around the banking crisis. So when the bank started to fail, and despite the rally in gold being nearly $2,000 an ounce.
Still think having gold as a portion of the portfolio makes a lot of sense. Gold doesn't do well in the short term when interest rates go up. So if
we're at the top of the interest rate cycle and potentially cutting interest rates, that's positive for gold. There still is a lot of
uncertainty in the debt ceiling, that's positive for gold.
There's geopolitical risk that's positive for gold. So there's still a lot of turmoil out there that I think is supportive of owning gold in a
portfolio today.
SOLOMON: Don't sleep on gold. All right, John Petrides, thank you. He is the Portfolio Manager at Tocqueville Asset Management.
PETRIDES: Thanks for having me on.
SOLOMON: We'll have you back soon. And coming up after the break going off script, it's hands down as Hollywood writers walk off the job and strike
for better pay, we have more when we come back.
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[09:30:00]
SOLOMON: And welcome back to "First Move"! U.S. stocks up and running on Wall Street. The major averages under a bit of pressure there the DOW,
NASDAQ and S&P all lower by let's call it a quarter of a percent. Investors in wait and see mode ahead of tomorrow's important Fed policy decision.
Also lots of critical U.S. jobs data being released over the next few days as well including Friday's all important jobs report.
And jobs related news Morgan Stanley says that it will cut an additional 3000 positions due to the ongoing investment banking slowdown and IBM
telling Bloomberg News that it is imposing a hiring freeze on thousands of positions that could soon be replaced by artificial intelligence.
Shares of the online learning firm CHEGG meantime, plunging after an AI related warning the shares are off wow, shocking 46 percent. It says that
students are starting to use ChatGPT for their homework, and that it's using its services less.
Better news meantime, from Uber shares are up 5 percent. That's after a better than expected 29 percent rises in revenue. The CEO saying that Uber
is off to a strong start in 2023 you'll see a 29 percent jump there. And from a strong start to a sudden stop and a case of writer's block and
Hollywood pay talks with 11,000 writers have failed leading them to strike for the first time since 2007.
Now, the immediate impact includes the suspension of the late night TV shows Stephen Colbert for his part stood by his own writers during last
night's edition which was taped before the decision.
(BEGIN VIDEO CLIP)
STEPHEN COLBERT, HOST, 'THE LATE SHOW WITH STEPHEN COLBERT': The deal has not been reached; the Union could go on strike tomorrow, which means that
writers might have to do something totally against their nature. Go outside, these people right here, these hellos, these are our writers,
these people. These are our writers and I'll stick myself in there because I'm WGA too. And they're so important to our show.
(END VIDEO CLIP)
SOLOMON: Only Stephen Colbert could somehow make light of this. Let's bring in CNN's Vanessa Yurkevich who was outside the Manhattan Theater where
Colbert is filmed. So Vanessa at the heart of this issue is pay but also streaming. Walk us through how we got here.
VANESSA YURKEVICH, CNN BUSINESS AND POLITICS CORRESPONDENT: Yes, and Stephen Colbert likely going to be a rerun this evening because of this
writer's strike. And the sticking points that were six weeks ago when these negotiations started.
They seem to remain today that we're getting a number value on just how far apart the writers and the studios are. The writers want an additional $429
million per year in compensation. The offer from the studios is $86 million.
I want to walk you through what the studios are offering. They say they're offering additional compensation. They're also offering additional
residuals on streaming, which is so critical to the writers. And they also say that they're willing to come up on those offers, but there are still
major sticking points, staffing levels, the amount of writers in the room, the duration of employment of writers on shows and movies, and how to
regulate artificial intelligence.
And we're hearing from the writers the residual offer from the studios just simply isn't enough. But the studios, we're talking about Amazon, we're
talking about Apple, we're talking about Disney, we're talking about CNN's Parent Company, Warner Brother's Discovery.
They say that they've had to make some cost cutting measures in recent years, including layoffs. But the writer say there's simply not as much
work to go around and especially because there's been this transition Rahel from broadcast to streaming.
Now the last strike was in 2007. That was 15 years ago that lasted hundred days, the economic impact from that hundred day strike is estimated to be
about $2 billion dollars, if you adjust that for inflation is about 3 billion.
And Rahel later this afternoon at various locations in California and New York City that is when we're going to see these writers come onto the
picket line. This is day one, of course. But these two sides really seem like they have a lot of work to do to reach a deal Rahel.
SOLOMON: Well, if there's ever any question about how important the writers are. It's that data point there $2 billion impact 3 billion when adjusted
for inflation. Vanessa Yurkevich thank you!
[09:35:00]
And staying with Hollywood and IMAX the big screen movie experience celebrating some big numbers right now, including the highest ever grossing
first quarter, the greatest global market share ever and strong growth across all key metrics it was a great quarter, to say the least.
There are a host of new releases this year, including Indiana Jones and "The Dial of Destiny" and Fast X also known as "Fast and Furious 10". But
it's not just the blockbusters that are bringing in the dollars because about a third of the IMAX box office was actually driven by non-Hollywood
films, and many of its new theater signings are coming from high value international market. So Rich Gelfond is the CEO perfect to have you on
this program Rich, welcome to the program.
RICHARD GELFOND, CEO, IMAX: Thank you, as you were doing the intro, I was thinking exactly that the theme for the first quarter for us was really
international and globalization.
SOLOMON: Absolutely. Well, we talked about it this morning on a programming call. So we're so great to have you today. We're so fortunate to have you
today. Before we talk about the first quarter that I just want to get a response I'm not sure if you saw our previous report on the Writers Guild
strike, what type of impact if any, is that having on IMAX?
GELFOND: I think for the rest of this year, very little, the kind of films we do. Hollywood blockbusters or international films are pretty much all in
the can for this year. So I don't really see an impact. I think if the strike goes on for months and months, you may start to see it have an
impact on 24.
But I think as you talked about in the piece, the short term impact really is a live programming series, that episodic series that are in the middle
of being produced right now. But these movies have been locked for quite a while. So I don't see an impact on us for quite a while.
SOLOMON: OK, good to know. Well, let's just talk about the first quarter. I mean, as I said, a really stellar quarter for IMAX walk us through how you
got there?
GELFOND: So it's really two big pieces. One was the box office in the earnings. And the second part was the signings on the box office in the
earnings. It started off with the reopening of China after the pandemic.
And then Avatar was a big part of driving the box office. The unexpected part was local language films. So about a third of our box office came from
Indian films, Japanese films, Chinese films, not only in their local language, territory, but also playing really strongly in other territories.
And, you know, not to minimize Avatar but looking at "Avatar" set records in a lot of places in Western Europe. So places like France and Germany
really had, you know their best runs of any film. So it was a combination of all that the local language, and really the breakout in Eastern Europe,
Western Europe, and Asia.
The second part of it was signings, which are new territories that we'll go into. And that's theaters that are open in the next one to three years. And
we announced 63 of those through the end of April on our call versus 47 for the whole year, last year. And again, those were mostly outside of North
America and outside of China place like Southeast Asia, France, big deals in Japan and there were some in North America
But again this global theme which is somewhere IMAX's 90 countries we've always gotten is really played out in the short term results and the long
term outlook.
SOLOMON: Yes, and Rich walk me through the calculus for movies as they're deciding for example I think about creed for example, deciding to show in
an IMAX walk me through that calculus?
GELFOND: So generally we do blockbuster Hollywood films things you coming up like Indiana Jones or "The Flasher" "Mission Impossible" or
"Oppenheimer" but we also have a film for IMAX program which is that really premium filmmakers like their films to kind of make a statement and have
kind of transcend their more niche audiences.
And Michael B Jordan and creed thought gee, you know, a sports movies never really been done an IMAX at this scale. If we shoot with IMAX cameras, we
really could create a global event and it worked in the box office for creed three was really good and you know, watching those punches hit an
IMAX is really special. I certainly fell back in my seat. You know, when I saw them.
SOLOMON: It's a different -- it takes the experience to a different level?
GELFOND: It does. You got to be ready for it though. Like I'm not good when the right hook comes at me but it worked.
SOLOMON: Fair enough.
GELFOND: It works very well at the box office. Another thing people wouldn't expect is just last night we announced that a documentary we're
working on with bad robot called Blue Angels about the fine Navy stunt planes we announced the deal with Amazon where they bought the streaming
rights to the movies.
[09:40:00]
So it'll go from IMAX to Amazon streaming. And I think that's another way that we're branching out and collaborating with the streamers, which is,
you know, is kind of new for this year; it used to be a little bit of a tug of war. Now we're working together.
SOLOMON: So watching that space, more sports movies, and perhaps more documentaries. Rich, we don't have a lot of time left. But I do want to get
in two quick questions in terms of where we're seeing growth globally. We know it's not uniform across the globe, but what areas are performing
strongest at our backup pre pandemic levels? And where does the U.S. fall in relation?
GELFOND: You know, I'd say pretty much everywhere right now, but particularly Western Europe, Southeast Asia, and within Western Europe,
France, the UK, Germany are doing very well, the U.S. because a Super Mario Brothers started April in a terrific way.
And Japan is our highest grossing market in the world with almost $2 million per screen. So, you know, we're pretty much tracking to pre
pandemic levels right now. We've got a much bigger market share than we had pre-pandemic it's up 50 percent in the U.S. and about 35 percent in the
rest of the world. So we're really firing on all cylinders right now.
SOLOMON: And Rich I have about 30 seconds left. I know you said our Super Mario Brothers there in terms of the slate moving forward what are you
watching? What are you most excited about?
GELFOND: You know that's like saying which child does you like best? I'm excited about a lot of things. But I'd say particularly, I think your
"Mission Impossible" is going to be terrific "Oppenheimer" with Chris Nolan IMAX always does a disproportionate market share on that Dune, with Danny
Ville -- Indiana Jones has gotten great early buzz, and the flash is kind of come to the front. We saw it at cinema con they showed in that looks
extremely promising Fast 10 coming out soon. Guardians coming out this weekend, you know, as I said, I there's a lot of things in the near term.
SOLOMON: So basically what you said Rich is that you love them all you love all of your children, you love all of your babies?
GELFOND: Well on CNN, I'm going to say that, you know, there are times they all make me happier or less happy. But right now it's very promising.
SOLOMON: OK, very politically correct answer Rich Gelfond the CEO of IMAX. Great to have you thank you.
GELFOND: Thank you so much.
SOLOMON: And coming up, Germany wants to ring in the hands of the fossil fuel age; it's calling for a new global push to cut greenhouse gases. We
are live in Berlin coming up next.
(COMMERCIAL BREAK)
[09:45:00]
SOLOMON: Welcome back to "First Move"! Germany calling for the world to adopt new global targets for the expansion of renewable energy to sharply
cut greenhouse gas emissions this week, Germany along with the UAE, is hosting its annual rounds of international climate change talks.
Representatives from around 40 countries about 40 countries are discussing how to limit global warming to 1.5 degrees Celsius. Fred Pleitgen is live
in Berlin for us. So Fred, walk us through some of the big conversations taking place there.
FREDERIK PLEITGEN, CNN SENIOR INTERNATIONAL CORRESPONDENT: Yes, massive conversations Rahel. And you know we were able to speak to the German
Foreign Minister earlier before the conference today started. And she said one of the things that need to happen is that rich nations need to help
poor nations deal better with the impact of climate change.
That's not combating climate change. That's not trying to decrease the temperatures around the world. That's just dealing with the fallout that is
already there from quiet climate change. And then, as you said, very correctly, she did say that the world also needs a bigger push to bring
renewable not just too industrialized nations but also to nations that aren't industrialized yet.
She seems there says there needs to be a global push for that. And she said, quite frankly, at this point in time, she believes that the world is
failing. Here's what she said.
(BEGIN VIDEO CLIP)
ANNALENA BAERBOCK, GERMAN FOREIGN MINISTER: We all know it's not enough to describe that we're not meeting our targets, we have to say how we want to
change course, to finally get back on the 1.5 degrees path.
(END VIDEO CLIP)
PLEITGEN: The 1.5 degrees path that obviously, is the goal of the nations at COP 28, the big COP 28 that's going to happen later this year in the UAE
and the Germans obviously saying right now the world not on that path.
And you know, one of the things that she mentioned at the conference today, she talked about a horrible drought that's currently going on in Spain,
where right now as we speak, the temperatures are much higher than they even would normally be and there simply isn't any rain. And we were able to
see that up close and the impact that that is having on the climate there and certainly also on the people there as well. Here's what we witnessed.
(BEGIN VIDEO TAPE)
PLEITGEN (voice over): From afar, even a natural disaster can look majestic. But up close, the full impact of the global climate emergency is
clear to see. This is the SAO reservoir near Barcelona, normally one of the largest bodies of freshwater in this part of Spain, but months of drought
and the water levels are so low and the entire medieval village usually underwater has come to light.
PLEITGEN (on camera): The folks here say normally you'd barely be able to see even the tip of the medieval church because it would be almost fully
submerged. But now as you can see, the church is very much on land. And the authorities here fear things will get much worse once the summer's heat
really sets in.
PLEITGEN (voice over): The sound reservoir is already at less than 10 percent capacity. And that's causing hundreds of thousands of acres of
farmland to dry up. All of this wheat is probably lost farmers, Santee Koutoubia (ph) shows me why?
The grain should be milking he said we're in a critical moment. If it doesn't rain, this will end up empty. We should be seeing the grain come up
to here, but it's only like this. If it doesn't rain in the coming week the crop will be zero. But there is no rain in sight and temperatures in Spain
have skyrocketed.
Scientists at the Institute of Agri Food Research and Technology are trying to find ways to make very little water go a longer way. Chief Scientist,
Joan Girona Gomis says like efficiency maximized.
JOAN GIRONA GOMIS, RESEARCHER, IRTA: Taking the most of our drop of water.
PLEITGEN (voice over): Just like the crops the people in this area are also in survival mode. Dozens of towns are without water and need to get it
trucked in. The village customers see it hasn't had any for about a year and residents say they can't even remember the last time it rained. I don't
recall one tells me it's been a long time a year or more without proper rain nothing.
This region of Spain is a breadbasket for all of Europe. And while the authorities say they're building desalination plants to combat the water
crisis, the Head of the Region's Water Authority says life here might change dramatically soon.
SAMUEL REYES, DIRECTOR, CATALAN WATER AGENCY: Sometimes I think about the capacity of the territory I mean, is this a country where we can handle
with the increase of citizens tourist industry farmers agriculture or we should stop.
[09:50:00]
PLEITGEN (voice over): At that point might be closer than some believe. Back at the SAO reservoir authorities are actually draining most of the
remaining water to prevent this precious and ever scarcer resource from getting contaminated by the sludge at the bottom of this once mighty lake.
(END VIDEO TAPE)
PLEITGEN: So that we could really see a Rahel up close the impact that climate change is already having, and obviously the lack of rain and the
lack of water as well on the people there in that region of Spain and because it's such an important place for food in Europe, also on the rest
of Europe as well.
And one of the things that really stuck out was one of the folks that we spoke to said he believes that one of the next big world wars as he put it
could be for fresh water. And that brings us back to the climate conference that we're seeing here in Berlin today. We're also the German Foreign
Minister said she believes that climate change is already a big factor for instability around the world Rahel.
SOLOMON: Well, fascinating Fred. Really interesting to see just the -- in that Spanish farm where crops should be and where that wheat should be, but
where they actually are now in the impact that's already happening on some spinach. Fred Pleitgen thank you!
And coming up next, the latest thrilling Disney ride cannot be found in any amusement park the wild up and down legal battle between Florida and the
entertainment giant taking a new twist. We'll explain coming up next.
(COMMERCIAL BREAK)
SOLOMON: Welcome back! The legal battle between the big D's Disney and DeSantis as far from deescalating, the high profile brawl taking a new
legal turn with a Florida government board now countersuing Disney, Steve Contorno was here with the latest. Steve, look, this has been a long time
coming this started even before Bob Iger came back bring us up to speed.
STEVE CONTORNO, CNN REPORTER: Yes, this is a battle that's been going back and forth since last year really and all stems from a bill that Governor
DeSantis signed into law that restricts how schools teach sexual orientation and gender identity.
Disney objected to the bill. So DeSantis went after their special taxing district. This is a district that has surrounded Disney's theme parks and
gave them the power to basically control their own government essentially they do the roads, the sewage system, and the fire department.
All that as they have operated since the beginning of their theme park while DeSantis has stepped in and said as retaliation for speaking out
against this bill. He's taking away that special power and putting his own people in charge of this district.
Well, Disney at the 11th hour pushed through a bunch of agreements that basically shifted the power to the company. The new board came in
discovered they were essentially powerless. And so they voted last week to nullify those agreements that prompted Disney to sue in federal court and
now this board is suing Disney in a state court.
[09:55:00]
So we have these sorts of dueling lawsuits that suggest that this is going to be fought in the courts now for the months to come. Governor DeSantis
though is not backing down. Yesterday, he addressed this issue during a press conference. Here's what he had to say about what Disney is doing
here.
(BEGIN VIDEO CLIP)
RON DESANTIS, FLORIDA GOVERNOR: It is wrong to for one corporation to basically corrupt the local government run it as their own fiefdom, be
exempt from laws have all kinds of benefits that nobody else has for them to act like they have the ability to veto that basically is putting their
thumb in the eye of the voters of the state.
(END VIDEO CLIP)
CONTORNO: Now, I should mention that fiefdom that Governor DeSantis mentioned that is a power that was given to Disney by the state but
DeSantis has said no more under his watch.
SOLOMON: Steve Contorno not easy to explain almost more than a year of back and forth in less than two minutes. So we appreciate it. Thank you. Good
context of Steve Contorno there. And that is it for the show. I'm Rahel Solomon. Thanks for watching "Connect the World" with Becky Anderson is
next.
(COMMERCIAL BREAK)
[10:00:00]
END
