🐂 Airbnb crackdown

Markets

Stocks in New York City struggled in the oppressive heat at the beginning of the truncated trading week. The prominent stock market indicators likely experienced a decline due to the surging oil prices, which reached a 10-month peak following the unexpected announcement by key oil producers Saudi Arabia and Russia to prolong their supply reductions by an additional three months.

Real-Estate Doom Loop Threatens America’s Banks

In 1979, when George Gleason acquired Bank OZK, the institution had just two branches located in rural Arkansas. Today, this Little Rock-based lender boasts a substantial portfolio of commercial real estate loans, extending its reach to cities like Miami and Manhattan. In fact, Bank OZK is actively participating in financing the construction of a towering office and luxury residential building, standing at an impressive 1,000 feet on Fifth Avenue.

Following a similar strategy, regional banks across the nation have eagerly embraced commercial real estate loans and associated investments in major urban centers throughout the past decade.

Now, with the commercial real estate market experiencing a severe downturn, these trillions of dollars tied up in loans and investments pose a looming threat not only to the banking sector but potentially to the broader economy as well. Moreover, the banks' exposure to this risk is more substantial than commonly acknowledged. There is a concerning possibility of a cascading scenario where losses on these loans compel banks to reduce their lending activities, resulting in further declines in property values and subsequently more significant losses.

Bank OZK, though not retreating from lending activities, has started to observe troubling indicators in the market. For instance, in January, a developer defaulted on a loan of approximately $60 million from Bank OZK due to escalating construction costs. This loan was initially deemed secure because it remained significantly below the property's appraised value of $139 million in 2021. However, a new appraisal in December revealed a reduced property value of $100 million.

Media

Disney, Charter and the fight of the future of TV

If you're disappointed about not being able to watch Duke football's surprising upset against Clemson over the weekend, consider the plight of Daniil Medvedev at the US Open. Despite being a participant in the tournament, he's unable to follow any of the US Open action.

The reason behind this tennis-less and football-less Labor Day weekend for Charter Communications' 15 million cable subscribers, including Medvedev, is a contract dispute between Charter and Disney. Just before the holiday weekend, all Disney-owned TV channels were removed from Charter's Spectrum cable service, leaving subscribers in the dark. Medvedev, in particular, expressed frustration as he couldn't even scout his rivals from his New York hotel room.

This dispute reflects a broader struggle between two major players in the world of entertainment and television: Charter and Disney. Charter aims to include Disney's streaming services (Disney+, ESPN+, and Hulu) for free in its cable packages, a proposal Disney has rejected. Conversely, Disney sought higher licensing fees, but Charter demanded concessions, such as the ability to exclude sports channels from certain packages.

Charter's CEO, Christopher Winfrey, stressed during an investor call that they are at a pivotal juncture, saying, "We're on the edge of a precipice. We're either moving forward with a new collaborative video model, or we're moving on." Given Charter's position as the second-largest cable company in the US, this threat to abandon the traditional linear TV model carries significant weight.

An analyst observed that the media and distribution landscape has been evolving towards this moment for many years. Disney has also been preparing for this scenario, with CEO Bob Iger discussing the potential sale of its cable assets (ABC, FX) and considering a direct-to-consumer approach for ESPN. Disney also leveraged the channel blackout to promote Hulu+ Live TV.

The outcome of this dispute could follow one of two paths: Charter and Disney reach an agreement, potentially setting a precedent for streaming companies partnering with cable providers, or Charter exits the industry, possibly marking the decline of linear TV as we know it, as suggested by The Hollywood Reporter. While Spectrum users were frustrated about missing college football's return, Iger and Winfrey were reportedly in contact, attempting to resolve the issue.

Politics

The FTC readies its Amazon lawsuit

Regulators are reportedly planning to file a lawsuit against Amazon for alleged antitrust violations later this month, as reported by the Wall Street Journal. This legal action would signal the end of an extensive investigation spanning several years into the activities of the corporate giant. The Federal Trade Commission (FTC) is anticipated to target multiple business segments within Amazon, accusing the company of unlawfully suppressing competition and potentially mandating its breakup as a remedy. The forthcoming lawsuit represents a critical juncture for FTC Chair Lina Khan, who gained prominence for her efforts to challenge Amazon's market dominance but has faced a series of recent setbacks in antitrust cases.

Teal Estate

Finding an Airbnb could be tough

We are on the brink of witnessing a revival of Midtown hotel bars in New York City. Recently, a new law has come into effect in the city, potentially eliminating a substantial portion of the approximately 38,500 Airbnb listings in the metropolis. This development could also serve as a model for other cities aiming to regulate properties that have been likened to stores adorned with TJ Maxx decor.

The new law, which Airbnb has described as a "de facto ban" but was unsuccessful in challenging in court, reinforces an existing regulation that permits home rentals for fewer than 30 days only when the host is present on the premises. The updated measure now mandates hosts to register with the city and imposes fines of up to $1,500 per transaction on platforms like Airbnb, Vrbo, and Booking.com if the listing isn't properly registered. Hosts themselves face potential fines of up to $5,000.

As of August 28, the Office of Special Enforcement in NYC reported that 3,250 hosts have submitted applications for city registration, with only 257 approvals granted so far.

The ongoing debate surrounding this law is divided. Critics argue that it effectively favors the hotel industry and could negatively impact homeowners seeking to earn extra income. On the other hand, supporters contend that short-term rentals have strained the limited housing supply and contributed to skyrocketing rent prices.

Looking ahead, while only a small fraction of Airbnb's 2022 revenue came from rentals in the Big Apple (approximately 1%), the company remains concerned that other cities may follow New York City's stringent crackdown. Several major destinations, including San Francisco and Berlin, have already implemented milder restrictions on short-term rentals.

Gaming

New game confirms: Space is big

The highly anticipated action role-playing game, Starfield, is now launching on Xbox, Windows, and Steam. Developed by the renowned Bethesda Game Studios, creators of Elder Scrolls and Fallout, the game is being hailed as an expansive cosmic adventure.

Starfield offers players the opportunity to explore a vast universe featuring over 1,000 planets, both real and fictional, making it, according to NPR, "one of the biggest stories ever told." Within this universe, players can undertake quests, establish outposts, and engage with extraterrestrial beings through an extensive dialogue system boasting 3 million words.

The gaming industry is eagerly anticipating the reception of Starfield, as it marks Bethesda's first original release in 25 years. The blockbuster potential of the game was so significant that Microsoft acquired Bethesda for $7.5 billion two years ago to ensure it could be available on Xbox consoles.

This launch serves as a crucial trial for both Bethesda and Microsoft. Bethesda aims to conquer the technical challenges of crafting a vast virtual world that is realistic, immersive, and free of glitches. Meanwhile, Microsoft is banking on Starfield becoming a major success to justify its strategy of acquiring game studios as it competes with console rivals Sony and Nintendo. The tech giant is currently in the process of persuading regulators to approve its $69 billion bid to acquire Activision Blizzard.