The stakes in the election could not be much higher, as the COVID-19 pandemic rages out of control and the economy struggles to return to life.
The entertainment industry also has a lot riding on the outcome. If Joe Biden is elected, companies could see a bigger stimulus bill and a more aggressive response to the pandemic. They could also face higher taxes and stricter antitrust regulation. President Trump has not laid out a second-term agenda in any detail, but it would likely involve more of the same.
Though most of the focus is on the presidential race, the battle for control of the Senate is almost as important. Biden could win the White House, but his agenda would be largely dead on arrival if he is confronted with a Republican Senate. Should Democrats take control, much will also depend on how willing they are to eliminate the filibuster.
Here’s a rundown of the key issues facing the entertainment industry ahead of Tuesday’s vote.
All Things COVID
Hollywood has slowly, painfully returned to work during a pandemic. But the process hasn’t always been a smooth one and it has come at great financial cost. The number of films and shows in production has been cut in half and the cost of new safety measures, from testing to extra cleanings, has added 10% to 20% to budgets.
Producers are hopeful that a Biden administration will take a more aggressive approach to containing the virus than Trump’s more laissez-faire, leave it to the states strategy. They are hopeful that will result in more testing, masks and other safety wear.
“If Biden wins, there is a sense that every federal resource will be focused on and dedicated to stamping out the pandemic,” says Arshi Siddiqui, partner in public law and policy at Akin Gump.
Studios and filmmakers are looking for more than personal protective equipment, however. Some are hoping that the federal government will figure out some way for them to get insured during the pandemic.
“Costs keep going up and these productions need a backstop at the federal level so they get get up and running again,” says Alissa Miller, a media and entertainment attorney at Akin Gump.
To Bailout or Not to Bailout?
The movie theater industry remains in a coma, as major releases keep getting postponed. Over the late summer and early fall, the National Association of Theatre Owners pushed for the RESTART Act, which would have provided hundreds of billions of dollars to the most distressed industries as part of a broader stimulus package.
But the stimulus bill — and the RESTART Act — went nowhere. Treasury Secretary Steven Mnuchin and House Speaker Nancy Pelosi spent weeks negotiating, but Senate Republicans never got on board. At this rate, it appears that nothing will happen until January at the earliest.
NATO is now advocating for the Save Our Stages bill, a $15 billion measure pushed by the live events industry. That bill would provide grants to companies with less than 500 employees, but would not do anything for larger theater chains or publicly traded companies.
“The solutions proposed in Congress are focused on small businesses,” says Esther Baruh, government relations director at NATO. “Larger companies are also struggling but we have not seen solutions addressing their circumstances.”
If Democrats take control of the Senate, companies can hope for a larger package than if Republicans retain control. But the theater companies are eager to work with representatives on both sides of the aisle.
“This is not a partisan thing,” Baruh said. “This is about saving the theaters.”
Higher Corporate Taxes?
Biden has pledged to roll back much of Trump’s 2017 tax reform, which lowered the corporate tax rate from 35% to 21%. That change saved the major entertainment companies billions of dollars. Biden would hike the rate back up to 28%.
Biden also has a plan — borrowed from Elizabeth Warren and Bernie Sanders — to raise taxes on companies like Amazon and Netflix that have reported paying little to no federal income tax despite high earnings. The Biden proposal would impose a 15% minimum tax on “book income,” meaning that companies could no longer reduce their tax burden to zero by claiming a slew of credits and deductions.
“You can say for sure it’s pretty likely that both companies in general would pay more under a book income tax than under the current tax we have,” says Matt Gardner, senior fellow at the Institute on Taxation and Economic Policy.
Biden would also raise taxes on companies’ foreign income, which would hit entertainment conglomerates that make much of their box office overseas.
The Trump tax law also provided special benefits for the film and TV industry, such as the ability to deduct the full cost of a production upon release. The entertainment industry will keep a close eye on those sorts of details in any Biden reform plan.
But it’s not clear how quickly a Biden administration would move on yet another overhaul of the tax code. The first priority will likely be to stop the pandemic and grow the economy, not raise taxes.
“People are hurting,” says Michele Alexander, a tax attorney at Barnes & Thornburg. “I don’t think there’s going to be a sweeping proposal in the first couple months.”
Mergers & Monopolies
If Trump is reelected, look for him to continue to use antitrust concerns as a cudgel in his battles with Silicon Valley and the Fourth Estate. Trump has generally taken a more corporate-friendly response to mergers and acquisitions activities, particularly if they involve a friend or supporter. Case in point: Trump’s ludicrous and factually-challenged claim that Rupert Murdoch’s decision to sell 21st Century Fox to Disney would create more jobs. It did quite the opposite.
Trump has become more concerned with monopolies when the proposed union involves a business that has rubbed him the wrong way — take for instance, the sale of Time Warner to AT&T, which had to fight off a robust Justice Department challenge that seemed to have had more to do with Time Warner’s ownership of CNN than any debate over the wisdom of vertical integration.
A Biden administration would probably also be inclined to let media and entertainment companies link up, though they might place more conditions on the merger, as the Obama White House imposed on Comcast when it bought NBCUniversal.
“A Biden presidency would more willing to scrutinize these deals than a Trump administration, but it’s an open question if they’d do anything different about M&A and consolidation,” says Sanjukta Paul, assistant professor of law at Wayne State University. “A lot will depend on who ends up on the Federal Trade Commission and their willingness to think in a more progressive direction.”
China, China, China
There isn’t going to be a lot of daylight between a Trump administration and a Biden administration when it comes to China. From trade to piracy to COVID-19, relations between the two countries are souring, as both Trump and Biden have pledged to get tough with the Middle Kingdom on the campaign trail. That means that tensions could continue to rise between China and the United States as new questions arise about restrictions on Chinese social media apps like TikTok or tariffs on goods and services that tech giants need to make smartphones or computers.
“The course is set,” says Caroline Brown, a national security and international trade partner in Crowell & Moring’s Washington, D.C. office. “This is one issue in the trade space where there’s going to be very little variation in approaches regardless of the outcome of the election. China and the United States are dug in at the point and the Cold War over trade and technology is only going to escalate.”
That could be bad news for movie studios, which have been waiting a long time for a new deal with China on new trade terms governing the number of Hollywood films that can gain entry to the country. A deal on quotas was supposed to be reached in 2017, but was never formalized. In the interim, China’s own film industry has blossomed, allowing the country to field home-grown hits like “The Eight Hundred” and “The Wandering Earth,” and diminishing the importance of imported content at the box office. In fact, smaller cities, where much of the new theater construction is taking place, prefer Chinese films to Hollywood content.
“China’s domestic product has dramatically improved,” says Stanley Rosen, a political science professor at USC who specializes in China. “They’ve taken a lot of Hollywood tropes and integrated them into their movies. At the same time, movies like ‘Mulan,’ that were tailored by Hollywood for China haven’t really worked because there’s been a skepticism about other cultures’ attempts to tell their stories.”