WEBVTT - Netflix Earnings and Twitter Wins... For Now 0:00:02.279 --> 0:00:05.640 From the heart of where innovation, money and power collive 0:00:06.400 --> 0:00:10.960 in Silicon Valley and beyond. This is Bloomberg Technology with 0:00:11.000 --> 0:00:26.799 Emily jay I rememerly Chang in San Francisco, and this 0:00:26.840 --> 0:00:29.440 is Bloomberg Technology coming up in the next hour. Well, 0:00:29.840 --> 0:00:31.960 it could have been worse. That's what analysts are saying 0:00:31.960 --> 0:00:36.840 about Netflix results. Shares jumping in late trade despite losing 0:00:36.880 --> 0:00:41.440 almost a million subscribers could add solve the company's problems. 0:00:41.960 --> 0:00:46.320 We will discuss plus Twitter wins for now. A judge 0:00:46.320 --> 0:00:49.479 grants the company's request to fast track its lawsuit against 0:00:49.479 --> 0:00:53.400 Elon Musk. The trial now scheduled to start in October. 0:00:53.760 --> 0:00:57.080 We'll explore this particular judges record and what it tells 0:00:57.160 --> 0:01:01.160 us about which side has a better shot. And as 0:01:01.160 --> 0:01:04.959 a major crypto lender and hedge fund collapse, is regulation 0:01:05.280 --> 0:01:07.920 the answer? The head of US policy of coin Based 0:01:08.000 --> 0:01:10.720 joins us to talk about the way out of the 0:01:10.760 --> 0:01:14.040 ashes of the crypto crash. Let's stay with Netflix now, 0:01:14.040 --> 0:01:17.039 I'm bringing down morgantin, your portfolio manager at sent Novis Trust. 0:01:17.080 --> 0:01:20.320 So Dan, explain this to me. Why are shares up 0:01:20.360 --> 0:01:25.080 if they've still lost almost a million subscribers. Well, it's 0:01:25.120 --> 0:01:27.080 kind of a confusing report, Emily, isn't it. I mean, 0:01:27.080 --> 0:01:28.920 if you think about it, it's kind of a sigh 0:01:28.959 --> 0:01:31.520 of relief, I think by a lot of people coming 0:01:31.560 --> 0:01:35.720 to the numbers. I mean, obviously, the projections going into 0:01:35.800 --> 0:01:39.000 the third quarter below expectations. In terms of number of 0:01:39.000 --> 0:01:41.520 new subscribers. They're saying they're going to add a million. 0:01:41.600 --> 0:01:44.160 The street was looking for one point eight million. They 0:01:44.160 --> 0:01:48.080 did lose less, right than expected in the second quarter. 0:01:48.120 --> 0:01:50.000 I think there were a lot of estimates. Some people 0:01:50.000 --> 0:01:52.080 are saying as many as two million. They came in 0:01:52.160 --> 0:01:55.760 losing seventy thousand. The other thing that's kind of confusing 0:01:55.800 --> 0:01:58.200 to Emily is that if you look at their guidance 0:01:58.240 --> 0:02:01.360 going into revenues and earnings for the third quarter, they 0:02:01.360 --> 0:02:04.000 are also below consensus, and yet the stock was up. 0:02:04.040 --> 0:02:06.000 And the only thing I can think of, Emily, is 0:02:06.040 --> 0:02:09.000 that they're kind of addressing a lot of their issues, right. 0:02:09.040 --> 0:02:12.080 They talked in their shareholder letter about how they're going 0:02:12.120 --> 0:02:15.080 to address the issues with all these people a hundred 0:02:15.120 --> 0:02:17.320 million people you know that are using the service for 0:02:17.400 --> 0:02:20.160 free um and they talked a little bit about free 0:02:20.160 --> 0:02:23.120 cash flow and various other things. So I think maybe 0:02:23.160 --> 0:02:25.880 people are just saying they're addressing their issues. It was 0:02:25.960 --> 0:02:28.400 as worse as we thought, and hopefully things will get 0:02:28.440 --> 0:02:29.799 better in the future. And that's how we have to 0:02:29.880 --> 0:02:32.920 leave it because the stock is up. Let's talk about 0:02:32.919 --> 0:02:36.080 this crackdown on password sharing, because let's be honest, Netflix 0:02:36.080 --> 0:02:38.680 has been giving Netflix away for free for a while 0:02:38.760 --> 0:02:41.560 to a lot of people who just haven't paid up. 0:02:41.760 --> 0:02:43.919 If they cracked down on the passports, how big an 0:02:43.960 --> 0:02:46.080 impact do you think that will actually have in getting 0:02:46.120 --> 0:02:49.960 some of those people to pay up. Well's teteresting him 0:02:49.960 --> 0:02:51.959 because in the shareholder letter they mentioned they're going to 0:02:52.080 --> 0:02:55.079 test two approaches in Latin America and they're going to 0:02:55.200 --> 0:02:57.720 charge to nine a month, and they're going to try 0:02:57.760 --> 0:03:00.160 to work something to try to to get these able 0:03:00.200 --> 0:03:02.040 to start pain. So I'm kind of curious to learn 0:03:02.080 --> 0:03:04.679 a little bit more about that. That seems pretty low 0:03:04.760 --> 0:03:07.440 to me, right tone a month. I pay close to 0:03:07.480 --> 0:03:10.200 twenty dollars a month for my Netflix subscription here in 0:03:10.240 --> 0:03:12.359 the United States. But so it's gonna be kind of 0:03:12.400 --> 0:03:14.359 interesting to see how they roll that out and put 0:03:14.400 --> 0:03:17.680 that together and and try to monetize these people and 0:03:17.760 --> 0:03:19.760 bring them in. How So, I think we need to 0:03:19.800 --> 0:03:21.440 just learn a little bit more about how they're going 0:03:21.480 --> 0:03:24.239 to do it. But that's a huge number, a hundred million, 0:03:25.360 --> 0:03:31.120 So advertising be the answer to Netflix's problems, you know, Emily, 0:03:31.160 --> 0:03:34.160 it's kind of interesting because I'm curious to see how 0:03:34.160 --> 0:03:36.320 that's going to play out. Right, they signed the agreement 0:03:36.320 --> 0:03:39.040 with Microsoft to help them last week. On that. I'm 0:03:39.080 --> 0:03:40.760 just wondering. And I could ask you, because you're a 0:03:40.760 --> 0:03:42.880 big user Netflix, if they got to the point where 0:03:42.920 --> 0:03:47.000 they're offering an add you know, streaming service and there's 0:03:47.000 --> 0:03:50.120 not that many ads, maybe it's every fifteen minutes, which 0:03:50.120 --> 0:03:52.200 is you'd be willing to maybe just say, hey, I'm 0:03:52.240 --> 0:03:54.240 not going to pay the fifteen twenty dollars a month 0:03:54.480 --> 0:03:57.640 and just go straight for the free ad streaming service. 0:03:57.880 --> 0:04:01.000 So that's interesting. And then the other thing component is 0:04:01.040 --> 0:04:03.560 they have two or twenty million people using their system 0:04:03.640 --> 0:04:06.000 right now. How many people do they add to this 0:04:06.040 --> 0:04:09.240 new ad streaming service and do they start competing against 0:04:09.240 --> 0:04:11.760 the like so let's say a Facebook or Google in 0:04:11.880 --> 0:04:15.520 terms of garnering all this revenue through advertising. So I 0:04:15.560 --> 0:04:17.160 don't know how that's going to come together for them. 0:04:17.160 --> 0:04:19.800 They're gonna let us know more and they're introducing some 0:04:19.839 --> 0:04:22.200 new services, I guess in two thousand twenty three, So 0:04:22.600 --> 0:04:24.359 it's going to be interesting to see what happens with 0:04:24.400 --> 0:04:28.880 this new ad streaming Netflix right. Time is precious, and 0:04:28.920 --> 0:04:30.320 so is money down. I mean, I think i'd have 0:04:30.360 --> 0:04:32.600 to look at the numbers and also the ad experience. 0:04:32.640 --> 0:04:34.840 You know, what kind of ads are these? How long 0:04:34.880 --> 0:04:37.479 am I watching them? Are they pleasing? Are they really 0:04:38.120 --> 0:04:41.600 tailored to me? The thing is, and and this point 0:04:41.640 --> 0:04:44.280 has been made. You know, the companies that are brought 0:04:44.360 --> 0:04:49.960 up as competitors Disney Plus, m Hulu, Amazon, HBO. Disney 0:04:49.960 --> 0:04:54.560 Plus isn't necessarily a substitute for Netflix, is it? What 0:04:54.680 --> 0:04:57.000 Dosney Plus is interesting because they have about a hundred 0:04:57.040 --> 0:05:01.679 million subscribers, are the largest competitor next to Netflix. They're 0:05:01.720 --> 0:05:06.040 targeting about two hundred and forty million subscribers by two 0:05:06.120 --> 0:05:08.680 thousand twenty four, which seems like a really big number 0:05:08.760 --> 0:05:11.560 for them. But I think you're right, Emily, Disney Plus 0:05:11.640 --> 0:05:13.800 seems a little bit more different in terms of their 0:05:13.880 --> 0:05:16.719 content than what we find on Netflix. You were talking 0:05:16.760 --> 0:05:20.560 earlier about the various uh, you know, series that they 0:05:20.560 --> 0:05:22.919 have and how people get hooked on them. A little 0:05:22.920 --> 0:05:25.320 bit of a different component as Disney has that huge 0:05:25.760 --> 0:05:28.560 library of movies and content through all the years of 0:05:28.600 --> 0:05:31.240 Disney production, so it is a little bit different. But 0:05:31.320 --> 0:05:33.400 there's no doubt that Disney in terms of number of 0:05:33.400 --> 0:05:37.400 subscribers is the closest in terms of Netflix in terms 0:05:37.440 --> 0:05:39.800 of their having the you know, hundred million, which is 0:05:39.800 --> 0:05:42.120 pretty close to two or twenty million. The rest of 0:05:42.160 --> 0:05:46.000 the other players have much less subscribers. So here's the 0:05:46.000 --> 0:05:49.960 other thing. Is the return on content space spending, paying 0:05:50.000 --> 0:05:54.360 off or dropping off. If Stranger Things is costing reportedly 0:05:54.480 --> 0:06:00.560 thirty million dollars an episode, is that worth it? Yeah? 0:06:00.600 --> 0:06:04.400 It's interesting, Emily. You look at their content expense projection 0:06:04.480 --> 0:06:07.880 for this year, it's about seventeen point nine billion, which 0:06:07.920 --> 0:06:10.680 is pretty much in line with they projected last year, 0:06:10.720 --> 0:06:13.680 which is around seventeen billions. So it seems to me 0:06:13.760 --> 0:06:16.600 like Netflix is getting a little more cautious in regards 0:06:16.640 --> 0:06:19.479 to this attitude We're just going to spend tons of money, 0:06:19.800 --> 0:06:22.120 create tons of content, and we're going to get the 0:06:22.160 --> 0:06:24.400 subscribers and we'll be able to pay for it. Seems 0:06:24.400 --> 0:06:26.840 like they're starting to pull back a little bit in 0:06:26.880 --> 0:06:30.560 regards to their content budgets. And expectations. It's starting to 0:06:30.600 --> 0:06:33.120 be a little bit more careful on margins and so forth. 0:06:33.480 --> 0:06:35.599 So you bring up a good point, where do you 0:06:35.640 --> 0:06:37.960 just keep spending and spending and spending if you're not 0:06:38.000 --> 0:06:41.080 getting the subscriber growth because your subscriber growth is negative. 0:06:41.520 --> 0:06:43.840 Doesn't make sense to keep spending more and more money 0:06:43.880 --> 0:06:45.560 on content. You need to bring it back in a 0:06:45.640 --> 0:06:48.479 little bit and kind of refocus, and it appears that 0:06:48.520 --> 0:06:50.960 they're starting to do that instead of this growth at 0:06:51.000 --> 0:06:52.760 all cost model, which is what they were doing in 0:06:52.760 --> 0:06:55.039 the past. All right, well, we're going to continue to 0:06:55.320 --> 0:06:58.200 digest these Netflix results to have a bit more later 0:06:58.200 --> 0:07:00.440 in the show, Dan Always get to have you here, 0:07:00.600 --> 0:07:05.480 Dan Morgan, Novist Trust. All right, coming up, Twitter gets 0:07:05.480 --> 0:07:08.240 the green light to take Elon Musk to court and fast. 0:07:08.360 --> 0:07:10.680 We will talk about what's next in Twitter v. Musk 0:07:10.760 --> 0:07:15.560 with a Columbia law professor and our very own Kurt Wagner, Mr. 0:07:15.600 --> 0:07:28.160 Is Bloomberg. Round one goes to Twitter. The company was 0:07:28.200 --> 0:07:31.200 granted its request a fast track its lawsuit against Elon 0:07:31.320 --> 0:07:34.040 Musk as he attempts to walk away from the fort 0:07:34.200 --> 0:07:37.760 four billion dollar deal. Delaware Judge Kathleen McCormick set a 0:07:37.840 --> 0:07:41.720 five day trial to start in October. For more, we're 0:07:41.800 --> 0:07:44.880 joined by Eric Talley, Columbia Law School professor and faculty 0:07:45.000 --> 0:07:47.760 co director of its Millstein Center, along with our very 0:07:47.760 --> 0:07:50.320 own Kurt Wagner, who of course covers Twitter for us. 0:07:50.360 --> 0:07:52.760 So what actually happened in court today? And by in 0:07:52.880 --> 0:07:56.360 court I mean virtual corp? The judge actually has COVID, 0:07:56.680 --> 0:07:59.200 Yes she does, so, I was listening on the dial 0:07:59.280 --> 0:08:02.160 in the public die Island, actually, which felt very interesting 0:08:02.280 --> 0:08:04.880 to listen to arguments that way. But both sides kind 0:08:04.880 --> 0:08:08.080 of presented their case. Obviously they had already submitted written, um, 0:08:08.120 --> 0:08:10.120 you know, elements to this. The judge took a little 0:08:10.120 --> 0:08:11.800 bit of time to review and think about things and 0:08:11.800 --> 0:08:15.160 then and issued a pretty quick verdict. You know, she said, 0:08:15.160 --> 0:08:18.120 based on the evidence, based on the arguments that had 0:08:18.160 --> 0:08:20.320 been made, I feel that it makes sense to speed 0:08:20.360 --> 0:08:22.520 this up. Not quite as fast as Twitter wanted. They 0:08:22.520 --> 0:08:25.000 were hoping to do a trial in September, but she 0:08:25.080 --> 0:08:27.640 still thought that, you know, the longer this thing drags out, 0:08:27.720 --> 0:08:30.280 the more chance there is for damage to Twitter's business 0:08:30.280 --> 0:08:32.360 and brand. And as a result, she said, we should 0:08:32.400 --> 0:08:34.480 do this in October. Versus the Musk team wanted to 0:08:34.520 --> 0:08:36.920 wait all the way till February. Now, Professor Tally, you 0:08:36.960 --> 0:08:42.760 actually know the judge here and know her record well. 0:08:43.000 --> 0:08:47.079 I understand she's a seller friendly judge, or at least 0:08:47.120 --> 0:08:50.200 has made seller friendly decisions in the past. What can 0:08:50.240 --> 0:08:53.800 you tell us about her? Yeah, I think she's largely 0:08:53.880 --> 0:08:56.360 right down the middle in terms of her predilections. But 0:08:56.600 --> 0:08:59.280 she's very good. She works harder than just about any 0:08:59.320 --> 0:09:02.480 judge I've ever met, and it's extremely smart. Now, the 0:09:02.720 --> 0:09:06.360 thing to remember is that the Delaware courts have seen 0:09:06.400 --> 0:09:08.920 a fair number of these cases in which buyers get 0:09:08.960 --> 0:09:11.120 cold feet and try to walk away, whether it's because 0:09:11.160 --> 0:09:14.120 of COVID the financial crisis. So in many ways, this 0:09:14.200 --> 0:09:17.400 is the most recent chapter. And Chancellor McCormick actually had 0:09:17.440 --> 0:09:20.840 one of these cases that came up during COVID about 0:09:20.880 --> 0:09:23.400 a year ago, and she did hold for the seller. 0:09:23.480 --> 0:09:25.920 Basically told the buyer, you know what, You're gonna be 0:09:25.960 --> 0:09:29.320 required to go forward with this transaction by the company 0:09:29.360 --> 0:09:31.400 that you're now trying to walk away from. And I 0:09:31.400 --> 0:09:34.400 don't even care that your financing has fallen through because 0:09:34.559 --> 0:09:37.400 you sort of made that happen. You sort of engineered 0:09:37.480 --> 0:09:41.079 or sabotage your own deal. So during the argument today, 0:09:41.120 --> 0:09:45.120 there's a lot of argument from Twitter's lawyers about whether 0:09:45.160 --> 0:09:49.120 Elon Musk had similarly been trying to sabotage the deal. 0:09:49.200 --> 0:09:51.760 Now we haven't gotten to any of those matters yet. 0:09:51.800 --> 0:09:55.160 The key question is whether this deal, this this litigation 0:09:55.240 --> 0:09:57.720 was gonna get fast tracked or put on the slow track. 0:09:57.800 --> 0:10:00.360 And we're definitely on the fast track. While Twitter lawyers 0:10:00.360 --> 0:10:03.280 didn't get exactly what they were hoping for, they ended 0:10:03.360 --> 0:10:05.640 up missing it by only about a couple of weeks, 0:10:05.640 --> 0:10:07.640 and she pushed what they had hoped to be a 0:10:07.679 --> 0:10:11.920 September trial into October. So largely one would chalk this 0:10:12.040 --> 0:10:14.920 up to a victory, at least as of today, to Twitter. 0:10:15.679 --> 0:10:17.480 So the question is how big a victory. I mean, 0:10:17.480 --> 0:10:21.040 you talk about precedent here, but was that other case 0:10:21.080 --> 0:10:24.160 of forty four billion dollar deal, and did it involve 0:10:24.320 --> 0:10:28.840 taking on Elon Musk Unless there are cake decorating companies 0:10:28.880 --> 0:10:32.520 that are worth forty four billion dollars, No, it wasn't. 0:10:32.559 --> 0:10:34.800 This was a small deal. It wasn't even a publicly 0:10:34.840 --> 0:10:37.600 traded company. And so there is a kind of an 0:10:37.640 --> 0:10:40.959 interesting question about whether when the stakes get ratcheted up 0:10:41.000 --> 0:10:44.800 like this, Chancellor McCormick is similarly going to be unsympathetic 0:10:45.280 --> 0:10:49.040 towards a buyer that wants to walk away. However, Uh, 0:10:49.120 --> 0:10:51.640 this particular deal, and everyone knew this because it was 0:10:51.679 --> 0:10:54.160 out there in the public domain. Uh, you know, Elon 0:10:54.240 --> 0:10:57.240 Musk went after Twitter. They were a reluctant seller. They 0:10:57.280 --> 0:10:59.440 finally signed up the deal when he said, hey, I'll 0:10:59.440 --> 0:11:01.800 make this a really sell her friendly deal. I won't 0:11:01.800 --> 0:11:04.920 do any diligence on a bunch of these technical aspects. 0:11:05.120 --> 0:11:07.880 And only after the deal got signed up did he 0:11:08.040 --> 0:11:10.520 start to seem to have problems with bots. And I 0:11:10.559 --> 0:11:13.400 think a lot of people, including Twitter's lawyers, said, you know, 0:11:13.840 --> 0:11:17.000 this is a pretext. This is essentially the beginning of 0:11:17.040 --> 0:11:20.440 an elaborate set of demands that was really intended to 0:11:20.520 --> 0:11:24.760 engineer an exit ramp for Elon must So one of 0:11:24.760 --> 0:11:27.680 the key um claims that he made was, oh, this 0:11:27.800 --> 0:11:29.920 bot problem is bigger than I thought it was going 0:11:29.960 --> 0:11:33.200 to be. But that was never really in the document itself. 0:11:33.240 --> 0:11:35.800 It was never in the agreement itself. It's sort of 0:11:35.840 --> 0:11:38.319 something that he injected into the picture. And I think 0:11:38.360 --> 0:11:40.360 one of the key questions that people were looking at 0:11:40.440 --> 0:11:42.600 today was whether the judge was going to be willing 0:11:42.600 --> 0:11:46.080 to take a long term litigation approach, which would be 0:11:46.120 --> 0:11:48.040 kind of a signal that she might be more willing 0:11:48.080 --> 0:11:51.400 to listen to some of this bought count war, and 0:11:51.440 --> 0:11:55.120 instead she's fast tracted. There's still gonna be arguments about bots, 0:11:55.160 --> 0:11:57.280 don't get me wrong, but they're not going to be 0:11:57.360 --> 0:12:00.040 the sort of blown out thing that Elon must and 0:12:00.120 --> 0:12:02.959 his lawyers wanted. You know, the professor makes a really 0:12:03.000 --> 0:12:04.960 good point. So much has happened you almost forget that 0:12:04.960 --> 0:12:08.720 Twitter didn't want to do this deal in the first place, 0:12:08.720 --> 0:12:11.120 and now here we are. What are you hearing from 0:12:11.160 --> 0:12:13.679 your Twitter sources about what they are going to be 0:12:13.720 --> 0:12:17.640 doing over the next few weeks. Well, obviously there's a 0:12:17.679 --> 0:12:20.679 lot of preparation that will go into this. But I 0:12:20.720 --> 0:12:23.240 think this, you know, as Eric mentioned, like, this is 0:12:23.280 --> 0:12:26.240 a good win for Twitter because it shows that their 0:12:26.360 --> 0:12:29.600 argument is already being well received, right, which I think 0:12:29.679 --> 0:12:31.920 was the big thing. I think they've already sort of 0:12:31.960 --> 0:12:34.719 one a little bit in the court of public opinion here. 0:12:34.760 --> 0:12:37.080 I don't know, I certainly on on my Twitter feed. 0:12:37.200 --> 0:12:38.760 You know, there was a lot of support for Twitter 0:12:38.800 --> 0:12:41.880 from their lawsuit. I've I've certainly seen employees seem to 0:12:41.920 --> 0:12:44.160 be happy with how the company has handled this. So 0:12:44.760 --> 0:12:47.680 I think at this point it's about trying to remove 0:12:47.720 --> 0:12:49.920 a lot of the uncertainty, right because the company has 0:12:49.920 --> 0:12:52.400 been in this weird state for months where they you know, 0:12:52.480 --> 0:12:54.520 they say, hey, it's business as usual, but you can't 0:12:54.559 --> 0:12:57.200 imagine that, you know, you're gonna be putting a six 0:12:57.240 --> 0:12:59.920 months twelve month product roadmap out the door when you 0:13:00.040 --> 0:13:02.440 have Elon Musk covering there. So I think at this 0:13:02.480 --> 0:13:04.120 point again, they want to do this as quick as 0:13:04.120 --> 0:13:06.840 possible so that they can get back to doing things 0:13:06.840 --> 0:13:11.280 like shipping products, doing things like, you know, improving the business. Indeed, 0:13:11.440 --> 0:13:15.600 um Professor Tally, how do you think Elon Musk's larger 0:13:15.600 --> 0:13:17.839 than life personality, the fact that he has a hundred 0:13:17.840 --> 0:13:21.040 million Twitter followers himself. I mean, there's a pretty uh, 0:13:21.080 --> 0:13:22.800 you know, if if we're talking about the court of 0:13:22.840 --> 0:13:25.560 public opinion, Elon Musk has a lot of fans. How 0:13:25.559 --> 0:13:29.120 do you think that will influence this trial? Well, there's 0:13:29.120 --> 0:13:31.160 a sense in which it already has. One of the 0:13:31.280 --> 0:13:34.320 arguments that Twitter's lawyers made today was that you just 0:13:34.360 --> 0:13:37.880 can't leave this deal in limbo when it may just 0:13:37.960 --> 0:13:40.040 be thrown into utter chaos if we're going to be 0:13:40.080 --> 0:13:42.920 going into another year's worth of litigation, and that may 0:13:42.920 --> 0:13:45.959 be in part due to their arguments about the amount 0:13:45.960 --> 0:13:49.680 of damage that Elon must could potentially do here. Now, 0:13:49.800 --> 0:13:52.640 it's definitely true that that you know, there is this 0:13:52.880 --> 0:13:55.480 There has long been this kind of question about whether 0:13:55.600 --> 0:13:58.400 Mr Musk has some sort of I don't know, Elon 0:13:58.520 --> 0:14:02.040 exceptionalism that wouldn't that wouldn't make him bound to the 0:14:02.080 --> 0:14:04.559 same rules that applied everyone else. This is an early 0:14:04.640 --> 0:14:07.560 shot across the bow that suggests that this judge in 0:14:07.559 --> 0:14:10.160 particular is willing to treat this case just like she 0:14:10.200 --> 0:14:13.120 would any other case. And when you've got a deal 0:14:13.160 --> 0:14:16.640 that has gotten signed up on very seller friendly terms 0:14:16.880 --> 0:14:20.400 with very little due diligence in what seems like, at 0:14:20.480 --> 0:14:23.400 least at present, to be a bit of a drummed 0:14:23.440 --> 0:14:26.040 up reason to want to walk away. Uh, you know 0:14:26.080 --> 0:14:30.120 that the the musque team probably has an uphill battle 0:14:30.280 --> 0:14:32.560 to climb here. Uh you know, I think there is 0:14:32.600 --> 0:14:35.560 a real sense as well that Delaware courts view this 0:14:35.680 --> 0:14:38.360 is kind of their um look in the mirror moment. 0:14:38.480 --> 0:14:40.920 They are widely reputed to be, and they embraced this 0:14:41.240 --> 0:14:43.680 as the place where sort of grown ups go to 0:14:43.680 --> 0:14:46.280 to to transact with one another. And if you put 0:14:46.280 --> 0:14:48.640 something down on paper and you promise it, um, they're 0:14:48.640 --> 0:14:51.040 gonna hold you to it. And so on some level, yes, 0:14:51.120 --> 0:14:54.440 Elon Musk has a has a larger than life presence, 0:14:54.720 --> 0:14:57.760 but that also has a countervailing effect that the Delaware 0:14:57.800 --> 0:15:01.360 courts might have an opportunity to say, even for this person, 0:15:01.840 --> 0:15:05.480 we're going to hold into his agreements. Fascinating. Well, I'm 0:15:05.520 --> 0:15:07.880 sure there will be many more twists and turns between 0:15:07.880 --> 0:15:12.000 now and October. Eric Talley, Columbia Law School Professor, thank you, 0:15:12.080 --> 0:15:14.360 as well as our very own Kurt Wagner, who has 0:15:14.360 --> 0:15:26.640 a day in Delaware court in October. A newly released 0:15:26.640 --> 0:15:30.720 memo is raising alarm about competitive practices in Silicon Valley 0:15:30.720 --> 0:15:34.480 and helping to shape regulation. An internal document prepared for 0:15:34.680 --> 0:15:39.800 Mark Zuckerberg by Facebook executives, now released by the House, 0:15:40.200 --> 0:15:42.800 reveals the company is more worried about threats from its 0:15:42.800 --> 0:15:47.680 own products like Instagram and What'sapp then threats from rivals. 0:15:47.680 --> 0:15:51.080 This memo has helped lawmakers put together the American Innovation 0:15:51.160 --> 0:15:55.480 and Choice Online Act that would curb some of Meta's powers. 0:15:55.520 --> 0:15:59.160 Here to discuss Bloomberg's Lee and Nilan who covers regulation 0:15:59.440 --> 0:16:01.640 in washing too, and so Lea tell us exactly what 0:16:01.680 --> 0:16:05.240 was in this memo and why it matters. Yeah, So 0:16:05.360 --> 0:16:07.840 this memo was written in twenty eight keen by a 0:16:08.000 --> 0:16:13.640 senior data scientist and economist at Facebook, Thomas Cummeningham, and 0:16:13.680 --> 0:16:18.320 he actually analyzed the ways in which Facebook's own products 0:16:18.360 --> 0:16:20.960 compete with each other, So the ways in which Instagram 0:16:20.960 --> 0:16:23.960 and Facebook compete against each other, the ways in which 0:16:24.240 --> 0:16:28.360 Facebook Messenger and What'sapp compete against each other, and how 0:16:28.560 --> 0:16:32.480 um those were growing or shrinking. And that was really 0:16:32.520 --> 0:16:35.560 interesting because this entire memo is about how Facebook's own 0:16:35.640 --> 0:16:39.200 products are really cannibalizing each other and seen as like 0:16:39.280 --> 0:16:43.160 the biggest competitors against Facebook's main product instead of any rivals. 0:16:43.200 --> 0:16:47.000 There aren't that many external companies that are even mentioned 0:16:47.000 --> 0:16:49.760 in this memo, you know, like YouTube gets a very 0:16:49.760 --> 0:16:52.600 small shout out, Apple's I message gets a very small 0:16:52.600 --> 0:16:55.520 shout out. TikTok isn't even mentioned in here, and that 0:16:55.560 --> 0:16:58.640 was what is so was so interesting to house investigators 0:16:58.760 --> 0:17:02.520 is it's sort of backs up the idea that Facebook 0:17:02.520 --> 0:17:05.440 had bought these properties to sort of extend its monopoly 0:17:05.720 --> 0:17:11.639 in social networking. So what's the impact that this memo 0:17:11.720 --> 0:17:17.480 could have on pending regulation and impact essentially on Facebook's 0:17:17.560 --> 0:17:20.080 laws that Facebook is ultimately potentially going to have to 0:17:20.119 --> 0:17:24.520 abide by. Yeah, so Congress right now is considering this legislation, 0:17:24.640 --> 0:17:27.840 the American Innovation and Choice Act, that would prevent some 0:17:27.880 --> 0:17:31.119 of the big tech platforms like Facebook from self preferencing, 0:17:31.200 --> 0:17:35.960 so giving advantages to its own products over those of rivals. 0:17:36.000 --> 0:17:38.359 So one thing that Facebook does, for example, is make 0:17:38.400 --> 0:17:41.359 it really easy to cross post between Facebook and Instagram, 0:17:42.080 --> 0:17:45.400 right this legislation would force them to make it easier 0:17:45.440 --> 0:17:48.120 for other platforms to also cross post to their own 0:17:48.480 --> 0:17:53.719 to their social networks. Um, this UH legislation has advanced 0:17:53.800 --> 0:17:55.679 in both the House and the Senate, but it still 0:17:55.720 --> 0:17:58.040 needs a floor vote, and so there's been a lot 0:17:58.080 --> 0:18:00.600 of pressure um in the Senate and for particular, for 0:18:00.640 --> 0:18:02.440 this to come up for a vote before the August 0:18:02.440 --> 0:18:05.480 recess and lawmakers sort of leave for the month and 0:18:05.520 --> 0:18:07.359 then when they come back they really are focused on 0:18:07.400 --> 0:18:09.520 the November elections. So this is seen as like the 0:18:09.600 --> 0:18:14.080 really large and last window for Congress to actually act 0:18:14.119 --> 0:18:16.560 on the NHS legislation if something is going to happen 0:18:16.600 --> 0:18:21.320 this year quickly any response from Facebook about this, I 0:18:21.320 --> 0:18:23.320 mean Facebook is actually the one that handed over the 0:18:23.320 --> 0:18:26.520 memo to the House in the first place. Yeah, they said, 0:18:26.560 --> 0:18:29.879 you know this is old news, this is from you know, 0:18:30.080 --> 0:18:32.840 the landscape has shifted since then. They do like to 0:18:33.000 --> 0:18:35.119 bring up now you know that TikTok Is is a 0:18:35.200 --> 0:18:38.280 very emerging rival, and um, you know they think that 0:18:38.320 --> 0:18:41.760 there's still a lot of competition in the social networking space. 0:18:43.000 --> 0:18:46.080 All Right, something will continue to follow Bloombergs Leon Nilan, 0:18:46.240 --> 0:18:58.240 thank you for that context. Welcome back to bloomber Technology 0:18:58.240 --> 0:18:59.840 and Emily changing in San Francisco. I want to get 0:18:59.880 --> 0:19:02.440 back to our top story, and that is Netflix share 0:19:02.520 --> 0:19:07.680 still jumping after hours after the streaming giant reported lower 0:19:08.080 --> 0:19:10.920 a lower than expected loss in subscribers in the second quarter, 0:19:10.960 --> 0:19:15.879 but the forecast still slower than expected recovery in the 0:19:16.000 --> 0:19:20.720 current quarter. Ross Gerber, CEO of Gerbert Kawasaki, joins us. Now, Ross, 0:19:21.040 --> 0:19:23.040 do you like what you see? I know you're a 0:19:23.040 --> 0:19:26.639 big Netflix holder, but here we are having lost another 0:19:26.720 --> 0:19:31.240 million subscribers. Well, yes and no, I mean obviously losing 0:19:31.280 --> 0:19:34.840 subscribers is not a great headline, but you have to 0:19:34.880 --> 0:19:37.320 look at it in the context of obviously rising prices 0:19:37.359 --> 0:19:38.960 in the United States and the fact that they don't 0:19:39.000 --> 0:19:41.560 have a way to monetize people who don't want to pay, 0:19:41.560 --> 0:19:45.880 which is turns out about people who watch Netflix don't pay, 0:19:45.960 --> 0:19:48.520 and that's really why I think people are so bullish. 0:19:48.600 --> 0:19:51.200 Is the strategy that Netflix is going to be employing 0:19:51.280 --> 0:19:54.480 to get these people to pay is a two pronged 0:19:54.520 --> 0:19:56.680 strategy that I think will be very effective. One is 0:19:56.720 --> 0:19:59.680 the ad supported tier, which I think is a wonderful 0:19:59.680 --> 0:20:02.719 opera tunity to address a global market if you're an 0:20:02.720 --> 0:20:06.879 advertiser and a very engaged audience. So as an advertiser myself, 0:20:06.920 --> 0:20:09.840 I would definitely put ads on Netflix, and then secondly 0:20:10.240 --> 0:20:13.560 um from getting some add on sub revenue from the 0:20:13.600 --> 0:20:16.800 people who use their mom's accounts. So you know, essentially 0:20:16.880 --> 0:20:19.520 this is a wake up call to millennials across America 0:20:19.840 --> 0:20:21.520 that they're going to have to watch ads if they 0:20:21.560 --> 0:20:23.479 don't want to pay for Netflix or their mom can 0:20:23.520 --> 0:20:25.960 pay another couple bucks a month. But the days of 0:20:26.040 --> 0:20:30.000 free streaming are definitely over for Netflix. What's your take 0:20:30.160 --> 0:20:34.840 on their content spending strategy. Yes, there are huge hits, 0:20:34.840 --> 0:20:37.200 they spend a lot on those hits, But it seems 0:20:37.240 --> 0:20:41.680 like Netflix makes a lot of stuff. Well, when you're 0:20:41.720 --> 0:20:45.280 serving the world, essentially, you have a huge audience to 0:20:45.359 --> 0:20:48.240 make happy, you know, so like a lot of content 0:20:48.320 --> 0:20:51.359 they make is really for niche audiences one way or 0:20:51.359 --> 0:20:53.720 another that they're trying to serve all throughout the world. 0:20:54.119 --> 0:20:56.760 But you have to look at it from this, you know, 0:20:56.840 --> 0:20:58.960 like how much goes out and how much comes in 0:20:59.160 --> 0:21:02.360 versus and what they get for what they're spending. And 0:21:02.400 --> 0:21:03.919 I think one of the things in the report that 0:21:03.960 --> 0:21:06.720 I found really interesting was the fact that Netflix is 0:21:06.720 --> 0:21:09.400 now getting to a point where they're amortizing the same 0:21:09.440 --> 0:21:12.439