WEBVTT - The Fed Decides; Warner Bros. Bidders Brace for a Fight 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.920 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:22.000 on Apple CarPlay or Android Auto with the Bloomberg Business App. 0:00:22.360 --> 0:00:25.680 Listen on demand wherever you get your podcasts, or watch 0:00:25.760 --> 0:00:27.040 us live on YouTube. 0:00:27.080 --> 0:00:29.360 We are thrilled to start this morning and all through 0:00:29.360 --> 0:00:33.239 the day fed coverage with Francis Donald. Incredibly strong is 0:00:33.320 --> 0:00:37.320 chief economist at RBC Capital Markets that can't say enough 0:00:37.320 --> 0:00:41.000 about the acuity, particularly from the border from Canada over 0:00:41.080 --> 0:00:45.159 to the US for North America is well. I'm going 0:00:45.240 --> 0:00:48.199 to make two observations. The money market fund used to 0:00:48.200 --> 0:00:51.320 be four point x even five percent. The money market 0:00:51.360 --> 0:00:54.400 fund is down three point six three point seven percent. 0:00:54.680 --> 0:00:58.240 And the other observation is a landa GDP now. The 0:00:58.320 --> 0:01:02.000 GDP now is a stunning three point five percent. Why 0:01:02.040 --> 0:01:05.000 in God's name are we cutting interest rates? Tom? 0:01:05.040 --> 0:01:07.000 If I woke up this morning and I'd been in 0:01:07.000 --> 0:01:09.400 a coma and all I had was the data, I 0:01:09.440 --> 0:01:12.560 would think, well, this Federal Reserve must be neutral or 0:01:12.600 --> 0:01:16.399 hawkish heading into this period. They are in an environment 0:01:16.440 --> 0:01:20.640 where inflation has been above target for fifty five months, 0:01:20.880 --> 0:01:24.080 the unemployment rate is extraordinarily tight. In fact, there's only 0:01:24.120 --> 0:01:26.440 two times in history, going back to the nineteen seventies, 0:01:26.480 --> 0:01:29.199 when the unemployment rate has been this tight. What happened 0:01:29.240 --> 0:01:32.560 to the concept of normalizing and growth is fine. So 0:01:32.720 --> 0:01:34.920 what I want to hear from Chair Powell today is 0:01:35.240 --> 0:01:36.560 why are you cutting the other. 0:01:36.360 --> 0:01:38.920 Side of the argument. People are saying cut cut, let's go, 0:01:39.040 --> 0:01:39.760 let's go, let's go. 0:01:39.840 --> 0:01:42.960 A hasset Myron Frankly, A lot of other people as 0:01:43.000 --> 0:01:44.600 well state their case. 0:01:45.040 --> 0:01:47.960 Well, the unemployment rate is moving in the quote unquote 0:01:48.040 --> 0:01:52.640 wrong direction, and historically labor markets move like forgive the 0:01:52.640 --> 0:01:56.400 Canadian reference, in a hockey shape direction, which is that 0:01:56.680 --> 0:02:00.160 when they weaken, they tend to weaken aggressively and quickly. 0:02:00.360 --> 0:02:01.320 Except that this. 0:02:01.280 --> 0:02:03.840 Labor market is a very different labor market than what 0:02:04.000 --> 0:02:04.480 we see. 0:02:05.000 --> 0:02:05.600 The game is. 0:02:05.640 --> 0:02:08.440 Different with the stupid bendy sticks now that break all 0:02:08.480 --> 0:02:12.079 the time. Yes, firstus the old days of Victoriaville's and 0:02:12.200 --> 0:02:13.560 CCM five stripes. 0:02:13.800 --> 0:02:18.200 If it's I agree with you, both literally and metaphorically 0:02:18.240 --> 0:02:21.320 when it comes to economic data, which is that the 0:02:22.280 --> 0:02:26.519 hockey sticks are indeed broken for a variety of reasons, 0:02:26.600 --> 0:02:29.919 and I do not expect this unemployment rate to move 0:02:29.960 --> 0:02:32.600 in a hockey shaped type of direction, And in fact, 0:02:32.600 --> 0:02:34.920 I would say, could we maybe work through lunch and 0:02:34.960 --> 0:02:37.840 look at the subcomponents of the unemployment rate, which will 0:02:37.880 --> 0:02:40.680 tell you that the unemployment rate for the prime age 0:02:40.680 --> 0:02:44.280 workers has been relatively stable and really the rise is 0:02:44.320 --> 0:02:46.320 coming from twenty to twenty four year olds. Are we 0:02:46.320 --> 0:02:48.440 cutting rates for twenty twenty four year olds? That's fine, 0:02:48.600 --> 0:02:49.799 but I want to hear. 0:02:49.720 --> 0:02:51.359 That should we do more hockey talk? 0:02:51.480 --> 0:02:55.559 Yeah? Absolutely, like the hockey references. That's all good, Francis. 0:02:55.760 --> 0:02:57.600 All right, let's assume we get the rate cut today. 0:02:57.800 --> 0:03:00.560 What do you think the FED does in twenty twenty six, Well. 0:03:00.400 --> 0:03:01.239 It depends. 0:03:01.600 --> 0:03:03.200 You know, I'm going to be old school on this 0:03:03.280 --> 0:03:05.919 fall and say it depends what the data does in 0:03:05.960 --> 0:03:09.160 twenty twenty six. I am feeling a little introspective that 0:03:09.280 --> 0:03:11.760 I used to spend so much time parceling out FED 0:03:11.800 --> 0:03:14.480 talk because the FED was such a large input into 0:03:14.520 --> 0:03:19.040 the economic outlook. But perhaps it's my now growing old age. 0:03:19.040 --> 0:03:20.600 I didn't have a birthday this weekend, but I do 0:03:20.680 --> 0:03:26.440 have a milestone one coming up, and increasingly I do 0:03:26.520 --> 0:03:29.080 increasingly believe that the data will lead the story. And 0:03:29.120 --> 0:03:31.440 while there are biases that exist within the FED. They're 0:03:31.480 --> 0:03:34.880 probably within a reasonable margin of error. So one meeting 0:03:35.200 --> 0:03:37.840 ahead or before twenty five basis points here or there. 0:03:38.040 --> 0:03:40.840 And the really big problem heading into twenty twenty six is, frankly, 0:03:40.880 --> 0:03:43.080 we're still missing a big chunk of twenty twenty five. 0:03:43.360 --> 0:03:46.080 This Fed's going to this meeting with only real clarity 0:03:46.120 --> 0:03:48.360 on where we were up until September, and I usually 0:03:48.360 --> 0:03:51.200 were about a month delayed, but we're three months delayed, 0:03:51.400 --> 0:03:53.760 and so between now and January we were going to 0:03:53.840 --> 0:03:57.360 get a boatload of more data, three jobs reports, two 0:03:57.360 --> 0:03:59.920 inflation prints, a lot more retail sales. 0:04:00.000 --> 0:04:00.640 Twenty twenty six. 0:04:00.720 --> 0:04:04.480 Clarity is going to become better as we head into 0:04:04.600 --> 0:04:06.800 the end of January, but I will still say I 0:04:06.920 --> 0:04:10.520 cannot believe that we are still not starting every conversation with. 0:04:10.440 --> 0:04:11.640 Respect to tariff policy. 0:04:11.680 --> 0:04:13.080 We are still in the midst of a once in 0:04:13.200 --> 0:04:16.640 one hundred year trade shock. We have not yet seen 0:04:16.640 --> 0:04:18.240 the full effects of that, and we don't even know 0:04:18.279 --> 0:04:21.039 the final trade policies that are coming through going to 0:04:21.040 --> 0:04:21.799 be really meaningful. 0:04:21.880 --> 0:04:24.120 I'm not sure we're ever going to know them. What 0:04:24.240 --> 0:04:27.039 is the view of terrass from Canada, Because you guys 0:04:27.040 --> 0:04:28.719 are kind of a big trading partner for the US. 0:04:28.800 --> 0:04:31.320 The last I heard, we are the primary trading partner. 0:04:31.400 --> 0:04:32.480 Thank yeah. 0:04:32.560 --> 0:04:36.359 So really sector specific, and I think that actually is 0:04:36.400 --> 0:04:40.040 a good microcosm for both the US and Canadian economies 0:04:40.080 --> 0:04:42.599 is that this trade shop has been a very sexual 0:04:42.680 --> 0:04:45.679 and regional shock. So if you look in Canada, for example, 0:04:45.760 --> 0:04:49.200 there are autos and steel and aluminum that have been 0:04:49.520 --> 0:04:52.200 impacted to a certain extent, and in the United States, 0:04:52.200 --> 0:04:55.359 same story, which is trade related. Sectors are shedding jobs, 0:04:55.400 --> 0:04:59.159 but they're being offset pretty substantially by the healthcare sector 0:04:59.200 --> 0:05:01.680 that is growing. And so the trade shop for me 0:05:01.760 --> 0:05:05.279 has been a reminder that one GDP story, one inflation story, 0:05:05.320 --> 0:05:08.160 one consumer story is no longer relevant and are telling 0:05:08.200 --> 0:05:10.560 the real stories. And while we like to think that 0:05:10.720 --> 0:05:13.240 one forecast on one sheet of paper will guide all 0:05:13.279 --> 0:05:17.000 investment decisions, you have to reincreasingly bottom up and thinking 0:05:17.000 --> 0:05:19.520 about watch sectors are being impacted, and that's the real 0:05:19.560 --> 0:05:22.360 tariff impact that gets lost amidst the what is your 0:05:22.360 --> 0:05:24.440 CPI forecast with respective tarif policy? 0:05:24.480 --> 0:05:27.640 Bloomberg surveillance across the nation, across Canada as well with 0:05:27.839 --> 0:05:30.360 US Francis Donald RBC, a lot of other good guests 0:05:30.880 --> 0:05:34.960 coming up here to really flesh out this really interesting 0:05:35.160 --> 0:05:38.320 nuanced FED day. And as Francis and Paul mentioned, we're 0:05:38.360 --> 0:05:41.080 a little blind heer on economic data. Maybe it's not 0:05:41.160 --> 0:05:43.720 as blind as six weeks ago, but we're blind. And 0:05:43.760 --> 0:05:45.880 we get a bunch of data coming up on Serious 0:05:46.040 --> 0:05:49.479 XM Channel one twenty one, Good Morning Canada. And we 0:05:49.680 --> 0:05:54.120 also say on YouTube, subscribe to Bloomberg podcast. Okay, so 0:05:54.160 --> 0:05:56.520 we're going to get a meeting and he's going to 0:05:56.560 --> 0:05:58.440 basically say what you said. We're going to get a 0:05:58.480 --> 0:06:02.120 lot of data here. It's a toggle switch. We're going 0:06:02.200 --> 0:06:07.320 to be December twenty nine, December twenty seven. OMG Powell 0:06:07.400 --> 0:06:10.440 was brilliant or OMG's a dummy? I mean, if that's 0:06:10.440 --> 0:06:11.360 simple right. 0:06:11.360 --> 0:06:13.680 Well, as Powell has told us, there is no risk 0:06:13.720 --> 0:06:16.760 free path. The one thing I'll say is that there 0:06:16.800 --> 0:06:19.280 is if you do have a buyas towards cutting, and 0:06:19.320 --> 0:06:21.920 this Central Bank does have a bias towards that they 0:06:22.360 --> 0:06:24.520 have expressed in multiple different ways that they want to 0:06:24.520 --> 0:06:26.640 be closer to neutral. Now is your window. 0:06:26.920 --> 0:06:27.440 You have a. 0:06:27.360 --> 0:06:29.839 Window where actually the lack of data has given you 0:06:29.920 --> 0:06:32.960 more optionality, but that window will close. 0:06:33.000 --> 0:06:33.960 It will close by. 0:06:33.839 --> 0:06:36.839 February when inflation starts to move much higher, and you 0:06:36.920 --> 0:06:39.919 don't see that material duration in the deterioration in the labor. 0:06:39.760 --> 0:06:43.479 Markt what does your own Powell do today for small 0:06:43.520 --> 0:06:44.600 business in America? 0:06:44.720 --> 0:06:46.600 Like the Palace which is just getting by? 0:06:46.839 --> 0:06:49.000 Well, I got the wrong morning invite. It sounds like 0:06:49.080 --> 0:06:52.719 right off the top, but I think that very little. 0:06:52.920 --> 0:06:55.320 And as I said earlier, we used to talk a 0:06:55.360 --> 0:06:58.920 lot about how FED policy was a major input into 0:06:59.000 --> 0:07:02.200 the economy, but this is economy is decreasingly rate sensitive 0:07:02.240 --> 0:07:05.360 on a go forward basis. The argument that we're going 0:07:05.400 --> 0:07:07.279 to hear from the Fed is that the labor market 0:07:07.480 --> 0:07:12.080 is deteriorating and therefore probably we're in restrictive policy. But 0:07:12.200 --> 0:07:15.000 who is policy restrictive for right now? And if we 0:07:15.040 --> 0:07:17.480 ease it by twenty five basis points, will you see 0:07:17.520 --> 0:07:20.640 material changes? Our point has been that the real pain 0:07:20.880 --> 0:07:23.560 of affordability and the real pain of prices and what's 0:07:23.600 --> 0:07:27.080 weighing on small businesses is coming from things like tariffs, 0:07:27.360 --> 0:07:30.520 not restrictive rate policy. So rate cuts today are like 0:07:30.600 --> 0:07:33.160 taking a tail and all for a broken arm. It'll help, 0:07:33.200 --> 0:07:34.280 but it's not going to curry. 0:07:34.120 --> 0:07:38.200 You to Thailand al yesterday for a birthday. Tell twelve seconds. 0:07:38.200 --> 0:07:40.040 Are the bond vigilantes out? 0:07:41.000 --> 0:07:43.600 The bond vigilantes are always out, But where are they 0:07:43.640 --> 0:07:46.440 on the curve is maybe the more important question. And 0:07:46.760 --> 0:07:49.040 I suspect that they will be more present as we 0:07:49.120 --> 0:07:51.360 head into February March, when that inflation data starts to 0:07:51.360 --> 0:07:51.560 take it. 0:07:51.640 --> 0:07:54.760 Oh yet, folks, I promise into the December, into the 0:07:54.800 --> 0:07:57.080 beginning of the year, we will give you more information 0:07:57.560 --> 0:08:01.120 on the nuances of what Francis Donald calls the spread market. 0:08:01.320 --> 0:08:05.560 There's some huge dynamics going on right now. Francis Donald 0:08:05.600 --> 0:08:09.040 with us with OURBC. Thank you so much for joining us. 0:08:09.200 --> 0:08:09.920 Stay with us. 0:08:10.160 --> 0:08:13.400 More from Bloomberg Surveillance coming up after this. 0:08:20.640 --> 0:08:24.200 You're listening to the Bloomberg Surveillance podcast. Catch us live 0:08:24.280 --> 0:08:27.440 weekday afternoons from seven to ten am Eastern Listen on 0:08:27.520 --> 0:08:31.200 Applecarplay and Android Auto with the Bloomberg Business app, or 0:08:31.320 --> 0:08:32.920 watch us live on YouTube. 0:08:33.080 --> 0:08:36.000 When you hear me say we protect the copyright of 0:08:36.040 --> 0:08:39.640 all of our guests, we take it very, very seriously. 0:08:40.080 --> 0:08:42.320 I have in front of me a coveted five page 0:08:42.320 --> 0:08:47.200 note from Moffatt and Nathanson in there. Just wonderful, Robert Fishman. 0:08:47.360 --> 0:08:52.360 It's loaded with global Wall Street knowledge on this media merger. 0:08:52.679 --> 0:08:55.920 We're thrilled at. Robert Fishman joins us right now, Robert, 0:08:55.960 --> 0:08:58.800 I went right to exhibit too, which is the deal 0:08:58.880 --> 0:09:02.720 valuation of Warner Brothers. It's three bar charts, folks, and 0:09:02.800 --> 0:09:06.600 right in the middle is run rate synergies. I don't 0:09:06.640 --> 0:09:10.720 buy for a minute anything, but whatever's going to get done, 0:09:11.120 --> 0:09:15.280 there's going to be synergies way larger than what's published now. 0:09:15.400 --> 0:09:16.319 Am I right on that? 0:09:17.960 --> 0:09:21.360 So I assume you're first talking about the Netflix did 0:09:21.640 --> 0:09:25.800 if we want to start there, and so, yes, I 0:09:25.840 --> 0:09:28.240 think the answer to your question is that there's likely 0:09:28.280 --> 0:09:33.040 to be more synergies from a Netflix Warner Brothers combination. 0:09:33.640 --> 0:09:37.559 I think there's you bound to be some cost efficiencies 0:09:37.600 --> 0:09:40.880 when I'm thinking about the programming spend and content spending 0:09:40.920 --> 0:09:44.440 of putting those two companies together. But that's that's where 0:09:44.440 --> 0:09:47.360 the company has started in terms of laying out what 0:09:48.120 --> 0:09:50.520 the cost energies are for this deal. 0:09:50.559 --> 0:09:53.400 Using the pro ratio evy to EB. I learned this 0:09:53.480 --> 0:09:56.199 from Michaels. I know the only reason I know it. 0:09:56.559 --> 0:10:00.440 Robert Fishman if you get synergies over six billion, do 0:10:00.559 --> 0:10:05.479 you get ev to ebit which proves valuable for Netflix shareholders. 0:10:07.400 --> 0:10:09.800 So let's let's break this down. 0:10:09.960 --> 0:10:14.240 So what Netflix has said so far is two to 0:10:14.320 --> 0:10:19.400 three billion dollars of cost energies. Paramount Skydance has thrown 0:10:19.440 --> 0:10:23.040 out the six billion dollar cost energy number because they 0:10:23.040 --> 0:10:28.120 are also buying the Global Networks portfolio. So the numbers 0:10:28.120 --> 0:10:32.440 aren't really apples to apples because you have to clearly 0:10:33.000 --> 0:10:37.800 understand that when putting the Paramount Skydance portfolio of cable 0:10:37.840 --> 0:10:42.000 networks together along with the Warner Brothers portfolio of networks, 0:10:42.040 --> 0:10:45.240 that there will be much larger cost energies when thinking 0:10:45.240 --> 0:10:49.440 about that versus Netflix, which is only just bidding on 0:10:49.760 --> 0:10:53.360 the streaming and studio assets in Warner Brothers. So again, 0:10:53.600 --> 0:10:56.960 it's not exactly apples to apples when comparing the two numbers. 0:10:57.080 --> 0:11:00.160 Hey, Rob, you know talking to some investors, heare One 0:11:00.160 --> 0:11:03.480 of the narratives I'm getting is for Netflix, this is 0:11:03.480 --> 0:11:07.360 a really nice to have. For Paramount Skuiddance, this is 0:11:07.559 --> 0:11:08.680 kind of a must have. 0:11:09.360 --> 0:11:10.959 Do you view it that way? 0:11:11.520 --> 0:11:15.400 We do from the Paramount Skuidance side, and why we 0:11:15.480 --> 0:11:19.000 upgraded Warner Brothers Discovery at the beginning of the year 0:11:19.520 --> 0:11:23.360 is we thought that the consolidation in the industry was inevitable. 0:11:23.640 --> 0:11:26.400 I think Michael's been on the show you over many 0:11:26.520 --> 0:11:29.680 years talking about this. And so when you think about 0:11:29.720 --> 0:11:33.680 who that the natural dance partners are, it was Comcast 0:11:33.760 --> 0:11:38.600 and it still is, Paramount Skuydance now after the Skydance 0:11:38.640 --> 0:11:42.400 deal and Warner Brothers Discovery. Those three are the most 0:11:42.520 --> 0:11:46.640 natural players because they're all subscale in streaming. So when 0:11:46.640 --> 0:11:50.360 thinking about how to solve that streaming scale issue from 0:11:50.360 --> 0:11:53.800 a global basis, it's just natural to think that you 0:11:53.880 --> 0:11:57.000 need to see some combination of those players. And so 0:11:57.120 --> 0:12:00.000 that's essentially what's playing out in front of us. Paramounts 0:12:00.040 --> 0:12:04.160 Skydance needs these assets in order to accelerate the timing 0:12:04.240 --> 0:12:07.480 to reach the scale that they're desiring on a global 0:12:07.480 --> 0:12:09.720 scale basis for Paramount Plus. 0:12:10.160 --> 0:12:11.800 So yes, we very. 0:12:11.679 --> 0:12:15.200 Much think that the combination with Paramount Skuidance is a 0:12:15.320 --> 0:12:15.720 must have. 0:12:16.400 --> 0:12:19.680 Rob the from an other perspective, if your Warner Brothers 0:12:19.720 --> 0:12:24.040 Discover Discovery aside from price, do you think they have 0:12:24.160 --> 0:12:29.720 a preference for one or the other and why so? 0:12:30.320 --> 0:12:32.920 I think what we saw so far is that the 0:12:32.920 --> 0:12:36.720 preference was Netflix, and you know that's they announced that 0:12:36.800 --> 0:12:41.080 the deal on Friday, and you know, if you believe 0:12:41.160 --> 0:12:45.119 everything that that's been written and that the paramount Skuidance 0:12:45.559 --> 0:12:49.240 has put out from their perspective, they didn't continue to 0:12:49.320 --> 0:12:51.880 engage with them. So I think that the preference on 0:12:51.920 --> 0:12:55.800 the Warner Brothers Discovery side so far was Netflix. And 0:12:56.200 --> 0:12:58.080 you know that that might be for a few different 0:12:58.120 --> 0:13:00.880 reasons if you want to break that down. I mean, clearly, 0:13:01.000 --> 0:13:06.280 Netflix brings an unprecedented global scale when thinking about what 0:13:06.320 --> 0:13:10.000 the opportunity is for Netflix to monetize this content, and 0:13:10.040 --> 0:13:13.280 Warner Brothers has licensed that content to Netflix. 0:13:12.880 --> 0:13:15.080 Already, you know, over the many years. 0:13:15.120 --> 0:13:20.280 So Netflix has essentially perfect information knowing how the content 0:13:20.360 --> 0:13:24.760 would perform on their platform. And that's the opportunity that 0:13:24.840 --> 0:13:27.640 I think that the company sees when monetizing this content 0:13:27.720 --> 0:13:28.360 going forward. 0:13:28.720 --> 0:13:30.680 Robert Fishman with us. We thrilledies with us. 0:13:30.720 --> 0:13:34.160 Today's with Mafatt Nathanson to give you a perspective here. 0:13:34.559 --> 0:13:40.040 Mafatt Nathanson out of Sanford Bernstein redefined independent media at 0:13:40.080 --> 0:13:42.760 research again. Their research here in the last couple of 0:13:42.840 --> 0:13:47.760 days has been just absolutely superb Rob Robert. One of 0:13:47.800 --> 0:13:51.480 the joys of this process has been Michael Nathanson's long, 0:13:51.600 --> 0:13:55.480 long note here on the merger on the first time 0:13:55.559 --> 0:13:59.240 he met the leadership of Netflix in a nondescript office 0:13:59.320 --> 0:14:00.440 ears in years. 0:14:00.320 --> 0:14:03.880 Ago, and he says, it's media one oh one. 0:14:04.679 --> 0:14:07.400 Do these mergers succeed or are we now at the 0:14:07.400 --> 0:14:09.760 point where it's just ego and they're going to be 0:14:09.800 --> 0:14:11.600 bad outcomes down the road. 0:14:13.640 --> 0:14:17.240 Unfortunately, we do have a long history that you know, 0:14:17.360 --> 0:14:21.480 Michael and I have been a part of where media 0:14:21.640 --> 0:14:23.960 m and A is a lot more difficult to pull 0:14:24.000 --> 0:14:28.320 off than just what the spreadsheets tell you. And yes, 0:14:28.480 --> 0:14:31.000 you can, you can get to accretion, you can get 0:14:31.040 --> 0:14:34.800 to you know, potential upside over the longer term when 0:14:34.800 --> 0:14:39.280 thinking about how a new owner can take the assets 0:14:39.280 --> 0:14:43.640 and redefine them. But the long history of media M 0:14:43.680 --> 0:14:47.400 and A suggests that it's even more difficult than we 0:14:47.440 --> 0:14:48.280 would all seem. 0:14:48.520 --> 0:14:50.000 I think a lot of that comes. 0:14:49.760 --> 0:14:52.520 Down to the culture, and you know, when you start 0:14:52.560 --> 0:14:57.200 smashing different cultures together, that obviously becomes a challenge, especially 0:14:57.240 --> 0:15:00.880 in the media industry given the creative output that is needed, 0:15:01.240 --> 0:15:04.360 but also just when thinking about where the headwinds and 0:15:04.760 --> 0:15:08.080 the tailwinds are for the industry. A lot of these 0:15:08.240 --> 0:15:11.520 recent media mergers have been focused more on the cable 0:15:11.560 --> 0:15:14.960 network side, and clearly that the linear ecosystem has had 0:15:15.040 --> 0:15:18.120 challenges over the past few years. So even with the 0:15:18.280 --> 0:15:21.200 m and A potential and the cost cutting where we 0:15:21.280 --> 0:15:26.080 started here, we haven't seen the true upside of those 0:15:26.120 --> 0:15:29.360 deals because it's really just enabled them to cut costs 0:15:29.400 --> 0:15:31.360 to offset the revenue headline synergy. 0:15:31.600 --> 0:15:33.360 Yeah, that's Robert. 0:15:34.040 --> 0:15:39.240 The regulatory hurdles here seemed pretty high for both players. 0:15:39.280 --> 0:15:40.920 How do you game that out for both of these 0:15:40.960 --> 0:15:41.440 bids here. 0:15:43.280 --> 0:15:46.920 Yeah, there's a lot of noise around regulatory approval right now. 0:15:47.040 --> 0:15:52.400 I mean clearly from the Paramount Skydance side, they seem 0:15:52.520 --> 0:15:55.800 to have an upper hand right now just in terms 0:15:55.800 --> 0:16:00.480 of the administration relationships that they have. At the same 0:16:00.520 --> 0:16:03.480 time that the true answer should come down to how 0:16:03.520 --> 0:16:07.040 the market is defined, and I think what Netflix is 0:16:08.520 --> 0:16:11.840 out there talking about is when you when you view 0:16:12.000 --> 0:16:17.440 the overall market to total total media consumption and look 0:16:17.480 --> 0:16:21.120 at how Nielsen measures it, Netflix today only has eight 0:16:21.160 --> 0:16:24.520 percent of that total pie, of the viewership pie in 0:16:24.560 --> 0:16:28.000 the US, and so when you when you compare who 0:16:28.160 --> 0:16:33.480 who Netflix is actually competing against YouTube actually has a 0:16:33.520 --> 0:16:36.960 bigger share of that viewing pie and so on the 0:16:36.960 --> 0:16:40.280 streaming side. And so when when you start thinking about 0:16:40.560 --> 0:16:44.480 all the different portfolio of assets, Netflix actually is not 0:16:44.760 --> 0:16:48.720 number one or two. The traditional media guys are above 0:16:48.800 --> 0:16:52.840 them in terms of when you combine the linear television viewers. 0:16:53.000 --> 0:16:54.880 Cut to the chase, Robert Fishman, do you think the 0:16:54.920 --> 0:16:55.960 government is going to buy that? 0:16:57.840 --> 0:17:01.160 I think it comes down to how you define the market. 0:17:01.280 --> 0:17:04.280 And I think Netflix has a really strong point of 0:17:04.320 --> 0:17:07.560 view here because what we haven't even talked about TikTok 0:17:07.920 --> 0:17:10.439 and you know, Instagram, so that there are lots of 0:17:10.480 --> 0:17:13.920 different ways that people engage with content these days. 0:17:13.920 --> 0:17:16.159 I mean, I'm looking Robert Fishman at the end of 0:17:16.200 --> 0:17:19.560 the Nathanson note, folks, ma fit Nathanson was way out 0:17:19.600 --> 0:17:20.959 front on cord cutting. 0:17:21.040 --> 0:17:22.880 Can't say enough about this. 0:17:23.200 --> 0:17:27.520 And there he's got the F free, the phrase free options. 0:17:27.680 --> 0:17:31.680 Like YouTube, Robert Fishman, the vector on YouTube is going up. 0:17:32.400 --> 0:17:35.560 The vector on Netflix is flat. Why is that going 0:17:35.640 --> 0:17:37.000 to change? 0:17:38.520 --> 0:17:41.200 Well as part of this deal, I think what Netflix 0:17:41.560 --> 0:17:44.639 is looking to do is exactly, you know, focus on 0:17:44.720 --> 0:17:49.520 that engagement because to your point, yes, engagement is a 0:17:49.560 --> 0:17:51.840 little bit more than flatted. It's been growing in the 0:17:51.880 --> 0:17:56.280 second half, but compared to YouTube, no one is really 0:17:56.320 --> 0:18:00.359 growing as fast as YouTube is over the past year loss. 0:18:00.720 --> 0:18:03.159 And so what I think Netflix is looking at is 0:18:03.400 --> 0:18:06.680 how can we supercharge our engagement through all of this 0:18:07.119 --> 0:18:08.440 really premium content. 0:18:08.480 --> 0:18:10.440 When thinking about HBO and. 0:18:10.400 --> 0:18:14.320 The Warner Brothers library on the television side, plus all 0:18:14.359 --> 0:18:18.720 the theatrical releases that come with that, that's a very 0:18:18.840 --> 0:18:23.160 unique and rare opportunity to buy all this amazing premium 0:18:23.200 --> 0:18:27.400 franchise content and help allow Netflix to really lean in 0:18:27.760 --> 0:18:29.560 so that they can accelerate engagement. 0:18:29.600 --> 0:18:32.560 Again, Robert, one of the variables in the Netflix deal 0:18:32.680 --> 0:18:36.480 is how to value the cable network business that Warner 0:18:36.480 --> 0:18:39.080 Brothers Discovery is going to spin out prior to a 0:18:39.080 --> 0:18:42.800 potential acquisition by Netflix. I've seen anything from one dollar 0:18:42.840 --> 0:18:44.679 to four or five dollars per share. How do you 0:18:44.680 --> 0:18:45.320 guys value it? 0:18:46.800 --> 0:18:50.160 Yeah, so we're working through all the updated numbers now, 0:18:50.240 --> 0:18:55.320 but what we can say is clearly, when thinking about 0:18:55.359 --> 0:18:59.239 what the value of this remaining asset would be, it 0:18:59.280 --> 0:19:01.640 comes down to how how much net debt is really 0:19:01.760 --> 0:19:05.000 left there From the equity perspective, So even if you 0:19:05.040 --> 0:19:07.399 want to put a four to five times multiple on 0:19:07.960 --> 0:19:11.879 the debate, and the range of how much equity value 0:19:12.119 --> 0:19:15.600 is left after that really comes down to the net debt. 0:19:15.880 --> 0:19:18.320 So what we're working through, you know, after all. 0:19:18.240 --> 0:19:21.120 Of these deals have been announced, is how much has 0:19:21.200 --> 0:19:24.480 transferred over you know, as part of the one scenario Netflix, 0:19:24.480 --> 0:19:27.320 and how much is left if it is a standalone entity. 0:19:27.960 --> 0:19:30.280 And that's the biggest wing factor in terms of the 0:19:30.359 --> 0:19:31.520 dollar versus four. 0:19:31.680 --> 0:19:35.359 Just one final question to Craig Moffatt and his historic work, 0:19:35.880 --> 0:19:37.480 is cord cutting continuing? 0:19:39.800 --> 0:19:42.320 So we just put out an updated note on this, 0:19:42.400 --> 0:19:45.719 so I appreciate you asking. We've actually seen, for the 0:19:45.760 --> 0:19:49.480 first time in a very long time, you know, cord 0:19:49.520 --> 0:19:51.439 cutting actually start to get better. 0:19:51.840 --> 0:19:53.120 And what do I mean by that? 0:19:53.160 --> 0:19:57.199 We actually saw net ads grow this quarter, which is 0:19:57.280 --> 0:20:00.520 really an unthinkable statement, you know, even twelve months ago. 0:20:01.000 --> 0:20:04.120 And so where's that growth coming? From YouTube TV? Back 0:20:04.119 --> 0:20:06.800 to our friends there, you know, continue to show some 0:20:06.840 --> 0:20:11.639 really strong momentum, but also from the traditional distributors. You 0:20:11.640 --> 0:20:13.760 know that that you've talked about with Craig for many 0:20:13.760 --> 0:20:17.320 many years. Carter has turned the corner and they have 0:20:17.600 --> 0:20:20.560 you know, started in to decline less and that's really 0:20:20.600 --> 0:20:23.760 helped allow the overall industry to see improvements in that 0:20:23.840 --> 0:20:26.719 core cutting trend. So, as you know, it's something that 0:20:26.760 --> 0:20:30.520 we watched very closely and see after football season, how 0:20:30.560 --> 0:20:32.240 many of those subscribers stick around. 0:20:32.359 --> 0:20:33.480 Robert Fisherman, brilliant. 0:20:33.680 --> 0:20:36.520 Thank you, thank you, Thank you so much again, Robert 0:20:36.520 --> 0:20:40.080 Fisherman with Moffatt Nathanson. Thank you to Moffett Nathanson, Tyra, 0:20:40.160 --> 0:20:43.480 thank you for getting those notes over to us today. 0:20:44.000 --> 0:20:44.760 Stay with us. 0:20:44.960 --> 0:20:55.280 More from Bloomberg Surveillance coming up after this. 0:20:55.280 --> 0:20:59.159 This is the Bloomberg Surveillance Podcast. Listen live each weekday 0:20:59.200 --> 0:21:02.520 starting at seven eight on Apple, Cocklay and Android Auto 0:21:02.640 --> 0:21:05.600 with the Bloomberg Business App. You can also listen live 0:21:05.680 --> 0:21:09.280 on Amazon Alexa from our flagship New York station. Just 0:21:09.320 --> 0:21:11.840 say Alexa play Bloomberg eleven thirty. 0:21:12.240 --> 0:21:15.200 We are migrate over to Amanda Agotti. Thrilled and she's 0:21:15.240 --> 0:21:18.159 been with us. Thank you for being so patient with 0:21:18.200 --> 0:21:21.199 a s Amanda Gottis with PNC Bank. What does a 0:21:21.240 --> 0:21:26.080 stock market want, Amanda Agatti out of today's fed festivities. 0:21:27.160 --> 0:21:30.080 Well, I'm still hung up on your comment about private 0:21:30.080 --> 0:21:31.639 equity buying into Penn State. 0:21:31.840 --> 0:21:32.760 My jaw dropped. 0:21:32.800 --> 0:21:35.280