WEBVTT - Amazon Rushes Out Latest AI Chip to Take on Nvidia, Google 0:00:00.240 --> 0:00:10.559 Bloomberg Audio Studios, podcasts, radio news. You're listening to the 0:00:10.600 --> 0:00:14.560 Bloomberg Intelligence podcast. Catch us live weekdays at ten am 0:00:14.600 --> 0:00:17.880 Eastern on Apple Coarcklay and Android Auto with the Bloomberg 0:00:17.920 --> 0:00:21.040 Business App. Listen on demand wherever you get your podcasts, 0:00:21.360 --> 0:00:23.080 or watch us live on YouTube. 0:00:23.880 --> 0:00:25.639 A lot of news in the tech space. I guess 0:00:25.640 --> 0:00:27.440 it's just every day. We have a lot of news 0:00:27.440 --> 0:00:29.280 in the tech space. I want to jump out of me. 0:00:29.360 --> 0:00:33.440 Is Amazon rush us out latest AI chip to take 0:00:33.479 --> 0:00:35.280 on in Vidia and Google? 0:00:35.320 --> 0:00:36.880 When that gets my attention, let me check in with 0:00:36.920 --> 0:00:38.960 somebody who might know a thing or two about this stuff. 0:00:39.120 --> 0:00:42.560 Man Deep Singh, senior tech industry analysts, Bloomberg Intelligence. He's 0:00:42.560 --> 0:00:44.320 out there in San Diego. I don't know what's going 0:00:44.360 --> 0:00:46.199 on in San Diego. I didn't get the invite, but 0:00:46.280 --> 0:00:47.879 Man Deep's out there doing the. 0:00:47.760 --> 0:00:49.080 Zoom thing, Man Deep. 0:00:49.520 --> 0:00:53.840 Amazon chips, where do they stack up a relative to say, 0:00:53.840 --> 0:00:54.880 an Nvidio or Google. 0:00:56.600 --> 0:00:59.920 I mean, look, Amazon Reno is the largest cloud provide 0:01:00.400 --> 0:01:04.160 with almost fifty percent share. And when it comes to 0:01:04.200 --> 0:01:09.880 the GPUs, everyone so far except for Google has relied 0:01:09.920 --> 0:01:14.880 on it media, you know, for training and what Amazon 0:01:15.000 --> 0:01:20.360 is doing is really copying that Google playbook where they 0:01:20.480 --> 0:01:23.479 want to use their own chips. It's just that they 0:01:23.840 --> 0:01:26.640 haven't had that kind of success that Google has had 0:01:26.680 --> 0:01:30.280 with TPUs, and they're trying to speed things up because 0:01:30.600 --> 0:01:34.360 in the end, all these hyperscalers don't want to spend 0:01:34.440 --> 0:01:37.520 you know, twenty to twenty five percent of their CAPEX 0:01:37.760 --> 0:01:41.800 on procuring in videos chips, and that is what the 0:01:41.920 --> 0:01:45.280 endgame is. I think Google so far is ahead in that, 0:01:46.040 --> 0:01:49.000 but clearly Amazon is trying to catch up when it 0:01:49.000 --> 0:01:50.560 comes to their own chips efforts. 0:01:51.160 --> 0:01:54.320 Man deep, it feels like Amazon Google are becoming more 0:01:54.520 --> 0:01:57.880 formidable competitors to Nvidia in this space. In Vidia the 0:01:57.920 --> 0:02:01.200 AI darling. When you think about twenty twenty, who are 0:02:01.280 --> 0:02:04.560 some of the winners in these AI arms race. 0:02:06.560 --> 0:02:09.920 I mean, look, when you're running a cloud business, you 0:02:09.919 --> 0:02:14.639 know you're trying to optimize things across the stack, and 0:02:14.680 --> 0:02:17.360 that's where you know, a META is very different from 0:02:17.560 --> 0:02:19.960 a Google or an Amazon, which have a big public 0:02:19.960 --> 0:02:24.080 cloud business. I think what you're going to see is 0:02:24.360 --> 0:02:28.800 focus more on capex efficiency. If Google can deliver you know, 0:02:29.560 --> 0:02:32.560 a lot more with their ninety billion dollars in capex 0:02:32.600 --> 0:02:35.560 in terms of training and printing and having a cloud business. 0:02:35.960 --> 0:02:39.120 Everyone will be measured the same way, whether it's Amazon 0:02:39.440 --> 0:02:42.800 or Meta, and that's where CAPEX efficiency will be a 0:02:42.880 --> 0:02:45.680 much bigger focus in twenty twenty six than it was 0:02:46.120 --> 0:02:48.160 in the past two years, where you know, there was 0:02:48.200 --> 0:02:51.919 a gold rush going on in terms of getting these GPUs, 0:02:52.040 --> 0:02:55.240 making sure you have chips for training your models. I 0:02:55.280 --> 0:02:59.280 think we are moving into a phase where CAPEX efficiency 0:02:59.320 --> 0:03:00.960 will be front end center going forward. 0:03:01.880 --> 0:03:04.919 Mandy, if I see a Bloomberg News story Apple AI 0:03:05.040 --> 0:03:05.720 head to leave. 0:03:06.680 --> 0:03:08.720 This doesn't feel right to me. What's going on with 0:03:08.760 --> 0:03:09.959 Apple and AI? And should I? 0:03:10.040 --> 0:03:11.760 Am I reading too much into this? Seems like there's 0:03:11.760 --> 0:03:12.680 a lot of turnover there. 0:03:13.919 --> 0:03:17.359 I mean, look for a good reason, because Apple, when 0:03:17.400 --> 0:03:20.880 you think about the back seven players, has trailed in 0:03:21.000 --> 0:03:25.480 terms of having an AI strategy making those investments. And 0:03:25.639 --> 0:03:28.800 right now we are seeing even you know, just yesterday 0:03:28.840 --> 0:03:32.600 Deep Seek release their latest model by Dance is talking 0:03:32.639 --> 0:03:36.360 about a model that can be run on your operating system. 0:03:36.480 --> 0:03:39.840 So there is so much going on at the hardware 0:03:39.880 --> 0:03:42.800 and at the operating system layer that you feel like 0:03:42.960 --> 0:03:46.360 Apple is missing out one because they don't have any 0:03:46.720 --> 0:03:49.920 AI models of their own and also in terms of 0:03:49.960 --> 0:03:53.840 their partnerships, they haven't been that upfront about, you know, 0:03:53.880 --> 0:03:56.960 whether it's Open AI or Google in terms of making 0:03:57.080 --> 0:04:00.840 changes to their operating system. So even so the hardware 0:04:00.880 --> 0:04:03.760 sales haven't really suffered because of that. I mean, when 0:04:03.800 --> 0:04:06.760 you look two years out, if Apple doesn't have a 0:04:06.880 --> 0:04:11.000 good AI strategy, a good model that works natively on 0:04:11.040 --> 0:04:14.000 the operating system, I think you will start to see 0:04:14.000 --> 0:04:15.480 an impact on the hardware sales. 0:04:16.720 --> 0:04:19.760 Stay with us more from Bloomberg Intelligence coming up after this. 0:04:23.400 --> 0:04:27.119 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:04:27.200 --> 0:04:30.240 weekdays at ten am Eastern on Apple, Cocklay and Android 0:04:30.279 --> 0:04:33.599 Auto with the Bloomberg Business app. Listen on demand wherever 0:04:33.640 --> 0:04:36.760 you get your podcasts, or watch us live on YouTube. 0:04:37.720 --> 0:04:40.320 Cyber Monday it's a thing, a lot of people spending 0:04:40.360 --> 0:04:42.320 a lot of money at the click of a button. 0:04:42.560 --> 0:04:43.760 Let's get some of the data here. 0:04:43.760 --> 0:04:46.680 Put him Goyle, senior US e commerce and retail analysts 0:04:46.680 --> 0:04:50.240 for Bloomberg Intelligence joints US here. Put them talk to 0:04:50.320 --> 0:04:52.360 us about cyber Monday. What were some of the trends 0:04:52.400 --> 0:04:55.280 you guys saw. There's more and more people if you 0:04:55.360 --> 0:04:56.480 need to shop online. 0:04:57.760 --> 0:05:00.560 Yeah, so people definitely came online to shop. But the 0:05:00.600 --> 0:05:04.400 results came out this morning. According to Adobe, sales were 0:05:04.480 --> 0:05:09.000 fourteen point two five billion dollars. That's just slightly ahead 0:05:09.000 --> 0:05:11.520 of the fourteen point two billion estimated, so a seven 0:05:11.560 --> 0:05:14.800 point one percent gain. So I'd say, you know, overall, 0:05:15.040 --> 0:05:19.400 things were largely to me as expected, maybe slightly better. 0:05:19.839 --> 0:05:23.520 We saw deals over Cyber Monday, which drew customers, but 0:05:23.640 --> 0:05:26.040 in all honesty, Paul, you know, we looked at eighty 0:05:26.160 --> 0:05:30.360 one brands online yesterday and what we found was that 0:05:30.520 --> 0:05:33.280 the majority of them, the deals were in line to 0:05:33.440 --> 0:05:37.279 last year. So we did see retailers pull back on 0:05:37.400 --> 0:05:40.680 discounting because there's just more costs that are built into 0:05:40.720 --> 0:05:41.800 this year from tariffs. 0:05:43.880 --> 0:05:47.520 Consumers buying what were they buying up a Cyber Monday, 0:05:47.520 --> 0:05:49.080 and what is that telling you about the health of 0:05:49.120 --> 0:05:51.400 the consumer. Was it big ticket items? Were they trading 0:05:51.440 --> 0:05:52.480 down to private labels? 0:05:53.720 --> 0:05:56.359 Yeah, what we saw. So we saw electronics still being 0:05:56.480 --> 0:05:59.560 very powerful this holiday season. The Apple air pods were 0:05:59.560 --> 0:06:02.200 cited to be among one of the top sellers. We 0:06:02.279 --> 0:06:05.679 also saw the PlayStation in high demand. People were shopping 0:06:05.680 --> 0:06:09.640 for fashion apparel, they were buying for the home across 0:06:09.720 --> 0:06:12.800 the news that we read, what we've seen sneakers, you know, 0:06:12.880 --> 0:06:16.479 athletic where was probably a little lore than expected. But 0:06:16.800 --> 0:06:19.960 once again, that's not really an item that you often 0:06:20.000 --> 0:06:22.360 put under the tree as much as you buy for yourself, 0:06:22.400 --> 0:06:23.880 So we think that could pick up. 0:06:26.120 --> 0:06:27.919 I'm thinking about some of the folks that really do 0:06:28.000 --> 0:06:32.400 a good job online, Walmart, Target, How are those guys, 0:06:32.560 --> 0:06:33.480 how are they performing? 0:06:34.279 --> 0:06:37.440 Yeah, so Walmart and Target, we think both actually had 0:06:37.440 --> 0:06:40.159 a good holiday season, but in terms of promotional activity, 0:06:40.160 --> 0:06:43.160 we think they were largely in line with last year. 0:06:43.200 --> 0:06:45.240 That said, we were in the store on Black Friday. 0:06:45.279 --> 0:06:48.359 We monitored their deals online over the weekend and say yesterday, 0:06:48.920 --> 0:06:52.200 and we think their deals were good, but they weren't 0:06:52.400 --> 0:06:55.680 aggressive or more aggressive i should say than last year, 0:06:56.040 --> 0:06:58.640 which is in a way a good thing because they'll 0:06:58.640 --> 0:07:03.120 help their margins or margins this holiday quarter won't suffer 0:07:03.240 --> 0:07:06.600 because retailers had to discount more aggressively than they did 0:07:06.720 --> 0:07:07.200 last year. 0:07:07.920 --> 0:07:10.400 How are you thinking about the retail sector going into 0:07:10.440 --> 0:07:13.960 next year? Do you expect that the strength will continue? 0:07:14.880 --> 0:07:17.440 I think it'll be tough. You know, we've seen shoppers 0:07:17.480 --> 0:07:20.480 come out to shop for events. Durven buying, whether that's 0:07:20.520 --> 0:07:24.600 back to school or holiday or birthdays or events they're 0:07:24.640 --> 0:07:29.040 coming out and their spending. But once we exit holiday, 0:07:29.280 --> 0:07:33.600 there is really no catalyst in January to shop. So 0:07:33.640 --> 0:07:36.040 we do think that you will kind of see the 0:07:36.080 --> 0:07:39.400 normal lull that you see after the holidays also creep 0:07:39.400 --> 0:07:42.200 into twenty twenty six. But next year it's really going 0:07:42.240 --> 0:07:45.920 to be more about what happens with pricing. We've seen 0:07:46.160 --> 0:07:49.720 retailers be able to hold prices study or raise them 0:07:49.800 --> 0:07:52.640 just slightly into the back half from tariffs, But next 0:07:52.720 --> 0:07:56.720 year will they have to implement bigger price increases because 0:07:57.240 --> 0:08:00.440 all the inventory will likely be impacted by some sort 0:08:00.480 --> 0:08:01.680 of tariff into next year. 0:08:02.120 --> 0:08:03.400 That's kind of where I want to go put on 0:08:03.760 --> 0:08:05.840 just lastly here, I mean, I don't know how to 0:08:05.880 --> 0:08:08.800 think about the tariff impact because it seems like we 0:08:08.840 --> 0:08:11.720 haven't really seen it too much at the consumer level, 0:08:12.080 --> 0:08:14.440 And maybe that means that, you know, the retailers the 0:08:14.440 --> 0:08:16.720 distributors that they've kind of taken it in their margin, 0:08:17.720 --> 0:08:19.760 and the tariff is what it is. That doesn't look 0:08:19.760 --> 0:08:22.040 like there's gonna be a second round of teriffs next year, 0:08:22.120 --> 0:08:24.720 So the tariffs are what they are in the economy, 0:08:24.720 --> 0:08:26.800 but you're saying that maybe there still could be some 0:08:26.880 --> 0:08:27.600 impact next year. 0:08:28.720 --> 0:08:30.880 Well, if you think about when the tariffs were implemented, 0:08:30.920 --> 0:08:32.959 it really affected the back half of this year, right, 0:08:33.000 --> 0:08:35.080 so when you go into the first half of next year, 0:08:35.360 --> 0:08:38.960 you're up against comparisons where there really wasn't a tariff impact. 0:08:39.000 --> 0:08:41.040 So that's one thing that you have to deal with. 0:08:41.080 --> 0:08:44.000 The second thing is is that prices are going up. 0:08:44.040 --> 0:08:46.600 I'm not you know, we did see select price increases. 0:08:46.640 --> 0:08:48.360 In fact, you know, Nike came out and said that 0:08:48.400 --> 0:08:51.480 they're directly raising prices but un select goods. And I 0:08:51.480 --> 0:08:53.800 think that's the approach that most retailers have been taking 0:08:53.920 --> 0:08:56.320 is we'll raise prices where we can, and where we 0:08:56.360 --> 0:08:59.040 know we can't, will absorb it or we'll offset it 0:08:59.120 --> 0:09:02.679 otherwise through a fit season supplier kickbacks. So that's what 0:09:02.720 --> 0:09:05.440 we'll continue to see happen next year. But there is 0:09:05.480 --> 0:09:09.240 still some pressure. Now. We'll see what happens next week 0:09:09.320 --> 0:09:12.040 right where the court ruling could be that the tariffs 0:09:12.080 --> 0:09:16.600 are just unwarranted and are unlawful. And if that happens, 0:09:16.960 --> 0:09:19.160 then I think we have some positive surprises and for 0:09:19.280 --> 0:09:19.880 us next year. 0:09:20.720 --> 0:09:23.840 Stay with us. More from Bloomberg Intelligence coming up after this. 0:09:27.760 --> 0:09:31.440 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:09:31.520 --> 0:09:34.600 weekdays at ten am Eastern on Apple, Cocklay and Android 0:09:34.640 --> 0:09:37.920 Auto with the Bloomberg Business App. Listen on demand wherever 0:09:38.000 --> 0:09:41.640 you get your podcasts, or watch us live on YouTube. 0:09:42.080 --> 0:09:45.400 We are waiting for a huge m and a trade 0:09:45.480 --> 0:09:48.080 to be announced Warner Brothers Discovery, with an enterprise value 0:09:48.080 --> 0:09:48.719 of about. 0:09:48.520 --> 0:09:51.600 Ninety billion dollars. It's up for sale. 0:09:52.120 --> 0:09:57.200 Second round bids for the company we're due yesterday. We 0:09:57.320 --> 0:10:00.240 understand that it's Netflix, it's Comcasts, and it's of course 0:10:00.280 --> 0:10:02.480 it's Paramount sky Dance and all that kind of stuff there. 0:10:02.520 --> 0:10:05.080 So Githa rang A Nathan. She is the senior media 0:10:05.080 --> 0:10:08.920 analysts for Bloomberg Intelligence. Keith, what's the latest there in 0:10:08.960 --> 0:10:11.960 Warner Brothers Discovery, because it seems like this is a 0:10:11.960 --> 0:10:14.640 company that wants to be sold and be sold quickly. 0:10:15.880 --> 0:10:18.960 Yeah, absolutely, Paul. I mean, things seem to be definitely intensifying. 0:10:19.000 --> 0:10:22.360 So the second round bids were due yesterday. The reporting 0:10:22.440 --> 0:10:26.280 so far seems to suggest that Netflix has mostly a 0:10:26.320 --> 0:10:29.640 cash bid. That's a little bit of a surprise, given 0:10:29.720 --> 0:10:32.600 that you know, when you compare Netflix with both comcasts 0:10:32.600 --> 0:10:36.800 and paramounts guidance. Obviously that stock has the most value. 0:10:37.040 --> 0:10:39.680 You know, they're treating it almost thirty times forwardy, but 0:10:40.000 --> 0:10:42.240 compared to a Comcast, which trades it about five times. 0:10:42.400 --> 0:10:44.760 So obviously, I mean, you know, it just goes to 0:10:44.800 --> 0:10:48.040 show that Netflix is very, very interested. There was obviously 0:10:48.120 --> 0:10:51.520 some you know, speculation earlier whether they were a serious 0:10:51.520 --> 0:10:52.120 bidder or not. 0:10:52.200 --> 0:10:55.040 I think this kind of puts that to rest. The 0:10:55.120 --> 0:10:56.280 offers this time are. 0:10:56.160 --> 0:10:59.160 Binding, means if the board likes something that it sees, 0:10:59.240 --> 0:11:02.600 they can absolutely go ahead and bring this whole process 0:11:02.640 --> 0:11:05.439 to a conclusion pretty quickly. So right now, just waiting 0:11:05.480 --> 0:11:08.800 to hear on the actual numbers. We haven't heard any 0:11:10.000 --> 0:11:13.079 any reporting on the actual bid numbers themselves. Warner Brothers, 0:11:13.120 --> 0:11:14.800 of course looking for thirty dollars a share. 0:11:15.440 --> 0:11:17.720 Githa Bank of America has a note that calls the 0:11:17.760 --> 0:11:21.360 bidding war for Warner Brothers quote industry realignment. Is that 0:11:21.400 --> 0:11:24.320 a fair characterization? And how do you see this bidding 0:11:24.360 --> 0:11:25.800 war transforming the industry? 0:11:26.800 --> 0:11:28.120 Absolutely agree with that. 0:11:28.200 --> 0:11:31.160 I mean, you know, you have Warner Brothers, which is 0:11:31.200 --> 0:11:35.120 one of the most iconic studios in Hollywood. You know, 0:11:35.160 --> 0:11:38.000 you have a great streaming service in HBO Max. You 0:11:38.160 --> 0:11:40.840 just look at the Warner Studio this week at the 0:11:41.120 --> 0:11:42.840 I mean sorry, this year at. 0:11:42.720 --> 0:11:43.560 The box office. 0:11:43.920 --> 0:11:47.480 They've had an absolutely phenomenal run. So they're leading with 0:11:47.520 --> 0:11:51.240 about a twenty eight almost thirty percent share of domestic 0:11:51.320 --> 0:11:54.240 box office. So this is a huge studio that could 0:11:54.240 --> 0:11:56.960 obviously or a huge company even that could you know, 0:11:57.040 --> 0:12:01.520 completely reshaped the media landscape. And it is transform transformative 0:12:01.520 --> 0:12:03.640 in many, many ways. So if you think about you know, 0:12:03.679 --> 0:12:07.400 Paramount sky Dances streaming assets right now, with Paramount Plus, 0:12:07.480 --> 0:12:10.480 they have about seventy million subscribers. You add HBO Max, 0:12:10.600 --> 0:12:14.560 you get over two hundred million. Same is true for Comcast. 0:12:14.600 --> 0:12:17.320 You know, these are this is kind of an existential deal, 0:12:17.320 --> 0:12:21.319 I would say for both those companies, and absolutely transformative. 0:12:21.360 --> 0:12:24.640 So you know, you take Warner Brothers and Paramount sky 0:12:24.760 --> 0:12:27.840 Dance for instance, if those two companies combine, that basically 0:12:27.920 --> 0:12:33.240 then becomes the second largest media company after Disney. So again, huge, 0:12:33.559 --> 0:12:37.720 huge things that stake here for all of these three bidders. 0:12:38.440 --> 0:12:41.560 How about valuation here, The company has said in the 0:12:41.559 --> 0:12:44.520 past that they would like thirty dollars share. The stock 0:12:44.600 --> 0:12:47.040 is trading at just north of twenty four dollars to share. 0:12:47.440 --> 0:12:51.400 John Malone, the company's chair emeritus and of course one 0:12:51.440 --> 0:12:53.800 of the biggest deal makers and media and telecom over 0:12:53.800 --> 0:12:57.400 the last fifty years, he says that number is quote possible. 0:12:58.520 --> 0:13:00.440 How do you think valuations can shake here? What's the 0:13:00.440 --> 0:13:01.840 price that's going to clear? Do you think? 0:13:03.080 --> 0:13:05.760 I think it's definitely going to be above twenty eight dollars. 0:13:05.840 --> 0:13:07.800 Part so we know that, you know, when all of 0:13:07.840 --> 0:13:11.080 this had started, Warner Brothers was trading at about twelve 0:13:11.120 --> 0:13:14.080 dollars a share. We're already up to twenty four dollars. 0:13:14.120 --> 0:13:16.880 We know that in the last bidding round, Paramount Guidance 0:13:16.960 --> 0:13:21.640 offered close to about twenty four dollars, which was rejected. Now, 0:13:21.640 --> 0:13:23.120 if you just think about the two parts of the 0:13:23.160 --> 0:13:26.040 business for Warner Brothers Discovery, you have the TV network's 0:13:26.080 --> 0:13:28.640 business again throwing out a lot of cash, but not 0:13:28.920 --> 0:13:31.720 necessarily big interms of valuation. I mean, this is a 0:13:31.760 --> 0:13:34.200 melting ice cube. You know, the multiple that you would 0:13:34.240 --> 0:13:36.319 slap on this part of the business would be maximum 0:13:36.360 --> 0:13:38.559 about a four or five x. But then you think 0:13:38.559 --> 0:13:42.080 about the streaming and the studio assets. Now that is 0:13:42.120 --> 0:13:44.839 where you have your scarcity asset. You have a lot 0:13:44.880 --> 0:13:47.480 of the IP sitting there. You have a streaming business 0:13:47.480 --> 0:13:50.839 that is that is turned profitable, that could become extremely 0:13:50.840 --> 0:13:53.439 profitable over the next few years, and so that's where 0:13:53.559 --> 0:13:56.760 most of the valuation is going to be. And you know, 0:13:56.800 --> 0:13:59.280 we ran some numbers. We think that just the streaming 0:13:59.320 --> 0:14:02.400 and the studio of the business alone could be worth 0:14:02.400 --> 0:14:04.320 about twenty eight dollars. So when you think about that 0:14:04.320 --> 0:14:07.199 thirty dollars per share that you know, John Malone says, 0:14:07.240 --> 0:14:09.280 as possible, we absolutely think yes. 0:14:10.000 --> 0:14:11.880 Etha, Can you please talk to us a little bit 0:14:11.880 --> 0:14:15.000 about what some of the long term strategic advantages will 0:14:15.040 --> 0:14:17.800 be for Warner Brothers when this deal closes. Whoever the 0:14:17.880 --> 0:14:19.040 you know, the final winner is. 0:14:20.240 --> 0:14:22.680 I think for the final winner you know, off the 0:14:22.680 --> 0:14:25.760 Warner Brothers asset. One thing is that it obviously completely 0:14:26.440 --> 0:14:29.120 transforms the business in terms of you know, increasing revenue, 0:14:29.160 --> 0:14:33.400 increasing scale, increasing EBITDA. But I think the big thing 0:14:33.440 --> 0:14:36.040 that everybody is looking for really is the synergy number. 0:14:36.640 --> 0:14:39.480 And if you think about you know, paramounts guidance, which 0:14:39.520 --> 0:14:42.320 is really looking to acquire all of Warner Brothers, so 0:14:42.400 --> 0:14:45.080 not just the studio and streaming, but also the linear networks. 0:14:45.240 --> 0:14:46.800 The synergies are going to be sizable. 0:14:46.840 --> 0:14:49.120 We think it could be anything upwards of five to 0:14:49.200 --> 0:14:52.520 six billion dollars. And that's really where you know, a 0:14:52.520 --> 0:14:55.160 lot of this is going to kind of flow down 0:14:55.240 --> 0:14:57.360 to the bottom line. Of course, you know, there's always 0:14:57.360 --> 0:15:00.000 this question about how much of synergies can be extracted, 0:15:00.480 --> 0:15:03.800 but actually Warner Brothers Discovery themselves have kind of provided 0:15:03.880 --> 0:15:06.720 us with an excellent template. They've done a fantastic job 0:15:06.760 --> 0:15:09.200 when it comes to extracting synergies both with the Scripts 0:15:09.200 --> 0:15:11.760 transaction as well as with the most recent Warner Brothers 0:15:11.760 --> 0:15:14.320 and Discovery merger. So we think if you know, they 0:15:14.400 --> 0:15:17.040 lay out a good plan, it can definitely be done. 0:15:17.240 --> 0:15:19.760 And so synergies really is the name of the game here, 0:15:19.800 --> 0:15:23.120 apart from, of course, monetizing all of the IP because 0:15:23.160 --> 0:15:25.000 they do have some of the best brands in the. 0:15:24.960 --> 0:15:28.360 Business, Comcast. How credible are they? 0:15:28.440 --> 0:15:31.440 I mean, we know the Roberts family, Brian Roberts loves 0:15:31.480 --> 0:15:33.600 to do deals, rarely goes more than five or six 0:15:33.680 --> 0:15:34.920 years without doing a big deal. 0:15:35.000 --> 0:15:38.880 Here, how do you handicap them here? 0:15:40.360 --> 0:15:43.120 You know, Paul so it you know, industry sources seem 0:15:43.200 --> 0:15:46.920 to suggest that Warner Brothers Discovery actually wants Comcasts to 0:15:46.960 --> 0:15:48.880 be the winner. And I think a lot of this 0:15:49.000 --> 0:15:51.480 has to do with the fact that, you know, David 0:15:51.520 --> 0:15:54.280 Zaslov obviously has this history with NBC. He used to 0:15:54.320 --> 0:15:57.800 work there. He obviously knows Brian Roberts extremely well. But 0:15:57.880 --> 0:16:00.240 I think they're all davids. Ozlav also kind of sees 0:16:00.280 --> 0:16:02.600 this as a path for him to ultimately run NBC. 0:16:02.720 --> 0:16:05.920 He doesn't necessarily want to exit Hollywood just yet, which 0:16:05.960 --> 0:16:08.840 is what would happen if he's sold to either paramount 0:16:08.840 --> 0:16:10.840 S Guidance or to Netflix. So I think in many 0:16:10.880 --> 0:16:13.400 ways he does want to kind of sell to Comcast. Again, 0:16:13.440 --> 0:16:15.800 it's going to come down to whether Comcast can put 0:16:15.880 --> 0:16:18.720 up the money, because they are right now in a 0:16:18.920 --> 0:16:23.280 very very tricky, precarious situation. Their cable business is struggling. 0:16:23.840 --> 0:16:26.520 They you know, the stock is trading at historical lows 0:16:26.640 --> 0:16:30.640 five times ebit, so really really in a tough spot, 0:16:31.040 --> 0:16:33.280 and they have to come up with a majority cash 0:16:33.360 --> 0:16:35.720 bid that you know, so we're looking at something like 0:16:35.720 --> 0:16:38.440 about sixty billion dollars. This has to be debt financed, 0:16:39.000 --> 0:16:40.360 and so you kind of think about all of that 0:16:40.400 --> 0:16:43.680 incremental interest expense for them, Paul, I mean this is 0:16:43.720 --> 0:16:45.520 going to be dilute up to free cash flow, and 0:16:45.560 --> 0:16:47.200 I don't think investors are going to like it. 0:16:48.040 --> 0:16:51.200 Stay with us. More from Bloomberg Intelligence coming up after this. 0:16:55.080 --> 0:16:58.800 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:16:58.880 --> 0:17:02.240 weekdays at ten am on Apple Coarclay, and Android Auto 0:17:02.360 --> 0:17:05.439 with the Bloomberg Business app. Listen on demand wherever you 0:17:05.480 --> 0:17:08.880 get your podcasts, or watch us live on YouTube. 0:17:09.240 --> 0:17:11.800 We have some news this week, big news for New 0:17:11.880 --> 0:17:15.800 York City, getting three casino licenses for the city, one 0:17:15.800 --> 0:17:16.920 in the Bronx. 0:17:17.200 --> 0:17:18.120 Two in Queens. 0:17:18.200 --> 0:17:21.640 This is to build like real casinos, not just the 0:17:21.760 --> 0:17:23.760 you know, some of the gaming stuff. This is real 0:17:23.880 --> 0:17:28.080 time stuff and it's big for the greater New York 0:17:28.080 --> 0:17:30.119 City metro area here. So we want to break it 0:17:30.119 --> 0:17:33.399 down with Briannegger, Senior Gaming and Launching analyst for Bloomberg Intelligence. 0:17:35.359 --> 0:17:36.359 So let's step back. 0:17:36.400 --> 0:17:38.760 Brian talk to us about kind of what the licenses 0:17:38.840 --> 0:17:41.320 represent and kind of where do we go from here. 0:17:42.320 --> 0:17:46.040 Sure, so this is a fairly protractive process, involving ultimately 0:17:46.040 --> 0:17:48.200 di selection of three recipients. By the way, the only 0:17:48.280 --> 0:17:50.959 three left in the running after a few others were 0:17:50.960 --> 0:17:56.520 eliminated and dropped out, and really it authorized resort casinos 0:17:56.600 --> 0:17:59.359 for the downstate New York area, mostly in New York City. 0:17:59.400 --> 0:18:02.440 And as it turned out, as you mentioned, the three 0:18:02.440 --> 0:18:08.120 casino qualified casino applicants, if you will, really are are 0:18:08.119 --> 0:18:12.000 in New York City, but outside the Borough of Manhattan itself. 0:18:13.320 --> 0:18:17.160 Brian, just looking at your note on these license approvals, 0:18:17.200 --> 0:18:20.520 you write that they face a narrow path to decent 0:18:20.600 --> 0:18:22.560 returns on investment. Can you please talk to us a 0:18:22.600 --> 0:18:24.240 little bit more about that idea? 0:18:24.880 --> 0:18:27.000 Sure? So, what we assume for those resorts is they 0:18:27.000 --> 0:18:30.919 will get what I would call a gaming revenue premium 0:18:30.960 --> 0:18:34.440 and room rate premium of ten twenty percent to other 0:18:35.119 --> 0:18:39.199 kind of high end urban area resorts such as the 0:18:39.240 --> 0:18:43.879 Burgat and Atlantic City wins Encore in Boston. However, are 0:18:44.000 --> 0:18:46.880 concerned if in terms of the return prospects are that 0:18:47.200 --> 0:18:50.280 development costs are quite high and perhaps some of the 0:18:50.320 --> 0:18:54.600 targeted non gaming contribution elements might be a bit ambitious. 0:18:54.640 --> 0:18:56.960 So for that reason, when we work the numbers, we 0:18:57.000 --> 0:19:00.000 came up with something like a ten percent return on investment, 0:19:00.160 --> 0:19:04.000 which is certainly a bit less than most operators would 0:19:04.000 --> 0:19:06.600 expect to attain in these regional markets. 0:19:07.200 --> 0:19:10.160 So I'm thinking here, I mean again, I'm just thinking 0:19:10.160 --> 0:19:13.480 about Steve Cohen's I was looking at his plans yesterday 0:19:13.520 --> 0:19:16.000 for in conjunction with his city field. 0:19:16.280 --> 0:19:17.560 He obviously he owns the Mets. 0:19:17.960 --> 0:19:21.320 City field is out there, the national tennis centers out. 0:19:21.160 --> 0:19:22.240 There the world. 0:19:23.640 --> 0:19:25.760 You know that we had the world's fair situations, so 0:19:25.840 --> 0:19:27.840 there's a ton of opportunity out there. 0:19:28.640 --> 0:19:29.920 It seems like these are going to be. 0:19:29.880 --> 0:19:35.399 More retail hotel than casino. How do you think the 0:19:35.440 --> 0:19:37.080 mix of revenue is going to be there? 0:19:37.840 --> 0:19:40.160 So there certainly is. I think when we work the numbers, 0:19:40.920 --> 0:19:45.560 we assume that with respect to either food and beverage 0:19:45.600 --> 0:19:49.200 or retail entertainment revenue, those will be fairly sizeable chunks 0:19:49.240 --> 0:19:53.480 of the overall revenue PI probably cumuatively close to half, 0:19:53.600 --> 0:19:57.359 which is true of many kind of gaming resorts in 0:19:59.000 --> 0:20:01.560 attractive environment where you get a lot of non gaming revenue. 0:20:01.600 --> 0:20:04.320 I think the same will be true here. The question 0:20:04.480 --> 0:20:06.960 is will it be enough and will be margins which 0:20:07.000 --> 0:20:10.000 we take to be about thirty percent, be sufficient to 0:20:10.040 --> 0:20:12.879 get a good return. But certainly, you know the logic 0:20:12.880 --> 0:20:15.400 of having a nexas city field makes a lot of sense. 0:20:15.440 --> 0:20:18.720 You know, the other locations, valleys at a golf course in 0:20:18.720 --> 0:20:22.520 the Bronx, you know, the resorts world in Queen's pretty 0:20:22.600 --> 0:20:25.639 much expanding and existing facility all have their merit. The 0:20:25.720 --> 0:20:28.480 question is will be enough to get a decent return. 0:20:28.560 --> 0:20:32.320 But certainly some of these locations have rational prospects. 0:20:32.920 --> 0:20:35.479 What does this victory for these three companies mean for 0:20:35.560 --> 0:20:39.159 their competitors like Sands, MGM, When where do they go 0:20:39.240 --> 0:20:39.720 from here? 0:20:40.680 --> 0:20:43.520 So it'd be queer. You know Sans exited this process 0:20:43.640 --> 0:20:48.440 back in April. When exited in May it's Hudson, York 0:20:48.520 --> 0:20:52.760