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Speaker 1: From the Heart where Innovations of Money and Power Collie

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Speaker 1: in Silicon Valley, NBN. This is Bloomberg Technology with Caroline

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Speaker 1: Hyde and Ed.

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Speaker 2: Ludlow and Plaine Hyde at Bloomberg's World headquarters in New York.

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Speaker 3: And I'm Ed Lovelow in San Francis. This is Bloomberg Technology.

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Speaker 2: Coming up, Microsoft, Alphabet amdo they struggle to meet high

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Speaker 2: AI expectations?

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Speaker 4: Will break down the earning supports and.

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Speaker 2: Discuss just how these big tech chants can prove themselves

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Speaker 2: down the road.

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Speaker 3: Plus the fifty five billion dollar question, should Musk's payday

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Speaker 3: go away?

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Speaker 5: At Delaware?

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Speaker 3: Judge thinks so and as voided the Tesla's CEOs compensation package.

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Speaker 3: We speak to the lawyer that beat Musk in court and.

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Speaker 2: The heads of five of the largest social media platforms

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Speaker 2: for Congress today testifying about what their companies are doing

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Speaker 2: to keep kids safe online.

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Speaker 4: We're live from DC.

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Speaker 3: Later in the hour, the three big AI names have

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Speaker 3: reported their earnings. Get right to AMD it is concerned

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Speaker 3: about their outlook for the current period and a lack

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Speaker 3: of rebound in end markets and echo from what we

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Speaker 3: heard with Intel, and at the same time, their AI

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Speaker 3: accelerator the MI three hundred ramps really well in the

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Speaker 3: quarter gone, and they exceeded that guidance they'd given us

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Speaker 3: that there will be a four hundred million dollar contribution

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Speaker 3: to revenues from the three hundred. So what's going on here?

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Speaker 3: Because the stock is down. Later today we will speak

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Speaker 3: to Lisa Sue, the CEO AMD, and work out what

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Speaker 3: the AI.

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Speaker 5: Story is here.

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Speaker 3: Similarly with Alphabet parent of Google, the markets zeroed in

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Speaker 3: on the miss in the core search business, but also

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Speaker 3: a worry about margins. Interesting because the cloud outperformed. If

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Speaker 3: you look at operating in club for the cloud in

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Speaker 3: the quarter gone, double what the street was looking for.

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Speaker 3: And when I spoke to Ruth pro actually said very

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Speaker 3: matter of factly, there is a contryution from generative AI

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Speaker 3: to what's happening in cloud, as well as our efforts

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Speaker 3: to cut costs.

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Speaker 5: Perhaps the winner of the three.

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Speaker 3: Microsoft growth in the Azure unit thirty percent year on year,

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Speaker 3: up sequentially from the prior quarter. A six percent contribution

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Speaker 3: to growth in cloud from AI, according to the CFO

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Speaker 3: Amy Hood in an interview at Bloomberg. But we're down

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Speaker 3: one point two percent. This was a high high bar quarter.

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Speaker 3: We knew what Microsoft had invested. We wanted to see

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Speaker 3: evidence that we got a boost in sales on software

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Speaker 3: and a boost in sales on cloud, and we got that,

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Speaker 3: but the market had very high expectations.

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Speaker 2: Caroline, I mean to have cloud revenues up twenty four

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Speaker 2: percent year on year, and that's still not meet those

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Speaker 2: lofty goals. Let's just talk to an investor in really

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Speaker 2: what her reaction is, Iako Yashioka, where police of Say

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Speaker 2: joins our senior portfolio consultant Wealth Enhancement Group holding both

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Speaker 2: Google and Microsoft, among many other names, and I go,

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Speaker 2: the overall feeling is that these companies delivered, but not

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Speaker 2: enough to meet the anticipation. Do you think let's talk

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Speaker 2: about Microsoft first and foremost that detail. We got the

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Speaker 2: six percent increase in revenue because of AI. Was it

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Speaker 2: just that she wasn't able to paint it forward for

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Speaker 2: this coming quarter that disappointed?

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Speaker 6: I don't necessarily think so, and thanks again for having

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Speaker 6: me today. You know, these stocks were up substantially year

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Speaker 6: to date, up over eight percent. You know, Microsoft itself

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Speaker 6: was up over our near seventies percent on a trailing

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Speaker 6: twelve month basis. So expectations have been by sort of

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Speaker 6: going into this quarter. And you know, for Microsoft they

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Speaker 6: were able to at least quantify the impact of AI

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Speaker 6: on the growth of cloud, unlike Alphabet or Google, which

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Speaker 6: I think is part of the differential here in terms

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Speaker 6: of why the stocks are behaving as they are.

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Speaker 2: Yeah, Alphabet less detail on really what contribution AI will have,

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Speaker 2: particularly on search IAGA. What about the capital expenditure that

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Speaker 2: both companies are having to give it the moment, the

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Speaker 2: investment to bring about the AI process.

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Speaker 4: Is it too much?

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Speaker 6: I don't know if it's too much, it is definitely

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Speaker 6: what is needed. I mean, Nvidia has talked about the

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Speaker 6: pricing of their chips in both Alphabet and Microsoft talked

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Speaker 6: about cappex increasing substantially in twenty twenty four relative to

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Speaker 6: twenty twenty three, and so that will be an extra

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Speaker 6: spend by both of these into data centers and servers,

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Speaker 6: and that's going to help build out the infrastructure in

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Speaker 6: which AI and all the applications can be built on.

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Speaker 3: Erco Dan Ives at Webbush has this note out that

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Speaker 3: Setia and Adella delivered a masterpiece that should be hung

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Speaker 3: up in the loover. The stock is down one point

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Speaker 3: two percent. Expectations were high as I went on about earlier.

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Speaker 3: I guess the question from someone like you that holds

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Speaker 3: a decent chunk of Microsoft shares is did you see

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Speaker 3: enough in the financial to keep buying into the stock

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Speaker 3: long term and believe in the AI story?

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Speaker 7: I think in the near term, and you know, we can.

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Speaker 6: We obviously expected a little bit of a pullback.

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Speaker 4: As I said, the.

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Speaker 6: Stocks really reflected a lot of high expectations, and so

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Speaker 6: you know, with any pullback there is an opportunity. I

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Speaker 6: think it would be nice to have the stock pullback

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Speaker 6: additionally in order to have you know.

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Speaker 7: New entry points.

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Speaker 6: And you know, for most people, I think Microsoft is

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Speaker 6: already at core position, So we just have to let

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Speaker 6: the dust settle on the stock, at least in the

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Speaker 6: near term.

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Speaker 3: Alphabet pairent of Google is down severely, and we're trying

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Speaker 3: to understand what the focus is here. Initially it seemed

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Speaker 3: like the anxiety was the core search business. Then people

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Speaker 3: started talking about margins. But if you take into account

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Speaker 3: the one time charge from headcount reduction and cost margins

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Speaker 3: look a bit better. And on an operating income basis,

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Speaker 3: the clouds did great. You know, they're saying, well, we

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Speaker 3: think jenn Ai is contributing here. Why are they not

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Speaker 3: getting credit for that cloud story?

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Speaker 8: Sure?

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Speaker 6: And you know they focused on operating income efficiencies over

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Speaker 6: the last year, and I think that's been a great

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Speaker 6: story for Alphabet, and you know, they've delivered on those promises.

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Speaker 6: I think the issue with Alphabet is really just getting

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Speaker 6: out there and telling the story and quantifying the impact

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Speaker 6: of AI into the cloud. I mean, and you know,

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Speaker 6: Microsoft talked about how there was a six percent contribution

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Speaker 6: and despite the spend that they are doing in order

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Speaker 6: to broaden out that infrastructure, they also saw some leverage

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Speaker 6: in their operating income there. So we'd love to see

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Speaker 6: more detail from Alphabet in terms of how that's going

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Speaker 6: to come about. Perhaps we'll get that once they launched

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Speaker 6: Gemini Ultra later this year, which will you know, really

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Speaker 6: impact Alphabet's Google Cloud division.

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Speaker 3: The k Senior portfolio consultant at Wealth Enhancement. Great to

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Speaker 3: have you on the show. Across so many earnings.

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Speaker 5: Thank you.

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Speaker 3: The next earnings on the doc is a MD let's

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Speaker 3: break down those results with Pierre Faragu, heads up the

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Speaker 3: Global Technology Infrastructure Research team at New Street Research.

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Speaker 5: Per great to see you.

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Speaker 3: You know, for me, the story on AMD is which

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Speaker 3: is more concerning or important to the market, right the

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Speaker 3: outlook for the current period, which makes us worried about

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Speaker 3: broad end markets or the progress they made on mi

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Speaker 3: I three hundred, because they showed a lot of progress.

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Speaker 5: Where's your head at?

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Speaker 9: Well, if you look at the stoke over like let's

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Speaker 9: say a two three year horizon, very clearly, the way

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Speaker 9: we get it is as a CPU business is going

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Speaker 9: to stabilize until he's coming back. That market is going

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Speaker 9: to balance sowood and really aimed. You managed to build

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Speaker 9: over the last five years of very sustainable challenge acquisition,

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Speaker 9: so not much is going to happen, but it's.

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Speaker 8: A very strong, very solid base.

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Speaker 9: Then, like the embedded part of the business, exiling start

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Speaker 9: of the business is very cyclical, and it's going down

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Speaker 9: at the moment, it's three coming down.

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Speaker 8: It hasn't reached the track yet, but the truff.

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Speaker 9: Is in line of sight, and then you have this

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Speaker 9: amazing opportunity in AI.

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Speaker 8: The way I read the situation today.

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Speaker 9: Is that MD is the only alternative to MVDR with

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Speaker 9: like a relatively general purpose, very similar GPU architecture, which

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Speaker 9: means that for all these people who number one find

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Speaker 9: it difficult to get enough Nvidia ships and number two

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Speaker 9: want to have an alternative supplier MD with the MI

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Speaker 9: I three hundred is probably a no brainer, and that

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Speaker 9: ramp is fascinating. And so we're talking MD potentially being

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Speaker 9: if m did a three point five or four billion

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Speaker 9: dollars of GPU revenues this year, that mean at the

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Speaker 9: end of the year they will get five maybe six

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Speaker 9: billion dollars of front ray for the thing to become

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Speaker 9: what Nvida was like what eighteen months ago, maybe yes,

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Speaker 9: eighteen months ago, in just a year, that's fascinating.

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Speaker 2: I mean, Pierre, you got a two hundred and twenty

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Speaker 2: five dollars price target, you got a buy recommendation. I mean,

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Speaker 2: what therefore is the catalyst to get us from one

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Speaker 2: hundred and sixty five to that two to five? Is

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Speaker 2: it articulation from Lisa to how they're going to end

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Speaker 2: up seeing the rewards of the AI.

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Speaker 8: That's a great question. Let me give you first what

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Speaker 8: I look look at.

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Speaker 9: My only question on Nvidia on a sorry on AMD

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Speaker 9: is execution. Does m I three hundred get into the

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Speaker 9: hand of clients and do these clients find it reasonably

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Speaker 9: easy because it's never easy to rent that new architecture

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Speaker 9: along with with Nvidia, and if that happens, then it's

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Speaker 9: like my price is actually probably far too you know, cautious.

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Speaker 9: So that's the way we look at it. So between

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Speaker 9: now and the end of this year, I want to

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Speaker 9: hear feedback from in the clients. I want to see

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Speaker 9: volumes ramping and people being like, yes, we are not

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Speaker 9: using so much of the gypis, we're going to continue

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Speaker 9: to use them. How the street looks at it is

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Speaker 9: a bit different. I think there is an elemental earnings

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Speaker 9: momentum and of course on that from that perspective, embedded

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Speaker 9: is still you know, with gaming in the down cycle,

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Speaker 9: CPU is uncertain, and of course everybody understands the obside

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Speaker 9: on GPU. When people start putting up expectations that don't

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Speaker 9: really that are not like on solid drown and when

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Speaker 9: expectations are too high, even if he talks about something

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Speaker 9: fascinating happening this year, there is a bit of a

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Speaker 9: technical disappointment.

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Speaker 8: And that's the reason why the stucky is today.

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Speaker 5: Pierre, in terms of what you still want to hear.

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Speaker 3: And I would never ask you to do my job

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Speaker 3: for me, but I am going to speak to Lisa

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Speaker 3: Sue a little later on this morning, what is the

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Speaker 3: question that's not been answered in this earning cycle?

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Speaker 5: What would you ask her?

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Speaker 8: First?

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Speaker 9: Say hello for me and the question the question I

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Speaker 9: would ask her at this at this stage is when

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Speaker 9: do you think you will have like a very strong

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Speaker 9: visibility on whether your clients are comfortable ramping for the

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Speaker 9: long run, for the long term I three hundred along Nvidia.

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Speaker 9: It's like it's very too early to say does she

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Speaker 9: need six months to have confidences that, does she need

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Speaker 9: a year?

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Speaker 8: And not too sure.

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Speaker 2: We really appreciate you, yeah, yeah, giving you a few

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Speaker 2: little hints for ED. A little bit later with Lisa

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Speaker 2: Soup Pierre Faragu, we thank you so much. New Street

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Speaker 2: Research Global Tech Infrastructure need coming up, Well, we're going

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Speaker 2: to be discussing in on masks fifty five billion dollar

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Speaker 2: pay package that is struck down by Delaware judge. Next,

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Speaker 2: we'll speak with one of those key lawyers representing the

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Speaker 2: shareholder who challenge the conversation and one elol Musk's fifty

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Speaker 2: five billion dollar Tesla pay package that.

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Speaker 4: Has been struck down by judge and Delaware.

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Speaker 2: That's after shareholder Richard Tanetta challenged it as excessive that

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Speaker 2: the ruling leaves the fortune of the world's richest man

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Speaker 2: now kind of up in the air.

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Speaker 4: He'll only be the third world's richest person. Cry cry.

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Speaker 2: Joining us now for more is Bloomberg's Max Traffkin, And

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Speaker 2: of course one of the lawyers for Richard Tanetta, this

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Speaker 2: Greg Ferrallo. He's from Bernstein, Littowitz Berger and Grossman. Bloomberg

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Speaker 2: reached out to Musk and his lawyer Evanchesla, but we

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Speaker 2: have not received a response thus far.

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Speaker 4: But Greg, I turned to you.

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Speaker 2: This was a long, hard fought case, and I think

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Speaker 2: actually the judge said, look, the defense tried very hard,

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Speaker 2: but it was the most an impossible task.

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Speaker 4: Will you expect and appeals?

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Speaker 2: Now, do you think that the board will go back

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Speaker 2: and just try to restructure some sort of payment for Alon?

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Speaker 10: Wouldn't surprise me at all if we saw an appeal

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Speaker 10: Delware practice. There is a direct appeal to the Delaware

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Speaker 10: Supreme Court, which is the final word on matters like this,

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Speaker 10: So it's likely there'll be an appeal.

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Speaker 2: And Max from Elon inc your expertise of all things,

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Speaker 2: I mean, he has been avidly against Delaware. More broadly

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Speaker 2: and clearly, there has been concerns about from Elon himself

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Speaker 2: a lack of control of his own company.

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Speaker 4: Now what do you think happens after this payper?

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Speaker 11: I mean, this is a huge development, not just because

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Speaker 11: of the amount of money that is at stake in

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Speaker 11: these options. The value of the options I've seen, you know,

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Speaker 11: figures as high as fifty billion reported of course he

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Speaker 11: hasn't exercised them yet, but also because this kind of

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Speaker 11: throws not just Tesla in the chaos. They have to

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Speaker 11: figure out a way to try to retain Elon Musk.

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Speaker 11: He's already been sort of making these kind of veiled

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Speaker 11: threats that he might be doing AI research outside of

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Speaker 11: the company if he doesn't get a bigger pay package.

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Speaker 11: And then at the same time you have all his

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Speaker 11: other companies, which of course depend on his financing. And

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Speaker 11: we remember one of the kind of one of the

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Speaker 11: reasons he wanted all this money supposedly was to pay

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Speaker 11: for is you.

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Speaker 5: Know, Mars explorations. You have to ask where every where

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Speaker 5: all of this goes.

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Speaker 11: Last thing I'll say is this is another big loss

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Speaker 11: on Della. Remember Delaware forced him to buy Twitter for

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Speaker 11: forty four billion dollars. So now even for the world's

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Speaker 11: richest man. Forty four billion, fifty billion. That's starting to

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Speaker 11: add up.

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Speaker 5: Greg, good morning. It's ed in San Francisco.

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Speaker 3: As far as I can tell, you and your clients

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Speaker 3: are the only ones to actually ever take a look

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Speaker 3: at the compensation package. So as a starting point, Greg,

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Speaker 3: what was it in the first place that worried you

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Speaker 3: or that you thought was unusual about the package that

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Speaker 3: caused you and your clients to look.

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Speaker 10: You know, I have to say that I have a

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Speaker 10: hard time articulating fifty five billion dollars. I often misspeak

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Speaker 10: and say fifty five million dollars. Fifty five billion dollars

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Speaker 10: are such a large pay package that it basically skewed

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Speaker 10: dramatically upward the entire data set for the compensation consulting industry.

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Speaker 12: I think we.

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Speaker 10: Put out a press release yesterday referring to it as

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Speaker 10: a gargantuan package. Let me start by saying it was

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Speaker 10: so large that we looked at it specifically because no

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Speaker 10: one had ever tried to come this close. And oh,

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Speaker 10: by the way, when you look at the nearest comparable,

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Speaker 10: it's Elon's prior pay package.

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Speaker 3: Okay, but Greg, here's the thing. It may be the

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Speaker 3: biggest compensation package in history. But there are a really

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Speaker 3: large body of Tesla investors out there that say, so what.

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Speaker 3: Seventy three percent of those investors voted in favor of

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Speaker 3: the package in twenty eighteen when it was awarded, And

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Speaker 3: there are is a big body of people out there, Greg,

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Speaker 3: I hope you don't mind me saying that, are pretty

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Speaker 3: mad at you and your client who had Tesla shareholders,

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Speaker 3: because they say, look at the share performance of Tesla

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Speaker 3: since that package was awarded. Look at Tesla's position as

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Speaker 3: the market incumbent in evs and their growth globally and

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Speaker 3: other products. Why does it matter?

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Speaker 10: Well, you know, there's this idea in efficient capital markets

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Speaker 10: that shareholders ought to have a say in things like this,

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Speaker 10: and this package was in fact put to shareholders, but

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Speaker 10: it was put to shareholders on approxy that the court

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Speaker 10: found to be materially misleading in several respects. And look,

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Speaker 10: the bottom line is, capital markets don't work if you

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Speaker 10: don't tell stockholders material facts when asking them to take action.

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Speaker 10: And that's exactly what happened here.

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Speaker 4: Max. This puts into question the board.

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Speaker 2: In particular, the accusations from many an investor is that

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Speaker 2: there is no pushback, and the judge articulated there was

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Speaker 2: at no point any sort of questioning that this pay

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Speaker 2: package was ever perhaps successive. What does it mean for

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Speaker 2: the board of Tesla.

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Speaker 5: Well, it's not clear to me.

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Speaker 11: You know, it's as Ed is kind of hinting at

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Speaker 11: many Tesla shareholders were aware that the Tesla boarder of

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Speaker 11: directors was essentially a rubber stamp.

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Speaker 5: You have a lot of people who are very.

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Speaker 11: Close friends with Elon, and I think one of the

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Speaker 11: reasons he lost his case is because you had nominally

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Speaker 11: independent directors who were going on vacation with him, and

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Speaker 11: we had clearly had a close relationship with Now that's

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Speaker 11: kind of like how Elon Musk has done business and

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Speaker 11: by Elon.

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Speaker 5: What's so I think.

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Speaker 11: Difficult about this going forward is that that's kind of

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Speaker 11: been If you asked Elon Musk, like, what is your playbook?

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Speaker 5: How have you been able to achieve so much?

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Speaker 11: He would say, well, it's because I have a you know,

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Speaker 11: I've been able to do essentially whatever I want to do.

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Speaker 11: And again, as I said earlier, he's been asking for

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Speaker 11: even more control from where he got so I don't

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Speaker 11: know where that goes.

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Speaker 5: I do think there is some piece.

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Speaker 11: Of risk that probably didn't exist yesterday that Elon Musk

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Speaker 11: could either threaten to or even And again I think

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Speaker 11: this is a far off possibility to decide to walk

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Speaker 11: away from Tesla.

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Speaker 2: I mean, this is why the share price is somewhat underpression,

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Speaker 2: not massive, Moss Gregg. But the articulation from the judge was,

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Speaker 2: at no point did it seem that this fifty five

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Speaker 2: billion or these options awarded was necessary to keep Elon motivated.

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Speaker 2: But then to that end, why not recompense the leader,

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Speaker 2: a founder with such a significant upside if he's going

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Speaker 2: to deliver for shareholders.

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Speaker 10: Well, the judgemente the point I think very coachingly, and

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Speaker 10: that is, I believe his net worth increased in increments

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Speaker 10: of ten billion dollars based on the stock he already

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Speaker 10: held without this pay package, for each increment that was

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Speaker 10: identified in this pay package. And so I think the

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Speaker 10: judges point of view was, if you look at other

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Speaker 10: successful founders, Bezos, Zuckerberg, others, they don't take pay packages,

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Speaker 10: or they don't take any material pay package. They rely

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Speaker 10: on driving value for their shareholders in their own underlying stock.

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Speaker 10: Mister Musk had the opportunity to increase his net worth

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Speaker 10: by almost one hundred billion dollars. I have to stop

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Speaker 10: and make sure I get the b right. One hundred

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Speaker 10: billion dollars if he accomplished what he set out to

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Speaker 10: accomplish under this pay package without getting a single option.

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Speaker 10: And at the end of the day, this is a

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Speaker 10: car company, it's not a space exploration company, and it's

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Speaker 10: a public company, and public companies live by different rules

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Speaker 10: than private companies.

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Speaker 3: If you're watching us live now on Bloomberg Television and

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Speaker 3: you're eternal subscriber, you can send questions to us via

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Speaker 3: ib greg I told our audience on social media you

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Speaker 3: were coming on and that there were lots of questions.

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Speaker 3: I think the most common is is just a want

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Speaker 3: for deeper understanding of what the pathway forward is, so

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Speaker 3: you talk with Caroline about a likely appeal. I think

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Speaker 3: my understanding from sources is that's likely as well. But

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Speaker 3: the other thing is that this current board, which is

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Speaker 3: different to what it was in twenty eighteen, could put

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Speaker 3: together a new compensation plan and then take it to

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Speaker 3: shareholders to be ratified. How involved do you think you

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Speaker 3: will be with your client? How involved you think Kathleen J.

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Speaker 3: McCormick will be in that process if it's all.

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Speaker 10: Well, the simple answer to that is that's a question

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Speaker 10: for the board to determine in the first instance, and

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Speaker 10: assuming it fulfills its fiduciary duties and uses ordinary and

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Speaker 10: reasonable means to arrive at a result, my guess is

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Speaker 10: I won't be involved at all, And my guess as

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Speaker 10: well as the judge won't be involved at all if

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Speaker 10: the Board comes out with a package which either facially

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Speaker 10: is ridiculous, gargantuan, or otherwise raises concerns from a fiduciary perspective.

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Speaker 10: I suspect you'll see my firm and I involved as well.

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Speaker 3: Right Max, There's so much to discuss here. I guess

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Speaker 3: the board could also say, well, here's another fifty five

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Speaker 3: billion dollar package. Looks different, same number.

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Speaker 5: I mean, one thing I'm curious about.

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Speaker 11: You know, musk Overnight was sort of threatening to leave

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Speaker 11: Delaware and to reincorporate in Texas. I believe or you know,

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Speaker 11: I think X he moved from Delaware in a.

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Speaker 5: Is that a re Can he do that?

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Speaker 11: And is that like, like, will there be another sort

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Speaker 11: of leg you know, transfer of lawsuits if it happens?

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Speaker 11: Because shareholders will saying, oh, he's he's just doing this

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Speaker 11: to reduce our rights or something.

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Speaker 10: So look, the simple answer to that is Musk can't

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Speaker 10: do anything himself. That's a matter that the board has

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Speaker 10: to decide in the first instance, and then it's presented

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Speaker 10: to shareholders for a vote. If shareholders, upon the board's recommendation,

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Speaker 10: decide to move to Nevada, they have a right to

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Speaker 10: do that, but it's not a Musk decision. Let me

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Speaker 10: also say that I'm not an expert in all fifty

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Speaker 10: states laws, but I suspect I get I would guess

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Speaker 10: that even Nevada prohibits you from putting out misleading proxy statements,

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Speaker 10: and that if Musk wants to go to Nevada and

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Speaker 10: do the same thing, he's probably going to run into

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Speaker 10: some problems there as well. It's this little idea of

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Speaker 10: telling the truth, you know, it's it's real base.

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Speaker 3: Right, Hey, Greg, real quick an audience question, and I'm

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Speaker 3: just going to read, do you worry about changing the

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Speaker 3: norms around Delaware corporate law? Way from non intervention? That

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Speaker 3: was a follow on from what Max asked we have

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Speaker 3: about thirty seconds.

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Speaker 8: No, not at all.

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Speaker 10: I think it's very important to recognize, and this is

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Speaker 10: something that's deeply embedded in Delaware law that every decision

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Speaker 10: is twice tested both from a legal perspective and an

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Speaker 10: equitable perspective. And when fiduciaries act in a way that's

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Speaker 10: not equitable or in violation of their duties, you're squarely

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Speaker 10: within the long tradition of the Delaware law to call

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Speaker 10: them on that.

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Speaker 3: I point out that Tesla had a sharp reaction after ours.

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Speaker 3: It's now down just four tens of one percent. We

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Speaker 3: thank Greg Varari, lawyer at Bernston Littlwitzburger Engrossman, and of

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Speaker 3: course friend of the show of Bloomberg's Max Chafkin.

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Speaker 13: Actually, I'm very boolished for the SMP five hundred, not

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Speaker 13: just for the Magnificent seven.

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Speaker 6: The DZSM for the Maneficent seven will continue.

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Speaker 14: As you look at the mag seven, you know there

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Speaker 14: are companies that have a broad exposure.

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Speaker 15: I think semi conductors will continue to be strong.

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Speaker 3: I think we have to look at areas like semiconductor

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Speaker 3: where AI could drive a lot more than they and

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Speaker 3: going forward, I.

444
00:23:02,480 --> 00:23:07,240
Speaker 14: Think twenty four is really about differentiation. Some will be

445
00:23:07,320 --> 00:23:11,080
Speaker 14: determined that they really aren't true AI beneficiaries.

446
00:23:12,680 --> 00:23:14,600
Speaker 5: Some of them were right and some of them were wrong.

447
00:23:14,720 --> 00:23:17,720
Speaker 3: Welcome back to Bloomberg Technology Ed Lovelow here in San Francisco,

448
00:23:17,800 --> 00:23:20,040
Speaker 3: and in the market's context, this is what the session

449
00:23:20,080 --> 00:23:22,399
Speaker 3: looks like right now in the moment. You can see then,

450
00:23:22,400 --> 00:23:24,840
Speaker 3: as that one hundred softer by one point four percent.

451
00:23:25,080 --> 00:23:28,720
Speaker 3: The earning story a big contributor to that. Microsoft off

452
00:23:28,760 --> 00:23:32,480
Speaker 3: one point three percent despite delivering what was a strong quarter.

453
00:23:32,560 --> 00:23:34,200
Speaker 5: There was evidence that AI.

454
00:23:34,000 --> 00:23:37,240
Speaker 3: Made meaningful contributions to the top and bottom line, but

455
00:23:37,280 --> 00:23:40,639
Speaker 3: it was a high bar quarter. Investors just wanted more.

456
00:23:41,000 --> 00:23:44,000
Speaker 3: But largely that was the positive story. More worrying, AMD

457
00:23:44,200 --> 00:23:47,440
Speaker 3: now softer three percent gave a worrying outlook for the

458
00:23:47,480 --> 00:23:50,080
Speaker 3: current period. Remember, they go into lots of end markets

459
00:23:50,119 --> 00:23:52,440
Speaker 3: where we're just not seeing the rebound we thought we would.

460
00:23:52,840 --> 00:23:55,800
Speaker 3: But the AI story was strong, right their AI accelerator

461
00:23:55,960 --> 00:23:58,359
Speaker 3: MI I three hundred. They ramped production in the quarter

462
00:23:58,440 --> 00:24:01,400
Speaker 3: to a reasonable volume and it ceded their sales guidance

463
00:24:01,440 --> 00:24:06,000
Speaker 3: that they'd previously given. Investors still a little concerned. Then

464
00:24:06,040 --> 00:24:10,040
Speaker 3: there's what's happening away from earnings in the media landscape.

465
00:24:10,640 --> 00:24:14,160
Speaker 3: A big bid for paramount from Byron Allen that sock

466
00:24:14,240 --> 00:24:15,520
Speaker 3: is now up seven point eight percent.

467
00:24:15,560 --> 00:24:16,680
Speaker 5: It had been much higher.

468
00:24:17,119 --> 00:24:19,960
Speaker 3: What about that conversation we were having in Caroline about

469
00:24:20,240 --> 00:24:23,040
Speaker 3: Paramount and Warner Brothers Discovery And then in the back

470
00:24:23,080 --> 00:24:26,520
Speaker 3: of your mind, remember somebody recently suggested that ESPN plus

471
00:24:26,560 --> 00:24:30,000
Speaker 3: goes on Netflix and what is happening here? No, I

472
00:24:30,040 --> 00:24:31,520
Speaker 3: think we have a conversation coming up.

473
00:24:31,680 --> 00:24:32,760
Speaker 5: Yeah, so much.

474
00:24:32,720 --> 00:24:37,240
Speaker 2: Discuss activist investors meets desire to.

475
00:24:36,520 --> 00:24:38,800
Speaker 4: Make some big bids on some TV assets.

476
00:24:38,840 --> 00:24:41,919
Speaker 2: That's returned to the comedian turned TV media mogul Byron

477
00:24:41,920 --> 00:24:44,879
Speaker 2: Allen because his latest take of attempt is a massive

478
00:24:44,880 --> 00:24:48,439
Speaker 2: one head fourteen billion dollars is offering for Paramount in

479
00:24:48,480 --> 00:24:51,439
Speaker 2: a text, the media mogul made basically that offer for

480
00:24:51,640 --> 00:24:53,959
Speaker 2: voting shares of the company and a fifty percent premium

481
00:24:53,960 --> 00:24:56,360
Speaker 2: to recent training. According to sources. Now, when you include

482
00:24:56,400 --> 00:24:59,879
Speaker 2: existing debt of Paramount, total value the deal thirty billion

483
00:25:00,440 --> 00:25:03,280
Speaker 2: him with more as US media analyst so Brie bag Intelligence, KEITHA.

484
00:25:03,359 --> 00:25:06,200
Speaker 2: Ranganathen and I mean, ultimately, do you think this is

485
00:25:06,240 --> 00:25:09,879
Speaker 2: a realistic deal? Barn Allen is known for making well

486
00:25:10,000 --> 00:25:13,560
Speaker 2: waves in media landscape and headlines, But is this a

487
00:25:13,600 --> 00:25:15,359
Speaker 2: realistic deal that you could follow through with.

488
00:25:16,600 --> 00:25:19,439
Speaker 1: It's definitely a solid deal, Caroline. I mean that the

489
00:25:19,480 --> 00:25:22,720
Speaker 1: premiums are solid, and this is really the first full

490
00:25:22,840 --> 00:25:26,160
Speaker 1: cash bid that Paramount has received for all of the company.

491
00:25:26,480 --> 00:25:29,040
Speaker 1: Having said that, though, I mean, you're absolutely right Byron

492
00:25:29,080 --> 00:25:31,760
Speaker 1: Island has kind of been in the take of all

493
00:25:31,800 --> 00:25:36,160
Speaker 1: of the media conversations, right. He's been making bids all

494
00:25:36,200 --> 00:25:39,040
Speaker 1: over the place, whether it was for you know, Disney's

495
00:25:39,080 --> 00:25:43,160
Speaker 1: linear assets, whether it was for bt TV stations from Scripts.

496
00:25:43,160 --> 00:25:45,399
Speaker 1: So I think it's still the market at least I

497
00:25:45,400 --> 00:25:48,480
Speaker 1: think views this as pretty much a long shot, just

498
00:25:48,560 --> 00:25:50,879
Speaker 1: kind of given that you know, there there is a

499
00:25:51,000 --> 00:25:53,840
Speaker 1: huge amount of debt, as you pointed out, over fifteen

500
00:25:53,840 --> 00:25:57,320
Speaker 1: billion dollars. Paramount is one of the most levered companies

501
00:25:57,400 --> 00:26:00,560
Speaker 1: in the media world over five times, and financing is

502
00:26:00,600 --> 00:26:03,119
Speaker 1: definitely going to be a problem, especially in the current

503
00:26:03,280 --> 00:26:04,120
Speaker 1: market environment.

504
00:26:05,760 --> 00:26:06,960
Speaker 5: Gita, I want to do the math.

505
00:26:07,000 --> 00:26:09,640
Speaker 3: You're right, fifteen point six billion on the debt side,

506
00:26:09,800 --> 00:26:13,879
Speaker 3: the offer is fourteen billion. Paramount's current market capitalization is

507
00:26:14,000 --> 00:26:17,439
Speaker 3: nine point nine five billion. But I guess what I

508
00:26:17,440 --> 00:26:20,520
Speaker 3: don't understand is like, where's Barron getting this number from?

509
00:26:20,880 --> 00:26:23,879
Speaker 3: Where is the value? Forget the kind of risk on

510
00:26:23,920 --> 00:26:26,600
Speaker 3: the debt side. But what is it the Paramount offers

511
00:26:26,680 --> 00:26:27,560
Speaker 3: or can be fixed.

512
00:26:29,119 --> 00:26:31,879
Speaker 1: Paramount actually offers a lot. I mean, it is a

513
00:26:32,000 --> 00:26:34,960
Speaker 1: very compelling collection of assets. One could argue that, yes,

514
00:26:35,040 --> 00:26:39,200
Speaker 1: they do have a very heavy exposure to TV networks,

515
00:26:39,240 --> 00:26:42,800
Speaker 1: you know, linear networks like the CBS broadcast network, like Nickelodeon,

516
00:26:43,520 --> 00:26:45,920
Speaker 1: you know Comedy Central, which are all in secular decline.

517
00:26:45,920 --> 00:26:49,280
Speaker 1: And remember, I mean, you know, advertising every quarter, if

518
00:26:49,320 --> 00:26:52,040
Speaker 1: you look at TV advertising, it's down about ten fifteen percent.

519
00:26:52,400 --> 00:26:56,000
Speaker 1: Affiliate fees again down because of cord cutting almost you know,

520
00:26:56,119 --> 00:26:58,280
Speaker 1: eight to nine or ten percent of cord cutting is

521
00:26:58,320 --> 00:27:01,200
Speaker 1: what we're seeing a quarter and water out. So yeah,

522
00:27:01,400 --> 00:27:03,840
Speaker 1: I mean it's definitely a tough landscape. But having said that,

523
00:27:03,880 --> 00:27:05,919
Speaker 1: I mean, you know, the linear networks still throw out

524
00:27:05,960 --> 00:27:08,720
Speaker 1: a decent amount of cash. But I think more importantly,

525
00:27:09,440 --> 00:27:12,679
Speaker 1: you know, is really the content assets. Paramount has an

526
00:27:12,760 --> 00:27:16,960
Speaker 1: absolutely formidable content production arm, whether it is the film

527
00:27:17,040 --> 00:27:20,520
Speaker 1: studio or the television studio, and that is really what

528
00:27:20,640 --> 00:27:23,080
Speaker 1: a lot of the other suitors. I'm not necessarily sure

529
00:27:23,080 --> 00:27:25,600
Speaker 1: whether Byron Allen is looking at the studio itself, but

530
00:27:25,640 --> 00:27:28,399
Speaker 1: we know that, you know, sky Dance Media, backed by

531
00:27:28,480 --> 00:27:31,399
Speaker 1: David Ellison has been very interested in in Paramount and

532
00:27:31,480 --> 00:27:33,879
Speaker 1: kind of combining it with sky Dance as well as

533
00:27:33,880 --> 00:27:36,240
Speaker 1: Apolo and of course Warner Brothers Discovery as.

534
00:27:36,119 --> 00:27:40,160
Speaker 5: Well Nickelodeon Blast from the Past.

535
00:27:40,160 --> 00:27:43,159
Speaker 3: When I was a kid, rug Rats, Wild Thorn Breeze,

536
00:27:43,200 --> 00:27:44,680
Speaker 3: that was my jam. And if you know what I'm

537
00:27:44,680 --> 00:27:46,560
Speaker 3: talking about on social media at me, I don't care,

538
00:27:46,880 --> 00:27:50,000
Speaker 3: no shame there US media analysts for Bloomberg Intelligence Geeta

539
00:27:50,080 --> 00:27:52,800
Speaker 3: rang and eighth and Nickelodeon. My goodness, let's keep a

540
00:27:52,840 --> 00:27:56,640
Speaker 3: conversation going and bring in Laura Martin's senior entertainment analyst

541
00:27:57,000 --> 00:27:59,919
Speaker 3: at need him and let's get right to it. Byron

542
00:28:00,359 --> 00:28:02,800
Speaker 3: buying Paramount thoughts.

543
00:28:03,840 --> 00:28:07,520
Speaker 16: Right, fantastic for Paramount shareholders. This company is too small.

544
00:28:07,640 --> 00:28:10,199
Speaker 16: It needs to have a different management team. I like

545
00:28:10,240 --> 00:28:12,119
Speaker 16: the idea of splitting it up. It's worth more on

546
00:28:12,160 --> 00:28:15,439
Speaker 16: pieces than together. We need new management here. Great idea.

547
00:28:16,760 --> 00:28:19,240
Speaker 3: So this is the stock that you cover in Caroline

548
00:28:19,280 --> 00:28:21,480
Speaker 3: and I've been talking over recent days kind of broadly

549
00:28:21,520 --> 00:28:25,600
Speaker 3: what's happening here, you know, take into account this proposal

550
00:28:25,680 --> 00:28:29,440
Speaker 3: that ESPN plus from Nelson Peltz, according to Bloomberg Sources,

551
00:28:29,720 --> 00:28:33,680
Speaker 3: does something with Netflix. It's still an industry where they're

552
00:28:33,680 --> 00:28:36,800
Speaker 3: trying to kind of right size and find the formula

553
00:28:36,920 --> 00:28:37,399
Speaker 3: for profit.

554
00:28:37,680 --> 00:28:39,600
Speaker 5: Is at least my read on all this newsflow.

555
00:28:40,960 --> 00:28:43,600
Speaker 16: So on ESPN, I don't think Nelson Puts will actually

556
00:28:43,600 --> 00:28:46,560
Speaker 16: win his board seats, so I think ESPN will stay

557
00:28:46,600 --> 00:28:48,960
Speaker 16: part of the Walt Disney company. I think a far

558
00:28:49,040 --> 00:28:53,360
Speaker 16: more interesting value creative solution for ESPN is to take

559
00:28:53,680 --> 00:28:56,560
Speaker 16: to get the MBA and the NFL to take pieces

560
00:28:56,600 --> 00:29:01,120
Speaker 16: like equity pieces in ESPN and they become basically ESPN

561
00:29:01,240 --> 00:29:05,600
Speaker 16: become the anchor tenants streaming like linear its TV streaming

562
00:29:05,600 --> 00:29:07,640
Speaker 16: for the leagues. That's a good idea, sort of like

563
00:29:07,680 --> 00:29:10,320
Speaker 16: what Hulu used to be for entertainment. I think the

564
00:29:10,360 --> 00:29:13,440
Speaker 16: Professional Sports League should do that with ESPN plus much

565
00:29:13,520 --> 00:29:16,320
Speaker 16: better idea than what than selling it to Netflix.

566
00:29:17,680 --> 00:29:20,680
Speaker 2: Just taking that step back, Laura and the idea that

567
00:29:21,520 --> 00:29:24,320
Speaker 2: M and A seems inevitable in twenty twenty four in

568
00:29:24,360 --> 00:29:27,600
Speaker 2: some way, shape or form. Who become the key players left?

569
00:29:27,680 --> 00:29:29,880
Speaker 2: In your mind's eye? Who are the winners from all

570
00:29:29,880 --> 00:29:30,080
Speaker 2: of this?

571
00:29:31,520 --> 00:29:31,880
Speaker 7: Bigger?

572
00:29:32,080 --> 00:29:34,520
Speaker 16: You must be bigger, So who you're competing with here

573
00:29:34,600 --> 00:29:37,880
Speaker 16: is Amazon Prime Video and Amazon It never needs to

574
00:29:37,920 --> 00:29:40,840
Speaker 16: make money from streaming, so that's your competitor. My opinion

575
00:29:40,880 --> 00:29:43,480
Speaker 16: is Apple comes in eventually, but they're not really a

576
00:29:43,480 --> 00:29:46,400
Speaker 16: serious player today. They spend two billion dollars on content

577
00:29:46,480 --> 00:29:49,800
Speaker 16: and as we know, Netflix spends seventeen billion without sports content.

578
00:29:50,200 --> 00:29:52,560
Speaker 16: So these players are the winners are going to be

579
00:29:52,600 --> 00:29:55,160
Speaker 16: the Walt Disney Company in my opinion, either it gets

580
00:29:55,160 --> 00:29:59,960
Speaker 16: bought or it's just big enough with enough IP franchises

581
00:30:00,280 --> 00:30:03,240
Speaker 16: to win. And I think Warner Brothers Discovery is like

582
00:30:03,280 --> 00:30:06,080
Speaker 16: the dark horse. But I gotta tell your paramount is

583
00:30:06,080 --> 00:30:10,160
Speaker 16: too small. There's no advantages to small size in this war.

584
00:30:11,240 --> 00:30:14,560
Speaker 2: What's interesting, Laura is also we were originally bringing you

585
00:30:14,600 --> 00:30:16,520
Speaker 2: on to talk about the earnings and the fact that

586
00:30:16,560 --> 00:30:19,400
Speaker 2: we have, you know, advertising looking pretty good when you're

587
00:30:19,400 --> 00:30:22,680
Speaker 2: looking at YouTube for example, and Alphabet out there managing

588
00:30:22,720 --> 00:30:25,280
Speaker 2: to still bring in the ad revenue when everyone really

589
00:30:25,320 --> 00:30:27,720
Speaker 2: wants to hear about AI. But from your perspective, Laura,

590
00:30:27,760 --> 00:30:30,480
Speaker 2: what is it that some of these tech companies in

591
00:30:30,560 --> 00:30:32,640
Speaker 2: Alphabet for example, can bring to the table when it

592
00:30:32,680 --> 00:30:34,280
Speaker 2: comes to our own consumption of content?

593
00:30:35,960 --> 00:30:40,400
Speaker 16: So I think what's really interesting about yeah, Google's strategic

594
00:30:40,440 --> 00:30:43,400
Speaker 16: position alphabet strategic position is YouTube is now the number

595
00:30:43,440 --> 00:30:48,120
Speaker 16: one streamed entity, and YouTube advertising grew sixteen percent and

596
00:30:48,120 --> 00:30:51,360
Speaker 16: they're now up to we think three billion dollars in

597
00:30:51,440 --> 00:30:54,080
Speaker 16: subscription revenue, which is sort of hidden in the other line.

598
00:30:54,120 --> 00:30:56,040
Speaker 16: You have to sort of go digging, but they said

599
00:30:56,040 --> 00:30:59,360
Speaker 16: they had fifteen million subscribe one hundred million subscribers and

600
00:30:59,440 --> 00:31:00,680
Speaker 16: fifteen billion.

601
00:31:00,400 --> 00:31:02,760
Speaker 7: Dollars in subscription revenue last year.

602
00:31:02,800 --> 00:31:05,280
Speaker 16: So this is another revenue stream sort of building up

603
00:31:05,880 --> 00:31:08,600
Speaker 16: under the sheets, and it's all video all the time.

604
00:31:08,920 --> 00:31:11,120
Speaker 7: YouTube is a YouTube TV with the.

605
00:31:11,160 --> 00:31:15,240
Speaker 16: NFL Sunday ticket really really rapid adoption, It's almost doubled

606
00:31:15,240 --> 00:31:16,680
Speaker 16: their subscribers that product.

607
00:31:17,760 --> 00:31:20,320
Speaker 3: Laura, I guess going into the earnings and coming out

608
00:31:20,320 --> 00:31:23,360
Speaker 3: of it, it simply came down to understanding the AI

609
00:31:23,520 --> 00:31:27,480
Speaker 3: story in a way that Google or alphabet demonstrates they

610
00:31:27,480 --> 00:31:30,360
Speaker 3: can make money from all of this investment in chat.

611
00:31:30,440 --> 00:31:32,520
Speaker 3: Do you now have a better understanding of that?

612
00:31:34,200 --> 00:31:34,520
Speaker 7: Yeah.

613
00:31:34,600 --> 00:31:38,600
Speaker 16: I think what's really interesting about they said AI sixty

614
00:31:38,640 --> 00:31:41,640
Speaker 16: seven times in their transcript, and they said generative AI twelve.

615
00:31:42,080 --> 00:31:45,640
Speaker 16: I think what's really interesting is their margins. They hired

616
00:31:45,760 --> 00:31:49,600
Speaker 16: zero extra headcount, they grew revenue at thirteen percent with

617
00:31:49,800 --> 00:31:52,760
Speaker 16: no extra costs, so guess what's happening to free cash flow.

618
00:31:52,960 --> 00:31:56,520
Speaker 16: Operating margins went up five hundred basis points to twenty

619
00:31:56,560 --> 00:31:57,200
Speaker 16: seven percent.

620
00:31:57,680 --> 00:32:00,600
Speaker 7: These companies that are now integrating.

621
00:32:00,320 --> 00:32:03,720
Speaker 16: Generative AI and AI not only are having faster product

622
00:32:04,160 --> 00:32:09,400
Speaker 16: innovation and product introductions, they're also cutting costs already, they're

623
00:32:09,440 --> 00:32:10,760
Speaker 16: not using as many people.

624
00:32:11,080 --> 00:32:13,360
Speaker 7: You keep seeing alphabet.

625
00:32:13,200 --> 00:32:16,120
Speaker 16: You know, a release seeing statement saying it's cutting more people.

626
00:32:16,400 --> 00:32:17,800
Speaker 7: This is all about automation.

627
00:32:18,360 --> 00:32:22,960
Speaker 16: So my opinion is the faster companies adopt generitive AI

628
00:32:23,320 --> 00:32:26,680
Speaker 16: and machine learning AI, the faster costs go down because

629
00:32:26,680 --> 00:32:28,520
Speaker 16: you're replacing people with machines.

630
00:32:29,680 --> 00:32:33,480
Speaker 2: It's tough, but from a bottom line, it's positive. Laura Martin,

631
00:32:33,560 --> 00:32:35,000
Speaker 2: it's so good to have you on the show.

632
00:32:35,040 --> 00:32:36,120
Speaker 4: As always. We thank you.

633
00:32:36,160 --> 00:32:39,080
Speaker 2: Just going the whole gamut of the media landscape with

634
00:32:39,080 --> 00:32:42,080
Speaker 2: our senior entertainment analyst over at Needham Stay well. Meanwhile,

635
00:32:42,080 --> 00:32:44,360
Speaker 2: coming up, look tech leaders, they've just sent it on

636
00:32:44,400 --> 00:32:47,240
Speaker 2: Capitol Hill to testify at a Senate herring focused on

637
00:32:47,440 --> 00:32:50,440
Speaker 2: children's digital safety. We have so much more on this

638
00:32:50,480 --> 00:32:51,720
Speaker 2: as we go live to Washington.

639
00:32:51,840 --> 00:32:53,840
Speaker 4: That's next. It's a really big technology.

640
00:32:54,280 --> 00:33:12,000
Speaker 3: There is a problem with accountability. Okay, tech CEOs across Meta, X, Snap, TikTok,

641
00:33:12,240 --> 00:33:15,360
Speaker 3: and more have descended on Capitol Hill to testify at

642
00:33:15,360 --> 00:33:19,160
Speaker 3: a Senate hearing focused on children's online safety. Joining us

643
00:33:19,200 --> 00:33:23,280
Speaker 3: live from Washington, Bloomberg's Alex Brinka and in any of

644
00:33:23,320 --> 00:33:25,920
Speaker 3: these hearings, you have to take the prepared remarks of

645
00:33:25,960 --> 00:33:30,000
Speaker 3: the speakers, the CEOs themselves, and then see what happens

646
00:33:30,000 --> 00:33:32,560
Speaker 3: with the line of questioning, which can sometimes be outside

647
00:33:32,640 --> 00:33:35,960
Speaker 3: the scope of the brief What have we learned so far?

648
00:33:36,680 --> 00:33:36,880
Speaker 5: Well?

649
00:33:36,960 --> 00:33:37,320
Speaker 12: So far.

650
00:33:37,400 --> 00:33:40,560
Speaker 13: Both the tech CEOs and the senators in the hearing

651
00:33:40,640 --> 00:33:43,560
Speaker 13: room came to the room with a lot of vigor

652
00:33:43,600 --> 00:33:46,600
Speaker 13: for those prepared remarks. It started with Senator Durbin showing

653
00:33:46,720 --> 00:33:52,400
Speaker 13: a somber video of victims who had experienced sexual exploitation online,

654
00:33:52,800 --> 00:33:56,880
Speaker 13: and went into Senator Graham telling Mark Zuckerberg, the CEO

655
00:33:56,920 --> 00:33:58,960
Speaker 13: of Meta, and the other CEOs on the witness table

656
00:33:59,000 --> 00:34:02,000
Speaker 13: inexplicably that they have quote blood on their hands.

657
00:34:02,000 --> 00:34:04,280
Speaker 12: The hearing room erupted in applause.

658
00:34:04,680 --> 00:34:07,080
Speaker 13: After those prepared remarks, we did get some new news

659
00:34:07,440 --> 00:34:10,560
Speaker 13: from the likes of Linda Yakarino, the CEO of X,

660
00:34:10,760 --> 00:34:13,120
Speaker 13: who said that her company would be the first to

661
00:34:13,360 --> 00:34:17,080
Speaker 13: support the stop see SAM Act, an act that is

662
00:34:17,320 --> 00:34:21,520
Speaker 13: meant to protect victims of who have their sexual images

663
00:34:21,600 --> 00:34:25,600
Speaker 13: uploaded online and expand the reporting process for them with

664
00:34:25,719 --> 00:34:28,399
Speaker 13: the tech companies. As we speak, the questioning is still

665
00:34:28,440 --> 00:34:30,920
Speaker 13: going on and some of those back and forth have

666
00:34:30,960 --> 00:34:35,160
Speaker 13: gotten a little bit testy, particularly as we get into

667
00:34:35,160 --> 00:34:36,600
Speaker 13: the day after the prepared remarks.

668
00:34:37,280 --> 00:34:41,680
Speaker 2: All of this comes as bills and legislation is debated,

669
00:34:41,800 --> 00:34:43,200
Speaker 2: but ultimately goes nowhere.

670
00:34:43,239 --> 00:34:45,120
Speaker 4: Alex, is there any sense.

671
00:34:45,280 --> 00:34:49,960
Speaker 2: That some sort of rules will change for ultimate liability

672
00:34:50,000 --> 00:34:52,799
Speaker 2: for these companies or in general? Is this more about

673
00:34:53,000 --> 00:34:55,040
Speaker 2: self regulation still?

674
00:34:55,120 --> 00:34:55,719
Speaker 12: I can tell you.

675
00:34:55,760 --> 00:34:59,080
Speaker 13: Senator Klobuchar had her seven minutes of questioning, and she

676
00:34:59,280 --> 00:35:03,600
Speaker 13: had an exasperated tone because she said, this conversation has

677
00:35:03,600 --> 00:35:06,279
Speaker 13: been going on for more than a decade now.

678
00:35:06,440 --> 00:35:07,800
Speaker 12: She had a really pointed statement.

679
00:35:07,880 --> 00:35:11,319
Speaker 13: She talked about the issues with the Boeing plane, saying,

680
00:35:11,320 --> 00:35:13,200
Speaker 13: if we have a piece of a plane fall off

681
00:35:13,440 --> 00:35:16,879
Speaker 13: and threaten lives, we ground those planes. If there are

682
00:35:16,960 --> 00:35:21,319
Speaker 13: children dying from interactions online by suicide or by coming

683
00:35:21,320 --> 00:35:24,200
Speaker 13: in contact with sexual credits, why aren't we doing that?

684
00:35:24,280 --> 00:35:27,840
Speaker 13: So that exasperation is certainly felt from in the members

685
00:35:28,239 --> 00:35:29,320
Speaker 13: on both sides of the aisle.

686
00:35:29,520 --> 00:35:30,759
Speaker 12: But we did hear folks like.

687
00:35:30,719 --> 00:35:33,839
Speaker 13: Republican Senator Lindsay Graham come to the table today saying

688
00:35:33,880 --> 00:35:36,919
Speaker 13: Republicans are happy to come to the table. Meanwhile, there

689
00:35:37,000 --> 00:35:40,000
Speaker 13: is kind of folks across the aisle who have bills

690
00:35:40,000 --> 00:35:43,400
Speaker 13: in motion. That being said, we've seen bills before that

691
00:35:43,520 --> 00:35:46,000
Speaker 13: aim to reign in the power of big tech when

692
00:35:46,000 --> 00:35:48,840
Speaker 13: there are children's lives and children's safety on the line.

693
00:35:49,120 --> 00:35:51,239
Speaker 13: Perhaps this is the moment that they can actually get

694
00:35:51,239 --> 00:35:52,200
Speaker 13: things over the line.

695
00:35:53,120 --> 00:35:56,000
Speaker 3: Ale's kind of in parallel and adjacent to this Bloomberg's

696
00:35:56,040 --> 00:36:02,160
Speaker 3: reporting with regards to Meta that previously some executive went

697
00:36:02,200 --> 00:36:05,000
Speaker 3: to Mark Zuckerberg and said we need to hire more

698
00:36:05,040 --> 00:36:08,960
Speaker 3: people focused on child's online safety in terms of headcount,

699
00:36:09,080 --> 00:36:13,120
Speaker 3: and that proposal was rejected by Zuckerberg. What's the story

700
00:36:13,200 --> 00:36:15,000
Speaker 3: there and what has the company's response been.

701
00:36:15,840 --> 00:36:18,560
Speaker 13: Sure, And I actually heard from Senators Blackburn and Blumenthal

702
00:36:18,640 --> 00:36:21,759
Speaker 13: yesterday before the hearing who talked about these emails that

703
00:36:21,800 --> 00:36:24,919
Speaker 13: the Committee is releasing in accordance with this hearing. They're

704
00:36:24,960 --> 00:36:28,440
Speaker 13: from around the time of September twenty twenty one from

705
00:36:28,480 --> 00:36:31,320
Speaker 13: a letter from those two senators. In response, Nick Klegg

706
00:36:31,400 --> 00:36:35,399
Speaker 13: met As head of Policy, basically came to Mark Zuckerberg saying, Hey,

707
00:36:35,680 --> 00:36:38,640
Speaker 13: I have a plan here for additional investment in wellness.

708
00:36:38,800 --> 00:36:41,120
Speaker 13: It's very important, it's a top issue, and we're having

709
00:36:41,160 --> 00:36:42,000
Speaker 13: outside pressure.

710
00:36:42,320 --> 00:36:44,200
Speaker 12: Can we look at this plan and invest in it.

711
00:36:44,400 --> 00:36:47,680
Speaker 13: Those emails went unanswered for a number of months, and

712
00:36:47,840 --> 00:36:50,200
Speaker 13: ultimately that investment was pushed back upon.

713
00:36:50,280 --> 00:36:52,160
Speaker 12: I do expect that the senators.

714
00:36:51,800 --> 00:36:54,960
Speaker 13: Will bring this this idea up today and query Mark

715
00:36:55,000 --> 00:36:59,120
Speaker 13: Zuckerberg himself and pose the question, why haven't we seen

716
00:36:59,160 --> 00:37:02,480
Speaker 13: additional investment. You have so many engineers, so much headcount.

717
00:37:02,480 --> 00:37:05,440
Speaker 13: In twenty twenty one, you hired more than ten thousand people.

718
00:37:05,640 --> 00:37:07,960
Speaker 13: Why isn't there more being done to protect kids on

719
00:37:08,120 --> 00:37:09,080
Speaker 13: metas platforms?

720
00:37:09,880 --> 00:37:10,640
Speaker 4: Alex BLERINCA.

721
00:37:10,920 --> 00:37:12,759
Speaker 2: We thank you for bringing us the latest on the

722
00:37:12,760 --> 00:37:15,120
Speaker 2: reporting and indeed the questioning that's going on on the

723
00:37:15,160 --> 00:37:15,799
Speaker 2: hill right now.

724
00:37:15,800 --> 00:37:18,040
Speaker 4: We want to stick with that hearing and.

725
00:37:18,040 --> 00:37:21,319
Speaker 2: Ultimately what policy could potentially come from it. The Center

726
00:37:21,360 --> 00:37:24,720
Speaker 2: of Humane Technology Policy Director Camille Carton joins us now

727
00:37:24,880 --> 00:37:27,560
Speaker 2: to really discuss where they think real change can happen

728
00:37:27,600 --> 00:37:30,520
Speaker 2: to protect children on social media and what these hearings

729
00:37:30,600 --> 00:37:34,120
Speaker 2: really mean for big tech Ultimately, Kamille, what if any

730
00:37:34,160 --> 00:37:37,560
Speaker 2: policy can be put in place to ensure that children

731
00:37:37,680 --> 00:37:41,239
Speaker 2: are that little bit safer. We can't cure humanity, but

732
00:37:41,280 --> 00:37:45,239
Speaker 2: we can potentially hope that we put some barriers in place,

733
00:37:45,239 --> 00:37:47,800
Speaker 2: whether it's technology or indeed just policy more broadly.

734
00:37:48,280 --> 00:37:51,600
Speaker 15: Yeah, absolutely, I think we're at a point, as everyone

735
00:37:51,600 --> 00:37:54,600
Speaker 15: has said so far, where we are happy that these

736
00:37:54,680 --> 00:37:57,400
Speaker 15: hearings are happening because the public needs to see it.

737
00:37:57,719 --> 00:37:59,760
Speaker 15: But we're also at the point in our democratic process

738
00:37:59,760 --> 00:38:02,719
Speaker 15: where it's time to push forward change. And some of

739
00:38:02,760 --> 00:38:05,560
Speaker 15: the things that we look for in bills specifically around

740
00:38:05,600 --> 00:38:08,279
Speaker 15: kids safety are three main pillars. We want a duty

741
00:38:08,280 --> 00:38:11,640
Speaker 15: of care, which essentially means just like a doctor has

742
00:38:11,680 --> 00:38:15,640
Speaker 15: a fiduciary responsibility to ensure that patients are treated in

743
00:38:15,680 --> 00:38:19,040
Speaker 15: their best interests. We want platforms to ensure that kids

744
00:38:19,080 --> 00:38:22,600
Speaker 15: are not harmed on their platforms. We want privacy by default.

745
00:38:22,760 --> 00:38:25,800
Speaker 15: This means if a kid goes onto Instagram, the moment

746
00:38:25,840 --> 00:38:28,319
Speaker 15: they sign up, they have all of their settings at

747
00:38:28,360 --> 00:38:30,560
Speaker 15: the highest level of privacy. It means that they won't

748
00:38:30,560 --> 00:38:33,760
Speaker 15: get messages from people that they're not friends with, their profiles,

749
00:38:33,760 --> 00:38:36,120
Speaker 15: won't be able to see PC and by exert people,

750
00:38:36,360 --> 00:38:39,040
Speaker 15: and we want safety by design. We want no more

751
00:38:39,080 --> 00:38:41,880
Speaker 15: addictive features, features that are known to be harmful to

752
00:38:41,960 --> 00:38:44,480
Speaker 15: kids that platforms continue to utilize because it keeps them

753
00:38:44,520 --> 00:38:45,080
Speaker 15: on longer.

754
00:38:45,400 --> 00:38:48,280
Speaker 2: I'm going back to that privacy focus now. Some companies

755
00:38:48,360 --> 00:38:50,520
Speaker 2: I think of one in France, Youbo, that came onto

756
00:38:50,520 --> 00:38:53,839
Speaker 2: the show last week saying how, ultimately you can use

757
00:38:53,880 --> 00:38:56,120
Speaker 2: technology as a force for good. Here you can have

758
00:38:56,440 --> 00:39:00,400
Speaker 2: some sort of ability to really age appropriately who is

759
00:39:00,440 --> 00:39:04,319
Speaker 2: part of using that system, But then privacy comes into it.

760
00:39:04,440 --> 00:39:07,320
Speaker 2: How do you allow the camera to identify whether a

761
00:39:07,400 --> 00:39:09,319
Speaker 2: child is indeed the age they say they are without

762
00:39:09,360 --> 00:39:11,759
Speaker 2: in some way impacting their own privacy. How do you

763
00:39:11,760 --> 00:39:13,880
Speaker 2: see technology being the sol fare.

764
00:39:14,320 --> 00:39:16,600
Speaker 15: Yeah, I think that that's a great point. But part

765
00:39:16,600 --> 00:39:20,439
Speaker 15: of what's missing is that these companies already have age

766
00:39:20,520 --> 00:39:23,400
Speaker 15: estimation tools that they use to know the age of

767
00:39:23,400 --> 00:39:25,719
Speaker 15: their users. I mean, one thing that came out of

768
00:39:25,760 --> 00:39:29,160
Speaker 15: the ag lawsuit that's happening across forty one States is

769
00:39:29,200 --> 00:39:31,960
Speaker 15: the fact that Meta knows that it has millions of

770
00:39:32,040 --> 00:39:34,640
Speaker 15: users under the age of thirteen on its platform, and

771
00:39:34,680 --> 00:39:37,319
Speaker 15: it's keeping that knowledge from the public. So they know

772
00:39:37,440 --> 00:39:41,080
Speaker 15: this and they use their estimation tools to actually target

773
00:39:41,160 --> 00:39:44,400
Speaker 15: against these kids and to target advertising to age ranges.

774
00:39:44,680 --> 00:39:47,520
Speaker 15: So we actually don't need new technology. Companies already have

775
00:39:47,560 --> 00:39:49,719
Speaker 15: this information, we just need them to enforce it.

776
00:39:51,160 --> 00:39:53,560
Speaker 3: Emil, I still go back to the idea that when

777
00:39:53,560 --> 00:39:56,400
Speaker 3: this Senate hearing is finished, what comes out of it,

778
00:39:56,480 --> 00:39:59,959
Speaker 3: because many of the social media companies have codified policy rights.

779
00:40:00,000 --> 00:40:02,480
Speaker 3: So if you take TikTok as an example, they have

780
00:40:02,560 --> 00:40:05,920
Speaker 3: restrictions on age. I think thirteen is the barrier to

781
00:40:06,080 --> 00:40:11,239
Speaker 3: using TikTok. And those are policies. The question seems to

782
00:40:11,280 --> 00:40:15,320
Speaker 3: be on enforcement, and as Caroline rightly points out, either

783
00:40:15,360 --> 00:40:19,520
Speaker 3: a lack of or use of technology to enforce those policies.

784
00:40:19,560 --> 00:40:22,200
Speaker 3: And I just wonder what your perspective is on policy

785
00:40:22,320 --> 00:40:22,959
Speaker 3: versus action.

786
00:40:25,600 --> 00:40:25,839
Speaker 5: Yeah.

787
00:40:25,920 --> 00:40:28,520
Speaker 15: I think the fundamental difference that we're talking about, though,

788
00:40:28,680 --> 00:40:31,719
Speaker 15: is self regulation policy by these platforms, which is where

789
00:40:31,719 --> 00:40:34,880
Speaker 15: we're at right now, as opposed to regulation.

790
00:40:34,440 --> 00:40:35,520
Speaker 12: That's codified in law.

791
00:40:35,920 --> 00:40:38,960
Speaker 15: So these platforms at any moment can change their terms

792
00:40:38,960 --> 00:40:41,440
Speaker 15: and conditions, and what we're seeing right now is that

793
00:40:41,480 --> 00:40:44,360
Speaker 15: they release features that folks have been asking for for

794
00:40:44,560 --> 00:40:47,920
Speaker 15: years ahead of a big pr moment, and that's great.

795
00:40:48,120 --> 00:40:51,000
Speaker 15: We want, you know, we want these better features, but

796
00:40:51,160 --> 00:40:54,440
Speaker 15: releasing these features because of a PR moment is no

797
00:40:54,640 --> 00:41:01,279
Speaker 15: substitute for regulation that incentivizes safe innovation and appropriate strategies

798
00:41:01,360 --> 00:41:02,200
Speaker 15: from the beginning.

799
00:41:03,520 --> 00:41:06,840
Speaker 3: Camille Pinterest's CEO, Bill Ready, has an op ed in

800
00:41:06,880 --> 00:41:10,640
Speaker 3: The Hill this morning likening the social media industry it's

801
00:41:10,640 --> 00:41:11,560
Speaker 3: a big tobacco.

802
00:41:11,719 --> 00:41:13,160
Speaker 5: That is something I've heard before.

803
00:41:14,200 --> 00:41:16,840
Speaker 3: Why do you think social media companies would do something

804
00:41:16,880 --> 00:41:18,760
Speaker 3: like that? Are they trying to get in the psyche

805
00:41:18,840 --> 00:41:22,200
Speaker 3: of lawmakers and show that they're on the same wavelength

806
00:41:22,320 --> 00:41:23,040
Speaker 3: or something like that.

807
00:41:24,360 --> 00:41:26,960
Speaker 15: Well, I think every social media company and the ways

808
00:41:26,960 --> 00:41:30,560
Speaker 15: in which they utilize their products are different. Pinterest has

809
00:41:30,560 --> 00:41:32,759
Speaker 15: a different business model and a different position than other

810
00:41:32,800 --> 00:41:36,200
Speaker 15: social media companies. We've seen that with Snap coming out

811
00:41:36,200 --> 00:41:39,440
Speaker 15: and endorsing the Kids Online Safety Act, now with X

812
00:41:39,480 --> 00:41:43,280
Speaker 15: coming out and endorsing CESUM. They're all taking slightly different positions.

813
00:41:43,320 --> 00:41:46,239
Speaker 15: But I think the main takeaway here is that we're

814
00:41:46,280 --> 00:41:48,719
Speaker 15: starting to see them come to the table. There is

815
00:41:49,000 --> 00:41:54,400
Speaker 15: overwhelming support by parents, by ags, I mean, schools are

816
00:41:54,440 --> 00:41:57,879
Speaker 15: suing these platforms, and I think that they're realizing that

817
00:41:58,320 --> 00:42:01,320
Speaker 15: the time is up of this move to brief things mentality,

818
00:42:01,719 --> 00:42:03,680
Speaker 15: and we need to come to the table and figure

819
00:42:03,719 --> 00:42:06,560
Speaker 15: out exactly what a path forward looks like, and that

820
00:42:06,600 --> 00:42:09,200
Speaker 15: path does require regulation in the same way that we

821
00:42:09,239 --> 00:42:10,280
Speaker 15: had to have with tobacco.

822
00:42:11,320 --> 00:42:13,879
Speaker 3: Okay, as we say the hearings ongoing, Senator to Ted

823
00:42:13,960 --> 00:42:17,319
Speaker 3: Cruz using props behind him, you can tune into that

824
00:42:17,400 --> 00:42:19,840
Speaker 3: hearing for the full detail center for your main technology

825
00:42:19,840 --> 00:42:22,800
Speaker 3: policy Director Quill Carlton, fantastic conversation.

826
00:42:22,960 --> 00:42:23,319
Speaker 5: Thank you.

827
00:42:24,000 --> 00:42:25,920
Speaker 4: I'm now for going what's going viral?

828
00:42:26,000 --> 00:42:29,360
Speaker 2: TikTok may find itself without music from thousands of artists

829
00:42:29,360 --> 00:42:33,240
Speaker 2: represented by Universal Music Group UMG has issued an open

830
00:42:33,320 --> 00:42:36,600
Speaker 2: letter to the Bytdance owned company condemning it for offering

831
00:42:36,800 --> 00:42:40,560
Speaker 2: unfair terms during licensing negotiations. Now UMG is posting on X,

832
00:42:40,719 --> 00:42:43,640
Speaker 2: then it must call time out on TikTok. Ed this

833
00:42:43,680 --> 00:42:47,279
Speaker 2: is about TikTok saying, look, you get free promotion for

834
00:42:47,560 --> 00:42:50,160
Speaker 2: your stars by the music on TikTok, but UMG saying

835
00:42:50,200 --> 00:42:53,800
Speaker 2: you're using AI that is going to ultimately take away

836
00:42:53,840 --> 00:42:55,320
Speaker 2: the power of our own artists.

837
00:42:56,080 --> 00:42:57,960
Speaker 3: I go to what Ceci and Nadella said on that

838
00:42:58,080 --> 00:43:00,799
Speaker 3: NBC interview in the content of them in the New

839
00:43:00,880 --> 00:43:03,080
Speaker 3: York Times is going to come down to intellectual property

840
00:43:03,320 --> 00:43:06,719
Speaker 3: versus fair use. And that's a different medium music, but

841
00:43:06,920 --> 00:43:07,640
Speaker 3: that's the case.

842
00:43:07,960 --> 00:43:10,040
Speaker 2: Yeah City Group saying, look, these are going to be

843
00:43:10,040 --> 00:43:12,600
Speaker 2: difficult negotiations, but actually I think UMG is taking the

844
00:43:12,680 --> 00:43:15,360
Speaker 2: right stance. The best, it secures better terms. The worst

845
00:43:15,520 --> 00:43:17,160
Speaker 2: looks like they protect their artists.

846
00:43:17,400 --> 00:43:19,480
Speaker 4: That does it for this edition of Bloomberg Technology Ed.

847
00:43:20,320 --> 00:43:22,040
Speaker 5: Check out the pod This is Bloomberg