WEBVTT - Amazon Agrees to Buy MGM Film Studio 0:00:01.800 --> 0:00:04.440 This is Bloomberg Business Week. I'm Carole Masser and I'm 0:00:04.480 --> 0:00:07.280 Bloomberg Quick Takes Tim Stanibek. We're here every day bringing 0:00:07.320 --> 0:00:09.840 you the latest news from the world to business and finance, 0:00:09.840 --> 0:00:13.680 plus technology, politics, economics, all partnessing the power of Business 0:00:13.680 --> 0:00:17.160 Week reporters and editors, not to mention our journalists and 0:00:17.160 --> 0:00:20.000 analysts in more than one twenty countries. You can download 0:00:20.000 --> 0:00:23.239 Bloomberg Business Week on iTunes, SoundCloud, or Bloomberg dot Com. 0:00:23.400 --> 0:00:25.160 You can also listen to our radio show at two 0:00:25.200 --> 0:00:27.880 pm Eastern Time on Bloomberg Radio or watch us on 0:00:27.920 --> 0:00:31.440 YouTube search Bloomberg Global News. Let's get to the remarks 0:00:31.480 --> 0:00:34.240 in the current issue of Bloomberg Business Week magazine coming out. 0:00:34.600 --> 0:00:36.600 It's a double issue. It's about how America has a 0:00:36.640 --> 0:00:39.680 housing mess and President Biden wants to fix it. Let's 0:00:39.720 --> 0:00:42.720 get into it. The story by Bloomberg News Finance reporter 0:00:42.800 --> 0:00:45.720 no ble Hire with us in Seattle along with Bloomberg 0:00:45.720 --> 0:00:47.760 Business Week at her Joe Webber in our interactive broker 0:00:47.840 --> 0:00:49.800 studio in New York. It is so true when you 0:00:49.840 --> 0:00:52.360 think of housing policy here in the United States, Joel. 0:00:52.520 --> 0:00:56.080 It's it's broken and has been for a while. Um, 0:00:56.120 --> 0:00:58.840 and Noah did a really amazing job of writing a 0:00:58.920 --> 0:01:03.080 story that UM, I think really uh helps you make 0:01:03.120 --> 0:01:06.360 sense of it and where it's been and still yet 0:01:06.680 --> 0:01:09.920 maybe maybe how it might change a little bit. Um. 0:01:10.640 --> 0:01:14.080 But you know, part of it is just rooted in, UM. 0:01:14.120 --> 0:01:17.839 You know, the fact that we've had a housing market 0:01:17.880 --> 0:01:21.440 that is on has been on fire. Uh. Inventory is 0:01:21.480 --> 0:01:25.400 incredibly low, Affordable housing is nonexistent in a lot of places. 0:01:25.880 --> 0:01:28.800 And that's the thing that looks like a growing mess 0:01:28.840 --> 0:01:32.240 and a growing problem. So so UM, no uh uh 0:01:32.640 --> 0:01:37.559 talk to us about what a solution might look like. Yeah, Well, 0:01:37.640 --> 0:01:40.400 I don't think it's I don't think it's uh necessarily 0:01:40.400 --> 0:01:43.360 going to be just one solution. Um. But part of 0:01:43.360 --> 0:01:45.920 why I wanted to write this article is to try 0:01:45.920 --> 0:01:49.520 and make sense, um of where we've been and some 0:01:49.600 --> 0:01:52.960 of these proposals that the Biden administration is putting forward 0:01:53.040 --> 0:01:57.600 to fix it. Um. First and foremost, uh, what the 0:01:57.600 --> 0:02:01.240 administration is trying to do um with more than fifty 0:02:01.240 --> 0:02:05.080 billion dollars that Congress has already allocated, is it fixed 0:02:05.080 --> 0:02:08.680 the immediate problem, which is just the enormous amount of 0:02:08.720 --> 0:02:14.240 financial strain um that the pandemic has caused. Mostly for renters, 0:02:14.280 --> 0:02:17.120 but but also for some homeowners. So there's there's more 0:02:17.120 --> 0:02:19.799 than fifty billion dollars out there. They're trying to to 0:02:20.440 --> 0:02:23.160 get out to people, UM to help them cover back 0:02:23.200 --> 0:02:26.799 rent racked up during the pandemic. UM and if they've 0:02:26.840 --> 0:02:29.959 missed mortgage payments, to do that as well. So that's 0:02:30.000 --> 0:02:32.920 part one. But UM, what's really interesting and what a 0:02:32.960 --> 0:02:36.840 lot of housing policy experts UM I talked with I 0:02:36.919 --> 0:02:40.320 want to discuss was was what's in the Infrastructure Plan 0:02:40.600 --> 0:02:44.919 and the American Families Plan, which is with the Biden administration, 0:02:45.240 --> 0:02:48.440 UM has has tried it out to you know, help 0:02:48.480 --> 0:02:52.400 the country and their words build back better UM and 0:02:52.480 --> 0:02:57.040 embedded in there are a lot of strategies to fix 0:02:57.320 --> 0:03:01.400 different parts of the housing system. So just for instance, UM, 0:03:01.520 --> 0:03:05.000 one of them, UH, which we talk about in the 0:03:05.080 --> 0:03:09.200 story is a surge in UH the Low Income Housing 0:03:09.280 --> 0:03:12.000 tax credit. These are tax credits at the federal government. 0:03:12.520 --> 0:03:15.280 What's out there. They're used by affordable housing developers and 0:03:15.320 --> 0:03:18.520 they've really been an engine for affordable housing production in 0:03:18.560 --> 0:03:22.400 this country for a long time. Hey, no, UH, to 0:03:22.800 --> 0:03:26.040 what extent does the US government actually have power? The 0:03:26.040 --> 0:03:28.560 federal government have power to do this? If if there 0:03:28.560 --> 0:03:31.280 are zoning laws and regulations and is you write in 0:03:31.320 --> 0:03:34.320 your story, um, expanding the supply of homes in some 0:03:34.360 --> 0:03:37.160 of these places we require taking on the nimbies, you know, 0:03:37.320 --> 0:03:42.760 not in my backyard. Yeah, that's that's certainly a huge issue. Um. 0:03:42.880 --> 0:03:46.640 And uh, it's it's something that you've seen, uh in 0:03:46.720 --> 0:03:49.520 places like Minneapolis, where the whole state of Oregon they've 0:03:49.560 --> 0:03:53.240 they've passed laws and were made zoning changes in the 0:03:53.320 --> 0:03:56.480 last couple of years to allow for more housing development. 0:03:56.800 --> 0:03:58.600 But you you hit the nail on the head. I mean, 0:03:58.640 --> 0:04:01.280 the federal government can own do so much here. A 0:04:01.280 --> 0:04:04.840 lot of what's holding back housing production in this country, 0:04:04.920 --> 0:04:08.200 especially in really prosperous places, it's just the fact that 0:04:08.240 --> 0:04:10.520 you can't build there or I mean, we make it 0:04:10.600 --> 0:04:13.320 so much harder for people to add more density and 0:04:13.360 --> 0:04:16.640 more housing. And so the Biden administration's planned there, um, 0:04:16.680 --> 0:04:20.559 which has been criticized is too timid, is to give 0:04:21.480 --> 0:04:25.479 municipalities grants to help them rezone and clear away some 0:04:25.600 --> 0:04:28.440 of these barriers. Um. But they're not you know, at 0:04:28.440 --> 0:04:32.120 some economists point out really, uh, you know, they're giving 0:04:32.160 --> 0:04:34.360 a carrot, but there's not so much of a stick. 0:04:34.400 --> 0:04:37.760 Involved here. Um, some folks pointed out to me that, 0:04:38.200 --> 0:04:40.000 you know, a more effective way to deal with this 0:04:40.080 --> 0:04:44.960 would basically be the high transportation dollars from the federal government. Um, 0:04:45.040 --> 0:04:48.440 you know, getting those to making these sorts of zoning reforms. 0:04:48.480 --> 0:04:50.120 One of the things I thought was interesting Noah in 0:04:50.160 --> 0:04:52.520 the story that talked about, you know, right now the 0:04:52.520 --> 0:04:55.320 mortgage market, you can get government back loans to buy 0:04:55.320 --> 0:04:57.720 homes and parts of South Florida that are already experiencing 0:04:58.000 --> 0:05:00.520 seasonal flooding because of rising sea levels. I know the 0:05:00.560 --> 0:05:03.440 magazine has done stories about this. We're in some communities 0:05:03.440 --> 0:05:06.000 the local governments are actually buying up the homes and 0:05:06.040 --> 0:05:09.000 taking them off the market because we know it's not 0:05:09.040 --> 0:05:11.680 a good home to own. I mean, there are just 0:05:12.040 --> 0:05:15.960 parts of the existing infrastructure and housing law and policy 0:05:15.960 --> 0:05:19.159 that just doesn't make sense anymore. Yeah, And I think 0:05:19.160 --> 0:05:21.480 that's a that's that's a really good point. It's sort 0:05:21.520 --> 0:05:24.159 of underscores how some things we do in certain parts 0:05:24.200 --> 0:05:27.919 of our government, uh promote a certain kind of activity, 0:05:28.000 --> 0:05:29.800 but while at the same time we're trying to like, 0:05:30.720 --> 0:05:33.839 uh maybe not develop in these areas that are going 0:05:33.880 --> 0:05:37.240 to be prone to climate change and and that I 0:05:37.279 --> 0:05:40.680 think is really um the very hard work that has 0:05:40.720 --> 0:05:43.200 to be done, which is how do you align all 0:05:43.240 --> 0:05:45.960 of these policies, be they at the federal level of 0:05:46.000 --> 0:05:48.320 the state level or the local level, local level, so 0:05:48.320 --> 0:05:52.640 they were actually working towards um goals, you know, whether 0:05:52.680 --> 0:05:56.680 they be around climate change or racial equity or affordability. 0:05:56.760 --> 0:06:01.039 And it's it's just we have this very complex system 0:06:01.080 --> 0:06:04.560 that's been built up over decades in decades, and just 0:06:04.640 --> 0:06:06.480 making sense of that is going to be a challenge, 0:06:06.600 --> 0:06:09.680 right especially in politics who are also involved in all 0:06:09.680 --> 0:06:13.000 of this good stuff. Nobu Hire Finance Report at Bloomberg News. 0:06:13.040 --> 0:06:15.680 These are the remarks in the new issue of Bloomberg 0:06:15.680 --> 0:06:18.360 Business Week magazine. Till Webb, thank you so much. This 0:06:18.640 --> 0:06:22.400 is Bloomberg Business Week with Carol Masser and Bloomberg Quick 0:06:22.440 --> 0:06:26.400 Takes Tim Stinovic on Bloomberg Radio. All right, Tim, safe 0:06:26.400 --> 0:06:28.919 to say it's one of the more telegraphed de yields 0:06:29.040 --> 0:06:32.440 in a while. And today we got confirmation Amazon buying 0:06:32.480 --> 0:06:36.000 the MGM Movie Company eight point forty five billion dollars. 0:06:36.000 --> 0:06:38.839 Really a bet that a nearly central old Hollywood icon 0:06:38.880 --> 0:06:42.599 can feed an insationable demand for streaming content. Feed me, 0:06:42.839 --> 0:06:46.599 feed me. It's all about that machine exactly. We've got 0:06:46.640 --> 0:06:48.200 a great pair to talk about the really the two 0:06:48.240 --> 0:06:50.560 sides of this story, the media and content side, as 0:06:50.560 --> 0:06:53.880 well as what this move means for Amazon. Kitaathan is 0:06:53.920 --> 0:06:56.719 technology and media analyst re Bloomberg Intelligence, our in house 0:06:56.760 --> 0:06:59.400 research team. She's on the phone in New Jersey. Spencer. 0:06:59.480 --> 0:07:02.800 Soaper is Limberg, news technology and e commerce reporter on 0:07:02.839 --> 0:07:06.599 the phone in Seattle. So let's start with you, Gita. 0:07:06.680 --> 0:07:09.840 We knew this was coming. So, um, I don't know 0:07:09.920 --> 0:07:12.440 what's the key takeaways? How do we need to as 0:07:12.440 --> 0:07:15.160 investors maybe look at what this means and what what 0:07:15.280 --> 0:07:18.520 else might be out there and what might be to come. Yeah, 0:07:18.520 --> 0:07:20.760 I think Carol of Virsual, Caroline Tim, thank you so 0:07:20.880 --> 0:07:23.119 much for having me. And I just want to say that, um, 0:07:23.160 --> 0:07:25.960 you know, this is really part of this whole vast 0:07:26.160 --> 0:07:29.360 reshaping of the media business, of the media landscape. The 0:07:29.400 --> 0:07:32.880 big are obviously looking to compete by getting bigger. We 0:07:32.920 --> 0:07:35.760 had the Disney Fox acquisition a few years ago, just 0:07:35.800 --> 0:07:38.280 a couple of weeks ago, we had Discovery with Warner 0:07:38.960 --> 0:07:41.720 and now you have Amazon and MGM and and it's 0:07:41.760 --> 0:07:44.520 really I think it really speaks to uh, you know 0:07:44.560 --> 0:07:46.840 the power of content and how everybody is kind of 0:07:46.840 --> 0:07:50.679 looking to consolidate their position in the streaming space. Talking 0:07:50.720 --> 0:07:54.160 about what this means for the other companies, I think, uh, 0:07:54.280 --> 0:07:56.640 it really kind of now separates the halves and the half. 0:07:56.720 --> 0:07:59.560 Not that you will, so obviously the independent studios, a 0:07:59.560 --> 0:08:02.440 few of them being you know, the Lions Gaze of 0:08:02.480 --> 0:08:06.040 the world, probably even a Sony. Obviously they might see 0:08:06.080 --> 0:08:08.840 their valuations go up as it's kind of, I think, 0:08:08.880 --> 0:08:10.679 almost to make or a great moment now in media 0:08:10.720 --> 0:08:13.160 when the other remaining players have to really kind of 0:08:13.200 --> 0:08:15.600 take take a step back, look where they are positioned 0:08:15.600 --> 0:08:19.040 and if they really have enough firepower to last the 0:08:19.080 --> 0:08:21.760 streaming shake out, if you will, they Spencer Souper, come 0:08:21.800 --> 0:08:24.560 on in here and give us the Amazon perspective, because 0:08:24.680 --> 0:08:27.560 for for years, when I've looked at what Amazon has 0:08:27.600 --> 0:08:31.160 done with Amazon Prime Instant Video or Amazon Prime Video 0:08:31.240 --> 0:08:33.400 or whatever iteration of it is now, I've always looked 0:08:33.400 --> 0:08:35.720 at it through the lens of of Amazon Prime and 0:08:35.720 --> 0:08:39.599 and sweetening the deal for that year Amazon Prime subscription, 0:08:39.600 --> 0:08:41.360 because the research has shown that people who are Prime 0:08:41.400 --> 0:08:43.360 members they buy more, they buy more expensive items, and 0:08:43.360 --> 0:08:45.520 they shot more frequently. Is it to the point though, 0:08:45.520 --> 0:08:48.000 where you have to look at Amazon's video ambitions beyond 0:08:48.040 --> 0:08:54.839 Amazon Prime. Uh, that's what they're trying. And there are 0:08:54.920 --> 0:09:00.440 people who are subscribing for the standalone video sub scription. 0:09:00.559 --> 0:09:04.040 So that's part of the play is Amazon needs to 0:09:04.120 --> 0:09:07.480 offer more to unbundle. But I think the big thing 0:09:07.720 --> 0:09:11.199 here with Amazon and this acquisition is Amazon traditionally tries 0:09:11.280 --> 0:09:13.880 to build it on its own. It's spent a lot 0:09:13.960 --> 0:09:16.600 of time and you know, several years and in a 0:09:16.720 --> 0:09:20.240 boatload of money in Hollywood trying to create its own 0:09:20.320 --> 0:09:23.520 hits and and really doesn't have any. And so they 0:09:23.600 --> 0:09:25.559 finally had to capitulate and say, you know what, we 0:09:25.640 --> 0:09:28.960 gotta buy James Bond, we gotta buy Rocky Balboa. Uh 0:09:29.000 --> 0:09:30.760 and kind of, you know, use our purse to get 0:09:30.840 --> 0:09:33.720 into this business. That that we've been kind of you know, 0:09:33.720 --> 0:09:36.120 trying to get in on our own without without a 0:09:36.120 --> 0:09:37.920 big hit to show for it. It was really about 0:09:37.960 --> 0:09:41.679 buying legally Blonde. Come on, Spencer, we know interesting how 0:09:41.679 --> 0:09:44.480 they highlighted that film in the press release? Who what not? 0:09:44.840 --> 0:09:48.160 L come on? Well two questions real quickly. I mean, Spencer, 0:09:48.760 --> 0:09:51.680 go ahead. I was gonna say it was eight billion 0:09:51.720 --> 0:09:53.880 for RoboCop and then I think half a million for 0:09:53.880 --> 0:09:57.439 the rest of it. Alright, alright, but but two questions 0:09:57.440 --> 0:09:59.160 I have. First of all, um, well, let me let 0:09:59.240 --> 0:10:02.000 me bring you back eight almost eight and a half 0:10:02.000 --> 0:10:05.320 billion dollars. Did they pay too much or they're going 0:10:05.400 --> 0:10:09.720 to get you know, a lot for that amount of money. Um, So, 0:10:09.840 --> 0:10:11.840 I don't necessarily think they paid too much. So we 0:10:11.920 --> 0:10:16.480 ran some numbers. It's a twenty five x multipost for MGM. 0:10:16.640 --> 0:10:18.840 That's pretty much in line with what we've seen in 0:10:18.880 --> 0:10:20.520 the past. So just a few years ago, we had 0:10:20.559 --> 0:10:23.040 Comcast Coops go out and buy Dreamwork for almost thirty 0:10:23.080 --> 0:10:25.120 five times either it to you kind of look at 0:10:25.160 --> 0:10:27.880 some of those deals, not too bad. Then again you 0:10:27.960 --> 0:10:30.360 had Comcasts and Apple who came in and take took 0:10:30.400 --> 0:10:32.199 a look at MGM and said they really didn't think 0:10:32.200 --> 0:10:34.400 it was worth more than six billion dollars. So so 0:10:34.440 --> 0:10:36.800 from that context, yes, I think Amazon paid up a 0:10:36.840 --> 0:10:38.600 little bit, but I think they're they're they're getting the 0:10:38.600 --> 0:10:40.400 bank for their part. You just look at what they've 0:10:40.440 --> 0:10:45.079 done during the pandemic. They paid millions for coming to America. 0:10:45.120 --> 0:10:47.760 They paid eighty million for the boor app pequels. Right, 0:10:47.800 --> 0:10:49.880 so you look at all of those individual movies and 0:10:49.920 --> 0:10:52.880 you look here at a studio library that they're getting. 0:10:53.960 --> 0:10:58.640 I think it's definitely uh uh you know a bank 0:10:58.679 --> 0:11:01.400 for their book. Well, and you me, you beautifully set 0:11:01.440 --> 0:11:03.600 me up for what I wanted to ask Spencer, and 0:11:03.600 --> 0:11:07.240 that is Spencer, is this all about Jeff and franchise development? Right? 0:11:07.280 --> 0:11:09.719 You own these brands now and you can just kind 0:11:09.720 --> 0:11:14.480 of run with them. They're remaking everything, right, It's like 0:11:14.640 --> 0:11:16.720 so it's it's kind of like, you know, it's a 0:11:16.760 --> 0:11:20.200 safe bet. It's formula Hollywood. They've taken the risk, they've 0:11:20.200 --> 0:11:23.400 tried to create their own hits. Uh, they haven't created them. 0:11:23.840 --> 0:11:27.200 So let's let's buy what people love to watch in 0:11:27.240 --> 0:11:31.000 the past and try to try to uh make new 0:11:31.080 --> 0:11:34.079 versions of new iterations of it for the future. Knowing 0:11:34.080 --> 0:11:36.440 that we have that big groad appeal fan base cooked in. 0:11:36.880 --> 0:11:40.240 So that's definitely a big, a big piece. And we 0:11:40.320 --> 0:11:44.080 know that Jeff Zos does see hollow even though Hollywood 0:11:44.120 --> 0:11:46.560 seen is this creative place that he does see a 0:11:46.600 --> 0:11:49.200 lot of the hits as being fairly formulaic. So this 0:11:49.320 --> 0:11:51.560 kind of appeals more to his his you know, the 0:11:51.600 --> 0:11:55.120 math part of his brain. Yeah, Ga, come on in 0:11:55.160 --> 0:11:57.760 here and talk a little bit about what this means 0:11:57.840 --> 0:12:01.200 for consumers of of Hulu and consumers who have been 0:12:01.280 --> 0:12:04.040 used to watching some of this content in other places. 0:12:04.040 --> 0:12:05.880 The Handmaids sale, for example, it was touted in the 0:12:05.880 --> 0:12:10.120 press release today announcing the acquisition, and I'm wondering if 0:12:10.160 --> 0:12:13.440 that means that handmaid still leaves it leaves Hulu if 0:12:13.440 --> 0:12:15.360 it goes to Amazon, or is this all about the 0:12:15.400 --> 0:12:18.880 future future content and less about what exists now. So 0:12:18.920 --> 0:12:20.839 I think him that's an excellent point. I think what 0:12:20.920 --> 0:12:23.040 would be really seeing over the at least past few 0:12:23.120 --> 0:12:24.800 years is that you have all of these studios that 0:12:24.840 --> 0:12:27.760 are part of conglomerates, and they're all now trying to 0:12:27.840 --> 0:12:30.520 use their studios to feed their own streaming platforms. So 0:12:30.600 --> 0:12:33.240 Disney obviously doing that with Disney Class. They also own 0:12:33.640 --> 0:12:36.880 two thirds of Hulu. Uh. We're seeing Warner kind of 0:12:36.880 --> 0:12:39.600 do that with HBO Max. So it's all about, you know, 0:12:39.720 --> 0:12:43.000 using that studio content. Amazon obviously did not have that. 0:12:43.040 --> 0:12:45.760 Now they're getting that with MGM. So we're really gonna 0:12:45.840 --> 0:12:47.480 have to wait and watch and see what they do. 0:12:47.520 --> 0:12:50.800 But I think we can pretty much count on the 0:12:50.800 --> 0:12:52.600 fact that they are going to take the handmade sailor 0:12:52.640 --> 0:12:55.120 at least future um, you know, seasons of the handmade 0:12:55.120 --> 0:12:57.520 sale and definitely to it on Prime as a way 0:12:57.559 --> 0:13:01.360 to kind of turbo charge their subscribe to me. All right, well, 0:13:01.400 --> 0:13:04.200 great stuff and certainly a company that is always on 0:13:04.280 --> 0:13:07.760 the move. Amazon. Great to get so many multiple sides 0:13:07.800 --> 0:13:09.720 to this story and get them from our own guitar 0:13:09.800 --> 0:13:12.600 Ranganath on Tech and Media analyst of Bloomberg Intelligence are 0:13:12.640 --> 0:13:14.800 in house group of analysts, and Spencer Soper we go 0:13:14.880 --> 0:13:17.000 to him when it comes to Amazon. He is Bloomberg 0:13:17.040 --> 0:13:20.560 News Technology and e Commerce reporter on the phone in Seattle. 0:13:20.960 --> 0:13:25.559 It's a big deal. Eight half biggs after well and 0:13:25.760 --> 0:13:29.120 if you think right exactly like they do smaller acquisitions. 0:13:30.120 --> 0:13:34.160 This is Bloomberg Business Week with Carol Masser and Bloomberg 0:13:34.240 --> 0:13:38.640 Quick Takes Tim Stenovic on Bloomberg Radio. So a lot 0:13:38.760 --> 0:13:42.960 going on on this Wednesday. No doubt the world has reopened, 0:13:43.320 --> 0:13:45.320 certainly when it comes to the business and financial world. 0:13:45.440 --> 0:13:48.760 We're feeling it. We also are noticing a story on 0:13:48.880 --> 0:13:53.079 the Bloomberg first time activist investor Tiny Tiny Steak in 0:13:53.280 --> 0:13:56.000 x on Mobile scoring a historic win in its proxy 0:13:56.080 --> 0:13:58.920 fight with the oil giants, signaling the growing importance of 0:13:58.960 --> 0:14:00.839 climate change to invest is this is a big deal 0:14:00.960 --> 0:14:05.679 Bloomberg deal Reporter Scott Devote here in our Interactive Brokers studio. Um, 0:14:06.200 --> 0:14:08.160 it does feel like a big deal. Are we putting 0:14:08.200 --> 0:14:10.600 it in perspective in the right way? Yeah? I think 0:14:10.720 --> 0:14:13.280 like what we're seeing out of this one in particular, 0:14:13.320 --> 0:14:15.120 and we've started to see this a little bit lately, 0:14:15.280 --> 0:14:18.079 is that, UM, it doesn't really matter how big of 0:14:18.120 --> 0:14:21.840 a steak an investor has in a company, UM, if 0:14:21.880 --> 0:14:25.520 they have a really good argument. So at Exxon, what 0:14:25.720 --> 0:14:29.440 they argued was there was uh an engine number one 0:14:29.520 --> 0:14:32.320 is by the way, the fun they bought a thirty 0:14:32.400 --> 0:14:35.080 seven million dollar steak and xxon which is a two 0:14:35.840 --> 0:14:40.440 billion dollar company point zero two steak. Yeah, basically nothing. 0:14:40.680 --> 0:14:42.840 They basically spend as much on the proxy fight as 0:14:42.880 --> 0:14:45.160 they did on the initial steak. But they came with 0:14:45.240 --> 0:14:48.720 an argument that said, you know you've been underperforming your peers, 0:14:49.400 --> 0:14:53.400 your climate goals are not aggressive enough, and you know 0:14:53.760 --> 0:14:56.400 you're putting your dividend in at risk basically, you know, 0:14:56.680 --> 0:14:58.760 based on this strategy, So you have to make some 0:14:59.440 --> 0:15:03.120 some you know, significant changes and I think you know, 0:15:04.560 --> 0:15:08.280 well the company probably was not you know, open to 0:15:08.360 --> 0:15:11.280 these ideas. The other investors were, and they got some 0:15:11.400 --> 0:15:14.120 momentum and obviously, you know today they got at least 0:15:14.160 --> 0:15:16.480 two seats on the board. So Scott, what what are 0:15:16.520 --> 0:15:18.680 they going for? What's engine number one going for? In 0:15:18.800 --> 0:15:21.000 terms of changes? What do they want to see? Well, 0:15:21.120 --> 0:15:24.520 basically what they argued was up until this point that 0:15:24.880 --> 0:15:26.920 and I think you know, there's a lot of evidence 0:15:26.960 --> 0:15:29.080 of that. You know, Excellon was a leader in the 0:15:29.160 --> 0:15:32.280 oil and gas industry UM, but then started to trail 0:15:32.360 --> 0:15:36.080 behind some of its piers, Chevron in particular, UM. And 0:15:36.200 --> 0:15:40.960 then uh they also argued that there was a climate 0:15:41.080 --> 0:15:45.280 angle on this, that Exxon was entrenched in carbon based UM, 0:15:46.040 --> 0:15:48.960 the carbon based fuels, and wasn't doing it enough to 0:15:49.520 --> 0:15:53.520 reach the goals or the Paris Agreement, and that you know, 0:15:53.760 --> 0:15:55.640 a lot of what they were saying and when it 0:15:55.680 --> 0:15:57.760 came to climate was lip service, and so they called 0:15:57.840 --> 0:16:01.080 them on it. And you know, we've seen obviously the 0:16:01.160 --> 0:16:04.800 institutional investors like black Rock and whatnot been very vocal 0:16:04.920 --> 0:16:08.040 this year about how they were going to vote based 0:16:08.080 --> 0:16:11.080 on E s G issues and so it really struck 0:16:11.120 --> 0:16:14.080 a chord with a lot of these institutions. UM, and 0:16:14.200 --> 0:16:16.480 I think, you know, I think a lot of people 0:16:16.600 --> 0:16:20.120 that you know, follow activism didn't think that Engine Number 0:16:20.160 --> 0:16:22.760 one had much of a shot at this, but um, 0:16:23.240 --> 0:16:25.560 they really did have their finger on the pulse of 0:16:25.640 --> 0:16:30.040 the simmering tension between x on itself and its investors. 0:16:30.160 --> 0:16:33.840 How much is Black Rock pushing kind of the whole 0:16:33.960 --> 0:16:36.880 momentum here with that? You know, Larry Fink has been 0:16:37.000 --> 0:16:40.480 so vocal in terms of the importance of climate specifically, 0:16:40.600 --> 0:16:44.200 and listen, they're the second largest shareholder institutional shareholder when 0:16:44.240 --> 0:16:46.800 it comes to ex On Mobile. Um. Kathy would told 0:16:46.800 --> 0:16:48.560 me that that she kind of speculated that maybe some 0:16:48.720 --> 0:16:50.800 of what Elon Musk and his kind of pulled back 0:16:51.200 --> 0:16:54.120 on bitcoin because of its impact, uh and on energy 0:16:54.200 --> 0:16:56.440 usage and impact on the environment, that maybe Black Rocks 0:16:56.480 --> 0:16:58.760 a big investor in Tesla. How much are they kind 0:16:58.760 --> 0:17:00.960 of moving the needle on this cam station. Well, I 0:17:01.080 --> 0:17:03.400 think there's no doubt that they're moving the needle on 0:17:03.480 --> 0:17:05.720 the conversation. I think that you know, you wouldn't have 0:17:06.600 --> 0:17:09.399 I cover a lot of activism campaigns and I'll put 0:17:09.440 --> 0:17:13.000 it in the perspective from an activist perspective. Now, when 0:17:13.040 --> 0:17:15.760 you see one of these letters go out criticizing a company, 0:17:15.880 --> 0:17:18.040 there is always going to be an E s G 0:17:18.200 --> 0:17:20.560 angle on it. And what they're trying to do is 0:17:20.640 --> 0:17:25.000 not only attract investment from funds that want to invest 0:17:25.440 --> 0:17:28.439 in you know, these hedge funds, but want to make 0:17:28.480 --> 0:17:30.800 sure that they're doing an E S G angle. They're 0:17:30.800 --> 0:17:34.520 also trying to win over the institutions who have you know, 0:17:34.680 --> 0:17:38.000 these these bents on making sure that they're supportive of 0:17:38.160 --> 0:17:41.280 boards that are implementing these E S G issues. Are 0:17:41.280 --> 0:17:43.320 we going to look back on today, on this period 0:17:43.359 --> 0:17:45.480 of time as being just a turning point when it 0:17:45.520 --> 0:17:47.200 comes to E S G? As you point out in 0:17:47.320 --> 0:17:50.600 your piece. On the same day, management at Chevron were 0:17:50.640 --> 0:17:53.160 reviewed by their shareholders, who voted a proposal to reduce 0:17:53.160 --> 0:17:56.520 emissions from the company's to pont recently stuffer vote against 0:17:56.560 --> 0:17:59.919 management on plastic pollution disclosures. Are we to turning point here? 0:18:00.280 --> 0:18:02.760 I think you're I think what you're seeing is something 0:18:02.840 --> 0:18:06.040 that's been simmering from a little while, like, but there 0:18:06.160 --> 0:18:08.200 was a very fine point put on a lot of 0:18:08.240 --> 0:18:11.840 these institutions. You think pension funds, all these other institutions. 0:18:11.920 --> 0:18:14.520 They're very serious about climate change now, and that's something 0:18:14.640 --> 0:18:16.440 that the oil and gas industries are going to have 0:18:16.480 --> 0:18:19.320 to deal with. Well, it's also to be fair, like, 0:18:19.560 --> 0:18:22.960 we know at some point there's going to be probably 0:18:23.119 --> 0:18:26.119 increasingly greater regulation. We're seeing it globally, we're seeing it 0:18:26.200 --> 0:18:28.520 here in the United States. I mean, the dynamics of 0:18:28.600 --> 0:18:32.000 this company. Eventually, I'm assuming we will transition to from 0:18:32.040 --> 0:18:34.800 a carbon based economy. I mean that's where the world's going. 0:18:34.880 --> 0:18:37.320 May not happen overnight, right, Well, that was that was 0:18:37.400 --> 0:18:40.240 the argument. I mean, if you don't start now, you're 0:18:40.240 --> 0:18:42.440 going to be left behind. I mean, I think Engine 0:18:42.520 --> 0:18:45.040 Number one said something along the lines of, you know, 0:18:45.320 --> 0:18:49.320 you there have been great American companies that have missed 0:18:49.400 --> 0:18:52.200 the way the world's going and you know, fall into 0:18:52.200 --> 0:18:55.040 the wayside. And so they were they were saying, you're 0:18:55.200 --> 0:18:59.679 risking becoming one of these like defunct iconic brands. Well, 0:18:59.680 --> 0:19:04.040 I think it's funny, funny, is it the right? And 0:19:04.119 --> 0:19:06.800 like the companies that were in the Dow initially or 0:19:06.960 --> 0:19:09.639 over it tunder twenty five year lifespan, there are those 0:19:09.680 --> 0:19:11.680 companies that aren't around anymore, and you do wonder about 0:19:11.680 --> 0:19:13.800 the fate of something like an exent. Yeah, I mean 0:19:14.040 --> 0:19:16.160 that's that was the argument. So we'll see, we'll see 0:19:16.200 --> 0:19:18.560 what happens. Well, it's amazing we ran out of time, 0:19:18.640 --> 0:19:20.720 but I've got to just tell you. Your story and 0:19:20.800 --> 0:19:23.600 your interview with Carl Icon really a killer. It's among 0:19:23.640 --> 0:19:26.000 the most read on the Bloomberg terminal, and I know 0:19:26.080 --> 0:19:27.800 our TV team also caught up with him, but it 0:19:27.920 --> 0:19:31.199 was greased thanks to your story. So thank you. Everybody 0:19:31.240 --> 0:19:33.320 can check it all out all of Scott's work at 0:19:33.359 --> 0:19:41.320 Bloomberg dot com. I'm bro journal Yeah, but you let 0:19:41.359 --> 0:19:52.720 me drive none please, I want to drive. Just drive 0:19:56.000 --> 0:20:07.360 good questions. Here is the drive to the globe. Thanks, 0:20:07.400 --> 0:20:12.000 We'll drying us Dawn on Bloomberg Radio. I just got 0:20:12.000 --> 0:20:15.040 about ten and a half minutes left in today's trading session. 0:20:15.280 --> 0:20:17.560 Is time for the drive to the close? And Amy 0:20:17.640 --> 0:20:20.200 Saying is with us. She is executive vice president portfolio 0:20:20.280 --> 0:20:23.320 manager over it at Alger. She oversees several small cap 0:20:23.400 --> 0:20:25.920 and MidCap stenogies. She is with us on the phone 0:20:26.320 --> 0:20:29.280 from Connecticut. Amy, nice to have you here, How are 0:20:29.359 --> 0:20:33.159 you great? Thank you, Carol, thank you for having me 0:20:33.280 --> 0:20:35.320 here today. Well, it's good to have you here in 0:20:35.400 --> 0:20:38.440 an interesting day, interesting week, and maybe partly because of 0:20:38.480 --> 0:20:40.240 the holiday, we had a fair amount of news flow. 0:20:40.320 --> 0:20:43.080 But it does feel like investors kind of not quite 0:20:43.160 --> 0:20:46.520 sure where to go next. And maybe it's because we're 0:20:46.520 --> 0:20:50.760 in this Netherlands between earning cycles. But how do you 0:20:50.840 --> 0:20:52.679 see and how do you see the market environment, especially 0:20:52.720 --> 0:20:58.320 for the midcake MidCap space that you play within. Yeah, well, 0:20:58.359 --> 0:21:02.399 I think I feel very constructive overall equity market, and 0:21:03.200 --> 0:21:08.080 I am very bullish UM makehaps now, especially UH makehap 0:21:08.160 --> 0:21:11.560