WEBVTT - Daybreak Holiday: Global Technology, Antitrust, Summer Travel 0:00:02.520 --> 0:00:04.920 Hello everybody, and thank you so much for joining us 0:00:04.920 --> 0:00:08.400 for this special edition of Bloomberg Daybreak. US markets are 0:00:08.440 --> 0:00:11.920 closed for the Juneteenth holiday. I'm Nathan Hager. Coming up 0:00:11.920 --> 0:00:14.480 this hour. We look at the state of antitrust in 0:00:14.560 --> 0:00:18.120 America with a paramount Skydance takeover of Warner Brothers Discovery 0:00:18.120 --> 0:00:22.239 getting final approval from the Justice Department. But is it final? 0:00:22.400 --> 0:00:26.400 We'll discuss with Jenniferree of Bloomberg Intelligence. Plus, the official 0:00:26.440 --> 0:00:28.920 start of summer is just days away. We'll look at 0:00:28.960 --> 0:00:32.160 what's in store for summer travel season with Nicki Eckstein 0:00:32.240 --> 0:00:35.920 and Chris Rouser of Bloomberg Pursuits. But we begin with 0:00:36.159 --> 0:00:39.240 earnings because one of the big flyers in the tech space, 0:00:39.440 --> 0:00:43.120 Micron Technology, is set to report next week. For a 0:00:43.159 --> 0:00:45.840 look at that and more of what the tech landscape's 0:00:45.840 --> 0:00:48.279 looking like about halfway through the year, we are very 0:00:48.320 --> 0:00:51.440 pleased to welcome man Deep Singh, Global head of Technology 0:00:51.479 --> 0:00:55.440 Research at Bloomberg Intelligence, along with Bloomberg Intelligence Senior tech 0:00:55.480 --> 0:00:58.040 analyst anurag Rana. It's great to have the both of 0:00:58.080 --> 0:01:00.560 you with us on this holiday. I mean, you just 0:01:00.600 --> 0:01:05.200 think about the run, not just Micron, but pretty much 0:01:05.240 --> 0:01:08.440 all of the memory chip stocks have had this year. 0:01:08.600 --> 0:01:12.559 It has been mind boggling, Mandy, what are we expecting 0:01:12.760 --> 0:01:16.560 when we actually hear second quarter numbers from Micron in 0:01:16.600 --> 0:01:17.240 the coming week. 0:01:17.400 --> 0:01:21.080 When it comes to Micron, they have had a phenomenal 0:01:21.280 --> 0:01:27.160 upward revision this year simply because memory demand has inflected. 0:01:27.920 --> 0:01:31.840 First we saw that with HPM, the high bandwidth memory 0:01:32.440 --> 0:01:35.560 that was used with all the accelerator chips. Now we 0:01:35.680 --> 0:01:40.319 have seen the same with DRAM and nand and other 0:01:40.480 --> 0:01:44.199 types of memory. And you know, there is a lot 0:01:44.240 --> 0:01:48.240 of stockpiling going on, but for a good reason, because 0:01:49.600 --> 0:01:52.160 you know, when you look at the large ANGLEIG models 0:01:52.200 --> 0:01:56.000 and the inference in side of llms, there is no 0:01:56.160 --> 0:01:59.760 doubt that you know, these models are being used for 0:01:59.840 --> 0:02:04.840 you use cases like coding agents, and that has just 0:02:05.040 --> 0:02:10.799 resulted in a lot more demand for all types of memories. 0:02:10.880 --> 0:02:14.920 And that's showing up in the device upgrades, that showing 0:02:15.000 --> 0:02:18.679 up in the new server deployments. But this is a 0:02:18.800 --> 0:02:22.160 very big secular trend and which is why you're seeing, 0:02:22.680 --> 0:02:25.560 you know, Micron probably going to post to over two 0:02:25.639 --> 0:02:29.840 hundred percent growth, you know this year in twenty twenty six. 0:02:30.280 --> 0:02:34.840 That demand has led to huge increases as you know, 0:02:35.280 --> 0:02:41.720 in memory chip prices and huge increases in capital expenditure 0:02:41.800 --> 0:02:45.760 forecast by so many of these companies. I wonder when 0:02:45.880 --> 0:02:49.360 we start to see a top on both of those 0:02:49.480 --> 0:02:52.200 man deep do you see that on the horizon. 0:02:52.480 --> 0:02:56.200 The way these cycles work is, you know, as you know, 0:02:56.400 --> 0:03:01.359 Memories and oligopoly with Micron, s Kehinex and Samsung, and 0:03:02.200 --> 0:03:07.440 these companies haven't really expanded their capacity in a big way. 0:03:07.560 --> 0:03:10.600 So when you look at the capex of the memory companies, 0:03:11.280 --> 0:03:15.120 they've been more around you know, mid to high single 0:03:15.200 --> 0:03:18.960 digit type of capacity expansion and the sort of demand 0:03:19.040 --> 0:03:22.640 trends that I alluded to earlier, we have seen demand 0:03:22.760 --> 0:03:26.200 grow you know, two x three x. So when there 0:03:26.280 --> 0:03:30.840 is such big you know, supply demand mismatch, I mean, 0:03:31.040 --> 0:03:34.800 the pricing obviously is off the charge, which is a 0:03:34.840 --> 0:03:37.720 big driver of what the top line growth of over 0:03:37.760 --> 0:03:42.120 two hundred percent. But we don't see that you know, 0:03:42.240 --> 0:03:46.560 supply demand coming into equilibrium anytime soon, simply because that 0:03:46.760 --> 0:03:51.760 capacity expansion is so muted. And until these memory companies 0:03:52.320 --> 0:03:55.160 expand their supply in a big way, or we find 0:03:55.200 --> 0:03:58.040 you know, there is a new memory player out of 0:03:58.160 --> 0:04:01.840 China or somewhere else, it's hard to imagine, you know, 0:04:02.080 --> 0:04:05.240 what will resolve this mismatch anytime soon. 0:04:05.440 --> 0:04:07.640 I want to bring you into the conversation, Anna rog 0:04:07.720 --> 0:04:10.720 because I know you cover many of the hyperscalers that 0:04:10.760 --> 0:04:13.200 are behind so much of this memory demand, as well 0:04:13.200 --> 0:04:17.479 as the software stocks that could potentially be disrupted by 0:04:17.560 --> 0:04:20.520 what we're seeing in the AI build out. What's your 0:04:20.640 --> 0:04:23.760 view on where the demand pictures headed from here? 0:04:23.920 --> 0:04:26.039 So it looks like that the kapex is going to 0:04:26.040 --> 0:04:29.440 be revised upward again, which is obviously good for all 0:04:29.480 --> 0:04:32.360 the semi names and memory as when he was talking about, 0:04:32.720 --> 0:04:35.599 but that's really the big you know focus right now. 0:04:35.640 --> 0:04:38.479 We came into the ear with a very common trait 0:04:38.640 --> 0:04:42.760 that was everybody's long semis and shot software and that 0:04:42.800 --> 0:04:45.440 continues to be the case, although you know, we have 0:04:45.560 --> 0:04:49.679 seen some relief over the past few weeks for software names, 0:04:49.720 --> 0:04:52.640 but you know, the easy trade for everybody is Kapix 0:04:52.720 --> 0:04:55.239 is going up, so the hardware and the semi names 0:04:55.560 --> 0:04:59.320 should benefit because of all that's going into that realm. 0:04:59.680 --> 0:05:02.600 And we are uncertain how the software world is going 0:05:02.640 --> 0:05:06.159 to shape up because these models are getting smarter day 0:05:06.200 --> 0:05:09.560 by day. And if that's the case, you don't need 0:05:09.600 --> 0:05:12.640 to pay so much for packet software down the road. 0:05:12.680 --> 0:05:15.440 So that still remains the case if you look at it. 0:05:15.920 --> 0:05:19.360 You know, Microsoft is down over fifteen percent this year, 0:05:19.720 --> 0:05:22.560 and yet some of the other cloud vendors such as 0:05:22.600 --> 0:05:25.400 Amazon up is up this year. So that's that's your 0:05:25.440 --> 0:05:26.520 dichotomy over there. 0:05:26.640 --> 0:05:29.240 Well and Rock, how do you see the software name 0:05:29.320 --> 0:05:32.839 sort of navigating the potential for disruption at this point. 0:05:32.839 --> 0:05:34.880 We haven't just heard from the hyperscalers. You've heard from 0:05:34.880 --> 0:05:37.279 the likes of Adobe and Oracle as well. 0:05:37.480 --> 0:05:39.279 Yeah, I mean each one of them has a different 0:05:39.320 --> 0:05:42.120 story that's going through it at this point. So when 0:05:42.160 --> 0:05:44.680 you look at you know, we published a big report 0:05:44.760 --> 0:05:47.400 earlier in the year. When you look at bigger companies 0:05:47.440 --> 0:05:50.320 like SAP, we think they are a little bit better 0:05:50.360 --> 0:05:56.160 protected then maybe somebody like an Adobe, where the product 0:05:56.480 --> 0:05:59.920 or the LMS can do some of that model generation 0:06:00.279 --> 0:06:03.760 or the image generation as well as the as movie generation. 0:06:04.440 --> 0:06:06.599 And I think that's where a lot of the arguments is. 0:06:07.240 --> 0:06:10.480 We are not seeing a lot of fundamentals get eroded 0:06:10.520 --> 0:06:13.720 at this point only because we are still early in 0:06:13.760 --> 0:06:17.279 the AI model race. But down the road there is 0:06:17.320 --> 0:06:21.520 a high chance that some of them will lose business 0:06:21.560 --> 0:06:24.080 to the lower end of the market. The bigger question 0:06:24.240 --> 0:06:28.400 is whether enterprises will shift into their homegrown systems or 0:06:28.440 --> 0:06:33.200 they still depend on the likes of Workday and Salesforce 0:06:33.320 --> 0:06:36.920 and all the other companies. At this point, we are 0:06:36.960 --> 0:06:40.279 not seeing that mass shift over because again, as I said, 0:06:40.320 --> 0:06:42.120 it's early in the game, but I think that's the 0:06:42.120 --> 0:06:43.039 big risk for them. 0:06:43.320 --> 0:06:47.320 We're speaking with annorag Rana, senior tech analysts for Bloomberg Intelligence, 0:06:47.360 --> 0:06:50.680 along with bi's global head of Tech research Mandeep saying 0:06:50.680 --> 0:06:53.240 for a broad look at the tech space as we're 0:06:53.279 --> 0:06:56.920 getting closer to the second half of the year. Mandeep, 0:06:56.920 --> 0:06:59.480 of course, one of the big elephants in the room 0:06:59.520 --> 0:07:03.200 in tech right now is the arrival of SpaceX in 0:07:03.320 --> 0:07:06.839 the public market, not just a rocket company, but positioning 0:07:06.880 --> 0:07:10.360 itself as a major player in AI as well with 0:07:10.480 --> 0:07:16.160 these dreams of data centers in orbit at some point, 0:07:16.360 --> 0:07:21.239 how do you see SpaceX affecting the overall AI race 0:07:21.400 --> 0:07:23.720 Now that it's in the public market, That. 0:07:23.760 --> 0:07:26.680 Makes it even more exciting in terms of you know 0:07:27.000 --> 0:07:31.200 what we are witnessing with this big technology shift that 0:07:31.280 --> 0:07:35.680 we are talking about in terms of AI and with 0:07:35.880 --> 0:07:41.560 space really, you know, it's SpaceX with IPO has shown 0:07:41.720 --> 0:07:45.800 that it is iconic in terms of what they have achieved. 0:07:45.920 --> 0:07:50.960 And even with the orbital data center vision, I know, 0:07:51.600 --> 0:07:56.480 you know, right now we don't have anything tangible in 0:07:56.560 --> 0:08:00.120 terms of actual compute being done in orbital data center, 0:08:00.280 --> 0:08:05.040 but as a concept, you know, it is huge in 0:08:05.160 --> 0:08:08.920 terms of meeting some of the compute requirements that we 0:08:08.960 --> 0:08:12.960 are talking about with AI. And if that vision turns 0:08:13.000 --> 0:08:15.760 into a reality, which is what they laid out, you 0:08:15.760 --> 0:08:19.600 know with the road show, it could be huge for 0:08:20.320 --> 0:08:24.720 you know, just the technology dominance that these companies have had, 0:08:24.880 --> 0:08:30.840 and I think the aipiece of SpaceX is clearly a 0:08:30.960 --> 0:08:34.160 vertical strategy that they are pursuing. You know, not only 0:08:34.200 --> 0:08:38.199 do they have the compute with the terrestrial data centers, 0:08:38.600 --> 0:08:41.480 they also have this orbital data center capacity and they 0:08:41.559 --> 0:08:45.760 can deploy it within their own rock model, which is 0:08:45.840 --> 0:08:49.239 what they're hoping to improve with the acquisition of Cursors. 0:08:49.240 --> 0:08:52.480 So a lot of moving parts in that company, but 0:08:54.200 --> 0:08:57.320 you know, they have a grand vision and if there's 0:08:57.520 --> 0:09:02.160 anyone who can make that space vision a reality, I 0:09:02.200 --> 0:09:06.640 would bet on SpaceX. And so it is a big bet. 0:09:07.120 --> 0:09:09.960 And we still don't know how feasible it is to 0:09:10.240 --> 0:09:16.600 you know, send these one hundred ton loads to space 0:09:17.000 --> 0:09:19.760 because they've shown they can do that for up to 0:09:19.880 --> 0:09:24.200 twenty three fifty tons, but sending it one hundred tons 0:09:24.200 --> 0:09:27.520 of payload and then doing that in a reusable way, 0:09:28.080 --> 0:09:30.880 that is the part that I think technology challenge that 0:09:31.000 --> 0:09:35.119 still needs to be solved for, and I think SpaceX 0:09:35.200 --> 0:09:36.440 is best position to do that. 0:09:36.760 --> 0:09:39.440 Of course, it is early days in terms of how 0:09:39.600 --> 0:09:42.960 SpaceX is going to perform in the market, and to 0:09:43.000 --> 0:09:45.200 your point on a rock about it being early days 0:09:45.240 --> 0:09:48.440 in the AI race in general, in terms of the 0:09:48.480 --> 0:09:52.000 stocks that you cover, some of those software names. Is 0:09:52.040 --> 0:09:54.480 there a SpaceX impact on your coverage area. 0:09:54.840 --> 0:09:58.040 No, there is no SpaceX direct impact other than you know, 0:09:58.080 --> 0:10:02.360 the traders trying to you know, I would say fivoit 0:10:02.559 --> 0:10:05.880 more towards those kinds of names, and perhaps you know, 0:10:06.559 --> 0:10:10.680 selling some of the traditional technology names, whether it's in 0:10:10.760 --> 0:10:14.120 consulting or software. I mean, we have seen some pressure 0:10:14.160 --> 0:10:17.400 on that in the last few weeks, but you know, 0:10:17.480 --> 0:10:19.520 by and large, there is no direct impact. 0:10:19.960 --> 0:10:23.920 There are so many dynamics around the tech story as well, 0:10:24.240 --> 0:10:28.120 not just this huge amount of competition, the valuations, but 0:10:28.280 --> 0:10:31.920 you know, there's been some level of pushback as well, 0:10:32.520 --> 0:10:37.760 not just from many consumers who are concerned about AI's 0:10:37.800 --> 0:10:41.400 impact on their job prospects or society as a whole, 0:10:41.440 --> 0:10:44.360 but some government pushback as well when it comes to 0:10:44.880 --> 0:10:48.679 Anthropic in particular. Man, Deep, how do you see that 0:10:48.800 --> 0:10:53.520 potentially affecting how things go in terms of the fundamentals 0:10:53.679 --> 0:10:54.560 for these companies. 0:10:54.840 --> 0:10:59.400 Yeah, Look, Anthropic has had a phenomenal growth this year 0:10:59.520 --> 0:11:02.840 here to Their revenue has grown, you know, five x 0:11:02.840 --> 0:11:06.280 from where they were back in December, and you know, 0:11:06.320 --> 0:11:09.480 it's a forty seven billion dollar revenue run rate business. 0:11:09.520 --> 0:11:14.720 So if something like this happens where a government bands, 0:11:14.760 --> 0:11:19.559 you know, the use of its models outside the country, 0:11:20.080 --> 0:11:24.280 it is a big deal and it will have repercussions 0:11:24.320 --> 0:11:28.520 in terms of, you know, what kind of growth we 0:11:28.559 --> 0:11:34.560 can expect, especially outside the US for a frontier model 0:11:34.600 --> 0:11:39.920 like Entropic. But it's still early days. I think Entropic 0:11:40.040 --> 0:11:44.199 being labeled the supply chain risk was always a threat. 0:11:44.360 --> 0:11:47.960 And you know, they talked about the capabilities of this 0:11:48.080 --> 0:11:53.120 Mythos model, which they commercially released under a new name 0:11:53.160 --> 0:11:58.840 called Fable. This has capabilities that could be used for 0:11:58.960 --> 0:12:02.400 all sorts of purpose is not just for useful work, 0:12:02.559 --> 0:12:05.160 but also you know, for cyber attacks, and I think 0:12:05.360 --> 0:12:08.280 poses a lot of risks. So from that perspective, we 0:12:08.320 --> 0:12:12.280 are still learning about the capabilities of this model, and 0:12:13.240 --> 0:12:17.000 I think like all these frontier labs may have to 0:12:17.160 --> 0:12:21.720 take a pause and really highlight the risks involved in 0:12:22.080 --> 0:12:26.000 deploying these models at scale. And that's where I think 0:12:26.000 --> 0:12:29.040 the governments will step in and make sure that sovereign 0:12:29.200 --> 0:12:33.560 element is clear, and you know, they know exactly how 0:12:33.600 --> 0:12:35.680 to regulate this, so there will be a lot more 0:12:35.720 --> 0:12:40.200 emphasis on regulation and government involvement with the deployment of 0:12:40.240 --> 0:12:41.480 these models going forward. 0:12:41.840 --> 0:12:44.480 Really appreciate the perspective from both of you as we 0:12:44.800 --> 0:12:47.880 keep a closer eye on the tech space into the 0:12:47.960 --> 0:12:51.240 second half. That's on a rag Rana and man Deep 0:12:51.280 --> 0:12:55.480 sing covering tech for Bloomberg Intelligence. Up next, we're going 0:12:55.520 --> 0:12:57.439 to take a look at the current state of anti 0:12:57.600 --> 0:13:01.880 trust with Jennifer Reed of blaeg Intelligence. It's twenty minutes 0:13:01.920 --> 0:13:05.040 past the hour. I'm Nathan Hager, and this is Bloomberg. 0:13:16.440 --> 0:13:19.439 Welcome back to this special edition of Bloomberg Daybreak. US 0:13:19.440 --> 0:13:22.920 markets are closed for the Juneteenth holiday. I'm Nathan Hager. 0:13:23.200 --> 0:13:27.400 The Justice Departments closed, it's antitrust probe into Paramount Skydance, 0:13:27.440 --> 0:13:29.640 and it's one hundred and ten billion dollar purchase of 0:13:29.840 --> 0:13:33.439 Warner Brothers Discovery. But it's far from a done deal. 0:13:33.840 --> 0:13:37.479 For more, let's bring in Bloomberg Intelligence senior litigation analysts 0:13:37.600 --> 0:13:41.240 Jennifer Ree set up the leading question, Jen why is 0:13:41.280 --> 0:13:42.400 it not a done deal? 0:13:43.200 --> 0:13:43.360 Right? 0:13:43.440 --> 0:13:45.440 You'd think that that would be a big hurdle for 0:13:45.520 --> 0:13:48.400 them to cross, but it wasn't really much of a surprise, 0:13:48.480 --> 0:13:53.240 to be honest. But this deal needs approval from regulators 0:13:53.320 --> 0:13:56.320 in the UK and also in Europe before it can close. 0:13:56.360 --> 0:13:58.920 That's a term within their agreement, but also the laws 0:13:58.960 --> 0:14:01.800 of those jurisdictions say that they need to get clearance 0:14:01.880 --> 0:14:05.640 before they've closed. And so those are ongoing investigations with 0:14:05.760 --> 0:14:09.080 some important dates coming up in July and August, whereby 0:14:09.200 --> 0:14:12.760 each one will decide whether or not they'll move into 0:14:12.800 --> 0:14:15.480 an in depth investigation of the deal or cleared the 0:14:15.520 --> 0:14:17.040 deal with or without concessions. 0:14:17.400 --> 0:14:21.280 So, the UK and the EU, what are the main 0:14:21.560 --> 0:14:26.040 hurdles that they could potentially be putting up against Paramount 0:14:26.040 --> 0:14:28.880 sky Dance in that Warner Brothers acquisition, So. 0:14:29.040 --> 0:14:32.640 They're looking at a lot of what I think challengers 0:14:32.960 --> 0:14:36.240 or complainants in this country have looked at the overlap 0:14:36.240 --> 0:14:38.760 in the movie theaters. It's really kind of Big five 0:14:38.840 --> 0:14:41.880 going down to Big four. There's some other fringe studios, 0:14:42.440 --> 0:14:45.640 but specifically, I think in Europe the concern might be 0:14:45.680 --> 0:14:51.160 an overlap in children's television stations. Most children's television stations 0:14:51.160 --> 0:14:54.200 in both the UK and Europe are owned by American companies, 0:14:54.480 --> 0:14:57.720 And with this combination Paramount and Warner Brothers, you bring 0:14:57.760 --> 0:15:02.880 together cartoon network Nickel, Nick Junior, cartoon Nito, and they 0:15:02.920 --> 0:15:06.040 both have some international children's channels as well. So I 0:15:06.120 --> 0:15:09.560 suspect that there may be some concessions needed with respect 0:15:09.600 --> 0:15:11.400 to divesting some of those channels. 0:15:11.600 --> 0:15:14.680 Okay, I think there'd been some Bloomberg News reporting that 0:15:15.080 --> 0:15:18.280 Paramount sky Dance might be willing to work with some 0:15:18.360 --> 0:15:21.880 of the regulators overseas on potentially divesting some of those 0:15:22.000 --> 0:15:24.160 children's channels. Would that be enough? You know? 0:15:24.240 --> 0:15:27.360 I think it will maybe with a few behavioral concessions, 0:15:27.440 --> 0:15:31.680 like promises to license their content to other distributors. Streaming 0:15:31.720 --> 0:15:36.320 distributors in those jurisdictions on fair, reasonable and non discriminatory 0:15:36.400 --> 0:15:39.880 terms rather than favoring their own streaming products. A few 0:15:39.880 --> 0:15:42.920 behavioral concessions, but I think that'll probably be enough to 0:15:42.960 --> 0:15:45.640 get those deals over the line. You know, when Disney 0:15:45.680 --> 0:15:48.760 acquired Fox, this is what they had to do. In Europe, 0:15:49.240 --> 0:15:51.240 there was an issue there with an overlap in what 0:15:51.280 --> 0:15:54.640 they called factual channels. These were mostly channels operated by 0:15:54.640 --> 0:15:56.800 A and E, and in order to get that deal cleared, 0:15:57.000 --> 0:15:59.320 they did need to divest I think with something five 0:15:59.440 --> 0:16:01.880 or six channels that were A and E stations. 0:16:02.080 --> 0:16:05.360 Now, if the deal does get over the line in 0:16:05.400 --> 0:16:08.960 the UK and EU, would that be the ultimate clearance 0:16:09.160 --> 0:16:09.440 for this? 0:16:09.720 --> 0:16:13.840 So not necessarily. You have the California Attorney General investigating 0:16:13.840 --> 0:16:16.600 the deal now with apparently a group of about ten 0:16:16.720 --> 0:16:20.520 or nine other states. The states have the right independently 0:16:20.800 --> 0:16:23.600 to enforce federal antitrust law no matter what the Department 0:16:23.680 --> 0:16:26.480 of Justice does. So if the States determined that they 0:16:26.520 --> 0:16:29.200 think the deal could harm competition, they can still bring 0:16:29.240 --> 0:16:32.080 a lawsuit. And they keep saying, hey, this isn't over yet. 0:16:32.080 --> 0:16:35.760 We're investigating and we're not done yet, so it's possible 0:16:35.880 --> 0:16:38.040 they could still go to court to challenge the deal. 0:16:38.440 --> 0:16:40.880 Even though it's been cleared by the DOJ and will 0:16:40.960 --> 0:16:42.320 likely be cleared elsewhere too. 0:16:42.440 --> 0:16:44.680 And to that point, the Justice Department has said they 0:16:44.680 --> 0:16:48.760 don't think that joining these two companies would be unfair 0:16:48.880 --> 0:16:52.080 to competition. So what are the potential arguments that the 0:16:52.360 --> 0:16:53.160 States could make. 0:16:53.280 --> 0:16:55.200 Well, the first thing I'll say about this is that 0:16:55.280 --> 0:16:57.760 the Department of Justice did say that, but gave very 0:16:57.880 --> 0:17:01.320 very little detail. They basically just said, hey, it's a 0:17:01.360 --> 0:17:04.480 competitive market. And these companies have promised the world. They've 0:17:04.480 --> 0:17:08.600 promised to invest, They've promised to maintain employment, they've promised 0:17:08.600 --> 0:17:12.080 to increase their slate of movies they produce, and to 0:17:12.160 --> 0:17:17.800 maintain theatrical distribution before going to streaming. But usually that's 0:17:17.880 --> 0:17:21.359 not those kinds of promises aren't good enough in somebody. 0:17:21.600 --> 0:17:24.959 Usually the authorities want those to be put down on paper. 0:17:25.400 --> 0:17:27.439 So it may be that the states there are a 0:17:27.440 --> 0:17:30.080 couple options here. The States just simply want to do 0:17:30.160 --> 0:17:32.800 better than saying here's what the company said they would do, 0:17:32.880 --> 0:17:35.160 and we're okay with that. You know, they might want 0:17:35.160 --> 0:17:37.520 some kind of a settlement. So the States are legally 0:17:37.560 --> 0:17:41.840 bound to those the companies are legally bound. And again 0:17:42.000 --> 0:17:44.119 I think there's a lot of room here. You know, 0:17:44.480 --> 0:17:47.600 antitrust and harm to markets can really be very gray 0:17:48.800 --> 0:17:52.960 and can be subjective. You know, where one assessment could 0:17:53.000 --> 0:17:56.720 show unlikely harm, another could show likely harm. Because remember 0:17:56.960 --> 0:17:59.359 they're looking at what might happen in the future, if 0:17:59.359 --> 0:18:02.639 two companies come together, what might their incentives be, what 0:18:02.800 --> 0:18:05.920 might happen in the market, So everybody speculating. Obviously it's 0:18:05.920 --> 0:18:08.200 not out of the realm of possibility that two different 0:18:08.240 --> 0:18:11.239 speculators could come out differently on that. And in the 0:18:11.280 --> 0:18:14.680 markets here, it's really very close. We tend to think 0:18:14.680 --> 0:18:17.040 of about a thirty percent combined market share as kind 0:18:17.080 --> 0:18:20.400 of being that level by which below it you're probably 0:18:20.440 --> 0:18:22.520 not too worried, but above it, maybe you have some 0:18:22.600 --> 0:18:25.119 concern about harm. And I do have to say, in 0:18:25.200 --> 0:18:27.879 most of the overlap markets for this deal, the shares 0:18:28.320 --> 0:18:31.720 get to about that level, but don't exceed that level. 0:18:31.800 --> 0:18:34.800 So it's hard to make out kind of an initial 0:18:34.840 --> 0:18:38.240 case that this could harm competition. But in particular, I 0:18:38.240 --> 0:18:41.320 think California is concerned about labor and the labor market 0:18:41.960 --> 0:18:44.679 in those cities in the state where they're making movies 0:18:44.680 --> 0:18:45.199 and content. 0:18:45.440 --> 0:18:49.479 Yeah, to have California potentially leading the charge on a 0:18:49.600 --> 0:18:52.800 challenge to this merger. It makes you think that, you know, 0:18:52.840 --> 0:18:55.280 this is kind of the home state, right, I mean, 0:18:55.359 --> 0:18:58.639 this is where Hollywood is. So what's the track record 0:18:58.760 --> 0:19:01.800 or is there a track recw for California when it 0:19:01.840 --> 0:19:07.199 comes to mounting challenges to mergers in their sort of 0:19:07.680 --> 0:19:09.119 home state industry. 0:19:09.480 --> 0:19:12.120 I would say that that track record is pretty good, 0:19:12.119 --> 0:19:13.000 but it's very new. 0:19:13.359 --> 0:19:13.399 You. 0:19:14.040 --> 0:19:16.679 It is unusual in the past for the states to 0:19:16.720 --> 0:19:21.159 go out independently. They're generally aligned with the federal antitrust enforcers. 0:19:21.520 --> 0:19:23.280 But what we have seen as a bit of a 0:19:23.280 --> 0:19:26.320 departure in the last couple of years whereby states are 0:19:26.520 --> 0:19:30.040 striking out independently in cases where they deemed the Department 0:19:30.080 --> 0:19:32.639 of Justice having been to lax or not doing it 0:19:32.720 --> 0:19:35.640 their job, and they've had some success. So, for instance, 0:19:35.720 --> 0:19:39.080 Nextstar Integna have merged. They were cleared by the Department 0:19:39.080 --> 0:19:42.480 of Justice and Federal Communications Commission, but the States said, 0:19:42.520 --> 0:19:45.000 not so fast, we think this is a problematic deal. 0:19:45.080 --> 0:19:47.080 They went to court. They tried to get to court 0:19:47.080 --> 0:19:49.439 before the deal closed, but they didn't manage to do that. 0:19:49.800 --> 0:19:52.199 But they went to court and they successfully obtained a 0:19:52.200 --> 0:19:57.359 preliminary injunction stopping the companies for now from integrating until 0:19:57.480 --> 0:19:59.840 the judge can decide on a permanent block on the deal, 0:20:00.000 --> 0:20:03.439 So that's in litigation. They also had great success in 0:20:03.480 --> 0:20:07.359 a lawsuit against Live Nation for monopolization. That was a 0:20:07.480 --> 0:20:10.320 jury trial and the Department of Justice was a plaintiff 0:20:10.359 --> 0:20:13.200 with the States there, but settled during the first week 0:20:13.200 --> 0:20:15.840 of trial. But at a large group of states said no, 0:20:16.680 --> 0:20:20.080 this is a problematic deal. The settlement doesn't resolve the concerns. 0:20:20.359 --> 0:20:23.159 They went forward. They litigated the case and they have 0:20:23.240 --> 0:20:26.160 won a liability decision, so again a big success for them, 0:20:26.480 --> 0:20:29.600 and that's still litigating now. The remedy aspect of that 0:20:29.880 --> 0:20:31.400 is what we're looking at. 0:20:31.400 --> 0:20:31.680 Now. 0:20:31.880 --> 0:20:35.680 We're speaking with Bloomberg Intelligence senior litigation analyst Jennifer Ree 0:20:35.720 --> 0:20:39.480 on where the Paramount Skydance Warner Brothers merger could go 0:20:40.040 --> 0:20:43.159 now that the Justice Department has approved the deal. If 0:20:43.240 --> 0:20:46.280 we do get to a point, Jen where the States 0:20:46.440 --> 0:20:50.439 bring a lawsuit and it does come to court, what 0:20:50.520 --> 0:20:54.840 are the potential arguments that Paramount Skydance could make in 0:20:55.040 --> 0:20:59.240 their defense that you know, combining with Warner Brothers wouldn't 0:20:59.440 --> 0:21:01.600 be a harm to competition. 0:21:02.000 --> 0:21:04.320 Well, I think exactly what they've said to the Department 0:21:04.320 --> 0:21:07.720 of Justice. No, we're promising something like thirty releases, and 0:21:07.760 --> 0:21:09.840 if we're going to release that many movies, we need 0:21:09.880 --> 0:21:13.080 to maintain both of these studios and maintain the employment 0:21:13.160 --> 0:21:16.400 because otherwise we can't get to that volume that we 0:21:16.480 --> 0:21:19.639 promise a certain theatrical release window in big theaters, and 0:21:19.720 --> 0:21:21.960 so it's not going to harm theaters, and it won't 0:21:21.960 --> 0:21:25.399 harm labor and g and streaming. When we combine HBO 0:21:25.480 --> 0:21:28.080 Max and Discovery Plus and Paramount Plus, we're still much 0:21:28.119 --> 0:21:31.640 smaller than all the other big streamers out there, Netflix 0:21:31.680 --> 0:21:35.040 in particular, and combined we only get to about I 0:21:35.080 --> 0:21:37.560 think a fifteen percent share in the United States. And 0:21:37.600 --> 0:21:42.960 these are just simply not historically problematic figures in antitrusturisprudence. 0:21:43.160 --> 0:21:45.080 So I think those are the kind of arguments they'll make. 0:21:45.160 --> 0:21:46.800 And if it gets to that point that we do 0:21:46.880 --> 0:21:49.560 see those kinds of arguments, could we see the Justice 0:21:49.560 --> 0:21:53.160 Department looking for further commitments or even further concessions from 0:21:53.240 --> 0:21:54.080 Paramount I. 0:21:54.119 --> 0:21:57.119 Think not at this point, because as of June sixteenth, 0:21:57.119 --> 0:21:59.359 the Department of Justice cleared the deal and issued a 0:21:59.400 --> 0:22:01.639 statement saying, you know, we're done. We don't think it 0:22:01.640 --> 0:22:05.119 would harm competition, but you could see a settlement with 0:22:05.200 --> 0:22:08.280 the companies in the States whereby they make certain promises. 0:22:09.200 --> 0:22:12.560 Now, time is of the essence, isn't it for paramount 0:22:12.600 --> 0:22:16.440 s guidance to really get this deal done to avoid 0:22:16.800 --> 0:22:20.680 ticking fees to Warner Brothers Discovery? Right, So how does 0:22:20.720 --> 0:22:21.600 that affect things? 0:22:22.280 --> 0:22:22.520 Right? 0:22:22.680 --> 0:22:24.720 So, they have this ticking fee that'll kick in at 0:22:24.760 --> 0:22:27.280 the end of September. I mean interestingly, the end date 0:22:27.280 --> 0:22:30.119 in their purchase agreement it isn't until June of twenty 0:22:30.160 --> 0:22:33.120 twenty seven, so they technically have time in their agreement 0:22:33.119 --> 0:22:35.480 to litigate if they have to. But what they're going 0:22:35.520 --> 0:22:37.560 to need to do if they get this clearance, these 0:22:37.600 --> 0:22:40.280 clearances from the UK and the EU, but the States 0:22:40.320 --> 0:22:42.159 go ahead and sue them, they're going to have to 0:22:42.200 --> 0:22:45.000 fight hard against a preliminary injunction that would be a 0:22:45.080 --> 0:22:48.320 temporary or short term block on closing the deal, while 0:22:48.359 --> 0:22:51.520 a judge can decide on a more permanent solution, because 0:22:51.600 --> 0:22:55.760 that would absolutely extend well beyond that September thirtieth date 0:22:55.800 --> 0:22:57.720