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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the

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Speaker 1: Bloomberg Intelligence Podcast. Catch us live weekdays at ten am

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Speaker 1: Eastern on Apple, Cocklay and Android Auto with the Bloomberg

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Speaker 2: Through Netflix shares are down about twenty five percent since

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Speaker 2: they began pursuing Warner Brothers in October. So is Netflix

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Speaker 2: in a race against time here?

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Speaker 3: I think so, Scarlett. I mean, you know, there has

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Speaker 3: obviously been a lot of worries about that falling stock

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Speaker 3: price and investors kind of questioning, Okay, so really what

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Speaker 3: is the value right if that's an eighty five fifteen

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Speaker 3: split for Warner Studio and streaming assets. I mean, Warner

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Speaker 3: shareholders obviously worried about the falling value of you know,

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Speaker 3: the Netflix stock, and so obviously Netflix, you're really trying

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Speaker 3: to estivate those investors by making it an all cash offer.

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Speaker 3: But yes, they are, you know, very much running against

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Speaker 3: the clock. There is the January twenty first deadline from

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Speaker 3: a rival, Paramount Skidance for tendering shares at thirty dollars

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Speaker 3: for all of Warner Brothers, Discovery, so there are multiple

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Speaker 3: things going on here, but this definitely should spark some

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Speaker 3: sort of response we think from Paramount Gita.

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Speaker 4: It feels like we're getting one escalation after the other

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Speaker 4: in the bidding war. Do you think that proposing an

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Speaker 4: all cash offer could actually exped expedite the closing of

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Speaker 4: this deal by Netflix or do you expect that Paramount

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Speaker 4: will fight back again.

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Speaker 3: We definitely think that Paramount will fight back because for them,

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Speaker 3: the cost of not doing the deal is definitely greater

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Speaker 3: than it is for Netflix. Paramount is in a very

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Speaker 3: dire situation. They need these assets very, very badly. Not

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Speaker 3: the case for Netflix, which has a really strong, you know,

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Speaker 3: financial profile, has a really strong content library. This is

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Speaker 3: really more of a nice to have rather than a

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Speaker 3: must have. So expect expect something from Paramount Skydance. We

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Speaker 3: don't expect them to go away quietly.

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Speaker 2: We don't expect them to go away quietly. But there's

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Speaker 2: a real question mark here because Paramount Skidance's bid for

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Speaker 2: Warner Brothers Discovery assumes that the value of the legacy

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Speaker 2: cable channels is zero, and of course it's bid covers

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Speaker 2: the entire company, whereas Netflix is only looking for the

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Speaker 2: streaming and the studio business. Yet what does that say

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Speaker 2: about Paramount Skuydiance's own legacy cable business zero? I mean,

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Speaker 2: does that mean that its business is also worth something

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Speaker 2: similar to zero?

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Speaker 3: I mean, that's just such a brilliant point that you raise,

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Speaker 3: Scarlett absolutely. I mean, when they, you know, basically devalue

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Speaker 3: the Warner Brothers assets, they risk doing the same for

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Speaker 3: their own cable networks. But there is, you know, there's

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Speaker 3: absolutely no way to sugar coat the fact that the

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Speaker 3: cable network business is a declining business. What Paramount is

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Speaker 3: doing to its you know, kind of favoring its argument

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Speaker 3: is basically using the poor stock performance of Versut, which

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Speaker 3: is the cable network group from or the cable network

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Speaker 3: spin off from Comcast. Its poor performance is kind of

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Speaker 3: the reason their justification for why the Warner Brothers legacy

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Speaker 3: networks should not really be worth much. But I still think,

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Speaker 3: you know, obviously they're still Yes, there is cord cutting,

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Speaker 3: Yes advertising is under pressure, but they are still cashcows.

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Speaker 3: They still do throw out a good amount of cash.

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Speaker 3: And that is true both for Warner Brothers as well

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Speaker 3: as for Paramount. And obviously Paramount still sees a lot

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Speaker 3: of you know, rationale and kind of combining those two

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Speaker 3: portfolios Paramounts own cable networks along with warners to kind

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Speaker 3: of just stem that whole melting ice cube argument that said, yeah,

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Speaker 3: it's it's this, This is really turning out to be,

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Speaker 3: you know, very very interesting. I think Warner Brothers still

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Speaker 3: kind of sees a lot of value in its networks.

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Speaker 3: They do want, you know, that the separation. They think

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Speaker 3: they can extract a lot more value with the separation

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Speaker 3: of their global networks business, which is supposed to happen

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Speaker 3: by the third quarter of this year. So again it's

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Speaker 3: still a wait and watch, but I think at this point, Scarlett,

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Speaker 3: the ball is definitely in Paramounts court.

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Speaker 4: Githa not too long ago, Bank of America said that

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Speaker 4: this bidding war is reshaping the broader media industry. What

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Speaker 4: are the consequences of it for the broader media industry,

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Speaker 4: do you think, and what kind of precedent does it

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Speaker 4: set for future media company acquisitions?

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Speaker 3: Yeah, absolutely, Alex. I think one of the things one

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Speaker 3: of our key takeaways from this whole exercise is that,

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Speaker 3: you know, obviously, linear networks are in a really precarious position,

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Speaker 3: no doubt about that. But then the studio assets as

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Speaker 3: well as the streaming platforms, the content generation part of it,

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Speaker 3: there's still quite a lot of value in those. So

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Speaker 3: any of you know, the studios that you see out there,

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Speaker 3: whether it's Alliance Gate or you know, maybe even an

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Speaker 3: AMC Networks which has a television production studio, maybe all

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Speaker 3: of that still has some value. But I think really

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Speaker 3: the biggest question for us, and I think for media

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Speaker 3: investors at large, is what happens with Comcast and what

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Speaker 3: happens with its NBC media group that really is somewhat of,

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Speaker 3: you know, this hidden jewel. I would say they have

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Speaker 3: to extract value for that. They probably have to spin

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Speaker 3: off that asset. So I think everybody is really super

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Speaker 3: focused on what they do next.

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Speaker 2: Okay, so in terms of what happens next, we are

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Speaker 2: waiting to see if Netflix actually does revise the term

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Speaker 2: of its offer to something that's all cash. And then

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Speaker 2: on the paramount skidance side, you said the deadline is

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Speaker 2: coming up for the tender offer.

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Speaker 5: When is that exactly?

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Speaker 3: Jan twenty first?

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Speaker 2: Jan twenty first, So next Wednesday we'll get a sense

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Speaker 2: of whether shareholders are in favor of it, and what

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Speaker 2: do we think is the reception right now.

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Speaker 3: Very very poor. The last we heard, only about two

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Speaker 3: percent of outstanding shares had been tendered, so really a

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Speaker 3: shareholder is still kind of holding out for that sweetened offer.

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Speaker 1: Stay with us.

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Speaker 2: More from Bloomberg Intelligence coming up after this.

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Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live

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Speaker 1: weekdays at ten am Eastern on Apple, cocklay and Android

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Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever

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Speaker 1: you get your podcasts, or watch us live on YouTube.

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Speaker 2: Some big news out of Big Tech this week when

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Speaker 2: it comes to jobs as well, Yeah, layoffs from meta platforms.

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Speaker 4: It is beginning to cut more than a thousand jobs

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Speaker 4: from the company's Reality Labs division, part of its plan

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Speaker 4: to redirect resources from virtual reality and metaverse products, which

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Speaker 4: is really really interesting given the facts that it invested

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Speaker 4: so much into this endeavor, even change its name accordingly,

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Speaker 4: and we have with us Man Deep Saying, Global Tech

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Speaker 4: Research head of Bloomberg Intelligence, to discuss this. Man Deep,

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Speaker 4: what does this all mean for Meta's bottom line? What

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Speaker 4: do these jobs job cuts?

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Speaker 3: Do?

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Speaker 5: I mean Reality lab segment is almost losing twenty billion

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Speaker 5: dollars a year and cumulatively they've lost about seventy billion

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Speaker 5: dollars over the past three years, so a lot of

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Speaker 5: investors questioned, you know, how long they were expected to

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Speaker 5: remain patient on those kind of losses. And I think

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Speaker 5: the initial rumors were about a thirty percent cut in

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Speaker 5: that unit. So this is somewhat build expectations in terms

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Speaker 5: of ten percent job cut, but it just goes to

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Speaker 5: show that right now, the companies obviously focus more on

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Speaker 5: the AI side in terms of building the infrastructure, building

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Speaker 5: their own large angrid model, and it may take a

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Speaker 5: while to you know, really bring it, bring that LLLM

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Speaker 5: concept in that variables or the whether it's a VR

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Speaker 5: headsets or the glasses. And I mean when you compare

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Speaker 5: VR headsets or the glasses that they're selling to let's

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Speaker 5: say air pods, the number of units pale in comparison.

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Speaker 5: We're talking, you know, ten million, maybe if they do

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Speaker 5: twenty million. Apple does more than one hundred million AirPods

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Speaker 5: a year, So what's the opportunity here? And I think

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Speaker 5: that's where you probably will see more cuts in that business.

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Speaker 2: That is a really really important contrast to make their

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Speaker 2: in terms of what Meta is trying to do, because

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Speaker 2: they want to be a part of the mass market here,

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Speaker 2: but it's not quite there yet. Mindy, As Meta pivots

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Speaker 2: away from VR in the metaverse to AI, what does

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Speaker 2: that mean for spending? I mean, they obviously had to

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Speaker 2: spend a lot to build out the metaverse, to build

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Speaker 2: out their VR offerings, and now they're going to shift

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Speaker 2: everything to building out the AI offerings, large language models,

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Speaker 2: these AI glasses. What do you think that the pace

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Speaker 2: of spending would just kind of continue, It won't really

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Speaker 2: shift all that much.

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Speaker 5: Yes, On the AI side, the opportunity is huge. What

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Speaker 5: everyone is chasing right now is an AI agent that

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Speaker 5: can book your travel, your Uber trip, order food, you know,

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Speaker 5: do shopping for you. That's the vision Google is chasing.

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Speaker 5: That's what Amazon alexaplus launch was all about. So Meta

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Speaker 5: has that surface area with you know, Instagram and WhatsApp,

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Speaker 5: and you could argue they could in theory develop such

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Speaker 5: an agent, but the hard part is integration and getting

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Speaker 5: the AI to where it's you know, reliable and pretty.

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Speaker 5: And that's where I mean, it's anybody's guests who is

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Speaker 5: best positioned. I think that Apple Google partnership that we

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Speaker 5: saw this week is probably a negative for Meta in

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Speaker 5: this sense. Like, if Apple is setting up defaults in

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Speaker 5: their phone, then that makes it hard for an external

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Speaker 5: kind of agent to do these kind of things. So

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Speaker 5: from that perspective, distribution really matters and operating system control

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Speaker 5: really matters. So Meta is somewhat at a disadvantage when

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Speaker 5: it comes to, you know, their distribution on Apple and

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Speaker 5: Android devices.

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Speaker 4: Mandy. We also got news today that Airbnb hired Meta's

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Speaker 4: head of General AI, which is really interesting because wasn't

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Speaker 4: it not too long ago that they declined to work

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Speaker 4: with open AI. What does this all mean for its

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Speaker 4: artificial intelligence endeavors.

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Speaker 5: Yeah, I think Brian Chesky has been quite vocal about

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Speaker 5: using open source llms as opposed to you know, proprietary

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Speaker 5: llms like open AI and Gemini, and so his thing is,

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Speaker 5: I've got a direct customer traffic coming to my website.

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Speaker 5: If I give away you know, my bookings interface to

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Speaker 5: these llms, then I'm losing that customer direct customer touch,

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Speaker 5: and he doesn't want to do that. He instead wants

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Speaker 5: to build his own LM based on an open source

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Speaker 5: model that's already out there, and that's where you know,

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Speaker 5: Meta has open source their model in the past, so

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Speaker 5: it makes sense to have somebody from Meta come in

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Speaker 5: and do something along those lines. ABNP has been open

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Speaker 5: to using Chinese open source models and building on top

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Speaker 5: of that. So from that perspective, it's an interesting strategy

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Speaker 5: that they are going ahead with in terms of using

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Speaker 5: all kinds of open source and not just you know,

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Speaker 5: the US based model.

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Speaker 2: Who in the tech world is winning the talent war

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Speaker 2: because it felt like for a long time open AI

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Speaker 2: and traffic they were, you know, picking up a lot

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Speaker 2: of talent.

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Speaker 4: Is that still the case?

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Speaker 5: I mean right now, the talent is going to where

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Speaker 5: the compute is. If you don't have the compute, you

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Speaker 5: just cannot attract the talent because these models need a

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Speaker 5: lot of compute for training. And you may be the

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Speaker 5: smartest person, but if you don't have the computer, you

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Speaker 5: can't test your idea. So from that perspective, infrastructure bill

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Speaker 5: really matters, which is why in Nvidia, even though they

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Speaker 5: are the chip provider, now they launch their own foundational

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Speaker 5: model in autos self driving that just goes to show

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Speaker 5: what compute can do, you know, and Vidia is definitely

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Speaker 5: moving up the stax. It will be interesting to see

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Speaker 5: how many areas where they compete in with their own foundational.

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Speaker 4: Model man Deep. We're early into the earning season, but

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Speaker 4: big tech results will be here before we know it.

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Speaker 4: And obviously the bar is really high when it comes

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Speaker 4: to what these companies are saying about how they're monetizing

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Speaker 4: their heavy AI in investments. Do you think that they'll

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Speaker 4: live up to the expectations.

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Speaker 5: I think right now you have to focus on where

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Speaker 5: you will see positive earnings revisions, and given the KAPEX

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Speaker 5: investments are going up for this year, it's going to

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Speaker 5: be hard to show, you know, positive revisions when it

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Speaker 5: comes to earnings, except for someone like Alphabet that really

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Speaker 5: has seen a big shift in sentiment because everyone realizes

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Speaker 5: that their models have caught up, and they also are

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Speaker 5: the most efficient when it comes to their stack, the

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Speaker 5: use of TPUs and low cost inferencing. So from that perspective,

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Speaker 5: I think Alphabet clearly is best position to deliver positive surprises.

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Speaker 5: But for someone like Meta, I mean, if you're hearing

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Speaker 5: job cuts, then you know probably it's going to be

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Speaker 5: hard for them to you know, show positive revisions this year.

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Speaker 2: And I feel like the counterpoint to an Alphabet a

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Speaker 2: Google that's doing really well is Oracle. We've seen it

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Speaker 2: really fall from grace of it, and I wonder how

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Speaker 2: critical investors are going to be when they hear from

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Speaker 2: the company this earning season.

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Speaker 5: Well, they will have to give foof points of the

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Speaker 5: build out, the open AI backlock that they have and

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Speaker 5: how that translates into revenue. Because the good thing is

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Speaker 5: market is skeptical of, you know, really far out revenue streams,

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Speaker 5: and so from that perspective, this is quite healthy that

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Speaker 5: you know, there was a correction in Oracle even though

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Speaker 5: they have given a four or five year revenue guide

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Speaker 5: and they have the backlock, market doesn't believe it. The

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Speaker 5: market wants to see more proof points. So I think

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Speaker 5: that's what companies will have to do when it comes

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Speaker 5: to open AI monetization and ROI. They'll have to start

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Speaker 5: showing more tangible proof points.

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Speaker 2: Stay with us more from Bloomberg Intelligence coming up after this.

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Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live

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Speaker 1: weekdays at ten am Eastern on Apple Corplay and Android

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Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever

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Speaker 1: you get your podcasts, or watch us live on YouTube.

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Speaker 2: We are talking about the big take that Bloomberg has

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Speaker 2: published today, and it's called the CEO playbook to navigate Trump.

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Speaker 2: This is kind of the question of the president's second,

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Speaker 2: second four year term. How do you manage this president?

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Speaker 2: And the answers with difficulty because the rules kind of

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Speaker 2: keep changing. Matt Boyle is one of the co authors

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Speaker 2: of this story, and Matt joins us now in studio.

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Speaker 2: Great story, Matt, and it was something that you had

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Speaker 2: trouble reporting on insofar as a lot of people wouldn't.

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Speaker 6: Talk to you exactly. I mean, the usual sort of

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Speaker 6: voices of Corporate America, the Chamber of Commerce, the Business Roundtable,

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Speaker 6: We're just like, you know, we're going to take a

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Speaker 6: pass on this one, and just about every CEO under

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Speaker 6: the sun, you know, just they just don't want to

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Speaker 6: go there. It's like the third rail. So it was

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Speaker 6: challenging to report. But we had a lot of great conversations,

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Speaker 6: let's say, on background, with those who are advising CEOs,

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Speaker 6: and that led to our playbook. Here the five Rules

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Speaker 6: for dealing with the Trump Madness.

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Speaker 4: Matt. We've seen a growing number of business leaders recently

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Speaker 4: kind of push back more than usual on some of

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Speaker 4: President Trump's policy proposals. We had City CFO this morning

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Speaker 4: pushing back on the credit card cap, x On Mobile

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Speaker 4: CEO calling Venezuela an investable? Is this unusual in what

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Speaker 4: might be the consequences for them?

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Speaker 6: Yeah, it takes a certain CEO to push back. It

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Speaker 6: takes a Jamie Diamond or the CEO of ex On

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Speaker 6: Mobile who have the clout and the authority and the

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Speaker 6: industry backing to say no. You know, this is actually

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Speaker 6: not perhaps a good idea. But most of the time,

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Speaker 6: as we saw with tariffs, it was happening behind the scenes.

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Speaker 6: You know, remember this is going back aways. But when

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Speaker 6: Trump told the Walmart CEO, Doug McMillan to eat the tariffs,

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Speaker 6: Walmart said nothing, and that was probably pretty wise. There

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Speaker 6: was no reason to get into a public spat on

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Speaker 6: true social with Trump. So but now maybe it's because

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Speaker 6: Trump is in a different position twelve months later, or

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Speaker 6: it's the issues involved. You know, banking CEOs are very

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Speaker 6: happy to go out against interest ratecaps, but we are

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Speaker 6: seeing in certain cases some CEOs pushed back.

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Speaker 2: Yes, and direct engagement does seem to pay off. If

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Speaker 2: you can find your way to the President and mobile phone,

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Speaker 2: which apparently he pans out the number pretty willingly to

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Speaker 2: certain top CEOs. You talk about in videos Jensen Huang

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Speaker 2: having a direct line to the President, also Lipboon Tam

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Speaker 2: of Intel being able to do that as well.

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Speaker 6: Exactly. I mean Jensen in video CEO one on Joe

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Speaker 6: Rogan in December and said, you know, Trump is extraordinarily accessible.

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Speaker 6: The United Airline CEO said the same thing to us.

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Speaker 6: I mean, you can call this man up. He does

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Speaker 6: answer his cell phone, as we've seen. Sometimes at four

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Speaker 6: thirty in the morning, he will pick up his cell phone.

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Speaker 6: But not everybody has Trump on speed dials. So a

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Speaker 6: point of our story was that you have to find

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Speaker 6: a way in, whether that's Susie Wiles, the chief of Staff,

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Speaker 6: whether it's Scott Besson Treasury or Commerce, Howard Lutnick, or

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Speaker 6: one of the sort of lower level aids. Also, I

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Speaker 6: mean we found that, you know, the director of the

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Speaker 6: White House Office of Public Liaison is somebody you can

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Speaker 6: you can go to also, So the point is to

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Speaker 6: find a way in, no matter how you do it.

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Speaker 4: Matt, what are some of the differences in how President

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Speaker 4: and Trump deals with business leaders in his second term

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Speaker 4: from his first term.

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Speaker 6: Well, the second term he's a little bit more unshackled.

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Speaker 6: Let's say in the first term, you had a few

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Speaker 6: more traditional Republican voices, you know, you had Rex Tillerson

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Speaker 6: in there and other folks who you know, were able

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Speaker 6: to maybe play little defense. They were able to slow

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Speaker 6: walk some of Trump's more outrageous policy proposals. Now it's

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Speaker 6: just all true believers. So he's sort of unfettered, he's unshackled,

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Speaker 6: and there's really not many checks. So what this means

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Speaker 6: for CEOs is, yeah, they really can't hide. They can't

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Speaker 6: just say well, we'll let our industry association take care

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Speaker 6: of this or don't worry. I mean, look at just

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Speaker 6: the past week what's been going on. CEOs really need

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Speaker 6: to be on watch.

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Speaker 4: Yeah, shackles is a fantastic word, a free range Trump right,

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Speaker 4: there we go, There we go.

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Speaker 2: The other thing that you could do, if you're trying

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Speaker 2: to get his attention or curry favor, is to give

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Speaker 2: him a made up award.

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Speaker 6: Yes, he does respond to these types of trinkets and trophies,

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Speaker 6: as we've seen of the Apple CEO, Tim Cook was

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Speaker 6: able to give him this sort of glass you know,

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Speaker 6: trophy with a twenty four carrot gold base or something,

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Speaker 6: you know, with the Apple logo on it. And you know,

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Speaker 6: guess what, you know, it was over tariffs and Cook

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Speaker 6: and Apple we're looking for some relief on foreign microchip tariffs.

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Speaker 6: So and you know that helped. It also helped though

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Speaker 6: that Cook had really put in the work though, talking

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Speaker 6: to Trump for years now, going back to the first administration.

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Speaker 6: So you can't just you know, sort of throw a

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Speaker 6: trophy at him. But it does take some groundwork as well.

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Speaker 6: But look at the Swiss business executives also giving him

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Speaker 6: a you know, a gold role X and you know,

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Speaker 6: so these things do tend to have an impact. As

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Speaker 6: we say, everything is a transaction with this president.

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Speaker 4: Matt, you mentioned it's been difficult getting people to speak

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Speaker 4: to you for this story. Did any of the business

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Speaker 4: leaders you spoke to give you reasoning for why they

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Speaker 4: might be afraid to talk or did they kind of

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Speaker 4: just brush you off?

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Speaker 6: It's I mean, many brush us off through their gatekeepers.

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Speaker 6: They just the thing is, they just don't see much upside.

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Speaker 6: They don't want to be the one CEO talking to

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Speaker 6: any report are on the record. But as we've seen now,

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Speaker 6: maybe we might see some more come out of the

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Speaker 6: woodwork now that Diamond and others are talking about you know,

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Speaker 6: the interest rates. The defense companies also might have something

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Speaker 6: to say about Trump pressuring them, you know, to up

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Speaker 6: their game. So we'll see. But it's that, you know,

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Speaker 6: CEOs again that they might be speaking out on certain issues,

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Speaker 6: but when it comes to Trump again, they just fail

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Speaker 6: to see the upside. But at this point, as we say,

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Speaker 6: or it was a Yale School of Management person wrote

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Speaker 6: today in Bloomberg Opinion, the chaos is not just no

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Speaker 6: longer in the background. The chaos is baked in. It's

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Speaker 6: in the system. It's coming for them, So they might

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Speaker 6: want us talk.

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Speaker 2: So yeah, it's front and center, and it feels in

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Speaker 2: many ways like those who know how to navigate governments

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Speaker 2: and emerging markets might be better positioned.

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Speaker 6: Yeah, so you have that experience exactly, you know, of

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Speaker 6: that sort of slightly more chaotic, slightly more freewheeling environments,

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Speaker 6: and many of these big multinationals, of course, do operate.

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Speaker 5: In those areas.

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