1 00:00:00,600 --> 00:00:07,760 Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. 2 00:00:10,560 --> 00:00:14,400 Speaker 2: This is Bloomberg Intelligence with Alex Steinhl and Paul'sweenye. 3 00:00:14,520 --> 00:00:17,720 Speaker 3: The real app performance has been in US corporate high yield. 4 00:00:17,880 --> 00:00:19,040 Speaker 4: Are the companies lean enough? 5 00:00:19,040 --> 00:00:20,240 Speaker 5: Have they trimmed all the fats? 6 00:00:20,320 --> 00:00:23,880 Speaker 3: The semiconductor business is a really cyclical business. 7 00:00:23,600 --> 00:00:27,200 Speaker 2: Breaking market headlines and corporate news from across the globe. 8 00:00:27,240 --> 00:00:29,880 Speaker 4: Do investors like the M and A that we've seen? 9 00:00:30,080 --> 00:00:31,000 Speaker 6: These are two. 10 00:00:31,040 --> 00:00:33,159 Speaker 3: Big time blue chip companies. 11 00:00:33,320 --> 00:00:36,920 Speaker 4: The window between the peak and cut changing super fast. 12 00:00:37,080 --> 00:00:41,680 Speaker 2: Bloomberg Intelligence with Alex Steinhall and Paul'sweenye on Bloomberg Radio. 13 00:00:43,159 --> 00:00:45,680 Speaker 3: On Today's Bloomberg Intelligence Show, we dig inside the big 14 00:00:45,720 --> 00:00:48,000 Speaker 3: business stories impacting Wall Street and the global markets. 15 00:00:48,040 --> 00:00:49,640 Speaker 4: Each and every week we're going to provide you in 16 00:00:49,720 --> 00:00:51,720 Speaker 4: that research and data on some of the two thousand 17 00:00:51,760 --> 00:00:55,000 Speaker 4: companies and one hundred and thirty industries our analysts cover worldwide. 18 00:00:55,120 --> 00:00:57,520 Speaker 3: Today will look at why Capital Ones bid for Discover 19 00:00:57,680 --> 00:01:00,040 Speaker 3: will likely face a rigorous anti trust review by the 20 00:01:00,120 --> 00:01:01,040 Speaker 3: US Justice Department. 21 00:01:01,120 --> 00:01:04,520 Speaker 4: Plus we'll discuss how shrinking advertising on traditional TV channels 22 00:01:04,560 --> 00:01:06,600 Speaker 4: is impacting sales at Paramount Global. 23 00:01:06,840 --> 00:01:09,360 Speaker 3: But first we dive into the retail space. This week, 24 00:01:09,400 --> 00:01:12,000 Speaker 3: Macy's said it plans to close almost a third of 25 00:01:12,000 --> 00:01:15,399 Speaker 3: its US locations. And this comes despite Macy's reporting fourth 26 00:01:15,480 --> 00:01:18,440 Speaker 3: quarter revenue and earnings that exceeded low analyst expectations. 27 00:01:18,440 --> 00:01:20,720 Speaker 4: All right, for more, we're joined now by Mary ross Gilbert, 28 00:01:20,760 --> 00:01:24,039 Speaker 4: senior equity analyst who covers retail for Bloomberg Intelligence. And 29 00:01:24,080 --> 00:01:26,520 Speaker 4: we first asked Mary about her take on Macy's most 30 00:01:26,520 --> 00:01:27,160 Speaker 4: recent quarter. 31 00:01:27,440 --> 00:01:30,240 Speaker 7: The focus really wasn't on how they did in the 32 00:01:30,280 --> 00:01:34,160 Speaker 7: fourth quarter. It's really their new plan that was the 33 00:01:34,200 --> 00:01:37,720 Speaker 7: big focus. The new plan and their guidance for the year. 34 00:01:38,120 --> 00:01:41,399 Speaker 7: So their guidance came in softer than consensus, and I 35 00:01:41,400 --> 00:01:44,480 Speaker 7: guess it's just no surprise just thinking about how department 36 00:01:44,560 --> 00:01:47,319 Speaker 7: stores are under pressure, and we've seen it across the 37 00:01:47,319 --> 00:01:51,040 Speaker 7: board with you know, again, Dillard's showed some weakness. We're 38 00:01:51,040 --> 00:01:54,520 Speaker 7: seeing it with Macy's in their outlook. But Macy's has 39 00:01:54,520 --> 00:01:59,840 Speaker 7: a plan to address the department store model in shuddering 40 00:02:00,000 --> 00:02:02,880 Speaker 7: one hundred and fifty underperforming stores, and then they're going 41 00:02:02,960 --> 00:02:05,400 Speaker 7: to invest in the three hundred and fifty remaining and 42 00:02:05,400 --> 00:02:07,160 Speaker 7: those are going to be primarily an A and A 43 00:02:07,320 --> 00:02:11,360 Speaker 7: plus plus plus malls and what they're going to do 44 00:02:11,480 --> 00:02:15,320 Speaker 7: is increase the service levels. Beauty has been something they've 45 00:02:15,320 --> 00:02:18,840 Speaker 7: been investing in almost every year and expanding the floor 46 00:02:18,880 --> 00:02:22,160 Speaker 7: space dedicated to beauty. You'll see that they have expanded 47 00:02:22,160 --> 00:02:24,160 Speaker 7: the space and who knows, they could expand it again 48 00:02:24,200 --> 00:02:26,360 Speaker 7: this year. We've been seeing it for the last five 49 00:02:26,440 --> 00:02:29,920 Speaker 7: years that that space has been expanded. So there's a 50 00:02:29,960 --> 00:02:33,280 Speaker 7: lot of details in what Macy's is doing. It's something 51 00:02:33,320 --> 00:02:35,800 Speaker 7: they need to do. They really need to up their game, 52 00:02:35,880 --> 00:02:39,840 Speaker 7: and that's exactly how they started their presentation, and that 53 00:02:40,160 --> 00:02:43,840 Speaker 7: includes really making the assortments a lot better than they 54 00:02:43,880 --> 00:02:46,840 Speaker 7: are because if you look at the inline store performance 55 00:02:46,880 --> 00:02:50,440 Speaker 7: at malls, the ones that are executing, such as the Abercrombies, 56 00:02:50,480 --> 00:02:52,840 Speaker 7: the Urban Outfitters, they're outperforming. 57 00:02:53,720 --> 00:02:55,880 Speaker 3: So Mary I was kind of surprised to see this 58 00:02:56,120 --> 00:02:58,320 Speaker 3: number of stores one p fifty because I kind of 59 00:02:58,360 --> 00:03:03,360 Speaker 3: thought that this decade plus long shrinkage of department store 60 00:03:03,360 --> 00:03:06,480 Speaker 3: footprints across the country by a lot of different companies, 61 00:03:06,919 --> 00:03:09,040 Speaker 3: that was more or less kind of we're done that, 62 00:03:09,280 --> 00:03:11,280 Speaker 3: or we're at near the finish line. So to see 63 00:03:11,320 --> 00:03:14,519 Speaker 3: another big round of closings that kind of surprised me. 64 00:03:14,560 --> 00:03:16,000 Speaker 3: Did it surprise the market at all, or is this 65 00:03:16,040 --> 00:03:18,200 Speaker 3: something that analyst and investors have been asking for. 66 00:03:18,480 --> 00:03:21,840 Speaker 7: What Macie's had said is, we don't need to close 67 00:03:21,880 --> 00:03:25,079 Speaker 7: stores except for the usual stores that you close every year, 68 00:03:25,120 --> 00:03:28,280 Speaker 7: which is maybe less than ten per year. But the 69 00:03:28,360 --> 00:03:32,160 Speaker 7: reason that they've decided to close them is because these 70 00:03:32,160 --> 00:03:34,880 Speaker 7: stores were underperforming, but they were still profitable on a 71 00:03:34,920 --> 00:03:37,760 Speaker 7: four wall basis, so historically that their thought was, well, 72 00:03:37,800 --> 00:03:41,160 Speaker 7: if it's still profitable and we're still generating cash, we'll 73 00:03:41,240 --> 00:03:41,880 Speaker 7: keep it open. 74 00:03:42,280 --> 00:03:43,880 Speaker 2: And this time what they. 75 00:03:43,760 --> 00:03:48,440 Speaker 7: Did is they took a more holistic approach and said, Okay, 76 00:03:48,480 --> 00:03:51,200 Speaker 7: even though it's four wall profitable, we could do a 77 00:03:51,240 --> 00:03:54,160 Speaker 7: lot better with the funds that we could generate closing 78 00:03:54,200 --> 00:03:57,080 Speaker 7: these stores, selling the real estate and redeploying it back 79 00:03:57,120 --> 00:03:59,680 Speaker 7: into the existing store base. And for all the initiatives 80 00:03:59,680 --> 00:04:02,120 Speaker 7: that they have going forward, it makes a lot of 81 00:04:02,160 --> 00:04:06,360 Speaker 7: sense because we really need to rethink the department store model. 82 00:04:06,400 --> 00:04:07,480 Speaker 7: It has to evolve. 83 00:04:08,040 --> 00:04:08,360 Speaker 6: Mary. 84 00:04:08,760 --> 00:04:13,040 Speaker 4: Does this do enough to get activist investors off Macy's back? 85 00:04:14,600 --> 00:04:15,840 Speaker 7: That is a good question. 86 00:04:16,200 --> 00:04:16,880 Speaker 1: I think it may. 87 00:04:17,120 --> 00:04:19,560 Speaker 7: I think board has made it very clear that they 88 00:04:19,560 --> 00:04:23,479 Speaker 7: are supporting this plan. Could they enhance the board with 89 00:04:23,760 --> 00:04:27,080 Speaker 7: additional directors. That could be a possibility, so learn more 90 00:04:27,120 --> 00:04:30,480 Speaker 7: about that in the coming months. But I think that 91 00:04:30,560 --> 00:04:33,720 Speaker 7: this plan is it's been decided that this is the 92 00:04:34,240 --> 00:04:37,279 Speaker 7: move forward. And when you think about what's happening with 93 00:04:37,360 --> 00:04:40,960 Speaker 7: the activists, it usually involves the real estate, and what 94 00:04:41,000 --> 00:04:45,240 Speaker 7: we have seen in past transactions is the real estate 95 00:04:45,560 --> 00:04:48,880 Speaker 7: is usually milked and it can be to the detriment 96 00:04:49,000 --> 00:04:50,440 Speaker 7: of the retail operations. 97 00:04:50,800 --> 00:04:53,000 Speaker 3: Talk to us about that, like a relative performance between 98 00:04:53,000 --> 00:04:56,039 Speaker 3: like a Macy's store and a comparable Bloomingdale store. Is 99 00:04:56,040 --> 00:04:58,880 Speaker 3: the Bloomingdale store maturely more profitable? 100 00:04:58,920 --> 00:05:02,920 Speaker 7: I guess yes, they don't disclose the profitability on Bloomingdale's 101 00:05:02,960 --> 00:05:07,599 Speaker 7: versus Macy's, but Bloomingdale's outperforms, as does bloom Mercury. This year, 102 00:05:07,640 --> 00:05:10,200 Speaker 7: their comp sales were down one point six percent because 103 00:05:10,200 --> 00:05:13,920 Speaker 7: the aspirational luxury consumer is spending less and we've been, 104 00:05:14,240 --> 00:05:18,680 Speaker 7: you know, hearing about the overall luxury business being impacted, 105 00:05:18,800 --> 00:05:23,880 Speaker 7: especially after we came off the post pandemic spending from 106 00:05:24,120 --> 00:05:29,719 Speaker 7: stimulus checks that really had that aspirational customer going after luxury. 107 00:05:30,000 --> 00:05:32,919 Speaker 7: So now that that's kind of falling back, we're seeing 108 00:05:32,960 --> 00:05:35,960 Speaker 7: more of a normalization. This is something Nordstrom Asco slided, 109 00:05:36,400 --> 00:05:38,960 Speaker 7: so their sales were just down one point six percent, 110 00:05:39,040 --> 00:05:42,359 Speaker 7: but they think that could probably stabilize and go higher 111 00:05:42,480 --> 00:05:44,960 Speaker 7: next year. And of course, you know what the beauty 112 00:05:45,000 --> 00:05:48,360 Speaker 7: side on luxury, you know that's posting positive comp sales. 113 00:05:48,640 --> 00:05:51,039 Speaker 4: Yeah, Mary, I was going to ask about then the inventory. 114 00:05:51,760 --> 00:05:54,960 Speaker 4: Macy's notoriously last year struggled with inventory. The last quarter 115 00:05:54,960 --> 00:05:56,880 Speaker 4: we saw they really got it together. What did we 116 00:05:56,920 --> 00:05:58,440 Speaker 4: learn this quarter about their inventory? 117 00:05:58,800 --> 00:06:01,040 Speaker 7: Yeah, so even though inventory it was up two percent 118 00:06:01,120 --> 00:06:05,679 Speaker 7: year every year, it's still down over twenty percent versus 119 00:06:05,839 --> 00:06:09,680 Speaker 7: twenty nineteen. So they've really done a great job reducing 120 00:06:09,680 --> 00:06:13,720 Speaker 7: their inventory, and that means that they're having less clearance activity. 121 00:06:14,000 --> 00:06:16,240 Speaker 7: This is something that's going to affect their first quarter 122 00:06:16,640 --> 00:06:19,719 Speaker 7: because last year they had more clearance and this year less. 123 00:06:20,120 --> 00:06:23,680 Speaker 7: So they're doing a great job overall. They've just been 124 00:06:24,200 --> 00:06:29,280 Speaker 7: improving their execution with data technology, logistics, and they're going 125 00:06:29,320 --> 00:06:32,480 Speaker 7: to be even employing some generative AI. They've already been 126 00:06:32,480 --> 00:06:36,400 Speaker 7: employing machine learning, so we'll see more. And they're going 127 00:06:36,440 --> 00:06:39,279 Speaker 7: to be streamlining operations. We didn't talk about that, but 128 00:06:39,320 --> 00:06:42,919 Speaker 7: they're going to be consolidating some of their facilities, so 129 00:06:42,960 --> 00:06:46,560 Speaker 7: they've really and they've reduced layers within the management structure, 130 00:06:47,080 --> 00:06:51,640 Speaker 7: so overall simplifying the operations. So all of these things 131 00:06:51,920 --> 00:06:55,880 Speaker 7: could restore positive growth in twenty twenty five. 132 00:06:56,000 --> 00:06:58,640 Speaker 3: Our thanks to Mary Ross Gilbert, senior equity analysts who 133 00:06:58,680 --> 00:07:00,479 Speaker 3: covers retail for Bloomberg and Eligence. 134 00:07:00,600 --> 00:07:02,080 Speaker 5: We moved now to the auto industry. 135 00:07:02,120 --> 00:07:03,520 Speaker 4: You know, we were told earlier in the week that 136 00:07:03,600 --> 00:07:06,600 Speaker 4: Apple is canceling a decade long effort to build an. 137 00:07:06,520 --> 00:07:08,920 Speaker 3: EV For more on this in the current state of 138 00:07:08,960 --> 00:07:11,320 Speaker 3: the electric vehicle industry, we were joined by David Welch, 139 00:07:11,360 --> 00:07:14,160 Speaker 3: Bloomberg Detroit Bureau chief. We first asked for his take 140 00:07:14,280 --> 00:07:15,240 Speaker 3: on this week's news. 141 00:07:15,440 --> 00:07:18,200 Speaker 8: Look, really, take the airplane up about twenty thousand feet 142 00:07:18,240 --> 00:07:21,760 Speaker 8: on Apple's decision. Their margins are what thirty or forty percent, 143 00:07:22,360 --> 00:07:25,640 Speaker 8: and gross margins for Tesla and General motors about the 144 00:07:25,680 --> 00:07:28,120 Speaker 8: same in these days at about sixteen percent, and you 145 00:07:28,120 --> 00:07:30,440 Speaker 8: have to spend billions of dollars to make this vehicle. 146 00:07:30,760 --> 00:07:33,200 Speaker 8: Why would they do that? So I think that's really 147 00:07:33,320 --> 00:07:35,800 Speaker 8: what this is about. They were looking at an electric 148 00:07:35,840 --> 00:07:37,560 Speaker 8: vehicle that was going to be about one hundred thousand dollars, 149 00:07:37,600 --> 00:07:39,400 Speaker 8: So this was going to be a luxury Apple EV 150 00:07:40,080 --> 00:07:43,680 Speaker 8: and we're you know, we see Rivian, we see Lucid. Yeah, 151 00:07:43,760 --> 00:07:44,840 Speaker 8: you know that's rare. 152 00:07:44,960 --> 00:07:45,320 Speaker 1: Frid Air. 153 00:07:45,600 --> 00:07:47,680 Speaker 8: That's a tough sell. There's just they're just don't that 154 00:07:47,760 --> 00:07:50,120 Speaker 8: many people who can afford one hundred thousand dollars vehicle. 155 00:07:50,800 --> 00:07:53,280 Speaker 8: And then one other thing I'd like to bring up 156 00:07:53,280 --> 00:07:55,600 Speaker 8: with Apple is they talked about Apple TV for a 157 00:07:55,640 --> 00:07:58,000 Speaker 8: long time and everyone thought we were going to have 158 00:07:58,080 --> 00:08:01,480 Speaker 8: this Apple TV hanging on the wall. But eaking television just 159 00:08:01,480 --> 00:08:04,920 Speaker 8: allows you high capital the bow marching business kind of 160 00:08:05,000 --> 00:08:07,960 Speaker 8: like automobiles. And then they gave us a box with content. 161 00:08:08,120 --> 00:08:12,200 Speaker 8: So you know, Apple supplies car plator automakers. You know, 162 00:08:12,320 --> 00:08:14,840 Speaker 8: they may still have an auto play with some kind 163 00:08:14,880 --> 00:08:18,280 Speaker 8: of content sort of thing in their vehicles. But I 164 00:08:18,360 --> 00:08:20,880 Speaker 8: think they looked at the capital side of this and said, 165 00:08:20,920 --> 00:08:22,760 Speaker 8: you know, that's not what they do. They create cool 166 00:08:22,800 --> 00:08:26,360 Speaker 8: stuff and contract someone else to make it. The business 167 00:08:26,440 --> 00:08:27,480 Speaker 8: just never made a lot of sense. 168 00:08:27,960 --> 00:08:30,880 Speaker 3: Hey, David, what's the feeling in Detroit these days as 169 00:08:30,960 --> 00:08:33,480 Speaker 3: to kind of how this EV thing is going to 170 00:08:33,600 --> 00:08:36,280 Speaker 3: evolve going forward? I mean, it seems to have hit 171 00:08:36,360 --> 00:08:39,040 Speaker 3: kind of a lull here in terms of the enthusiasm, 172 00:08:39,120 --> 00:08:40,400 Speaker 3: and I guess a lot of folks are trying to 173 00:08:40,400 --> 00:08:42,640 Speaker 3: get a sense of Is it because the costs is 174 00:08:42,720 --> 00:08:46,800 Speaker 3: just too high? Is it because people just don't like evs? 175 00:08:47,000 --> 00:08:49,280 Speaker 3: Is it because there's not enough choice, there's not enough 176 00:08:49,360 --> 00:08:52,360 Speaker 3: charging stations. What's the feeling in Detroit is how this 177 00:08:52,400 --> 00:08:53,240 Speaker 3: thing will evolve? 178 00:08:54,240 --> 00:08:58,480 Speaker 8: It's all of that, but I would say especially choice 179 00:08:58,920 --> 00:09:02,000 Speaker 8: and price. I mean, look, there's one EV on the 180 00:09:02,120 --> 00:09:04,520 Speaker 8: US market that sells for less than forty thousand dollars. 181 00:09:04,520 --> 00:09:07,640 Speaker 8: Now it's a Nissan a Lead. It's a compact hatchback, 182 00:09:07,720 --> 00:09:10,959 Speaker 8: which Americans hate, that gets about two hundred miles of range, 183 00:09:11,400 --> 00:09:13,679 Speaker 8: and so everything else is much more expensive than that, 184 00:09:14,120 --> 00:09:17,880 Speaker 8: and for most Americans that doesn't cut it, particularly when 185 00:09:17,880 --> 00:09:20,000 Speaker 8: the charging network is bad. It's all these things are 186 00:09:20,040 --> 00:09:23,600 Speaker 8: sort of related. But I think the carmakers are now 187 00:09:23,960 --> 00:09:28,360 Speaker 8: really cautiously watching this and in the vehicle to watch 188 00:09:29,120 --> 00:09:32,000 Speaker 8: in the next year is General Motors is going to 189 00:09:32,040 --> 00:09:34,960 Speaker 8: sell an electric Chevy Equinox. So the Equinox is a 190 00:09:35,000 --> 00:09:38,000 Speaker 8: small crossover reshuerv. It's that's kind of the new family 191 00:09:38,040 --> 00:09:40,880 Speaker 8: car because no one buys Sedanze and they're going to 192 00:09:40,880 --> 00:09:43,400 Speaker 8: sell that EV for thirty five thousand dollars and it'll 193 00:09:43,400 --> 00:09:45,480 Speaker 8: go three hundred and twenty miles on a charge, which 194 00:09:45,520 --> 00:09:49,040 Speaker 8: is pretty good. And that will kind of tell us 195 00:09:49,160 --> 00:09:51,600 Speaker 8: if the mass market is ready to go electric, because 196 00:09:51,679 --> 00:09:53,160 Speaker 8: right now, a lot of the people who buy evs, 197 00:09:53,240 --> 00:09:55,360 Speaker 8: they're not just early adopters and rich people. They are 198 00:09:55,400 --> 00:09:57,240 Speaker 8: early adopters and rich people with three or four other 199 00:09:57,280 --> 00:09:59,200 Speaker 8: cars in the garage. So if they need to drive 200 00:09:59,400 --> 00:10:02,160 Speaker 8: on a long run trip, they pull the land rover around, 201 00:10:02,360 --> 00:10:06,040 Speaker 8: gass it up, and go. And so can the industry 202 00:10:06,120 --> 00:10:10,360 Speaker 8: sell evs to people who have one car in their gage? 203 00:10:09,920 --> 00:10:12,040 Speaker 8: And we'll see. So that's going to tell us a 204 00:10:12,040 --> 00:10:14,520 Speaker 8: lot about what's going to happen with this market and 205 00:10:14,840 --> 00:10:17,320 Speaker 8: how flat the middle of this S curve is in 206 00:10:17,440 --> 00:10:18,840 Speaker 8: order to get to the next. 207 00:10:18,600 --> 00:10:21,920 Speaker 4: Way, David, I'm also wondering just the mood, I mean, 208 00:10:21,960 --> 00:10:23,280 Speaker 4: to Paul's point, the mood in. 209 00:10:23,320 --> 00:10:27,560 Speaker 5: Detroit, Like, how do the workers feel about all of this? Right? 210 00:10:27,600 --> 00:10:29,560 Speaker 4: I mean, we know the shift to evs eventually, when 211 00:10:29,559 --> 00:10:31,920 Speaker 4: you're just making EV's, you need less workers, et cetera. 212 00:10:32,880 --> 00:10:34,320 Speaker 5: And I'm just wondering, kind. 213 00:10:34,200 --> 00:10:36,960 Speaker 4: Of, yeah, like how do they feel right now? 214 00:10:38,080 --> 00:10:41,559 Speaker 8: So I'm not totally convinced by the way that it's 215 00:10:41,600 --> 00:10:43,640 Speaker 8: going to need fewer workers. I think over a long 216 00:10:43,679 --> 00:10:46,400 Speaker 8: period of time maybe, but that's a different issue that 217 00:10:46,480 --> 00:10:49,720 Speaker 8: the union worker does think that, and they also think 218 00:10:49,720 --> 00:10:52,480 Speaker 8: that the engine and transmission jobs will be gone and 219 00:10:52,720 --> 00:10:55,079 Speaker 8: batteries will come in from someplace else. 220 00:10:54,920 --> 00:10:56,520 Speaker 9: And they won't be the ones making them. 221 00:10:56,559 --> 00:10:58,520 Speaker 8: So there is a lot of fear, and I think 222 00:10:58,520 --> 00:11:00,600 Speaker 8: they're breathing some kind of a side of relief that 223 00:11:00,679 --> 00:11:02,959 Speaker 8: maybe a lot of these workers are a bit older, 224 00:11:02,960 --> 00:11:06,000 Speaker 8: they'll be retired before this is a real issue. And 225 00:11:06,600 --> 00:11:09,160 Speaker 8: so I think if you're the union, you're looking at 226 00:11:09,160 --> 00:11:12,680 Speaker 8: this transition as being longer and slower than everybody thought 227 00:11:12,840 --> 00:11:16,600 Speaker 8: probably two years ago, and so to be more manageable, 228 00:11:17,000 --> 00:11:18,960 Speaker 8: you know that the you know, the attrition can be 229 00:11:19,040 --> 00:11:22,120 Speaker 8: just done by retirements and people want to lose their 230 00:11:22,200 --> 00:11:23,640 Speaker 8: jobs and be left with nothing. 231 00:11:24,679 --> 00:11:27,400 Speaker 3: It'll just But it is the commitment from the car 232 00:11:27,440 --> 00:11:31,040 Speaker 3: companies still there, David, because I could make an argument 233 00:11:31,679 --> 00:11:33,959 Speaker 3: I think half of this country will never go electric 234 00:11:34,040 --> 00:11:36,920 Speaker 3: for reasons other than economics, other than powertrain. 235 00:11:37,800 --> 00:11:40,040 Speaker 5: Was it like, look or what politics? 236 00:11:40,520 --> 00:11:41,400 Speaker 3: I'm not going green? 237 00:11:42,280 --> 00:11:45,240 Speaker 8: That's interesting. I've sort of thought for a long time 238 00:11:45,320 --> 00:11:49,040 Speaker 8: that Elon Musk has gone conservative for two reasons. One, 239 00:11:49,120 --> 00:11:51,520 Speaker 8: he's been fighting with the government, so he hates regulators. 240 00:11:51,840 --> 00:11:55,000 Speaker 8: Democrats get pinned with regulation, so he went conservative. I 241 00:11:55,000 --> 00:11:57,480 Speaker 8: think the other is that guy's a brilliant marketer. It's 242 00:11:57,520 --> 00:12:00,800 Speaker 8: the most underrated thing about Elon Musk. He knows that 243 00:12:00,960 --> 00:12:04,240 Speaker 8: EV's have been politicized, he knows conservatives don't like them, 244 00:12:04,840 --> 00:12:07,600 Speaker 8: and so I think he went conservative because maybe they'll 245 00:12:07,600 --> 00:12:09,880 Speaker 8: buy evs from their guy. Right, He's the guy on 246 00:12:09,920 --> 00:12:12,280 Speaker 8: Twitter letting them say whatever they want. And I've always 247 00:12:12,640 --> 00:12:15,080 Speaker 8: sort of thought, with no evidence, that maybe that's what 248 00:12:15,120 --> 00:12:17,440 Speaker 8: he's doing. But eventually everyone's going to go EV because 249 00:12:17,440 --> 00:12:20,079 Speaker 8: that'll just be the powertrain available. Question is how long 250 00:12:20,120 --> 00:12:21,440 Speaker 8: does it take to get there? 251 00:12:21,840 --> 00:12:24,240 Speaker 3: Our thanks to David Welch, Bloomberg Detroit Bureau Chief. 252 00:12:24,480 --> 00:12:26,040 Speaker 4: All right, coming up, we're going to break down why 253 00:12:26,040 --> 00:12:28,520 Speaker 4: a Capital One discovered deal will likely fase a rigorous 254 00:12:28,559 --> 00:12:30,360 Speaker 4: antitrust review by the DOJ. 255 00:12:30,760 --> 00:12:33,560 Speaker 3: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in 256 00:12:33,600 --> 00:12:35,880 Speaker 3: depth research and data on two thousand companies and one 257 00:12:35,920 --> 00:12:36,920 Speaker 3: hundred and thirty industries. 258 00:12:37,000 --> 00:12:39,920 Speaker 4: I'll Paul Sweeney and Am alex deal, and this is Bloomberg. 259 00:12:51,280 --> 00:12:55,160 Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live 260 00:12:55,240 --> 00:12:58,320 Speaker 2: weekdays at ten am Eastern on Effo card playing Enroud 261 00:12:58,360 --> 00:13:01,440 Speaker 2: Otto with the Bloomberg Business App. Listen on demand wherever 262 00:13:01,520 --> 00:13:04,640 Speaker 2: you get your podcasts, or watch us live on YouTube. 263 00:13:06,240 --> 00:13:08,160 Speaker 5: Next, we take a look at the anti trust base. 264 00:13:08,200 --> 00:13:10,720 Speaker 4: So it's likely the Capital Ones bid for Discover will 265 00:13:10,760 --> 00:13:13,600 Speaker 4: face a rigorous anti trust review by the DOJ. And 266 00:13:13,679 --> 00:13:16,040 Speaker 4: this comes as the proposed thirty five point three billion 267 00:13:16,080 --> 00:13:18,959 Speaker 4: dollar mega merger would create the largest credit card lender 268 00:13:19,040 --> 00:13:19,800 Speaker 4: in the US. 269 00:13:20,160 --> 00:13:22,640 Speaker 3: To discuss this and other deals that are facing scrutiny, 270 00:13:22,760 --> 00:13:26,360 Speaker 3: we were joined by Jennifer Ree, Bloomberg Intelligence Senior litigation analyst. 271 00:13:26,720 --> 00:13:29,720 Speaker 3: We first asked Jennifer for her Capital One Discover prediction. 272 00:13:30,080 --> 00:13:32,240 Speaker 1: This one is such a tough one, you know. I 273 00:13:32,280 --> 00:13:34,560 Speaker 1: think that the Department of Justice is kind of in 274 00:13:34,600 --> 00:13:36,920 Speaker 1: a conundrum with this one, right because they're under a 275 00:13:36,960 --> 00:13:39,920 Speaker 1: directive to get tougher on deals, and in particular get 276 00:13:39,920 --> 00:13:42,320 Speaker 1: tougher on bank deals. I mean, this is come from 277 00:13:42,320 --> 00:13:45,400 Speaker 1: back in twenty twenty one when President Biden issued an 278 00:13:45,400 --> 00:13:47,960 Speaker 1: executive order saying, look, you know, we can't just rubber 279 00:13:47,960 --> 00:13:50,360 Speaker 1: stamp these bank deals. We've got these huge banks. We've 280 00:13:50,360 --> 00:13:53,360 Speaker 1: had problems with banking, and we need to get more aggressive. 281 00:13:53,600 --> 00:13:55,680 Speaker 1: And the Department of Justice is on board with that, 282 00:13:55,760 --> 00:13:57,800 Speaker 1: you know, we've heard their statement saying that they're on 283 00:13:57,840 --> 00:14:01,080 Speaker 1: board with that. But we also have a market that 284 00:14:01,160 --> 00:14:04,400 Speaker 1: simply hasn't been competitive for many, many, many years, and 285 00:14:04,400 --> 00:14:05,880 Speaker 1: that's in credit card processing. 286 00:14:06,120 --> 00:14:06,280 Speaker 6: Right. 287 00:14:06,320 --> 00:14:09,200 Speaker 1: We really have just two biggies, Visa and MasterCard, and 288 00:14:09,360 --> 00:14:13,840 Speaker 1: this deal provides an opportunity to really bolster competition in 289 00:14:13,880 --> 00:14:17,000 Speaker 1: an area that's been problematic ever since. I can remember 290 00:14:17,240 --> 00:14:20,040 Speaker 1: when I started anti trust, the very first lawsuit I 291 00:14:20,040 --> 00:14:23,040 Speaker 1: worked on was the Department of Justice versus Visa and MasterCard, 292 00:14:23,320 --> 00:14:26,160 Speaker 1: alleging that they were engaging in conduct that was blocking 293 00:14:26,160 --> 00:14:30,320 Speaker 1: out Discover and American Express. And ever since then, we've 294 00:14:30,360 --> 00:14:34,560 Speaker 1: had allegations of or private litigation public litigation against those 295 00:14:34,560 --> 00:14:37,600 Speaker 1: two companies for anti trust violations, and we've had regulation. 296 00:14:38,160 --> 00:14:41,560 Speaker 1: So this deal does have these strong pro competitive benefits, 297 00:14:41,560 --> 00:14:45,080 Speaker 1: but you've also seen massive political reaction against it. So 298 00:14:45,360 --> 00:14:49,200 Speaker 1: you really have two very strong opposing sides, and I 299 00:14:49,200 --> 00:14:51,800 Speaker 1: think it's just going to come down to the investigation 300 00:14:51,960 --> 00:14:54,600 Speaker 1: and how the Department of Justice views the credit card 301 00:14:54,600 --> 00:14:57,560 Speaker 1: issuing market and the overlaps in the credit card issuing 302 00:14:57,560 --> 00:15:01,560 Speaker 1: market between these two companies, and how out any potential 303 00:15:01,600 --> 00:15:05,040 Speaker 1: for harm it might find against this this pro competitive aspect. 304 00:15:05,280 --> 00:15:08,120 Speaker 3: So, but it seems like a reasonable argument that putting 305 00:15:08,120 --> 00:15:11,680 Speaker 3: Capital One and Discovered together does in fact create a 306 00:15:11,800 --> 00:15:15,560 Speaker 3: viable competitor to Visa master Card. Otherwise there will never 307 00:15:15,600 --> 00:15:17,120 Speaker 3: be a viable competitor. 308 00:15:17,160 --> 00:15:20,000 Speaker 1: Actly Yeah, No, that's exactly right. And that's why this 309 00:15:20,040 --> 00:15:22,880 Speaker 1: is an unusual deal, because you know, all companies with 310 00:15:22,920 --> 00:15:24,520 Speaker 1: deals come in and say, oh, there are all sorts 311 00:15:24,520 --> 00:15:27,000 Speaker 1: of pro competitive benefits that are going to benefit consumers 312 00:15:27,000 --> 00:15:30,600 Speaker 1: and innovation, et cetera. And usually sometimes they're kind of 313 00:15:31,000 --> 00:15:34,880 Speaker 1: lawyer created. Sometimes they're really you know, it's unclear whether 314 00:15:34,920 --> 00:15:37,040 Speaker 1: they're going to come to fruition. And most of the 315 00:15:37,040 --> 00:15:39,520 Speaker 1: time the Department of Justice or Federal Trade Commission are 316 00:15:39,520 --> 00:15:42,200 Speaker 1: going to be very skeptical about those claims. They say 317 00:15:42,240 --> 00:15:44,880 Speaker 1: they don't really ever bear fruit. But in this case, 318 00:15:45,080 --> 00:15:47,920 Speaker 1: it's a much stronger claim, and it is kind of 319 00:15:48,000 --> 00:15:51,160 Speaker 1: obvious to see how there really truly could be a 320 00:15:51,320 --> 00:15:54,520 Speaker 1: very significant pro competitive benefit here, and so it could 321 00:15:54,560 --> 00:15:57,240 Speaker 1: be one of these unique deals where that aspect is 322 00:15:57,320 --> 00:16:00,359 Speaker 1: given more weight than usual by the Department of Justice 323 00:16:00,760 --> 00:16:04,520 Speaker 1: and possibly be considered important enough to allow the deal 324 00:16:04,600 --> 00:16:06,880 Speaker 1: to go through even if there might be some other issues. 325 00:16:07,280 --> 00:16:09,240 Speaker 4: Jen couldn't I have made the same argument with say 326 00:16:09,280 --> 00:16:12,040 Speaker 4: Spirit and Jet Blue, and that definitely didn't work out. 327 00:16:12,440 --> 00:16:14,200 Speaker 1: You know, it's so interesting you bring that up, because 328 00:16:14,240 --> 00:16:16,840 Speaker 1: I see so many parallels between that case and this case, 329 00:16:16,880 --> 00:16:20,000 Speaker 1: even though completely different industries. Because there was a very 330 00:16:20,000 --> 00:16:23,520 Speaker 1: strong argument that those two combined could have bolstered competition 331 00:16:23,560 --> 00:16:27,280 Speaker 1: against the legacy airlines Delta, United, etc. But the problem 332 00:16:27,320 --> 00:16:29,600 Speaker 1: there was that there was a small set of consumers 333 00:16:29,600 --> 00:16:32,880 Speaker 1: that really depended on the unbundled low fares that were 334 00:16:32,920 --> 00:16:34,920 Speaker 1: offered by Spirit and we're going to lose out where 335 00:16:35,000 --> 00:16:37,800 Speaker 1: jet Blue took over those routes and retrofitted the planes 336 00:16:37,840 --> 00:16:41,320 Speaker 1: and created more space but raised fares and a weird way, 337 00:16:41,360 --> 00:16:43,720 Speaker 1: you kind of have the same dynamic here. You can 338 00:16:43,760 --> 00:16:47,000 Speaker 1: create a lot more competition as against the incumbents, the 339 00:16:47,040 --> 00:16:50,720 Speaker 1: big legacies Visa and MasterCard, but you might have some 340 00:16:50,760 --> 00:16:54,840 Speaker 1: sort of a negative effect on underserved consumers. Because Capital 341 00:16:54,880 --> 00:16:57,640 Speaker 1: wanted to discover when they issue credit they tend to 342 00:16:57,680 --> 00:17:00,800 Speaker 1: focus more on underserved populations then do some of the 343 00:17:00,840 --> 00:17:03,760 Speaker 1: other big issuers of credit, so people who are new 344 00:17:03,760 --> 00:17:08,200 Speaker 1: to credit, people who carry a revolving balance, subprime borrowers. 345 00:17:08,440 --> 00:17:10,760 Speaker 1: And it may be that there's a view that this 346 00:17:10,880 --> 00:17:14,080 Speaker 1: impacts a smaller group of subprime borrowers, and in Jet 347 00:17:14,080 --> 00:17:16,040 Speaker 1: Blue and Spirit at the end of the day, that 348 00:17:16,080 --> 00:17:19,000 Speaker 1: one out the DOJ one because of that harmful impact 349 00:17:19,280 --> 00:17:22,359 Speaker 1: on a small set of particular consumers. You have the 350 00:17:22,400 --> 00:17:25,159 Speaker 1: same thing here, but what you might have here is 351 00:17:25,200 --> 00:17:28,080 Speaker 1: a stronger argument on the pro competitive side than you 352 00:17:28,160 --> 00:17:28,960 Speaker 1: had in that case. 353 00:17:29,359 --> 00:17:31,800 Speaker 4: Is there an argument you made for some of these 354 00:17:32,080 --> 00:17:34,359 Speaker 4: potential deals that are getting a hard time from the 355 00:17:34,440 --> 00:17:37,800 Speaker 4: DJ or FTC to kind of bide time till the 356 00:17:37,880 --> 00:17:38,800 Speaker 4: number six of this. 357 00:17:38,840 --> 00:17:41,640 Speaker 1: Year absolutely went off the. 358 00:17:41,560 --> 00:17:43,560 Speaker 5: Clock, Like is this part of a strategy? 359 00:17:43,760 --> 00:17:45,960 Speaker 1: I mean absolutely, And look at Capital one and discover 360 00:17:46,119 --> 00:17:48,280 Speaker 1: they very well are probably going to bleed into the 361 00:17:48,320 --> 00:17:53,119 Speaker 1: next administration, whether it's Democrat or Republican, there is no doubt, Alex. 362 00:17:53,200 --> 00:17:57,520 Speaker 1: I mean, historically Republican administrations have the reputation in the 363 00:17:57,560 --> 00:18:00,680 Speaker 1: merger world of being more business friendly and also being 364 00:18:00,720 --> 00:18:03,439 Speaker 1: far less skeptical of claims of efficiencies, giving them a 365 00:18:03,440 --> 00:18:05,600 Speaker 1: lot more weight, and that's going to be important. As 366 00:18:05,640 --> 00:18:08,680 Speaker 1: I mentioned, in this deal. Right now, it's a little 367 00:18:08,720 --> 00:18:11,200 Speaker 1: bit of a wildcard. It used to be ten years 368 00:18:11,200 --> 00:18:14,480 Speaker 1: ago that whoever came in to run the FTC, if 369 00:18:14,480 --> 00:18:17,520 Speaker 1: we had a Republican president, whoever got appointed as chair, 370 00:18:17,840 --> 00:18:20,280 Speaker 1: the Republican majority there, and whoever came in on the 371 00:18:20,320 --> 00:18:24,280 Speaker 1: DOJ side, we're likely to be more business friendly or 372 00:18:24,400 --> 00:18:26,840 Speaker 1: likely to look at efficiencies in a more friendly manner. 373 00:18:27,119 --> 00:18:29,680 Speaker 1: Right now, though, we have kind of two different kinds 374 00:18:29,720 --> 00:18:32,000 Speaker 1: of Republicans. You have sort of a Josh Holly type 375 00:18:32,040 --> 00:18:33,600 Speaker 1: and that you guys may have seen in the news 376 00:18:33,600 --> 00:18:35,680 Speaker 1: that he's already come out and complained about this deal, 377 00:18:36,000 --> 00:18:38,439 Speaker 1: said the Department of Justice should block it. And then 378 00:18:38,480 --> 00:18:40,760 Speaker 1: you kind of have the Joe Simon's type, who was 379 00:18:41,080 --> 00:18:43,880 Speaker 1: the chair of the FTC in the previous Trump administration, 380 00:18:44,160 --> 00:18:46,320 Speaker 1: a little bit more traditional in the way we think 381 00:18:46,359 --> 00:18:49,120 Speaker 1: of Republicans in the antitrust world. And so I think 382 00:18:49,160 --> 00:18:51,280 Speaker 1: to some extent it might depend on who you get 383 00:18:51,280 --> 00:18:54,199 Speaker 1: at the DOJ, but I would still say that it 384 00:18:54,280 --> 00:18:57,920 Speaker 1: ticks higher. The chances of getting cleared probably tick higher 385 00:18:57,960 --> 00:19:00,360 Speaker 1: if we have a change of administrations next year. 386 00:19:00,520 --> 00:19:03,600 Speaker 3: Our thanks to Jennifer Ree, Bloomberg Intelligence senior litigation analysts. 387 00:19:03,600 --> 00:19:05,520 Speaker 4: All right, let's go to big tech, Paul, because Amazon 388 00:19:05,560 --> 00:19:09,320 Speaker 4: dot Com finally joined the famous Dow Jones Industrial Average. 389 00:19:09,320 --> 00:19:12,440 Speaker 4: So this week the e commerce giant replaced Walgreens Boots 390 00:19:12,440 --> 00:19:14,240 Speaker 4: Alliance in the thirty stockage. 391 00:19:14,400 --> 00:19:17,080 Speaker 3: Yes, Amazon's inclusion in the Dow is another milestone and 392 00:19:17,080 --> 00:19:20,000 Speaker 3: the retailer's rapid expansion. The company already sells goods of 393 00:19:20,040 --> 00:19:22,840 Speaker 3: all kinds and runs the world's largest cloud computing business. 394 00:19:23,080 --> 00:19:26,399 Speaker 3: But Amazon is still working on ongoing initiatives to boost 395 00:19:26,400 --> 00:19:27,640 Speaker 3: market share and profits. 396 00:19:27,680 --> 00:19:30,000 Speaker 4: So discuss all things Amazon and the ladies in the 397 00:19:30,000 --> 00:19:32,600 Speaker 4: retail space were joined now by Punham Goyle, senior US 398 00:19:32,680 --> 00:19:36,000 Speaker 4: e Commerce and retail analysts at Bloomberg Intelligence. We first 399 00:19:36,040 --> 00:19:38,720 Speaker 4: asked her why people are getting so excited about Amazon. 400 00:19:39,040 --> 00:19:41,399 Speaker 6: I think it's all about profits. For a long time, 401 00:19:41,520 --> 00:19:44,639 Speaker 6: Amazon was all about marketshare, and today the story is 402 00:19:44,720 --> 00:19:47,960 Speaker 6: really a profit story. It's the profitability that's about to 403 00:19:48,080 --> 00:19:51,440 Speaker 6: unfold at Amazon that's really getting people excited and interested. 404 00:19:51,880 --> 00:19:53,879 Speaker 6: We wrote about this a few months ago, where you know, 405 00:19:54,280 --> 00:19:57,399 Speaker 6: if you look at their most lucrative businesses and everyone 406 00:19:57,480 --> 00:20:00,760 Speaker 6: knows of the cloud, which generates thirty percent bit margins, 407 00:20:01,000 --> 00:20:03,560 Speaker 6: which we think can go to forty percent. That could 408 00:20:03,600 --> 00:20:06,000 Speaker 6: be a two hundred billion dollar business. So you're looking 409 00:20:06,040 --> 00:20:08,960 Speaker 6: at sixty to eighty billion dollars in profits in the 410 00:20:08,960 --> 00:20:12,600 Speaker 6: coming years. But then if you add advertising to then, Paul, 411 00:20:12,640 --> 00:20:15,800 Speaker 6: you know the space, well, they have fifty percent ebit 412 00:20:15,880 --> 00:20:18,879 Speaker 6: margins and we can see advertising growing to one hundred 413 00:20:18,880 --> 00:20:21,560 Speaker 6: billion dollars in just a few years. So you're talking 414 00:20:21,640 --> 00:20:25,320 Speaker 6: about fifty billion in advertising, plus if you add another 415 00:20:25,440 --> 00:20:30,480 Speaker 6: sixty seventy of cloud, you're talking a big profit number here, 416 00:20:30,840 --> 00:20:34,359 Speaker 6: and I think that's what's getting people excited. Aside from that, 417 00:20:34,440 --> 00:20:37,600 Speaker 6: retail is growing, and part of the reason that advertising 418 00:20:37,680 --> 00:20:40,600 Speaker 6: is doing so well is because people go into Amazon 419 00:20:40,600 --> 00:20:42,399 Speaker 6: as if it was a search engine. Right, You go 420 00:20:42,520 --> 00:20:45,119 Speaker 6: in and you search for something. But the difference with 421 00:20:45,200 --> 00:20:47,480 Speaker 6: Amazon versus a search engine is you go with the 422 00:20:47,520 --> 00:20:50,520 Speaker 6: purchase intent. People go into Amazon looking for something and 423 00:20:50,560 --> 00:20:53,000 Speaker 6: to Colleck that buy button. They already know they want it, 424 00:20:53,040 --> 00:20:54,480 Speaker 6: They just want to find it and get it there 425 00:20:54,480 --> 00:20:55,399 Speaker 6: in two days or less. 426 00:20:55,560 --> 00:20:57,119 Speaker 4: That is such a good point, and this is a 427 00:20:57,160 --> 00:21:00,399 Speaker 4: great example of this story of Amazon replacing one So 428 00:21:00,400 --> 00:21:02,399 Speaker 4: I was talking to an anchor who's been struggling with 429 00:21:02,440 --> 00:21:04,600 Speaker 4: feeling sick and feels like that winter, like you're just 430 00:21:04,640 --> 00:21:07,040 Speaker 4: sick all the time. And I was telling about Airborne, 431 00:21:07,280 --> 00:21:09,480 Speaker 4: which you take if you feel a coming on of 432 00:21:09,480 --> 00:21:09,760 Speaker 4: a cold. 433 00:21:09,840 --> 00:21:10,760 Speaker 5: She's like, oh, where do I buy it? 434 00:21:10,800 --> 00:21:13,280 Speaker 4: Amazon? And I'm like, no, go to your local drug store. 435 00:21:13,280 --> 00:21:15,919 Speaker 4: It's two blocks away. But that idea, right, like walking 436 00:21:15,920 --> 00:21:17,600 Speaker 4: those two blocks isn't going to happen. And I have 437 00:21:17,640 --> 00:21:19,880 Speaker 4: to go to Amazon to buy the thing because it'll 438 00:21:19,880 --> 00:21:20,400 Speaker 4: come in two days. 439 00:21:20,440 --> 00:21:23,080 Speaker 5: And I'm not even worried about it. Where is the downside? 440 00:21:23,080 --> 00:21:23,280 Speaker 2: Though? 441 00:21:23,320 --> 00:21:23,639 Speaker 5: Who know? 442 00:21:23,840 --> 00:21:26,280 Speaker 4: I mean, you laid out a pretty convincing case, So 443 00:21:26,359 --> 00:21:28,800 Speaker 4: how do I I don't know what do I worry about? 444 00:21:28,920 --> 00:21:31,320 Speaker 6: So I think you know the downside? If we enter 445 00:21:31,640 --> 00:21:35,080 Speaker 6: a consumer recession, clearly Amazon will be impacted, right, so 446 00:21:35,160 --> 00:21:37,840 Speaker 6: we'll the rest of retail. But I think that's near term, 447 00:21:37,920 --> 00:21:40,800 Speaker 6: and as we've seen in past cycles, what goes down 448 00:21:40,880 --> 00:21:43,400 Speaker 6: comes up eventually. Amazon is one of those places where 449 00:21:43,400 --> 00:21:45,640 Speaker 6: we think if you view it for the longer term, 450 00:21:45,640 --> 00:21:48,760 Speaker 6: there's just a lot of opportunity across all its businesses. 451 00:21:49,280 --> 00:21:52,840 Speaker 6: We can't control the macro, but with the logistics platform 452 00:21:52,960 --> 00:21:56,199 Speaker 6: in place, and even this example that you gave. You know, 453 00:21:56,520 --> 00:21:59,199 Speaker 6: you need cold medicine, or you need anything, and you 454 00:21:59,320 --> 00:22:01,720 Speaker 6: have to go to CBS or somewhere else because you 455 00:22:01,760 --> 00:22:04,440 Speaker 6: need it. Now you can't wait six hours, twelve hours, 456 00:22:04,440 --> 00:22:06,840 Speaker 6: twenty four hours for it. But I'll tell you that 457 00:22:06,880 --> 00:22:10,680 Speaker 6: Amazon's delivery has gotten much faster. I mean I'm seeing 458 00:22:10,680 --> 00:22:13,439 Speaker 6: stuff at my door that I ordered in less than 459 00:22:13,480 --> 00:22:16,720 Speaker 6: twenty four hours, sometimes eight to twelve hours. And that's 460 00:22:16,760 --> 00:22:19,560 Speaker 6: pretty incredible. And that's really a part due to their 461 00:22:19,920 --> 00:22:23,320 Speaker 6: realignment of their distribution centers, which they're able to infuse 462 00:22:23,359 --> 00:22:25,000 Speaker 6: an even faster delivery. 463 00:22:25,240 --> 00:22:27,280 Speaker 3: See it now, I have a general idea where Punham 464 00:22:27,440 --> 00:22:30,720 Speaker 3: and our family live. It's literally amongst or very close to, 465 00:22:30,880 --> 00:22:33,919 Speaker 3: like I think all these distribution centers in Central Jersey. 466 00:22:34,040 --> 00:22:36,760 Speaker 3: It's unbelievable. I think we've got to be like the 467 00:22:36,880 --> 00:22:39,520 Speaker 3: Central we have to be like the distribution hub of 468 00:22:39,560 --> 00:22:40,440 Speaker 3: the East Coast. 469 00:22:40,440 --> 00:22:42,439 Speaker 5: It seems like I feel like a Jersey primo. 470 00:22:42,600 --> 00:22:45,280 Speaker 3: Oh yeah, wh yeah, I am. So when I see 471 00:22:45,280 --> 00:22:48,320 Speaker 3: the Gove, I tell them, you know, so put them 472 00:22:48,359 --> 00:22:50,720 Speaker 3: let's backway from Amazon talk to us about just retail 473 00:22:50,920 --> 00:22:54,040 Speaker 3: in general. Here how's the consumer doing out there? What 474 00:22:54,080 --> 00:22:55,360 Speaker 3: are you hearing from your companies? 475 00:22:55,960 --> 00:22:58,600 Speaker 6: I think the consumer is very focused on value today. 476 00:22:58,640 --> 00:23:01,160 Speaker 6: If you're seeing the retailers that are actually being able 477 00:23:01,200 --> 00:23:04,000 Speaker 6: to drive the share gains, you'll see that they offer 478 00:23:04,160 --> 00:23:06,719 Speaker 6: some sort of value in their proposition, whether it was 479 00:23:06,720 --> 00:23:09,320 Speaker 6: from Walmart, you know, that's doing well. But then we 480 00:23:09,320 --> 00:23:12,560 Speaker 6: hear from the other retailers, the more discretionary ones, and 481 00:23:12,840 --> 00:23:16,320 Speaker 6: they're struggling. Even the at leisure companies. We heard, you know, 482 00:23:16,320 --> 00:23:19,040 Speaker 6: from Puma and Adidas. We heard from some of the 483 00:23:19,080 --> 00:23:21,720 Speaker 6: other companies where they may have done well in four 484 00:23:21,800 --> 00:23:25,160 Speaker 6: Q because holiday was really strong last year, but when 485 00:23:25,200 --> 00:23:28,280 Speaker 6: they look out for their guidance, it's been conservative for 486 00:23:28,359 --> 00:23:30,640 Speaker 6: the most part from most of the retailers that I've 487 00:23:30,680 --> 00:23:32,800 Speaker 6: heard from, And I think that just goes to show 488 00:23:32,840 --> 00:23:35,560 Speaker 6: you that you have to have what the consumer wants, 489 00:23:35,560 --> 00:23:37,119 Speaker 6: and you have to have it at the price that 490 00:23:37,160 --> 00:23:40,360 Speaker 6: the consumer wants for you to actually succeed in today's environment. 491 00:23:40,920 --> 00:23:43,800 Speaker 3: You know, we talk about inflation. Punum prices buy and 492 00:23:43,880 --> 00:23:47,679 Speaker 3: large in the supermarket don't come down after they shot up. However, 493 00:23:47,680 --> 00:23:50,800 Speaker 3: many per percent here, that's just the inflation rate of 494 00:23:50,840 --> 00:23:54,479 Speaker 3: growth is slowing. How about for like Adidas, do they 495 00:23:54,480 --> 00:23:59,800 Speaker 3: ever cut the price of a shoe because inflation's declining? 496 00:24:00,160 --> 00:24:03,200 Speaker 6: That No, they had discounts, right, So if you want 497 00:24:03,200 --> 00:24:06,240 Speaker 6: to bring prices down, retailers use discounts as a medium 498 00:24:06,280 --> 00:24:09,640 Speaker 6: to do that. But once prices go up, they don't 499 00:24:09,640 --> 00:24:10,120 Speaker 6: come down. 500 00:24:10,400 --> 00:24:14,560 Speaker 3: See that's a problem with inflation. That's why inflation is insidious. 501 00:24:14,680 --> 00:24:15,320 Speaker 5: Yeah. 502 00:24:15,359 --> 00:24:18,000 Speaker 4: But so to kind of Paul's question, but really to 503 00:24:18,040 --> 00:24:20,080 Speaker 4: my question, are we going to see a lot of 504 00:24:20,080 --> 00:24:21,359 Speaker 4: discounting from retailers? 505 00:24:21,440 --> 00:24:21,520 Speaker 6: So? 506 00:24:21,640 --> 00:24:22,600 Speaker 5: I don't know if you guys know this. 507 00:24:22,720 --> 00:24:24,600 Speaker 4: Have we talked about alex as a counter indicator? 508 00:24:24,840 --> 00:24:25,000 Speaker 3: No? 509 00:24:25,400 --> 00:24:28,120 Speaker 4: I only shop on sale, Okay, so where I'm shopping, 510 00:24:28,240 --> 00:24:30,240 Speaker 4: you should be shorting the stocks. So this is a 511 00:24:30,359 --> 00:24:32,919 Speaker 4: joke that winds up happening because I'm shopping there because 512 00:24:32,920 --> 00:24:35,680 Speaker 4: their inventory is bloated and because the sales are so good. 513 00:24:36,080 --> 00:24:38,359 Speaker 4: So am I going to be going to Bluemy's in 514 00:24:38,400 --> 00:24:40,399 Speaker 4: the next couple of weeks or they finally have their 515 00:24:40,440 --> 00:24:42,080 Speaker 4: pricing power and inventory in check? 516 00:24:43,160 --> 00:24:46,040 Speaker 6: I think inventory is getting more in check as we 517 00:24:46,160 --> 00:24:48,560 Speaker 6: move into the spring. So I was in stored. The 518 00:24:48,600 --> 00:24:52,000 Speaker 6: discounts were pretty reasonable. They weren't too aggressive. There were 519 00:24:52,080 --> 00:24:54,720 Speaker 6: some clearance wracks across them all, but I can tell 520 00:24:54,720 --> 00:24:58,120 Speaker 6: you the stores were quiet. So it's it's interesting because 521 00:24:58,160 --> 00:25:01,320 Speaker 6: there's new inventory that's flown in for the spring, and 522 00:25:01,480 --> 00:25:04,399 Speaker 6: as stores put this new inventory out, they're going to 523 00:25:04,400 --> 00:25:07,000 Speaker 6: be a little careful with their discounting and we could 524 00:25:07,040 --> 00:25:09,680 Speaker 6: see more discounts come in in April on the spring 525 00:25:09,760 --> 00:25:12,640 Speaker 6: inventory before now they're being steady and careful with them. 526 00:25:12,880 --> 00:25:15,479 Speaker 3: Our thanks to put them. Goyle, Senior US e Commerce 527 00:25:15,520 --> 00:25:17,359 Speaker 3: and retail analyst at Bloomberg Intelligence. 528 00:25:17,400 --> 00:25:20,280 Speaker 4: Coming up on the program a conversation with Mark Hoplomasian 529 00:25:20,480 --> 00:25:23,119 Speaker 4: President and CEO of Hyatt Hotels in the state of 530 00:25:23,160 --> 00:25:24,080 Speaker 4: the hotel industry. 531 00:25:24,280 --> 00:25:27,159 Speaker 3: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in 532 00:25:27,200 --> 00:25:29,239 Speaker 3: depth research and data on two thousand companies and one 533 00:25:29,320 --> 00:25:32,159 Speaker 3: hundred and thirty industries. You can access Bloomberg Intelligence via 534 00:25:32,240 --> 00:25:33,320 Speaker 3: Bigo on the terminal. 535 00:25:33,440 --> 00:25:36,200 Speaker 4: I'm Paul Sweeney and I'm Alex Deeal and this is Bloomberg. 536 00:25:45,280 --> 00:25:49,200 Speaker 2: You're listening to the Bloomberg Intelligence podcast. Catch us live 537 00:25:49,240 --> 00:25:52,760 Speaker 2: weekdays at ten am Eastern on applecar Play and Android 538 00:25:52,800 --> 00:25:55,960 Speaker 2: Auto with the Bloomberg Business. You can also listen live 539 00:25:56,080 --> 00:25:59,240 Speaker 2: on Amazon Alexa from our flagship New York station, Just 540 00:25:59,320 --> 00:26:01,520 Speaker 2: Say Alexa played Bloomberg eleven. 541 00:26:03,400 --> 00:26:05,880 Speaker 4: We moved out of the hotel industry, so Highed Hotels 542 00:26:05,920 --> 00:26:08,160 Speaker 4: recently reported net income for the fourth quarter and full 543 00:26:08,240 --> 00:26:10,920 Speaker 4: year twenty twenty three that surpassed analyst expectations. 544 00:26:11,040 --> 00:26:13,360 Speaker 3: For more on this and the state of the hotel industry, 545 00:26:13,400 --> 00:26:16,400 Speaker 3: we were joined by Mark Hopplomasian President and chief executive 546 00:26:16,440 --> 00:26:18,440 Speaker 3: officer of Hia Hotels. When we first asked them about 547 00:26:18,480 --> 00:26:21,879 Speaker 3: Hyatt's most recent quarterly results and the messaging the company 548 00:26:21,920 --> 00:26:22,840 Speaker 3: is trying to get across. 549 00:26:23,119 --> 00:26:26,280 Speaker 9: The clear message was really centered around the fact that 550 00:26:26,480 --> 00:26:31,120 Speaker 9: the transformation of the company to asset lighter platform has 551 00:26:31,200 --> 00:26:33,920 Speaker 9: now shown up in the numbers in a very material way. 552 00:26:34,359 --> 00:26:36,600 Speaker 9: We had the highest pre cash flow that in the 553 00:26:36,640 --> 00:26:41,200 Speaker 9: company's history. We also had the mix of our asset 554 00:26:41,280 --> 00:26:44,000 Speaker 9: light earnings to our total earnings went up to seventy 555 00:26:44,080 --> 00:26:47,160 Speaker 9: six percent five years ago. That was in the mid forties. 556 00:26:47,240 --> 00:26:50,520 Speaker 3: Hey Mark described first, what your asset light strategy is 557 00:26:50,520 --> 00:26:52,400 Speaker 3: is I'm relying more on franchisees. 558 00:26:52,640 --> 00:26:54,679 Speaker 9: Yeah, so it's not really I wouldn't call it an 559 00:26:54,720 --> 00:26:56,600 Speaker 9: asset light strategy. I would call it an asset light 560 00:26:56,640 --> 00:26:59,199 Speaker 9: program where we were selling down we had we had 561 00:26:59,200 --> 00:27:01,479 Speaker 9: two major drivers of our earnings. One was from real 562 00:27:01,600 --> 00:27:03,919 Speaker 9: estate that we own hotels, and the other ones from 563 00:27:03,960 --> 00:27:08,080 Speaker 9: management franchising hotels across the world. We're primarily a management business, 564 00:27:08,119 --> 00:27:10,520 Speaker 9: not a franchise business, but those are the two businesses. 565 00:27:10,840 --> 00:27:14,120 Speaker 9: So as we sell down real estate, the proportion that's 566 00:27:14,119 --> 00:27:17,680 Speaker 9: coming from real estate sourced earnings has been dropping. We've 567 00:27:17,720 --> 00:27:21,520 Speaker 9: concurrently reinvested in buying new platforms and new brands over 568 00:27:21,520 --> 00:27:25,200 Speaker 9: the last five years, and that has driven up our 569 00:27:25,240 --> 00:27:28,400 Speaker 9: management and franchising fees at the same time, so the 570 00:27:28,440 --> 00:27:32,960 Speaker 9: mix has shifted to much more in the management and 571 00:27:32,960 --> 00:27:37,000 Speaker 9: franchise fee driven business, which is very low capital intensivity 572 00:27:37,480 --> 00:27:40,840 Speaker 9: and high margin and high free cash floaks inversion. So 573 00:27:40,880 --> 00:27:43,359 Speaker 9: that was probably the key message. The other thing that 574 00:27:43,359 --> 00:27:46,800 Speaker 9: we did is we simplified our financial presentation because we 575 00:27:46,840 --> 00:27:50,240 Speaker 9: have a business that's a subscription model membership business called 576 00:27:50,400 --> 00:27:53,199 Speaker 9: Unlimited Ucation Club, and we sold the majority interest in 577 00:27:53,240 --> 00:27:56,240 Speaker 9: that business to a third party, which helped us simplify 578 00:27:56,640 --> 00:27:59,600 Speaker 9: how we report our earnings, and that was very well 579 00:27:59,600 --> 00:28:01,199 Speaker 9: received by investors. 580 00:28:01,560 --> 00:28:04,160 Speaker 4: So Mark, that's you and the c suite managing all 581 00:28:04,200 --> 00:28:06,879 Speaker 4: of that. What about the demand side of the business, 582 00:28:07,160 --> 00:28:09,400 Speaker 4: What kind of pricing power do you have per room, 583 00:28:09,520 --> 00:28:11,400 Speaker 4: and what's the demand situation like. 584 00:28:11,760 --> 00:28:15,360 Speaker 9: We think about three different demand drivers. One is leisure, 585 00:28:15,560 --> 00:28:19,160 Speaker 9: which has been the leader of the recovery through post 586 00:28:19,200 --> 00:28:22,480 Speaker 9: COVID period. We think about group business, which is big 587 00:28:22,520 --> 00:28:25,720 Speaker 9: meetings and conventions and things like that, and we also 588 00:28:25,760 --> 00:28:30,119 Speaker 9: have business travel individual business travel. All three are showing 589 00:28:30,160 --> 00:28:35,399 Speaker 9: signs of great momentum and positive outlooks. So starting with leisure, 590 00:28:35,600 --> 00:28:38,400 Speaker 9: in the first quarter of this year, our pace meeting 591 00:28:38,400 --> 00:28:42,360 Speaker 9: our bookings are up eleven percent for our all inclusive 592 00:28:42,360 --> 00:28:46,240 Speaker 9: resorts in the Pervian and also up for our resorts 593 00:28:46,320 --> 00:28:50,240 Speaker 9: in the Americas. But leisure travel has been really, really 594 00:28:50,280 --> 00:28:53,240 Speaker 9: solid in China. We had a record year for Lunar 595 00:28:53,280 --> 00:28:57,120 Speaker 9: New Year. The spending amongst Chinese, both inside of China 596 00:28:57,280 --> 00:29:00,000 Speaker 9: and other destinations in Asia was at them all time high. 597 00:29:00,200 --> 00:29:03,360 Speaker 9: So that's leisure in group Our pace into this year, 598 00:29:03,640 --> 00:29:06,560 Speaker 9: that is forward bookings are up eight percent and so 599 00:29:06,640 --> 00:29:10,280 Speaker 9: we're looking at another solid year of growth in meetings. 600 00:29:10,560 --> 00:29:14,400 Speaker 9: And I think corporations are increasingly resolved to make sure 601 00:29:14,520 --> 00:29:17,480 Speaker 9: that they prioritize those meetings, and then on business transient 602 00:29:17,600 --> 00:29:22,120 Speaker 9: the US is lagging, but the overall business transient category 603 00:29:22,200 --> 00:29:25,760 Speaker 9: demand around the world is about seven percent the low 604 00:29:25,800 --> 00:29:28,160 Speaker 9: where it was pre pandemic, so we're getting closer and 605 00:29:28,160 --> 00:29:30,800 Speaker 9: closer to being a parody. Europe is fully recovered, and 606 00:29:30,800 --> 00:29:33,480 Speaker 9: then some China is fully recovered, and then some the 607 00:29:33,600 --> 00:29:36,400 Speaker 9: United States is still lagging, and we're seeing positive signs 608 00:29:36,480 --> 00:29:39,720 Speaker 9: of business transient travel increasing. So I would say across 609 00:29:39,760 --> 00:29:43,320 Speaker 9: all three major categories, we're seeing positive trends into twenty. 610 00:29:43,160 --> 00:29:44,960 Speaker 3: Four Mark, did you talked to us about M and 611 00:29:45,000 --> 00:29:48,320 Speaker 3: A and kind of growth via acquisition? How does that 612 00:29:48,360 --> 00:29:51,640 Speaker 3: figure into your growth plans? What are you guys messaging 613 00:29:51,640 --> 00:29:54,080 Speaker 3: to the street about your willingness to engage in em Anda, 614 00:29:54,120 --> 00:29:55,800 Speaker 3: because I know you had to buy out recently of 615 00:29:55,840 --> 00:29:58,120 Speaker 3: the Apple Leisure Group. I want to see kind of 616 00:29:58,280 --> 00:29:59,360 Speaker 3: your appetite is going forward. 617 00:30:00,000 --> 00:30:03,040 Speaker 9: In the past five years, we've invested about three point 618 00:30:03,080 --> 00:30:06,920 Speaker 9: eight billion dollars in acquisitions, the biggest one being Apple 619 00:30:07,000 --> 00:30:10,120 Speaker 9: Leisure Group at two point seven billion, and it's been 620 00:30:10,200 --> 00:30:12,920 Speaker 9: tremendously beneficial to us because we've been able to expand 621 00:30:12,920 --> 00:30:15,640 Speaker 9: our customer base and highest growth and most relevant to 622 00:30:15,760 --> 00:30:19,520 Speaker 9: US categories, which is leisure, lifestyle, and luxury, and so 623 00:30:19,960 --> 00:30:22,560 Speaker 9: we've really done this in a very deliberate way to 624 00:30:22,640 --> 00:30:25,560 Speaker 9: move the company in that direction. In the fourth quarter, 625 00:30:25,720 --> 00:30:28,120 Speaker 9: I think we had fifty seven percent of our total 626 00:30:28,200 --> 00:30:31,200 Speaker 9: rooms revenue around the world was leisure focused, which is 627 00:30:31,280 --> 00:30:34,520 Speaker 9: up twenty points from the mid thirties to the mid 628 00:30:34,560 --> 00:30:37,200 Speaker 9: fifties pre pandemics on now, so the mix in the 629 00:30:37,240 --> 00:30:41,560 Speaker 9: company has tremendously shifted, but they're also been very profitable 630 00:30:41,880 --> 00:30:46,200 Speaker 9: and high value acquisitions. The fees per room that we 631 00:30:46,240 --> 00:30:48,600 Speaker 9: are earning are materially higher than they were five years 632 00:30:48,600 --> 00:30:51,320 Speaker 9: ago before we made these acquisitions and evolved the company. 633 00:30:51,760 --> 00:30:55,200 Speaker 9: Even as we have grown our select service brands, so 634 00:30:55,400 --> 00:30:59,400 Speaker 9: we are expanding in lower price points, but our overall 635 00:30:59,440 --> 00:31:02,880 Speaker 9: feed growth per room has been growing, which is really 636 00:31:03,080 --> 00:31:05,680 Speaker 9: I think part of the equation of actually driving share 637 00:31:05,680 --> 00:31:08,560 Speaker 9: holder value on an accelerated basis. I think there will 638 00:31:08,560 --> 00:31:10,960 Speaker 9: be more opportunities for MNA in the future, but probably 639 00:31:11,000 --> 00:31:11,880 Speaker 9: smaller scale. 640 00:31:12,040 --> 00:31:14,040 Speaker 4: Talk to me about how expensive it is to run 641 00:31:14,080 --> 00:31:17,560 Speaker 4: your business, like where costs coming down, where costs going up? 642 00:31:18,000 --> 00:31:20,520 Speaker 9: First of all, let's start with the biggest cost category, 643 00:31:20,560 --> 00:31:21,200 Speaker 9: which is people. 644 00:31:21,320 --> 00:31:22,920 Speaker 5: Yeah, at our hotels in. 645 00:31:22,800 --> 00:31:25,800 Speaker 9: Twenty twenty one non union markets, which is primarily in 646 00:31:25,840 --> 00:31:28,760 Speaker 9: the South, the sun Belt, the smile of the United States. 647 00:31:28,880 --> 00:31:31,960 Speaker 9: Our wage rates went up by twenty percent over the 648 00:31:32,000 --> 00:31:35,400 Speaker 9: course of that year, and that started to mitigate or 649 00:31:35,440 --> 00:31:39,160 Speaker 9: ameliorate in twenty twenty two and twenty twenty three. But 650 00:31:39,320 --> 00:31:43,200 Speaker 9: we experienced a massively ac situation in terms of supply 651 00:31:43,400 --> 00:31:43,880 Speaker 9: of labor. 652 00:31:44,320 --> 00:31:45,120 Speaker 8: That's evened out. 653 00:31:45,160 --> 00:31:46,640 Speaker 9: We were in the mid teams. 654 00:31:47,080 --> 00:31:49,240 Speaker 4: That's evened out in that because we also talked about 655 00:31:49,280 --> 00:31:53,480 Speaker 4: didn't we pall about cleaning services like not staffing housekeeping 656 00:31:53,520 --> 00:31:55,240 Speaker 4: because it just can't find the workers. So do you 657 00:31:55,280 --> 00:31:57,360 Speaker 4: feel like you're at the right spot? 658 00:31:57,520 --> 00:31:59,640 Speaker 9: I would say that there are pockets where we still 659 00:31:59,680 --> 00:32:02,760 Speaker 9: have shortages, and I think part of that has to 660 00:32:02,800 --> 00:32:05,520 Speaker 9: do with the nature of the workforce at this point. 661 00:32:05,600 --> 00:32:09,480 Speaker 9: So we've got a lot of the byproduct of not 662 00:32:09,600 --> 00:32:14,360 Speaker 9: having a really advanced immigration policy in the United States 663 00:32:14,360 --> 00:32:19,280 Speaker 9: and HTB VISA program, is that for at times, especially 664 00:32:19,320 --> 00:32:21,840 Speaker 9: over the summer, where you have peat demand, we don't 665 00:32:21,880 --> 00:32:24,400 Speaker 9: have the right type of labor that's willing to take 666 00:32:24,440 --> 00:32:28,400 Speaker 9: those jobs and be happy to start their careers in 667 00:32:28,440 --> 00:32:31,520 Speaker 9: those jobs. So I think they go together a lot 668 00:32:31,560 --> 00:32:34,360 Speaker 9: of the HTB people that come in on an HDB visa, 669 00:32:34,400 --> 00:32:37,000 Speaker 9: which is a temporary work visa. They come and they leave. 670 00:32:37,360 --> 00:32:41,120 Speaker 9: For the incidence of immigration that allows us to hire 671 00:32:41,200 --> 00:32:44,120 Speaker 9: people who are coming into the workforce in the United 672 00:32:44,120 --> 00:32:47,640 Speaker 9: States for the first time has been under some pressure now. 673 00:32:47,800 --> 00:32:50,320 Speaker 9: Having said that, overall, our vacancy rates have gone from 674 00:32:50,320 --> 00:32:53,920 Speaker 9: mid teens to mid single digits, so down ten points, 675 00:32:54,120 --> 00:32:57,000 Speaker 9: which is extraordinary, and that's over the last eighteen months. 676 00:32:57,120 --> 00:32:59,760 Speaker 9: So we are having a better time finding labor, but 677 00:32:59,760 --> 00:33:02,240 Speaker 9: they're definitely pockets of constraints, all right. 678 00:33:02,240 --> 00:33:06,080 Speaker 4: Thanks to Mark Copplomaisian president and CEO of Hyatt Hotels. 679 00:33:06,360 --> 00:33:08,960 Speaker 3: We now turn to the media and entertainment space. This week, 680 00:33:09,080 --> 00:33:12,360 Speaker 3: Paramount Global, the paramount of CBS, MTV and other networks, 681 00:33:12,440 --> 00:33:16,440 Speaker 3: reported fourth quarter sales below analyst expectations. This is largely 682 00:33:16,480 --> 00:33:19,400 Speaker 3: the result of shrinking advertising on traditional TV channels. 683 00:33:19,400 --> 00:33:21,680 Speaker 4: I heard that before. Still Paramount said it sees profit 684 00:33:21,720 --> 00:33:24,560 Speaker 4: for Paramount Plus domestically in twenty twenty five. So for more, 685 00:33:24,600 --> 00:33:28,320 Speaker 4: we're joined by guitamranghanad than Bloomberg intelligence analyst on US media, 686 00:33:28,360 --> 00:33:31,400 Speaker 4: and we ask Gita about her takeaway on Paramount's earnings results. 687 00:33:31,600 --> 00:33:35,680 Speaker 10: Streaming was definitely a key positive, and subscriber numbers those 688 00:33:35,760 --> 00:33:39,120 Speaker 10: came in slightly ahead of estimates. The bigger positive was 689 00:33:39,160 --> 00:33:42,600 Speaker 10: the RPOO trends. So remember Wall Street has now kind 690 00:33:42,640 --> 00:33:46,280 Speaker 10: of shifted its focus away from subscriber growth to revenue 691 00:33:46,320 --> 00:33:49,000 Speaker 10: growth as well as profitability, and they kind of scored 692 00:33:49,040 --> 00:33:51,600 Speaker 10: pretty well on the revenue growth metrics as well. So 693 00:33:51,720 --> 00:33:55,160 Speaker 10: arpoo increased about thirty percent through the year, and that's 694 00:33:55,160 --> 00:33:57,520 Speaker 10: on the back of a price increase, and then the 695 00:33:57,520 --> 00:33:59,600 Speaker 10: next thing, of course you look at was profitability and 696 00:33:59,640 --> 00:34:02,240 Speaker 10: their narrowed, so they're obviously taking a step in the 697 00:34:02,320 --> 00:34:04,760 Speaker 10: right direction. I think what investors are kind of really 698 00:34:04,800 --> 00:34:07,560 Speaker 10: cheering though, is that they did articulate some kind of 699 00:34:07,600 --> 00:34:11,000 Speaker 10: strategy to kind of get to profitability, and they outlined 700 00:34:11,160 --> 00:34:13,440 Speaker 10: a timeframe as well, so twenty twenty five is when 701 00:34:13,440 --> 00:34:17,080 Speaker 10: they're expecting paramount plus profitability, which is definitely I think 702 00:34:17,120 --> 00:34:20,360 Speaker 10: good news. The question is, I'm not sure whether it's enough. 703 00:34:20,840 --> 00:34:23,480 Speaker 3: What does the ownership here want to do with the company, 704 00:34:23,480 --> 00:34:25,880 Speaker 3: And it appears by all accounts that they're just not 705 00:34:25,960 --> 00:34:28,920 Speaker 3: big enough to compete against some of these big technology companies. 706 00:34:28,920 --> 00:34:30,880 Speaker 3: Some of these big media companies like a Netflix, like 707 00:34:30,880 --> 00:34:33,920 Speaker 3: a Disney, and boy, there's a lot of speculation around Paramount. 708 00:34:33,960 --> 00:34:35,080 Speaker 3: Did they address that at all? 709 00:34:35,600 --> 00:34:37,920 Speaker 10: They didn't. I mean the one thing though, that you know, 710 00:34:38,000 --> 00:34:39,920 Speaker 10: I think Bob Bkish got out of the way was 711 00:34:40,239 --> 00:34:42,480 Speaker 10: they are going to do something that is good for 712 00:34:42,719 --> 00:34:45,759 Speaker 10: all shareholders. He kind of underlined that because there has 713 00:34:45,840 --> 00:34:49,000 Speaker 10: been this constant, you know, question about whether you know, 714 00:34:49,040 --> 00:34:50,799 Speaker 10: Sherry Redstone is kind of just going to cash out 715 00:34:50,840 --> 00:34:53,719 Speaker 10: and leave everybody else hanging, and so he wanted to, 716 00:34:53,800 --> 00:34:55,279 Speaker 10: you know, kind of get that out of the way. 717 00:34:55,880 --> 00:34:58,120 Speaker 10: But again, you know, I think the focus is going 718 00:34:58,160 --> 00:34:59,919 Speaker 10: to come, you know, the M and A options. Paul 719 00:35:00,200 --> 00:35:02,439 Speaker 10: and we've discussed this seem to be shrinking at this point. 720 00:35:02,480 --> 00:35:05,800 Speaker 10: You know, Warner Brothers, Discovery obviously said they're no longer interested. 721 00:35:06,440 --> 00:35:08,680 Speaker 10: Other firms have kind of come taken a look. Apollo 722 00:35:08,760 --> 00:35:11,720 Speaker 10: being one of them, said not interested. The only interested 723 00:35:11,719 --> 00:35:14,640 Speaker 10: party right now is sky Dance, controlled by David Ellison. 724 00:35:15,040 --> 00:35:17,680 Speaker 10: But again, there's really no natural buyer for all of 725 00:35:17,719 --> 00:35:21,000 Speaker 10: the assets. He's not interested in controlling some TV networks. 726 00:35:21,239 --> 00:35:23,200 Speaker 10: He's only really looking at the studio. So again, I'm 727 00:35:23,239 --> 00:35:27,399 Speaker 10: not sure that Paramount Management necessarily wants to do kind 728 00:35:27,400 --> 00:35:30,319 Speaker 10: of parts sale here, so I think they're going to 729 00:35:30,400 --> 00:35:32,640 Speaker 10: kind of go back and focus on fundamentals. I think 730 00:35:32,640 --> 00:35:35,160 Speaker 10: some of the realistic m ANDA expectations are kind of 731 00:35:35,160 --> 00:35:36,600 Speaker 10: going to subside a little bit. We're going to go 732 00:35:36,640 --> 00:35:38,359 Speaker 10: back to fundamentals, I think for the time being. 733 00:35:38,400 --> 00:35:41,120 Speaker 4: Well to that point, then did they buy themselves some time? 734 00:35:41,200 --> 00:35:43,040 Speaker 4: Because I could make an argument that, Okay, well the 735 00:35:43,040 --> 00:35:45,680 Speaker 4: slowing and AD sales and maybe that's then industry wide thing. Okay, 736 00:35:45,719 --> 00:35:48,680 Speaker 4: other players are getting hit. They did as a streaming subscribers, 737 00:35:48,719 --> 00:35:50,040 Speaker 4: so they have some time now. 738 00:35:50,280 --> 00:35:51,440 Speaker 5: Is that a real statement or no? 739 00:35:51,719 --> 00:35:54,480 Speaker 10: I think so. I definitely think so, because with streaming, 740 00:35:54,560 --> 00:35:56,240 Speaker 10: what we're going to see is we're going to see 741 00:35:56,239 --> 00:36:00,919 Speaker 10: some sustained momentum in those ARPO increases, so they're doing more, 742 00:36:01,280 --> 00:36:05,160 Speaker 10: you know, international price increases. They've kind of integrated showtime 743 00:36:05,239 --> 00:36:07,640 Speaker 10: into Paramount and with that they've been able to take 744 00:36:07,640 --> 00:36:09,279 Speaker 10: some price increases. So we're going to kind of see 745 00:36:09,280 --> 00:36:12,000 Speaker 10: that play out so pretty much most of twenty twenty four. 746 00:36:12,040 --> 00:36:14,279 Speaker 10: The question is what happens after twenty twenty four, But 747 00:36:14,320 --> 00:36:15,840 Speaker 10: they definitely have bought themselves sometime. 748 00:36:16,120 --> 00:36:19,640 Speaker 3: What is the outlook for the studio here at Gita Studio. 749 00:36:19,719 --> 00:36:22,920 Speaker 10: Unfortunately, for twenty twenty four looks really really bleak. So 750 00:36:23,120 --> 00:36:25,120 Speaker 10: the big movie, of course that everybody was kind of 751 00:36:25,160 --> 00:36:27,800 Speaker 10: looking at, was Mission Impossible. That's been pushed out to 752 00:36:27,920 --> 00:36:30,719 Speaker 10: twenty twenty five. We do have a few movies here 753 00:36:30,760 --> 00:36:32,520 Speaker 10: and there. I mean, you have Quiet Plays that's coming 754 00:36:32,560 --> 00:36:36,040 Speaker 10: out in June. There's obviously some anticipation building there. But again, 755 00:36:36,200 --> 00:36:39,400 Speaker 10: in general, Paul, the box office outlook for twenty twenty 756 00:36:39,400 --> 00:36:42,600 Speaker 10: four is just pretty weak, and that's just because of 757 00:36:42,640 --> 00:36:45,279 Speaker 10: all of those Hollywood strikes. Has pushed out a lot 758 00:36:45,320 --> 00:36:47,319 Speaker 10: of movies into twenty twenty five. It's kind of going 759 00:36:47,400 --> 00:36:49,400 Speaker 10: to shave off I think at least two billion dollars 760 00:36:49,520 --> 00:36:50,400 Speaker 10: off the box office. 761 00:36:50,440 --> 00:36:52,400 Speaker 4: So presumably we're going to look through that, right, I mean, 762 00:36:52,440 --> 00:36:54,319 Speaker 4: presumably they're going to recoup that and they'll be pent 763 00:36:54,520 --> 00:36:55,719 Speaker 4: up in twenty twenty five. 764 00:36:56,239 --> 00:36:59,000 Speaker 10: That is the big question, right. Yes, we've seen kind 765 00:36:59,000 --> 00:37:01,359 Speaker 10: of box office demand and you know, in general kind 766 00:37:01,400 --> 00:37:04,479 Speaker 10: of come back, but it's still about twenty percent below 767 00:37:04,520 --> 00:37:06,879 Speaker 10: pre pandemic level. So the big question is, Okay, when 768 00:37:06,920 --> 00:37:09,040 Speaker 10: all of those big titles kind of hit the screens 769 00:37:09,400 --> 00:37:11,440 Speaker 10: in twenty twenty five, are we kind of going to 770 00:37:11,480 --> 00:37:13,040 Speaker 10: see a bigger resurgence. 771 00:37:13,520 --> 00:37:14,480 Speaker 6: The jury is still out. 772 00:37:14,520 --> 00:37:16,520 Speaker 10: I think yes, it's definitely going to be better than twenty 773 00:37:16,520 --> 00:37:18,279 Speaker 10: twenty four. Is it going to be as good as 774 00:37:18,360 --> 00:37:21,000 Speaker 10: it was? You know, and it's heyday, I'm not so sure. 775 00:37:21,360 --> 00:37:21,680 Speaker 5: Githa. 776 00:37:21,960 --> 00:37:25,240 Speaker 3: How about the CBS television network and the Viacom cable networks, 777 00:37:25,320 --> 00:37:26,839 Speaker 3: you know, one point that was such a big part 778 00:37:26,920 --> 00:37:29,480 Speaker 3: of this company. Here, talk to us about the advertising 779 00:37:29,520 --> 00:37:32,560 Speaker 3: the television advertising market. What's kind of the forecast for 780 00:37:32,600 --> 00:37:34,920 Speaker 3: the next several years. Is it a growing business? Is 781 00:37:34,960 --> 00:37:36,080 Speaker 3: it a declining business? 782 00:37:36,480 --> 00:37:39,319 Speaker 10: It's a melting ice cube ul just like you know, 783 00:37:39,640 --> 00:37:43,480 Speaker 10: just like the whole PayTV ecosystem. So you know, this 784 00:37:43,320 --> 00:37:44,959 Speaker 10: is this used to be back in the day about 785 00:37:44,960 --> 00:37:47,600 Speaker 10: a sixty billion market. It's shrunk. It's going to probably 786 00:37:47,719 --> 00:37:50,040 Speaker 10: hit about forty five billion by the end of next year. 787 00:37:50,480 --> 00:37:52,600 Speaker 10: And really, you know, this is just kind of a 788 00:37:52,640 --> 00:37:55,080 Speaker 10: progression of where all the eyeballs are moving. So they're 789 00:37:55,080 --> 00:37:57,640 Speaker 10: moving away from the linear TV networks to streaming, and 790 00:37:57,680 --> 00:38:00,520 Speaker 10: so we're seeing kind of those ad dollars follow those 791 00:38:00,520 --> 00:38:04,000 Speaker 10: eyeballs and going from you know, the TV medium to 792 00:38:04,560 --> 00:38:07,120 Speaker 10: what is now called connected TV, which is really all 793 00:38:07,160 --> 00:38:09,200 Speaker 10: the streaming platforms and you know, you're using all your 794 00:38:09,200 --> 00:38:12,840 Speaker 10: connected TV devices, the rokus and the Google Sticks and 795 00:38:12,880 --> 00:38:14,839 Speaker 10: all of that to kind of watch television, and that's 796 00:38:14,840 --> 00:38:18,160 Speaker 10: where all of the advertising is moving as well. Unfortunately, 797 00:38:18,200 --> 00:38:20,200 Speaker 10: Paramount doesn't have too much of a presence there. Yes, 798 00:38:20,280 --> 00:38:23,360 Speaker 10: they do have, you know, Pluto TV, which is their solution, 799 00:38:24,080 --> 00:38:26,439 Speaker 10: but it's not going to be able to kind of 800 00:38:26,440 --> 00:38:30,040 Speaker 10: offset the leakage that we're seeing in the television ecosystem 801 00:38:30,680 --> 00:38:32,680 Speaker 10: and that is really a problem for all of these 802 00:38:32,680 --> 00:38:34,799 Speaker 10: media companies, for Paramount a little bit more so. 803 00:38:35,040 --> 00:38:37,880 Speaker 4: All right, Thanks to geta Maganathan, Bloomberg Intelligence analyst on 804 00:38:37,960 --> 00:38:38,560 Speaker 4: US media. 805 00:38:39,320 --> 00:38:43,959 Speaker 2: This is the Bloomberg Intelligence Podcast, available on Apples, Spotter, Pye, 806 00:38:44,080 --> 00:38:47,239 Speaker 2: and anywhere else you get your podcasts. Listen live each 807 00:38:47,280 --> 00:38:50,640 Speaker 2: weekday ten am to noon Eastern on Bloomberg dot com, 808 00:38:50,760 --> 00:38:54,160 Speaker 2: the iHeartRadio app, tune In, and the Bloomberg Business App. 809 00:38:54,280 --> 00:38:57,360 Speaker 2: You can also watch us live every weekday on YouTube 810 00:38:57,520 --> 00:38:59,280 Speaker 2: and always on the Bloomberg Journal. 811 00:39:00,280 --> 00:39:01,920 Speaker 5: Contint cont