1 00:00:02,759 --> 00:00:11,040 Speaker 1: Bloomberg Audio, Studios, podcasts, radio news. This is Bloomberg Intelligence 2 00:00:11,119 --> 00:00:13,200 Speaker 1: with Scarletfoo and Paul Sweeney. 3 00:00:13,320 --> 00:00:15,440 Speaker 2: How do you think the FED is looking at tariffs? 4 00:00:15,560 --> 00:00:16,799 Speaker 2: The uncertainty of terriffs. 5 00:00:16,840 --> 00:00:18,840 Speaker 3: Let's take a look at the sectors and how. 6 00:00:18,680 --> 00:00:20,920 Speaker 2: They performed a lot of investors getting whip saled every 7 00:00:21,000 --> 00:00:21,959 Speaker 2: day by news. 8 00:00:21,680 --> 00:00:24,080 Speaker 3: Events, breaking market headlines. 9 00:00:23,560 --> 00:00:25,840 Speaker 4: And corporate news from across the globe. 10 00:00:25,840 --> 00:00:28,440 Speaker 3: Could we see a market disruption of market events? 11 00:00:28,520 --> 00:00:30,560 Speaker 2: So people just too exuberant out there? 12 00:00:30,680 --> 00:00:33,280 Speaker 3: You see some so called low quality stocks driving this 13 00:00:33,320 --> 00:00:34,120 Speaker 3: short term rally. 14 00:00:34,159 --> 00:00:38,920 Speaker 1: Bloomberg Intelligence with Scarletfoo and Paul Sweeney on Bloomberg Radio, 15 00:00:39,120 --> 00:00:41,000 Speaker 1: YouTube and Bloomberg Originals. 16 00:00:42,000 --> 00:00:44,560 Speaker 2: On Today's Bloomberg Intelligence Show, we dig inside the big 17 00:00:44,600 --> 00:00:46,800 Speaker 2: business stories impacting Wall Street and global markets. 18 00:00:46,840 --> 00:00:48,960 Speaker 3: Each and every week, we provide in depth research and 19 00:00:49,040 --> 00:00:50,879 Speaker 3: data on some of the two thousand companies and one 20 00:00:50,960 --> 00:00:53,559 Speaker 3: hundred and thirty industries are analysts covered worldwide. 21 00:00:53,720 --> 00:00:55,840 Speaker 2: Today, as earning season rolls on, we'll take a look 22 00:00:55,840 --> 00:00:58,240 Speaker 2: at results from some of the biggest names in food, travel, 23 00:00:58,280 --> 00:00:59,440 Speaker 2: and entertainment. 24 00:00:59,000 --> 00:01:01,440 Speaker 3: Plus the cash stock While at Berkshire, Hathway grows through 25 00:01:01,440 --> 00:01:02,320 Speaker 3: a record. 26 00:01:02,200 --> 00:01:05,160 Speaker 2: But first this week, Young Brands launched a strategic review 27 00:01:05,200 --> 00:01:07,640 Speaker 2: for the pizza maker Pizza Hut. This comes after the 28 00:01:07,640 --> 00:01:10,360 Speaker 2: company reported earnings that beat Wall Street estimates. For more, 29 00:01:10,440 --> 00:01:13,120 Speaker 2: we were joined by Michael Halen, Bloomberg Intelligence senior restaurant 30 00:01:13,160 --> 00:01:15,640 Speaker 2: and food service analyst, first to ask Michael for his 31 00:01:15,760 --> 00:01:18,240 Speaker 2: take on the possible sale of Pizza Hut. 32 00:01:18,520 --> 00:01:20,679 Speaker 5: I think this was kind of a long time coming. 33 00:01:20,720 --> 00:01:22,880 Speaker 5: It's really been a drag on the top and bottom 34 00:01:22,920 --> 00:01:27,080 Speaker 5: line growth. Taco Bell is an absolute monster as putting 35 00:01:27,120 --> 00:01:30,040 Speaker 5: up strong unit growth as well as same store sales 36 00:01:30,040 --> 00:01:34,080 Speaker 5: growth quarter after quarter after quarter. KFC has had some 37 00:01:34,120 --> 00:01:37,520 Speaker 5: well documented same store sales issues in the US, but 38 00:01:38,440 --> 00:01:41,280 Speaker 5: that seems to be turning. They had a solid little 39 00:01:41,400 --> 00:01:45,440 Speaker 5: quarter here with flat same store sales versus six straight 40 00:01:45,520 --> 00:01:49,000 Speaker 5: quarters of decline, so that business seems to be accelerating 41 00:01:49,040 --> 00:01:52,800 Speaker 5: a little bit. And KFC unit growth overseas is phenomenal, 42 00:01:53,080 --> 00:01:57,160 Speaker 5: absolutely phenomenal. They crush it overseas. Yeah, So Pizza Hut 43 00:01:57,160 --> 00:02:00,559 Speaker 5: has been this drag on this business for quite some time. 44 00:02:00,640 --> 00:02:04,120 Speaker 5: I think the street is is really excited about a 45 00:02:04,120 --> 00:02:05,400 Speaker 5: potential divestiture here. 46 00:02:05,760 --> 00:02:09,000 Speaker 2: Any potential buyers out there that you can identify, No, 47 00:02:09,080 --> 00:02:09,520 Speaker 2: we don't have. 48 00:02:10,160 --> 00:02:12,720 Speaker 5: We don't think any of the companies in the public 49 00:02:12,760 --> 00:02:17,280 Speaker 5: market are going to be an acquirer of pizza hut. 50 00:02:17,320 --> 00:02:17,560 Speaker 6: Yeah. 51 00:02:17,600 --> 00:02:20,160 Speaker 5: We you know this this thing is, like I said, 52 00:02:20,280 --> 00:02:24,200 Speaker 5: has struggled mightily. I mean we can see pete private equity. 53 00:02:24,240 --> 00:02:29,440 Speaker 5: I think private equity would be a good fit, right, 54 00:02:29,560 --> 00:02:31,480 Speaker 5: because it's going to take you know, management set on 55 00:02:31,480 --> 00:02:34,040 Speaker 5: the call. It might take some of their markets two 56 00:02:34,280 --> 00:02:37,640 Speaker 5: three years to get them back to like their rightful 57 00:02:37,680 --> 00:02:42,040 Speaker 5: position as market leader in those countries they which they 58 00:02:42,080 --> 00:02:45,440 Speaker 5: see as their rightful h you know position. I think 59 00:02:45,440 --> 00:02:48,760 Speaker 5: Dominos would have something to say about that. But you know, 60 00:02:48,800 --> 00:02:50,480 Speaker 5: it's going to take a few years to turn around 61 00:02:50,480 --> 00:02:53,400 Speaker 5: some of these markets, and private equity obviously looking at 62 00:02:53,440 --> 00:02:56,120 Speaker 5: a five to seven year time horizon, would be a 63 00:02:56,120 --> 00:02:56,519 Speaker 5: good fit. 64 00:02:56,880 --> 00:02:59,680 Speaker 2: All right, Mike, let's step back the restaurant space in general, 65 00:02:59,720 --> 00:03:02,840 Speaker 2: getting through you know, earning season here. What are you 66 00:03:02,919 --> 00:03:05,359 Speaker 2: learning about kind of the consumer out there from the 67 00:03:05,400 --> 00:03:06,239 Speaker 2: restaurant perspective. 68 00:03:06,760 --> 00:03:10,800 Speaker 5: We heard from Wingstop and another fast casual chain that's 69 00:03:11,000 --> 00:03:14,280 Speaker 5: struggling also partly been a victim of its own success, right, 70 00:03:14,440 --> 00:03:17,840 Speaker 5: It's absolutely crushed it over the last six years, and 71 00:03:17,919 --> 00:03:20,560 Speaker 5: it's lapping very very strong results from last year, but 72 00:03:20,919 --> 00:03:24,560 Speaker 5: they talked some more about low income consumers and Hispanic 73 00:03:24,919 --> 00:03:30,120 Speaker 5: consumer weakness and it broadening here in the third quarter. 74 00:03:30,680 --> 00:03:33,520 Speaker 5: There's some optimism here, I think around the smart kitchens. 75 00:03:33,560 --> 00:03:37,040 Speaker 5: So what's a smart kitchen they're so they're rolling out 76 00:03:37,320 --> 00:03:44,680 Speaker 5: some kitchen technology that's boosting operations. It's speeding up service times, 77 00:03:44,720 --> 00:03:49,119 Speaker 5: you know, they're they're putting out consistent ten minute service times, 78 00:03:50,040 --> 00:03:52,760 Speaker 5: which is fifty percent better than they were doing prior. 79 00:03:54,440 --> 00:03:58,480 Speaker 5: Accuracy is better, Food's getting to customers hotter and fresher, 80 00:03:58,560 --> 00:04:01,160 Speaker 5: and people are going to have a better experience. And 81 00:04:01,240 --> 00:04:05,000 Speaker 5: so stores that have had this technology right now, it's 82 00:04:05,000 --> 00:04:06,920 Speaker 5: in about two thirds of the US stores, it's going 83 00:04:06,960 --> 00:04:09,200 Speaker 5: to be in all three thousand by the end of 84 00:04:09,240 --> 00:04:12,480 Speaker 5: the year. But stores that have this equipment and have 85 00:04:12,600 --> 00:04:15,800 Speaker 5: had it the longest are outperforming on same source sales 86 00:04:15,840 --> 00:04:19,840 Speaker 5: by five hundred basis points. So we think that's that's 87 00:04:19,920 --> 00:04:22,359 Speaker 5: why the stock is up so much. People are now 88 00:04:22,640 --> 00:04:26,160 Speaker 5: a little bit more confident in a positive twenty twenty 89 00:04:26,200 --> 00:04:31,200 Speaker 5: six despite the decelerating trends here in the third quarter. 90 00:04:31,600 --> 00:04:34,360 Speaker 2: What's going on on the laborfront for restaurants I think 91 00:04:34,800 --> 00:04:38,719 Speaker 2: quick service restaurants, you know, with the Southern border shut off, 92 00:04:38,720 --> 00:04:40,880 Speaker 2: that was one of the industries that said we may 93 00:04:40,920 --> 00:04:43,520 Speaker 2: have some labor problems associated with that. Have you heard 94 00:04:43,520 --> 00:04:44,480 Speaker 2: from your companies about that? 95 00:04:46,080 --> 00:04:50,320 Speaker 5: Yeah, you know, our companies just talk about the fact 96 00:04:50,320 --> 00:04:54,480 Speaker 5: that they use Everify and there and they do everything 97 00:04:54,520 --> 00:04:57,440 Speaker 5: by the book, which you know, I think is predominantly 98 00:04:57,520 --> 00:05:01,440 Speaker 5: the case. The impact that you know you're seeing a 99 00:05:01,440 --> 00:05:04,680 Speaker 5: is with more of the independent restaurants. Okay, then be 100 00:05:05,400 --> 00:05:10,479 Speaker 5: also kind of causes labor costs to go higher here 101 00:05:10,640 --> 00:05:13,599 Speaker 5: for the public chains, right right, they're seeing another four 102 00:05:13,600 --> 00:05:17,680 Speaker 5: to five percent you know, wage rate inflation this year. 103 00:05:17,720 --> 00:05:20,840 Speaker 5: That's been pretty common year in and year out since 104 00:05:20,880 --> 00:05:21,480 Speaker 5: the pandemic. 105 00:05:21,839 --> 00:05:24,560 Speaker 2: All right, Thanks to Michael Halin, Bloomberg Intelligence Senior Restaurant 106 00:05:24,600 --> 00:05:25,599 Speaker 2: and Food Service ANLS. 107 00:05:25,920 --> 00:05:28,640 Speaker 3: We move now to earnings from the fast food giant McDonald's. 108 00:05:28,800 --> 00:05:31,440 Speaker 3: The company reported faster than expected US sales growth in 109 00:05:31,480 --> 00:05:33,680 Speaker 3: the third quarter, and this comes as the restaurant looks 110 00:05:33,720 --> 00:05:36,880 Speaker 3: to restore its reputation for affordable meals with new deals 111 00:05:36,880 --> 00:05:40,400 Speaker 3: and promotions. We're joined by Red Brown, Bloomberg News earnings reporter. 112 00:05:40,960 --> 00:05:43,359 Speaker 7: I think in the context of the other results that 113 00:05:43,360 --> 00:05:45,200 Speaker 7: we've gotten from a couple of other restaurants. I think 114 00:05:45,200 --> 00:05:50,560 Speaker 7: it's really interesting. During the call, the McDonald's CEO CFO 115 00:05:50,839 --> 00:05:53,400 Speaker 7: really talked about this bifurcation that they've been observing for 116 00:05:53,400 --> 00:05:57,880 Speaker 7: the last two years between higher income diners and lower 117 00:05:57,880 --> 00:06:01,000 Speaker 7: income people, and it seems like that trend is cantinuing, persisting, 118 00:06:01,800 --> 00:06:04,920 Speaker 7: potentially accelerating. It seems like, and specifically what I'm talking 119 00:06:04,960 --> 00:06:06,920 Speaker 7: about is the higher income consumers seem to be coming 120 00:06:06,960 --> 00:06:10,240 Speaker 7: down into McDonald's and shopping a bit more drawn in 121 00:06:10,320 --> 00:06:12,800 Speaker 7: by the value that McDonald's has been pushing over the 122 00:06:12,839 --> 00:06:15,840 Speaker 7: last couple of quarters. And we're seeing that across all 123 00:06:15,880 --> 00:06:18,720 Speaker 7: of the fast food chains that's young as well, and 124 00:06:18,839 --> 00:06:21,720 Speaker 7: also burger king things like that. And then on the 125 00:06:21,760 --> 00:06:24,840 Speaker 7: other side of that, companies like Chipotle and Cava, these 126 00:06:24,920 --> 00:06:27,800 Speaker 7: kind of like middle tier that you know, twenty dollars 127 00:06:28,320 --> 00:06:30,440 Speaker 7: bowls of food are struggling a little bit more. Is 128 00:06:30,480 --> 00:06:34,039 Speaker 7: like people lose interest in that value proposition that they're offering. 129 00:06:34,080 --> 00:06:36,920 Speaker 7: So I think McDonald's, obviously the biggest name in the space, 130 00:06:37,000 --> 00:06:39,839 Speaker 7: really kind of hammers that point home for this earning season, 131 00:06:39,880 --> 00:06:41,159 Speaker 7: and I think that's kind of the thing like the 132 00:06:41,200 --> 00:06:42,800 Speaker 7: main takeaway for me at the moment, And. 133 00:06:42,760 --> 00:06:45,719 Speaker 3: Of course McDonald's is leaning into this idea that it 134 00:06:45,760 --> 00:06:48,720 Speaker 3: offers value at a difficult time for a lot of consumers. 135 00:06:49,000 --> 00:06:51,840 Speaker 3: It's got a lot of deals and promotions to maintain 136 00:06:51,880 --> 00:06:54,840 Speaker 3: that reputation. Does that cost it in any way or 137 00:06:54,920 --> 00:06:57,080 Speaker 3: do the same source of sales kind of back that 138 00:06:57,240 --> 00:06:58,400 Speaker 3: up that this works. 139 00:06:58,680 --> 00:07:01,280 Speaker 7: I think it's a little early before they've seen that 140 00:07:01,960 --> 00:07:04,200 Speaker 7: benefit from it quite yet, Like they have seen a 141 00:07:04,240 --> 00:07:07,080 Speaker 7: little bit of pressure on the profitability because the company 142 00:07:07,120 --> 00:07:10,040 Speaker 7: is so committed to this, like getting restoring the value 143 00:07:10,040 --> 00:07:12,680 Speaker 7: reputations kind of the language that they use with their 144 00:07:12,680 --> 00:07:16,280 Speaker 7: customers that they're actually supporting the franchisees. They're giving them marketing, 145 00:07:16,720 --> 00:07:18,680 Speaker 7: they're helping them make up some of that losses that 146 00:07:18,720 --> 00:07:22,480 Speaker 7: they will make they will have from offering these discounts 147 00:07:22,720 --> 00:07:26,080 Speaker 7: on the menu. So McDonald's committed to this. It sounds 148 00:07:26,120 --> 00:07:28,559 Speaker 7: like they're committed to this in the long term because 149 00:07:28,600 --> 00:07:30,440 Speaker 7: they do want to get people back in the stores. 150 00:07:30,480 --> 00:07:32,200 Speaker 7: It doesn't it's kind of remains to be seen whether 151 00:07:32,280 --> 00:07:34,800 Speaker 7: or not the foot traffic is actually benefiting such that 152 00:07:34,880 --> 00:07:37,720 Speaker 7: it is driving the bottom line as well. But they see, 153 00:07:37,720 --> 00:07:41,080 Speaker 7: it is so important to kind of refreshing or kind 154 00:07:41,120 --> 00:07:44,480 Speaker 7: of reintroducing the brand proposition to people that they're willing 155 00:07:44,520 --> 00:07:46,240 Speaker 7: to commit to this. Take a little bit of that 156 00:07:46,280 --> 00:07:48,960 Speaker 7: short term pain for the long term benefits. 157 00:07:49,280 --> 00:07:51,239 Speaker 2: What are they saying about their cost structure here? Actue 158 00:07:51,800 --> 00:07:55,320 Speaker 2: beef prices much higher over the last year or two. 159 00:07:55,440 --> 00:07:57,760 Speaker 2: What are they saying about there's some of their cost 160 00:07:57,760 --> 00:07:58,480 Speaker 2: to get sold here. 161 00:07:58,800 --> 00:08:01,080 Speaker 7: Well, the one thing they call it on the cost 162 00:08:01,120 --> 00:08:03,040 Speaker 7: of good soul before we get into the beef issue 163 00:08:03,080 --> 00:08:05,000 Speaker 7: is the marketing, So they are kind of bumping up 164 00:08:05,040 --> 00:08:07,120 Speaker 7: the marketing. They saw around a twenty percent jump in 165 00:08:07,160 --> 00:08:11,640 Speaker 7: their their SGNA expense because of that. But on the 166 00:08:11,640 --> 00:08:15,560 Speaker 7: beef thing, McDonald's is the largest buyer of beef yep, 167 00:08:15,600 --> 00:08:17,760 Speaker 7: so that scale kind of allows them to take it. 168 00:08:17,920 --> 00:08:20,480 Speaker 7: They can take advantage of the scale and and you know, 169 00:08:21,080 --> 00:08:23,440 Speaker 7: and negotiate strong contracts when it comes to beef. Obviously, 170 00:08:23,480 --> 00:08:26,080 Speaker 7: beef inflation has been hitting all of these companies, but 171 00:08:26,240 --> 00:08:30,080 Speaker 7: not in a way that the companies are like outsized. 172 00:08:30,800 --> 00:08:33,720 Speaker 7: Negatively impact thus far, but definitely something to watch as 173 00:08:33,720 --> 00:08:35,600 Speaker 7: the beef prices continue to go higher. 174 00:08:35,600 --> 00:08:38,480 Speaker 3: And the improvement here, especially for its US comparable sales 175 00:08:38,559 --> 00:08:41,720 Speaker 3: really comes at a timely point because for a while 176 00:08:41,760 --> 00:08:44,440 Speaker 3: the company had been laggered when it came to comparable 177 00:08:44,440 --> 00:08:45,719 Speaker 3: sales at least domestically. 178 00:08:46,080 --> 00:08:49,800 Speaker 7: Yeah, definitely, And it does speak to the kind of 179 00:08:50,240 --> 00:08:52,959 Speaker 7: strategic changes that they've they've made, like they did act 180 00:08:53,160 --> 00:08:54,920 Speaker 7: maybe a little bit late in the game. Burger King 181 00:08:54,960 --> 00:08:57,880 Speaker 7: has been rolling out their value offerings for a little 182 00:08:57,880 --> 00:09:02,199 Speaker 7: over a year, butmc Donald's has like acted and acted swiftly, 183 00:09:02,280 --> 00:09:03,920 Speaker 7: like you know, it's it's a big deal, I think 184 00:09:03,960 --> 00:09:06,760 Speaker 7: to get the buy in from the franchise ease of McDonald's, 185 00:09:06,800 --> 00:09:09,760 Speaker 7: like they had almost a consensus. It's very rare that 186 00:09:09,800 --> 00:09:12,320 Speaker 7: you see almost like a high ninety percentage of franchisees 187 00:09:12,480 --> 00:09:14,160 Speaker 7: willing to take the prices because they're the ones that 188 00:09:14,200 --> 00:09:15,520 Speaker 7: are dealing with this at the end of the day. 189 00:09:16,200 --> 00:09:19,640 Speaker 7: But I think, you know, McDonald's acting fast, acting boldly 190 00:09:19,760 --> 00:09:22,280 Speaker 7: to kind of get back into the green. 191 00:09:22,880 --> 00:09:25,560 Speaker 2: I've noticed, really really in the last several years, so 192 00:09:25,640 --> 00:09:28,880 Speaker 2: much more technology in the stores, Like you can a 193 00:09:28,960 --> 00:09:31,840 Speaker 2: lot of them don't even have people practically taking your order. 194 00:09:31,960 --> 00:09:36,280 Speaker 2: It's all done electronically. What are they saying about their 195 00:09:36,320 --> 00:09:40,959 Speaker 2: investments in technology, maybe even AI how's that impacting that business? 196 00:09:41,000 --> 00:09:43,240 Speaker 7: Yeah, for McDonald's, like they it was. There's quite a 197 00:09:43,240 --> 00:09:47,040 Speaker 7: bit of talk about their their digital offerings for this quarter. 198 00:09:47,679 --> 00:09:51,200 Speaker 7: All of these companies, so so between McDonald's, Young which 199 00:09:51,240 --> 00:09:55,200 Speaker 7: has KFC, Taco Bell, and a couple other brands under 200 00:09:55,200 --> 00:09:57,920 Speaker 7: that umbrella, are all really pushing the digital for that 201 00:09:57,960 --> 00:10:00,959 Speaker 7: exact reason to get the cost down. You know, McDonald's 202 00:10:01,000 --> 00:10:03,040 Speaker 7: just rolled out their Monopoly program. And when I was 203 00:10:03,040 --> 00:10:05,080 Speaker 7: a kid, Monopoly was the peel off on the cops. 204 00:10:05,120 --> 00:10:07,320 Speaker 7: It was very exciting. Now it's completely digital, right, So, 205 00:10:07,320 --> 00:10:09,480 Speaker 7: like that's another way of their kind of drive people 206 00:10:09,559 --> 00:10:11,600 Speaker 7: into the app to beet people to shop through there. 207 00:10:11,640 --> 00:10:13,480 Speaker 7: This is where a lot of promotions are that'll help 208 00:10:13,520 --> 00:10:16,680 Speaker 7: also drive foot traffic. So it's two it's helping in 209 00:10:16,720 --> 00:10:19,080 Speaker 7: two ways. It's helping people get in chop more and 210 00:10:19,120 --> 00:10:20,320 Speaker 7: also helping on the cost front. 211 00:10:20,960 --> 00:10:22,920 Speaker 3: Our Thanks to Red Brown, he is a Bloomberg News 212 00:10:22,960 --> 00:10:23,640 Speaker 3: earnings reporter. 213 00:10:24,080 --> 00:10:27,080 Speaker 2: Moving next to the hospitality industry, this week, Cruse, company 214 00:10:27,120 --> 00:10:30,160 Speaker 2: in the Reach and Cruise line, reported earnings that missed expectations. 215 00:10:30,400 --> 00:10:32,400 Speaker 2: For more on this, we were joined by Brian Egger, 216 00:10:32,440 --> 00:10:34,800 Speaker 2: Bloomberg Intelligence Senior Gaming and lodging analyst. 217 00:10:35,280 --> 00:10:37,840 Speaker 8: People are still cruising, the bookings are higher. I think 218 00:10:38,000 --> 00:10:39,760 Speaker 8: that there was a bit of a change in their 219 00:10:39,800 --> 00:10:43,240 Speaker 8: strategy related to the Norwegian Cruise Line brand, trying to 220 00:10:43,280 --> 00:10:46,440 Speaker 8: get more families and kids and all that could talk 221 00:10:46,440 --> 00:10:49,559 Speaker 8: about that, but that does have some slightly dampiting impact 222 00:10:49,559 --> 00:10:51,080 Speaker 8: on you'll growth for the fourth quarter. 223 00:10:51,720 --> 00:10:54,320 Speaker 3: So this is the idea that they're broadening their customer base, 224 00:10:54,440 --> 00:10:58,679 Speaker 3: not just targeting the super high income consumer, which by 225 00:10:58,720 --> 00:11:02,120 Speaker 3: all accounts is doing just in this economy, whereas the 226 00:11:02,120 --> 00:11:04,800 Speaker 3: lower income consumer and the mass consumer perhaps is struggling 227 00:11:04,840 --> 00:11:08,160 Speaker 3: with rates staying fairly elevated and a lot of question 228 00:11:08,240 --> 00:11:11,800 Speaker 3: marks over their job prospects. What is Norwegian Cruise Lines 229 00:11:12,040 --> 00:11:15,600 Speaker 3: strategy here, certainly compared to its peers like Carnival and 230 00:11:16,240 --> 00:11:16,960 Speaker 3: Royal Caribbean. 231 00:11:17,800 --> 00:11:20,320 Speaker 8: I think it's twofold. I think number one, to try 232 00:11:20,360 --> 00:11:23,920 Speaker 8: to attract more of a family audience, increase the core 233 00:11:23,960 --> 00:11:26,480 Speaker 8: customer base of the Norwegian Cruise Line brand, and also 234 00:11:26,960 --> 00:11:31,600 Speaker 8: by having more shorter duration cruises, maybe with homeports closer 235 00:11:31,640 --> 00:11:34,440 Speaker 8: to where people live, that could result the longer term 236 00:11:34,480 --> 00:11:39,040 Speaker 8: and kind of more efficient operations and some you know, 237 00:11:39,160 --> 00:11:42,720 Speaker 8: more savings on the net cruise costs for net unicost side, 238 00:11:43,000 --> 00:11:45,079 Speaker 8: but it remains to be seen, and I think that's 239 00:11:45,080 --> 00:11:47,200 Speaker 8: why there's a little bit of caution, because the near 240 00:11:47,280 --> 00:11:50,200 Speaker 8: trim effect will be a slightly dampening impact on the 241 00:11:50,280 --> 00:11:53,920 Speaker 8: overall mix of yields. You know, caverns filled with children 242 00:11:54,000 --> 00:11:58,520 Speaker 8: or families may have a slightly lower combined revenue yield 243 00:11:58,600 --> 00:12:00,280 Speaker 8: than a different type of customer. 244 00:12:00,080 --> 00:12:05,240 Speaker 2: Audience, typically the cruiser. They're pretty loyal people, Brian, how 245 00:12:05,240 --> 00:12:09,560 Speaker 2: did they typically react or how did they spend during 246 00:12:10,040 --> 00:12:12,600 Speaker 2: what could be maybe a little bit softer economic environment. 247 00:12:14,040 --> 00:12:16,640 Speaker 8: So if you judge by the current environment, the overall 248 00:12:16,640 --> 00:12:19,800 Speaker 8: bookings pace, I think for the third quarter overall was 249 00:12:19,880 --> 00:12:22,480 Speaker 8: up twenty percent. The out for next year is quite 250 00:12:22,480 --> 00:12:24,800 Speaker 8: good with at least modest field growth, you know, so 251 00:12:24,880 --> 00:12:27,520 Speaker 8: I think we're seeing still a pretty steady pace of 252 00:12:28,360 --> 00:12:30,920 Speaker 8: consumer demand. Obviously, that could always change if we see 253 00:12:30,920 --> 00:12:34,680 Speaker 8: a more severe economic downturn, But the overall pace in 254 00:12:34,760 --> 00:12:38,120 Speaker 8: terms of bookings demand, notwithstanding this kind of tweak and 255 00:12:38,200 --> 00:12:40,960 Speaker 8: marketing strategy, has been quite good. 256 00:12:41,080 --> 00:12:44,439 Speaker 2: Our thanks to Brian Eggert, Bloomberg Intelligence senior gaming and lodging. 257 00:12:44,200 --> 00:12:46,760 Speaker 3: Analysts coming up inside one of the biggest deals of 258 00:12:46,800 --> 00:12:49,360 Speaker 3: the Week, Kimberly clarkbind can you the maker of til 259 00:12:49,400 --> 00:12:49,600 Speaker 3: and All? 260 00:12:49,760 --> 00:12:52,679 Speaker 2: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in 261 00:12:52,760 --> 00:12:54,920 Speaker 2: depth research at data on two thousand companies and one 262 00:12:54,960 --> 00:12:56,000 Speaker 2: hundred and thirty industries. 263 00:12:56,080 --> 00:12:59,280 Speaker 3: You can access Bloomberg Intelligence via bi go on the terminal. 264 00:12:59,360 --> 00:13:00,360 Speaker 3: I'm Scarlett and. 265 00:13:00,400 --> 00:13:02,439 Speaker 2: I'm Paul Swimming. This is Bloomberg. 266 00:13:06,160 --> 00:13:10,680 Speaker 1: This is Bloomberg Intelligence with Scarlett Foo and Paul Sweeney 267 00:13:11,040 --> 00:13:12,360 Speaker 1: on Bloomberg Radio. 268 00:13:13,120 --> 00:13:15,240 Speaker 2: It was a merger Monday this week in the consumer 269 00:13:15,320 --> 00:13:17,760 Speaker 2: goods space, Kimberly Clark announced plans to by ken View, 270 00:13:17,880 --> 00:13:19,920 Speaker 2: the maker of tile On, in a forty billion dollar 271 00:13:20,000 --> 00:13:21,080 Speaker 2: cash and stock deal. 272 00:13:21,240 --> 00:13:23,520 Speaker 3: A combination would create a company with thirty two billion 273 00:13:23,520 --> 00:13:26,040 Speaker 3: dollars in revenue and become the second biggest seller of 274 00:13:26,080 --> 00:13:28,560 Speaker 3: health and wellness products for more. We were joined by 275 00:13:28,559 --> 00:13:31,720 Speaker 3: Diana Gomez, Bloomberg Intelligence senior equity research analyst. 276 00:13:32,360 --> 00:13:38,240 Speaker 4: So it is surprising in many ways from the perspective 277 00:13:38,240 --> 00:13:43,240 Speaker 4: of Kimberly Clark, I must confess it shows that ken 278 00:13:43,320 --> 00:13:45,960 Speaker 4: View really has a lot of work to do to 279 00:13:46,040 --> 00:13:49,960 Speaker 4: turn around the business since it split from Jane Jay 280 00:13:50,520 --> 00:13:55,480 Speaker 4: about two years ago and the third quarter miss just 281 00:13:55,559 --> 00:14:00,200 Speaker 4: added up to a pile of disappointing results. Obviously, there 282 00:14:00,280 --> 00:14:04,040 Speaker 4: there's a ton of law hanging fruit, let's say, in 283 00:14:04,080 --> 00:14:07,200 Speaker 4: terms of efficiencies that can be gained in terms of 284 00:14:07,400 --> 00:14:11,360 Speaker 4: plugging the great iconic, well known trusted brands from Canview 285 00:14:11,760 --> 00:14:17,960 Speaker 4: into Canview's system that is running at a more efficient 286 00:14:18,240 --> 00:14:24,160 Speaker 4: level at the moment, but it will there is septicism 287 00:14:24,200 --> 00:14:28,360 Speaker 4: there because we are talking about revenue synergies as well 288 00:14:28,400 --> 00:14:31,520 Speaker 4: as cost synergies, and this will be quite a complex 289 00:14:32,360 --> 00:14:36,120 Speaker 4: new company. At the point when Kimberly Clark was just 290 00:14:36,200 --> 00:14:40,720 Speaker 4: simplifying as they were, they are aiming to close the 291 00:14:40,760 --> 00:14:46,840 Speaker 4: transaction on their international business that includes segments like tissue 292 00:14:47,920 --> 00:14:52,720 Speaker 4: by mid twenty twenty six, and now this merger expected 293 00:14:52,760 --> 00:14:55,800 Speaker 4: to close around the same time, just seems to complicate 294 00:14:56,320 --> 00:15:01,120 Speaker 4: the picture a little bit. The file andal, yes, and 295 00:15:01,280 --> 00:15:04,960 Speaker 4: we know ow Kenvy has been dealing with some crisis 296 00:15:05,520 --> 00:15:09,720 Speaker 4: in the last months with tailan Ore and then with 297 00:15:10,000 --> 00:15:11,560 Speaker 4: talk all suits outside the. 298 00:15:11,600 --> 00:15:13,440 Speaker 3: US as well, So I'm glad you went there. The 299 00:15:13,520 --> 00:15:18,440 Speaker 3: tailan Al situation. The Trump administration has been attacking Thailand 300 00:15:18,440 --> 00:15:21,200 Speaker 3: a overall. Do you think that's something that might complicate 301 00:15:21,240 --> 00:15:26,040 Speaker 3: this deal. Could regulators step in and hold things up 302 00:15:26,160 --> 00:15:28,800 Speaker 3: or raise questions that will just drag things out. 303 00:15:31,240 --> 00:15:34,600 Speaker 4: Quite different questions, I would say, but great questions. So 304 00:15:34,760 --> 00:15:39,320 Speaker 4: in terms of thailan O, the legal risk is there. 305 00:15:40,200 --> 00:15:44,360 Speaker 4: They can View was already fighting in the courts some lawsuits, 306 00:15:44,440 --> 00:15:49,680 Speaker 4: but we now have Texas State wawsuit on top on 307 00:15:49,760 --> 00:15:55,720 Speaker 4: top of it, the Humbroway Quarks price. When we walk 308 00:15:55,760 --> 00:15:59,760 Speaker 4: in terms of for instance, UH and a bit to enterprise, 309 00:16:00,120 --> 00:16:04,240 Speaker 4: you multiple and I'm taking twenty twenty five, twenty six, 310 00:16:05,600 --> 00:16:09,760 Speaker 4: twenty twenty five, sorry that they will report, so that 311 00:16:09,880 --> 00:16:14,200 Speaker 4: will come at about fourteen times, whereas historic call transactions 312 00:16:14,200 --> 00:16:17,240 Speaker 4: in the consumer health space were in the range of 313 00:16:17,320 --> 00:16:20,560 Speaker 4: sixteen to twenty times. So fourteen times comes built all 314 00:16:20,680 --> 00:16:24,680 Speaker 4: that so really reflecting not only the struggles of can 315 00:16:24,800 --> 00:16:29,640 Speaker 4: View where their organic growth is still declining, but also 316 00:16:29,800 --> 00:16:34,160 Speaker 4: that viability risk with lawsuits that are ongoing. And that's 317 00:16:34,280 --> 00:16:37,760 Speaker 4: a new lawsuits that can be added as well. In 318 00:16:37,880 --> 00:16:43,880 Speaker 4: terms of the say anti trust competition regulatory approval, as 319 00:16:43,920 --> 00:16:47,200 Speaker 4: I see it, they don't really overlap directly, but it 320 00:16:47,320 --> 00:16:52,240 Speaker 4: really depends on a country, region by region basis. Because 321 00:16:52,280 --> 00:16:54,920 Speaker 4: we know the US stands can be very different from 322 00:16:55,000 --> 00:16:56,400 Speaker 4: the European Commission one. 323 00:16:57,520 --> 00:17:00,680 Speaker 2: Yeah, I'm should we expect more consolidation and consumer product space? 324 00:17:00,760 --> 00:17:01,400 Speaker 2: Do you think. 325 00:17:03,160 --> 00:17:03,360 Speaker 7: Yes? 326 00:17:03,480 --> 00:17:09,320 Speaker 4: So that's a team that I've been watching very closely. Obviously, 327 00:17:09,400 --> 00:17:15,159 Speaker 4: we had other large former groups with significant consumer health businesses, 328 00:17:15,200 --> 00:17:18,520 Speaker 4: so we are talking not only over the counter medicines 329 00:17:18,760 --> 00:17:23,560 Speaker 4: but also the more personal care that deals with wellness. 330 00:17:24,880 --> 00:17:28,800 Speaker 4: Sonofi decided to sell it to private equity, so at 331 00:17:28,880 --> 00:17:32,479 Speaker 4: least for the next few years. That is that buyer 332 00:17:32,680 --> 00:17:37,600 Speaker 4: is still considering while not considering, as management says, puts it. 333 00:17:37,680 --> 00:17:41,639 Speaker 4: But buyer still has their consumer health business and they 334 00:17:41,680 --> 00:17:47,840 Speaker 4: could be walking into either listing it or further consolidation 335 00:17:48,200 --> 00:17:50,360 Speaker 4: within the current employers. 336 00:17:50,440 --> 00:17:54,399 Speaker 3: Our Thanks to Diana Gomez Bloomberg Intelligence here equity research journalists, we. 337 00:17:54,440 --> 00:17:56,600 Speaker 2: Also got earnings in the media space as well. 338 00:17:56,720 --> 00:17:59,639 Speaker 3: Warner Brothers Discovery, the parent of HBO and CNN, reported 339 00:17:59,680 --> 00:18:03,000 Speaker 3: third sales that missed analyst estimates, providing a glimpse into 340 00:18:03,040 --> 00:18:05,760 Speaker 3: the company's businesses as it puts itself up for sale. 341 00:18:05,920 --> 00:18:08,320 Speaker 3: For details, we caught up with KEITHA. Rung Andathan Bloomberg 342 00:18:08,320 --> 00:18:10,040 Speaker 3: intelligence analysts on US media. 343 00:18:11,280 --> 00:18:15,440 Speaker 9: So fundamental Scarlett really don't measure all that much at 344 00:18:15,440 --> 00:18:18,919 Speaker 9: this point. Especially yes, the TV networks business, as we 345 00:18:19,000 --> 00:18:21,960 Speaker 9: know now for many many quarters, has been severely challenged. 346 00:18:22,000 --> 00:18:25,479 Speaker 9: We saw a twenty percent slump in TV advertising, We 347 00:18:25,480 --> 00:18:28,840 Speaker 9: saw a twenty percent decline in TV EBITDA. This was 348 00:18:28,960 --> 00:18:31,760 Speaker 9: kind of well expected, and this really speaks to why 349 00:18:31,840 --> 00:18:34,480 Speaker 9: they need to separate themselves, why they need to separate 350 00:18:34,760 --> 00:18:38,160 Speaker 9: the low growth or rather the no growth TV assets 351 00:18:38,200 --> 00:18:40,440 Speaker 9: from one part from the part of the business that's 352 00:18:40,480 --> 00:18:44,720 Speaker 9: actually growing, which is studio and streaming. That part of 353 00:18:44,720 --> 00:18:47,240 Speaker 9: the business actually posted really good numbers. We saw the 354 00:18:47,280 --> 00:18:50,800 Speaker 9: studio Warner Brothers has actually been having a very very 355 00:18:50,800 --> 00:18:53,080 Speaker 9: successful run in the box office this year. They have 356 00:18:53,080 --> 00:18:56,440 Speaker 9: about a twenty seven percent share of domestic box office 357 00:18:56,480 --> 00:18:58,600 Speaker 9: and we've seen that kind of translate into really strong 358 00:18:58,640 --> 00:19:01,600 Speaker 9: IBIDA numbers. So we saw studio and streaming actually put 359 00:19:01,680 --> 00:19:04,520 Speaker 9: up really really good numbers, and that again speaks to 360 00:19:04,680 --> 00:19:08,600 Speaker 9: why so many different parties, including a Netflix, including a Comcast, 361 00:19:08,920 --> 00:19:12,560 Speaker 9: are interested in going after those studio and streaming assets. 362 00:19:13,320 --> 00:19:17,440 Speaker 9: So right now, again fundamentals don't matter that much. It's 363 00:19:17,520 --> 00:19:18,760 Speaker 9: really all about the M and A. 364 00:19:19,160 --> 00:19:21,840 Speaker 2: And I'm actually surprised KEITHA that maybe we haven't had 365 00:19:21,920 --> 00:19:24,000 Speaker 2: some more news on the MNA front because we've seen, 366 00:19:24,680 --> 00:19:26,560 Speaker 2: you know, the m and A environment is very very 367 00:19:26,560 --> 00:19:29,000 Speaker 2: active with the market. It's very receptive to m and A. 368 00:19:29,080 --> 00:19:32,560 Speaker 2: Here we have a willing seller in terms of David 369 00:19:32,640 --> 00:19:36,480 Speaker 2: Zaslov and the board of directors here, who do you 370 00:19:36,720 --> 00:19:38,200 Speaker 2: how do you think this is going to play out? 371 00:19:39,480 --> 00:19:41,159 Speaker 2: Is something to make a bid for the entire company 372 00:19:41,240 --> 00:19:43,080 Speaker 2: or just maybe the good pieces for it. 373 00:19:44,600 --> 00:19:47,480 Speaker 9: We're having all possible permutations and combinations here, Paul. So 374 00:19:47,520 --> 00:19:50,280 Speaker 9: we know that Paramounts Guidance is actually interested in all 375 00:19:50,320 --> 00:19:53,160 Speaker 9: of the company, including the TV networks. They've already made 376 00:19:53,320 --> 00:19:56,600 Speaker 9: three bids. The highest one was for twenty three and 377 00:19:56,600 --> 00:19:59,760 Speaker 9: a half dollars per share for Warner Brothers Discovery. All 378 00:19:59,800 --> 00:20:03,720 Speaker 9: of that was turned down, so they obviously have to 379 00:20:03,720 --> 00:20:06,720 Speaker 9: come up with a much better offer now. The other bidders, 380 00:20:07,040 --> 00:20:09,440 Speaker 9: and the two that are most often mentioned are Netflix 381 00:20:09,440 --> 00:20:12,199 Speaker 9: and Comcast. They are the ones that are only interested 382 00:20:12,800 --> 00:20:15,720 Speaker 9: in the studio and streaming assets, no interest at all 383 00:20:15,760 --> 00:20:19,160 Speaker 9: in the TV linear network business. We know that Netflix 384 00:20:19,160 --> 00:20:21,960 Speaker 9: has started looking into the books of Warner Brothers Discovery. 385 00:20:22,119 --> 00:20:24,720 Speaker 9: This doesn't necessarily mean that they have to come out 386 00:20:24,720 --> 00:20:28,600 Speaker 9: with a bid. I mean, remember this. You know zaslav Is, 387 00:20:28,640 --> 00:20:31,280 Speaker 9: as you just mentioned, he's a very very tough negotiator. 388 00:20:31,359 --> 00:20:34,240 Speaker 9: He's a deal maker. He is going to make sure 389 00:20:34,320 --> 00:20:36,879 Speaker 9: that they really get paid well for the streaming and 390 00:20:36,920 --> 00:20:39,639 Speaker 9: studio assets if they sell that, and we expect, you know, 391 00:20:39,680 --> 00:20:41,919 Speaker 9: a price tag somewhere in the ballpark of about seventy 392 00:20:41,920 --> 00:20:44,080 Speaker 9: five to eighty billion. So you know, whoever makes a 393 00:20:44,119 --> 00:20:46,800 Speaker 9: big bid has to cough up a huge chunk of 394 00:20:46,880 --> 00:20:48,119 Speaker 9: change for this asset. 395 00:20:48,440 --> 00:20:51,800 Speaker 3: So we keep talking about how it's Netflix, Comcast and 396 00:20:51,880 --> 00:20:55,000 Speaker 3: Paramount Skuidance. Could there be another bidder that emerges from 397 00:20:55,040 --> 00:20:56,159 Speaker 3: the shadows. 398 00:20:56,760 --> 00:20:59,760 Speaker 9: Absolutely, I mean you can never rule out big tech. 399 00:21:00,320 --> 00:21:03,280 Speaker 9: You know, Amazon obviously has shown some interest in the past. 400 00:21:03,359 --> 00:21:06,400 Speaker 9: They bought the MGM studio. We're not necessarily sure whether 401 00:21:06,440 --> 00:21:08,840 Speaker 9: they've actually taken a look at the Warner brother assets. 402 00:21:09,119 --> 00:21:11,199 Speaker 9: But again, Scarlett, as you kind of think about the 403 00:21:11,200 --> 00:21:13,200 Speaker 9: whole media landscape and you kind of think about the 404 00:21:13,240 --> 00:21:15,960 Speaker 9: various assets out there, This is kind of a once 405 00:21:16,000 --> 00:21:19,240 Speaker 9: in a lifetime, kind of a generational opportunity for anybody 406 00:21:19,240 --> 00:21:22,080 Speaker 9: who wants to get big in media to really go 407 00:21:22,200 --> 00:21:24,520 Speaker 9: after Warner I mean, they have some of the best 408 00:21:24,640 --> 00:21:27,880 Speaker 9: ip out there. They have a streaming business that has 409 00:21:28,080 --> 00:21:31,600 Speaker 9: performed really well. Hbo Max is a name that resonates 410 00:21:31,600 --> 00:21:35,680 Speaker 9: across the globe. So you know, anybody and everybody should 411 00:21:35,760 --> 00:21:37,520 Speaker 9: really be taking a look at this asset. So I 412 00:21:37,520 --> 00:21:39,439 Speaker 9: wouldn't be surprised if we have some kind of a 413 00:21:39,520 --> 00:21:40,520 Speaker 9: dark horsepitter here. 414 00:21:40,800 --> 00:21:40,879 Speaker 7: Oh. 415 00:21:40,920 --> 00:21:44,360 Speaker 2: Thanks to KEITHA. Wrong Andathan Bloomberg Intelligence, US media analyst. 416 00:21:44,520 --> 00:21:46,320 Speaker 3: We also got earnings reports this week from two of 417 00:21:46,359 --> 00:21:48,920 Speaker 3: the world's biggest ride share companies, Uber and Lyft. 418 00:21:49,160 --> 00:21:51,440 Speaker 2: Men Deep Singh Joints is here research head of Bloomberg 419 00:21:51,480 --> 00:21:54,240 Speaker 2: Intelligence on tech stories. Talk to us about that segment 420 00:21:54,320 --> 00:21:57,960 Speaker 2: of the economy, the ride sharing, the outsourcing, you know, 421 00:21:58,040 --> 00:22:01,359 Speaker 2: the third party delivery. Are people still spend money on 422 00:22:01,359 --> 00:22:01,840 Speaker 2: that stuff? 423 00:22:02,520 --> 00:22:05,960 Speaker 6: They are and all these companies, I mean, Uver reported 424 00:22:06,680 --> 00:22:10,080 Speaker 6: over twenty percent growth, door Dash reported twenty five percent 425 00:22:10,119 --> 00:22:13,600 Speaker 6: top line growth. Even though the stock reaction was negative, 426 00:22:13,640 --> 00:22:18,200 Speaker 6: that was primarily because they plan to spend more money 427 00:22:18,240 --> 00:22:24,080 Speaker 6: next year on building their tech stack. I think what 428 00:22:24,160 --> 00:22:28,400 Speaker 6: the playbook here is to expand in more geographies as 429 00:22:28,440 --> 00:22:32,240 Speaker 6: well as branch out into other areas of last mile 430 00:22:32,359 --> 00:22:35,640 Speaker 6: delivery and in the case of door Dash, their experimenting 431 00:22:36,240 --> 00:22:42,640 Speaker 6: with you know, delivering food without a career human person involved, 432 00:22:42,960 --> 00:22:47,320 Speaker 6: and also expanding into restaurant point of sale devices. I 433 00:22:47,320 --> 00:22:52,359 Speaker 6: mean they're developing technology where you can pay using a 434 00:22:52,440 --> 00:22:56,680 Speaker 6: DoorDash hardware and point of sale device. So clearly there 435 00:22:56,720 --> 00:22:59,479 Speaker 6: is a lot that these companies are doing beyond you know, 436 00:22:59,520 --> 00:23:01,200 Speaker 6: the original all business that they. 437 00:23:01,000 --> 00:23:03,600 Speaker 2: Have, you know, having you know, when you spend time 438 00:23:03,640 --> 00:23:05,520 Speaker 2: in England and you go pay for meal, the car 439 00:23:05,680 --> 00:23:07,879 Speaker 2: never leaves your presence. They just tap it on some 440 00:23:08,000 --> 00:23:11,200 Speaker 2: machine and ball here. They take it, They put it 441 00:23:11,200 --> 00:23:12,920 Speaker 2: in a little folder, they take it away for five. 442 00:23:12,720 --> 00:23:14,280 Speaker 3: Minutes, and that's what you pay twenty person for. 443 00:23:14,480 --> 00:23:17,760 Speaker 2: You don't know where it's going. And that's what I'm surprised. 444 00:23:17,760 --> 00:23:19,920 Speaker 2: We're so behind here in Yos about that at point. 445 00:23:19,920 --> 00:23:22,000 Speaker 3: We've always been kind of behind this, you know that 446 00:23:22,200 --> 00:23:23,160 Speaker 3: that's been our calling card. 447 00:23:23,800 --> 00:23:25,480 Speaker 6: The way to think about it is, there are so 448 00:23:25,520 --> 00:23:29,000 Speaker 6: many legacy systems that anytime you have new technology, even 449 00:23:29,040 --> 00:23:32,520 Speaker 6: everyone is talking about AI agents and whatnot, it has 450 00:23:32,600 --> 00:23:35,440 Speaker 6: to sit on top of a lot of legacy technology. 451 00:23:35,920 --> 00:23:39,240 Speaker 6: And like the promise of AI is it can rewrite 452 00:23:39,280 --> 00:23:42,159 Speaker 6: a lot of that legacy code and migrate into the 453 00:23:42,400 --> 00:23:45,040 Speaker 6: you know, the modern technology. But we have yet to 454 00:23:45,080 --> 00:23:47,080 Speaker 6: come across you know, real proof points of that. 455 00:23:47,200 --> 00:23:49,040 Speaker 3: So when you're talking man Deep, I noticed that you 456 00:23:49,080 --> 00:23:51,919 Speaker 3: talked a lot about how these companies are spending, they're investing, 457 00:23:52,080 --> 00:23:55,080 Speaker 3: and I'm curious about the reception that gets from investors 458 00:23:55,119 --> 00:23:58,560 Speaker 3: because initially in the big AI build up, everyone was 459 00:23:58,600 --> 00:24:01,280 Speaker 3: excited about these plans. But now more and more everyone's like, oh, 460 00:24:01,320 --> 00:24:02,960 Speaker 3: I'm not so sure that's a great idea that you're 461 00:24:02,960 --> 00:24:05,400 Speaker 3: spending so much, whether it's on AI or whether it's 462 00:24:05,440 --> 00:24:07,879 Speaker 3: on new products and internal platform like it is with 463 00:24:07,920 --> 00:24:11,240 Speaker 3: door Dash. Why do you think investors are now more 464 00:24:11,280 --> 00:24:14,720 Speaker 3: skeptical about this idea of companies spending, Well. 465 00:24:15,000 --> 00:24:18,400 Speaker 6: Just because we've seen you know, Uber and all these 466 00:24:18,440 --> 00:24:21,560 Speaker 6: companies really struggle with free cash flow initially, I mean 467 00:24:21,640 --> 00:24:24,199 Speaker 6: in the zerp era, you know, these companies burned a 468 00:24:24,200 --> 00:24:26,640 Speaker 6: lot of cash. Now they have gotten to a point 469 00:24:26,640 --> 00:24:29,359 Speaker 6: where the business model does generate you know, seven to 470 00:24:29,400 --> 00:24:32,159 Speaker 6: eight billion dollars in free cash flow for Uber and 471 00:24:32,280 --> 00:24:35,280 Speaker 6: even for door Dash it's twenty percent ebit dumb margins. 472 00:24:35,280 --> 00:24:39,080 Speaker 6: So the fact that they're talking about spending again, it 473 00:24:39,160 --> 00:24:42,080 Speaker 6: makes you think Okay, if you're an investor, you waited 474 00:24:42,160 --> 00:24:44,560 Speaker 6: all this while for these companies to get mature and 475 00:24:44,600 --> 00:24:47,320 Speaker 6: you know, start delivering on cash, and now they're talking 476 00:24:47,359 --> 00:24:50,399 Speaker 6: about another investment cycle. And that's where you know, in 477 00:24:50,440 --> 00:24:53,000 Speaker 6: the case of Uber, it's their hand is forced by 478 00:24:53,600 --> 00:24:57,800 Speaker 6: Veimo launching on ten cities and really expanding it potentially Tesla. 479 00:24:58,359 --> 00:25:01,359 Speaker 6: I think in the case of DoorDash, they feel, you know, 480 00:25:01,960 --> 00:25:05,919 Speaker 6: making acquisitions will help them expand their geographic footprint, and 481 00:25:05,960 --> 00:25:08,760 Speaker 6: then obviously they want to expand their text tech to 482 00:25:08,880 --> 00:25:09,560 Speaker 6: more areas. 483 00:25:10,160 --> 00:25:13,000 Speaker 2: Our thanks to man deep Seeing, Bloomberg Intelligence global tech 484 00:25:13,200 --> 00:25:16,719 Speaker 2: research head coming up, Berksher's cash pile sorted almost three 485 00:25:16,800 --> 00:25:18,280 Speaker 2: hundred and eighty two billion dollars. 486 00:25:18,400 --> 00:25:20,920 Speaker 3: That is a fresh record for Warren Buffett's company will 487 00:25:20,920 --> 00:25:21,720 Speaker 3: bring you details. 488 00:25:22,000 --> 00:25:24,800 Speaker 2: You're listening to bloomerg Intelligence on Bloomberg Radio, providing in 489 00:25:24,840 --> 00:25:26,960 Speaker 2: depth research and data on two thousand companies and one 490 00:25:27,000 --> 00:25:28,080 Speaker 2: hundred and thirty industries. 491 00:25:28,280 --> 00:25:31,639 Speaker 3: You can always access Bloomberg Intelligence via big on the terminal. 492 00:25:31,760 --> 00:25:32,800 Speaker 3: I'm Scarlet Foo. 493 00:25:32,640 --> 00:25:34,800 Speaker 2: And I'm Paul Sweeney, and this is Bloomberg. 494 00:25:42,080 --> 00:25:47,000 Speaker 1: This is Bloomberg Intelligence with Scarlettfoo and Paul Sweeney on 495 00:25:47,160 --> 00:25:48,240 Speaker 1: Bloomberg Radio. 496 00:25:48,880 --> 00:25:51,920 Speaker 2: Berksher Hathway reported it's cash pile reached over three hundred 497 00:25:51,920 --> 00:25:54,240 Speaker 2: and eighty one billion dollars in the third quarter, a record. 498 00:25:54,280 --> 00:25:56,520 Speaker 2: This comes as Bercher Hathway declined to buy back its 499 00:25:56,600 --> 00:25:58,040 Speaker 2: own shares for the fit straight quarter. 500 00:25:58,280 --> 00:26:01,440 Speaker 3: So we brought in Matthew Palizola, Bloomber Intelligence, senior analysts 501 00:26:01,440 --> 00:26:04,159 Speaker 3: of P ANDC Insurance. We began by asking Matthew to 502 00:26:04,200 --> 00:26:06,040 Speaker 3: break down Berkshire's most recent quarter. 503 00:26:06,720 --> 00:26:10,560 Speaker 10: The interesting thing is the stock has underperformed the market 504 00:26:10,600 --> 00:26:13,000 Speaker 10: by like thirty percent since Buffett announced that he was 505 00:26:13,040 --> 00:26:16,280 Speaker 10: stepping down in May, and they haven't bought back any 506 00:26:16,320 --> 00:26:17,760 Speaker 10: stock over that entire period. 507 00:26:19,280 --> 00:26:19,520 Speaker 8: Yeah. 508 00:26:19,560 --> 00:26:21,280 Speaker 2: Does that turned my mic on? I say, why? 509 00:26:21,480 --> 00:26:26,399 Speaker 10: Yeah? So Buffett used to have a rule when the 510 00:26:26,440 --> 00:26:30,320 Speaker 10: stock was above one point two times priced to book, 511 00:26:30,359 --> 00:26:32,800 Speaker 10: they wouldn't buy it back. They kind of kicked that 512 00:26:32,840 --> 00:26:33,960 Speaker 10: out and they said, we're just going to buy it 513 00:26:33,960 --> 00:26:37,919 Speaker 10: back whenever we see intrinsic value below. So, you know, 514 00:26:38,000 --> 00:26:40,480 Speaker 10: I don't to me it begs question. I mean, maybe 515 00:26:40,480 --> 00:26:43,679 Speaker 10: he sees the stock as kind of fully valued, even down. 516 00:26:43,640 --> 00:26:46,600 Speaker 3: You know, year to date, even with the lagging performance 517 00:26:46,640 --> 00:26:50,000 Speaker 3: as well. So does that change when Greg Able, the 518 00:26:50,000 --> 00:26:53,600 Speaker 3: handpicked successor to Warren Buffett, takes the reins officially at 519 00:26:53,640 --> 00:26:54,240 Speaker 3: the end of the year. 520 00:26:55,280 --> 00:26:59,359 Speaker 10: You know, Scarlett, he walks a fine line between putting 521 00:26:59,359 --> 00:27:02,000 Speaker 10: some sort of stamp on the company maybe over time, 522 00:27:02,119 --> 00:27:05,800 Speaker 10: and then kind of respecting the ethos of Berkshire and 523 00:27:05,840 --> 00:27:09,440 Speaker 10: how they've operated. I would hope something happens. I mean, 524 00:27:09,640 --> 00:27:12,320 Speaker 10: they did a ten billion dollar deal in the fourth quarter, 525 00:27:12,320 --> 00:27:16,160 Speaker 10: they bought the oxycam business from Occidental. They just don't 526 00:27:16,200 --> 00:27:18,680 Speaker 10: have things that can move the needle very much. Even 527 00:27:18,680 --> 00:27:23,399 Speaker 10: in the quarter, their net stock buys and sells or 528 00:27:23,440 --> 00:27:25,679 Speaker 10: a negative six billion dollars, so they were negative on 529 00:27:25,840 --> 00:27:26,719 Speaker 10: other equities as well. 530 00:27:26,840 --> 00:27:29,439 Speaker 3: Yeah, there were net seller stocks for twelfth straight quarter, 531 00:27:29,880 --> 00:27:33,120 Speaker 3: and that cash and equivalents was at a record high 532 00:27:33,119 --> 00:27:35,919 Speaker 3: at the end of September. Is that a signal that 533 00:27:36,240 --> 00:27:39,960 Speaker 3: they're waiting for the market to tank, that they see 534 00:27:40,000 --> 00:27:42,400 Speaker 3: a correction, Maybe not tank that might be too strong. 535 00:27:42,400 --> 00:27:44,600 Speaker 3: They see a correction or consolidation in the nearer terment 536 00:27:44,600 --> 00:27:45,280 Speaker 3: are ready for it. 537 00:27:47,080 --> 00:27:48,359 Speaker 10: They're always ready for it. 538 00:27:49,080 --> 00:27:49,280 Speaker 2: You know. 539 00:27:49,359 --> 00:27:52,480 Speaker 10: Buffett has always said, we're not looking to time the market. 540 00:27:52,560 --> 00:27:56,439 Speaker 10: We're just looking for good companies. He's also been you know, 541 00:27:56,680 --> 00:27:58,800 Speaker 10: when I talk to people that the thought is, is 542 00:27:58,840 --> 00:28:01,040 Speaker 10: he just hoarding money for greg Abel and kind of 543 00:28:01,080 --> 00:28:03,520 Speaker 10: setting the company up and just handing it over. He's 544 00:28:03,600 --> 00:28:07,560 Speaker 10: said he's not doing that, so you know, unfortunately I don't. 545 00:28:07,560 --> 00:28:10,920 Speaker 10: They don't talk to investors, so we don't can't really 546 00:28:10,960 --> 00:28:13,879 Speaker 10: pick his brain besides at the annual meeting, so we 547 00:28:13,880 --> 00:28:17,560 Speaker 10: don't exactly know what's going on there. I think he's 548 00:28:17,760 --> 00:28:21,240 Speaker 10: just extra conservative in his old age. 549 00:28:21,280 --> 00:28:23,800 Speaker 2: I guess. All right, And here's my cynical Wall Street perspective. 550 00:28:24,080 --> 00:28:28,680 Speaker 2: When mister Buffet passes three percent dividend yield, massive stock buyback, 551 00:28:28,960 --> 00:28:31,320 Speaker 2: do you think that's a scenario. I think. 552 00:28:33,400 --> 00:28:36,359 Speaker 10: Dividend yield, hopefully you know, some sort of dividend, maybe 553 00:28:36,359 --> 00:28:42,120 Speaker 10: special dividends. The buyback, I think will also kind of 554 00:28:42,440 --> 00:28:44,760 Speaker 10: weigh on what able sees the intrinsic value, So I 555 00:28:44,800 --> 00:28:47,920 Speaker 10: don't I would say probably hopefully dividend. I would say 556 00:28:47,920 --> 00:28:51,920 Speaker 10: maybe more steady buyback. There's also they can't buy back 557 00:28:51,960 --> 00:28:55,520 Speaker 10: a ton of shares on volume, because you know, there's 558 00:28:55,600 --> 00:28:57,120 Speaker 10: rules on how much they can buy back and how 559 00:28:57,160 --> 00:28:58,800 Speaker 10: active they can be in the market, so that limits 560 00:28:58,800 --> 00:28:59,320 Speaker 10: them a little bit. 561 00:28:59,360 --> 00:29:02,680 Speaker 2: That's planned b get it. Don't you have to split 562 00:29:02,720 --> 00:29:04,120 Speaker 2: the stock like a gajillion to one. 563 00:29:04,240 --> 00:29:06,160 Speaker 10: They have the A shares and the B shares, but 564 00:29:06,240 --> 00:29:09,640 Speaker 10: there's I don't have all the exact roles. But they've 565 00:29:09,840 --> 00:29:12,200 Speaker 10: talked about we can only buy back so much at 566 00:29:12,200 --> 00:29:14,800 Speaker 10: a time. They bought back none. So I think a 567 00:29:14,840 --> 00:29:18,240 Speaker 10: steady buyback plus some returns of capital and forms of 568 00:29:18,680 --> 00:29:20,840 Speaker 10: I would hope special dividends. They maybe they don't want 569 00:29:20,840 --> 00:29:23,360 Speaker 10: to be beholden too a regular quarterly dividend. 570 00:29:24,040 --> 00:29:27,000 Speaker 3: Yeah makes sense. Okay, so that's something we'll watch for 571 00:29:27,480 --> 00:29:30,840 Speaker 3: when that eventually happens. In the meantime, how are the 572 00:29:30,840 --> 00:29:33,600 Speaker 3: businesses of Berkshire Hathway performing, especially insurance? 573 00:29:33,720 --> 00:29:35,800 Speaker 2: Yeah, so all good. 574 00:29:35,880 --> 00:29:39,200 Speaker 10: In the quarter, the insurance business made much more money 575 00:29:39,240 --> 00:29:40,960 Speaker 10: than the year ago, but that was because they had 576 00:29:40,960 --> 00:29:43,240 Speaker 10: a bunch of large losses in the year ago. They 577 00:29:43,280 --> 00:29:48,000 Speaker 10: also had this favorable reserve development, which means they write 578 00:29:48,000 --> 00:29:50,600 Speaker 10: business and those losses come in better or worse than 579 00:29:50,600 --> 00:29:54,920 Speaker 10: they expect over time, and that was those losses were 580 00:29:54,920 --> 00:29:58,040 Speaker 10: coming in better than they expected. So that is it's 581 00:29:58,080 --> 00:30:00,600 Speaker 10: a good thing, but it's not a super high quality 582 00:30:00,680 --> 00:30:01,640 Speaker 10: source of earnings. 583 00:30:01,640 --> 00:30:01,840 Speaker 1: Beat. 584 00:30:01,960 --> 00:30:04,840 Speaker 10: So the insurance business performed well on those two things, 585 00:30:04,880 --> 00:30:08,640 Speaker 10: which aren't super high quality in my opinion. The underlying 586 00:30:08,680 --> 00:30:11,720 Speaker 10: business and the insurance doing well. The problem is is 587 00:30:11,760 --> 00:30:13,920 Speaker 10: hard for it to get much better next year. The 588 00:30:14,080 --> 00:30:17,800 Speaker 10: underwriting side. The prices in that are going down, so 589 00:30:17,840 --> 00:30:20,840 Speaker 10: I think it's tough to see the insurance underwriting doing 590 00:30:20,880 --> 00:30:23,880 Speaker 10: better next year. It's also tough to see the investments 591 00:30:23,880 --> 00:30:26,200 Speaker 10: doing better next year. And we're talking about really just 592 00:30:26,280 --> 00:30:29,480 Speaker 10: the fixed income investment, so like the equities, who knows 593 00:30:29,480 --> 00:30:32,200 Speaker 10: what happens, but in terms of the interest income, we 594 00:30:32,200 --> 00:30:33,880 Speaker 10: saw that decline in the quarter as well. 595 00:30:34,200 --> 00:30:37,000 Speaker 2: The business fundamentals of the underlying businesses, did they move 596 00:30:37,000 --> 00:30:40,920 Speaker 2: the stock historically? Not really, So it's tough because I 597 00:30:41,600 --> 00:30:44,360 Speaker 2: asked the one fundamental question. That's enough. Let's get back 598 00:30:44,360 --> 00:30:46,240 Speaker 2: to the main point of the story here. It's also 599 00:30:46,280 --> 00:30:49,240 Speaker 2: my job too, But is there an activist investor who's 600 00:30:49,280 --> 00:30:52,160 Speaker 2: ever oh, good question, one word about this company? 601 00:30:53,040 --> 00:30:56,239 Speaker 10: So historically there have been investors very vocal about it. 602 00:30:56,560 --> 00:31:00,280 Speaker 10: I don't have names, but no one's ever been able 603 00:31:00,320 --> 00:31:03,080 Speaker 10: to move the new buffets always the majority shareholder, so 604 00:31:03,440 --> 00:31:05,680 Speaker 10: there's really been no one who's ever been forcing them 605 00:31:05,720 --> 00:31:09,320 Speaker 10: to do anything. And so why would they even listen? 606 00:31:09,480 --> 00:31:11,120 Speaker 3: And can you do that with a company that has 607 00:31:11,160 --> 00:31:13,040 Speaker 3: an A class year and B class year with this 608 00:31:13,240 --> 00:31:13,640 Speaker 3: what is. 609 00:31:13,600 --> 00:31:16,400 Speaker 2: His voting control? I haven't done it, man, I don't. 610 00:31:16,440 --> 00:31:17,840 Speaker 10: I don't, I don't know off the top of my head, 611 00:31:18,160 --> 00:31:20,000 Speaker 10: I thought it was something like sixty percent of the 612 00:31:20,000 --> 00:31:23,760 Speaker 10: shares or something like that, and other insiders will hold more. 613 00:31:23,840 --> 00:31:27,640 Speaker 10: So there's almost no way of wrestling control from him. 614 00:31:27,640 --> 00:31:29,280 Speaker 10: The A shares and the B shares they did so 615 00:31:29,320 --> 00:31:31,960 Speaker 10: the A shares are are several hundred thousand dollars, and 616 00:31:31,960 --> 00:31:34,320 Speaker 10: then they instituted the B shares and they're they're going 617 00:31:34,360 --> 00:31:36,920 Speaker 10: to peg to each other, so they can't. 618 00:31:36,960 --> 00:31:37,240 Speaker 9: You can't. 619 00:31:37,280 --> 00:31:39,479 Speaker 10: You couldn't buy up the B shares and kind of 620 00:31:39,600 --> 00:31:40,400 Speaker 10: take control either. 621 00:31:41,000 --> 00:31:42,680 Speaker 3: They've come up with all kinds of rules to make 622 00:31:42,720 --> 00:31:44,840 Speaker 3: sure that all the things you just proposed can't happen. 623 00:31:46,120 --> 00:31:46,920 Speaker 10: He's not a dumb guy. 624 00:31:47,040 --> 00:31:51,000 Speaker 2: But yeah, still exactly right. It's been an extraordinary run. 625 00:31:51,360 --> 00:31:53,320 Speaker 2: Is there a sense that the law of large numbers 626 00:31:53,480 --> 00:31:55,720 Speaker 2: over the last several years, if not the last decade, 627 00:31:55,920 --> 00:31:57,600 Speaker 2: is kind of caught up to this name? Yeah for sure. 628 00:31:57,600 --> 00:32:00,320 Speaker 10: I mean they they bought a company for twelve billion 629 00:32:00,360 --> 00:32:02,920 Speaker 10: dollars Allegheny and it barely moves the needle. They bought 630 00:32:02,920 --> 00:32:05,560 Speaker 10: this oxycam for a ten billion, barely moves the needle. 631 00:32:06,520 --> 00:32:10,880 Speaker 10: They bought like twenty billion of Chevron stock two years ago. 632 00:32:11,040 --> 00:32:12,920 Speaker 10: It didn't even come up at the annual meeting. People 633 00:32:12,920 --> 00:32:15,320 Speaker 10: didn't even ask about it. I was sitting there. I 634 00:32:15,320 --> 00:32:18,440 Speaker 10: couldn't believe it, said, no one's going to ask about this. So, 635 00:32:19,280 --> 00:32:22,280 Speaker 10: you know, there's just things that are are tough for 636 00:32:22,360 --> 00:32:25,000 Speaker 10: them to move. The new from having so much money, 637 00:32:25,240 --> 00:32:28,320 Speaker 10: they're making those investments in Japan, which I think are interesting. 638 00:32:28,320 --> 00:32:31,000 Speaker 10: So they invest in the trading houses in Japan. It's 639 00:32:31,080 --> 00:32:34,080 Speaker 10: hard to for me to know a ton about those businesses. 640 00:32:34,240 --> 00:32:36,800 Speaker 10: Some of them are like mini Berkshires. Maybe this is 641 00:32:36,840 --> 00:32:39,520 Speaker 10: stuff that they kind of do in the future. Also 642 00:32:39,920 --> 00:32:43,160 Speaker 10: the energy business. Greg Abil's an energy guy. Aon is 643 00:32:43,200 --> 00:32:45,640 Speaker 10: an insurance broker. They talked about last week this huge 644 00:32:45,680 --> 00:32:49,840 Speaker 10: opportunity with the hyperscalers, needing, risk transfer services and other things. 645 00:32:49,840 --> 00:32:52,720 Speaker 10: So like those are things that fit right into Berkshi's wheelhouse, right, 646 00:32:52,720 --> 00:32:55,080 Speaker 10: the risk transfer and the energy businesses. So those are 647 00:32:55,120 --> 00:32:56,479 Speaker 10: opportunities for them in the future. 648 00:32:57,240 --> 00:33:00,320 Speaker 3: Our thanks to Matthew Paulazola, Bloomberg Intelligence Senior and for 649 00:33:00,320 --> 00:33:01,200 Speaker 3: P and C Insurance. 650 00:33:01,480 --> 00:33:04,400 Speaker 2: We move next to earnings from the entertainment space. This week, 651 00:33:04,480 --> 00:33:08,200 Speaker 2: Spotify reported active users and sales beat expectations in the 652 00:33:08,240 --> 00:33:09,720 Speaker 2: third quarter, but ad. 653 00:33:09,560 --> 00:33:12,200 Speaker 3: Supported revenue declined six percent from a year ago because 654 00:33:12,200 --> 00:33:14,600 Speaker 3: of pricing pressure for more. We were joined by Githa 655 00:33:14,640 --> 00:33:17,240 Speaker 3: Rong Andathan Bloomberg Intelligence analysts on US media. 656 00:33:17,880 --> 00:33:20,240 Speaker 9: I actually like the Spotify numbers, you know, the big 657 00:33:20,320 --> 00:33:22,240 Speaker 9: numbers that we always look for are, of course, the 658 00:33:22,360 --> 00:33:24,960 Speaker 9: user metrics. We want to see them kind of do 659 00:33:25,080 --> 00:33:28,120 Speaker 9: well on both monthly active users, which are basically the 660 00:33:28,160 --> 00:33:31,240 Speaker 9: free listeners, as well as the premium subscribers, which is basically, 661 00:33:31,280 --> 00:33:33,920 Speaker 9: you know, everyone paying about twelve dollars a month for 662 00:33:33,960 --> 00:33:36,400 Speaker 9: a Spotify subscription, and both those numbers came in well 663 00:33:36,440 --> 00:33:38,840 Speaker 9: ahead of guidance. The other number that we look for 664 00:33:38,920 --> 00:33:42,680 Speaker 9: in Spotify results is gross margin. This has been you know, 665 00:33:42,920 --> 00:33:46,800 Speaker 9: a constant point of debate, but Spotify has done really 666 00:33:46,840 --> 00:33:50,120 Speaker 9: well in terms of expanding their gross margin. They again 667 00:33:50,240 --> 00:33:53,880 Speaker 9: delivered numbers ahead of guidance both for you know, third 668 00:33:53,960 --> 00:33:56,320 Speaker 9: quarter as well as ahead of forecast for the fourth quarter. 669 00:33:56,320 --> 00:34:00,200 Speaker 9: In terms of guidance, so fundamentals seem to be really strong. 670 00:34:00,560 --> 00:34:03,560 Speaker 9: I think the one concern, Paul, that has really kind 671 00:34:03,560 --> 00:34:06,239 Speaker 9: of emerged with Spotify over the past few months is 672 00:34:06,320 --> 00:34:10,640 Speaker 9: pricing power. You know, are they going to keep you know, 673 00:34:11,120 --> 00:34:13,480 Speaker 9: being able to increase prices? And this is something that 674 00:34:13,520 --> 00:34:16,160 Speaker 9: has dominated the conversation for not just Spotify, but of 675 00:34:16,200 --> 00:34:18,960 Speaker 9: course for any streaming company. We've seen Netflix, as you 676 00:34:19,000 --> 00:34:22,000 Speaker 9: just pointed out, demonstrate really good pricing power. I think 677 00:34:22,040 --> 00:34:24,680 Speaker 9: Spotify has very good pricing power as well, but people 678 00:34:24,760 --> 00:34:27,719 Speaker 9: are really waiting for the next big US price hike 679 00:34:28,400 --> 00:34:30,160 Speaker 9: to really gain more confidence in the story. 680 00:34:30,560 --> 00:34:33,879 Speaker 2: Keith, what's the competitive landscape for Spotify out there? Because 681 00:34:34,000 --> 00:34:36,759 Speaker 2: as we think about the video business, it's Netflix and 682 00:34:36,800 --> 00:34:38,600 Speaker 2: then a kind of a big drop down to Disney 683 00:34:38,600 --> 00:34:40,600 Speaker 2: and then a bigger drop to kind of everybody else 684 00:34:40,760 --> 00:34:44,320 Speaker 2: fighting it out. What's the landscape for in the audio business. 685 00:34:45,040 --> 00:34:48,440 Speaker 9: It's actually very similar, Paul. In fact, you know, Spotify 686 00:34:48,600 --> 00:34:51,120 Speaker 9: just leads by a wide, wide margin. So if you 687 00:34:51,280 --> 00:34:54,840 Speaker 9: just look at both the global audio streaming market in 688 00:34:54,920 --> 00:34:57,000 Speaker 9: terms of subscribers, they have about a thirty three percent 689 00:34:57,080 --> 00:35:00,000 Speaker 9: share globally they have close to almost a forty percent 690 00:35:00,080 --> 00:35:03,160 Speaker 9: and share in the US market, so way ahead of 691 00:35:03,200 --> 00:35:06,919 Speaker 9: their competitors. So obviously gives them a lot of I think, 692 00:35:06,960 --> 00:35:09,680 Speaker 9: you know, again we come back to pricing power. Gives 693 00:35:09,680 --> 00:35:12,640 Speaker 9: them definitely a lot of pricing power in the market. 694 00:35:13,120 --> 00:35:16,239 Speaker 2: So what's on the cost structure for them? What are 695 00:35:16,239 --> 00:35:18,120 Speaker 2: the real levers for them? It seems like you know, 696 00:35:18,200 --> 00:35:20,480 Speaker 2: the I know at Netflix said they got to write big, 697 00:35:20,480 --> 00:35:24,759 Speaker 2: big checks to you know, either license content or you know, 698 00:35:24,800 --> 00:35:28,280 Speaker 2: create their own content. What's it like on the Spotify side. 699 00:35:29,280 --> 00:35:31,120 Speaker 9: Yeah, you bring up an excellent point, Paul, And this 700 00:35:31,160 --> 00:35:33,120 Speaker 9: has kind of again been one of the pain points 701 00:35:33,120 --> 00:35:36,120 Speaker 9: for Spotify because again, this is a music streaming service. 702 00:35:36,160 --> 00:35:40,760 Speaker 9: They don't own any of you know, the music music itself. 703 00:35:40,760 --> 00:35:44,160 Speaker 9: That's all kind of controlled by the labels. And as 704 00:35:44,200 --> 00:35:46,720 Speaker 9: you well know, content is king. So this is really 705 00:35:46,760 --> 00:35:49,280 Speaker 9: where Spotify has a lot of trouble because for every 706 00:35:49,320 --> 00:35:52,759 Speaker 9: dollar that they earned, about seventy cents goes back to 707 00:35:52,880 --> 00:35:55,759 Speaker 9: the music label, So they have very little leverage. They've 708 00:35:55,800 --> 00:35:58,719 Speaker 9: been trying to kind of change that whole dynamic, that 709 00:35:58,760 --> 00:36:01,360 Speaker 9: whole equation come up with more of their content. So 710 00:36:01,400 --> 00:36:03,480 Speaker 9: a big investment area for them has been, you know, 711 00:36:04,320 --> 00:36:07,280 Speaker 9: podcast has been audiobooks where they kind of get better, 712 00:36:07,480 --> 00:36:11,640 Speaker 9: you know, profit dynamics. It has worked well. But actually 713 00:36:11,680 --> 00:36:13,680 Speaker 9: one of the things that we're kind of looking for 714 00:36:14,239 --> 00:36:16,759 Speaker 9: next year is we're going to see a step up 715 00:36:16,840 --> 00:36:20,360 Speaker 9: in all of the royalty costs. And that's again something 716 00:36:20,360 --> 00:36:23,240 Speaker 9: that the street and investors are a little bit nervous 717 00:36:23,280 --> 00:36:26,640 Speaker 9: about because we need to see how, you know, Spotify 718 00:36:26,719 --> 00:36:30,160 Speaker 9: kind of manages their whole margin expansion story as those 719 00:36:30,239 --> 00:36:33,719 Speaker 9: royalty costs go up, So the amount that they're paying 720 00:36:33,760 --> 00:36:35,720 Speaker 9: all of the music labels, the warners, and the universals 721 00:36:35,760 --> 00:36:37,840 Speaker 9: of the world is going to go up slightly. But 722 00:36:37,880 --> 00:36:39,440 Speaker 9: we still think that they're in good shap. They've been 723 00:36:39,440 --> 00:36:42,440 Speaker 9: adding a ton of new features to all of their tiers. 724 00:36:42,560 --> 00:36:45,399 Speaker 9: They're probably going to debut some new tiers. Again. All 725 00:36:45,400 --> 00:36:48,240 Speaker 9: of that bills to that whole pricing, power and monetization story. 726 00:36:48,560 --> 00:36:51,760 Speaker 2: And how is Apple as a competitor here, because anytime 727 00:36:51,760 --> 00:36:55,320 Speaker 2: I see a company that's even remotely in competition Apple, 728 00:36:55,360 --> 00:36:56,040 Speaker 2: I get nervous. 729 00:36:57,680 --> 00:36:59,600 Speaker 9: So Apple, you know, if you're just kind of looking 730 00:36:59,600 --> 00:37:03,120 Speaker 9: at it, And in terms of share, they are way 731 00:37:03,160 --> 00:37:06,360 Speaker 9: below Spotify, both globally as well as in the US market, 732 00:37:06,640 --> 00:37:11,480 Speaker 9: so not much of a competitor from a share standpoint. 733 00:37:11,600 --> 00:37:14,920 Speaker 9: In fact, they've even priced their products slightly lower. Some 734 00:37:14,960 --> 00:37:17,560 Speaker 9: of the you know, some of the noise around Spotify 735 00:37:17,640 --> 00:37:20,000 Speaker 9: and Apple has been you know in terms of the 736 00:37:20,040 --> 00:37:23,080 Speaker 9: iOS and whether you know, Spotify can kind of get 737 00:37:23,120 --> 00:37:25,640 Speaker 9: better terms and they've managed to do that as well. 738 00:37:25,880 --> 00:37:28,319 Speaker 9: So some of the changes on the iOS system have 739 00:37:28,400 --> 00:37:32,200 Speaker 9: actually helped Spotify in terms of getting a better market 740 00:37:32,280 --> 00:37:36,360 Speaker 9: share and getting better economics. Actually, so Apple Music not 741 00:37:36,480 --> 00:37:38,960 Speaker 9: too much of a worry for Spotify. 742 00:37:39,719 --> 00:37:42,560 Speaker 2: Oh thanks to Githa Rong and Nottan Bloomberg Intelligence US 743 00:37:42,680 --> 00:37:45,319 Speaker 2: media analyst. That's this week's edition of Bloomberg Intelligence on 744 00:37:45,320 --> 00:37:48,240 Speaker 2: Bloomberg Radio, providing in research and data on two thousand 745 00:37:48,280 --> 00:37:50,000 Speaker 2: companies and one hundred and thirty industries. 746 00:37:50,120 --> 00:37:52,920 Speaker 3: And remember you can always access Bloomberg Intelligence via b 747 00:37:53,080 --> 00:37:55,279 Speaker 3: I go on the terminal. I'm Scarlett Foe and. 748 00:37:55,360 --> 00:37:57,880 Speaker 2: All Paul Sweeney. Stay with us. Today's top stories and 749 00:37:57,920 --> 00:38:00,000 Speaker 2: global business headlines are coming up right now. 750 00:38:01,360 --> 00:38:01,640 Speaker 6: Zero