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Speaker 2: There was a headline today about how Amazon and Google
Speaker 2: are being probed by the Federal Trade Commission on their
Speaker 2: search advertising practices.
Speaker 3: This is according to.
Speaker 2: Bloomberg reporting, citing people who are familiar with the matter.
Speaker 2: So we need to bring in Justin Treesi. He is
Speaker 2: the anti trust litigation and policy analyst here for us
Speaker 2: at Bloomberg Intelligence. Justin just walk us through what these
Speaker 2: headlines mean to you when you look at it through
Speaker 2: your anti trust lens.
Speaker 4: Hi Scarlett, Happy Friday to you. So interestingly enough, here
Speaker 4: in this case, it really looks like more of a
Speaker 4: consumer protection investigation, not an anti trust kind of investigation.
Speaker 4: So what I mean by that here is that we're
Speaker 4: really looking at the pricing and the terms that perhaps
Speaker 4: were set forth by Amazon and by Google in their
Speaker 4: workings with advertisers, and when the or not that pricing
Speaker 4: and those terms was misleading in any way, So a
Speaker 4: different kind of series of facts here from what we're
Speaker 4: seeing in the anti trust cases route advertising, with a
Speaker 4: big one coming up in about a week the Remedies
Speaker 4: trial and the Google ad Tech case starts in Virginia
Speaker 4: very soon. More risk there, if you ask me. But
Speaker 4: this one here really focused on those pricing policies. It
Speaker 4: looks like at those companies and the remedies here are
Speaker 4: probably nowhere near the kind of breakup risk that we
Speaker 4: would see in a more antitrust aligned case.
Speaker 5: That's what I was going to ask justin is whether
Speaker 5: or not you know this makes the case to bolsters
Speaker 5: the case to break up these tech giants. I also
Speaker 5: want to make clear that these allegations are now different
Speaker 5: from what both Google and Amazon are facing. They're facing
Speaker 5: trials this month, right with separate lawsuits brought by federal agencies.
Speaker 6: Yep, that's right.
Speaker 4: So you're hit the nail on the head there too.
Speaker 4: This is really more related to search issues and search advertising, which,
Speaker 4: interestingly enough, that's what we just had that huge remedies
Speaker 4: ruling on in the Google search case, right. And in
Speaker 4: that case, there was a lot of discussion in the
Speaker 4: remedies about increasing transparency and pricing for the text based
Speaker 4: search ads, right, So one could actually say a lot
Speaker 4: of those remedies are already on their way to being
Speaker 4: implemented as part of that ruling Number one. Number two, Yeah, absolutely,
Speaker 4: the Google case that's pending, that's about open web advertising
Speaker 4: on websites, you know, little ads you see when you
Speaker 4: might go to Bloomberg dot com or CNN dot com
Speaker 4: for example, that pop up on the side, separated apart
Speaker 4: from search ads. And then the Amazon trial coming up
Speaker 4: this month that's about Amazon Prime terms, right, and whether
Speaker 4: or not there was misleading kind of behavior and how
Speaker 4: that was sold to consumers.
Speaker 2: We should note that the FDC and Google declined to
Speaker 2: comment on our reporting in Amazon did not respond to
Speaker 2: requests for comment. So justin when you look at all
Speaker 2: of this, what does this mean in terms of how
Speaker 2: much of an overhang this will be for the companies?
Speaker 2: Is this something that's going to be a month long
Speaker 2: investigation or months long maybe years long investigation?
Speaker 7: Right?
Speaker 4: And I think the latter definitely scarlet right, So I
Speaker 4: think just now you know, and great reporting by the way,
Speaker 4: as usual by our colleagues Leahoniland and Josh Cisco over
Speaker 4: at Bloomberg News. But I would say, you know, we're
Speaker 4: really early on here, I think, is the story if
Speaker 4: they're just starting to look into these these allegations, These
Speaker 4: things can take years absolutely to pan out. A lot
Speaker 4: of times there's no case that's even broad at the
Speaker 4: end of them. It's really about ascertaining the facts, figuring
Speaker 4: out what, if anything, happened, and moving on from there.
Speaker 4: So I don't think we'll see any more announcements from
Speaker 4: the FTC about how this is proceeding either. Typically all
Speaker 4: of this is confidential, so as it moves forward, we
Speaker 4: may or may not see updates that come out, you know,
Speaker 4: in different ways about the case. But it's a long
Speaker 4: term risk absolutely.
Speaker 5: Is this just another example though, of how the Trump
Speaker 5: administration is deal with big tech? Do you think justin.
Speaker 4: Yeah, you know, I find this a little interesting too, right,
Speaker 4: So I think, you know, you look back to the
Speaker 4: AI Action Plan that came out earlier in the summer,
Speaker 4: and you know, in that plan language the White House said, hey, FTC,
Speaker 4: stay away from investigations that might inhibit the growth of
Speaker 4: AI in any way. So that leads me to believe,
Speaker 4: you know, are we looking to areas like advertising as
Speaker 4: a car veut from that messaging, right, are we looking
Speaker 4: to different areas of tech there there might be a
Speaker 4: problem that falls out of that.
Speaker 6: Ambit of AI.
Speaker 4: But it seems like, you know, and there is that
Speaker 4: whiplash right where the White House might have one statement
Speaker 4: on things and there might be a visit to the
Speaker 4: White House right by certain CEOs on the other hand,
Speaker 4: But then you said the FTC file pursuing an investigation
Speaker 4: like this, So there certainly is a back and forth.
Speaker 4: But I would say if it doesn't fall within the
Speaker 4: ambit of AI, there's still is a possibility and some
Speaker 4: risk that things could be subject to investigations.
Speaker 2: Okay, so very much moving goalposts and a TBD kind
Speaker 2: of scenario. Justin you and Jennifer Ree, who's our senior
Speaker 2: litigation analysts, have also done some research on Live Nation
Speaker 2: and how its dominance in events is at risk because
Speaker 2: of a lawsuit. And this is a lawsuit that will
Speaker 2: is scheduled to lead to an antitrust jury trial that
Speaker 2: will begin I think in the first quarter.
Speaker 3: Just walk us through what we'd need to know there.
Speaker 4: Yeah, So alter for Jennifer on the nuts and bolt
Speaker 4: of that particular case, she's been following from the start,
Speaker 4: she's really been knee deep in that litigation. But what
Speaker 4: I will say is that it's not just the courts
Speaker 4: we're looking at here from the aspect of ticketing right
Speaker 4: Really recently, we've seen legislation introduced at the federal and
Speaker 4: state levels where we're looking at the secondary marketplace for
Speaker 4: ticketing too, and what's happening there things like increased price
Speaker 4: price transparency for consumers when they're going through that ticket
Speaker 4: purchasing process, a whole host of issues there, but perhaps
Speaker 4: capping the fees that are allowed on the secondary sale
Speaker 4: of tickets. So there's a lot happening in that particular area.
Speaker 4: You're right, there is a monopolization suit that precedes next spring,
Speaker 4: and I think that's going to be a really you know,
Speaker 4: bet the company kind of litigation in many ways for
Speaker 4: Live Nation. But there also is this kind of political
Speaker 4: risk that's out there too, really more focused, I would say,
Speaker 4: on those secondary resale tickets, ticket resellers, you know what, I'm.
Speaker 5: Curious, So have consumers really felt the difference yet when
Speaker 5: it comes to ticketing and pricing regarding Live Nation. I mean,
Speaker 5: I know they're sort of embroiled in a lot of a.
Speaker 3: Lot of lawsuits.
Speaker 4: Actually, sure, I'd say probably not yet, right. I think
Speaker 4: we saw some activity around a class action case just
Speaker 4: really recently there. But you know, the FTC's rule mandating
Speaker 4: these price transparency issues for consumers when they're in that
Speaker 4: kind of ticket prison purchasing process that just wanted to
Speaker 4: effect a few months ago, right, So, really it's a
Speaker 4: trickle out, trickle down here, a slow moving kind of
Speaker 4: issue here with politics and with litigation, and of course,
Speaker 4: you know, we haven't even gotten to the liability phase
Speaker 4: of that Live Nation trial, much less remedies that would
Speaker 4: be imposed if there were a finding of liability in
Speaker 4: that case. Right, So, I think we're at the beginning
Speaker 4: of a lot of activity, but certainly no real outcomes
Speaker 4: are developing just yet.
Speaker 2: I mean, I'm a very imperfect example of you know
Speaker 2: what you see when you actually try to buy tickets,
Speaker 2: But I've noticed when I do try to buy tickets
Speaker 2: on secondary markets, there's a lot more text about how
Speaker 2: this is. You know, every single fee included, so we're
Speaker 2: not going to add anything more to your final price tag.
Speaker 2: And that's something that's only really started to roll out,
Speaker 2: I would see in the last couple of months.
Speaker 4: Yep, you're right, and that's the FTC rule right there
Speaker 4: in play right. You're seeing them with ticketing applications. We're
Speaker 4: also seeing that in kind of travel travel websites as well,
Speaker 4: right where you kind of get to the checkout page
Speaker 4: and wait a minute, there's all these fees for things
Speaker 4: like baggage that maybe you didn't know about upfront when
Speaker 4: you saw the fairs. So that's kind of how those
Speaker 4: are rolling out there too. And i'd say to your point,
Speaker 4: that's really the impact you've had so far on the consumer.
Speaker 4: More likely yet to come.
Speaker 2: Stay with us. More from Bloomberg Intelligence coming up after this.
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Speaker 5: Lots of news in tech, Adobe's earnings beat open AI
Speaker 5: closer to becoming a for profit company. Want to break
Speaker 5: some of this down now with any rog Rana Bloomberg
Speaker 5: Intelligence technology analysts coming to us from our Chicago bureau.
Speaker 5: So a rog, let's break down Adobe first, because I
Speaker 5: know it was sort of the step child of the
Speaker 5: AI craze for a long time. But I think with
Speaker 5: this earnings report it sort of has Wall Street rethinking.
Speaker 6: That, Yeah, I know, it's still the stepchild. It's still
Speaker 6: not up.
Speaker 7: I mean you could see that, you know, imagine what
Speaker 7: would have happened even if they would have missed the numbers.
Speaker 6: So this is definitely the one that.
Speaker 7: Has the biggest AI cloud in terms of being disrupted.
Speaker 7: And it's going to take some multiple quarters like this
Speaker 7: for people to get comfortable with the story.
Speaker 6: I think last night they showed.
Speaker 7: Really good numbers, really good AI adoption, but they really
Speaker 7: have to do continue to do that for a long
Speaker 7: period of time.
Speaker 3: I think you hit it on the hit the nail
Speaker 3: on the head.
Speaker 2: That's going to take multiple quarters of this to convince
Speaker 2: Wall Street that this is a story where Adobe has
Speaker 2: figured out AI and how to monetize off of it.
Speaker 2: Up until this point, and until very recently, it feels
Speaker 2: like investors were souring on app software makers. Why is
Speaker 2: that and how does Adobe's results start to push back
Speaker 2: against that idea?
Speaker 7: See there again that Halo is not going to again
Speaker 7: go for multiple quarters. The concept is very simple because
Speaker 7: of large language models, you can spin up a software
Speaker 7: very quickly, which means if you do not, you don't
Speaker 7: need to go to app software vendors. You know, whether
Speaker 7: it's be salesforce, workday, or any any function that you're
Speaker 7: looking at where your large language model can do for it.
Speaker 7: We think it's a bit false narrative over there, but
Speaker 7: it's going to take some time again for people to
Speaker 7: get comfortable. We think it is not going to be
Speaker 7: easy to get rid of the system of record for finance,
Speaker 7: for HR for sales. People are not just going to
Speaker 7: get rid of those software and just put in a
Speaker 7: prompt and let you know, let somebody take care of it.
Speaker 7: So but again, the software industry is declining right now.
Speaker 7: That is not tied to AI. But that has to
Speaker 7: do with macro spending being bad, the overall economy being
Speaker 7: bad when it comes to enterprise IT spending. So I
Speaker 7: think those are the two opposing factors that are happening there. Oracle,
Speaker 7: I mean Adobe's results do help them a little bit,
Speaker 7: but I think it's going to be multiple years before
Speaker 7: we get comfortable with that.
Speaker 5: And Eric, I want to switch gears and talk a
Speaker 5: little open AI because we know the company is trying
Speaker 5: to move closer to becoming a for profit company. We
Speaker 5: know that it is, you know, facing criticism from Elon Musk,
Speaker 5: who's accusing the company of defrauding investors about its commitment
Speaker 5: to its charitable mission. Just tell us how this might work,
Speaker 5: How might this conversion work?
Speaker 7: Yeah, so again we don't have any details of what happened,
Speaker 7: but the only good thing is that Microsoft and Opening
Speaker 7: I have in principle agreed that they will move forward
Speaker 7: with this. The question, you know, for us, the biggest
Speaker 7: thing is will Microsoft still have access to open aiyes,
Speaker 7: you know, top of the line mode models or not.
Speaker 6: So that's the biggest thing.
Speaker 7: And second, what kind of revenue shared they will have
Speaker 7: with Microsoft on the inferencing side, so when people are
Speaker 7: using more chat GPT, whether that operation will run on
Speaker 7: Microsoft Cloud or not. So those are the things if
Speaker 7: and we think Microsoft will be willing to give some
Speaker 7: equity for these kinds of deals for these two factors,
Speaker 7: and you know that would be in the best interest
Speaker 7: of Microsoft sharedholders.
Speaker 2: Let me ask you presently as that John had mentioned,
Speaker 2: which is about Apple delaying the launch of its new
Speaker 2: iPhone Air in mainland China. These are regulatory approval issues
Speaker 2: that are holding that up. Is that on the side
Speaker 2: of the US or on the side of China. And
Speaker 2: how big of a knock is this for on Apple's
Speaker 2: revenue line.
Speaker 7: Yeah, it sounds like it's more from the you know,
Speaker 7: the China side of it. Now, the big question is
Speaker 7: what happens is the iPhone's going to be available, you know,
Speaker 7: a week from now, so from September nineteenth to October
Speaker 7: you know thirty first is you could say, a few
Speaker 7: days of revenue recognition of the newest model that you
Speaker 7: get in the current quarter. Most likely that gets pushed
Speaker 7: out in the next quarter. So that's the only difference
Speaker 7: it's going to have. I know, it's a you know
Speaker 7: for the Chinese users who are looking forward to this phone,
Speaker 7: they may not get it in the next ten to
Speaker 7: fifteen days, but you know, I don't think it's going
Speaker 7: to be longer before they'll be able to get.
Speaker 5: That in the about forty five seconds we have left.
Speaker 5: Just want to get your take on Microsoft teams basically
Speaker 5: avoiding a hefty fine with the EU. Bring us up
Speaker 5: to speed on that.
Speaker 7: Yeah, So this has been a case that's been around
Speaker 7: for a while, and the question is to use aggreg
Speaker 7: disaggregate teams versus Slack. So Microsoft has to do it.
Speaker 7: There's always a tying aspect of Microsoft products. It bundles
Speaker 7: in these things, and competitors think, you know, that's an
Speaker 7: unfair advantage for them, and you know they have to
Speaker 7: do with they're frankly speaking otherwise. You know this is
Speaker 7: a you know, the lawsuits otherwise that they will face
Speaker 7: because of it.
Speaker 3: Stay with us. More from Bloomberg Intelligence coming up after this.
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
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Speaker 5: I'm Alexis Kristoffers along with Scarlett Foo and Paramount sky
Speaker 5: Dance Boy wasting no time when it comes to making
Speaker 5: acquisitions right The Hollywood Studio taken over just last month
Speaker 5: by the independent filmmaker David Ellison, now reportedly preparing a
Speaker 5: bid for Warner Brothers. Discovery and Wall Street seems to
Speaker 5: like the news because Warner Brothers up about fourteen percent
Speaker 5: right now. We've even got Paramount sky Dance on the
Speaker 5: plus side by nearly three percent. Let's break it down
Speaker 5: with Geetha Ranganathan Bloomberg, intelligence analyst on US Media. He's
Speaker 5: watching it all for us from his perch in Princeton, GI.
Speaker 5: The great to see you. I guess Bloomberg was the
Speaker 5: first to report this, but we should make clear no
Speaker 5: official offer made yet. So what do we know?
Speaker 8: Yeah, so what we know right now, alexis is that
Speaker 8: Paramount is definitely interested in making a bid for Warner
Speaker 8: Brothers Discovery. And what's interesting. I mean, you pointed out
Speaker 8: the timing. That's definitely a very very critical aspect here.
Speaker 8: The second thing that's very interesting about this offer is
Speaker 8: that it's going to be for the entire company.
Speaker 4: Now.
Speaker 8: The reason I bring that up is because Warner Brothers
Speaker 8: Discovery was actually planning to split off its different assets. So,
Speaker 8: you know, the company owns TV networks like a CNN,
Speaker 8: a TVs at TNT. They also own one of you know,
Speaker 8: the biggest Hollywood movie and TV studios, and of course
Speaker 8: they have their you know, iconic HBO Max streaming platform.
Speaker 8: So there's a whole you know, portfolio of different assets there,
Speaker 8: and they were planning to separate out the TV assets
Speaker 8: which have been challenged for the past few years by
Speaker 8: cord cutting, and separate that out from the studio and
Speaker 8: the streaming part of the business. And so really what
Speaker 8: we were kind of thinking was that there would be
Speaker 8: a lot of and interest, a lot of appetite for
Speaker 8: the studio and streaming portion of the business, just given that,
Speaker 8: you know, those are kind of the crown jewels of
Speaker 8: the business, if you will. But you know, having Paramount
Speaker 8: kind of come in for the entire company is obviously
Speaker 8: a little bit of a surprise. There's no deal or
Speaker 8: dollar value yet, though, Alexis and.
Speaker 5: You are saying Etha that this, if it were to happen,
Speaker 5: would be a cash offer, like an all cash offer.
Speaker 8: That is what has been reported. It would be a
Speaker 8: majority cash offering for all of Warner Brothers Discovery.
Speaker 5: So I'm wondering if if Paramount Skydance is interested in
Speaker 5: all of Warner Brothers Discovery, what might regulators have to
Speaker 5: say about that.
Speaker 8: Yeah, normally it would have been a problem. I think,
Speaker 8: you know, you do have two of the biggest studios
Speaker 8: kind of combining it will become a top studio with
Speaker 8: about a twenty five percent box office share, Not that
Speaker 8: such deals haven't gone through, you know, the regulatory process before.
Speaker 8: So if you just remember if years ago Disney bought
Speaker 8: the Fox studio that gave them about a twenty five
Speaker 8: twenty six percent share of the box office. So it
Speaker 8: has been done. But I think what gives us more
Speaker 8: confidence in the whole regulatory process here is that David
Speaker 8: Ellison and you know, the family, the whole Sky Dance
Speaker 8: A team just went through this whole approval process for
Speaker 8: the Paramount merger with the Trump administration just about a
Speaker 8: month ago, so they obviously know their way around around
Speaker 8: the system. They know how to navigate all of the
Speaker 8: different challenges that come with, you know, a deal of
Speaker 8: this size. So I think that gives us plenty of confidence.
Speaker 8: And the other thing that I would mention is that
Speaker 8: there is no broadcast there's no combination of broadcast assets,
Speaker 8: So combining two broadcast networks like a CBS or an
Speaker 8: NBC that would be problematic. In this case, there is
Speaker 8: no broadcast asset from Warner Brothers, Discovery.
Speaker 5: Good good point, Githa. So I'm just wondering about the
Speaker 5: synergies here bouncing off of that, and you know, would
Speaker 5: there be a fair amount of overlap in the center
Speaker 5: that we may see a bunch of layoffs if and
Speaker 5: when this deal happens.
Speaker 8: Well, that is absolutely bound to happen. So we were
Speaker 8: actually already seeing that at both companies separately. So remember
Speaker 8: Warner Brothers Discovery is actually a combination of Warner Brothers
Speaker 8: and Discovery, and they had like mentioned or they had
Speaker 8: announced a lot of synergies and a lot of cost
Speaker 8: savings at the time that they you know, merged those
Speaker 8: two companies. We're going to see the same thing with
Speaker 8: Paramount and sky Dance. And now when you kind of
Speaker 8: see this mega merger, there absolutely is going to be
Speaker 8: a ton of layoffs just kind of given you know,
Speaker 8: the duplicative systems in place here. You know, you're talking
Speaker 8: about a studio business. Again, a lot of positions there
Speaker 8: can be eliminated, you know, the streaming platforms, the TV networks.
Speaker 8: You're going to have multiple teams kind of performing the
Speaker 8: same functions. So, yes, we do project something like about
Speaker 8: four or five billion dollars in potential cost savings. A
Speaker 8: lot of those, of course would be you know, with
Speaker 8: the elimination of jobs. So the Hollywood unions definitely would
Speaker 8: not be happy here.
Speaker 5: Yeah, I bet, and I just want to ask you
Speaker 5: a little bit about the market reaction we're seeing. Again, again,
Speaker 5: no deal has been made. This is Bloomberg reporting out
Speaker 5: there that's actually moving these stocks today. Warner Brothers Discovery
Speaker 5: up about fourteen percent, but we also got Paramount sky
Speaker 5: Dance up about three percent. Usually the acquirer comes under
Speaker 5: a little bit of pressure in the thirty seconds I have.
Speaker 5: Why do you think we're seeing both stocks higher?
Speaker 8: Yeah, that's a really interesting point you bring up, Alexis.
Speaker 8: The reason we're seeing Paramount trade higher is because remember
Speaker 8: this is a subscale streamer, so they have only about
Speaker 8: seventy five million streaming subscribers right now. Merging with Warner
Speaker 8: Brothers Discovery really kind of puts them on the map
Speaker 8: along with Netflix and Disney makes them a really formidable player.
Speaker 8: And so this is why we're kind of seeing a
Speaker 8: lot of enthusiasm for this bid.
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