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Speaker 2: There's a lot going on in media, or we keep
Speaker 2: hearing that there's going to be a lot going on
Speaker 2: in media, because some companies are up for sale and
Speaker 2: other companies are looking to buy, but we haven't gotten
Speaker 2: any actual bids just yet.
Speaker 3: Keitha.
Speaker 2: Ranganathan is our US media analyst here at Bloomberg Intelligence
Speaker 2: and Keitha.
Speaker 4: We've been looking at.
Speaker 2: Warner Brothers because it has announced plans to split itself
Speaker 2: up to extract more value. David Zaslov, the CEO, we
Speaker 2: know as a deal maker. Yet it just came out
Speaker 2: with results that showed revenue and the third quarter dropped
Speaker 2: six percent from a year ago. What does this mean
Speaker 2: for its plan to sell itself?
Speaker 5: So fundamentals Scarlett really don't matter all that much at
Speaker 5: this point, especially yes, the TV networks business as we
Speaker 5: know now for many many quarters has been severely challenged.
Speaker 5: We saw a twenty percent slump in TV advertising. We
Speaker 5: saw a twenty percent decline in TV EBITDA.
Speaker 3: This was kind of well expected, and this.
Speaker 5: Really speaks to why they need to separate themselves, why
Speaker 5: they need to separate the low growth or rather the
Speaker 5: no growth TV assets from one part from the part
Speaker 5: of the business that's actually growing, which is studio and streaming.
Speaker 5: That part of the business actually posted really good numbers.
Speaker 5: We saw the studio Warner Brothers has actually been having
Speaker 5: a very very successful run in the box office this year.
Speaker 5: They have about a twenty seven percent share of domestic
Speaker 5: box office and we've seen that kind of translate into
Speaker 5: really strong EBITDA numbers. And so we saw studio and
Speaker 5: streaming actually put up really really good numbers, and that
Speaker 5: again speaks to why so many different parties, including a Netflix,
Speaker 5: including a Comcast, are interested in going after those studio
Speaker 5: and streaming as. So right now, again fundamentals don't matter
Speaker 5: that much. It's really all about the m and A.
Speaker 6: And I'm actually surprised, Githa that maybe we haven't had
Speaker 6: some more news on the MNA front, because we've seen,
Speaker 6: you know, the m ANDA environment is very very active,
Speaker 6: with the market's very receptive to M and A. Here
Speaker 6: we have a willing seller in terms of David Zaslov
Speaker 6: and the board of directors here who how do you
Speaker 6: think this is going to plug out? Is something to
Speaker 6: make a bid for the entire company or just maybe
Speaker 6: the good pieces for it.
Speaker 5: We're having all possible permutations and combinations here, Paul. So
Speaker 5: we know that Paramounts Guidance is actually interested in all
Speaker 5: of the company, including the TV networks.
Speaker 3: They've already made three bids.
Speaker 5: The highest one was for twenty three and a half
Speaker 5: dollars per share for Warner Brothers Discovery all of it
Speaker 5: that was turned down, so they obviously have to come
Speaker 5: up with a much better offer.
Speaker 3: Now.
Speaker 5: The other bidders, and the two that are most often
Speaker 5: mentioned are Netflix and Comcast. They are the ones that
Speaker 5: are only interested in the studio and streaming assets, no
Speaker 5: interest at all in the TV linear network business. We
Speaker 5: know that Netflix has started looking into the books of
Speaker 5: Warner Brothers Discovery. This doesn't necessarily mean that they have
Speaker 5: to come out with a bid. I mean remember this.
Speaker 5: You know zaslav is, as you just mentioned, he's a
Speaker 5: very very tough negotiator.
Speaker 3: He's a deal maker.
Speaker 5: He is going to make sure that they really get
Speaker 5: paid well for the streaming and studio assets if they
Speaker 5: sell that, and we expect, you know, a price tag
Speaker 5: somewhere in the ballpark of about seventy five to eighty billion,
Speaker 5: So you know, whoever makes a big bid has to
Speaker 5: cough up a huge chunk of change for this asset.
Speaker 2: So we keep talking about how it's Netflix, Comcasts and
Speaker 2: Paramount Skuidance.
Speaker 4: Could there be another bidder that emerges from the shadows.
Speaker 5: Absolutely, I mean you can never rule out big tech.
Speaker 5: You know, Amazon obviously has shown some interest in the past.
Speaker 5: They bought the MGM studio. We're not necessarily sure whether
Speaker 5: they've actually taken a look at the Warner brother assets.
Speaker 5: But again, Scarlett, as you kind of think about the
Speaker 5: whole media land and you kind of think about the
Speaker 5: various assets out there, this is kind of a once
Speaker 5: in a lifetime, kind of a generational opportunity for anybody
Speaker 5: who wants to get big in media to really go
Speaker 5: after Warner I mean, they have some of the best
Speaker 5: ip out there. They have a streaming business that has
Speaker 5: performed really well. HBO Max is a name that resonates
Speaker 5: across the globe. So you know, anybody and everybody should
Speaker 5: really be taking a look at this asset. I wouldn't
Speaker 5: be surprised if we have some kind of a dark
Speaker 5: horsepitter here.
Speaker 2: Okay, speaking of media companies with names, brands that really resonate,
Speaker 2: Disney's ESPN dropped Penn National as its sports betting partner
Speaker 2: and has picked up Draft Kings.
Speaker 4: Why didn't it just do that the first time around?
Speaker 3: Yeah, that's a great question.
Speaker 5: So if you remember actually two three years ago they
Speaker 5: were in talks with DraftKings. I think it ultimately came
Speaker 5: down to price. I think they got a much better
Speaker 5: deal with pen, which was paying them something like about
Speaker 5: two billion dollars over ten years.
Speaker 3: The thing is that they were really a late mover.
Speaker 5: You know, by the time ESPN bet came to the
Speaker 5: market with Ben, DraftKings and FANDUIL had already kind of
Speaker 5: really consolidated their share in the market. They have about
Speaker 5: a seventy percent share of the sports betting market. Ben
Speaker 5: had a lot of problems, you know. Yes, they kind
Speaker 5: of got the product out there, they have just about
Speaker 5: maybe a three percent share. They just haven't been able
Speaker 5: to kind of convert users. The user experience hasn't been good.
Speaker 5: So I think, you know, ESPN did make a good
Speaker 5: decision and dropping them and going back to the DraftKings.
Speaker 6: Mickey Mouse and sports betting. I never thought i'd see that,
Speaker 6: I know.
Speaker 2: Right, Yeah, well, once upon a time they were like,
Speaker 2: we're not getting into any exact you're.
Speaker 6: Exactly right, hey, Keith, I see our good friends of Comcast.
Speaker 6: Speaking of Comcasts, they have plans to split their cable
Speaker 6: networks apart from their broadband and cable TV businesses, and
Speaker 6: they're going to call this lovely company versut go figure.
Speaker 6: But I understand they're going to have an investor day
Speaker 6: December fourth, So it sounds like Comcast is moving forward
Speaker 6: on this split. Here, give us a sense of what
Speaker 6: do you think verse will look like? And when do
Speaker 6: you think that split's going to happen.
Speaker 5: The split's going to happen before ear end falls. And
Speaker 5: they've you know, they've got all the pieces moving here.
Speaker 5: This is really all of the cable networks other than
Speaker 5: Bravo and you know, so we have the USA Network,
Speaker 5: we have Golf, Sci Fi, all of these networks that
Speaker 5: they're kind of splitting out. Again the problem with the
Speaker 5: cable network business is that it is severely challenged, more
Speaker 5: so than the broadcast business, which is why they're still
Speaker 5: keeping NBC broadcast, the keeping the Peacock streaming platform. It's
Speaker 5: just these cable networks that have been severely challenged, you know,
Speaker 5: as we kind of model out advertising, affiliate fees and EBITDA,
Speaker 5: we're kind of looking for, you know, mid single digit
Speaker 5: IBADA decline. But it still does throw out a good
Speaker 5: amount of cash, so we're you know, as we kind
Speaker 5: of look at it, it's about two and a half
Speaker 5: two point six billion dollars in cash, so again, still
Speaker 5: a recent business.
Speaker 3: Kita.
Speaker 4: Why is Bravo so valuable then to Comcast.
Speaker 5: Because they have a lot of content and nonfiction content
Speaker 5: that they put from Bravo to Peacock and it doesn't, yeah,
Speaker 5: cheap to make, and it doesn't necessarily.
Speaker 3: Fit with the rest of the portfolio. So I want
Speaker 3: to hold on to that.
Speaker 4: Cheap to make.
Speaker 6: I think that's a theme here, Paul, I know, I know,
Speaker 6: But and it's also about sports as well, you know,
Speaker 6: and the sports is still working for these networks, mostly
Speaker 6: the wrong They all.
Speaker 4: Paid up a ton yep, so it's only employment viewing.
Speaker 6: It exactly exactly right. This is Warner Brothers Discovery still
Speaker 6: thinking about a split. Here, githa thirty seconds.
Speaker 5: To anybody's guests called but right now, if they don't
Speaker 5: get the price that they that they want, which we
Speaker 5: think is upwards of thirty dollars a share for the
Speaker 5: entire company, I think they will go ahead with the split.
Speaker 5: And I think Zoslav is willing to wait this out
Speaker 5: and we'll see that split happens sometime in the middle
Speaker 5: of twenty twenty six.
Speaker 6: Stay with us. More from Bloomberg Intelligence coming.
Speaker 4: Up after this.
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Speaker 6: All right, let's talk a little technology, because we've got
Speaker 6: technology earnings all over the place. Men Deep sing Joints
Speaker 6: is here, research head of Globe Bloomberg Intelligence. On tech stories,
Speaker 6: Uber Lift, they reported some numbers Door Dash repeated. Are
Speaker 6: people talk to us about that SEC segment of the economy,
Speaker 6: the ride sharing, the outsourcing, you know, the third party delivery.
Speaker 6: Are people still spending money on that stuff? They are?
Speaker 7: And all these companies, I mean, Uber reported over twenty
Speaker 7: percent growth, door Dash reported twenty five percent top line growth.
Speaker 7: Even though the stock reaction was negative, that was primarily
Speaker 7: because they plan to spend more money next year on
Speaker 7: building their tech stack. I think what the playbook here
Speaker 7: is to expand in more geographies as well as branch
Speaker 7: out into other areas of last mile delivery. And in
Speaker 7: the case of door Dash, they are experimenting with, you know,
Speaker 7: delivering food without a career human person involved, and also
Speaker 7: expanding into restaurant point of sale devices. I mean they're
Speaker 7: developing technology where you can pay using a door dash
Speaker 7: hardware and point of sale device. So clearly there is
Speaker 7: a lot that these companies are doing beyond you know,
Speaker 7: the original business that they have.
Speaker 6: You know having you know, when you spend time in
Speaker 6: England and you go pay for meal, the card never
Speaker 6: leaves your presence. They just tap it on some machine
Speaker 6: and here they take it. They put it in a
Speaker 6: little folder, they take it away for.
Speaker 4: Five minutes, and that's what you pay twenty person for.
Speaker 6: You don't know where it's going. And that's why I'm
Speaker 6: surprised we're so behind here in Yos about that.
Speaker 2: At point We've always been kind of behind this, you
Speaker 2: know that that's been our calling card.
Speaker 7: The way to think about it is, there are so
Speaker 7: many legacy systems that anytime you have new technology, even
Speaker 7: everyone is talking about AI agents and whatnot, it has
Speaker 7: to sit on top of a lot of legacy technology.
Speaker 7: And like the promise of AI is it can rewrite
Speaker 7: a lot of that legacy code and migrate into the
Speaker 7: you know, the modern technology. But we have yet to
Speaker 7: come across, you know, real proof points of that.
Speaker 2: So when you're talking man Deep, I noticed that you
Speaker 2: talked a lot about how these companies are spending, they're investing,
Speaker 2: and I'm curious about the reception that gets from investors
Speaker 2: because initially in the big AI build up, everyone was
Speaker 2: excited about these plans. But now more and more everyone's like, oh,
Speaker 2: I'm not so sure that's a great idea that you're
Speaker 2: spending so much, whether it's on AI or whether it's
Speaker 2: on new products and internal platform like it is with
Speaker 2: door Dash. Why do you think investors are now more
Speaker 2: skeptical about this idea of companies spending.
Speaker 7: Well, just because we've seen you know, Uber and all
Speaker 7: these companies really struggle with free cash flow. Initially, I
Speaker 7: mean in the zerp era, you know, these companies burned
Speaker 7: a lot of cash. Now they have gotten to a
Speaker 7: point where the business model does generate you know, seven
Speaker 7: to eight billion dollars in free cash flow for Uber
Speaker 7: and even for door Dash it's twenty percent ebit dumb margins.
Speaker 7: So the fact that they're talking about spending again, it
Speaker 7: makes you think, Okay, if you're an investor, you waited
Speaker 7: all this while for these companies to get mature and
Speaker 7: you know, start delivering on cash, and now they're talking
Speaker 7: about another investment cycle. And that's where you know, in
Speaker 7: the case of Uber, it's their hand is forced by
Speaker 7: Veimo launching on in ten cities and really expanding and
Speaker 7: potentially Tesla. I think in the case of door Dash,
Speaker 7: they feel, you know, making acquisitions will help them expand
Speaker 7: their geographic footprint and then obviously they want to expand
Speaker 7: their tech stach to more areas.
Speaker 6: Most important. Do you arbitrage Lift versus Uber?
Speaker 7: I don't these days, simply because I think what Uber
Speaker 7: has done well is they know my preferences, especially when
Speaker 7: it comes to business travel, and their you know, frequency
Speaker 7: and their ability to reduce wait times is far beyond
Speaker 7: anyone else in terms of giving me a ride wherever
Speaker 7: I am and shrinking that way time. I think that's
Speaker 7: very important when you compare to autonomous drive, Like I
Speaker 7: could go to San Francisco and get a Vema, but
Speaker 7: then I have to wait for five minutes, whereas I
Speaker 7: get an Uber in less than a minute. So that's
Speaker 7: where if you really care about your time, you still
Speaker 7: go for Uber.
Speaker 2: Yeah, I use Lyft because I have a Chase card
Speaker 2: and I get a ten dollars a month.
Speaker 7: Quality points is another aspect.
Speaker 4: Yeah, stay with us.
Speaker 6: More from Bloomberg Intelligence coming up after this.
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
Speaker 1: weekdays at ten am Eastern on Applecarplay and Android Auto
Speaker 1: with the Bloomberg Business app. Listen on demand wherever you
Speaker 1: get your podcasts, or watch us live on YouTube.
Speaker 2: Let's talk a little bit about companies that are affected
Speaker 2: not just by tariffs, but by a consumer that perhaps
Speaker 2: is somewhat weakened, a little bit more cautious given the
Speaker 2: softness in the job market. Let's bring and put on Goyle,
Speaker 2: she is our senior US e commerce and retail analysts,
Speaker 2: to talk a little bit about under Armour, whose shares
Speaker 2: are down about five percent in late morning trading. When
Speaker 2: it comes to under Armour, how much of the struggles
Speaker 2: that this company is experiencing is due to things like
Speaker 2: teriffs which is beyond its control, versus an overall product
Speaker 2: selection and a consumer whose taste might have shifted.
Speaker 8: Sure, I think it's a combination of both. When you
Speaker 8: look at the top line, it's really self inflicted. Right,
Speaker 8: they're trading out of off price, They're trying to drive
Speaker 8: more full price sales. They're really revamping their whole message,
Speaker 8: trying to resonate better with consumers. So that's why we
Speaker 8: continue to say weakness there. They need to drive more
Speaker 8: product innovation. But then when it comes to margins, it's
Speaker 8: a little bit of both. Tariffs are impacting them, in
Speaker 8: fact more than some of our other companies who have
Speaker 8: been largely able to offset these headwinds. They are not
Speaker 8: able to and that's sending gross margins down about two
Speaker 8: hundred basis points for their fiscal year.
Speaker 6: So I think about that, you know, athletic market plunam
Speaker 6: it just feels super uber competitive to me. Is this
Speaker 6: a place where under Armour can win? Visa be the
Speaker 6: Nikes of the world the iddas.
Speaker 8: Yeah, look, I think the market is growing and competitive,
Speaker 8: and that's you're absolutely right. It feels like every company
Speaker 8: right now in the at leisure space is on a
Speaker 8: reset mode. When you think of Nike, they're under reset,
Speaker 8: Pumas under reset, under Armors under a reset, right, So
Speaker 8: they're all going after the same customer, but in a
Speaker 8: different way. Nike clearly the giant in the room. They
Speaker 8: have the dollars to invest in brand, marketing and endorsements,
Speaker 8: so they can continue to step harder on innovation. When
Speaker 8: it comes to under Armor. I think we've heard the
Speaker 8: story so many times now, Paul. I mean I've heard
Speaker 8: their turnaround and seen it go up and then away
Speaker 8: every couple of years. So will this be the time
Speaker 8: they get it right. It's really hard to tell because
Speaker 8: right now they've controlled their inventories, which is a good thing.
Speaker 8: They're down six percent, they're downward than the sales decline.
Speaker 8: But the innovation adds and flows, so we'll let's stick.
Speaker 8: Will the consumer, you know, stay committed and loyal to
Speaker 8: under Armour? I don't think the consumer is weld at
Speaker 8: anything today.
Speaker 4: That's a really good point.
Speaker 2: They're loyal to price price first is what they're loyal
Speaker 2: to and deals phuna. Under Armour also announced a new executive,
Speaker 2: a new CFO for the company, Raisa Taligani, will be
Speaker 2: taking over or starting in February. Does this raise concerns
Speaker 2: about not leadership so much, but in terms of strategy
Speaker 2: for the company, because as you mentioned, feels like under
Speaker 2: Armour has been in turnaround mode for a long time.
Speaker 8: It doesn't concern me about the strategy. He was a
Speaker 8: CFO in his prior role as well with another company.
Speaker 8: I think the leadership is really identified by the CEO,
Speaker 8: Kevin Blank at this example, and he has a plan
Speaker 8: to lead this turnaround. And the plan is pretty basic.
Speaker 8: It's not anything new. It's returning back to product customer
Speaker 8: innovation and going back to full price selling to maintain
Speaker 8: brand help That is retail one on one playbook for
Speaker 8: any brand, and he's just going back to the roots.
Speaker 8: So I think the strategy is right. It's whether the
Speaker 8: customer will respond and whether they will drive enough innovation.
Speaker 8: But innovation with performance. I think that's what you need
Speaker 8: from an athletic were brand and that's where they need
Speaker 8: to put the focus.
Speaker 6: Plut how's the holiday shopping season shaping up. What are
Speaker 6: the expectations.
Speaker 8: The expectations are for at least for online. You know,
Speaker 8: we think online will continue to game share over the
Speaker 8: holiday season. We do see strength. I mean I cover
Speaker 8: Amazon as well, and I think Amazon's going to have
Speaker 8: a great holiday season. In terms of the broader retail
Speaker 8: I think what you'll see again is a biification and trends.
Speaker 8: The retailers that push the pedal on price and have
Speaker 8: the product the consumer's desire will take share. But then
Speaker 8: those in the middle still stand to fall behind. And
Speaker 8: that's been the case for many years now. It hasn't changed.
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