WEBVTT - Apple Too Dependent on iPhone Cycle, Needs AI, Software: Gillis 0:00:05.800 --> 0:00:08.720 Welcome to the Bloomberg p m L Podcast. I'm Pim Fox. 0:00:08.760 --> 0:00:11.520 Along with my co host Lisa Abramowitz. Each day we 0:00:11.640 --> 0:00:15.120 bring you the most important, noteworthy, and useful interviews for 0:00:15.200 --> 0:00:17.840 you and your money, whether you're at the grocery store 0:00:17.960 --> 0:00:20.720 or the trading floor. Find the Bloomberg p m L 0:00:20.840 --> 0:00:32.840 Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. I'm 0:00:32.840 --> 0:00:37.120 Taylor Regg's I'm filling in for Lisa Abramowitz today. Of course, Pim, 0:00:37.200 --> 0:00:40.599 the big news this week is tech earnings. We're wrapping 0:00:40.720 --> 0:00:44.120 up tech earnings here on this Friday morning. I'm looking 0:00:44.159 --> 0:00:48.280 at the big a's Apple, Amazon alphabet and to help 0:00:48.280 --> 0:00:50.440 break down some of these earnings with me, we have 0:00:50.600 --> 0:00:53.280 in studio with us Colin Gillis. He's the director of 0:00:53.400 --> 0:00:56.760 research at s Our Partners. Colin, I want to start 0:00:56.800 --> 0:00:59.960 with alphabet. Of course, that's Google's parents. I was reading 0:01:00.160 --> 0:01:02.720 a few of the analyst notes this morning and it's 0:01:02.760 --> 0:01:05.440 just incredible. You have a company in the twentie year 0:01:05.840 --> 0:01:09.640 still posting top line revenue growth of twenty percent. Where 0:01:09.680 --> 0:01:13.399 do you see Google still continuing to grow in the future. 0:01:13.560 --> 0:01:15.640 Is it in the Google Cloud or is there something 0:01:15.680 --> 0:01:19.520 else Hi, Taylor. So, you know, a remarkable two thousand 0:01:19.600 --> 0:01:21.760 and seventeen for Google. This is the first year at 0:01:21.800 --> 0:01:25.679 the company cracked one billion dollars in total revenue and 0:01:25.720 --> 0:01:29.600 to still be growing north is an incredible feat. Now 0:01:29.640 --> 0:01:33.680 as an investment, the thing we love most about Google 0:01:34.040 --> 0:01:36.440 is that you can see where the immediate near term 0:01:36.480 --> 0:01:39.039 revenue is gonna come from, right, it's core search business. 0:01:39.200 --> 0:01:41.600 But you can also see where future growth is going 0:01:41.640 --> 0:01:44.839 to come from, right whether it's their Android platform, whether 0:01:44.880 --> 0:01:49.360 it's YouTube, whether it's their YouTube TV platform, whether it's UM, 0:01:49.400 --> 0:01:53.560 their way Mo driverless cars. So there's multiple areas including, 0:01:53.680 --> 0:01:57.680 like you mentioned, their cloud business, which cracked one billion 0:01:57.720 --> 0:02:00.960 dollars in revenue for the December quarter. Tell people what 0:02:01.160 --> 0:02:04.240 is the cloud business? And why does it matter whether 0:02:04.320 --> 0:02:08.520 I use Amazon's Web services, which is their cloud business, 0:02:08.560 --> 0:02:12.440 or whether I use Google's cloud business or someone else's 0:02:12.440 --> 0:02:15.919 cloud business like Microsoft. Sure, And that's a fantastic question, pain, 0:02:16.040 --> 0:02:18.919 because you know, the the leader in the cloud is 0:02:18.960 --> 0:02:21.960 Amazon and it's AWS. And you know, if you want 0:02:22.000 --> 0:02:25.520 to put in perspective, they do more business in the 0:02:25.560 --> 0:02:28.280 cloud then all the other competitors combined, right through the 0:02:28.320 --> 0:02:31.120 north of five billion dollars. Plus it grew tremendously for 0:02:31.200 --> 0:02:33.920 Amazon on the fourth quarter. Growth actually picked back up 0:02:33.960 --> 0:02:38.200 again north of you over a year. So it's computing cycles. 0:02:38.320 --> 0:02:41.240 Why do you need to have local resources when you 0:02:41.280 --> 0:02:45.640 can have massive computing cycles available to you that you 0:02:45.680 --> 0:02:48.160 can tap into as needed. So it's just like why 0:02:48.280 --> 0:02:50.560 own a car then leave it parked in a garage, 0:02:50.800 --> 0:02:52.840 right when you could just have a car whenever you 0:02:52.880 --> 0:02:55.639 want to drive one, and the resources get shared among 0:02:55.680 --> 0:02:59.320 different customers, right, And that's the concept of the public cloud. Now, 0:02:59.720 --> 0:03:01.880 the lip side is that even though this is going 0:03:01.919 --> 0:03:04.840 to be a massive business, that it may become a 0:03:04.880 --> 0:03:07.360 commodity like a utility, and that there will be price 0:03:07.440 --> 0:03:10.520 compression coming in over time. But suffice to say, the 0:03:10.560 --> 0:03:12.520 book of business is going to be so large that 0:03:12.600 --> 0:03:15.920 whoever captures the majority of it, it's going to be lucrative, 0:03:16.000 --> 0:03:18.080 no matter what the margin. So saying that even if 0:03:18.080 --> 0:03:21.480 it becomes a commodity, it's gonna be a ways before 0:03:21.520 --> 0:03:24.000 that happens, and the amount of money that they can 0:03:24.040 --> 0:03:27.919 make on that road is so big and so consistent 0:03:28.480 --> 0:03:32.280 that the competitive issues don't really come into play. Correct, 0:03:32.400 --> 0:03:34.520 That's right, I mean, you know, competitive issues always come 0:03:34.520 --> 0:03:36.760 into a play to a certain degree. But but again, 0:03:36.880 --> 0:03:39.440 you know, even a I mean, it's not like Microsoft's 0:03:39.440 --> 0:03:43.840 cloud is that much more expensive or that much better 0:03:43.960 --> 0:03:46.000 than the cloud that you would use if you were 0:03:46.400 --> 0:03:48.600 going to go to Amazon. Ultimately, you know that there 0:03:48.640 --> 0:03:51.520 are some pains to switching, but the switching barriers will 0:03:51.520 --> 0:03:53.520 continue to be reduced. Let me think about you know, 0:03:53.560 --> 0:03:56.840 when you use your search engine, right, most people use Google, right, 0:03:56.880 --> 0:03:59.080 but the actual switching costs to move to bing is 0:03:59.120 --> 0:04:02.520 relatively low, right and and but yet people don't really 0:04:02.520 --> 0:04:05.080 switch yet. Um, but that may happen in the future 0:04:05.120 --> 0:04:09.120 down the road. So again it's a area of growth. 0:04:09.160 --> 0:04:11.920 But I would also focus more on what's happening at YouTube. 0:04:12.200 --> 0:04:15.320 There's been a little concern about some of the videos 0:04:15.320 --> 0:04:17.080 that you just tell this story about, because we were 0:04:17.080 --> 0:04:19.640 talking just before you came in here about younger people. 0:04:19.640 --> 0:04:21.960 And when I mean younger people, these are the consumers 0:04:21.960 --> 0:04:25.480 of the future. They do not seem to know what NBC, 0:04:25.520 --> 0:04:30.520 ABC and CBS are, correct, They know all about YouTube 0:04:30.520 --> 0:04:33.080 and they just watch those videos all day long. That's right. 0:04:33.120 --> 0:04:35.120 So when we sit down my ten year old son, 0:04:35.440 --> 0:04:37.680 you know, we try to figure out what program you 0:04:37.720 --> 0:04:41.080 know is where, right, it's either Netflix or it's Amazon, 0:04:41.480 --> 0:04:44.279 or it's on YouTube. And we also use YouTube TV 0:04:44.560 --> 0:04:47.240 to get our live TV. And it has the unlimited 0:04:47.800 --> 0:04:51.080 DVR storage cloud storage, so you can record any programs. Right. 0:04:51.160 --> 0:04:54.480 So it's really it's a fantastic offering. And if they 0:04:54.480 --> 0:04:58.080 can start to if Google can start to monetize television 0:04:58.120 --> 0:05:00.400 to the same degree that they've monetized YouTube to, right, 0:05:00.440 --> 0:05:02.839 that's a could be a very lucrative driver for them 0:05:03.080 --> 0:05:08.520 and the idea of content consumption. It's completely changed. The 0:05:08.600 --> 0:05:12.039 brands have completely moved in. The company that's nowhere to 0:05:12.040 --> 0:05:14.480 be seen in any of this, of course, is Apple. Right, 0:05:14.640 --> 0:05:16.880 You've got Amazon in there, You've got Google in there, 0:05:16.880 --> 0:05:20.480 You've got Netflix in there, but Apples zero. You mentioned Amazon. 0:05:20.560 --> 0:05:22.400 I want to touch on that quickly. Why you have 0:05:22.880 --> 0:05:25.479 why we have you here? You talked about it's the 0:05:25.520 --> 0:05:29.080 first time the companies generated over a billion dollars in 0:05:29.240 --> 0:05:32.359 quarterly profit. I've been asking this question. You're part of 0:05:32.360 --> 0:05:36.560 my poll. Is Amazon getting too big? Where they're starting 0:05:36.640 --> 0:05:38.719 to enter into a lot of different industries. We have 0:05:38.800 --> 0:05:41.920 whole foods. Now, at what point did they start to dry? Uh? 0:05:42.000 --> 0:05:45.960 You know, attract regulators perhaps, sure. I mean, you know 0:05:46.040 --> 0:05:48.960 what's interesting is we used to talk about the competition 0:05:49.040 --> 0:05:52.600 between Apple and Google, and back when Android was first launching, 0:05:53.000 --> 0:05:55.640 and Eric Schmidt, who was the CEO of Google, used 0:05:55.640 --> 0:05:59.359 to be on Apple's board. And but now the battle 0:05:59.480 --> 0:06:02.960 that's much more interesting is Alphabet versus Amazon, because these 0:06:02.960 --> 0:06:07.080 two companies are colliding on multiple points, including advertising, including 0:06:07.160 --> 0:06:13.200 smart homes. You see Amazon pushing into many facets of technology, right, 0:06:13.200 --> 0:06:16.000 and the purchase of whole foods is a great example 0:06:16.200 --> 0:06:18.280 that they're trying to get into groceries. They want to 0:06:18.320 --> 0:06:22.000 get into medicine. Um, they're in your house with Alexa, 0:06:22.440 --> 0:06:26.520 in our house with Alexa exactly right, And so you 0:06:26.560 --> 0:06:30.160 know that's always a concern, but in terms of government regulation, 0:06:30.200 --> 0:06:32.039 but that's a concern for any of these companies that 0:06:32.040 --> 0:06:36.560 we're discussing in technology. These are major forces and what 0:06:36.640 --> 0:06:39.680 Jeff Bezos is chasing after is a very big picture 0:06:39.960 --> 0:06:43.000 in terms of how much of your consumer dollars he 0:06:43.040 --> 0:06:46.080 wants to capture, which is basically all of it. Okay, 0:06:46.279 --> 0:06:48.880 if you got the chance to sit down with Tim Cook, 0:06:49.040 --> 0:06:52.240 the chief executive of Apple, and he said, look, I'm 0:06:52.279 --> 0:06:54.599 interested in your thoughts about what do you think we 0:06:54.640 --> 0:06:56.680 ought to be doing so that five years from now 0:06:56.680 --> 0:06:59.040 we're still part of the conversation. What would you suggest? 0:06:59.400 --> 0:07:03.000 I would just uh that Mr Cook consider taking more risks, 0:07:03.160 --> 0:07:06.920 and he's been a very um careful steward of Apple, 0:07:07.240 --> 0:07:09.760 but I think that that may wind up catching up 0:07:09.760 --> 0:07:11.960 to them. So when we sit down and we have 0:07:12.120 --> 0:07:15.000 the various you know, home assistants, right, we've got Google Home, 0:07:15.000 --> 0:07:18.600 We've got Alexa devices, Uh, Apple is just so far 0:07:18.680 --> 0:07:21.320 behind an AI and I would have them focus more 0:07:21.360 --> 0:07:25.080 in that area. And I would also consider apples software 0:07:25.120 --> 0:07:29.560 skills and prowess. Um. I think they're fantastic hardware company, 0:07:29.600 --> 0:07:32.440 but I think the software you know is not innovative 0:07:32.560 --> 0:07:38.040 and frequently is lackluster. And so right now, right as 0:07:38.080 --> 0:07:40.880 you know, concerned of the iPhone supercycle is sort of 0:07:40.920 --> 0:07:43.320 you know, storry that thesis is falling apart. All that's 0:07:43.360 --> 0:07:45.760 really left is you know, cap structure and and and 0:07:45.840 --> 0:07:48.960 debt you know share every purchasing right uh, and dividends 0:07:49.120 --> 0:07:52.000 and so a cap structure play is not necessarily a 0:07:52.040 --> 0:07:55.560 fantastic investment thesis is an investment thesis. But if the 0:07:55.560 --> 0:07:59.680 iPhone cycle, you know, falls apart. Then Apple, that's so 0:07:59.760 --> 0:08:01.840 many sound of revenue. Apple is not in a position 0:08:01.880 --> 0:08:04.360 to replace that easily. Yeah, does that mean going out 0:08:04.400 --> 0:08:06.400 and making acquisitions? And take a look at our f 0:08:06.440 --> 0:08:09.640 a function free cash flow fifty billion dollars. What do 0:08:09.720 --> 0:08:11.560 they do with the cash? Yeah, I mean it's a 0:08:11.560 --> 0:08:15.160 great question. And you know they're returning it to shareholders, right, 0:08:15.160 --> 0:08:18.040 and that the excitement. The biggest piece of news that 0:08:18.040 --> 0:08:20.800 came from the Ernis call was net cash zero. Right. 0:08:20.840 --> 0:08:24.480 Apple has pledged to return all of its cash or 0:08:24.520 --> 0:08:26.680 to deploy all of its cash, right, whether that's stock 0:08:26.720 --> 0:08:30.160 we purchases or dividends. Thanks very much, Colin gillis a pleasure, 0:08:30.200 --> 0:08:34.400 Director of research for Chatham Road Partners see our partners. 0:08:34.520 --> 0:08:37.320 Congratulations on your new venture. Much appreciate it, and we 0:08:37.360 --> 0:08:39.440 appreciate your coming in and sharing your knowledge with us. 0:08:53.559 --> 0:08:56.880 Good morning. This is Bloomberg Radio. I'm Taylor Riggs filling 0:08:56.920 --> 0:08:59.800 in for Lisa abrama Witz. You know, Pim, like you 0:08:59.840 --> 0:09:01.840 were mentioning, We've got a lot of news this week 0:09:01.840 --> 0:09:05.520 concerning more developments in the investigation of Russian meddling in 0:09:05.520 --> 0:09:09.800 the presidential election. To walk us through all of this, 0:09:10.000 --> 0:09:13.240 where we stand. Where we go from here is Clint Watts. 0:09:13.240 --> 0:09:18.240 He's a senior fellow at the Foreign Policy Research Institute. Clint, 0:09:18.679 --> 0:09:21.720 you know, broadly speaking here, just to start us off, 0:09:22.080 --> 0:09:25.880 do tech companies need to do more to prevent more 0:09:25.960 --> 0:09:29.840 Russian meddling in our election? Have they done enough? Yeah? So, 0:09:29.920 --> 0:09:33.079 they've made some drastic improvements over the last year. I 0:09:33.480 --> 0:09:36.320 think Facebook has been quite transparent. They brought out a 0:09:36.360 --> 0:09:39.120 lot of the issues they seem to have tracted down 0:09:39.240 --> 0:09:42.440 fairly quickly, and they've moved more aggressively in other elections 0:09:42.440 --> 0:09:45.400 around the world. But the biggest thing that all the 0:09:45.440 --> 0:09:48.040 social media companies should be required to do by law 0:09:48.559 --> 0:09:51.800 is to say what the sources of political and social 0:09:51.800 --> 0:09:56.280 issue advertising. It's standard for radio like this, it's standard 0:09:56.360 --> 0:10:01.199 for television, print, And because this layer of of attribution 0:10:01.320 --> 0:10:03.120 is not there in social media, it makes it much 0:10:03.160 --> 0:10:06.679 easier for foreign power to influence the US audiences. All right, 0:10:06.760 --> 0:10:09.080 let's just move on to what is going to be 0:10:09.280 --> 0:10:12.360 perhaps a most watched memo at least of the weekend. 0:10:12.520 --> 0:10:14.240 And this has to do with the memo that was 0:10:14.280 --> 0:10:18.199 put together by GOP staffers on the House Intelligence Committee 0:10:18.400 --> 0:10:22.600 having to do with the FBI's investigation into Russian meddling 0:10:22.920 --> 0:10:25.559 in the U S elections. What is your thoughts? But 0:10:25.640 --> 0:10:29.240 what do you believe is in that memo? I imagine 0:10:29.280 --> 0:10:33.600 what they're trying to do is selectively pull information out 0:10:33.640 --> 0:10:37.520 of the authorization the application for a Foreign Intelligence Surveillance 0:10:37.559 --> 0:10:43.240 Act warrant, which connects the dossier to justifications for that application. 0:10:43.280 --> 0:10:45.640 You're gonna have to tell people, remind them that dossier 0:10:45.800 --> 0:10:48.920 and the people involved, because when you said to use 0:10:49.840 --> 0:10:53.440 selective information, it has to do with eavesdropping on a 0:10:53.440 --> 0:10:57.800 Trump campaign foreign policy aid Carter Page. Right, So the 0:10:57.920 --> 0:11:01.400 target of the application for the search war was Carter Page, 0:11:01.440 --> 0:11:04.360 who was named by the Trump team as one of 0:11:04.400 --> 0:11:07.520 his foreign policy advisors and who had shown up actually 0:11:07.520 --> 0:11:10.640 in Moscow, you know, doing a talk during the run 0:11:10.720 --> 0:11:14.079 up to the election. What this application did was it 0:11:14.240 --> 0:11:17.880 asked for surveillance on him. And in that application, what 0:11:18.000 --> 0:11:20.319 I think will probably come out is that they cited 0:11:20.320 --> 0:11:23.800 the dossier. This is the x m I six UH 0:11:23.840 --> 0:11:28.079 Steal dossier, which brought forth lots of raw reporting and 0:11:28.200 --> 0:11:31.280 was put up on buzzbeed and essentially it asserted that 0:11:31.400 --> 0:11:35.080 Russia was trying to you know, win the election for 0:11:35.160 --> 0:11:38.280 Trump and to suppress Clinton. Uh. In the run up, 0:11:38.400 --> 0:11:41.959 that dossier has been under great contention in the House 0:11:42.000 --> 0:11:45.240 Intelligence Committee. They have really fought it the rasci of 0:11:45.240 --> 0:11:49.120 it because the Clinton campaign funded it at one point 0:11:49.440 --> 0:11:55.200 was also refunded, initially funded by a traditionally Republican opposition 0:11:55.360 --> 0:11:58.320 research group. And so they're trying to steer this into 0:11:58.360 --> 0:12:02.640 a conspiracy that the FBI and the spies application. We're 0:12:02.920 --> 0:12:06.280 trying to push Clinton forward and suppress Trump going into 0:12:06.280 --> 0:12:09.000 the election, and this this plays the president's narrative of 0:12:09.040 --> 0:12:12.600 a witch hunt Clinton. I want to ask this week, 0:12:12.640 --> 0:12:15.120 President Trump said he may authorize a release of the 0:12:15.160 --> 0:12:19.040 memo that's not redacted. Are there any risk to national 0:12:19.080 --> 0:12:21.920 security if the memo is released it doesn't have redactions 0:12:21.960 --> 0:12:24.959 to it. Yeah. I think there's risk in two ways. 0:12:24.960 --> 0:12:29.160 So with regards to redactions, if it discloses sources or methods, 0:12:29.160 --> 0:12:32.360 this really hurts us in terms of our intelligence capability 0:12:32.400 --> 0:12:35.400 around the world. Will it will disclose how we went 0:12:35.679 --> 0:12:37.800 or how we use that information or where we get 0:12:37.800 --> 0:12:40.800 it from. Even broader than that, this has never happened 0:12:40.840 --> 0:12:43.720 before in our history. It would be the selective leaking 0:12:43.760 --> 0:12:48.400 out of classified information. From you know, surveillance applications. So 0:12:48.520 --> 0:12:52.040 just imagine the tidal wave of disclosures that could be 0:12:52.160 --> 0:12:55.440 used for political purposes by either party moving forward. Uh, 0:12:55.520 --> 0:12:58.840 somebody could go and dig into any application written by 0:12:58.880 --> 0:13:02.120 any agent going back many years, pull a piece of 0:13:02.160 --> 0:13:04.720 information out for political purposes, and then either use it 0:13:04.760 --> 0:13:08.240 to attack that investigation the investigator, or to try and 0:13:08.360 --> 0:13:12.760 undermine uh, you know, judicial processes writ large. So it's 0:13:12.880 --> 0:13:15.320 very dangerous for the country in the sense that we 0:13:15.520 --> 0:13:18.760 just saw a fight for FIS a reauthorization a few 0:13:18.800 --> 0:13:21.360 weeks ago, so we could use this tool in the 0:13:21.400 --> 0:13:25.520 pursuit of terrorists, you know, and uh, foreign intelligence efforts. 0:13:25.520 --> 0:13:29.160 So it's pretty damaging to the institutions of democracy, and 0:13:29.200 --> 0:13:32.280 it seems like a very short run political plan for 0:13:32.400 --> 0:13:35.960 would ultimately be a long run disaster for the country. Okay, 0:13:35.960 --> 0:13:38.400 but let me just play Devil's advocate here in the 0:13:38.559 --> 0:13:42.000 world in which there is wiki leaks, in the world 0:13:42.000 --> 0:13:44.400 in which everything that you commit to any kind of 0:13:44.440 --> 0:13:49.720 digital repository is pretty much available to a hacker. Who 0:13:49.880 --> 0:13:52.640 on the other side, who's the who's the on the 0:13:52.679 --> 0:13:56.160 other side that doesn't already know all this? It's isn't 0:13:56.160 --> 0:14:00.040 it the public, the American people that don't know. I 0:14:00.040 --> 0:14:02.160 don't really think that's the case. I mean, this goes 0:14:02.240 --> 0:14:06.920 through a very rigorous process. The FIZER process just internally 0:14:06.960 --> 0:14:10.560 to the FBI or any investigator gative agency is exhausting, 0:14:11.000 --> 0:14:13.040 so it usually takes weeks or months to even put 0:14:13.080 --> 0:14:15.400 that package together. It then goes to a series of 0:14:15.480 --> 0:14:19.200 judges who then review it and and explore it and 0:14:19.200 --> 0:14:22.200 see if there's validity to it. So we have processes 0:14:22.240 --> 0:14:26.160 in place. The public giving a snippet out of what 0:14:26.280 --> 0:14:29.800 might be a sixty page or one page application even 0:14:30.440 --> 0:14:33.240 uh probably doesn't have the context to understand it, or 0:14:33.320 --> 0:14:36.720 has any context around the FIA process and what's trying 0:14:36.760 --> 0:14:39.440 to be done. So I put it in the same 0:14:39.480 --> 0:14:43.480 as wiki leaks, which is these disclosures are selective. They 0:14:43.480 --> 0:14:47.080 often omit tons of context. I don't think the public 0:14:47.160 --> 0:14:51.200 is informed. I really think they're confused in the end. Alright, 0:14:51.240 --> 0:14:53.920 So if they're if they're confusing two things, what do 0:14:53.960 --> 0:14:56.600 you think the ramifications are going to be if the 0:14:56.720 --> 0:14:59.640 memo is actually released, which their GOP seems to think 0:14:59.640 --> 0:15:02.840 it's going to happen, You know, ultimately it will lead 0:15:02.880 --> 0:15:05.560 to outcry by one side or the other. You know, 0:15:05.600 --> 0:15:08.760 we've seen this with both political group But what would happen? 0:15:09.080 --> 0:15:11.440 I mean, I'm just curious, like what physically will happen. 0:15:11.480 --> 0:15:13.880 I understand that there will be a lot of shouting uh, 0:15:13.920 --> 0:15:16.200 and you know the Sunday talk shows will be all 0:15:16.240 --> 0:15:18.480 full of this, But is there anything that will happen? 0:15:18.520 --> 0:15:20.400 Just give you about ten seconds. Anything happened to the 0:15:20.480 --> 0:15:24.000 U S Intelligence agencies? Yeah, you're going to see a withdrawal, 0:15:24.120 --> 0:15:29.080 retraction of investigations and the fact that investigators can't trust 0:15:29.120 --> 0:15:31.680 the systems which they're using to bring their cases forward. 0:15:32.120 --> 0:15:36.120 They'll feel ambushed from both sides politically, and they're going 0:15:36.160 --> 0:15:39.800 to have a hard time moving forward with investigations, particularly 0:15:39.880 --> 0:15:43.520 in political corruption cases on the criminal side and foreign 0:15:43.560 --> 0:15:46.480 counter intelligence cases on the national security side. Thank you 0:15:46.600 --> 0:15:48.680 very much. Clint Watts is a senior fellow at the 0:15:48.720 --> 0:16:07.440 Farm Policy Research Institute. I'm Taylor Riggs filling in for 0:16:07.600 --> 0:16:10.800 Lisa Abramowitz. I'm also sitting next to him. We are 0:16:10.880 --> 0:16:13.960 eagerly awaiting Sunday the Super Bowl. Pim do you watch 0:16:14.000 --> 0:16:16.480 the Super Bowl? You're watching for the game for the ads. 0:16:17.360 --> 0:16:19.960 I probably will watch the ads more than I will 0:16:20.000 --> 0:16:23.720 watch the game. But that's just because well, our next 0:16:23.720 --> 0:16:26.880 guest might like that answer. Let's bring him in now, 0:16:27.040 --> 0:16:30.720 nat Ives, he's the ad Age executive editor. He is 0:16:30.800 --> 0:16:34.560 joining this now. Uh Na, okay, you have to help 0:16:34.600 --> 0:16:37.760 me out here. Are super Bowl ads still as expensive 0:16:37.800 --> 0:16:40.080 as they are even with all the cord cutters and 0:16:40.120 --> 0:16:45.560 the millennials who are seemingly not uh not watching? Absolutely, 0:16:45.600 --> 0:16:48.280 the Super Bowl ad prices can fluctuate a little bit, 0:16:48.320 --> 0:16:53.640 but they're basically on and upward, grind to plateau. You're 0:16:53.680 --> 0:16:56.400 not going to see anything commensurate with the drops in 0:16:56.840 --> 0:17:00.400 regular TV ratings in super Bowl prices because of super 0:17:00.440 --> 0:17:03.000 Bowl ratings don't drop the way the rest of td 0:17:03.200 --> 0:17:05.480 TV does. Super Bowl doesn't drop the way the rest 0:17:05.480 --> 0:17:08.320 of the NFL does. Even super Bowl defies gravity, and 0:17:08.320 --> 0:17:10.840 the ad presses stay there too. Not What can I 0:17:10.880 --> 0:17:13.159 get for five million dollars if I happen to have 0:17:13.240 --> 0:17:15.639 some spare cash and I'd like to use it during 0:17:15.680 --> 0:17:19.200 the Super Bowl, That'll buy you thirty seconds. But remember 0:17:19.240 --> 0:17:21.480 that five million is not actually going to be enough 0:17:21.520 --> 0:17:24.680 in most cases. NBC is going to say thirty thirty 0:17:24.680 --> 0:17:27.720 seconds will cost you five million, But the cost to 0:17:27.840 --> 0:17:31.560 do that deal. Will let you do that deal only 0:17:31.600 --> 0:17:33.640 if you also agree to spend a lot of money 0:17:33.680 --> 0:17:35.560 with us during the Olympics and the rest of the year. 0:17:36.320 --> 0:17:39.679 How much, I don't know. It depends these You know, 0:17:39.760 --> 0:17:42.600 anasor bush In for example, has been a sponsor for 0:17:42.640 --> 0:17:44.280 so long that it's got all kinds of deals that 0:17:44.320 --> 0:17:47.240 are grandfathered in. That's going to be a different situation 0:17:47.280 --> 0:17:49.879 than somebody who walks up for the first time, knocks 0:17:49.920 --> 0:17:53.680 on NBC's door and says, hey, can I buy an ad? Now? 0:17:53.800 --> 0:17:56.399 I always wonder this if the ad sales depend on 0:17:56.640 --> 0:17:59.320 who is playing? For example, do I want to buy 0:17:59.480 --> 0:18:02.359 this year because the Patriots made it into the Super Bowl? 0:18:02.359 --> 0:18:06.600 For example? It's fascinating. We always look at how the 0:18:06.640 --> 0:18:08.959 matchups are shaking out to see how the ratings are 0:18:08.960 --> 0:18:12.560 going to do during the playoffs, but it stops there. 0:18:13.000 --> 0:18:15.400 I mean, it's not great news for anybody. If too 0:18:15.720 --> 0:18:19.159 small market teams that never got national attention during the 0:18:19.160 --> 0:18:22.800 season and don't have wide followings meet in the Super Bowl, 0:18:22.920 --> 0:18:25.520 that doesn't help. But it also doesn't seem to hurt 0:18:25.560 --> 0:18:28.080 that much. It's really more about the quality of the game, 0:18:28.119 --> 0:18:31.399 and um that's unpredictable, and for the most part in 0:18:31.480 --> 0:18:34.160 recent years the games have been pretty close. Last year 0:18:34.160 --> 0:18:37.760 we had our first overtime game, so again, the ratings 0:18:38.280 --> 0:18:43.600 don't depend on factors that ordinarily would lift or tank 0:18:43.720 --> 0:18:46.879 an ordinary football game or TV broadcast. Have you seen 0:18:47.040 --> 0:18:50.520 many of the ads that are scheduled to be broadcast 0:18:50.600 --> 0:18:53.840 during the Super Bowl? I have, and for better or worse, 0:18:53.960 --> 0:18:57.119 so have many Americans. These are pre released, of course, 0:18:57.160 --> 0:19:00.119 as they have been for many years. Doubt that, not 0:19:00.200 --> 0:19:03.359 to say they all have, but a significant portion of 0:19:03.400 --> 0:19:06.920 them have. So I've seen some funny ads. I've seen 0:19:06.960 --> 0:19:10.479 more funny ads. It's been interesting to try to infer 0:19:10.560 --> 0:19:11.879 what the trends are going to be this year and 0:19:11.920 --> 0:19:14.200 compare them to last year. We don't have a complete 0:19:14.200 --> 0:19:16.520 picture yet. There will be surprises on game day, but 0:19:17.400 --> 0:19:20.359 we know a lot already now. And I wonder about 0:19:20.400 --> 0:19:23.080 the motivation for these companies. I mean, what's different about 0:19:23.080 --> 0:19:26.600 the Super Bowl is people actually look forward to watching them. 0:19:26.640 --> 0:19:28.840 I don't want to fast forward through them. So if 0:19:28.880 --> 0:19:31.520 I'm a company and I'm thinking about buying ad space, 0:19:31.600 --> 0:19:34.320 do I actually expect more people to buy my product 0:19:34.680 --> 0:19:36.479 or do I just want to be in the hype 0:19:36.520 --> 0:19:39.480 and be in the know and what's being talked about 0:19:39.480 --> 0:19:42.880 the next day. There's a couple of goals, and one 0:19:43.000 --> 0:19:46.960 is probably your legit business goal. I need to sell 0:19:47.119 --> 0:19:50.479 more of my widgets or cars or printers or what 0:19:50.520 --> 0:19:53.719 have you. Or I need to drive awareness of a 0:19:53.760 --> 0:19:56.440 product that nobody knows exists, or I need to speak 0:19:56.480 --> 0:19:59.480 to a very specific audience. And this is, for whatever reason, 0:19:59.520 --> 0:20:01.800 a good way to do it, real business goals. The 0:20:01.880 --> 0:20:04.120 other part of it, though, is the pr game, where 0:20:04.160 --> 0:20:08.919 everybody wants to polish their halo, get their company's name 0:20:09.040 --> 0:20:11.159 or their product name on the tip of the tongue. 0:20:11.359 --> 0:20:13.480 You want to become something closer to a household dame 0:20:13.880 --> 0:20:15.600 if you're in the Super Bowl. That's why you've seen 0:20:15.640 --> 0:20:19.119 from time to time a superglue company show up at 0:20:19.119 --> 0:20:21.439 the Super Bowl. You know they did it once. It 0:20:21.480 --> 0:20:24.720 was their entire year's ad budget, and uh they say 0:20:24.720 --> 0:20:29.080 it worked okay, but they didn't come back. Others are 0:20:29.080 --> 0:20:32.159 playing the twofold game. Really. They want to get the 0:20:32.480 --> 0:20:34.399 buzz of being discussed in the press the way that 0:20:34.720 --> 0:20:37.359 we had Adage and everybody else in the business press 0:20:37.359 --> 0:20:40.240 are are doing right now. Um and then hopefully also 0:20:40.800 --> 0:20:43.600 sell some product. You know, it's funny. The pre release 0:20:43.640 --> 0:20:46.720 strategy is slightly controversial because it takes some of the 0:20:46.800 --> 0:20:48.800 surprise out of the game. But in the case of 0:20:48.800 --> 0:20:52.000 one this year, pringles you know people people buy snacks 0:20:52.040 --> 0:20:54.359 for the Super Bowl. Pre rereleasing their ad might have 0:20:54.560 --> 0:20:57.960 literally increased sales for Super Bowl Sunday. Let's go to 0:20:58.160 --> 0:21:00.000 just some of the ads. Quickly, give me your thoughts 0:21:00.040 --> 0:21:02.760 about them. The eminem spot. It's the first and three years. 0:21:02.800 --> 0:21:05.400 It stars Danny DeVito. Give me about ten seconds on that. 0:21:06.440 --> 0:21:09.200 I mean, I like it, okay, uh, I can see 0:21:09.200 --> 0:21:12.560 how Danny DeVito is a funny way to say, you know, 0:21:13.119 --> 0:21:15.560 don't eat me. Um, it's just a it's a weird 0:21:15.600 --> 0:21:18.959 gimmick the Eminem's have where the spokes candies are all 0:21:19.080 --> 0:21:22.879 edible and are mildly concerned about it, but not totally concerned. Alright. 0:21:22.880 --> 0:21:26.639 Ten seconds on Kiano reeves with square space. This is 0:21:26.680 --> 0:21:29.840 controversial in our office. I like it better than some others. 0:21:29.880 --> 0:21:32.560 This is Kiano just standing on a motorcycle and appearing 0:21:32.560 --> 0:21:35.000 to kind of take off at the end. What can 0:21:35.040 --> 0:21:37.040 I say. I think it's a little bit different. Um. 0:21:37.040 --> 0:21:40.160 Others here disagree. All right, and finally let me get 0:21:40.160 --> 0:21:45.080 your thoughts on avocados. Avocados from Mexico is consistently funny. 0:21:45.119 --> 0:21:46.960 Each year they bring you a little inn yet that 0:21:47.000 --> 0:21:49.000 makes you laugh, and they do it again this year, 0:21:49.080 --> 0:21:52.200 and they work in a selling proposition or at least 0:21:52.200 --> 0:21:55.960 a serving suggestion, which might do the same job. All right, 0:21:56.000 --> 0:21:58.040 thanks very much. By the way, who do you think 0:21:58.119 --> 0:22:03.560 is gonna win? Probably the pets? Oh sorry, Mark, Well 0:22:04.359 --> 0:22:07.080 careful there Na, all right, thanks very much. Natives as 0:22:07.119 --> 0:22:10.399 executive editor at Age and he can be followed on 0:22:10.440 --> 0:22:13.359 Twitter at nat I get ready for a Super Bowl 0:22:13.800 --> 0:22:31.680