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Speaker 1: Welcome to a special episode of Strictly Business, the podcast

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Speaker 1: in which we speak with some of the brightest minds

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Speaker 1: in media today. I'm Andrew Wallenstein with Variety. No guests

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Speaker 1: this week, just a roundtable of Variety hosts coming together

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Speaker 1: to talk shop at a time when there's plenty of

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Speaker 1: shop to talk about. Not only are we coming out

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Speaker 1: of the midpoint of twenty twenty three, but the second

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Speaker 1: quarter earning season will begin on the nineteenth, with Netflix

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Speaker 1: among a slew of media and tech stocks ready to

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Speaker 1: reveal their latest numbers in the coming weeks. We're also

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Speaker 1: coming to you as many of the CEOs of those

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Speaker 1: companies are convening in sun Valley for the annual Allen

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Speaker 1: and Company Conference. Where there are no shortage of issues

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Speaker 1: and challenges to be discussed. That gives us plenty to discuss.

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Speaker 1: So I'm glad to be joined by the business partner

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Speaker 1: Variety co editor in chief Cynthia Littleton, and my colleague

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Speaker 1: at Variety Intelligence platform analyst, Heidi Chump. That's all coming

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Speaker 1: up right after the break. Hi, this is Andrew Wallenstein

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Speaker 1: with Variety's Strictly Business podcast. If you love Varieties podcasts,

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Speaker 1: you're going to want to try Variety Intelligence Platform or VIP.

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Speaker 1: It's a digital subscription tier on Variety dot com for

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Speaker 1: a great new newsletter and offers more special reports than ever.

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Speaker 1: twenty percent discount, and we are back with strictly business.

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Speaker 1: Heidi is the editor of Variety Intelligence Platforms, Media and

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Speaker 1: Money newsletter, which comes every Monday. It's part of a

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Speaker 1: expanded slate of newsletters that VIP puts out five days

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Speaker 1: a week. If you haven't checked it out, please do.

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Speaker 1: It's really a labor of love for myself and my team,

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Speaker 1: and I really suggest you check it out.

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Speaker 2: I echo that, and I am excited to be sitting

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Speaker 2: here with Heidi. Heidi's newsletter is now part of my

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Speaker 2: weekly routine. It sets us off on Monday with all

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Speaker 2: the news we need to know. And so Heidi, with that,

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Speaker 2: let's take it away. Will give you the biggest jump

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Speaker 2: ball question to start from the thirty thousand foot view.

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Speaker 2: We've just completed the first half of twenty twenty three.

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Speaker 2: What stands out to you in terms of themes or

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Speaker 2: developments inequities as you study them every day. You don't

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Speaker 2: call Heidi between nine thirty and four on weekdays.

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Speaker 3: Thanks Cynthia.

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Speaker 4: First, I'm so excited to make my debut on this podcast.

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Speaker 4: Any excuse to talk about the markets and media and

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Speaker 4: entertainment really is a great opportunity for us. To take

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Speaker 4: your question. I do want to step back a little

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Speaker 4: bit and look at the broader market here to really

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Speaker 4: get some context into what we're seeing here in media

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Speaker 4: and entertainment.

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Speaker 3: As well as the tech sectors. So I'm sure you

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Speaker 3: both recalled.

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Speaker 4: Twenty twenty two was a brutal year for the stock market,

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Speaker 4: right the SMP five hundred tumbling nearly twenty percent to

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Speaker 4: finish the year. It was actually the worst year on

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Speaker 4: record for the index since two thousand and eight, So

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Speaker 4: I think it's safe to say a lot of folks

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Speaker 4: out there were pretty bearish headed into twenty twenty three.

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Speaker 4: But if you're looking at the markets now and kind

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Speaker 4: of how we ended up at the first half of

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Speaker 4: twenty twenty three, I think a lot of people were

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Speaker 4: pretty surprised to see this bull run that we have

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Speaker 4: been on also a recession with something that a lot

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Speaker 4: of people were talking about. We have not seen that

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Speaker 4: come to fruition, and a lot more strategists are saying

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Speaker 4: we might not even see that this year or beyond.

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Speaker 4: So to wrap up the first half of this year,

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Speaker 4: the SMP five hundred was up fifteen percent. That was

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Speaker 4: the best first half since twenty nineteen. The Dow climbed

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Speaker 4: about three point eight percent, and the tech heavy Nasdaq

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Speaker 4: jumped nearly thirty two percent. So I do also want

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Speaker 4: to mention we've seen some data out there from research

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Speaker 4: firms like CFRA. If we see a positive first half,

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Speaker 4: historically for the SMP five hundred, we're much more likely

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Speaker 4: to see a positive second half. Now, for additional context,

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Speaker 4: when we take a look at the macroeconomic backdrop, all

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Speaker 4: of this is very strange, right. We're seeing an extremely

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Speaker 4: high interest rate environment. The FED is planning to raise

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Speaker 4: interest rates further from here. I believe it's about a

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Speaker 4: sixteen year high for these interest rate levels, right, So

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Speaker 4: that's pretty dramatic, and traditionally that's not great for stocks,

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Speaker 4: especially for tech stocks which are very sensitive to borrowing costs.

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Speaker 4: So with inflation where it is, the labor market remaining tight.

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Speaker 4: We do see that consumer confidence is pretty high as

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Speaker 4: well as consumer spending. We did see a little bit

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Speaker 4: of a pullback last month, but overall levels are pretty good.

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Speaker 4: So I don't want to be the one betting against

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Speaker 4: the markets in the second half of this year. But

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Speaker 4: like I said earlier, if history is any indication we

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Speaker 4: could see another positive half.

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Speaker 2: Let me ask you, though, I'm sort of wondering, like

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Speaker 2: what headlines is Wall Street and investors reading that we

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Speaker 2: are not because I hate just I mean, it has

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Speaker 2: just been unrelentlessly doom and gloom. In the media sector,

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Speaker 2: it's been budget cuts, staff cuts, I mean not, I

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Speaker 2: mean on a massive scale. We're seeing We're seeing we

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Speaker 2: feel the tectonic plates in Hollywood shift. There's labor strife

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Speaker 2: is just ever is the perfect cauldron of economic disruption.

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Speaker 2: And so what do you think is driving this, you know,

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Speaker 2: level of buoyancy.

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Speaker 4: So when I say the markets are up, that doesn't

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Speaker 4: mean every facet of the market is up. Right, So

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Speaker 4: the best performing sector in the first half of the

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Speaker 4: year was technology, and a lot of that was driven

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Speaker 4: by the the interest by investors in the AI boom,

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Speaker 4: the generative AI boom specifically, and so even though we're

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Speaker 4: in a situation where interest rates are high, we had

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Speaker 4: the two banks collapse back in March.

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Speaker 3: That was really scary.

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Speaker 4: The markets really didn't react as badly as a lot

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Speaker 4: of us were thinking. But this, this sort of optimism

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Speaker 4: about where technology is headed has really driven up those stocks. Though.

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Speaker 4: I will say, even though there's a lot of bullishness

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Speaker 4: in the market, a lot of investors right now are

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Speaker 4: sort of worried that we're seeing a bit of an

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Speaker 4: overbought situation. So does this market have that much more

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Speaker 4: room to run? That remains to be seen. But like

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Speaker 4: I said, technology was one of the best performers, and

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Speaker 4: within technology, it was really companies like Nvidia, mentioning AI,

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Speaker 4: Microsoft Google. On the flip side, you don't really have,

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Speaker 4: you know, sectors like healthcare or industrials talking about AI.

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Speaker 4: Right those companies are probably not going to see the

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Speaker 4: kind of booms that we've been seeing, especially headed into

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Speaker 4: Q two earning season. It's oy're all, we're not expecting

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Speaker 4: earnings growth for the SMP five hundred in Q two earnings.

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Speaker 4: We're actually expecting a decline of seven point two percent.

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Speaker 3: So that just kind of.

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Speaker 4: Gives you some context into the fact that most companies

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Speaker 4: in the SNP five hundred are probably not going to

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Speaker 4: report big earnings growth, and that is a result of

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Speaker 4: a lot of the pressures we're seeing in the macroeconomic

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Speaker 4: environment right now.

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Speaker 1: On the one hand, I'm not surprised that AI is

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Speaker 1: driving what I think is still kind of an irrational

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Speaker 1: confidence in the tech sector. On the other hand, if

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Speaker 1: you look at what to me is still the most

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Speaker 1: important indicator for the tech sector, which is advertising, which

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Speaker 1: is still that's the biggest revenue generator. And yes, those

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Speaker 1: numbers are up, but they're nowhere near as up as

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Speaker 1: they usually are. You look at that top line number

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Speaker 1: and it's still a much lower number than it's been.

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Speaker 1: I think it's like the lowest increase it's been in

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Speaker 1: like fourteen years. It's below h ten percent for the

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Speaker 1: first time in a long time. Why isn't that making

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Speaker 1: investors more nervous.

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Speaker 4: Because at least within the advertising market, Yes, we're seeing

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Speaker 4: an overall slow down when we're taking a look at

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Speaker 4: the bigger picture, but digital advertising is still growing, right

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Speaker 4: It's not growing nearly the same level that it was before,

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Speaker 4: but we're still expecting about eight point four percent growth

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Speaker 4: within global digital advertising. I think a lot of the

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Speaker 4: tech sector though we've seen tons of layoffs, which of

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Speaker 4: course isn't great, but it's good for the company's bottom line, right,

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Speaker 4: They're able to cut costs while they're focusing on this

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Speaker 4: adversssion sort of passing. Everyone is expecting it to be cyclical,

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Speaker 4: then that the ad market will bounce back at some point.

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Speaker 3: No one knows when.

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Speaker 4: But that being said, yes, digital advertising isn't growing at

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Speaker 4: the pace it used to, but it is still a

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Speaker 4: growth area, and so I think that's why investors aren't

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Speaker 4: necessarily ringing the lorm for these big.

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Speaker 3: Tech companies, especially social like Meta as well.

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Speaker 2: Heidi, is there any kind of hangover from the predictions

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Speaker 2: that there would be a more significant slowdown of economic activity,

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Speaker 2: including even a recession. Did some people pull back on

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Speaker 2: advertising expecting the slow down and are a little surprised

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Speaker 2: to see so much activity, So we might see a bounce,

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Speaker 2: a higher bounce in the second half.

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Speaker 4: Yeah, I think a lot of you know, any kind

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Speaker 4: of recession, whether it's an advertising recession, economic recession. It's

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Speaker 4: very forward looking, right, People are expecting something to happen

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Speaker 4: and thus they cut back on those costs ahead of time.

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Speaker 4: And so when we were heading into twenty twenty three,

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Speaker 4: twenty twenty two was so bad, everyone was out there

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Speaker 4: saying we're going to see a recession for sure, doom

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Speaker 4: and gloom.

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Speaker 3: We saw marketers and advertisers really pulled back on those budgets.

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Speaker 4: But as we see the economy sort of continue to

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Speaker 4: chug along, I think right now we're in a very

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Speaker 4: important wait and see approach. If the second half of

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Speaker 4: twenty twenty three is again better than a lot of

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Speaker 4: people were expecting, I think we could definitely see advertising

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Speaker 4: start to come back. That being said, balance sheets are

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Speaker 4: so important at these companies, right it's about how much

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Speaker 4: money they're going to have to spend on other things

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Speaker 4: aside from their day to day you know, line items.

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Speaker 4: And so again, twenty twenty three has been an interesting year.

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Speaker 4: The second half will I think be very indicative of

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Speaker 4: where we'll be heading in twenty twenty four, recession or

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Speaker 4: no recession.

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Speaker 1: Cynthia, what do you think will be what we'll hear

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Speaker 1: from media CEOs with regard to the advertising outlook, Because

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Speaker 1: typically we hear what I think is sort of interrational

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Speaker 1: exuberance with regard to the advertising market when we are

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Speaker 1: hearing that the upfront pricing is not going to be

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Speaker 1: looking good. Brian Steinberg's been all over that, and yet

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Speaker 1: you know, Bob Backish and Bob Iger, all the bobs,

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Speaker 1: they're always talking it up as if not everything's going

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Speaker 1: to be fine. I got a feeling that this time around,

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Speaker 1: even these guys can't possibly put lipstick on a What

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Speaker 1: do you think we're going to hear from that?

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Speaker 2: I think we will hear a lot about a lot

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Speaker 2: of emphasis in the digital sector, in the avod sector,

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Speaker 2: any place where you have any green shoots of growth,

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Speaker 2: We're going to hear a lot about that. I think,

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Speaker 2: even as Heidi was talking, even for the macro economy

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Speaker 2: outside of media entertainment, in so many sectors, it feels

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Speaker 2: like twenty twenty three is a real year of just

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Speaker 2: restructuring and extreme bell tightening, Like twenty twenty three is

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Speaker 2: the year you clean up the messes that have probably

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Speaker 2: been brewing since pandemic or even even pre pandemic. After

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Speaker 2: the Q one results, I don't you know, I don't

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Speaker 2: know how the spin gets better for Q two. I

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Speaker 2: think it's going to be a lot of like we're

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Speaker 2: investing for the long haul. We did the we've made

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Speaker 2: the hard choices. Now now we're coming out of that.

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Speaker 2: I think there we're going to talk company by company,

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Speaker 2: but I think there will be some companies that really

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Speaker 2: have to have some very specific answers to things that

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Speaker 2: they probably don't want to address. And Disney has I

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Speaker 2: think a few of those big questions. But I think

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Speaker 2: you'll hear a lot about like cost cutting, belt tightening,

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Speaker 2: downsizing of their labor forces. I just think it's going

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Speaker 2: to be, you know, it's it's it's certainly not going

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Speaker 2: to be no matter you know, no matter how they

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Speaker 2: spend it, it's not going to be a record quarter.

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Speaker 2: It's going to be it's going to be a pretty painful,

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Speaker 2: I think, a pretty painful march of results for most,

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Speaker 2: not everybody, but probably for most.

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Speaker 3: No, absolutely I agree.

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Speaker 4: If you take a look at the major media companies

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Speaker 4: and sort of their performance so far this year, we

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Speaker 4: have far more companies underperforming the broader market than we

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Speaker 4: do having you know, outperforming the market, and so I

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Speaker 4: think that says a lot about investor sentiment towards media

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Speaker 4: right now. I think a lot of folks are kind

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Speaker 4: of scared to jump in in the group because there's

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Speaker 4: so many changes going on internally, whether it's management, whether

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Speaker 4: it's figuring out profitability, whether it's dealing with linear TV declines.

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Speaker 4: Think there's a lot of trouble at these companies now

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Speaker 4: that you know management is going to have to clean

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Speaker 4: up and figure out.

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Speaker 1: Well, let's get into the individual companies. Since the gat

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Speaker 1: you mentioned, Disney, uh Iger has man. I wonder whether

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Speaker 1: going back into this big job that he realized just

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Speaker 1: I'm sure he knew it was going to be challenging.

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Speaker 1: I wonder if he saw how challenging it was going

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Speaker 1: to be, if he saw, you know, Indiana Jones flopping,

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Speaker 1: Elemental flopping, all the many challenges that he's that he's facing,

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Speaker 1: the cuts that he's had to put in place at ESPN.

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Speaker 1: Do you think that when he gets on the call,

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Speaker 1: I guess in August at this point, it's it's still

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Speaker 1: a bit of way that he is going to be

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Speaker 1: able to project an air of confidence for Wall Street.

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Speaker 2: I think Iiger will come on and he will bring

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Speaker 2: every ounce of his Bob igerness to to the and

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Speaker 2: of course you know he does have that measure of

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Speaker 2: respect that his is a long track record, but boy

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Speaker 2: does he have big questions. He's going to get questions

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Speaker 2: about the departure of Disney's CFO, Christine McCarthy. That's going

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Speaker 2: to be a big question for Wall Street analysts. I

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Speaker 2: know reporters are often frustrated because there's big there's big

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Speaker 2: headlines that are happening in the world, and analysts on

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Speaker 2: these earnings calls always ask the very financial specific questions.

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Speaker 2: I don't think there's any world in which he doesn't

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Speaker 2: get grilled about what's going on with Christine McCarthy, given

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Speaker 2: the extremely prominent role that she has played in that company.

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Speaker 2: There's another, you know, another big question looming about Hulu

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Speaker 2: and Disney and Comcasts have a complicated transaction that basically

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Speaker 2: calls Disney to buy Hulu at a preset price that

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Speaker 2: is a much bigger check than Disney probably wants to

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Speaker 2: write right now. So there are some big issues that

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Speaker 2: are big that have big financial dollars associated with them

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Speaker 2: and deadlines that I think he's really going to have

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Speaker 2: to have to address. And I think he's going to

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Speaker 2: probably in the sort of the version of throwing himself

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Speaker 2: on the mercy of the court, I did the layoffs.

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Speaker 2: I have done the cuts, and I have done the cuts.

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Speaker 2: And we know Wall Street does cheer layoffs in the

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Speaker 2: sense not that they're greedy and awful, but that it

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Speaker 2: does show that the company is wreck is looking at

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Speaker 2: a balance sheet and saying, WHOA, we cannot continue at

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Speaker 2: this pace. So I think the other the real question too,

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Speaker 2: for Disney is, as always, what's the bell weather? The

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Speaker 2: parks are such an interesting bell weather of consumers, and

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Speaker 2: this year they have been doing a real heavy lift

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Speaker 2: the park, so that will be really interesting to see.

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Speaker 2: By all accounts, just my observations as a Southern California resident,

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Speaker 2: the people are still going to those Disney parks.

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Speaker 4: Well, not to be the bearer of bad news, but

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Speaker 4: we've recently seen some reporting saying that maybe the parks

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Speaker 4: are starting to see a bit of a slowdown in

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Speaker 4: terms of attendance.

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Speaker 3: The Wall Street.

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Speaker 4: Journal citing a third party company that was tracking the

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Speaker 4: wait times at Disney World, Disneyland, as well as other

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Speaker 4: theme parks like Universal Studios, and they take a look

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Speaker 4: at the time spent in each line and they found

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Speaker 4: that during Independence Day, the actual day and the weekend

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Speaker 4: before it was the lowest level of attendance for that

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Speaker 4: weekend in quite some time, So that could be bad

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Speaker 4: news for not just Disney, but other companies that rely

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Speaker 4: on theme park revenue like Comcast.

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Speaker 2: Right, let me ask you too, let me ask you

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Speaker 2: to Heidi, in terms of my sense is that the

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Speaker 2: Disney stock is kind of like Disney is the general

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Speaker 2: motors of the entertainment sector. And I'm probably aging myself

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Speaker 2: with that description, but it so.

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Speaker 3: It's basically a blue chip within the entertainment space.

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Speaker 2: Does Disney, you know, as goes Disney, does it drag

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Speaker 2: down other stocks? If people are looking at saying there's

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Speaker 2: not a lot of confidence in Disney, does that hurt

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Speaker 2: everybody else down the line?

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Speaker 4: You know, that used to be the case and to

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Speaker 4: some extent, and I would agree that that is still

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Speaker 4: probably the way that a lot of folks take a

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Speaker 4: look at Disney as a stock, because it is part

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Speaker 4: of the doubt. It's one of those blue chip companies

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Speaker 4: within the entertainment space. It has its hand in a

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Speaker 4: lot of different kinds of businesses, whether it's theme parks,

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Speaker 4: linear TV as well as now streaming.

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Speaker 3: Right.

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Speaker 4: But the reason why I think we're seeing such a

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Speaker 4: big underperformance by Disney shares is because they're starting to

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Speaker 4: see a little bit bit of trouble in their very

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Speaker 4: profitable linear TV business and now potentially even its theme

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Speaker 4: parks business. Now with streaming, it's a difficult one, right,

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Speaker 4: It's not exactly profitable for a lot of these players

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Speaker 4: in the space, and so they were relying on revenues

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Speaker 4: from linear TV to sort of prop up streaming for

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Speaker 4: the time being until they reach break even or profitability.

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Speaker 4: Disney was originally planning to reach break even by twenty

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Speaker 4: twenty four, I believe the fall of twenty twenty four,

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Speaker 4: and management continues to say that that's the goal and

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Speaker 4: that they're planning to reach that, but a lot of

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Speaker 4: folks are concerned. I think last quarter, operating income from

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Speaker 4: linear TV fell by a significant amount, like thirty to

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Speaker 4: thirty five percent or so, and that was the sharpest

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Speaker 4: year over year decline in at least three years.

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Speaker 3: So not great news on that front.

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Speaker 4: And then, like I mentioned, those reports about the theme

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Speaker 4: parks slowing down as well, that's a cash cow for Disney, right,

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Speaker 4: that's basically where all the free cash flow is coming in,

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Speaker 4: and if we start to see a decline in that

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Speaker 4: with all the promotions that they're putting out there for

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Speaker 4: not only hotel stays, but you know, park spending on

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Speaker 4: like food and things like that, that could be bad

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Speaker 4: news for Disney too.

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Speaker 1: I would argue the general motors as Netflix that they

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Speaker 1: are the bell weather in this space, and we saw

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Speaker 1: that in twenty twenty two when the subscriber declined happened,

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Speaker 1: and that reset Wall Street's expectations for the entire space.

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Speaker 1: We are still in that place now, and let's fast

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Speaker 1: forward to now where Netflix is on a roll and

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Speaker 1: their stock has been performing better than it has in

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Speaker 1: the past eighteen months. Their ability to generate hit after

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Speaker 1: hit is doing better than anyone else in the space.

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Speaker 1: I think they are the ones to watch, and they

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Speaker 1: are going to be the first out the gate in

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Speaker 1: Q two, and I think they're making all the right

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Speaker 1: moves right now. I think what they're doing in terms

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Speaker 1: of enabling password sharing with families is the right move.

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Speaker 1: I think they've gotten off on the right foot in

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Speaker 1: terms of the ad supported subscriptions, and I think they

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Speaker 1: are still the ones that set the agenda in this space.

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Speaker 1: Wouldn't you agree?

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Speaker 3: I do agree with that. I do.

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Speaker 4: I think That status of potentially being the general motors

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Speaker 4: of the entertainment space is a very new thing though

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Speaker 4: for Netflix, because it is such a volatile stock. Right before,

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Speaker 4: it used to trade so heavily on subscriber editions. You

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Speaker 4: would see ten percent pops or ten percent fifteen percent declines,

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Speaker 4: and that's extremely volatile for a potential blue chip stock.

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Speaker 4: But recently with Netflix, as the industry has begun to

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Speaker 4: grade these media giants differently, I think it has reached

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Speaker 4: that status andy of potentially being the GM. That being said,

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Speaker 4: I have to echo what you're saying. In terms of

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Speaker 4: strategic moves by the company. Recently, we've seen you know, yes,

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Speaker 4: it was off to a slow start, but the ad

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Speaker 4: supporter has really started to gain momentum. And I think

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Speaker 4: investors agree with you. I think investors are saying Netflix

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Speaker 4: is one of those companies that it's a long term

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Speaker 4: bet within media, right they have the content library. The

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Speaker 4: stock is up nearly fifty percent this year, significantly outperforming

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Speaker 4: the SMP five hundreds fifteen percent gain. But I do

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Speaker 4: want to say that I think that a lot of

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Speaker 4: those bullish sentiments are already priced into the stock. That

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Speaker 4: forty five percent gain is rather massive, right, So yes,

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Speaker 4: I think Q two results from Netflix will be fairly good.

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Speaker 4: I think I think the market will be happy with

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Speaker 4: the developments and the updates that we get from the

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Speaker 4: company in terms of those two strategic initiatives. That being said,

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Speaker 4: I don't know that we'll see more double digit gains

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Speaker 4: like this for the next half of this year. Again,

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Speaker 4: I don't want to be too contrarian here, but I

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Speaker 4: do think a lot of the bullishness is already priced

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Speaker 4: into the stock price.

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Speaker 2: It's so interesting because with my very Hollywood centric hat on,

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Speaker 2: I say, like, Netflix seems to have everything going for it,

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Speaker 2: and it has, of course, it has great shows, but

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Speaker 2: it hasn't There hasn't been something new that really bubbled

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Speaker 2: to the surface as a big hit, something that like

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Speaker 2: everybody was talking about it a certain time. And that's

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Speaker 2: a very subjective and unscientific measure. But my hunches, whereas

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Speaker 2: like you know, qualitatively, HBO had a really strong first

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Speaker 2: half between the Last of Us and the succession for that,

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Speaker 2: like they qualitatively, I felt like HBO was firing on

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Speaker 2: all cylinders. Cannot say the same thing. Maybe this is

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Speaker 2: our say way into Warner Brothers Discovery we did not

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Speaker 2: plan this, but I really think that. So just to

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Speaker 2: button up on Netflix, I think that and content I

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Speaker 2: think still. I think entertainment is still a hit driven business,

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Speaker 2: and they their their content is important. Although their hits

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Speaker 2: now are measured in more territories than just the contiguous

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Speaker 2: United States Alaska, Hawaii, So that does that really does

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Speaker 2: open up the open up the world for them.

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Speaker 1: We're going to take a quick break. We'll be back

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Speaker 1: with more conversations about media stocks.

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Speaker 4: Hi.

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Speaker 1: This is Andrew Wallenstein with Variety's Strictly Business podcast. If

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00:22:44,680 --> 00:22:47,119
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00:23:15,359 --> 00:23:19,240
Speaker 1: And we're back talking about media stocks heading into the

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Speaker 1: second quarter. I'm joined by my colleagues Cynthia Littleton and

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Speaker 1: Heidi Chung. I'm Andrew Wallenstein. But let's talk some more

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Speaker 1: Warner Brothers Discovery because that's a stock. I mean, it's interesting.

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Speaker 1: On the one hand, I think there's all this headline

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Speaker 1: noise about David Zaslov lurching from one pr nightmare to

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Speaker 1: the other. I mean, but wouldn't you agree that there's

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Speaker 1: a lot of upside to this stock.

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Speaker 4: Well, I don't know about upside, but I will say

437
00:23:49,400 --> 00:23:52,719
Speaker 4: despite everything that's going on headline wise with as the

438
00:23:52,760 --> 00:23:57,040
Speaker 4: market is loving everything that he's doing strategically within the company. Right. So,

439
00:23:57,520 --> 00:23:59,480
Speaker 4: last quarter of the company announcing that it turned up

440
00:23:59,480 --> 00:24:03,760
Speaker 4: fifty million dollar profit, Yay, that's good news, and Zaslov

441
00:24:03,800 --> 00:24:06,560
Speaker 4: saying that he expects that they're going to reach profitability

442
00:24:06,560 --> 00:24:09,320
Speaker 4: in its US streaming business in twenty twenty three, not

443
00:24:09,480 --> 00:24:12,639
Speaker 4: the original twenty twenty five. So those things got the

444
00:24:12,640 --> 00:24:16,080
Speaker 4: investors really hyped up and excited about where this company

445
00:24:16,119 --> 00:24:19,000
Speaker 4: is headed. They like the fact that he's aggressive, right, Like,

446
00:24:19,080 --> 00:24:22,480
Speaker 4: he is not shy about making the necessary cuts, He

447
00:24:22,600 --> 00:24:25,600
Speaker 4: is not shy about pulling content from the platform. He

448
00:24:25,800 --> 00:24:28,600
Speaker 4: is aggressive, and I think that's what Wall Street analysts

449
00:24:28,600 --> 00:24:30,879
Speaker 4: and investors like to see. We don't want to see

450
00:24:30,920 --> 00:24:36,160
Speaker 4: slow moves that take years to really see the benefit.

451
00:24:36,200 --> 00:24:38,560
Speaker 4: Of right, like we want to see things now. Times

452
00:24:38,560 --> 00:24:41,240
Speaker 4: are rough and they have a huge debt load. Free

453
00:24:41,240 --> 00:24:43,960
Speaker 4: cash flow is not great, so let's get those numbers

454
00:24:44,000 --> 00:24:44,879
Speaker 4: back to where they need to be.

455
00:24:44,920 --> 00:24:45,800
Speaker 3: And he's been delivering.

456
00:24:46,520 --> 00:24:48,720
Speaker 2: And here I go, just interrupting our flow here. But

457
00:24:48,920 --> 00:24:51,640
Speaker 2: one thing I wanted to say about Disney was they

458
00:24:51,640 --> 00:24:56,280
Speaker 2: have quietly been selling rights to shows the package just

459
00:24:56,320 --> 00:24:59,680
Speaker 2: shows here in different regions. They've been quietly selling content

460
00:25:00,119 --> 00:25:02,520
Speaker 2: outside the US in the old fashioned way where they

461
00:25:02,560 --> 00:25:04,480
Speaker 2: sell it to somebody and somebody writes them a check

462
00:25:04,520 --> 00:25:06,800
Speaker 2: that they can cash in the bank, as opposed to

463
00:25:07,320 --> 00:25:09,600
Speaker 2: the streaming model of we're going to everything we keep,

464
00:25:09,640 --> 00:25:11,719
Speaker 2: we're going to keep on our platform, and so they

465
00:25:11,720 --> 00:25:16,639
Speaker 2: don't get that vital revenue. Same thing with Warrener Brothers Discovery,

466
00:25:16,760 --> 00:25:19,320
Speaker 2: they've been doing a little more loudly, but they're out

467
00:25:19,320 --> 00:25:22,919
Speaker 2: there AVA channels, licensing in different territories. They don't have

468
00:25:22,920 --> 00:25:25,920
Speaker 2: as big a footprint with HBO, excuse me. They don't

469
00:25:25,960 --> 00:25:28,880
Speaker 2: have as big a footprints with Max as Disney does

470
00:25:28,880 --> 00:25:32,960
Speaker 2: with Disney Plus internationally. So I think that both I

471
00:25:32,960 --> 00:25:35,680
Speaker 2: think you will hear Eiger talk about hey, we are

472
00:25:35,800 --> 00:25:38,879
Speaker 2: We're we're waking up to the need for more, you know,

473
00:25:38,960 --> 00:25:41,879
Speaker 2: more cash flow to just circulate through this company. So

474
00:25:41,920 --> 00:25:44,960
Speaker 2: I think you'll hear both both Iiger and Zaslav will

475
00:25:44,960 --> 00:25:48,399
Speaker 2: talk about their deals in ben A Luxe and Luxembourg

476
00:25:48,520 --> 00:25:51,000
Speaker 2: and other big territories to say, hey, everybody, we get

477
00:25:51,080 --> 00:25:53,320
Speaker 2: we need dollars, you know, we need dollars and other

478
00:25:53,359 --> 00:25:54,440
Speaker 2: currencies coming in.

479
00:25:55,119 --> 00:25:58,440
Speaker 1: We should note that our VIP colleague Gavin Bridge has

480
00:25:58,520 --> 00:26:03,560
Speaker 1: said that he affects both Netflix and Disney to get

481
00:26:03,560 --> 00:26:08,160
Speaker 1: into the fast business, as as Max has already signaled

482
00:26:08,160 --> 00:26:10,320
Speaker 1: it will do. It's just there is a lot of

483
00:26:10,400 --> 00:26:14,080
Speaker 1: upside there. It's it's the future I think for anyone

484
00:26:14,119 --> 00:26:15,440
Speaker 1: in the streaming business right now.

485
00:26:15,560 --> 00:26:18,240
Speaker 2: Yeah, I growth what HEI do, what you know, but

486
00:26:18,280 --> 00:26:19,760
Speaker 2: when you have a company, I just can't. I mean,

487
00:26:20,080 --> 00:26:23,000
Speaker 2: you know, I've covered Warner Brothers and its iterations for

488
00:26:23,040 --> 00:26:26,399
Speaker 2: so long. It's a thirteen dollars. I mean, the price

489
00:26:26,440 --> 00:26:29,000
Speaker 2: of the real estate where Warner Brothers sits is worth

490
00:26:29,480 --> 00:26:32,359
Speaker 2: thirteen You know what does it do to a company

491
00:26:32,359 --> 00:26:34,880
Speaker 2: when you're no matter what you do, you know, your

492
00:26:34,920 --> 00:26:36,560
Speaker 2: shares are just underwater.

493
00:26:37,119 --> 00:26:38,879
Speaker 4: Yeah, and you know, I think when we talk about

494
00:26:38,880 --> 00:26:42,520
Speaker 4: Warner Brothers, Discovery stock doing well this year, that's not

495
00:26:42,720 --> 00:26:44,439
Speaker 4: really the whole picture, like you point out right, if

496
00:26:44,440 --> 00:26:46,400
Speaker 4: you take a look at the chart over a five

497
00:26:46,480 --> 00:26:49,680
Speaker 4: year period. Five years ago, it was at twenty five

498
00:26:49,720 --> 00:26:52,120
Speaker 4: bucks a year, and so sitting at thirteen is far

499
00:26:52,200 --> 00:26:54,760
Speaker 4: far lower than it should be on a historical basis,

500
00:26:55,160 --> 00:26:58,120
Speaker 4: And so there's a lot of room to run here. Again,

501
00:26:58,200 --> 00:27:01,159
Speaker 4: it's going to depend on David's aslov and what he

502
00:27:01,200 --> 00:27:03,920
Speaker 4: can do, not just like fixing up the balance sheet,

503
00:27:03,960 --> 00:27:06,920
Speaker 4: but also you know, all his own personal PR nightmares

504
00:27:06,920 --> 00:27:09,679
Speaker 4: as well, like he needs to figure out what the

505
00:27:09,760 --> 00:27:12,639
Speaker 4: message is that he's sending across to investors, like do

506
00:27:13,320 --> 00:27:15,960
Speaker 4: a good job of making sure you're not in the spotlight,

507
00:27:16,040 --> 00:27:18,159
Speaker 4: make sure the company's name is in the spotlight for

508
00:27:18,200 --> 00:27:21,760
Speaker 4: good reason. So I think yes to your point, it's

509
00:27:21,800 --> 00:27:25,080
Speaker 4: at a very historical lows in terms of market cap.

510
00:27:25,119 --> 00:27:28,120
Speaker 4: It's sitting out about thirty one point four billion dollars.

511
00:27:28,520 --> 00:27:31,359
Speaker 4: That's very far off from where its rivals are sitting

512
00:27:31,440 --> 00:27:35,920
Speaker 4: right like Netflix and Disney, and so yeah, I we'll

513
00:27:35,960 --> 00:27:36,919
Speaker 4: have to see where it ends.

514
00:27:36,840 --> 00:27:39,840
Speaker 2: Up, and pretty far from where the AT and T Yes,

515
00:27:39,960 --> 00:27:43,320
Speaker 2: Warner Media Discovery. That very complicated track transaction when that

516
00:27:43,400 --> 00:27:45,880
Speaker 2: was done in April twenty twenty two. Off the top

517
00:27:45,880 --> 00:27:48,040
Speaker 2: of my head, I know there were many more billions,

518
00:27:48,320 --> 00:27:51,760
Speaker 2: tens of billions added to that market cap, and that's

519
00:27:52,040 --> 00:27:54,800
Speaker 2: that's got to be tough, and it I know it's

520
00:27:54,840 --> 00:27:57,760
Speaker 2: got a pain, probably David's aslov more than anyone, because

521
00:27:57,800 --> 00:27:59,480
Speaker 2: I know that man loves his balance sheet.

522
00:27:59,480 --> 00:28:01,479
Speaker 1: Oh yes, I think it's going to bounce back. And

523
00:28:01,520 --> 00:28:04,000
Speaker 1: I think it's going to bounce back in part because

524
00:28:04,119 --> 00:28:06,919
Speaker 1: I do think they're going to sell CNN. That is

525
00:28:07,000 --> 00:28:10,080
Speaker 1: my prediction, just as I think eventually we're going to

526
00:28:10,119 --> 00:28:14,719
Speaker 1: see Disney sell off ESPN. I think the linear business,

527
00:28:15,480 --> 00:28:19,840
Speaker 1: of course, is in a secular decline. And I think,

528
00:28:21,359 --> 00:28:25,480
Speaker 1: and I'm not telling these CEOs anything they don't already know,

529
00:28:27,119 --> 00:28:30,840
Speaker 1: the pay TV business, as great as these brands have

530
00:28:31,000 --> 00:28:35,160
Speaker 1: been to these businesses for a very long time, if

531
00:28:35,200 --> 00:28:39,640
Speaker 1: they sell these businesses now before they decline any further,

532
00:28:39,720 --> 00:28:42,640
Speaker 1: and there are buyers out there, I believe, in private

533
00:28:42,680 --> 00:28:46,160
Speaker 1: equity or whatnot, now is the time to unload them.

534
00:28:46,440 --> 00:28:49,400
Speaker 4: No to that point, I just want to quickly bring up.

535
00:28:49,920 --> 00:28:52,280
Speaker 4: The annual rate of cord cutting hit six point nine

536
00:28:52,320 --> 00:28:55,040
Speaker 4: percent in the first q of twenty twenty three, and

537
00:28:55,240 --> 00:28:58,320
Speaker 4: recent data from Nielsen show that summer broadcast viewing is

538
00:28:58,320 --> 00:29:01,440
Speaker 4: down thirteen percent year over year, So it continues to bleed.

539
00:29:01,760 --> 00:29:04,200
Speaker 4: I really don't see a scenario andy where it gets

540
00:29:04,400 --> 00:29:06,400
Speaker 4: much better than where it is now, especially when we

541
00:29:06,440 --> 00:29:08,480
Speaker 4: hear Q two results coming in.

542
00:29:08,680 --> 00:29:12,400
Speaker 1: Here's another stat. PwC put out their annual numbers recently.

543
00:29:12,920 --> 00:29:15,600
Speaker 1: They said that the pay TV business was going to

544
00:29:15,720 --> 00:29:19,760
Speaker 1: shed thirty billion dollars in the next I think it

545
00:29:19,840 --> 00:29:24,120
Speaker 1: was five years. That's the combination of both affiliate fees

546
00:29:24,200 --> 00:29:26,959
Speaker 1: and advertising. I mean, it's just tremendous.

547
00:29:27,000 --> 00:29:29,240
Speaker 2: I mean again, I have to just point out in

548
00:29:29,280 --> 00:29:34,400
Speaker 2: the context of Hollywood and dealing with unions and contracts

549
00:29:34,440 --> 00:29:38,040
Speaker 2: and you know, real issues of pay equity and who

550
00:29:38,080 --> 00:29:42,760
Speaker 2: makes what that is, those conversations sometimes seem to happen

551
00:29:42,800 --> 00:29:45,200
Speaker 2: in different worlds where you have the creative community and

552
00:29:45,240 --> 00:29:47,680
Speaker 2: its concerns and then you have the financial community, and

553
00:29:47,800 --> 00:29:51,840
Speaker 2: clearly there needs to be more understanding kind of in

554
00:29:51,880 --> 00:29:54,560
Speaker 2: both worlds. But as we talk about these kinds of

555
00:29:54,640 --> 00:29:57,760
Speaker 2: numbers and the transition, I feel like we use this

556
00:29:58,040 --> 00:30:02,120
Speaker 2: sentence every day in variety stories. This industry is going

557
00:30:02,160 --> 00:30:06,760
Speaker 2: through a historic transition. I think some of what's broiling

558
00:30:06,760 --> 00:30:09,440
Speaker 2: Hollywood right now, if there was a greater understanding of

559
00:30:09,640 --> 00:30:14,120
Speaker 2: just billions of dollars of what used to be earnings

560
00:30:14,440 --> 00:30:19,000
Speaker 2: in this business are evaporating with cord cutting, I think

561
00:30:19,000 --> 00:30:22,160
Speaker 2: that would put some of some of this all into context.

562
00:30:22,400 --> 00:30:25,040
Speaker 2: Cut I think that would help put things into context

563
00:30:25,160 --> 00:30:29,880
Speaker 2: better for for contract, for asks at the negotiating table.

564
00:30:30,400 --> 00:30:32,560
Speaker 3: I mean that being said, you have been following that.

565
00:30:32,600 --> 00:30:36,360
Speaker 4: I'm curious how you think the c suite of a

566
00:30:36,360 --> 00:30:38,200
Speaker 4: lot of these companies are sort of going to trust

567
00:30:38,680 --> 00:30:40,880
Speaker 4: the labor issues that are ongoing right now.

568
00:30:41,400 --> 00:30:44,880
Speaker 2: Well, I think that these contracts are coming, these contract

569
00:30:44,960 --> 00:30:47,200
Speaker 2: negotiations are coming at a time when they're dealing with

570
00:30:47,280 --> 00:30:51,320
Speaker 2: the larger you know, these are these are truly existential

571
00:30:51,560 --> 00:30:56,320
Speaker 2: issues they're dealing with. Cord Cutting isn't new, but it's accelerating. Streaming,

572
00:30:56,600 --> 00:30:59,200
Speaker 2: which was the great hope, is clearly not going to

573
00:30:59,440 --> 00:31:04,120
Speaker 2: replicate remotely. You know, a court, maybe you know some

574
00:31:04,120 --> 00:31:06,920
Speaker 2: some percentage of the economics, but you'll you're never going

575
00:31:07,000 --> 00:31:09,840
Speaker 2: to get We are never going to see the kind

576
00:31:09,880 --> 00:31:13,400
Speaker 2: of the heyday of cable television, which really does seem

577
00:31:13,440 --> 00:31:16,720
Speaker 2: to be bookended by a period of call it roughly

578
00:31:16,840 --> 00:31:19,720
Speaker 2: nineteen eighty, so let's just call it the pandemic like that.

579
00:31:19,960 --> 00:31:22,920
Speaker 2: That seems to be a pretty good, pretty good rough

580
00:31:23,080 --> 00:31:26,120
Speaker 2: period and those you know, those were forty great years

581
00:31:26,280 --> 00:31:29,640
Speaker 2: of earnings. But but what is coming in its place

582
00:31:29,960 --> 00:31:34,160
Speaker 2: is very unclear. It'll be interesting to see to these

583
00:31:34,400 --> 00:31:37,040
Speaker 2: third party licensing deals that you're starting to see Disney

584
00:31:37,080 --> 00:31:39,520
Speaker 2: and Warners. It'll be interesting to see at what you know,

585
00:31:39,560 --> 00:31:43,440
Speaker 2: long term, what dollars those are done, at what you

586
00:31:43,480 --> 00:31:46,680
Speaker 2: know obviously, if they do more, if they if is

587
00:31:47,080 --> 00:31:49,880
Speaker 2: is there a world someday where Disney Plus is a

588
00:31:49,920 --> 00:31:52,040
Speaker 2: small thing and we're back to just kind of the

589
00:31:52,040 --> 00:31:55,880
Speaker 2: same old movie licensing, TV you know, windowing of TV shows.

590
00:31:56,280 --> 00:31:58,400
Speaker 2: You know, it could in ten years time we could

591
00:31:58,440 --> 00:32:00,720
Speaker 2: be looking back, Oh remember when everybody lost their mind

592
00:32:00,760 --> 00:32:01,480
Speaker 2: over streaming.

593
00:32:02,080 --> 00:32:05,320
Speaker 4: And also a question that I have is we have

594
00:32:05,680 --> 00:32:09,360
Speaker 4: quite a good amount of media giants right now that

595
00:32:09,440 --> 00:32:12,040
Speaker 4: have their own identity. Right in ten years, is that

596
00:32:12,120 --> 00:32:16,360
Speaker 4: going to be five media giants that have survived and

597
00:32:16,880 --> 00:32:20,280
Speaker 4: after consolidation, Sure, M and A is not you know,

598
00:32:20,400 --> 00:32:22,960
Speaker 4: mega deals are probably not likely for the time being,

599
00:32:23,080 --> 00:32:24,800
Speaker 4: but who knows. I mean, if we get a new

600
00:32:24,800 --> 00:32:27,760
Speaker 4: administration if we have people who are a little more

601
00:32:27,840 --> 00:32:31,160
Speaker 4: lax in Washington about M and A cold, we see

602
00:32:31,160 --> 00:32:34,720
Speaker 4: another big deal, perhaps a paramount plus and a peacock.

603
00:32:34,800 --> 00:32:37,000
Speaker 4: Those names are always thrown out there right as being

604
00:32:37,000 --> 00:32:38,520
Speaker 4: on the chop or not the chopping block, but the

605
00:32:38,600 --> 00:32:39,240
Speaker 4: auction block.

606
00:32:40,400 --> 00:32:45,320
Speaker 2: So also potential for like a CJ M or know,

607
00:32:45,440 --> 00:32:48,800
Speaker 2: one of the larger conglomerates that are not based in

608
00:32:48,840 --> 00:32:52,160
Speaker 2: the US. You know, that's happened before and it's usually

609
00:32:52,240 --> 00:32:55,160
Speaker 2: not gone well, but it's it is truly now a

610
00:32:55,240 --> 00:32:59,720
Speaker 2: different the content marketplace is truly global, and that would

611
00:32:59,720 --> 00:33:03,640
Speaker 2: seem to really open up open up more opportunities. All

612
00:33:03,760 --> 00:33:06,480
Speaker 2: that said, you know, the cultural issues can can often

613
00:33:06,520 --> 00:33:08,640
Speaker 2: be fraught even you know, you could argue that it

614
00:33:08,680 --> 00:33:11,280
Speaker 2: was a foreign entity at and T a butt time

615
00:33:11,320 --> 00:33:14,600
Speaker 2: Warner a few years ago. So but that but I

616
00:33:14,600 --> 00:33:17,240
Speaker 2: think the potential for an international actor to come in

617
00:33:17,880 --> 00:33:20,000
Speaker 2: as a as A in an M and A context

618
00:33:20,120 --> 00:33:23,520
Speaker 2: is very interesting. And it's like we didn't have enough

619
00:33:23,520 --> 00:33:26,040
Speaker 2: companies to keep an eye on now now we're watching me.

620
00:33:26,400 --> 00:33:28,720
Speaker 2: But it is interesting. It's one of the big dynamic things.

621
00:33:29,680 --> 00:33:32,440
Speaker 4: A bunch more regulators who have to prove that too, though, so.

622
00:33:33,000 --> 00:33:36,160
Speaker 1: I mean, as for the regulatory issues, I would imagine

623
00:33:36,200 --> 00:33:41,200
Speaker 1: byte Dance would have taken over the entire world already. Yeah,

624
00:33:41,240 --> 00:33:42,000
Speaker 1: but uh.

625
00:33:42,480 --> 00:33:46,400
Speaker 2: Up between byte Dance and and Meta basically yeah.

626
00:33:46,600 --> 00:33:50,720
Speaker 1: Yeah. But you know, Heidi, you wrote this week in

627
00:33:50,920 --> 00:33:55,120
Speaker 1: VIP's coverage of Sun Valley that, uh, this is a

628
00:33:55,160 --> 00:34:00,600
Speaker 1: conference that is famous or maybe infamous for uh M

629
00:34:00,680 --> 00:34:04,200
Speaker 1: and A and deal making that goes on there. But

630
00:34:04,400 --> 00:34:09,440
Speaker 1: because of the regulatory world and the fact that you know,

631
00:34:09,719 --> 00:34:12,560
Speaker 1: at the FTC right now, Lena Khan is a real

632
00:34:12,760 --> 00:34:16,240
Speaker 1: hawk on the monopoly front, that we just don't expect

633
00:34:16,280 --> 00:34:21,399
Speaker 1: there to be any imminent activity. But in the long term,

634
00:34:21,600 --> 00:34:25,000
Speaker 1: do you think that seeds are being planted this week

635
00:34:25,440 --> 00:34:28,360
Speaker 1: for perhaps M and A in the long term?

636
00:34:28,440 --> 00:34:28,600
Speaker 4: Oh?

637
00:34:28,680 --> 00:34:29,279
Speaker 3: Absolutely.

638
00:34:30,560 --> 00:34:34,320
Speaker 4: We have Sherry Redstone there and she's previously held talks

639
00:34:34,400 --> 00:34:37,239
Speaker 4: with Comcast and there was a lot of chatter at

640
00:34:37,239 --> 00:34:40,560
Speaker 4: the time that oh, maybe they're working on something just

641
00:34:40,920 --> 00:34:43,360
Speaker 4: more than a partnership, maybe there could be a potential merger.

642
00:34:43,360 --> 00:34:47,000
Speaker 4: So if she's caught, you know, canoodling with with Comcast

643
00:34:47,120 --> 00:34:53,200
Speaker 4: again or in the non romantic sense, yes yes, what

644
00:34:53,320 --> 00:34:58,799
Speaker 4: a sexist time, then who knows, maybe they're having conversations

645
00:34:58,800 --> 00:35:02,400
Speaker 4: about what could possibly on the horizon down the line.

646
00:35:02,480 --> 00:35:04,600
Speaker 4: But that being said, for taking a look at where

647
00:35:04,760 --> 00:35:08,279
Speaker 4: MNA is now, it's really really.

648
00:35:08,040 --> 00:35:10,440
Speaker 3: At low's compared to where it was the past couple

649
00:35:10,440 --> 00:35:10,759
Speaker 3: of years.

650
00:35:10,800 --> 00:35:15,960
Speaker 4: I think SMP Global Market Intelligence said that overall MNA

651
00:35:16,440 --> 00:35:19,680
Speaker 4: in Q one globally was about twenty three percent lower

652
00:35:19,719 --> 00:35:21,920
Speaker 4: than where it was last year, and that's because a

653
00:35:21,920 --> 00:35:24,560
Speaker 4: lot of folks are one scared to spend that kind

654
00:35:24,600 --> 00:35:27,000
Speaker 4: of capital right now and may not have that kind

655
00:35:27,040 --> 00:35:31,239
Speaker 4: of capital unless they're PE or PC or whatever. But

656
00:35:31,440 --> 00:35:35,200
Speaker 4: also because the regulatory stuff. When we look at Activision

657
00:35:35,280 --> 00:35:40,920
Speaker 4: Microsoft that is still very much not been approved and

658
00:35:41,719 --> 00:35:44,240
Speaker 4: we still don't know what's going to happen there.

659
00:35:44,400 --> 00:35:48,239
Speaker 3: So it's hard to say. I think I mentioned.

660
00:35:47,920 --> 00:35:51,080
Speaker 4: This earlier, but unless we have a more lax administration

661
00:35:51,160 --> 00:35:55,359
Speaker 4: that comes in after the election, it's probably not likely

662
00:35:55,400 --> 00:35:58,280
Speaker 4: we'll see a mega deal to this scale of Warner

663
00:35:59,040 --> 00:36:03,640
Speaker 4: Brothers Discovery or even the Amazon MGM deal. Right, So

664
00:36:03,680 --> 00:36:05,560
Speaker 4: those are some of the biggest recent ones that we've

665
00:36:05,600 --> 00:36:08,560
Speaker 4: seen within media. But I don't know, but these are

666
00:36:08,600 --> 00:36:09,680
Speaker 4: being planted for sure.

667
00:36:09,600 --> 00:36:12,120
Speaker 2: Not that you know, not that the CEOs needed, but

668
00:36:12,200 --> 00:36:14,560
Speaker 2: you kind of have to fit like it's hard out

669
00:36:14,600 --> 00:36:17,319
Speaker 2: here for a CEO right now, just every single thing

670
00:36:17,680 --> 00:36:20,719
Speaker 2: and deal making. Let's face it, we've all seen companies

671
00:36:20,719 --> 00:36:23,399
Speaker 2: and CEOs that were just deal junkies and just kept

672
00:36:23,440 --> 00:36:26,960
Speaker 2: it going. Like even that solution, like even the solution

673
00:36:27,040 --> 00:36:30,480
Speaker 2: of well, I'll float a potential for you know, company

674
00:36:30,600 --> 00:36:32,959
Speaker 2: X merged with company. Why we've all seen that juice

675
00:36:32,960 --> 00:36:34,600
Speaker 2: of stock price or type, like, you can't even do

676
00:36:34,680 --> 00:36:37,759
Speaker 2: that now because there is an understanding, and I think

677
00:36:37,760 --> 00:36:40,640
Speaker 2: that will also, certainly for business, will cast an interesting

678
00:36:41,080 --> 00:36:44,040
Speaker 2: tone on the presidential race because you know, I mean,

679
00:36:44,040 --> 00:36:47,240
Speaker 2: the Biden administration signaled where it was when it blocked

680
00:36:47,560 --> 00:36:51,080
Speaker 2: the merger of the oldest form of media books, when

681
00:36:51,080 --> 00:36:55,440
Speaker 2: it blocked Simon and Schuster from from merging with Penguin

682
00:36:55,560 --> 00:36:58,200
Speaker 2: Random House. Now, granted Penguin Random House is the number

683
00:36:58,239 --> 00:37:01,760
Speaker 2: one publisher. Would they have locked you know, Simon Schuster's

684
00:37:01,800 --> 00:37:03,759
Speaker 2: number four? Would they have blocked number three and number

685
00:37:03,760 --> 00:37:07,240
Speaker 2: four from cutting together? But that was a pretty big signal.

686
00:37:07,280 --> 00:37:10,799
Speaker 2: They've also been saying, you know, they've been you know,

687
00:37:10,840 --> 00:37:13,800
Speaker 2: saying that they're looking at higher regulation in the tech sector.

688
00:37:14,280 --> 00:37:19,040
Speaker 2: So that regulatory threat is bigger than in median entertainment

689
00:37:19,120 --> 00:37:21,799
Speaker 2: and now tech. I think certainly bigger than it's been

690
00:37:22,320 --> 00:37:25,040
Speaker 2: since like the early nineties in terms of a factor

691
00:37:25,200 --> 00:37:26,640
Speaker 2: in moving markets and stuff.

692
00:37:27,120 --> 00:37:32,440
Speaker 1: And yet beet is a piece of paramount that I

693
00:37:32,440 --> 00:37:35,799
Speaker 1: don't hear any regulatory issues there that I think is

694
00:37:35,840 --> 00:37:41,000
Speaker 1: going to get unloaded. So to my thesis of ESPN CNN,

695
00:37:41,640 --> 00:37:44,840
Speaker 1: I do think there's going to be an unwinding of

696
00:37:44,920 --> 00:37:50,160
Speaker 1: the PayTV business that is going to happen. And I

697
00:37:50,200 --> 00:37:54,239
Speaker 1: also wonder, you know, we saw rumors reports a year

698
00:37:54,320 --> 00:37:59,680
Speaker 1: ago about Comcast and EA, and I still think there's

699
00:37:59,719 --> 00:38:02,719
Speaker 1: an evitability to the video game business which we have

700
00:38:02,840 --> 00:38:06,439
Speaker 1: not mentioned yet in this conversation and makes so much

701
00:38:06,560 --> 00:38:12,040
Speaker 1: sense because that is where the eyeballs are. I've got

702
00:38:12,200 --> 00:38:14,800
Speaker 1: to imagine somehow the video game business is going to

703
00:38:14,920 --> 00:38:19,520
Speaker 1: assert itself in the entertainment business somehow, some way. Don't

704
00:38:19,520 --> 00:38:20,839
Speaker 1: you think there's logic there?

705
00:38:21,680 --> 00:38:21,839
Speaker 2: Yeah?

706
00:38:22,080 --> 00:38:25,200
Speaker 4: And I think, you know, with the whole generative AI stuff,

707
00:38:25,239 --> 00:38:28,359
Speaker 4: with mixed reality headsets, there's a lot of opportunity within

708
00:38:28,480 --> 00:38:31,000
Speaker 4: gaming as well, and so a lot of folks are

709
00:38:31,000 --> 00:38:33,480
Speaker 4: saying that gaming is really a next opportunity. We see

710
00:38:33,520 --> 00:38:36,719
Speaker 4: Netflix trying to get in on that space. I don't

711
00:38:36,880 --> 00:38:40,160
Speaker 4: know though, that regulators would be okay with a purchase

712
00:38:40,239 --> 00:38:43,480
Speaker 4: of a Take to Interactive or a merger of those

713
00:38:43,560 --> 00:38:48,640
Speaker 4: big names either. I feel like the Microsoft Activision Blizzard again,

714
00:38:48,800 --> 00:38:52,759
Speaker 4: the regulatory framework for that is basically like it's you

715
00:38:52,840 --> 00:38:55,759
Speaker 4: would be in charge of such a big part of

716
00:38:55,840 --> 00:39:00,080
Speaker 4: the video game market that we don't think it's it

717
00:39:00,200 --> 00:39:04,359
Speaker 4: aligns with you know, whatever antitrust's laws that are out there.

718
00:39:04,920 --> 00:39:09,120
Speaker 4: And so I think if Microsoft Activision Blizzard gets through,

719
00:39:09,880 --> 00:39:14,800
Speaker 4: then that's good news for potential video game acquisitions or mergers.

720
00:39:14,840 --> 00:39:16,719
Speaker 4: But I really don't see a situation where a big

721
00:39:16,800 --> 00:39:19,120
Speaker 4: company like you know, like I said, a Take two

722
00:39:19,160 --> 00:39:21,520
Speaker 4: Interactive and EA is really going to be bought out,

723
00:39:21,560 --> 00:39:22,920
Speaker 4: do you? And no?

724
00:39:23,360 --> 00:39:25,640
Speaker 1: I think it does go back to the regulatory front.

725
00:39:25,960 --> 00:39:30,719
Speaker 1: If Biden loses next year, the floodgates of M and

726
00:39:30,800 --> 00:39:34,200
Speaker 1: A are going to open like nothing we have ever

727
00:39:34,400 --> 00:39:35,120
Speaker 1: seen before.

728
00:39:36,520 --> 00:39:39,319
Speaker 4: You think, so, I mean, let's say Donald Trump, who

729
00:39:39,480 --> 00:39:42,320
Speaker 4: is you know, currently trying to run for a president.

730
00:39:42,840 --> 00:39:45,880
Speaker 4: He has also been tough on tech regulation, and so

731
00:39:46,239 --> 00:39:49,120
Speaker 4: let's say we get a Republican in office, will they

732
00:39:49,200 --> 00:39:49,800
Speaker 4: be more locks.

733
00:39:49,840 --> 00:39:51,200
Speaker 3: I don't know that that's going to be true.

734
00:39:53,040 --> 00:39:55,439
Speaker 1: You know, that's a whole other ball of wax, because

735
00:39:55,480 --> 00:39:57,719
Speaker 1: with Trump it was if you think back to his

736
00:39:57,960 --> 00:40:01,839
Speaker 1: personal issues with CNN, and I think that's a different thing.

737
00:40:02,640 --> 00:40:05,360
Speaker 2: We reference cord cutting Heidi a little bit ago. I

738
00:40:05,440 --> 00:40:07,480
Speaker 2: wanted to get back to that. So you know, you

739
00:40:07,560 --> 00:40:10,120
Speaker 2: can't say you can't spell cord cutting without Comcasts. I

740
00:40:10,120 --> 00:40:11,440
Speaker 2: don't know if that's true, but I just made that.

741
00:40:11,960 --> 00:40:15,640
Speaker 2: But you know, Comcast is another one of these companies

742
00:40:15,680 --> 00:40:18,600
Speaker 2: that is really betwixt in between in terms of its

743
00:40:18,640 --> 00:40:21,680
Speaker 2: core business is undergoing a lot of a lot of shift.

744
00:40:21,800 --> 00:40:24,680
Speaker 2: But I think people would give Comcast credit of the

745
00:40:24,760 --> 00:40:27,719
Speaker 2: big cable system operators, and they're the biggest. They have

746
00:40:27,840 --> 00:40:30,960
Speaker 2: done the most investment R and D to try to

747
00:40:31,120 --> 00:40:36,000
Speaker 2: keep that core cable system's business relevant, up to speed

748
00:40:36,480 --> 00:40:39,960
Speaker 2: in terms of technology and features and functions. They you know,

749
00:40:40,239 --> 00:40:43,000
Speaker 2: every single Comcast earnings call, we hear, we hear about

750
00:40:43,000 --> 00:40:47,600
Speaker 2: the voice controlled remote. What is your thinking just both

751
00:40:47,640 --> 00:40:50,320
Speaker 2: how the stock has been, but just long term, what

752
00:40:50,440 --> 00:40:51,560
Speaker 2: do you see for Comcast?

753
00:40:52,080 --> 00:40:55,919
Speaker 3: Comcast is doing okay, It's still outperforming the broader market.

754
00:40:56,080 --> 00:40:58,120
Speaker 3: Not by a huge margin, but it is.

755
00:40:58,400 --> 00:41:02,320
Speaker 4: And but the is with Comcast is it's not immune

756
00:41:02,360 --> 00:41:04,719
Speaker 4: to cord cutting. Right last quarter, it also lost I

757
00:41:04,800 --> 00:41:09,200
Speaker 4: think six hundred thousand PayTV subscribers excuse me.

758
00:41:09,400 --> 00:41:10,719
Speaker 3: And if you take a look at the chart of

759
00:41:10,840 --> 00:41:13,920
Speaker 3: losses quarter over quarter, the chart is very much in

760
00:41:14,000 --> 00:41:15,760
Speaker 3: a downward trend. So it's not immune.

761
00:41:16,040 --> 00:41:19,520
Speaker 4: But it does have a broadband which is something that

762
00:41:19,680 --> 00:41:22,360
Speaker 4: was propping up the company, especially during the pandemic and

763
00:41:22,520 --> 00:41:25,160
Speaker 4: even now because people do need high speed internet and

764
00:41:25,280 --> 00:41:28,160
Speaker 4: Exfinity is one of those providers of that kind of internet,

765
00:41:28,800 --> 00:41:33,080
Speaker 4: and Comcast is also in the media business. It has

766
00:41:33,200 --> 00:41:35,960
Speaker 4: theme parks. It's planning on expanding those theme parks. Again,

767
00:41:36,000 --> 00:41:37,960
Speaker 4: I don't know if the timing of that kind of

768
00:41:38,040 --> 00:41:41,960
Speaker 4: expansion is great. Sure it wants to capitalize on this

769
00:41:42,120 --> 00:41:46,400
Speaker 4: pent up demand amongst consumers, but it's a capital intensive endeavor, right.

770
00:41:46,480 --> 00:41:49,360
Speaker 4: It takes a lot of money and investment into building

771
00:41:49,360 --> 00:41:52,520
Speaker 4: out these parks. And so it's been propped up again

772
00:41:52,640 --> 00:41:55,480
Speaker 4: also by its theme parks business, which is a big

773
00:41:55,600 --> 00:41:58,080
Speaker 4: free cash flow generator, not just for Comcasts but for

774
00:41:58,200 --> 00:42:01,120
Speaker 4: Disney as well. So I think those things have been

775
00:42:01,200 --> 00:42:04,480
Speaker 4: keeping it afloat. But Peacock is one of those companies

776
00:42:04,520 --> 00:42:07,279
Speaker 4: that's still sure. It had its growth quarter over quarter,

777
00:42:07,360 --> 00:42:10,680
Speaker 4: but it's still not at a scale that's comparable to

778
00:42:10,840 --> 00:42:14,400
Speaker 4: some of its larger rivals. So being in the media

779
00:42:14,440 --> 00:42:17,880
Speaker 4: business is exceptionally hard, and I think, especially with the

780
00:42:18,000 --> 00:42:21,480
Speaker 4: continued cord cutting acceleration, Comcast is not going to be immune.

781
00:42:23,160 --> 00:42:26,400
Speaker 4: But yeah, the stock is still doing fairly well compared

782
00:42:26,440 --> 00:42:30,200
Speaker 4: to last year. Last year it was underperforming dramatically. But

783
00:42:30,400 --> 00:42:32,600
Speaker 4: I think what we hear from Q two results from

784
00:42:32,600 --> 00:42:35,480
Speaker 4: management in terms of how it's dealing with those losses

785
00:42:35,920 --> 00:42:39,240
Speaker 4: in traditional TV and how it's investing further and broadband

786
00:42:39,280 --> 00:42:43,600
Speaker 4: five G even those will be indicative of how the

787
00:42:43,680 --> 00:42:45,840
Speaker 4: company could potentially do going forward.

788
00:42:46,520 --> 00:42:49,560
Speaker 1: I think there's a question of whether Comcast even needs

789
00:42:49,680 --> 00:42:52,960
Speaker 1: to be in the media business, especially at a time

790
00:42:53,000 --> 00:42:56,279
Speaker 1: where this is a year they've had some key executive

791
00:42:56,360 --> 00:43:00,799
Speaker 1: exits in Jeff Schell and Lindya Karita, who my guess

792
00:43:00,920 --> 00:43:06,239
Speaker 1: is regretting leaving NBC Universal right now for Twitter, and

793
00:43:06,400 --> 00:43:09,240
Speaker 1: now they've got a new guy in place in Mike Cavanaugh,

794
00:43:09,280 --> 00:43:13,520
Speaker 1: who has got to prove himself right now. It's a

795
00:43:13,640 --> 00:43:18,200
Speaker 1: really critical time for Brian Roberts, who I think people

796
00:43:18,320 --> 00:43:22,839
Speaker 1: have wondered whether he's got to make another big deal

797
00:43:23,000 --> 00:43:26,840
Speaker 1: and maybe has sort of sat on his on his

798
00:43:27,200 --> 00:43:30,600
Speaker 1: you kept the gunpowder dry for perhaps a little too

799
00:43:30,840 --> 00:43:34,040
Speaker 1: long in terms of what that next big deal is

800
00:43:34,120 --> 00:43:36,160
Speaker 1: going to be. They thought EA was going to be

801
00:43:36,239 --> 00:43:39,320
Speaker 1: a deal last year. He didn't pull the trigger on that.

802
00:43:39,520 --> 00:43:41,440
Speaker 1: He's got to do something, and I don't know what

803
00:43:41,719 --> 00:43:42,520
Speaker 1: that is going to be.

804
00:43:42,640 --> 00:43:47,799
Speaker 2: Except for back to our other other thread of this conversation,

805
00:43:48,160 --> 00:43:52,880
Speaker 2: Comcast was has long been in the crosshairs regulators because

806
00:43:53,000 --> 00:43:56,400
Speaker 2: broadband is so important, because broadband really is the utility

807
00:43:56,719 --> 00:43:59,880
Speaker 2: now that powers you know, the powers everything in our homes.

808
00:44:00,040 --> 00:44:02,680
Speaker 2: And I think they have an extra layer of scrutiny

809
00:44:03,200 --> 00:44:05,600
Speaker 2: in DC because they are so big and you know,

810
00:44:05,719 --> 00:44:09,080
Speaker 2: remember hard to believe, like ten years ago they were

811
00:44:09,200 --> 00:44:13,439
Speaker 2: mixed for you know, the FDC nixed them from buying

812
00:44:13,560 --> 00:44:16,240
Speaker 2: Time Warner Cable, which would have really made them bigger

813
00:44:16,360 --> 00:44:18,400
Speaker 2: in cable. I'm sure there's a lot of you know,

814
00:44:18,520 --> 00:44:21,520
Speaker 2: what if scenarios, if that could have if that could

815
00:44:21,600 --> 00:44:24,360
Speaker 2: have happened. So I think that they are also I

816
00:44:24,440 --> 00:44:28,000
Speaker 2: think they have always shot down any suggestion that NBC

817
00:44:28,160 --> 00:44:31,000
Speaker 2: Universal might be somehow spun off from the cable but

818
00:44:31,320 --> 00:44:33,880
Speaker 2: that just boy, that does that seem to like create

819
00:44:34,600 --> 00:44:38,239
Speaker 2: more flexibility. So when something is that logical, it feels like,

820
00:44:38,400 --> 00:44:41,800
Speaker 2: you know that it may sort of carry away on

821
00:44:41,920 --> 00:44:45,200
Speaker 2: its own logical weight. But you know, then again, the

822
00:44:45,360 --> 00:44:47,960
Speaker 2: Roberts have preferred The Roberts family has preferred shares. They

823
00:44:48,000 --> 00:44:52,719
Speaker 2: have pretty firm control of comcasts, so it's good to

824
00:44:52,800 --> 00:44:53,600
Speaker 2: have preferred shares.

825
00:44:53,640 --> 00:44:59,880
Speaker 1: I guess, well, whether it's Brian Roberts, Bob Backish, Bob Iger,

826
00:45:00,360 --> 00:45:02,680
Speaker 1: Ted Sarandos, a lot of people we got to keep

827
00:45:02,680 --> 00:45:05,840
Speaker 1: an eye on in the coming quarter. Thank you Cynthia

828
00:45:05,920 --> 00:45:10,239
Speaker 1: and Heidi for walking through some really interesting issues as

829
00:45:10,400 --> 00:45:12,800
Speaker 1: we head into what's going to be a really interesting

830
00:45:12,880 --> 00:45:14,080
Speaker 1: period for the media sector.

831
00:45:14,320 --> 00:45:17,400
Speaker 2: And please, dear listeners, do not forget to go to.

832
00:45:18,239 --> 00:45:22,560
Speaker 1: If you go to Variety dot com slash vip save,

833
00:45:22,920 --> 00:45:29,040
Speaker 1: that's twenty percent off our new vip Vitals package, which

834
00:45:29,120 --> 00:45:32,000
Speaker 1: is a great set of newsletters five days a week,

835
00:45:32,480 --> 00:45:38,319
Speaker 1: including our Media and Money newsletter every Monday featuring Heidi Chung.

836
00:45:44,680 --> 00:45:47,640
Speaker 1: This has been another episode of Strictly Business. Tune in

837
00:45:47,760 --> 00:45:51,240
Speaker 1: next week for another helping of scintillating conversation with media

838
00:45:51,360 --> 00:45:53,880
Speaker 1: movers and shakers, and please make sure you subscribe to

839
00:45:53,920 --> 00:45:57,240
Speaker 1: the podcast to hear future episodes. Also leave a review

840
00:45:57,320 --> 00:45:59,920
Speaker 1: in Apple Podcasts. Let us know how we're doing.

841
00:46:00,239 --> 00:46:02,200
Speaker 2: P P Thin T tay