WEBVTT - Paramount Makes Hostile Bid for Warner Bros. Discovery 0:00:02.520 --> 0:00:13.600 Bloomberg Audio Studios, podcasts, radio news. Bloomberg Tech is alive 0:00:13.640 --> 0:00:17.439 from coast to coast with Caroline Hyde in New York 0:00:17.720 --> 0:00:20.200 and Vla low in sentrances. 0:00:19.600 --> 0:00:25.680 Go, this is Bloomberg Tech coming up. Paramount making a 0:00:25.800 --> 0:00:28.920 hostile bid for Warner Brothers Discovery, just days after the 0:00:28.920 --> 0:00:31.040 company agreed to a deal with Netflix. 0:00:31.280 --> 0:00:34.720 Plus, President Trump wants to limit state level AI regulation. 0:00:34.800 --> 0:00:37.640 He plans to approve an executive order this week aiming 0:00:37.680 --> 0:00:40.080 for one rule on artificial intelligence. 0:00:40.520 --> 0:00:43.960 And IBM is buying the data streaming platform Confluent for 0:00:44.000 --> 0:00:47.279 about nine point three billion dollars, one of its largest takeovers. 0:00:47.320 --> 0:00:50.600 Yeah, look at that share market reaction for Confluence. 0:00:50.680 --> 0:00:52.000 Let's check in on the broader market. 0:00:52.120 --> 0:00:55.680 So anticipation, anticipation of the macro perspective that is the 0:00:55.680 --> 0:00:58.320 Federal Reserve policy making later this week. We're down by 0:00:58.360 --> 0:01:00.800 about a quarter of a percent, But so much is 0:01:00.840 --> 0:01:02.600 happening underneath the hood at the moment, ed and you're 0:01:02.640 --> 0:01:04.600 going to dig into our story of the day of 0:01:04.600 --> 0:01:05.600 the week, maybe the year. 0:01:06.400 --> 0:01:09.880 Yep, Warner Brothers Discovery. This is the state of play 0:01:09.959 --> 0:01:13.440 this morning. Paramount Skuydowance comes in with a hostile bid 0:01:13.680 --> 0:01:17.880 at thirty dollars per share for the entirety of Warner 0:01:17.880 --> 0:01:21.080 Brothers Discovery. At the end of last week. Netflix had 0:01:21.080 --> 0:01:23.679 come in with an offer of twenty seven dollars seventy 0:01:23.680 --> 0:01:26.160 five cents a share, but that was largely for the 0:01:26.280 --> 0:01:30.640 streaming and studio businesses, with the plan that Warner Brothers Discovery, 0:01:30.680 --> 0:01:33.840 who entered into those talks with Netflix, would divest and 0:01:33.880 --> 0:01:36.600 spin off some of the remaining legacy cable units. There 0:01:36.640 --> 0:01:39.039 is so much to discuss in this, the financing in 0:01:39.080 --> 0:01:41.480 both senses, where's it coming from, and what does the 0:01:41.480 --> 0:01:43.360 President of the United States have to say about it? 0:01:43.440 --> 0:01:47.400 Character There are so many angles to get into. Let's 0:01:47.440 --> 0:01:49.600 go to our key reporter on all of this, Bluebogs 0:01:49.680 --> 0:01:52.520 Entertainment reporter Lucas. Sure, you head the entertainment coverage for 0:01:52.560 --> 0:01:53.360 this network. 0:01:53.080 --> 0:01:55.600 And I'm interested. What's the standout for you? 0:01:55.600 --> 0:01:59.040 Because we are unfolding who's behind the money, what's behind 0:01:59.240 --> 0:02:00.600 the attitude to go so hostile? 0:02:00.640 --> 0:02:04.200 Take us there first, I guess the part that stands 0:02:04.240 --> 0:02:06.760 out to me is that David Ellison is coming back 0:02:06.840 --> 0:02:09.320 and going hostile with the same bid that was just 0:02:09.480 --> 0:02:10.760 rejected by the board. 0:02:11.800 --> 0:02:13.400 Rather than sweetening the offer. 0:02:13.480 --> 0:02:17.000 You know, paramounts Guidance has now made six different attempts 0:02:17.040 --> 0:02:21.160 at buying Warner Brothers Discovery. They've been rejected every single time. 0:02:21.919 --> 0:02:25.119 But they are adamant and have been for days now, 0:02:25.160 --> 0:02:28.200 that their offer is better than Netflix's, that the board 0:02:28.280 --> 0:02:31.400 is not factoring in certain things that are confused by 0:02:31.400 --> 0:02:34.280 the valuation on the cable networks, for example, which would 0:02:34.280 --> 0:02:36.160 be spun off in the Netflix scenario. 0:02:37.120 --> 0:02:39.040 And so they're you know, they're not going. 0:02:38.840 --> 0:02:40.800 Down without a fight, but I still think that they 0:02:40.800 --> 0:02:43.000 will end up probably having to raise the offer. 0:02:44.520 --> 0:02:44.920 Lucas. 0:02:44.960 --> 0:02:48.880 Over the weekend you reported in detail a meeting that 0:02:48.960 --> 0:02:52.120 took place between Netflix co CEO Ted Sarandos and the 0:02:52.160 --> 0:02:56.280 President of the United States. Then the President Sunday Night said, 0:02:56.320 --> 0:02:58.799 and this is before the Paramount Skuydance bid came in, 0:02:59.360 --> 0:03:03.120 that from an antitrust or market share perspective, this has 0:03:03.160 --> 0:03:06.000 got to be looked at. Would the same not apply 0:03:06.480 --> 0:03:07.799 to Paramount Skydance. 0:03:09.120 --> 0:03:12.000 It would. It just is a different type of market 0:03:12.080 --> 0:03:12.680 I guess right. 0:03:12.720 --> 0:03:15.360 So the President's comments I thought were notable because he 0:03:15.360 --> 0:03:18.800 had not spoken out against the Netflix bid at all, 0:03:18.960 --> 0:03:22.200 despite the fact that the Paramount people were convinced that 0:03:22.240 --> 0:03:24.200 Trump was going to try to block it and was 0:03:24.240 --> 0:03:26.440 against it, And I would say his comments were sort 0:03:26.440 --> 0:03:28.600 of balanced. On the one hand, he praised Netflix and 0:03:28.600 --> 0:03:31.360 praised Ted Sarandos, but he did say that it would 0:03:31.360 --> 0:03:34.600 need to be reviewed. You know, Netflix is the biggest 0:03:34.680 --> 0:03:37.040 player in Hollywood in streaming, and so if we're to 0:03:37.040 --> 0:03:40.080 add on HBO and Warner Brothers, who would make it 0:03:40.120 --> 0:03:43.520 even stronger there. In Paramount's case, they'd be combining two 0:03:43.520 --> 0:03:47.119 movie studios. They'd be combining huge amounts of television networks. 0:03:47.280 --> 0:03:49.600 The respective share of either. 0:03:49.440 --> 0:03:52.440 Combined company in terms of TV viewing would be quite large, 0:03:52.680 --> 0:03:55.600 would be somewhat similar, and yet both I think would 0:03:55.600 --> 0:03:56.960 still be smaller than YouTube. 0:03:57.000 --> 0:03:58.320 So a lot of this, if. 0:03:58.160 --> 0:04:00.960 We get to you know, I trust case is going 0:04:01.000 --> 0:04:03.320 to depend on what market you are defining. 0:04:04.400 --> 0:04:06.920 Let's just think about the storyline that's capturing a lot 0:04:06.960 --> 0:04:08.720 of attention today is the money. 0:04:09.200 --> 0:04:11.400 And we're all about the money for these things. 0:04:11.720 --> 0:04:16.280 Lucas was involved previously. It looks as though Chinese money 0:04:16.320 --> 0:04:18.599 is now being put to one side, but Middle Eastern 0:04:18.640 --> 0:04:21.200 money coming to the fall, and Jared Kushner's money private 0:04:21.240 --> 0:04:23.440 equity at least which is also about by Middle Eastern 0:04:23.480 --> 0:04:25.160 money coming to the fall. 0:04:25.320 --> 0:04:28.440 Yes, the Middle Eastern money is probably the most interesting 0:04:28.440 --> 0:04:31.040 part of it because there had been a report, you know, 0:04:31.200 --> 0:04:33.680 at this point, maybe a month ago in variety of 0:04:33.680 --> 0:04:36.839 the Holly Trade publication saying that there were three prominent 0:04:37.279 --> 0:04:40.400 Middle Eastern sovereign wealth funds involved in the Paramount bid. 0:04:40.600 --> 0:04:44.400 Paramount initially didn't really engage, then later that day said 0:04:44.440 --> 0:04:46.880 that the report was inaccurate, And then it turns out 0:04:46.880 --> 0:04:49.000 the report looks like it was pretty accurate, because yes, 0:04:49.080 --> 0:04:51.760 I had heard and that they have since disclosed that 0:04:51.839 --> 0:04:54.240 you do have a lot of Middle Eastern money in 0:04:54.279 --> 0:04:56.400 this bid, and there had been Chinese money, which makes 0:04:56.400 --> 0:04:58.800 it even more interesting that, you know, Paramount's one of 0:04:58.839 --> 0:05:03.480 Paramount's arguments is that they will have an easier time 0:05:03.600 --> 0:05:08.160 getting this deal approved. But Warner Brothers Discoveries perspective was, well, 0:05:08.160 --> 0:05:10.599 it's actually making our life more complicated if you have 0:05:10.720 --> 0:05:13.520 all of this foreign money, because then Siphius might have 0:05:13.600 --> 0:05:14.680 to look at it and approve it. 0:05:15.720 --> 0:05:18.599 Bloombo's Lucas Shaw, who's led the team on this story 0:05:18.600 --> 0:05:20.599 every step of the way, thank you so much. Let's 0:05:20.600 --> 0:05:25.000 continue the conversation with Brandon Katz, Greenlight Analytics Director of 0:05:25.080 --> 0:05:28.440 Insights and Content Strategy. Lucas did a really good job 0:05:28.440 --> 0:05:31.800 in explaining the differences in structure of the deals and 0:05:31.880 --> 0:05:35.640 also the different perspectives of each party. But I wondered 0:05:35.640 --> 0:05:38.960 if you'd help our audience understand what the differences between 0:05:39.240 --> 0:05:43.120 a Netflix joined with Warner Brothers Discoveries, streaming and studio 0:05:43.240 --> 0:05:47.120 business versus a paramount s guidance taking the entire thing? 0:05:47.240 --> 0:05:48.039 What does that look like? 0:05:49.120 --> 0:05:50.919 You and Lucas have already done a great job, so 0:05:50.960 --> 0:05:54.680 I'll try to pitch in here. Really WBD in paramount 0:05:55.400 --> 0:05:59.599 more redundancies, more overlap. They are both traditional TV and 0:05:59.680 --> 0:06:04.479 film companies with streaming services tacked on, whereas Netflix, obviously, 0:06:04.520 --> 0:06:07.360 as we know famously or infamously depending on your perspective, 0:06:07.520 --> 0:06:10.320 they are a streaming first, at all costs company, so 0:06:10.440 --> 0:06:15.080 there's less overlap and far more new integration of potentially 0:06:15.160 --> 0:06:20.760 complementary or potentially conflicting businesses. Now, we have seen mega 0:06:20.800 --> 0:06:22.919 mergers of this nature in the past, but they have 0:06:23.000 --> 0:06:28.320 almost always been a like versus like company absorbing each other. 0:06:28.600 --> 0:06:31.640 We have not really seen a major major streaming service 0:06:31.880 --> 0:06:35.160 take a company at the size of Warner Brothers Discovery just. 0:06:35.160 --> 0:06:38.720 Yet, Brendan, We're going later in the programs go deep 0:06:38.720 --> 0:06:42.440 on the anti trust considerations. There are anti trust considerations here. 0:06:42.800 --> 0:06:45.760 But let's say in either event Netflix comes out on 0:06:45.839 --> 0:06:48.839 top or Paramount Skuidance comes out on top. How does 0:06:48.880 --> 0:06:52.480 that change the landscape of entertainment? What does it look 0:06:52.600 --> 0:06:54.440 like to have an entity of that size. 0:06:55.640 --> 0:06:58.599 Roughly two thirds of US adults who subscribe to HBO 0:06:58.680 --> 0:07:02.200 Max also subscribe to Netflix, whereas about forty percent of 0:07:02.360 --> 0:07:05.760 HBO Mac subscribers also use Paramount Plus, according to Greenlight 0:07:05.760 --> 0:07:09.760 Analytics data. So as of right now, the clear raw 0:07:09.840 --> 0:07:14.560 subscription streaming upside obviously favors Paramount Plus, which has about 0:07:14.640 --> 0:07:16.680 eighty million subscribers globally. 0:07:16.960 --> 0:07:19.480 So they are a solid growing. 0:07:19.160 --> 0:07:22.240 Streamer that's been on original content hot Streak since late 0:07:22.240 --> 0:07:25.440 twenty twenty three, but clearly isn't remotely the same size 0:07:25.440 --> 0:07:29.440 as Netflix, Amazon or Disney Plus. So if Netflix were 0:07:29.440 --> 0:07:33.200 to get WBD, they would suddenly be investing in a 0:07:33.240 --> 0:07:35.560 lot of new businesses, and we don't know how they 0:07:35.560 --> 0:07:38.440 would play up theatrical they know, we don't know how 0:07:38.480 --> 0:07:44.120 they would handle wbdtv's massive external TV licensing business. We 0:07:44.240 --> 0:07:47.119 do know that Paramount and WB there's more of again 0:07:47.240 --> 0:07:50.720 overlap and redundancies, so we can safely say that that 0:07:50.760 --> 0:07:54.040 would probably be more predictable as to what the future 0:07:54.040 --> 0:07:57.080 would look like, and it would certainly position Paramount to 0:07:57.400 --> 0:08:01.200 make that entrance into the top three content of media companies. 0:08:01.640 --> 0:08:03.720 Certainly, David Ellis has been talking about getting in the 0:08:03.720 --> 0:08:07.480 position to produce more more content, in particular for the 0:08:07.520 --> 0:08:09.440 consumer brand and just listen to what he told our 0:08:09.480 --> 0:08:12.800 own Lucas Shore a little bit earlier in October at 0:08:12.840 --> 0:08:13.720 our stream time event. 0:08:14.960 --> 0:08:18.400 We have a good relationship with the administration. And look, 0:08:18.440 --> 0:08:20.360 I think if you look to that, I do believe 0:08:22.480 --> 0:08:25.120 other things that have been rumored about right are very 0:08:25.240 --> 0:08:28.080 large scale players that would affect that could potentially create 0:08:28.240 --> 0:08:31.960 monopolies obviously in the ecosystem. And again I think when 0:08:32.000 --> 0:08:34.080 you look at the lens of consolidation for us, I'll 0:08:34.200 --> 0:08:36.079 keep going back to it, it's always how do you 0:08:36.160 --> 0:08:38.600 create long term value creation, how do you put yourself 0:08:38.600 --> 0:08:41.280 in the position to produce more content, not less, and 0:08:41.360 --> 0:08:43.480 how do you ultimately build something that is better for 0:08:43.520 --> 0:08:44.080 the consumer? 0:08:44.679 --> 0:08:46.679 Brandon, What serves the consumer best. 0:08:47.880 --> 0:08:51.720 What serves the consumer best overall is usually competition. So 0:08:51.880 --> 0:08:55.280 I think there is a large sect of industry analysts 0:08:55.280 --> 0:08:58.520 and professionals that would probably prefer Warner Brothers Discovery to 0:08:58.559 --> 0:09:02.160 remain as an independent company because it means more competition, 0:09:02.200 --> 0:09:04.720 it means more buyers on the market, It probably means 0:09:05.000 --> 0:09:08.600 less layoffs of the labor force. Having said that, that's 0:09:08.679 --> 0:09:11.360 unfortunately not the reality that we live in. So somebody 0:09:11.480 --> 0:09:14.040 is going to get Warner Brothers. So it is really 0:09:14.080 --> 0:09:18.800 deciding which ultimate partner is probably best for the industry. 0:09:18.840 --> 0:09:21.800 And now, if you combine Netflix and HBO Max, and 0:09:21.840 --> 0:09:24.720 if you can't combine Paramount Plus and HBO Max, they 0:09:24.800 --> 0:09:28.880 are still significantly smaller than YouTube, which is currently about 0:09:28.880 --> 0:09:32.800 a third bigger than Netflix in the US. So either way, 0:09:32.840 --> 0:09:35.280 there are still a lot of competition out there, depending 0:09:35.280 --> 0:09:37.440 on which industry you're putting against one another. 0:09:37.640 --> 0:09:41.120 Let's talk about good old cable television, because that. 0:09:41.160 --> 0:09:45.240 Is where many would say there is perhaps value, and it. 0:09:45.360 --> 0:09:47.400 Depends on which side of the equation you think. 0:09:47.480 --> 0:09:49.880 At the moment, it feels as though Warner Brothers Discovery 0:09:49.880 --> 0:09:51.720 and thought there was more value in spinning off that 0:09:51.800 --> 0:09:54.520 part of the business than the thirty dollars coming from 0:09:54.520 --> 0:09:55.520 paramounts guidance. 0:09:55.600 --> 0:09:57.160 How do you look at those valuations. 0:09:57.880 --> 0:10:00.520 Well, let's stick with a famous Warner Brothers property friends. 0:10:00.720 --> 0:10:03.880 Ross was a famous paleontologist in the shell, which means 0:10:03.920 --> 0:10:06.560 he loved fossils, which means he would love the cable 0:10:06.600 --> 0:10:10.760 network assets. They are rapidly declining. They are shrinking every day, 0:10:10.760 --> 0:10:13.040 and while they still spin out a decent amount of 0:10:13.040 --> 0:10:16.280 free cash flow, Wall Street sees them as an albatross 0:10:16.360 --> 0:10:19.200 an anchor. So they all these companies want to position 0:10:19.240 --> 0:10:22.920 themselves for long leashes from shareholders and Wall Street and 0:10:23.000 --> 0:10:27.719 the cable nets just aren't part of that strategy. 0:10:27.000 --> 0:10:32.800 Niche analogy, but we're here for it. The most important question, seriously, 0:10:33.120 --> 0:10:37.120 was posed by Bloomberg Tech producer PILESIVERI just take this 0:10:37.200 --> 0:10:37.920 at face value. 0:10:37.960 --> 0:10:38.400 Seriously. 0:10:39.320 --> 0:10:41.719 Let's say iver deal goes through and we don't know 0:10:41.760 --> 0:10:44.480 if it will there's antitrust. Does that mean that we 0:10:44.600 --> 0:10:48.360 stop paying for multiple subscriptions and we can just pay 0:10:48.400 --> 0:10:51.520 for one subscription where all of our platforms are in one. 0:10:51.880 --> 0:10:54.040 Because that's the other side of it. Everyone has a 0:10:54.040 --> 0:10:57.320 dozen or more different subscriptions. And what's so funny is 0:10:57.360 --> 0:11:03.080 like the parties here. They're all contributors that ecosystem. 0:11:03.160 --> 0:11:05.920 Yeah, this seems to be let's say Netflix gets it. 0:11:06.200 --> 0:11:09.600 I'm betting HBO will be available as a premium add 0:11:09.600 --> 0:11:11.520 on and upsell you have to pay more for it. 0:11:11.600 --> 0:11:14.440 But what's interesting about that is it puts Netflix in 0:11:14.559 --> 0:11:18.600 closer competition to Amazon Channels, which is an aggregator, a 0:11:18.600 --> 0:11:22.079 platform from which you can subscribe to other streaming services. 0:11:22.200 --> 0:11:25.800 That's the really big strategic question because if Netflix pulls 0:11:25.800 --> 0:11:28.120 this off, who's to say there won't start offering this 0:11:28.200 --> 0:11:31.640 to other niche or subscale streaming services that need the 0:11:31.679 --> 0:11:34.560 broad reach and distribution of Netflix. Because we've seen both 0:11:34.600 --> 0:11:40.160 YouTube and Amazon primetime channels are massively beneficial for subscale streamers, 0:11:40.280 --> 0:11:43.440 and then those host companies get a huge cut of 0:11:43.480 --> 0:11:46.720 ad revenue, subscription revenue, and it becomes an entirely new, 0:11:46.800 --> 0:11:49.079 self fulfilling business model all on its own. 0:11:49.679 --> 0:11:51.880 You are all about entertainment data. 0:11:52.000 --> 0:11:54.280 The moment our data is to look at share prices 0:11:54.760 --> 0:11:57.480 and paramount goes higher today on the back of this 0:11:57.559 --> 0:12:01.480 news and Netflix sinks yet more. Do you think there 0:12:01.520 --> 0:12:04.480 is more value to be had longer term for the 0:12:04.640 --> 0:12:06.760 entire industry with one or the other, Brandon. 0:12:08.360 --> 0:12:10.800 I think if Netflix said, you know what, we're going 0:12:10.880 --> 0:12:12.839 to be complacent, We're not going to touch our bid 0:12:13.280 --> 0:12:15.520 and they didn't get it, they would still be the 0:12:15.600 --> 0:12:19.000 number one streaming subscription video service in the world and 0:12:19.040 --> 0:12:22.079 for the foreseeable future. And we've already seen through the 0:12:22.160 --> 0:12:26.160 last month that shareholders aren't totally convinced that ingesting let's say, 0:12:26.520 --> 0:12:30.720 non traditional business assets compared to their business model is 0:12:30.800 --> 0:12:33.800 the right way to go, whereas Paramount is a little 0:12:33.800 --> 0:12:37.199 bit more comfortable and familiar with these businesses that it 0:12:37.240 --> 0:12:41.280 would be ingesting. So I think also because Paramount is 0:12:41.360 --> 0:12:43.480 trying to be a top three contender and a last 0:12:43.520 --> 0:12:45.800 man standing in the streaming wars, they probably have the 0:12:45.840 --> 0:12:47.720 most to gain by getting w. 0:12:47.760 --> 0:12:51.280 BA Brandon Katz or the energy of Green Night Analytics, 0:12:51.320 --> 0:12:52.160 we appreciate it. 0:12:52.720 --> 0:12:56.360 Coming up, President Trump, he's aiming to cub state AI rules. 0:12:56.440 --> 0:12:58.600 We'll discuss what that means for the future of the 0:12:58.720 --> 0:12:59.880 USAI industry. 0:13:00.200 --> 0:13:00.280 ED. 0:13:00.280 --> 0:13:02.560 What are you looking at M and a Monday. 0:13:02.720 --> 0:13:06.559 IBM is buying Confluent for nine point three billion dollars 0:13:06.679 --> 0:13:09.320 enterprise value of the deal eleven billion dollars including debt. 0:13:09.360 --> 0:13:12.520 I think if Confluent as like the plumbing for data, 0:13:12.600 --> 0:13:15.240 particularly in a world where these very large frontier models 0:13:15.240 --> 0:13:18.079 aren't relevant to lots of companies. IBM basically wants you 0:13:18.160 --> 0:13:20.679 to pipe your data into its Watson platform real time, 0:13:20.840 --> 0:13:23.520 and that's what this deal represents. IBM a little higher 0:13:23.559 --> 0:13:25.320 but confluent up twenty eight percent. 0:13:25.559 --> 0:13:26.840 This is Bloomberg Tech. 0:13:38.720 --> 0:13:42.000 President Trump saying he plans to approve an executive order 0:13:42.040 --> 0:13:45.800 this week establishing quote one rule on AI to limit 0:13:45.840 --> 0:13:47.880 state level policies regulating the technology. 0:13:48.160 --> 0:13:50.480 Bloomag Senior Tech editor Mike Shepard has been. 0:13:50.360 --> 0:13:53.200 Across what we knew has been being talked about more 0:13:53.240 --> 0:13:56.000 and more, and anxiety that there will be fifty rules 0:13:56.000 --> 0:13:58.720 for AI companies instead of just one federal rule. 0:13:59.360 --> 0:14:01.920 What sort of form could fate take, Mike. 0:14:03.000 --> 0:14:04.079 Well, it's really unclear. 0:14:04.160 --> 0:14:07.960 We have seen circulating in recent weeks a draft version 0:14:08.000 --> 0:14:10.760 of a measure that the President might sign that would 0:14:10.800 --> 0:14:13.800 call for two things. It would allow the Justice Department 0:14:13.880 --> 0:14:17.520 to sue states over regulations at the state level that 0:14:17.600 --> 0:14:20.320 the federal government finds unconstitutional. 0:14:20.560 --> 0:14:22.920 It would also call for cutting. 0:14:22.520 --> 0:14:26.120 Funding to states that have regulations in place that the 0:14:26.160 --> 0:14:28.120 administration finds objectionable. 0:14:28.240 --> 0:14:29.360 It's unclear what those. 0:14:29.200 --> 0:14:30.800 Criteria exactly are. 0:14:31.000 --> 0:14:33.440 We did see an AI action plan, a call for 0:14:33.800 --> 0:14:37.480 reigning in rules that might impede innovation, but those are 0:14:37.520 --> 0:14:39.920 all the specifics we have in hand at this moment, 0:14:39.960 --> 0:14:43.160 so we'll be waiting to see what emerges on the 0:14:43.200 --> 0:14:46.160 President's desk. We do know this as a priority for 0:14:46.200 --> 0:14:49.520 the administration, for the President and for his top AI advisor, 0:14:49.600 --> 0:14:52.400 David Sachs, as well as the tech industry. We've heard 0:14:52.440 --> 0:14:55.040 from Jensen Wog, we have heard from Mark and Dreeson. 0:14:55.160 --> 0:14:57.400 We've heard from Open AI and Google that they really 0:14:57.440 --> 0:15:00.640 would like to rein in what they call a hatchwork 0:15:00.760 --> 0:15:04.440 of state level rules. There are thirty eight states enacting 0:15:04.480 --> 0:15:07.760 almost one hundred measures so far this year, and it's 0:15:07.800 --> 0:15:09.720 becoming a bit much in their view. 0:15:11.040 --> 0:15:13.080 Chet My sense from what I'm hearing out of DC 0:15:13.320 --> 0:15:16.560 is that THISEO will focus more on the why those 0:15:16.600 --> 0:15:20.120 state laws are bad, rather than a proactive here's one 0:15:20.160 --> 0:15:23.960 great rule for everyone. But politically, it's really interesting because 0:15:24.000 --> 0:15:28.520 it's not as if Republicans broadly are supporting the president 0:15:29.040 --> 0:15:33.680 in diluting or detracting from state powers. I think of Rondacentis, 0:15:33.760 --> 0:15:36.440 for example, his position and this has been quite clear. 0:15:36.640 --> 0:15:40.080 So private industry of course would support that, but politically 0:15:40.160 --> 0:15:43.480 the president has to do some management here well. 0:15:43.520 --> 0:15:48.080 Absolutely ed and really regulating AI has been a politically 0:15:48.240 --> 0:15:51.360 tricky issue from the get go, and the reason is 0:15:51.400 --> 0:15:55.119 there are so many different points of view on artificial intelligence. 0:15:55.160 --> 0:15:59.080 There are a handful of members in Congress who are accelerations, 0:15:59.080 --> 0:16:03.160 who really want to speed the adoption of technology, setting 0:16:03.240 --> 0:16:06.920 aside whatever needs there might be for regulation, and then 0:16:06.960 --> 0:16:09.200 there are others who really want to slow it down. 0:16:10.200 --> 0:16:12.840 There in the middle, you do have a large number 0:16:12.840 --> 0:16:17.200 of other lawmakers who are seeking to rein in specific areas. 0:16:17.240 --> 0:16:20.200 Some are worried more about the DUMA issue, others worried 0:16:20.240 --> 0:16:23.480 about privacy, others still are worried about copyright. And so 0:16:23.640 --> 0:16:27.000 far we do not have anything comprehensive at the federal level, 0:16:27.280 --> 0:16:30.120 and in the spirit that space a whors a vacuum. 0:16:30.120 --> 0:16:32.520 This is why we are seeing at the state level, 0:16:32.520 --> 0:16:37.480 both in Republican states and democratic states, legislators and governors 0:16:37.680 --> 0:16:40.600 moving in to try to impose some order in a 0:16:40.640 --> 0:16:44.520 system that they see as both economically significant but also 0:16:44.720 --> 0:16:47.840 potentially perilous to voters and consumers. And we are hearing 0:16:47.880 --> 0:16:53.600 from Ron DeSantis of Florida, Sarah Huckabee Sanders in Arkansas, 0:16:53.880 --> 0:16:57.320 and then even here in Washington, Marjorie Taylor Green, a 0:16:57.320 --> 0:17:01.360 one time ally but now really at President Donald Trump 0:17:01.680 --> 0:17:06.520 favoring state autonomy when it comes to regulating this new technology. 0:17:06.560 --> 0:17:08.520 So it'll be interesting to see how this plays out 0:17:08.600 --> 0:17:11.320 and whether they do more to articulate a vision for 0:17:11.440 --> 0:17:15.600 regulating artificial intelligence at the federal level as opposed to 0:17:15.920 --> 0:17:19.840 just saying why the state level rules on a patchwork 0:17:19.920 --> 0:17:20.720 basis are bad. 0:17:20.800 --> 0:17:23.359 Right now, Mike Sheperd breaking it down, We thank you. 0:17:23.480 --> 0:17:24.680 Let's continue the conversation. 0:17:24.760 --> 0:17:26.760 We can head out to Sarah Olam VP and senior 0:17:26.800 --> 0:17:30.720 fellow the Technology Policy Institute. From your perspective, is it 0:17:30.760 --> 0:17:33.480 better to have technology policy from a state level on 0:17:33.560 --> 0:17:35.359 AI or federal. 0:17:36.600 --> 0:17:39.280 Well, if you look at all the introduced state laws, 0:17:39.280 --> 0:17:42.320 they're over one thousand apparently that are out there floating 0:17:42.760 --> 0:17:45.640 in addition to the ones that have been enacted. They're 0:17:45.680 --> 0:17:48.920 just so diverse. There are like six or seven buckets 0:17:48.920 --> 0:17:52.800 of the type of state law, including disclosure mandates, algorithmic 0:17:52.880 --> 0:17:57.640 discrimination notice, and bias requirements. So you have this matrix 0:17:57.680 --> 0:18:01.200 of fifty states times six or seven bus, and that's 0:18:01.240 --> 0:18:05.600 a patchwork. What you see also is race to the bottom. 0:18:05.720 --> 0:18:10.320 So the most conservative rule might rule them all. And 0:18:10.400 --> 0:18:15.280 so really it is a matter of time and effort 0:18:15.400 --> 0:18:19.240 for small and large companies to know what these policies are. 0:18:20.000 --> 0:18:23.399 The discussion mimics a lot of the privacy debates that 0:18:23.440 --> 0:18:27.679 we had ten years ago and still do. But really 0:18:28.160 --> 0:18:32.080 it's difficult to see innovation move forward when you have 0:18:32.640 --> 0:18:33.760 all these seat laws. 0:18:34.680 --> 0:18:38.760 Sarah, the mechanism of an EO is not that surprising 0:18:39.160 --> 0:18:41.840 if you look at the prior initiatives of this White House. 0:18:41.880 --> 0:18:45.360 In November, a big push by the White House on 0:18:45.480 --> 0:18:50.480 Congress to include a federal moratorium on state AI laws 0:18:50.520 --> 0:18:52.040 in a particular piece of legislation. 0:18:52.119 --> 0:18:53.520 That effort not successful. 0:18:53.960 --> 0:18:57.360 Explain why that was important, please sure. 0:18:57.320 --> 0:19:00.920 So you're seeing this post today because four days ago, 0:19:01.280 --> 0:19:05.280 apparently the state law moratorium was dropped from the NDAA 0:19:05.840 --> 0:19:10.359 Defense Spending Bill. I think Representative Scalise mentioned that it 0:19:10.400 --> 0:19:13.600 wouldn't be included. There was a push in November to 0:19:13.720 --> 0:19:17.280 include it in the NDAA, and that was after in 0:19:17.400 --> 0:19:20.560 July there was a push to include it in the 0:19:20.560 --> 0:19:24.800 the spending bill, the bb B Big Beautiful Bill, and 0:19:24.880 --> 0:19:27.879 so there has been discussion, a lot of buzz on 0:19:27.960 --> 0:19:31.399 the hill how how to include this moratorium in legislation, 0:19:32.040 --> 0:19:35.639 but you know, Congress thought it's not the right vehicle 0:19:35.760 --> 0:19:39.080 to include a moratorium. And so then you see this EO. 0:19:39.680 --> 0:19:43.120 The draft proposal was floated three weeks ago. It's called 0:19:43.160 --> 0:19:47.160 Eliminating State Law Obstruction of National AI Policy. You can 0:19:47.200 --> 0:19:52.080 read it. It includes a litigation task force, evaluation of 0:19:52.119 --> 0:19:58.000 state laws, restriction of funding, and also involves Commerce Department, 0:19:58.119 --> 0:20:03.320 the FCC, FTC, DOJ. Yeah, and so that was the draft. 0:20:03.400 --> 0:20:06.160 We don't know if all that was in is in 0:20:06.320 --> 0:20:09.840 the actual but they floated it for review. 0:20:10.560 --> 0:20:12.439 Sarah, I want to push it forward a little bit 0:20:12.480 --> 0:20:15.440 of what actually is necessary, because it's all very well 0:20:15.480 --> 0:20:17.520 and good saying we don't want it from a state level, 0:20:17.920 --> 0:20:20.439 but many would harp back to what happened with social media, 0:20:20.480 --> 0:20:22.959 where ultimately the big companies were left to regulate themselves 0:20:22.960 --> 0:20:25.120 because no federal policy was ever enacted. 0:20:25.560 --> 0:20:27.600 Do you have optimism that there will. 0:20:27.400 --> 0:20:29.639 Be some rules of the road, some guardrails from a 0:20:29.640 --> 0:20:31.879 federal perspective, or will it just be pushed back on 0:20:31.920 --> 0:20:32.600 a state level. 0:20:33.920 --> 0:20:37.160 You know, it's hard to say. About the harms of technology, 0:20:37.240 --> 0:20:40.760 because yes, there are harms, but who can really know 0:20:40.960 --> 0:20:46.520 what will be the really emergent or difficult harms out 0:20:46.520 --> 0:20:49.200 of thousands of possibilities. You know, you don't want to 0:20:49.240 --> 0:20:53.600 stop all of them in all innovation, and so you know, 0:20:53.840 --> 0:20:58.000 is government the right venue to discover that? Really? You 0:20:58.040 --> 0:21:03.080 see it through litigation. And in Europe they've taken the approach, well, 0:21:03.160 --> 0:21:06.800 let's do blanket regulation, and you know that hasn't turned 0:21:06.800 --> 0:21:09.479 out very well. As you can see, people are pushing 0:21:09.520 --> 0:21:15.000 back against EU regulations right now. So it really is 0:21:15.560 --> 0:21:19.520 a matter of perspective. The biden Ai Executive Order was 0:21:19.600 --> 0:21:23.560 rolled back and that is a perspective that's more precautionary. 0:21:24.000 --> 0:21:27.320 And so the Trump EO is taking the other approach, 0:21:27.400 --> 0:21:33.320