WEBVTT - Anadarko Will Be Huge Stretch For Occidental's Coffers 0:00:02.640 --> 0:00:05.320 Welcome to the Bloomberg pien L Podcast on past when you, 0:00:05.360 --> 0:00:07.680 along with my co host Lisa Brahma, wits each day 0:00:07.720 --> 0:00:10.240 we bring you the most noteworthy and useful interviews for 0:00:10.280 --> 0:00:12.520 you and your money, whether at the grocery store or 0:00:12.560 --> 0:00:15.480 the trading floor. Find a Bloomberg Penl podcast on Apple 0:00:15.520 --> 0:00:17.959 podcast or wherever you listen to podcasts, as well as 0:00:17.960 --> 0:00:23.759 at Bloomberg dot com. Simmon's Energy America's team leader for 0:00:23.760 --> 0:00:27.480 Bloomberg News, he joined us on our Bloomberg Interactive Brooker Studio. So, 0:00:27.520 --> 0:00:30.880 first of all, Simon, are you surprised that Chevron walked 0:00:30.880 --> 0:00:36.120 away today? No, we're not surprised as as as my work, 0:00:36.200 --> 0:00:38.600 and you just heard him earlier that he's very keen. 0:00:39.760 --> 0:00:45.360 We can't stress enough capital discipline, his commitment to returning 0:00:45.400 --> 0:00:48.640 as much cash as possible to investors, not getting carried away, 0:00:48.800 --> 0:00:54.160 and making bold and over ambitious deals here. So although 0:00:54.200 --> 0:00:56.280 this was this would have been the biggest deal of 0:00:56.440 --> 0:00:59.440 his career, it would have been I think possibly Chevron's 0:00:59.440 --> 0:01:03.560 biggest acquisition today. The money that the offer was there 0:01:03.560 --> 0:01:06.199 on the table, and they were pretty clear they were 0:01:06.360 --> 0:01:08.679 they weren't going to go any higher, and a lot 0:01:08.680 --> 0:01:11.480 of people saw them just staying with this, and when 0:01:11.480 --> 0:01:16.280 Occidental came back improved their offer, it was it was 0:01:16.560 --> 0:01:20.120 questionable whether Chevron had the willingness to go above that. 0:01:20.400 --> 0:01:24.360 And certainly shareholders today are rewarding Chevron for that discipline, 0:01:24.480 --> 0:01:27.240 they are not rewarding Occidental. Shares down six point two 0:01:27.680 --> 0:01:30.480 in the week of Chevron's decision to walk away. How 0:01:30.640 --> 0:01:34.120 negative is this for Accidental? To give you some idea, 0:01:34.160 --> 0:01:36.600 Occidental's market caout the last time I looked with something 0:01:36.680 --> 0:01:39.080 like a fifth of what Chevon's. It's Chevron is an 0:01:39.160 --> 0:01:42.240 enormous company by any measure. It's got the balance sheet, 0:01:42.280 --> 0:01:45.680 it's got the financial flexibility to buy a company of 0:01:45.680 --> 0:01:50.280 Anadarko size fairly easily. For Occidental, this is a huge stretch, 0:01:50.680 --> 0:01:53.200 and as we we know, they've been flying or literally 0:01:53.240 --> 0:01:56.200 flying around the last couple of weeks trying to trying 0:01:56.240 --> 0:01:58.840 to engineer this deal and make sure it works for them. 0:01:58.880 --> 0:02:01.480 They've gone to Warren buffet it. They've got ten billion 0:02:01.560 --> 0:02:05.000 dollars of cash, a commitment from him. They've gone total 0:02:05.320 --> 0:02:08.920 in France Total, have agreed to take some assets post deal, 0:02:09.120 --> 0:02:13.400 which should ease some concerns there Nevertheless, there is a 0:02:13.440 --> 0:02:16.920 real anxiety that how is Occidental going to pay for 0:02:16.960 --> 0:02:20.720 this and manage its balance sheet and not get too leveraged. 0:02:20.840 --> 0:02:23.520 And this is this is the oil industry, of course, 0:02:23.560 --> 0:02:27.000 this is a cyclical industry. Where the price has done 0:02:27.000 --> 0:02:29.919 a bit better this year, there's no guarantee oil prices 0:02:29.919 --> 0:02:31.960 will stay around where they are at the moment. They 0:02:31.960 --> 0:02:34.560 won't go down back down to fifty dollars a barrel 0:02:34.639 --> 0:02:37.560 or even lower next year. Who knows, so Simon, you 0:02:37.639 --> 0:02:40.280 just you mentioned the great balance sheet that Chevron has. 0:02:40.360 --> 0:02:43.440 What do you think Chevron's next step is, given that 0:02:43.440 --> 0:02:46.840 they're now passing on in a darker I I think 0:02:46.880 --> 0:02:50.399 any CEO, especially in the oil industry and the way 0:02:50.400 --> 0:02:51.880 it is at the moment, with what's going on in 0:02:51.919 --> 0:02:54.000 the Permian, myke Worth has got to be looking at 0:02:54.000 --> 0:02:57.560 other other opportunities. Again, we heard him there. He wouldn't 0:02:57.560 --> 0:03:00.880 be drawn into sort of naming names or really committing 0:03:00.960 --> 0:03:03.120 himself to doing another deal. He's he's playing it as 0:03:03.120 --> 0:03:05.200 you would expect him at this moment to be. It's 0:03:05.360 --> 0:03:09.040 playing it safe, stressing the increase that announced this morning, 0:03:09.120 --> 0:03:12.240 the share buy backs, and that's what she helds want 0:03:12.240 --> 0:03:14.600 to see in the near term. But look what's going 0:03:14.639 --> 0:03:18.200 on in the Permian right now. This is huge explosive 0:03:18.240 --> 0:03:22.440 growth there. Exon and Chevron, the two big giants of 0:03:22.440 --> 0:03:25.080 the industry here have for years have kind of sat 0:03:25.120 --> 0:03:27.920 on the sidelines a bit. They've been involved, but they 0:03:27.960 --> 0:03:31.320 it's only this year that they got really they made 0:03:31.480 --> 0:03:34.639 really strong commitments to invest billions and billions over the 0:03:34.720 --> 0:03:37.680 next few years and really make the Permian a centerpiece 0:03:37.720 --> 0:03:40.800 of their growth plans. Uh. And there's a there's a 0:03:40.840 --> 0:03:44.560 huge opportunity here in the Permian for these companies and 0:03:44.600 --> 0:03:47.720 others to come in and consolidate. There's a very fragmented 0:03:48.120 --> 0:03:51.680 ownership in that region. There are a lot of independent players, 0:03:51.800 --> 0:03:56.360 mid sized companies, some of them have you know, operational challenges. 0:03:57.600 --> 0:03:59.920 And what's what's happened in the last few weeks were 0:04:00.120 --> 0:04:03.080 with Anadarka coming into play. It's really ignited a lot 0:04:03.080 --> 0:04:07.280 of speculation about future m and A maybe involving Chevron, 0:04:07.320 --> 0:04:12.280 but also maybe involving other majors, even x On Shell. Uh, 0:04:12.480 --> 0:04:15.320 maybe some consolidation between some of those mid sized players 0:04:15.680 --> 0:04:18.440 and really kind of rationalizing what's going on there. You know, 0:04:18.480 --> 0:04:21.000 as you mentioned, Simon this is a cyclical business, and 0:04:21.200 --> 0:04:22.920 I think about some of the pain that we've seen 0:04:22.920 --> 0:04:25.640 in the Pachelle patch, particularly from the debt market side. 0:04:25.680 --> 0:04:27.520 We certainly saw that in two thousand and fifteen, two 0:04:27.560 --> 0:04:31.719 thousand and sixteen. I'm wondering whether this acquisition by Accidental 0:04:31.800 --> 0:04:35.360 is setting up that company for a similar pain later on. 0:04:35.400 --> 0:04:36.880 I mean, is are they going to end up paying 0:04:36.920 --> 0:04:39.920 for this largely with dead And I am looking right 0:04:39.920 --> 0:04:42.600 now at Occidental bonds that are selling off sharply, uh 0:04:43.000 --> 0:04:47.200 in the our investment grade currently, but definitely investors are 0:04:47.240 --> 0:04:50.000 showing some scottishness there. Yeah, it's a big question. I mean, 0:04:50.279 --> 0:04:54.240 you look at I can't keep going back to the buffet, 0:04:54.240 --> 0:04:59.240 the buffet deal and Buffet's got he's got, he's got 0:04:59.240 --> 0:05:03.080 preferred stock. The paying I mean, this is really expensive 0:05:03.120 --> 0:05:05.920 to get this deal done for them, and they ostensibly 0:05:05.920 --> 0:05:08.920 did this to avoid a shareholder votes, but in the end, 0:05:09.160 --> 0:05:13.560 you know, even if they push this through, it's going 0:05:13.600 --> 0:05:15.680 to turn around and buy them. I definitely watched the 0:05:15.680 --> 0:05:21.240 bonds um. There's a there's a huge continuing anxiety among investors, 0:05:21.440 --> 0:05:25.840 bond holders, shareholders about what has happened in this sector 0:05:25.880 --> 0:05:27.440 over the last three or four years. I mean, the 0:05:27.440 --> 0:05:32.560 oil price sold off steeply back in and it's only 0:05:32.640 --> 0:05:34.720 just started to recover. If you if you look over 0:05:34.800 --> 0:05:36.599 us at the last five years or so, you know, 0:05:36.720 --> 0:05:38.919 it used to be at a hundred dollars a barrel. 0:05:39.240 --> 0:05:42.080 Where is it at the moment. It's like arrow depending 0:05:42.080 --> 0:05:45.240 on which price you're looking at. Um. So we're not 0:05:45.520 --> 0:05:48.160 out of the woods yet. And the last few years 0:05:48.160 --> 0:05:50.760 the mantra has been in the oil industry capital discipline, 0:05:50.839 --> 0:05:55.560 spending discipline. Uh, you know, and there are the industry 0:05:55.600 --> 0:06:00.240 has hasn't yet recovered to the damage, hasn't really pair 0:06:00.400 --> 0:06:03.840 the damage to its reputation. And you know, looking at 0:06:03.839 --> 0:06:06.360 the commentary, speaking to investors, speaking to analysts over the 0:06:06.440 --> 0:06:08.600 last couple of weeks, as I said, it's a real 0:06:08.680 --> 0:06:12.600 worry that does this take over battles signal and an 0:06:12.720 --> 0:06:17.120 end to this period of discipline and austerity. So Chevron 0:06:17.200 --> 0:06:22.599 stepping backs given its investors a bit of a relief, um, 0:06:22.640 --> 0:06:26.440 But for occidental shareholders, the anxiety is very real at 0:06:26.440 --> 0:06:28.599 the moment, and it must be. There must be a 0:06:28.640 --> 0:06:31.880 worry for investors in other share other companies right now. 0:06:31.920 --> 0:06:33.800 Are they going to take a leap. Is this going 0:06:33.839 --> 0:06:35.880 to be We're going to see more deals? Could we 0:06:35.880 --> 0:06:38.400 see another takeover battle? I mean that would be kind 0:06:38.400 --> 0:06:41.040 of negative for some of them. Sam and Casey, thank 0:06:41.080 --> 0:06:43.719 you so much. I wonder I wonder where actually where 0:06:43.720 --> 0:06:46.440 where is the jet right now? Real quickly, the last time, 0:06:46.520 --> 0:06:48.359 for the last time I looked, it was still in 0:06:48.400 --> 0:06:51.400 the in the Hague. And what that mean? What does 0:06:51.480 --> 0:06:54.200 that mean? Very good? We don't even look to be clear. 0:06:54.320 --> 0:06:56.240 We all we know is that the Occidental jet is 0:06:56.279 --> 0:06:59.000 in the Netherlands. We don't know who's on board or 0:06:59.000 --> 0:07:03.320 while they're there. One of my okay understood, Simon Casey, 0:07:03.400 --> 0:07:05.920 Energy team leader Bloomberg News joining us on our Bloomberg 0:07:05.960 --> 0:07:09.520 Interactive Broker studio. I believe Royal Dutch Shell might be 0:07:09.600 --> 0:07:12.720 somewhere in that part of the world. But the Occidental 0:07:12.800 --> 0:07:15.480 now owns this asset. They now own a big, big 0:07:15.480 --> 0:07:18.720 piece of the Permian basin. UH. They've arranged for financing 0:07:19.000 --> 0:07:23.080 with Warren Buffett in terms of ten billion dollars preferred stock. UH. 0:07:23.120 --> 0:07:24.800 They've met with the folks and have an agreement a 0:07:24.880 --> 0:07:28.440 total for some divestitures. So they're certainly putting their best 0:07:28.440 --> 0:07:31.120 foot forward here. And what is a very big deal 0:07:31.200 --> 0:07:34.040 for the occidental petroleum folks in terms of assets, in 0:07:34.160 --> 0:07:38.360 terms of purchase price. Uh So, now the hard work begins. Now, 0:07:38.400 --> 0:07:42.200 let's head to UH Nathan Hagar for World at national headlines, Nathan, 0:08:00.000 --> 0:08:03.400 globally are getting more concerned today about the prospects of 0:08:03.480 --> 0:08:06.440 no trade deal with between the US and China. Both 0:08:06.480 --> 0:08:09.600 sides appear to be hardening their stance, and Nastac leading 0:08:09.600 --> 0:08:11.440 the declines in the US, but down by one and 0:08:11.440 --> 0:08:14.520 a half percent. Really though, one of the biggest moves 0:08:14.560 --> 0:08:16.920 that can be seen in currency markets. I'm looking right 0:08:16.960 --> 0:08:20.120 now at the ms c I Emerging Markets uh Currency Index, 0:08:20.160 --> 0:08:23.400 which is poised for its biggest one day loss right 0:08:23.440 --> 0:08:26.680 now since October eighteen, had fallen the most since August 0:08:26.720 --> 0:08:29.360 of last year at one point, and has retraced all 0:08:29.400 --> 0:08:32.720 of its gains for joining US now to talk about 0:08:32.720 --> 0:08:36.280 this from the emerging markets angle and and just currencies 0:08:36.320 --> 0:08:39.400 in general. Al Hasseani He is senior interest rates and 0:08:39.400 --> 0:08:43.240 currencies analysts for Columbia thread Needle Investments, helping to oversee 0:08:43.400 --> 0:08:47.719 four hundred and thirty billion dollars from Minneapolis, Minnesota. Thank 0:08:47.720 --> 0:08:49.160 you so much for being with us ed. I just 0:08:49.200 --> 0:08:51.320 want to start with the big move that we're seeing 0:08:51.559 --> 0:08:55.400 in the ms I Emerging Markets Currency Index. I'm just wondering, 0:08:55.800 --> 0:08:58.360 is this the beginning of something that could be a 0:08:58.440 --> 0:09:02.240 real protracted sell off among emerging markets, particularly in South 0:09:02.559 --> 0:09:07.800 in Asia should the deal breakdown completely? Sure, I mean 0:09:07.800 --> 0:09:10.360 I think if the deal does break down, we probably 0:09:10.400 --> 0:09:13.480 see a little bit more downside uh two currencies. If 0:09:13.480 --> 0:09:16.079 you look at what happened, let's say, in the course 0:09:16.080 --> 0:09:18.880 of the past six months in the e M space, 0:09:19.320 --> 0:09:22.520 is we've seen uh the real rate question versus the 0:09:22.640 --> 0:09:25.640 US shrink quite considerably. The M as a class of 0:09:25.679 --> 0:09:28.040 the whole has done, has done quite well until I'd 0:09:28.080 --> 0:09:31.320 say about two months ago, and it's flatline since. And 0:09:31.400 --> 0:09:33.360 now we're starting to see some of that volatility and 0:09:33.440 --> 0:09:36.600 risk assets spill over into e M UM and and 0:09:36.600 --> 0:09:39.040 and generally that tends to be a very toxic combination 0:09:39.080 --> 0:09:42.120 for for M currencies. So I talk about some of 0:09:42.120 --> 0:09:45.280 the European currencies, thinking about the Euro obviously, the European 0:09:45.480 --> 0:09:48.600 region very sensitive to you know, the health and growth 0:09:48.640 --> 0:09:51.480 and situation in China. What is your thoughts about the 0:09:51.520 --> 0:09:55.760 euro right here? Yeah, we we have liked being short 0:09:55.880 --> 0:09:58.120 the euro for more than a year now, it's been 0:09:58.160 --> 0:10:00.800 it's been a good trend. That trend is flat line, 0:10:00.800 --> 0:10:03.800 I would say a little bit more recently, UM, A 0:10:03.840 --> 0:10:05.960 couple of things have played into this flattening trend. And 0:10:06.000 --> 0:10:09.080 instead of the decline and volatility in euro dollar one, 0:10:09.480 --> 0:10:12.040 European data at this point seems to have a little 0:10:12.040 --> 0:10:14.520 bit less downside than it did even three months ago. 0:10:15.480 --> 0:10:17.480 We've bottomed out in a lot of the industrial in 0:10:17.520 --> 0:10:20.520 the seas, We're starting to see some recovery in in 0:10:20.640 --> 0:10:24.719 export data, some recovering sentiment data, and that's playing against 0:10:25.640 --> 0:10:28.040 what we're seeing on on the trade front and again 0:10:28.080 --> 0:10:31.160 greater uncertainly coming in terms of US China trade relations. 0:10:31.160 --> 0:10:33.839 So those two forces are are playing off against each 0:10:33.880 --> 0:10:36.040 other at the moment. And I would add the other 0:10:36.080 --> 0:10:40.320 factor is in terms of positioning spect positioning. Speculative positioning 0:10:40.400 --> 0:10:43.800 right now is quite heavily short the euro, and so 0:10:43.960 --> 0:10:47.320 I think that that plays against UM dollar strength as well. 0:10:47.520 --> 0:10:49.800 More broadly, I would say dollars trend has more room 0:10:49.800 --> 0:10:52.960 to run, but versus the euro, I think, UM, we're 0:10:52.960 --> 0:10:55.400 seeing less and less room for for the euro tow 0:10:55.559 --> 0:10:57.880 to weaken. And you know, I have to wonder the 0:10:57.880 --> 0:11:01.720 big story today really is the trade tensions appear to 0:11:01.720 --> 0:11:04.880 be ratcheting up between the US and China. I'm trying 0:11:04.880 --> 0:11:07.080 to figure out how much of a game changer a 0:11:07.120 --> 0:11:11.400 breakdown in discussions would be four currency markets. How much 0:11:11.720 --> 0:11:14.840 would no deal between the US and China alter your 0:11:14.920 --> 0:11:20.800 current views on currencies and in sort of where you're positioning, Yeah, 0:11:20.840 --> 0:11:22.840 I would say I would say it probably as a 0:11:22.920 --> 0:11:25.880 first order issue, we would strengthen my conviction that the 0:11:25.960 --> 0:11:31.160 dollar will move higher UH, particularly against two baskets of currencies. First, 0:11:31.640 --> 0:11:35.600 high beta EM currencies like South Africa, Mexico and Brazil 0:11:35.760 --> 0:11:38.000 that have performed quite well on a year to date 0:11:38.080 --> 0:11:40.760 basis um and and have a lot of room to 0:11:40.760 --> 0:11:45.800 sell off UM and Second, developed market currencies of small, 0:11:45.880 --> 0:11:49.040 open economies. And I would say there's sort of I 0:11:49.080 --> 0:11:51.600 look at a basket of five, but the Australian dollar, 0:11:51.840 --> 0:11:55.920 the New Zealand dollar, UH, Swedish Corona, Korean Land, and 0:11:56.040 --> 0:11:59.160 the Canadian dollar. I think that basket is where we've 0:11:59.200 --> 0:12:04.120 seen a combination of things. First, weakening growth into this environment, 0:12:04.640 --> 0:12:08.160 the biggest exposure to trade, and therefore this this global 0:12:08.320 --> 0:12:10.520 or this location between the U S and China, and 0:12:10.559 --> 0:12:13.640 then central banks having to step in and now ease policy. 0:12:13.640 --> 0:12:16.080 And we've seen New Zealand take a step in that direction. 0:12:16.760 --> 0:12:21.600 We've seen easing signs from Australia, Korea, um And and Sweden. 0:12:21.600 --> 0:12:24.319 And so all of these five currencies are now sort 0:12:24.360 --> 0:12:26.640 of the front line of of of weakness versus a 0:12:26.679 --> 0:12:29.640 are so ed you mentioned some of the areas and 0:12:30.400 --> 0:12:33.560 emerging markets where you rightly have concerns, particularly in the 0:12:33.559 --> 0:12:36.840 backdrop of a you know, a trade potential, trade escalating 0:12:36.840 --> 0:12:38.760 conflict between the U S and China. Are there areas 0:12:38.760 --> 0:12:42.160 in emerging markets where you still feel comfortable, uh, putting 0:12:42.320 --> 0:12:46.160 capital to work. Sure, I would say in in local 0:12:46.280 --> 0:12:50.720 rates markets, we've seen a couple of places where you're 0:12:50.720 --> 0:12:53.400 pretty well compensated. Real rates are high central banks of 0:12:53.440 --> 0:12:56.040 starting easing cycles. Um. I would say if you look 0:12:56.040 --> 0:12:59.800 around Asia the moment um, Indonesia and the Philodines standout 0:13:00.600 --> 0:13:03.000 as as pretty good places to put money to work 0:13:03.280 --> 0:13:07.320 on a currency hatched basis um in in in in 0:13:07.360 --> 0:13:11.240 the local rates markets, in in Latin America less so 0:13:11.480 --> 0:13:13.400 just because you know, some of the core markets have 0:13:13.480 --> 0:13:17.520 done quite well, uh, you know, particularly Brazil UM and 0:13:17.559 --> 0:13:20.480 then when I look around for stress cases, I would 0:13:20.520 --> 0:13:23.400 say again, so the two issues from last year in 0:13:23.520 --> 0:13:26.720 Argentina and Turkey again float to the top of the 0:13:26.920 --> 0:13:30.080 of the risk list and and and have performed quite poorly. 0:13:30.120 --> 0:13:33.679 You today, Ed al Husseini, thanks so much for being 0:13:33.720 --> 0:13:35.760 with us it as a senior Interest Rates and currency 0:13:35.760 --> 0:13:38.559 as a Columnia thread Needle Investments joining us on the 0:13:38.600 --> 0:13:58.720 phone from Minneappolis. Well, as usual, there is a lot 0:13:58.800 --> 0:14:01.760 going on in the media industry as traditional media companies 0:14:01.840 --> 0:14:04.440 look at their businesses to see if they can even 0:14:04.440 --> 0:14:08.000 compete with big tech giants such as Amazon, Netflix, and Apple. 0:14:08.240 --> 0:14:10.720 Our next guest is part of the top notch media 0:14:10.800 --> 0:14:14.040 reporting team. We have a Bloomberg News, Lucashaw's entertainment reporter 0:14:14.080 --> 0:14:16.960 for Bloomberg News, usually based on our Los Angeles bureau, 0:14:17.000 --> 0:14:19.320 but joining us live here on our Bloomberg Interactive Brookers 0:14:19.400 --> 0:14:21.720 studio here in New York. So, Lucas, thanks so much 0:14:21.760 --> 0:14:23.880 for being with us. First of all, you know we 0:14:23.960 --> 0:14:27.280 had Disney this week with earnings. They're making a big 0:14:27.320 --> 0:14:29.680 pivot to try to be a streaming company. What did 0:14:29.680 --> 0:14:32.400 you take out of some of Bob Ogger's comments. You 0:14:32.440 --> 0:14:36.920 know he has very effectively changed the conversation around Disney 0:14:36.920 --> 0:14:39.200 over the past couple of years. For a while, it was, 0:14:39.760 --> 0:14:42.040 you know, the movie studio is doing so well because 0:14:42.080 --> 0:14:45.680 of the Marvel movies and Pixar and Star Wars. But ESPN, 0:14:45.720 --> 0:14:47.480 which had been the profit driver for so long, with 0:14:47.560 --> 0:14:50.640 struggling because people were cutting the cord, canceling pay TV, 0:14:51.080 --> 0:14:54.520 And he has shifted the focus to these new streaming 0:14:54.520 --> 0:14:57.480 services ESPN Plus, Disney Plus and Hulu, in which Disney 0:14:57.480 --> 0:14:59.840 owns a majority stake, and for the most part in 0:15:00.000 --> 0:15:02.080 investors are going along with it. You know, Disney says 0:15:02.120 --> 0:15:04.000 that profits they're down a little bit, but they're not 0:15:04.040 --> 0:15:07.000 down as much as people think. Uh and and people 0:15:07.000 --> 0:15:09.560 are cool with that. For the longest time, the the 0:15:09.720 --> 0:15:12.320 you know, the important metric at Disney has been profitability 0:15:12.560 --> 0:15:14.880 and it's not anymore. Is this a sort of a 0:15:15.040 --> 0:15:19.280 recognition by investors that really the future of media is 0:15:19.320 --> 0:15:22.240 streaming and that it's going to be expensive and this 0:15:22.320 --> 0:15:24.400 is going to be a difficult time, But it's all 0:15:24.440 --> 0:15:27.640 about how you position for the future, and profitability is 0:15:27.680 --> 0:15:29.760 that much less important than the near term for the 0:15:29.800 --> 0:15:32.200 short term. I think that's exactly right. You know, Netflix 0:15:32.240 --> 0:15:36.720 has built this kind of colossus and earned evaluation north 0:15:36.720 --> 0:15:39.720 of a hundred fifty billion dollars without making a cent 0:15:39.800 --> 0:15:41.480 of profit. I mean they report one with their free 0:15:41.480 --> 0:15:44.680 cash flow is really negative. Uh. You know, Disney obviously 0:15:44.680 --> 0:15:46.200 can't get away with that, but they are going to 0:15:46.280 --> 0:15:48.000 have a couple of years I think where they can 0:15:48.040 --> 0:15:50.800 report profits that are flat or down a little bit, 0:15:50.840 --> 0:15:54.640 provided that they show growth in streaming lucas. You know, 0:15:54.680 --> 0:15:57.360 one of the things that I think drove the Disney 0:15:57.520 --> 0:15:59.920 Century Fox deal was the belief that, gee, if you're 0:16:00.000 --> 0:16:02.200 bob Byger and Disney, over the next five or ten years, 0:16:02.200 --> 0:16:05.040 your competition is not so much Warner Brothers or Viacom. 0:16:05.040 --> 0:16:07.440 It's maybe more like an Apple or Amazon. Do you 0:16:07.480 --> 0:16:10.040 think those tech companies are going to at any point 0:16:10.200 --> 0:16:12.600 really dive into the deep end of the pool in 0:16:12.680 --> 0:16:16.680 terms of media and content. I would say that Amazon 0:16:16.720 --> 0:16:18.880 at least is already there in terms of spending. I mean, 0:16:18.880 --> 0:16:22.200 they're spending five six seven billion dollars on programming in 0:16:22.200 --> 0:16:24.880 a year now. I don't know that they've had success 0:16:24.960 --> 0:16:27.520 with their shows on the scale that that Netflix or 0:16:27.560 --> 0:16:30.040 even Hulu has had. Most TV studio executives that I 0:16:30.040 --> 0:16:32.800 talked to feel like the Amazon's perception in the market 0:16:32.920 --> 0:16:36.840 is is vastly overstated. Um, Apple is a is a 0:16:36.880 --> 0:16:39.240 big question mark. I'm really not sure how committed they are. 0:16:39.240 --> 0:16:40.800 They had this big event a couple of months ago. 0:16:40.840 --> 0:16:42.880 They tried out j j Abrams and Oprah and Reese 0:16:42.920 --> 0:16:45.240 Witherspoon and Jennifer Aniston. You know, I was talking with 0:16:45.280 --> 0:16:47.400 somebody yesterday who joked that it was like Apple just 0:16:47.440 --> 0:16:50.160 staged its own Vanity fair cover. But we haven't seen 0:16:50.240 --> 0:16:53.080 a second of any footage, and we don't know how 0:16:53.120 --> 0:16:56.000 serious they are about selling the services. I think for 0:16:56.000 --> 0:16:59.000 for Disney, it's at least now it's all about Netflix 0:16:59.160 --> 0:17:02.720 and with the Fox steal, buying enough intellectual property, having 0:17:02.840 --> 0:17:05.680 enough shows and movies that they're going to have a 0:17:05.760 --> 0:17:08.440 robust service that has thousands of titles that you will 0:17:08.480 --> 0:17:10.400 have to subscribe to. Do we have a better sense 0:17:10.400 --> 0:17:14.400 of pricing for Apple or for Disney Disney Disney said 0:17:14.440 --> 0:17:17.440 that it's going to be I think it's six, but 0:17:17.480 --> 0:17:19.520 it's not going to include a lot of the other things, right, 0:17:19.520 --> 0:17:21.480 I mean, it's not going to include absolutely everything. It 0:17:21.560 --> 0:17:25.080 will have what you think of as kids or family 0:17:25.119 --> 0:17:29.080 friendly programming, so the kind of everything animated Pixar and 0:17:29.240 --> 0:17:31.520 you know, the record Ralph movies. All that will be there, 0:17:32.000 --> 0:17:35.680 most of the Marvel movies, Star Wars movies, some original series. 0:17:36.080 --> 0:17:38.080 What it won't have is some of that Edgy or 0:17:38.240 --> 0:17:41.000 Fox programming that they just acquired that. I think the 0:17:41.000 --> 0:17:43.520 average show that's on the FX network, for example, will 0:17:43.560 --> 0:17:46.359 probably live elsewhere. But one thing that is going to 0:17:46.440 --> 0:17:48.000 be on the app that surprised me a little bit 0:17:48.040 --> 0:17:50.320 was The Simpsons, which you could see being a natural fit, 0:17:50.400 --> 0:17:52.800 say for Hulu, which has done a lot in what 0:17:52.960 --> 0:17:56.800 you quote unquote adult animation. Uh, and instead it's gonna 0:17:56.840 --> 0:18:00.280 be on on Disney Plus. It's interesting that this streaming 0:18:00.280 --> 0:18:02.640 business is getting kind of crowded. One could argue, we've 0:18:02.640 --> 0:18:05.280 had announcements from you know, NBC that they're going to 0:18:05.359 --> 0:18:07.679 launch a streaming service, Um, you know, a T and 0:18:07.720 --> 0:18:09.439 T and so on and so forth. Is there a 0:18:09.480 --> 0:18:12.840 sense out there about how much the market can really bear? 0:18:12.960 --> 0:18:14.720 Is it just kind of too early to figure that out. 0:18:15.160 --> 0:18:17.480 It's a little early to figure that out. We've seen 0:18:17.760 --> 0:18:21.120 people some firms are starting to do research on consumer willingness. 0:18:21.119 --> 0:18:23.400 I think most people figure that there's a people will 0:18:23.400 --> 0:18:26.879 subscribe to three to five, maybe six. There'll be a 0:18:26.880 --> 0:18:28.080 lot more than them. And there are a lot of 0:18:28.200 --> 0:18:31.359 already dozens, if not hundreds, of niche services that have 0:18:31.840 --> 0:18:34.960 four hundred thousand subscribers, two hundred thousand subscribers. I really 0:18:34.960 --> 0:18:37.080 don't know what happens to them in the long term, 0:18:37.320 --> 0:18:40.120 and we could end up with, you know, a bundle 0:18:40.240 --> 0:18:42.560 that is not that different from the PayTV bundle you 0:18:42.560 --> 0:18:44.960 see today, where you pay fifty bucks a month or 0:18:45.000 --> 0:18:46.720 a hundred bucks a month and you get seven or 0:18:46.760 --> 0:18:48.919 eight of these. The question is will people participate? You know, 0:18:48.960 --> 0:18:52.040 Apple try to do that. Instead of focusing on building 0:18:52.040 --> 0:18:55.560 its own shows, it wanted to package together different subscription 0:18:55.640 --> 0:18:58.560 services with its TV app, which it has on the 0:18:58.840 --> 0:19:01.359 Apple TV set top block right now. The problem is 0:19:01.359 --> 0:19:03.520 is that Netflix has been unwilling to participate, and if 0:19:03.560 --> 0:19:05.480 you don't have the number one player, it's really hard 0:19:05.520 --> 0:19:08.560 to drive customers. They're talking about how crowded is. Walmart's 0:19:08.560 --> 0:19:13.199 getting into with a platform called Voodoo, not Hulu Voodoo, 0:19:14.200 --> 0:19:18.080 but it is going to offer free programs just with commercials. 0:19:18.320 --> 0:19:20.359 I'm wondering, who do you think would be the bundler. 0:19:21.080 --> 0:19:25.520 Bundler for the different services, probably one of the big 0:19:25.520 --> 0:19:29.479 tech companies, Apple, And because Apple and Amazon already offer 0:19:29.680 --> 0:19:32.520 a version of this, Amazon as this program called Channels 0:19:32.800 --> 0:19:35.000 where if you are a subscriber to Prime, which is, 0:19:35.240 --> 0:19:38.000 you know, to free day delivery, you can add on 0:19:38.160 --> 0:19:41.800 other services. Lucas Shaw, thank you so much, as always 0:19:41.800 --> 0:19:43.879 for being with us. Lucas Shaw, Great, see you in person. 0:19:44.000 --> 0:19:47.240 Entertainment reporter for Bloomberg News normally in Los Angeles, but 0:19:47.280 --> 0:19:49.640 here with us in New York in a Bloomberg Interactive 0:19:49.720 --> 0:20:06.280 broker's studios. But let's switch back to the China deal. 0:20:06.320 --> 0:20:09.240 We're you know, this is the two days that really matter. 0:20:09.359 --> 0:20:12.560 The US delegation and the Chinese delegation are meeting in Washington, 0:20:12.640 --> 0:20:16.199 d C. Tensions are very high on both sides. To 0:20:16.240 --> 0:20:18.800 get the latest of what we might expect, we welcome 0:20:18.840 --> 0:20:22.480 Andy Brown and he's the editorial director for Bloomberg New Economy. 0:20:22.520 --> 0:20:26.040 He joins us live here in our Bloomberg Interactive Brooker studio. So, Andy, 0:20:26.440 --> 0:20:28.560 tensions are high on both sides. Just in the last 0:20:28.680 --> 0:20:31.200 twenty four forty eight hours. Do you think we get 0:20:31.200 --> 0:20:34.639 a deal here? Uh? Look, I I think the omens 0:20:34.720 --> 0:20:36.880 are not looking good at all. I think it's it's 0:20:37.000 --> 0:20:41.640 very notable that the chief Chinese negotiate, Leoha, is arriving 0:20:41.680 --> 0:20:46.159 this time not as an emissary of President Si Jimping 0:20:46.240 --> 0:20:48.680 as he did before, even though of course they're very close. 0:20:48.720 --> 0:20:52.679 They've been friends since school days, which indicates it in 0:20:52.760 --> 0:20:57.720 Chinese bureaucratic terms, they are in a sense lowering them 0:20:58.119 --> 0:21:02.240 you know, position of this, of this delegation. It's smaller 0:21:02.760 --> 0:21:05.680 than it was supposed to be. And there it seems 0:21:05.680 --> 0:21:08.040 as though the lowering expectations as well. I mean, at 0:21:08.040 --> 0:21:10.560 the very least, he's not arriving as a grand planet 0:21:10.560 --> 0:21:14.080 opoury of presidents. He to wrap up a great trade 0:21:14.119 --> 0:21:16.320 deal with the White House. You don't get that feeling 0:21:16.400 --> 0:21:20.240 at all. So what happened? Look, I think a couple 0:21:20.280 --> 0:21:23.719 of things. First of all, the economic context has changed. 0:21:23.960 --> 0:21:26.439 Um that when they began the talks, the Chinese economy 0:21:26.480 --> 0:21:28.919 was looking pretty fragile. They've since short it up with 0:21:28.960 --> 0:21:32.200 a mix of all kinds of stimulus. Um. They've got 0:21:32.240 --> 0:21:36.480 the private sector firing again. Um. And you know, on 0:21:36.520 --> 0:21:39.560 the other hand, the Chinese may calculate that the United 0:21:39.600 --> 0:21:42.399