WEBVTT - DOJ Opens Probe Into NFL’s Sports TV Deals 0:00:02.720 --> 0:00:10.600 Bloomberg Audio Studios, podcasts, radio news. You're listening to the 0:00:10.600 --> 0:00:14.560 Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 0:00:14.600 --> 0:00:17.880 Eastern on Apple, Cocklay and Android Auto with the Bloomberg 0:00:17.920 --> 0:00:21.040 Business app. Listen on demand wherever you get your podcasts, 0:00:21.360 --> 0:00:23.080 or watch us live on YouTube. 0:00:23.920 --> 0:00:26.320 Really interesting headline came across the tape just a couple 0:00:26.320 --> 0:00:29.080 of minutes ago. According to a Wall Street Journal, the 0:00:29.120 --> 0:00:32.760 Department of Justice opens probe into the NFL on anti 0:00:32.880 --> 0:00:34.320 competitive concerns. 0:00:34.360 --> 0:00:36.159 I mean, who wants to mess with the NFL? I 0:00:36.159 --> 0:00:37.159 guess the federal government. 0:00:37.280 --> 0:00:39.599 You can. But let's break it down a little bit 0:00:39.640 --> 0:00:39.960 if we can. 0:00:40.040 --> 0:00:43.559 Randa Williams, Bloomberg Business of Sports reporter, random, what's the 0:00:43.560 --> 0:00:44.120 story here? 0:00:44.720 --> 0:00:48.280 So basically Senator Mike Lee, he's from Utah. He sent 0:00:48.360 --> 0:00:50.400 a letter about a month ago, maybe a little bit 0:00:50.440 --> 0:00:54.440 longer than that, and he encouraged the Federal Trade Commission, 0:00:54.480 --> 0:00:57.640 the SEC in the Department of Justice to review this 0:00:57.760 --> 0:01:00.360 Sports Broadcasting Act because of the fact that it cost 0:01:00.440 --> 0:01:03.400 over one thousand dollars to watch NFL games. Now, rising 0:01:03.520 --> 0:01:07.480 costs over broadcasting gals is pretty normal. I mean we've 0:01:07.520 --> 0:01:10.120 seen every single time a league goes to the negotiating table. 0:01:10.360 --> 0:01:12.399 Normally the costs are passed down to the consumer, but 0:01:12.440 --> 0:01:15.160 also the games grow and so I think that it'll 0:01:15.160 --> 0:01:18.880 be interesting to see how they approach this if anything changes. 0:01:18.920 --> 0:01:21.360 But the NFL still has four years left on its 0:01:21.400 --> 0:01:23.760 broadcasting rights agreement. There have been reports that they want 0:01:23.800 --> 0:01:25.959 to opt out of that and negotiate early. 0:01:26.000 --> 0:01:28.840 Those talks are very very early, so we'll see. 0:01:29.520 --> 0:01:33.640 Could there be possible political motivations behind this. 0:01:34.280 --> 0:01:37.160 I think with everything happening in the country right now, 0:01:37.200 --> 0:01:40.080 you never know who is setting your sights on the NFL. 0:01:40.160 --> 0:01:43.080 And I mean, you see what's happening with the Rooney Rule. 0:01:43.120 --> 0:01:46.240 There is a Florida Attorney General who has turned his 0:01:46.319 --> 0:01:48.480 sites towards the NFL and saying that the Rooney Rule 0:01:48.720 --> 0:01:51.320 goes against federal law. We'll see how that plays out. 0:01:51.400 --> 0:01:53.280 And I mean, there are no reports right now that 0:01:53.720 --> 0:01:58.520 those two things are connected, but we've seen different areas 0:01:58.600 --> 0:02:01.800 of this administration set the sites on sporting leagues and 0:02:01.840 --> 0:02:04.520 other organizations out there, so it wouldn't surprise me, but 0:02:04.560 --> 0:02:05.800 it hasn't been reported yet. 0:02:05.880 --> 0:02:08.520 So Randa, this is focusing primarily on the media rights 0:02:08.520 --> 0:02:09.440 deals for the NFL. 0:02:09.680 --> 0:02:10.480 Now most of those. 0:02:11.240 --> 0:02:12.120 Even going back. 0:02:12.160 --> 0:02:14.919 Thirty years, forty years, there's. 0:02:14.720 --> 0:02:16.960 Been some paid component to it because even if I want 0:02:16.960 --> 0:02:19.320 to watch my CBS game, I'm probably getting it through 0:02:19.320 --> 0:02:22.200 my cable package as opposed to having my rabbit ears that. 0:02:22.639 --> 0:02:27.240 So it's always been some consumers directly paying for sports. 0:02:27.480 --> 0:02:29.679 Is it different now that it's streaming? 0:02:30.800 --> 0:02:32.040 There are more partners now. 0:02:32.360 --> 0:02:34.919 So Amazon has a Thursday night football game you can 0:02:34.960 --> 0:02:38.280 stream on Peacock. Occasionally YouTube has streamed the game before. 0:02:38.560 --> 0:02:42.320 The NFL has been selling rights to these streamers and 0:02:42.360 --> 0:02:46.239 these broadcasting companies for many, many years, and as the 0:02:46.360 --> 0:02:48.600 game has grown, as the business has grown, the costs 0:02:48.600 --> 0:02:51.280 have grown as well. And I think in reference to 0:02:51.440 --> 0:02:54.120 what it costs to watch all NFL games, yes, it 0:02:54.120 --> 0:02:56.600 would be expensive because you would then be paying for 0:02:57.120 --> 0:02:59.399 NFL Sunday ticket, you could be paying for red Zone, 0:02:59.400 --> 0:03:04.000 you could be paying for each individual subscription of you know, 0:03:04.040 --> 0:03:06.360 some of these games. With that in mind, of course, 0:03:06.400 --> 0:03:08.639 the costs have gone up because they've added partners, they've 0:03:08.639 --> 0:03:10.840 added games, you know, all of those things. 0:03:11.280 --> 0:03:13.440 But again, like we're talking about. 0:03:13.200 --> 0:03:17.480 ABC, NBCCBS, i'm ESPN, all of these things are you 0:03:17.520 --> 0:03:20.360 could walk into a bar or just subscribe to your 0:03:20.400 --> 0:03:22.400 local cable and they would be right there. Now, you 0:03:22.400 --> 0:03:24.960 wouldn't be able to choose a game. And here in 0:03:24.960 --> 0:03:27.359 New York you would probably be subject to the Jets 0:03:27.360 --> 0:03:29.480 and Giants and other places. It would be the local 0:03:29.800 --> 0:03:32.120 markets there. So it really depends on if the customer 0:03:32.160 --> 0:03:34.640 wants to pay for all of these games that the 0:03:34.720 --> 0:03:35.640 NFL broadcast. 0:03:36.120 --> 0:03:38.880 In the letter here by Senator Mike Lee, he said 0:03:38.880 --> 0:03:41.400 to watch every NFL game during the past season, football 0:03:41.440 --> 0:03:45.839 fans spent almost one thousand dollars on cable and streaming descriptions. Yeah, 0:03:46.080 --> 0:03:47.360 I guess if you're a fan, Yeah. 0:03:47.200 --> 0:03:47.640 It's with it. 0:03:47.680 --> 0:03:48.440 I mean, it depends. 0:03:48.480 --> 0:03:50.480 I would just say this that the last Super Bowl 0:03:50.600 --> 0:03:52.240 was twelve to zero and then had one hundred and 0:03:52.240 --> 0:03:55.040 twenty five million viewers, And it was twelve to zero 0:03:55.160 --> 0:03:57.080 at one point heading I believe, heading into the fourth 0:03:57.160 --> 0:03:59.800 or you know, fairly well into the game. And it 0:03:59.920 --> 0:04:02.160 was the second most watched Super Bowl of all time. 0:04:02.360 --> 0:04:04.280 And with that in mind, if you're the NFL, of 0:04:04.320 --> 0:04:07.920 course you would like to go back to the negotiating 0:04:07.960 --> 0:04:10.760 table to try to get more money. Now, if let's 0:04:10.800 --> 0:04:13.880 just say that this investigation kicks things down the road. 0:04:14.440 --> 0:04:16.520 If your Super Bowl is twelve to zero and it's 0:04:16.520 --> 0:04:19.880 the second most watched game ever four years down the 0:04:19.880 --> 0:04:21.839 line might not be a bad thing. You just want 0:04:21.880 --> 0:04:23.880 that money right now. So evidently I do think that 0:04:23.920 --> 0:04:27.000 the NFL will get their money. It's just about when to. 0:04:26.880 --> 0:04:27.839 Get even more money. 0:04:27.880 --> 0:04:31.280 There's obviously very advanced talks to add an eighteenth game, 0:04:31.440 --> 0:04:32.960 and that would be that would be it. 0:04:32.839 --> 0:04:36.000 And that would well, see, I mean that is I 0:04:36.040 --> 0:04:36.720 would say it happen. 0:04:36.760 --> 0:04:39.000 You have to open up the whole agreement with the players. 0:04:38.839 --> 0:04:41.760 Of course, yeah, And the Players Association has been in 0:04:42.600 --> 0:04:46.040 flux for over a year. They've had three executive directors 0:04:46.080 --> 0:04:48.760 in under a year. And when you have three executive directors, 0:04:48.880 --> 0:04:52.080 the NFL then has to go to the players Association, 0:04:52.240 --> 0:04:54.560 rip up the collective bargaining agreements, and then they have 0:04:54.640 --> 0:04:57.159 to come to terms on a deal. Those negotiations have 0:04:57.279 --> 0:04:59.880 not started at all. So an eighteenth game, a six 0:05:00.000 --> 0:05:03.440 sixteen international game package that the NFL could sell, those 0:05:03.480 --> 0:05:05.960 negotiations haven't started at all. So I think that Roger, 0:05:06.279 --> 0:05:09.120 I've heard Jerry Jones, I've heard Robert Kraft. And those 0:05:09.120 --> 0:05:11.240 are the Patriots and the Cowboys owners all talk about 0:05:11.320 --> 0:05:13.800 adding these things, and I do think that they want to, 0:05:14.040 --> 0:05:16.159 but it's so so early, which is why, you know, 0:05:16.200 --> 0:05:18.640 going back to this investigation, in a worst case scenario 0:05:18.720 --> 0:05:21.440 for the NFL, if they had to wait four years, 0:05:21.480 --> 0:05:23.440 it might work out in their favor because of the 0:05:23.480 --> 0:05:25.720 fact that they haven't negotiated as CBA. 0:05:25.839 --> 0:05:27.720 So you know, I think that we'll see how this 0:05:27.800 --> 0:05:28.400 plays out. 0:05:28.480 --> 0:05:31.120 But right now, I think that if I'm the NFL 0:05:31.200 --> 0:05:33.159 watching this, it's like, Okay, we'll see. 0:05:33.600 --> 0:05:36.719 Yeah, what could possibly be the endgame here? 0:05:38.200 --> 0:05:39.839 I'm not exactly sure. 0:05:40.000 --> 0:05:43.320 I think that it could be to congregate some of 0:05:43.320 --> 0:05:47.880 these costs to make sure that the CBS and the 0:05:47.880 --> 0:05:50.480 ABC that there are less streamers involved, that it is 0:05:50.520 --> 0:05:52.760 not passed down to the customer as much. But again, 0:05:53.240 --> 0:05:54.880 like you got to think, this was one of the 0:05:54.920 --> 0:05:57.360 most watched NFL seasons of all time, So really, are 0:05:57.400 --> 0:05:59.599 the streamers hurting and I mean, excuse me, are the 0:05:59.640 --> 0:06:02.600 customer is hurting if they're continuing to tune in that 0:06:02.600 --> 0:06:05.000 That is what I think the NFL's defense to this 0:06:05.040 --> 0:06:08.960 would be is that people are watching regardless and they're paying. 0:06:10.080 --> 0:06:13.159 Stay with us. More from Bloomberg Intelligence coming up after this. 0:06:16.640 --> 0:06:20.320 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:06:20.400 --> 0:06:23.520 weekdays at ten am Eastern on Apple, Cocklay and Android 0:06:23.520 --> 0:06:26.839 Auto with the Bloomberg Business App. Listen on demand wherever 0:06:26.880 --> 0:06:30.200 you get your podcasts, or watch us live on YouTube. 0:06:31.120 --> 0:06:32.520 One of the news that we covered earlier today, I 0:06:32.560 --> 0:06:34.719 want to cover it from a different angles the NFL. 0:06:35.400 --> 0:06:38.880 The DJ is investigating the NFL on anti competitive terrifs 0:06:38.920 --> 0:06:41.080 and it relates to the media rights deals that they have, 0:06:42.080 --> 0:06:44.880 and the media rights deals are so important to these leagues. 0:06:44.920 --> 0:06:45.360 It is a. 0:06:45.320 --> 0:06:49.800 Primary driver of value for the franchises across pretty much 0:06:49.839 --> 0:06:53.960 all sports. And it's equally valuable to the broadcast networks 0:06:54.000 --> 0:06:55.880 and to the cable networks and to the streamers that 0:06:55.920 --> 0:06:59.560 put this stuff out there, because boy, advertisers love live programming. 0:06:59.560 --> 0:07:02.080 Ethan Ynek, and she's the expert here, she's a US 0:07:02.200 --> 0:07:04.480 media analyst here. So Keitha just talk to us a 0:07:04.520 --> 0:07:08.360 little bit about this dooja investigation into the NFL. What 0:07:08.680 --> 0:07:10.760 are the big media companies who are so vested into this, 0:07:11.160 --> 0:07:11.840 What are they saying? 0:07:13.280 --> 0:07:15.920 This is actually good news, Paul, for the media companies. 0:07:16.000 --> 0:07:19.120 So remember we are right smack in the middle of 0:07:19.560 --> 0:07:23.600 what is expected to become a very very contentious media 0:07:23.720 --> 0:07:27.680 rights renegotiation process with the NFL. So the NFL is 0:07:27.880 --> 0:07:31.400 seeking something like about a sixty percent increase in its 0:07:31.480 --> 0:07:36.960 rights fees basically from companies like Fox, Paramount Skuidance from Comcasts, 0:07:36.960 --> 0:07:38.880 and be Seeing from Walt Disney. Those are the companies 0:07:38.920 --> 0:07:40.080 that are the most exposed. 0:07:40.400 --> 0:07:40.960 And with the. 0:07:40.920 --> 0:07:44.960 DOJ going after the NFL on anti competitive practices, it 0:07:45.000 --> 0:07:47.560 looks like what they're saying is that the NFL is 0:07:47.600 --> 0:07:50.960 trying to harm consumers by basically making it more and 0:07:51.040 --> 0:07:53.640 more difficult to access their programming. So we know that 0:07:53.680 --> 0:07:56.360 the NFL in the past has tried to sell these 0:07:56.360 --> 0:08:00.120 smaller packages to streamers, you know, whether it's Christmas Day 0:08:00.160 --> 0:08:04.200 games to Netflix or the Thursday night football package to Amazon. 0:08:04.480 --> 0:08:07.840 They try to carve out these smaller deals basically in 0:08:07.880 --> 0:08:12.360 a move to kind of maximize you know, monetization. But 0:08:12.440 --> 0:08:14.600 obviously that's not sitting well with the DOJ. But this 0:08:14.640 --> 0:08:16.680 is good news for the broadcasters because I think, you know, 0:08:16.720 --> 0:08:20.280 we think it gives them definitely better negotiating leverage when 0:08:20.320 --> 0:08:23.200 they go back to renegotiate deals this year with the NFL. 0:08:24.240 --> 0:08:27.360 What about let's now head to Disney, they're reading to 0:08:27.400 --> 0:08:30.280 cut a thousand jobs, largely in marketing. You've talked a 0:08:30.280 --> 0:08:33.160 lot about efficiency, So where exactly are these job cuts 0:08:33.160 --> 0:08:36.000 happening and how do you make sure that or as 0:08:36.000 --> 0:08:39.440 an analyst, how do you make sure that these don't 0:08:39.480 --> 0:08:43.440 hit the creative engines of Disney and really affect the 0:08:43.480 --> 0:08:44.480 future of the company. 0:08:45.400 --> 0:08:48.000 Yeah, so it looks like it's about these job cuts 0:08:48.040 --> 0:08:51.160 are really happening in the marketing departments. So let's just 0:08:51.240 --> 0:08:52.920 look at you know, if you kind of take a 0:08:52.920 --> 0:08:55.240 step back and look at the whole Disney engine. I mean, 0:08:55.240 --> 0:08:59.040 they have over two hundred and thirty thousand employees, so, 0:08:59.200 --> 0:09:01.839 you know, cutting about one thousand jobs, it's less than 0:09:01.840 --> 0:09:04.240 one percent. It's really just a drop in the bucket. 0:09:04.840 --> 0:09:07.280 But you know, the layoffs are really part of this 0:09:07.400 --> 0:09:10.800 whole cost cutting and as you just said, the efficiencies. 0:09:10.840 --> 0:09:14.439 You know, Ever since Barb Byger returned to Disney as 0:09:14.480 --> 0:09:17.480 the CEO in November of twenty twenty two, he embarked 0:09:17.520 --> 0:09:20.600 on this whole efficiency cost cutting program. He eliminated about 0:09:20.640 --> 0:09:24.040 eight thousand jobs, which resulted in about seven and a 0:09:24.080 --> 0:09:28.000 half billion dollars of cost cuts. And really this latest 0:09:28.040 --> 0:09:31.200 wave of another thousand layoffs is just part of that. 0:09:31.360 --> 0:09:34.920 So it is not in any of the creative parts 0:09:34.960 --> 0:09:38.079 of the company. This is really more in the marketing department. 0:09:38.800 --> 0:09:41.520 So we already know that, you know, Disney has many 0:09:41.720 --> 0:09:45.560 multiple operations, so they have like a whole team supporting 0:09:45.559 --> 0:09:48.280 Disney Plus. They have a very similar team supporting Hulu, 0:09:48.400 --> 0:09:51.400 which is basically, you know, a product that is very 0:09:51.440 --> 0:09:53.760 soon going to be integrated. So Disney Plus and Hulu 0:09:53.760 --> 0:09:57.320 are going to become one consolidated, integrated product, which means 0:09:57.320 --> 0:10:00.280 there's really no need to have two separate treat teas teams, 0:10:00.520 --> 0:10:03.080 and so this is just really a process of streamlining 0:10:03.160 --> 0:10:08.640 and removing redundancies and increasing the efficiency in the business. 0:10:09.280 --> 0:10:13.760 KEITHA, what's the latest on the Paramount Skydiance and Warner 0:10:13.760 --> 0:10:14.520 Brothers Discovery. 0:10:14.520 --> 0:10:15.920 When is that deal going to close? 0:10:16.000 --> 0:10:18.959 And what's some of the feedback you're getting from investors 0:10:18.960 --> 0:10:19.600 about this deal? 0:10:20.720 --> 0:10:24.679 The deal Paul is expected to get regulatory approval and 0:10:24.760 --> 0:10:28.320 to close by September thirtieth of this year, so we 0:10:28.400 --> 0:10:31.280 have a few more months. It looks like some of 0:10:31.320 --> 0:10:36.080 the biggest investors are recommending that Warner Brothers shareholders obviously 0:10:36.160 --> 0:10:38.600 vote in favor of the deal. That vote is set 0:10:38.640 --> 0:10:41.440 for April twenty third, So it definitely looks like they're 0:10:41.480 --> 0:10:45.880 not going to head into any big regulatory problem, something 0:10:45.880 --> 0:10:48.439 that we were kind of anticipating with Netflix. This path 0:10:48.480 --> 0:10:51.760 seems a lot more cleaner, a lot more smoother, and 0:10:52.600 --> 0:10:54.760 in good news for Paramount, what they've done is they've 0:10:54.840 --> 0:10:57.760 kind of secured the Middle Eastern funding, so they've got 0:10:57.760 --> 0:11:01.480 about twenty four billion dollars, you know, some sovereign wealth 0:11:01.520 --> 0:11:04.160 management funds. This was kind of a little bit of 0:11:04.160 --> 0:11:06.080 an investor concern just kind of given all of the 0:11:06.120 --> 0:11:09.720 geopolitical tensions and the regional conflicts there. But with that 0:11:09.800 --> 0:11:12.760 kind of locked and loaded, I think investors are definitely 0:11:12.840 --> 0:11:15.720 kind of heaving a sigh of relief here, and it 0:11:15.760 --> 0:11:20.240 looks like everything will go, you know, as per plan. 0:11:20.559 --> 0:11:23.280 The question, really, Paul, is whether they're going to be 0:11:23.360 --> 0:11:26.840 able to deliver after the deal closes. That's really what 0:11:26.920 --> 0:11:29.480 investors are going to be looking for, especially with the 0:11:29.520 --> 0:11:33.000 six billion dollars of synergies that they've outlined and. 0:11:33.000 --> 0:11:34.560 A lot of debt on the boundaryt talked to us 0:11:34.559 --> 0:11:36.920 just real quickly how the market's thinking about their leverage 0:11:36.920 --> 0:11:38.559 profile because they're gonna be the most or one of 0:11:38.600 --> 0:11:40.080 the most levered media companies out. 0:11:40.000 --> 0:11:44.480 There, absolutely right, Paul seven times leverage about eight billion 0:11:44.520 --> 0:11:47.480 dollars in debt when the deal closes. So that is 0:11:47.559 --> 0:11:49.640 really what you know, the market is worried about, as 0:11:49.679 --> 0:11:53.280 you pointed pointed out, and you know, again we have 0:11:53.440 --> 0:11:55.880 so many different parts here, but I think the biggest 0:11:55.960 --> 0:11:59.280 worry is really the exposure to the linear TV ecosystem. 0:11:59.360 --> 0:12:02.280 It's you know, at fifty five percent of revenue still 0:12:02.360 --> 0:12:05.280 is going to come from, you know, the linear TV bundle, 0:12:06.240 --> 0:12:08.560 and really it's about how well they can manage that. 0:12:08.760 --> 0:12:11.000 So this is going to be a wait and wat story. 0:12:11.240 --> 0:12:13.320 We've not seen very good results in the past, so 0:12:13.440 --> 0:12:14.240 fingers crossed. 0:12:14.960 --> 0:12:18.080 Stay with us. More from Bloomberg Intelligence coming up after this. 0:12:21.960 --> 0:12:25.640 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:12:25.720 --> 0:12:28.840 weekdays at ten am Eastern on Apple, Cocklay and Android 0:12:28.840 --> 0:12:32.160 Auto with the Bloomberg Business app, Listen on demand wherever 0:12:32.200 --> 0:12:35.320 you get your podcasts, or watch us live on YouTube. 0:12:36.360 --> 0:12:37.640 You know, it seems like a lot of these big 0:12:37.640 --> 0:12:40.400 tech companies are almost tripping over themselves to get press 0:12:40.440 --> 0:12:43.480 releases out, saying how big their AI revenue is, how 0:12:43.559 --> 0:12:45.560 fast it's growing, and. 0:12:45.640 --> 0:12:46.720 Amazon's no difference. 0:12:46.760 --> 0:12:50.800 Amazon CEO Andy Jase, in a shareholder letter set aws's 0:12:50.880 --> 0:12:53.960 AI revenue run rate is over twenty billion dollars, as 0:12:53.960 --> 0:12:56.440 Selections was just reporting. That's up from fifteen billion just 0:12:56.480 --> 0:12:59.240 in first quarter. So that's pretty good. Stocks trading higher 0:12:59.240 --> 0:13:03.440 on rog ranaj here technology channels for Bloomberg Intelligence. He's 0:13:03.480 --> 0:13:07.600 out there in Chicago anrah Amazon twenty billion. 0:13:07.640 --> 0:13:09.000 It seems big to me, how about you? 0:13:10.120 --> 0:13:11.760 Yeah, no, it's a very big deal. In fact, this 0:13:11.800 --> 0:13:13.760 is the first time they are actually putting a number 0:13:13.760 --> 0:13:16.360 around it, because if you remember a couple of years ago, 0:13:16.440 --> 0:13:19.400 Microsoft was throwing its number out and everybody else was 0:13:19.400 --> 0:13:21.960 asking Amazon, where is your number? Where are you? But 0:13:22.160 --> 0:13:23.640 you know, one of the things we talked about at 0:13:23.640 --> 0:13:27.080 that point, Amazon's writing on the chat GPT wave where 0:13:27.120 --> 0:13:30.720 Amazon's more enterprise focus, and now those enterprise workloads are 0:13:30.720 --> 0:13:33.800 coming in and that's where we see the AI revenue 0:13:33.920 --> 0:13:35.040 for Amazon. 0:13:35.600 --> 0:13:38.080 How does this change the calculus for the outlook of 0:13:38.080 --> 0:13:40.720 the company, like the are you more bullish than you 0:13:40.800 --> 0:13:41.400 already are? 0:13:42.559 --> 0:13:44.600 That's a very good question. In fact, we published a 0:13:44.640 --> 0:13:48.120 note yesterday saying that we anticipate aw's growth to pick 0:13:48.200 --> 0:13:50.360 up this year, in fact even in the first quarter, 0:13:50.440 --> 0:13:53.000 because one of the things we saw just now it's 0:13:53.040 --> 0:13:55.840 two days ago was Anthropics revenue went from I think 0:13:55.960 --> 0:13:59.359 nine billion to thirty billion within no time. And AWS 0:13:59.480 --> 0:14:02.480 is one of the preferred partners. And if you remember 0:14:02.559 --> 0:14:05.160 two years ago, it was all Opening II Microsoft. Now 0:14:05.200 --> 0:14:07.760 we are seeing Anthropic doing really well and that helps 0:14:07.800 --> 0:14:11.000 Amazon Web Services. So this year we think Amazon Web 0:14:11.040 --> 0:14:14.160 Service is going to do better than what most people anticipate. 0:14:14.960 --> 0:14:18.240 And rag updates on kind of the competitive landscape. Now 0:14:18.240 --> 0:14:20.600 where is Amazon fit in these days? 0:14:21.400 --> 0:14:24.080 Yeah, so you go back and look at it. Prior 0:14:24.160 --> 0:14:27.720 to the AI era, Amazon Web Services was the largest. 0:14:27.840 --> 0:14:30.640 It's still the largest, but it was the largest by 0:14:30.640 --> 0:14:34.480 a massive amount compared to Microsoft and Google. Since then, 0:14:34.520 --> 0:14:37.480 after charge GPT, Microsoft really closed the gap with them 0:14:37.800 --> 0:14:41.520 and became a much bigger cloud vendor, you know, compared 0:14:41.520 --> 0:14:45.280 to Google, but not as big as Amazon. But all 0:14:45.320 --> 0:14:48.440 three of them are doing phenomenally well. Because remember, this 0:14:48.560 --> 0:14:50.320 is a business where you need to put in a 0:14:50.360 --> 0:14:54.040 lot of CAPEX and data centers in order to gain 0:14:54.080 --> 0:14:56.280 this revenue. This is not something you and I can 0:14:56.320 --> 0:14:59.240 build in house using you know, either Claude or anything, 0:14:59.280 --> 0:15:04.240 because you need physical infrastructure, data center chips. Amazon talked 0:15:04.240 --> 0:15:07.120 about their chip business for example. So Amazon still is 0:15:07.280 --> 0:15:10.680 in the driver's seat with the largest market share, but 0:15:10.840 --> 0:15:13.480 both the others I would say Microsoft and Google are 0:15:13.520 --> 0:15:15.600 catching up fairly faster at this point. 0:15:15.760 --> 0:15:17.760 So speaking of this flu of deals, we also have Core. 0:15:17.800 --> 0:15:20.720 We've expanding their metadal for AIA computing the twenty one 0:15:20.800 --> 0:15:23.880 billion dollars. At a headline level, what does the deal 0:15:24.000 --> 0:15:26.520 tell you the size and duration was what is that 0:15:26.600 --> 0:15:29.800 signal and does it tell you METASAI demand is stronger 0:15:29.840 --> 0:15:30.520 than expected? 0:15:31.880 --> 0:15:33.960 I think Beta is spending so much because they need 0:15:34.000 --> 0:15:36.880 to be relevant. Also in the large language model space, 0:15:37.200 --> 0:15:40.160 it seems to me that this particular deal is tied 0:15:40.240 --> 0:15:43.360 more so for the training of the model rather than infancing. 0:15:43.400 --> 0:15:45.200 Because one of the things what we are seeing is 0:15:45.440 --> 0:15:48.320 when it comes to even hyperskid cloud providers, whether that's 0:15:48.360 --> 0:15:51.080 Microsoft or Google, they're doing some of the work in 0:15:51.120 --> 0:15:53.760 house with their own data centers, but as they can't 0:15:53.880 --> 0:15:57.040 expand that rapidly, they're going out to these neoclouds, whether 0:15:57.080 --> 0:16:02.440 it's Nebeis or code and renting out their capacity so 0:16:02.480 --> 0:16:04.280 that they can parse out some of that work to 0:16:04.320 --> 0:16:06.800 them as well. So this is just a continuation of that. 0:16:07.120 --> 0:16:10.120 The bottom line is AI infrastructure demand is very strong 0:16:10.440 --> 0:16:13.440 and it actually helps out everybody, not just the hyperscal 0:16:13.600 --> 0:16:16.400 cloud providers, but also the neoclouds. 0:16:16.000 --> 0:16:18.320 And you cover all the software providers. 0:16:19.400 --> 0:16:20.960 They've had a tough go over it over the last 0:16:21.000 --> 0:16:23.440 several months, four or five months as investors try to 0:16:23.520 --> 0:16:26.400 sense which one of these software companies and sectors and 0:16:26.480 --> 0:16:28.880 verticals could be at risk from AI. 0:16:29.520 --> 0:16:31.520 Where are we now? Where Where's what's the market selling 0:16:31.560 --> 0:16:32.200 these days? 0:16:32.840 --> 0:16:34.280 So you can see them. I mean the index is 0:16:34.320 --> 0:16:36.960 down quite a bit even today. Every software company is down, 0:16:37.240 --> 0:16:39.280 and yesterday we heard that, you know, there's going to 0:16:39.280 --> 0:16:41.760 be some new model by Clouds. So every time there 0:16:41.840 --> 0:16:44.400 is a brand new model from Anthropic or anybody else, 0:16:44.440 --> 0:16:46.680 there is pressure on these names, and I don't think 0:16:46.680 --> 0:16:49.520 that's going to change anytime soon. What these companies have 0:16:49.600 --> 0:16:51.800 to do is show that they are not going to 0:16:51.800 --> 0:16:55.240 get cannibalized by these large language models, but actually embed 0:16:55.320 --> 0:16:58.240 them in their core product and can continue with that 0:16:58.480 --> 0:17:01.280 profitabil growth that they have. But that's not an argument 0:17:01.320 --> 0:17:04.040 that gets settled in the next twelve months. It's going 0:17:04.080 --> 0:17:06.600 to take a few years to build that out. What 0:17:06.640 --> 0:17:09.280 we want to see from companies like Salesforce is to 0:17:09.280 --> 0:17:10.879 go out and buy back a lot of the shares, 0:17:10.880 --> 0:17:13.520 which they did twenty five billion dollar buy back that 0:17:13.600 --> 0:17:16.960 they have announced. If these guys are able to embed 0:17:17.119 --> 0:17:20.159 some of these models in their own products and protect 0:17:20.240 --> 0:17:22.359 what they have, I think this is going to be 0:17:22.400 --> 0:17:24.879 a change around in sentiment. But again, that's not going 0:17:24.920 --> 0:17:27.080 to happen anytime soon. It's going to be a few 0:17:27.119 --> 0:17:28.320 years before that shows up. 0:17:29.720 --> 0:17:32.520 Stay with us more from Bloomberg Intelligence coming up there 0:17:32.560 --> 0:17:32.760 for this. 0:17:35.880 --> 0:17:39.560 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:17:39.640 --> 0:17:42.720 weekdays at ten am Eastern on Apple Coarclay, and Android 0:17:42.760 --> 0:17:46.040 Auto with the Bloomberg Business App. Listen on demand wherever 0:17:46.119 --> 0:17:49.240 you get your podcasts, or watch us live on YouTube. 0:17:50.119 --> 0:17:51.160 Bernie's they're out there. 0:17:51.200 --> 0:17:55.560 Constellation Brands was last night after the close, stock straining 0:17:55.600 --> 0:17:56.960 higher here. I thought some of the guidance was a 0:17:57.000 --> 0:17:59.199 little soft, but I guess the street says, hey, it's 0:17:59.240 --> 0:18:00.560 better than we thought it was to be able. Let's 0:18:00.560 --> 0:18:03.400 break it down with the red Brown Bloomberg consumer reporter 0:18:04.040 --> 0:18:06.720 read what do we hear from Constellation about their business. 0:18:07.080 --> 0:18:10.800 Yeah, you're right, the guidance was a little soft last night, 0:18:10.840 --> 0:18:12.399 but I think this morning on the call, the company 0:18:12.480 --> 0:18:17.359 kind of made the case that March sales were quite strong. 0:18:17.640 --> 0:18:19.520 They feel like that momentum in this early part of 0:18:19.560 --> 0:18:21.560 the year is going to kind of carry on through 0:18:21.600 --> 0:18:24.240 the summer, and with that, they're planning to kind of 0:18:24.240 --> 0:18:27.720 support the early momentum with I think the word they 0:18:27.800 --> 0:18:30.040 use was an aggressive marketing campaign. So if you think 0:18:30.080 --> 0:18:32.160 about the big events we have in the summer, makes 0:18:32.160 --> 0:18:33.840 a lot of sense. Of the World Cup, the company 0:18:33.840 --> 0:18:36.719 expects that to be kind of a growth driver, especially 0:18:36.760 --> 0:18:39.640 for their bigger brands Modello Corona, you know, we associate 0:18:39.680 --> 0:18:41.439 those with the summer as well, so makes a lot 0:18:41.440 --> 0:18:43.000 of sense. So I think that's kind of explaining a 0:18:43.040 --> 0:18:45.040 little bit of the share move that we're seeing. The 0:18:45.160 --> 0:18:47.119 question now, I guess, becomes whether or not that this 0:18:47.240 --> 0:18:49.800 is just a blip or they're still kind of subject 0:18:49.800 --> 0:18:51.760 to the sort of secular decline we're seeing in the 0:18:51.840 --> 0:18:53.200 other parts of the alcohol industry. 0:18:53.480 --> 0:18:55.879 How much of this softer outlook is macro driven. We 0:18:55.960 --> 0:18:58.760 know that it's not really a good economy consumers are 0:18:58.760 --> 0:19:01.480 feeling pinch as opposed to with the products themselves. 0:19:01.800 --> 0:19:05.240 Yeah, no, the company is making the case with the 0:19:05.359 --> 0:19:07.680