WEBVTT - Tom Rogers on How Stock Market Volatility is Hitting Hollywood

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<v Speaker 1>Welcome to Strictly Business, Variety's weekly podcast featuring conversations with

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<v Speaker 1>industry leaders about the business of media and entertainment. I'm

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<v Speaker 1>Cynthia Lyttleton, co editor in chief of Variety. This is

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<v Speaker 1>a special bonus episode of Strictly Business for April twenty second,

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<v Speaker 1>twenty twenty five. As this week has already seen two

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<v Speaker 1>days of wild swings in US stock markets, I reached

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<v Speaker 1>out to industry veteran Tom Rogers to help make sense

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<v Speaker 1>of what's happening. That interview is followed by a discussion

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<v Speaker 1>with Variety Business editor Todd Spangler on why Google and

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<v Speaker 1>Meta are both in the thick of antitrust court fights

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<v Speaker 1>in Washington. That's all coming up after this break, and

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<v Speaker 1>we're back with a bonus episode of varieties Strictly Business

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<v Speaker 1>podcast for April twenty second, twenty twenty five. Tom Rogers

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<v Speaker 1>is the definition of a media industry insider. He's a

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<v Speaker 1>founder of CNBC. He's been in the C suites at NBC,

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<v Speaker 1>Universal and TiVo. He's a veteran marketwatcher who is now

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<v Speaker 1>executive chairman of Playgrid, a cloud AI company. We started

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<v Speaker 1>the week off with another nail bider of a trading

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<v Speaker 1>frame and big swings for the Dow and NASDAC on Monday.

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<v Speaker 1>Here Rogers ways in on how to navigate this unprecedented volatility,

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<v Speaker 1>and he offers his insight as to how this kind

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<v Speaker 1>of macroeconomic storm can affect the day to day decision

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<v Speaker 1>making for leaders of large enterprises. Tom Rogers, thank you

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<v Speaker 1>for joining me, Thank you for helping us sort out

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<v Speaker 1>what is going on in equities markets right now.

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<v Speaker 2>Thanks for having me.

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<v Speaker 1>Let me just start with can can you think of

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<v Speaker 1>any analogous time to the last couple of weeks we've

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<v Speaker 1>had since the faithful pen strokes of April second.

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<v Speaker 2>Well, certainly there's been other times of market volatility, some

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<v Speaker 2>greater than this, but I can't think of any other

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<v Speaker 2>time when it was self inflicted by the United States

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<v Speaker 2>government taking shot after shot at the US equity market

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<v Speaker 2>and an effort to do something that very few people

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<v Speaker 2>can make any sense of and is clearly having all

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<v Speaker 2>kinds of negative consequences on not only the equity markets,

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<v Speaker 2>but the bond markets and the currency markets.

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<v Speaker 1>Tom, you've been in big publicly traded companies at the

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<v Speaker 1>high levels, NBC, Universal, TVO. What does this level of

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<v Speaker 1>volatility do sort of how do they feel it immediately?

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<v Speaker 2>Well, immediate and what may flow from all this or

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<v Speaker 2>obviously two different things. We're seeing. Equity prices clearly get hit.

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<v Speaker 2>The stock market itself being volatile in it does not

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<v Speaker 2>necessarily impact day to day life on main street, although

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<v Speaker 2>it's gotten to the point that as some are saying,

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<v Speaker 2>it's no longer what's happening to your four O one K,

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<v Speaker 2>it's what's happening to your one O one K, So

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<v Speaker 2>clearly there are some main street implications there. Bond market

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<v Speaker 2>is obviously getting hit, meaning interest on rates on bonds

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<v Speaker 2>are going up, the dollar is weakening, and the currency

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<v Speaker 2>market is having the opposite effect, which is leading people

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<v Speaker 2>to believe that really there's something going on in the

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<v Speaker 2>world markets, which is saying, hey, if you're going to

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<v Speaker 2>invest in the United States, you're going to need more

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<v Speaker 2>of a risk premium. That there's instability in the United States,

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<v Speaker 2>and no one's quite sure where this is going. So

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<v Speaker 2>those are kind of unusual variables to be playing out,

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<v Speaker 2>to say the leavest, when you're in a big company

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<v Speaker 2>and you're seeing this and there is a real prospect

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<v Speaker 2>that we are dealing with either a recession or maybe worse, stagflation,

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<v Speaker 2>where you have stagnant or recessionary economic issues and inflation,

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<v Speaker 2>that gets scary because that means slow down, That means

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<v Speaker 2>earnings are going to be lower, and that's when people

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<v Speaker 2>start drawing off plans for belt tightening, which generally means layoffs.

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<v Speaker 2>We're not seeing that on a major scale yet, but

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<v Speaker 2>obviously a recession means greater unemployment than that gets scary

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<v Speaker 2>for people.

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<v Speaker 1>We're talking here on Monday at just at one o'clock

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<v Speaker 1>specific just as the markets are wrapping up, the Nasdaq

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<v Speaker 1>is down four hundred and fifteen points, the Dow Jones

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<v Speaker 1>is down nine hundred and seventy one points. If you're

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<v Speaker 1>at the top of the Lew Wasserman Tower right now

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<v Speaker 1>trying to make decisions for Universal Pictures, long term television,

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<v Speaker 1>long term theme parks, how does all of this affect

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<v Speaker 1>that process.

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<v Speaker 2>You're dealing with a lot of uncertainty. Uncertainty makes it

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<v Speaker 2>very difficult to plan. I've noticed on some earnings calls

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<v Speaker 2>you're not hearing people making forecasts of what their next

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<v Speaker 2>quarter is the life going to be like, but scenarios

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<v Speaker 2>of what it might be like under various circumstances, and

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<v Speaker 2>you hear multiple scenarios well once people are not providing

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<v Speaker 2>projections or forecasts because they don't have enough clarity, and

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<v Speaker 2>they're talking about what it might be under various scenarios.

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<v Speaker 2>They're basically saying, this is clouding the pictures significantly enough

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<v Speaker 2>that we don't have a real view of where everything

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<v Speaker 2>may be going, and that effects all kinds of planning, expenditures,

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<v Speaker 2>cap aacs, etc. Going forward.

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<v Speaker 1>In a bloodbath like what we've seen the last couple

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<v Speaker 1>of weeks, nobody is spared. But have you seen some

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<v Speaker 1>stocks do better than others? Are any of the magnificent

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<v Speaker 1>seven tech stalks big enough to buck this downturn?

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<v Speaker 2>I think Netflix may be a very interesting and unique case.

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<v Speaker 2>Not only are its fundamentals going so well, not only

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<v Speaker 2>here but around the world. And not only is it

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<v Speaker 2>a service that is less not about manufacturing and therefore

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<v Speaker 2>may not be in the im mediate sites of a

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<v Speaker 2>trade war, but it is something that has built up

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<v Speaker 2>a lot of local following in its key markets with

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<v Speaker 2>its local productions and all, and therefore more integrated into

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<v Speaker 2>the local media fabric, and therefore may not be something

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<v Speaker 2>that that other governments want to touch in terms of

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<v Speaker 2>doing things to raise its price. So they were pretty

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<v Speaker 2>clear that they didn't see anything given what was going

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<v Speaker 2>on now, that was going to fundamentally undermine where their

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<v Speaker 2>financial forecast may go over the course of the year,

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<v Speaker 2>and in fact gave a forecast, not scenarios. I don't

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<v Speaker 2>think we're going to hear that from a lot of

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<v Speaker 2>other companies.

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<v Speaker 1>If your Disney or Universal, are you nervous about these

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<v Speaker 1>reports that Europeans and Asians and other people are you

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<v Speaker 1>know that would have otherwise come to America planned a

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<v Speaker 1>big trip to come to Disneyland or Disney World or

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<v Speaker 1>one of the Universal theme parks, They're going to explore

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<v Speaker 1>other places that are not America.

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<v Speaker 2>Theme parks in a recession are going to get hit.

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<v Speaker 2>And it's not just the international travel you're mentioning. You know,

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<v Speaker 2>a lot of those parks are based on domestic attendance.

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<v Speaker 2>In a recession, people cut back, They cut back on

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<v Speaker 2>big trips and discretionary family expenditures, and so that's a

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<v Speaker 2>real point of vulnerability. At the same time, advertising generally

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<v Speaker 2>for media companies is a big point of vulnerability. Disney

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<v Speaker 2>and NBC Universal both obviously have that vulnerability as well.

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<v Speaker 2>So you compare that to a Netflix, where you know,

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<v Speaker 2>maybe four percent of its revenue is advertising today, even

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<v Speaker 2>though that's a big growth area for it going forward,

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<v Speaker 2>that really needs to be a catalyst for its continued growth.

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<v Speaker 2>But today it's four percent of its revenue. If it

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<v Speaker 2>got hit to the tune of thirty percent, you're talking

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<v Speaker 2>about one percent of its revenue. On the other hand,

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<v Speaker 2>when you're talking about Disney, the combination of its steam

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<v Speaker 2>parts and its advertising revenue, you're somewhere between forty five

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<v Speaker 2>and fifty percent of the revenue of a company being vulnerable.

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<v Speaker 2>That's a very different place used to be in a recession.

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<v Speaker 1>Tom, What are you going to be watching for the

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<v Speaker 1>rest of this week?

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<v Speaker 2>The administration has tried to calm the waters as these

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<v Speaker 2>as the markets are volatile, but I'm not quite sure

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<v Speaker 2>what else it can say unless it totally backs off,

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<v Speaker 2>which I don't see, are going to be terribly calming.

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<v Speaker 2>And you combine that with the increased rhetoric about removing

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<v Speaker 2>FED chair Powell from his position and doing something to

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<v Speaker 2>undermine the independence of the FED. And unless that rhetoric

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<v Speaker 2>backs off, which I don't think is very likely either,

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<v Speaker 2>there's not a lot of coming words that can be said.

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<v Speaker 2>They off ramp that I think may save the administration

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<v Speaker 2>and with it, save the markets from this ongoing turmoil.

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<v Speaker 2>But it's not going to be near term. As a

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<v Speaker 2>Supreme Court ultimately ruling that the President does not have

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<v Speaker 2>the power on tariffs that he has said he has,

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<v Speaker 2>it may well be that they find what he has

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<v Speaker 2>done here as beyond the authority of the executive But

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<v Speaker 2>again that's not near terms. So I think we're in

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<v Speaker 2>for continued volatility. I don't think it's clear yet that

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<v Speaker 2>we're in for a recession, but the markets are clearly roiled,

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<v Speaker 2>and I don't think anything is going to combat for

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<v Speaker 2>the near term.

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<v Speaker 1>Tom, thank you so much for your time in helping

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<v Speaker 1>us sort all this out.

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<v Speaker 2>Thanks for having me.

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<v Speaker 1>Okay, so there are two big federal antitrust trials going

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<v Speaker 1>on right now, ones in DC, ones in Virginia might

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<v Speaker 1>as well be DC. Ones involving Google, and one's involving Meta.

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<v Speaker 1>Let's start with the one that's involving Google, because there

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<v Speaker 1>was a ruling in this trial last week. Can you

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<v Speaker 1>break it down for us in terms of tell us

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<v Speaker 1>the scope of what they're fighting over right.

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<v Speaker 3>Now, so the judge in this case found that Google

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<v Speaker 3>has a monopoly and has worked to illegally preserve that

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<v Speaker 3>monopoly in two areas. It's the Internet ad server market

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<v Speaker 3>and the Internet ad exchange market. Now, these are two

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<v Speaker 3>pieces that are really the lifeblood of Internet advertising. And

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<v Speaker 3>what the judge fan was that Google unlawfully tied it's

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<v Speaker 3>ad server and ad exchange together with locking customers in

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<v Speaker 3>essentially so they were forced to use these tools. So

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<v Speaker 3>that's illegal. You know, that violates the Sherman Act. So

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<v Speaker 3>the next stage, and this is going to be for

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<v Speaker 3>the judge to determine potential remedies.

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<v Speaker 1>So this is not all of Google's advertising business. This

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<v Speaker 1>is targeting a component of it.

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<v Speaker 3>Right, This is the networks that they used to buy

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<v Speaker 3>and sell ads on websites across the Internet. And so

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<v Speaker 3>what the judge said was, look, this didn't harm just competitors.

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<v Speaker 3>This harmed the publisher customers that used Googles tools and

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<v Speaker 3>were forced to use Google's tools, according to the ruling,

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<v Speaker 3>and ultimately consumers of information on the open Internet.

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<v Speaker 1>In terms of the significance of an ad server and

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<v Speaker 1>the ad networks, Google's superpower in digital advertising is being

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<v Speaker 1>able to get gazillion ads to the right spots at

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<v Speaker 1>the right time, and when you think about the vastness

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<v Speaker 1>of the Internet, that's a lot harder than it sounds,

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<v Speaker 1>am I.

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<v Speaker 3>Right, Yes, they're the match maker essentially.

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<v Speaker 2>Right.

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<v Speaker 3>They run a network and exchange lets people buy and

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<v Speaker 3>sell ads on multiple websites. Now, as you point out,

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<v Speaker 3>this is just a portion of Google's overall business, where

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<v Speaker 3>the big chunk is Internet search. And here's another significant

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<v Speaker 3>point to make. A different federal court in August twenty

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<v Speaker 3>twenty four found that Google had a monopoly in Internet

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<v Speaker 3>search and the company broke the law by doing these

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<v Speaker 3>multi billion dollar deals to make it. Search engine did

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<v Speaker 3>a fault on web browser and smartphones, including in these

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<v Speaker 3>very large deals with that Apple and Samsung. So that's

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<v Speaker 3>been decided and remedies in that case are yet to

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<v Speaker 3>be determined.

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<v Speaker 1>So Google is just waiting for all kinds of shoes

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<v Speaker 1>to drop in DC.

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<v Speaker 3>Yes, they're in the antitrust crossers. Let me just say that.

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<v Speaker 3>You know, Google, for its part, has said, look, this

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<v Speaker 3>is the government trying to pick winners and losers, and look,

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<v Speaker 3>people use our products because we have the best products

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<v Speaker 3>on the market. And you know. Oh, by the way,

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<v Speaker 3>technology moves faster than the wheels of the legal system

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<v Speaker 3>turn anyway, So technology will make all of this mood

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<v Speaker 3>in a couple of years anyway. Yes, is essentially what

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<v Speaker 3>their argument.

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<v Speaker 1>Is, and this is also the crux of the Meta

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<v Speaker 1>case as well. The Federal Trade Commission pursuing the argument

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<v Speaker 1>that Meta has used acquisitions, in particular of Instagram and

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<v Speaker 1>WhatsApp to platform two services that are no stranger to

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<v Speaker 1>people in Hollywood, that buying those essentially was designed to

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<v Speaker 1>squash competition. It does seem like what has been standard

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<v Speaker 1>operating procedure for tech for a long time, a hot

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<v Speaker 1>startup with a hot patent, or that whole paradigm of

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<v Speaker 1>how business has operated for decades in Silicon Valley seems

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<v Speaker 1>rather suddenly under threat from DC regulators.

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<v Speaker 3>Well, I think there's been a desire and political capital, frankly,

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<v Speaker 3>for many years to do something about the tremendous power

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<v Speaker 3>that these tech companies have amassed. So, you know, in

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<v Speaker 3>the me A case, basically the FTC is saying, hey,

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<v Speaker 3>these acquisitions that you guys made going on now more

0:15:08.800 --> 0:15:12.920
<v Speaker 3>than ten years ago were anti competitive and designed to

0:15:13.080 --> 0:15:17.440
<v Speaker 3>knock out a rival or a potential rival, and Metta

0:15:17.600 --> 0:15:21.960
<v Speaker 3>is saying, hey, you can't just decide that you now

0:15:22.040 --> 0:15:23.880
<v Speaker 3>think that's not okay.

0:15:24.040 --> 0:15:25.200
<v Speaker 1>No vaccas right.

0:15:25.920 --> 0:15:29.920
<v Speaker 3>Their position is that like if no acquisition is ever final,

0:15:30.080 --> 0:15:33.360
<v Speaker 3>you know, that really would insert a lot of uncertainty

0:15:33.440 --> 0:15:36.240
<v Speaker 3>into the market. So that's their position, and they do

0:15:36.320 --> 0:15:39.880
<v Speaker 3>have a case there. The other thing that's squishy about

0:15:40.120 --> 0:15:43.640
<v Speaker 3>the government's case against Meta here is they're trying to

0:15:43.680 --> 0:15:49.480
<v Speaker 3>prove hypothetical what would have happened if Mark Zuckerberg had

0:15:49.520 --> 0:15:53.280
<v Speaker 3>not decided to buy Instagram for a billion dollars. Just

0:15:53.360 --> 0:15:58.120
<v Speaker 3>in the legal technicalities here, they're trying to say that

0:15:58.200 --> 0:16:03.800
<v Speaker 3>Meta has a monopoly in social networks, and you know

0:16:04.760 --> 0:16:08.479
<v Speaker 3>Meta's response to that. Again, to this point of technology

0:16:08.520 --> 0:16:11.640
<v Speaker 3>moves pretty fast, and there's a whole set of competitors

0:16:11.640 --> 0:16:15.760
<v Speaker 3>that didn't even exist when this case was in the

0:16:15.840 --> 0:16:19.760
<v Speaker 3>earliest stages. This was filled in twenty twenty. Now you know,

0:16:20.080 --> 0:16:25.760
<v Speaker 3>YouTube and TikTok are huge competitors to Instagram and they

0:16:25.800 --> 0:16:28.440
<v Speaker 3>have evidence to show that. So there is, again there's

0:16:28.480 --> 0:16:31.560
<v Speaker 3>this political capital on both the left and the right

0:16:32.040 --> 0:16:35.320
<v Speaker 3>to do something to rein in the power. How they

0:16:35.400 --> 0:16:39.120
<v Speaker 3>get there and their viewpoint on what the harm actually

0:16:39.200 --> 0:16:42.640
<v Speaker 3>is a little bit different, but you know, there is

0:16:42.680 --> 0:16:45.840
<v Speaker 3>a consensus that these big tech companies are too big

0:16:46.200 --> 0:16:47.600
<v Speaker 3>and something should be done about it.

0:16:48.560 --> 0:16:50.600
<v Speaker 1>Now. Of course, it was one of the big stories

0:16:50.640 --> 0:16:54.480
<v Speaker 1>coming out of President Trump's inauguration in January. You know,

0:16:54.520 --> 0:16:57.320
<v Speaker 1>you couldn't help, but notice there was quite a contingent

0:16:57.480 --> 0:17:03.440
<v Speaker 1>of Silicon Valley CEOs that attended the inauguration, and it

0:17:03.480 --> 0:17:06.400
<v Speaker 1>was the most symbolic effort to kind of cozy up

0:17:06.440 --> 0:17:11.359
<v Speaker 1>to the new administration after some strained times between the

0:17:11.400 --> 0:17:15.199
<v Speaker 1>major tech platforms with President Trump. Do you think that

0:17:15.280 --> 0:17:18.080
<v Speaker 1>those that showed up at the inauguration in January, do

0:17:18.119 --> 0:17:21.239
<v Speaker 1>you think that some of those thought that writing some

0:17:21.359 --> 0:17:24.480
<v Speaker 1>checks and being there and applauding the new president would

0:17:24.760 --> 0:17:27.160
<v Speaker 1>change the dynamic for them in some of these cases.

0:17:27.600 --> 0:17:30.719
<v Speaker 3>I don't know if they specifically were hoping that this

0:17:30.800 --> 0:17:34.400
<v Speaker 3>would make these anti trust actions go away. I mean,

0:17:35.800 --> 0:17:38.879
<v Speaker 3>I'm not sure that that was anyone's expectation, but sure

0:17:39.320 --> 0:17:43.879
<v Speaker 3>they thought that, you know, look, careering favor with the

0:17:43.920 --> 0:17:48.000
<v Speaker 3>person in power, especially a personality like Donald Trump who

0:17:48.119 --> 0:17:53.960
<v Speaker 3>trades on you know, cachet, you know, this would flatter

0:17:54.760 --> 0:17:58.520
<v Speaker 3>him and you know, get him to kind of be

0:17:58.600 --> 0:18:02.240
<v Speaker 3>on her side and some of these agreements and perhaps

0:18:02.359 --> 0:18:06.520
<v Speaker 3>reach settlements in various matters that would be favorable to them.

0:18:07.560 --> 0:18:10.719
<v Speaker 3>I sure think that was part of the expectation. And

0:18:10.760 --> 0:18:12.840
<v Speaker 3>in any case, you know, like, how could it hurt,

0:18:13.400 --> 0:18:16.560
<v Speaker 3>except you know, the optics made it look like big

0:18:16.640 --> 0:18:22.280
<v Speaker 3>Tech was suddenly bending the knee to salute President Trump

0:18:22.359 --> 0:18:24.720
<v Speaker 3>and in his victory back into the White House.

0:18:25.000 --> 0:18:27.800
<v Speaker 1>All of this focus on size and monopoly power would

0:18:27.880 --> 0:18:31.560
<v Speaker 1>seem to raise interesting questions for TikTok. As we know,

0:18:31.640 --> 0:18:34.840
<v Speaker 1>the Trump administration right now is busily trying to find

0:18:35.000 --> 0:18:38.359
<v Speaker 1>a US buyer for the US component of TikTok. With

0:18:38.520 --> 0:18:41.880
<v Speaker 1>all of this scrutiny, it certainly would suggest that TikTok

0:18:41.960 --> 0:18:44.080
<v Speaker 1>is not going to go to one of the existing

0:18:44.920 --> 0:18:48.200
<v Speaker 1>Magnificent seven stocks as Wall Street calls them these days.

0:18:48.800 --> 0:18:53.560
<v Speaker 3>I mean, there had been chatter about Amazon throwing its

0:18:53.600 --> 0:18:56.480
<v Speaker 3>hat into the ring for potentially buying a piece of TikTok.

0:18:57.680 --> 0:19:02.800
<v Speaker 3>And another point, you know, Oracle, it could still be

0:19:02.840 --> 0:19:05.760
<v Speaker 3>in the running. Oracle is not quite in the same

0:19:05.760 --> 0:19:08.520
<v Speaker 3>space as that we've been talking about, but still and

0:19:08.600 --> 0:19:12.360
<v Speaker 3>Microsoft has at one point or another expressed interest in TikTok.

0:19:12.760 --> 0:19:16.040
<v Speaker 3>I mean, it's a valuable asset. But yeah, I don't

0:19:16.040 --> 0:19:19.800
<v Speaker 3>think Mark Zuckerberg has any illusions that they would give

0:19:19.840 --> 0:19:23.359
<v Speaker 3>the green lights to meta buying TikTok.

0:19:23.800 --> 0:19:26.080
<v Speaker 1>No shortage of stuff for us to cover. Todd, thank

0:19:26.119 --> 0:19:31.520
<v Speaker 1>you as always for being on the case. Thanks for listening.

0:19:31.920 --> 0:19:34.240
<v Speaker 1>Be sure to leave us a review at the podcast

0:19:34.240 --> 0:19:37.280
<v Speaker 1>platform of your choice. We love to hear from listeners.

0:19:37.760 --> 0:19:41.120
<v Speaker 1>Stay tuned on Wednesday for our regular episode. This week,

0:19:41.160 --> 0:19:46.600
<v Speaker 1>we'll hear from producer Wheelhouse Entertainment President Courtney White,