WEBVTT - XPO, Spotify, and AI 0:00:00.120 --> 0:00:04.360 Bloomberg is now on your dashboard with Apple CarPlay and 0:00:04.360 --> 0:00:08.160 Android Auto. It gives you access to every Bloomberg podcast, 0:00:08.280 --> 0:00:11.560 live audio feeds from Bloomberg Radio, print stories from Bloomberg 0:00:11.640 --> 0:00:14.920 News in audio form, and the latest headlines of the 0:00:14.920 --> 0:00:18.600 click of a button with Bloomberg News. Now it's free 0:00:18.680 --> 0:00:21.439 with the latest version of the Bloomberg Business App. That's 0:00:21.680 --> 0:00:24.400 the Bloomberg Business App. Get it on your phone in 0:00:24.440 --> 0:00:27.760 the Apple App Store or on Google Play. Just download 0:00:27.800 --> 0:00:30.560 the app, connect your phone to your car and get started. 0:00:30.960 --> 0:00:34.400 And it's all presented by our sponsor, Interactive Brokers. 0:00:35.400 --> 0:00:38.600 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 0:00:38.640 --> 0:00:39.800 my co host Matt Miller. 0:00:40.200 --> 0:00:44.159 Every business day we bring you interviews from CEOs, market pros, 0:00:44.320 --> 0:00:48.160 and Bloomberg experts, along with essential market moven News. 0:00:48.720 --> 0:00:51.839 Find the Bloomberg Markets podcast called Apple Podcasts or wherever 0:00:51.960 --> 0:00:54.560 you listen to podcasts, and at Bloomberg dot Com slash 0:00:54.600 --> 0:00:59.320 podcast we talk about serial entrepreneurs. I gotta throw our 0:00:59.320 --> 0:01:01.880 next guest into this category. Brad Jacobs. He's the executive 0:01:01.920 --> 0:01:05.960 chairman of XPO. You know that logistics company. XPO is 0:01:06.000 --> 0:01:08.440 a ticker on your Bloomberg Terminal. 0:01:08.200 --> 0:01:10.400 Mirrork Sockey more than one hundred and seventy percent. 0:01:10.560 --> 0:01:10.880 Not bad. 0:01:10.959 --> 0:01:13.160 It's got a ten point five billion dollar market cap, 0:01:13.240 --> 0:01:16.920 all right. But before that XBO, he was chairman and 0:01:17.000 --> 0:01:20.800 CEO of United Waste Management, United Waste Systems, I'm sorry, 0:01:21.400 --> 0:01:24.880 former chairman and CEO of United Rentals. And he's CEO 0:01:25.160 --> 0:01:27.480 of XBO from twenty eleven to twenty twenty two before 0:01:27.480 --> 0:01:30.440 becoming executive chairman. So this is somebody who just can't 0:01:30.480 --> 0:01:33.440 sit still quite the CV Brad Jacobs. He's in our 0:01:33.440 --> 0:01:36.039 Bloomberg andheract the Broker studio today. So Braday, I know 0:01:36.040 --> 0:01:38.520 you've got a new fund out there, a billion dollars. 0:01:38.560 --> 0:01:39.920 I'm guessing most of it. I it's not all of 0:01:39.920 --> 0:01:42.840 it's your money. What are you guys looking to do 0:01:42.880 --> 0:01:44.399 with this new fund? What's next? 0:01:44.760 --> 0:01:46.919 So only nine hundred million is mine, okay. 0:01:47.120 --> 0:01:49.920 The other one hundred million is from friends and family okay, 0:01:50.000 --> 0:01:51.560 the largest one being Sequoy Heritage. 0:01:51.600 --> 0:01:52.960 Oh nice, that's a good family. 0:01:52.720 --> 0:01:53.600 Being real family. 0:01:53.680 --> 0:01:55.880 Yes, I'm a sister of my brother nephews. 0:01:56.040 --> 0:01:59.200 So we're taking that billion dollars and we're putting it 0:01:59.280 --> 0:02:02.480 into a small cap about fifteen to twenty million dollar 0:02:02.520 --> 0:02:04.680 market cap. Well it was, it's double the stock price today, 0:02:04.720 --> 0:02:06.560 so maybe it's thirty or forty million market cap now 0:02:06.800 --> 0:02:11.600 called silver Sun Technologies. And we're then going to spin 0:02:11.720 --> 0:02:15.200 that company back off to the legacy shareholders of silver Sun. 0:02:15.320 --> 0:02:18.080 So in a few months when the deal closes, the 0:02:18.120 --> 0:02:20.800 silver Sun shareholders with other their company back. They'll also 0:02:20.800 --> 0:02:23.240 get a two and a half million dollar dividend, and 0:02:23.280 --> 0:02:26.919 they'll get a about a zero point three percent share 0:02:27.080 --> 0:02:28.280 in my new company. 0:02:28.880 --> 0:02:32.640 And your new company is going to do what Well, 0:02:32.680 --> 0:02:35.120 we haven't announced the industry yet. I wanted there, are 0:02:35.120 --> 0:02:39.239 you gonna use this shell, this publicly, this entity, this 0:02:39.360 --> 0:02:42.560 vehicle to make an acquisition? Absolutely, so tell us. 0:02:42.520 --> 0:02:43.440 What this company. 0:02:43.440 --> 0:02:46.720 This company will be publicly traded, it'll have billion dollars 0:02:46.760 --> 0:02:50.079 in cash, and we'll do the same playbook that I've 0:02:50.080 --> 0:02:53.480 been doing for decades. I'm going to consolidate an industry. 0:02:53.520 --> 0:02:56.200 I'm going to buy companies, I'm going to assimilate them. 0:02:56.240 --> 0:02:57.959 I'm going to improve them. We're going to going to 0:02:58.000 --> 0:03:00.320 get synergy from them. I'm gonna symbol the world class 0:03:00.400 --> 0:03:03.560 team and applied technology, improve the business, and we'll. 0:03:03.440 --> 0:03:03.960 Be off to the race. 0:03:04.000 --> 0:03:07.080 So you've identified the company, you just haven't announced it yet, 0:03:07.320 --> 0:03:08.200 that's correct, So. 0:03:08.280 --> 0:03:10.639 We can you've identified the industry. 0:03:10.720 --> 0:03:11.880 You've identified the industry. 0:03:12.600 --> 0:03:15.040 We don't have a companies per se that we're about 0:03:15.040 --> 0:03:16.720 to buy, although we're talking to several of them. 0:03:17.040 --> 0:03:18.679 Can you tell us what the industry is here? 0:03:18.800 --> 0:03:21.399 Well, we'll play bigger than a small bread. 0:03:21.440 --> 0:03:23.040 So I got to get your back again. And you're like, 0:03:23.160 --> 0:03:25.280 what a week's time or something something like that. All right, 0:03:25.360 --> 0:03:27.760 all right, So what do you look for? I mean, 0:03:27.919 --> 0:03:31.680 waste management logistics. I mean these things aren't sexy, but 0:03:31.880 --> 0:03:34.680 what are you living more sexy? They essentially for your 0:03:34.720 --> 0:03:35.320 bank accounts. 0:03:35.440 --> 0:03:37.840 It means making a lot of money for shareholders, that's right. 0:03:37.840 --> 0:03:40.280 And United Rentals we got in it was it was 0:03:40.360 --> 0:03:42.360 three dollars and fifty cents a share when I started 0:03:42.360 --> 0:03:44.560 the company in nineteen ninety seven. 0:03:44.320 --> 0:03:46.880 And on Friday it was over five hundred dollars a year. 0:03:46.920 --> 0:03:51.240 And XPO Logistics when we started in twenty eleven. Are 0:03:51.360 --> 0:03:53.240 the investors who came in with me made thirty two 0:03:53.280 --> 0:03:55.040 times in money as a last year, So I can 0:03:55.040 --> 0:03:56.320 save that very very sexy. 0:03:56.320 --> 0:03:58.400 When you put it that way. So what legit. What 0:03:58.920 --> 0:04:01.120 characteristics do you look for in a business when you 0:04:01.240 --> 0:04:03.640 go to acquired because you remind me of a a 0:04:03.680 --> 0:04:05.320 gunging off to think of his name again, who did 0:04:05.360 --> 0:04:07.880 this in the cable industry, the radio business and then 0:04:08.000 --> 0:04:10.320 entertainment business up in Boston. Anyway, What do you look 0:04:10.360 --> 0:04:12.000 for in a company or an industry? 0:04:12.440 --> 0:04:15.160 So I look for very specific things. They've all been 0:04:15.240 --> 0:04:19.520 in industrial services, that's my okay. I look for large industries. 0:04:19.560 --> 0:04:22.160 I look for industries that are hundreds of billions of 0:04:22.240 --> 0:04:25.320 dollars in size. I look for ones that there's lots 0:04:25.360 --> 0:04:28.640 of interesting companies to buy. It's not consolidated so much 0:04:28.640 --> 0:04:30.240 as there's not a whole lot to buy. It's still 0:04:30.279 --> 0:04:33.919 fragmented and at reasonable prices at multiples less than what 0:04:34.360 --> 0:04:36.280 we're going to trade out, so we get some accretion. 0:04:36.000 --> 0:04:36.760 From what we're buying. 0:04:37.320 --> 0:04:40.719 And I look for an industry where it's not totally 0:04:40.760 --> 0:04:44.040 tech forward yet and I can take our tech prowess 0:04:44.080 --> 0:04:46.799 and apply it to the industry to get an advantage. 0:04:47.160 --> 0:04:50.720 So what industries do you see that have opportunities? 0:04:50.800 --> 0:04:54.320 At this point, you're not going to give up, so 0:04:54.560 --> 0:04:55.200 stay tuned. 0:04:55.520 --> 0:04:57.960 I will definitely tell the whole world, what industry we're 0:04:57.960 --> 0:04:59.360 going to consolidate but not today. 0:05:00.279 --> 0:05:03.359 What kind of capital structure do you think is appropriate 0:05:03.400 --> 0:05:06.159 today versus maybe when you did United Reynolds, when you 0:05:06.200 --> 0:05:10.919 did XPO. Debt is not free anymore. Talk to us 0:05:10.960 --> 0:05:12.479 about that, and talk to us about maybe if there's 0:05:12.480 --> 0:05:14.880 any other external equity you need, can you get. 0:05:14.760 --> 0:05:18.920 It so in the first instance, will be debt free. 0:05:18.960 --> 0:05:21.880 We'll have a billion dollars of equity that we're putting 0:05:21.880 --> 0:05:24.799 into the company, and we'll have no debt over time. 0:05:25.480 --> 0:05:28.080 To answer your question, I think one or two turns 0:05:28.160 --> 0:05:30.479 is probably a conservative way to approach it, given the 0:05:30.480 --> 0:05:33.200 world and the turbulence and the risk risky nature of 0:05:33.240 --> 0:05:36.480 what's going on in geopolitics, and in terms of it available, 0:05:36.680 --> 0:05:39.200 there's no never any problem raising money if you've got 0:05:39.200 --> 0:05:40.840 a good track record and you have a good team, 0:05:40.920 --> 0:05:42.599 and you have a good business plan. So I'm not 0:05:42.640 --> 0:05:44.000 worried about access to capital. 0:05:44.360 --> 0:05:46.400 What do you think that tells us about the direction 0:05:46.480 --> 0:05:47.640 of the economy right now? 0:05:48.920 --> 0:05:49.400 Well, I don't. 0:05:49.520 --> 0:05:51.560 I'm not going to give it prediction because my prediction 0:05:51.600 --> 0:05:53.560 has been bad last year and a half, like most 0:05:53.560 --> 0:05:55.919 everyone else year and a half two years ago, I 0:05:55.920 --> 0:05:58.479 thought a recession was coming, and no recession camp so 0:05:58.920 --> 0:06:02.080 I've withdrawn my convey on particular the economy. Having said that, 0:06:02.520 --> 0:06:04.680 I do see it being generally soft out there in 0:06:04.720 --> 0:06:07.200 Europe and the United States, and I see it slowing. 0:06:07.200 --> 0:06:08.240 I don't see it picking up. 0:06:09.160 --> 0:06:12.760 So in your investments, let's say, what you're looking at 0:06:12.880 --> 0:06:15.599 coming forward? Is it Do you prefer to stay in 0:06:15.600 --> 0:06:17.880 the US, You're looking for a global business? How do 0:06:17.920 --> 0:06:19.960 you just think about g geography? Because a lot of 0:06:20.000 --> 0:06:22.560 folks are saying, I can't go to China, Europe's to 0:06:23.600 --> 0:06:26.080 the growth isn't there in Europe for me? How do 0:06:26.120 --> 0:06:26.760 you think about it? 0:06:27.400 --> 0:06:30.120 Well, Asia has an extra level of risk because what's 0:06:30.120 --> 0:06:32.920 going on with China, So I'm not eager to get 0:06:32.800 --> 0:06:36.400 into Asia. I liked North America a lot, like the 0:06:36.520 --> 0:06:38.960 United States a real lot for all the obvious reasons. 0:06:39.320 --> 0:06:43.400 But I don't mind Western Europe, France, UK, Spain, Germany. 0:06:43.760 --> 0:06:46.279 These are great countries with big economies and. 0:06:46.400 --> 0:06:49.880 The rule of law. So what we saw during the 0:06:49.920 --> 0:06:55.320 pandemic was a sense of reshoring or friend shoring, that 0:06:55.360 --> 0:06:58.479 type of thing. Did you see that? Do you see 0:06:58.480 --> 0:07:00.440 that at XBO? And how does maybe how does that 0:07:01.200 --> 0:07:03.960 change our supply chain because I kind of grew up 0:07:04.080 --> 0:07:06.640 in an era that was all about globalization, more and 0:07:06.640 --> 0:07:09.040 more globalization that seems so installed a little bit. 0:07:09.279 --> 0:07:11.960 Ins stalled a lot. I see that more in our 0:07:12.680 --> 0:07:16.080 supply chain spin off GXO Logistics, which has about two 0:07:16.160 --> 0:07:20.160 hundred million square feet of warehouses across a thousand warehouses 0:07:20.480 --> 0:07:23.160 around the world. There you've seen a lot of our 0:07:23.240 --> 0:07:26.080 customers who had a lot big part of their supply 0:07:26.160 --> 0:07:30.960 chain originating in China migrate to Malaysia, to Vietnam, to India, 0:07:31.240 --> 0:07:34.160 to Mexico back to the United States. So that's trend 0:07:34.200 --> 0:07:36.160 that's probably not going to turn around. I think people 0:07:36.240 --> 0:07:39.400 want to de risk being dependent on China. 0:07:39.000 --> 0:07:41.160 And especially when it comes to the supply chains and 0:07:41.160 --> 0:07:43.760 what we just went through because of the pandemic. Where 0:07:43.760 --> 0:07:46.760 are you seeing improvements and where are there still some 0:07:46.960 --> 0:07:50.360 lags there that are issues for the broader global supply chain. 0:07:50.480 --> 0:07:52.760 Oh, the supply chain has normalized quite a bit. It's 0:07:52.800 --> 0:07:54.520 not anything like it was a couple of years ago 0:07:54.640 --> 0:07:57.360 during COVID, when it was hard to get anything and 0:07:57.400 --> 0:07:59.520 things move very slowly and the prices were real high. 0:07:59.680 --> 0:08:03.920 The price of freight transportation and logistics in general has 0:08:03.960 --> 0:08:08.720 come down a lot, and it's capacity. The availability of 0:08:09.080 --> 0:08:11.080 transportation is available quite a bit. 0:08:11.520 --> 0:08:14.400 So what's the biggest challenge as you think about it. 0:08:14.440 --> 0:08:16.760 I mean, you're going to put some capital to work here. 0:08:18.120 --> 0:08:20.000 What do you think, just broadly defined out, some of 0:08:20.000 --> 0:08:22.880 the biggest challenges that you're going to have for again, 0:08:23.160 --> 0:08:26.760 redoing your playbook, growing, maybe through acquisition and so on 0:08:26.800 --> 0:08:28.120 and so forth. What do you think some of the 0:08:28.160 --> 0:08:29.840 challenges over the next several years for you? 0:08:29.920 --> 0:08:32.800 The most important thing that has to be accomplished in 0:08:32.840 --> 0:08:34.920 any business plan, but particularly one that's going to be 0:08:35.200 --> 0:08:37.360 high growth and where we're aiming for the stars in 0:08:37.480 --> 0:08:40.840 terms of very high returns to shareholders is people. You've 0:08:40.840 --> 0:08:43.679 got to assemble a world class real world class, not 0:08:43.720 --> 0:08:47.600 even first class, a world class management team that's hard working, 0:08:47.640 --> 0:08:50.000 that's honest, that gets along well and plays well in 0:08:50.000 --> 0:08:54.400 the play in the sandbox together, is super smart, very focused, 0:08:54.480 --> 0:08:57.200 really understands what they're doing on top of everything. And 0:08:57.280 --> 0:09:00.400 if you can get a management team assembled, it's got 0:09:00.440 --> 0:09:01.720 those kind of superstars. 0:09:01.960 --> 0:09:02.360 The rest. 0:09:02.520 --> 0:09:04.720 I won't say it's super easy, because nothing's super easy, 0:09:04.760 --> 0:09:06.040 but it's relatively easy. 0:09:06.520 --> 0:09:09.199 What's one of the top questions that you get from shareholders. 0:09:10.800 --> 0:09:13.320 Well, shareholders are always thinking about well depends which sheholder 0:09:13.320 --> 0:09:13.920 you're talking about. 0:09:14.120 --> 0:09:15.480 So there's two categories there. 0:09:15.679 --> 0:09:18.000 You have short term and long term. So the hedge 0:09:18.000 --> 0:09:20.719 funds and some of the high velocity funds, they're very 0:09:20.720 --> 0:09:24.080 interested in the quarter, maybe the next quarter right the most, 0:09:24.160 --> 0:09:26.400 the outlook for the next year. But the long only 0:09:26.520 --> 0:09:30.240 institutions who own five, ten, fifteen percent of a company 0:09:30.679 --> 0:09:33.560 and are owning it for several years, they're seeing way 0:09:33.559 --> 0:09:36.680 past that. They're not so interested in the quarter. That's interesting, 0:09:36.720 --> 0:09:39.040 but it's not the real focus. The focus is how 0:09:39.080 --> 0:09:40.839 are you going to grow the business? How are you 0:09:40.880 --> 0:09:42.840 going to grow this business over the next five years, 0:09:42.840 --> 0:09:44.719 over the next ten years, how you what kind of 0:09:44.840 --> 0:09:46.760 organic growth a you're going to have, what kind of 0:09:46.760 --> 0:09:49.440 margin expansion you're going to have, What are you looking 0:09:49.440 --> 0:09:52.600 at in terms of return on capital? And what is 0:09:52.640 --> 0:09:55.360 the specific business plan and the levers we should watch 0:09:55.679 --> 0:09:57.560 in order to hold you accountable. Those are the kind 0:09:57.600 --> 0:10:00.520 of questions that the serious shareholders at all. 0:10:00.600 --> 0:10:03.240 Right, we'll be paying attention. We're watching the Bloomberg terminal 0:10:03.320 --> 0:10:05.880 to see if that headline go across Brad Jacobs. He's 0:10:05.960 --> 0:10:08.880 executive chairman for now of XPO, which is in New York. 0:10:08.880 --> 0:10:12.600 Stock executive just say, okay, he's gonna end. He's got 0:10:12.600 --> 0:10:14.320 a new he's got a new fund out there, folks. 0:10:14.360 --> 0:10:16.480 So you know, keep an eye out on your Bloomberg criminals. 0:10:16.480 --> 0:10:19.600 See what the Brad and his team go for next. 0:10:19.600 --> 0:10:23.680 Brad Jacobs, executive Chairman XPO. In our Bloomberg Interactive Brokers studio. 0:10:24.920 --> 0:10:28.319 You're listening to the team. Ken's a live program Bloomberg 0:10:28.360 --> 0:10:31.720 Markets weekdays at ten am Eastern on Bloomberg dot Com, 0:10:31.800 --> 0:10:34.960 the iHeartRadio app, and the Bloomberg Business App, or listen 0:10:35.040 --> 0:10:37.319 on demand wherever you get your podcasts. 0:10:39.120 --> 0:10:41.480 Paul, as we were talking about earlier, taking a look 0:10:41.520 --> 0:10:46.120 at Spotify, reducing its workforce by seventeen percent in the 0:10:46.120 --> 0:10:49.320 company steves cuts yet this year is part of an 0:10:49.320 --> 0:10:53.080 aggressive effort to shrink costs and drive profitability. If you 0:10:53.080 --> 0:10:55.920 look at that stock ticker symbol spot up about eight 0:10:56.000 --> 0:10:58.760 percent this morning, on pace for its best day since 0:10:58.840 --> 0:11:00.960 late October. If you look at your date, up over 0:11:01.080 --> 0:11:05.319 one hundred and forty five percent. Who better to chat 0:11:05.320 --> 0:11:08.360 with us about the latest news with Spotify than Ashley Carmen, 0:11:08.480 --> 0:11:11.920 reporter with Bloomberg News covering the auto industry, joining us 0:11:12.000 --> 0:11:14.840 on zoom. Ashley walk us through the latest with Spotify. 0:11:14.880 --> 0:11:15.800 What do we need to know here? 0:11:17.160 --> 0:11:20.360 Yeah, so, I mean, obviously the big headline seventeen percent 0:11:20.360 --> 0:11:25.600 of employees fifteen hundred people. Really awful, really really awful. 0:11:25.640 --> 0:11:28.360 It's a third cut this year. Spotify has really been 0:11:28.440 --> 0:11:33.400 under pressure from investors to cut costs achieve profitability. Spotify 0:11:33.440 --> 0:11:36.840 invested heavily in the podcast space, and investors believed that 0:11:36.840 --> 0:11:38.880 that was a bad one and we're really seeing the 0:11:38.920 --> 0:11:40.640 repercussions of it into this year. 0:11:41.040 --> 0:11:44.200 All right, So, I mean the stockstone great. I'm looking 0:11:44.280 --> 0:11:47.240 on the FA function of the Bloomberg terminal. Analysts are 0:11:47.280 --> 0:11:50.320 expecting this company to turn profitable in twenty twenty four. 0:11:50.440 --> 0:11:54.560 So it seems like the company's in good space. Do 0:11:54.559 --> 0:11:57.559 you feel like this is an announcement of coming from 0:11:57.640 --> 0:11:59.880 a point of strength or not. 0:12:02.679 --> 0:12:04.760 It feels like it's coming from a point of strength. 0:12:04.760 --> 0:12:09.360 Although it is surprising. It does make me wonder about 0:12:09.400 --> 0:12:12.120 the status of the podcast business. We've already seen them 0:12:12.200 --> 0:12:15.400 cut significantly in that department. They cut two percent of 0:12:15.440 --> 0:12:18.320 the workforce in June primarily in podcasting. So it does 0:12:18.360 --> 0:12:22.640 make me wonder if that bet continues to just not 0:12:22.800 --> 0:12:26.520 pay off and they continue to recognize it, or if 0:12:26.520 --> 0:12:28.440 they think that they're just going to have to brand 0:12:28.480 --> 0:12:30.720 into new areas and that they'll have to cut costs 0:12:30.760 --> 0:12:32.000 to do so. 0:12:32.040 --> 0:12:34.920 Talk to us about the issues they've had with losing 0:12:34.960 --> 0:12:37.480 money just in due to terms of when it comes 0:12:37.480 --> 0:12:40.280 to licensing agreements with music right holders. 0:12:41.679 --> 0:12:43.840 Yeah, so they have to pay a substantial portion of 0:12:43.840 --> 0:12:46.240 their revenue to the rights holders, of course, because in 0:12:46.320 --> 0:12:48.680 order to have a music streaming service, you have to 0:12:48.720 --> 0:12:52.160 license the music, and of course the labels want their 0:12:52.240 --> 0:12:55.760 fair share. So that has been a real challenge for Spotify, 0:12:55.800 --> 0:12:58.439 which is why it has attempted to diversify its business 0:12:58.440 --> 0:13:01.679 by moving into podcasts and then most recently, it began 0:13:01.760 --> 0:13:04.959 offering audiobooks as part of premium subscriptions on its service. 0:13:06.280 --> 0:13:09.120 Talk to us about the I guess the competitive environment 0:13:09.160 --> 0:13:12.120 here for streaming music. Just if you get set out 0:13:12.160 --> 0:13:14.800 kind of where Spotify fits in this. I'm not a 0:13:14.800 --> 0:13:18.080 big streamer of music, but you know, I don't know, 0:13:18.200 --> 0:13:20.040 I mean, there's a lot out there. I mean, iHeart 0:13:20.040 --> 0:13:21.280 and everything. Just give us a sense of what the 0:13:21.280 --> 0:13:22.480 competitive landscape looks like. 0:13:23.760 --> 0:13:28.640 Yeah, So Spotify is the largest streaming service pretty much globally, 0:13:30.200 --> 0:13:33.760 and they're independent. They are not tied to a tech platform, 0:13:33.760 --> 0:13:36.400 which their primary competitors are. So you have Apple Music, 0:13:36.559 --> 0:13:39.080 Amazon Music. You mentioned iHeart. I mean, that's obviously a 0:13:39.080 --> 0:13:43.360 big US company in radio, but their primary competitors here 0:13:43.400 --> 0:13:47.240 are Apple Music and Amazon Music, and those two really 0:13:47.240 --> 0:13:49.240 have the benefit of being tied through tech companies. So 0:13:49.240 --> 0:13:52.000 Spotify is trying to make it on its own as 0:13:52.000 --> 0:13:55.760 an independent and make the economics work, which is a challenge. 0:13:55.960 --> 0:13:59.760 So do other players in the industry face similar issues 0:13:59.800 --> 0:14:01.880 just Spotify or is it just more unique to that 0:14:01.960 --> 0:14:04.000 company given what you were talking about when it comes 0:14:04.040 --> 0:14:06.920 to another platform like Apple Music, when you're a part 0:14:07.000 --> 0:14:10.960 of a much bigger technology company, maybe you're more immune. 0:14:13.440 --> 0:14:15.600 I think it could be that there may be more immune. 0:14:15.600 --> 0:14:17.360 But Spotify really came out to get I mean, they 0:14:17.400 --> 0:14:20.720 spent over a billion dollars on podcasting, so they were 0:14:20.760 --> 0:14:24.160 the ones that made that huge, huge bet and push 0:14:24.280 --> 0:14:26.520 on that space, which I think puts them in a 0:14:26.560 --> 0:14:29.040 really unique position. And I do think that they also 0:14:29.800 --> 0:14:32.920 have to diversify to survive. Where is it as possible 0:14:33.000 --> 0:14:36.240 that Apple Music and Amazon Music can kind of they 0:14:36.320 --> 0:14:39.840 squarely focused on music and be Okay, how much of. 0:14:39.800 --> 0:14:44.160 Their business is subscription versus advertising and where does the 0:14:44.200 --> 0:14:46.960 market feel like maybe the most growth can come from. 0:14:48.400 --> 0:14:52.920 They've continued to grow their subscriptions, which quarter or over 0:14:53.000 --> 0:14:57.000 quarter has just been a wild, amazing testament to the 0:14:57.040 --> 0:15:01.160 strength of Spotify. They continue to grow subscribers the advertising business. 0:15:01.640 --> 0:15:03.880 They have free users, of course, and I think as 0:15:03.880 --> 0:15:07.680 they move into more developing countries like India, those users, 0:15:07.680 --> 0:15:10.680 of course are going to potentially beyond cheaper plans or 0:15:10.760 --> 0:15:13.520 free plans, so advertising could become a bigger part of 0:15:13.520 --> 0:15:16.200 the story. But really they are subscription business and investors 0:15:16.240 --> 0:15:17.680 want to see subscriptions. 0:15:18.360 --> 0:15:22.080 And this does come during a year where Taylor Swift 0:15:22.160 --> 0:15:26.320 had quite the momentum on Spotify. So how is it 0:15:26.400 --> 0:15:29.040 when you have someone that's successful on that's still maybe 0:15:29.040 --> 0:15:32.640 not enough to prevent Spotify from having to go through 0:15:32.640 --> 0:15:34.200 these different cost cutting efforts. 0:15:35.720 --> 0:15:38.960 Yeah, I mean Taylor Swift, of course, super successful, Beyonce Drake, 0:15:39.040 --> 0:15:40.680 all of them. But at the end of the day, 0:15:41.160 --> 0:15:43.880 Spotify has to pay royalties every single time someone listens 0:15:43.920 --> 0:15:47.200 to those songs. So they're not getting to necessarily benefit 0:15:47.200 --> 0:15:49.680 from that. I mean they get subscribers and they make 0:15:49.760 --> 0:15:52.720 some money, but not enough to offset just the fact 0:15:52.720 --> 0:15:55.200 that people are obsessed with Taylor Swift. I mean that's 0:15:55.200 --> 0:15:57.600 why that podcast that where they don't have to pay 0:15:57.680 --> 0:16:02.320 royalties whenever someone listens to a podcast with smart But 0:16:02.720 --> 0:16:05.240 the question is can they actually build business around it? 0:16:05.320 --> 0:16:06.320 And isn't working? 0:16:06.600 --> 0:16:06.800 Right? 0:16:06.920 --> 0:16:08.600 So Taylor Swift is actually going to earn more than 0:16:08.640 --> 0:16:12.880 one hundred million dollars in Spotify royalties for twenty seven yes, 0:16:12.920 --> 0:16:14.320 oh my good, breaking it in. 0:16:14.760 --> 0:16:18.560 So where are we with the podcast business? Actually? I 0:16:18.600 --> 0:16:21.200 mean are they still committed to it? How did they 0:16:21.400 --> 0:16:23.520 phrase kind of how they're going to invest in that 0:16:23.600 --> 0:16:25.520 going forward, because I know that was a concern as 0:16:25.560 --> 0:16:27.080 you mentioned before for a lot of investors. 0:16:29.160 --> 0:16:33.200 You know, they still have at least prior to these cuts, 0:16:33.240 --> 0:16:35.960 they still had a podcast department that was dedicated to 0:16:36.000 --> 0:16:39.880 doing original programming. I think after these cuts will find 0:16:39.880 --> 0:16:42.479 out more about what the state is of those shows. 0:16:43.120 --> 0:16:45.440 But really where I have seen the company focus has 0:16:45.440 --> 0:16:48.840 been on advertising. They really want to not only put 0:16:48.880 --> 0:16:52.600 podcast advertisements behind their own programming, but also behind their 0:16:52.640 --> 0:16:55.560 third party partnerships with people like Joe Rogan and Dak Shepherd, 0:16:55.840 --> 0:16:59.040 as well as people who use one of their hosting services, 0:16:59.080 --> 0:17:01.800 So that could be places like MPR, for example, uses 0:17:01.840 --> 0:17:05.520 their service they put ads on their shows. So that 0:17:05.560 --> 0:17:09.360 has really been the focus moving forward for Spotify, and 0:17:10.119 --> 0:17:12.720 that was a newer goal. So I think we're still 0:17:12.760 --> 0:17:15.600 trying to figure out whether that's going to pay off. 0:17:15.840 --> 0:17:18.280 We only have about a minute left. But do you 0:17:18.480 --> 0:17:22.480 see further job cuts coming in the next few months 0:17:22.720 --> 0:17:24.200 or the next year, or do you think this will 0:17:24.240 --> 0:17:25.840 be limited to what we saw today. 0:17:27.400 --> 0:17:30.640 In his blog post, the CEO Daniel X said that 0:17:30.800 --> 0:17:34.199 this decision was made to avoid further cuts into the 0:17:34.240 --> 0:17:38.160 next year or two, so that's where he's at with it. 0:17:38.960 --> 0:17:41.280 I would hope for the sake of the employees that's 0:17:41.400 --> 0:17:43.600 the case, because this has probably been a pretty traumatic 0:17:43.640 --> 0:17:46.119 year for them. But yeah, as of right now, that 0:17:46.200 --> 0:17:47.040 that's kind of what we know. 0:17:47.720 --> 0:17:49.679 All right, Ashley, thank you so much for joining us. 0:17:49.680 --> 0:17:52.879 Really appreciate it, appreciate the reporting there. Ashley Carmen, reporter 0:17:52.920 --> 0:17:55.560 for Bloomberg News, talking about Spotify again, one of the 0:17:55.560 --> 0:17:58.600 bigger stories today on the Bloomberg terminal cutting fifteen hundred jobs. 0:17:59.040 --> 0:18:00.800 You take a look at the stock and it's been 0:18:01.200 --> 0:18:03.760 all over but it's had again up you. 0:18:03.760 --> 0:18:06.119 Know, up over one hundred and forty five percent a 0:18:06.200 --> 0:18:06.640 year to date. 0:18:06.880 --> 0:18:08.960 Yeah, but he just pull up the max chart here. 0:18:09.040 --> 0:18:12.080 I mean, it's obviously well, it's spiked and got up 0:18:12.080 --> 0:18:14.080 to three hundred and fifty dollars three hundred and fifty 0:18:14.119 --> 0:18:16.199 five dollars a share, you know, back in kind of 0:18:16.320 --> 0:18:18.960 the beginning of twenty twenty one. So it's got a 0:18:18.960 --> 0:18:20.800 lot of work to retrace, so it's not nearest all 0:18:20.800 --> 0:18:23.359 time high, but it's definitely moving higher. And again this 0:18:23.440 --> 0:18:26.320 is another tech story, much like meta, where you're getting 0:18:26.359 --> 0:18:29.800 rewarded for cutting your costs and focusing on profitability, which 0:18:29.880 --> 0:18:32.680 was different from you know, just several years ago, when 0:18:32.760 --> 0:18:35.480 a lot of these text stories were rewarded simply for 0:18:35.560 --> 0:18:37.880 growing top line growth with whether that's reven or even 0:18:37.880 --> 0:18:40.560 subscribers or anything like that. Now the metric has become 0:18:41.280 --> 0:18:44.080 profitability kind of the way it probably always should have been. 0:18:44.520 --> 0:18:47.639 You're listening to the tape. Can's are Live program Bloomberg 0:18:47.680 --> 0:18:51.280 Markets weekdays at ten am Eastern on Bloomberg Radio. The 0:18:51.359 --> 0:18:54.560 tune in app Bloomberg dot Com and the Bloomberg Business App. 0:18:54.640 --> 0:18:57.440 You can also listen live on Amazon Alexa from our 0:18:57.440 --> 0:19:01.439 flagship New York station just Say Alexa playing Bloomberg eleven. 0:19:03.200 --> 0:19:05.520 Jess and I have talked about a big, big story 0:19:05.600 --> 0:19:08.720 in the stock market, in the economy in twenty twenty 0:19:08.720 --> 0:19:13.080 three has been AI can nowhere, and now every company 0:19:13.119 --> 0:19:14.960 talks about it. I don't care what business they're in, 0:19:15.000 --> 0:19:20.159