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Speaker 2: You know, need some more news today on this Warner
Speaker 2: Brothers Discovery transaction.
Speaker 3: Again. Netflix is bidding here. They've got their bid in there.
Speaker 2: They just amended that to make it on all cash bid,
Speaker 2: and Paramount Skuydants is also there and they just kind
Speaker 2: of extended their deadline today for trying to get some
Speaker 2: shares tendered.
Speaker 3: I don't know, but so far it's not been good
Speaker 3: for them.
Speaker 2: I don't know. I don't know what's going on there.
Speaker 3: But let's talk to Semashaw.
Speaker 2: She's a pro with this stuff, vice president Research and
Speaker 2: Insights at Censor Tower STEMA. Are you surprised that, I
Speaker 2: don't know, either Netflix or Paramount SKUIDANTCE hasn't raised their offer.
Speaker 3: We kind of just seem to be waiting here.
Speaker 4: Yeah.
Speaker 5: Well, I'm more surprised that Paramount has a simply because
Speaker 5: I think they need the merger more based on their performance.
Speaker 5: They are significantly smaller, like four percent of monthly actor
Speaker 5: users share on a global basis compared to forty eight
Speaker 5: percent for Netflix and ten percent for HBO max very
Speaker 5: small percentage of ott AD revenue four percent again versus
Speaker 5: eight percent for Netflix and like thirty thirty five percent
Speaker 5: for Hulu. So for them, this deal would be much
Speaker 5: more transformative. Right, and HBO has those tent pole shows
Speaker 5: like White Lotus and now like Heated Robbery that are
Speaker 5: in the zeitgeist and make people continue to remain subscribers.
Speaker 2: Right.
Speaker 5: Netflix already has the highest retention rate for them, the
Speaker 5: HBO acquisition is an opportunity to extend their growth rapidly,
Speaker 5: like internationally where HBO is growing at a much faster
Speaker 5: rate than anyone else. So I'm actually more surprised that
Speaker 5: Paramount has it. But from what I've read also, the
Speaker 5: Warner brother shareholders do not want that deal, so it
Speaker 5: would have to probably be a substantial jump in price
Speaker 5: to get over ninety percent of the shareholders to change
Speaker 5: their mind.
Speaker 6: So Paramount of Skydance State extending its tender offer for
Speaker 6: those Warner Brothers' shares. The new offer expires February twentieth,
Speaker 6: does this change anything. I mean roughly, I mean about
Speaker 6: one hundred and sixty eight and a half million shares
Speaker 6: have been tendered as of yesterday. That's only seven percent
Speaker 6: of Warner Brothers shares outstanding. So does pushing out the
Speaker 6: deadline actually mean it's going to get more support?
Speaker 5: I don't think so. I don't think the delay is
Speaker 5: simply because people haven't had a chance to tender their shares.
Speaker 5: I just don't think that they find the offer as compelling.
Speaker 5: And also, Warner Brothers management is sided with Netflix, right,
Speaker 5: It's a well capitalized business, highest retention rate, you know,
Speaker 5: content creation machine, especially on a global basis, you know,
Speaker 5: non English language content, and so I think it's just
Speaker 5: really hard for Amount, it's so much smaller to compete
Speaker 5: with it. Like what does it bring to the table
Speaker 5: for Warner Brothers which And I think that's the question.
Speaker 2: And if Paramount does not get it, and you suggest
Speaker 2: that you know, they probably need it, it's a mustag
Speaker 2: versus maybe a nice to have for Netflix. What happens
Speaker 2: you think the Paramount? If they don't get this deal,
Speaker 2: then what do they do?
Speaker 5: Well? I mean I think you just pushed them further
Speaker 5: to the margin, right, as I said, they only have
Speaker 5: like four percent of active user share on a global basis,
Speaker 5: just to put that in perspective. Obviously, Netflix is the
Speaker 5: belhema that forty eight percent. Amazon and Disney Plus are
Speaker 5: about fifteen percent. So I'm not sure how they continue
Speaker 5: to really grow. They would have to really change their model.
Speaker 5: How are they going to grow internationally? Are they going
Speaker 5: to try to get more sports, They're going to have
Speaker 5: local language content. All of those endeavors to grow and
Speaker 5: become larger require a lot of funding, right for sports,
Speaker 5: right its content creation. So I feel like they'll sort
Speaker 5: of still be on the periphery in many cases compared
Speaker 5: to the larger streamers, and as a whole, by the way,
Speaker 5: the entire space is all still competing with short form
Speaker 5: video and just simply people's attention being pulled in other directions, right,
Speaker 5: So I think that's kind of where that leaves them
Speaker 5: if they don't get the deal.
Speaker 6: So SIMA Sensor Tower is a digital market intelligence platform.
Speaker 6: You provide data, analytics insights into the mobile app ecosystem.
Speaker 6: What does your research what does your data show about
Speaker 6: people's engagement with Warner Brothers properties? I mean beyond HBO,
Speaker 6: the other stuff, and I guess that includes the cable
Speaker 6: networks that Warner Brothers wants to spin off, that Paramountain
Speaker 6: wants to buy, and that Netflix doesn't. And you know,
Speaker 6: how does that compare to say what Netflix offers people.
Speaker 5: Well, Netflix has the highest retention rate across the space,
Speaker 5: right seventy four percent of its users are retained users.
Speaker 5: People spend about ninety one minutes per week eleven sessions
Speaker 5: per week on Netflix. In comparison, it's about six point
Speaker 5: four sessions per week on Paramount. And so you know,
Speaker 5: HBO is sort of in the middle. Our data is
Speaker 5: really focused on the digital side of the business versus
Speaker 5: any linear TV and then also our advertising data. So
Speaker 5: I think what is also very attractive about HBO is
Speaker 5: its advertising and the space of the categories that it's
Speaker 5: in where it has decent share about five four percent
Speaker 5: in healthcare, which is the largest category where OTT is
Speaker 5: the largest channel for healthcare, and Netflix doesn't have that
Speaker 5: much exposure there. So I think that is a plus
Speaker 5: for them. As far as like Warnerbug Sorry, Paramount wanting
Speaker 5: the other assets, I think it goes kind of goes
Speaker 5: back with like they want to get what they can get,
Speaker 5: so they can see how they can manage to figure
Speaker 5: out how to grow their own business, right, So I
Speaker 5: think that's why they're willing to take everything rather than
Speaker 5: sort of curate what like the way Netflix is.
Speaker 2: You know, the Netflix stock is down ten percent this
Speaker 2: year and twelve percent over the trailing twelve months. Is
Speaker 2: that kind of the market saying, hey, you know, I'm
Speaker 2: not sure we want you guys to buy this thing.
Speaker 5: Well, it also has done very well in the past.
Speaker 5: It might be, or maybe it's just simply the uncertainty
Speaker 5: of whether, even if they get the deal, if they'll
Speaker 5: be able to get through antitrust, you know, the FTC,
Speaker 5: will there be any issues getting the deal through? So
Speaker 5: I feel like it's more about that and maybe just
Speaker 5: the general idea that across streaming time spent is down,
Speaker 5: and it goes back to what I said about distractions
Speaker 5: for the consumer from short form video and other types
Speaker 5: of technology that's taking time. So I think it might
Speaker 5: be that sort of the deal with regulation and then
Speaker 5: just sort of what's happening in streaming and the cost
Speaker 5: of streaming. To get the content that gets the most
Speaker 5: the highest audience costs a lot of money, right, and
Speaker 5: they have a lot of competitors, including the microdramas that
Speaker 5: you know have been growing very rapidly.
Speaker 1: Stay with us.
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Speaker 2: Lots of earnings kind of get you know, overshadowed a
Speaker 2: little bit by on the news flow coming out of Davilas.
Speaker 2: But you know, one of the big American companies that
Speaker 2: we like to follow, General Electric, reported some numbers.
Speaker 3: A little bit disappointed. I thought they were pretty good.
Speaker 2: But the stock's down about five and a half percent today,
Speaker 2: and the stock is up over the tre past twelve months,
Speaker 2: up about sixty percent sixty zero, So maybe given back
Speaker 2: a little bit there. But let's break it down here.
Speaker 2: What's going on with our friends at GE. SID Philip Bloomberg,
Speaker 2: chief correspondent covers Global Aviation for Bloomberg News. SID talk
Speaker 2: to us about GE. What's going on with that story?
Speaker 2: They report its earnings?
Speaker 7: Yeah, so GE's actually they reported better than expected results.
Speaker 7: In the fourth quarter. But unfortunately for the company, the
Speaker 7: shareholders and the investors were expecting a much higher expectation
Speaker 7: for the full yer next year this year, and so
Speaker 7: the fullier outlook has underwhelmed investors, which is why the
Speaker 7: share stumbled. And so they said that earnings will be
Speaker 7: seven ten to seven forty a share, and that sort
Speaker 7: of compares with about seven to ten which is what
Speaker 7: the analyst expected. But that's still sort of they're talking
Speaker 7: about how there's going to be low double digit percentage
Speaker 7: of revenue growth, and that sort of after the sort
Speaker 7: of daring performance that they've had over the last year
Speaker 7: year and a half, that that sort of comes up
Speaker 7: as a break for the stock.
Speaker 2: What I like about GE or just fascinating watching the
Speaker 2: GE story over the past twenty years. They've dramatically slimmed
Speaker 2: down the company. They were just jillions of different businesses,
Speaker 2: including one of the biggest financial services companies in the world.
Speaker 3: They've slimmed that down to really a couple sectors.
Speaker 2: Here, commercial engines and services number one, and then defense
Speaker 2: and propulsion number two.
Speaker 3: What's the play, Here's where's the growth for this company?
Speaker 7: Yeah, so Larry Culp has sort of focused the company
Speaker 7: on its core aerospace business, and aerospace has sort of
Speaker 7: become what GE is and that's actually a really good
Speaker 7: business for the company. I mean they have a large
Speaker 7: sort of share of the narrow body marketplace.
Speaker 3: I mean they make any engines.
Speaker 7: Yeah, make engines with CFM, which is the biggest narrowbody
Speaker 7: engine provider. They also make all the engines for Boeing's
Speaker 7: white body aircraft. So they've got a big aerospace division
Speaker 7: and that's sort of a business that continues to generate
Speaker 7: revenue as you get those aircraft. These engines come in
Speaker 7: for servicing and they come in for sort of overhauls.
Speaker 7: That sort of keeps the revenue going. And so that's
Speaker 7: where Culpus focused on. He's sort of focused on cutting
Speaker 7: costs and as well as ramping up their aftermarket business
Speaker 7: as well as their like their maintenance and repair operation,
Speaker 7: and that's been one of the key businesses that they've
Speaker 7: been growing. They've also been growing their defense business, and
Speaker 7: I mean they're sort of getting a big share of
Speaker 7: the overall defense by it. I mean that business may
Speaker 7: come up against some investor resistance because of trump recent
Speaker 7: announcements about gapping dividends and capping share.
Speaker 2: By a back right, yeah, because I don't think of
Speaker 2: G as a defense contractor like a Lockheed Martin or
Speaker 2: something like that.
Speaker 7: But they're not a defense prime. But they are a
Speaker 7: major supplier to the defense industry.
Speaker 2: On the engine side, on the jet engine side. Do
Speaker 2: they sell to both Boeing and Airbus.
Speaker 7: They sell to Airbus through CFM, which is their joint
Speaker 7: venture with Saffron Ah, and so they about seventy five
Speaker 7: percent of the overall narrow body market. So that's a
Speaker 7: big percentage of the market.
Speaker 3: That's awesome.
Speaker 2: So, I mean, I always feel good seeing a GE
Speaker 2: engine hanging on a wing.
Speaker 3: You know, you feel like you're in good shape there.
Speaker 2: Talk to us about just you know, we follow Boeing
Speaker 2: very closely, and they've had their problems with the production,
Speaker 2: as has Airbus. I mean, the whole supply chain for
Speaker 2: aerospace and building these big jet engines. It's kind of
Speaker 2: been tough on a global scale. What does G say
Speaker 2: to say about that?
Speaker 7: So, I mean that that's been one of the I mean,
Speaker 7: Airbus famously called out G a couple of months ago,
Speaker 7: saying that they weren't producing engine CFM wasn't producing engines
Speaker 7: fast enough, and that's been a major sort of bottleneck
Speaker 7: for the aviation industry as they come out of the pandemic.
Speaker 7: I mean they've been struggling since the pandemic to actually
Speaker 7: ramp up production. I mean air Bus had to cut
Speaker 7: its annual outlook in December and they just about made
Speaker 7: their target. And so we've seen the airspace the aerospace
Speaker 7: businesses talking about sort of growth and then having to
Speaker 7: come up against the reality of a supply chain and
Speaker 7: the supply chain being severely constrained. At the same time,
Speaker 7: all the suppliers, especially GE, RTX and others have been
Speaker 7: focusing on maximizing their profitability and making sure that while
Speaker 7: they grow and while they scale up their businesses, they
Speaker 7: don't do that at the cost of profitability. And that
Speaker 7: sort of runs into the airframers their ambition of ramping
Speaker 7: up production so they won't growth at any cost, and
Speaker 7: the suppliers are saying, hey, we will grow, but it
Speaker 7: has to be profitable for us.
Speaker 2: One of the things we've heard from Bowing is it's
Speaker 2: just hard to find employees. This isn't like making a car.
Speaker 2: You got to be really really skilled.
Speaker 3: Does GE have that same issue?
Speaker 7: It does, and that's the same issue that and it's
Speaker 7: not just GE but also supplies the GEM. The problem
Speaker 7: with the aerospace supply chain is that it's so intertwined
Speaker 7: that you need every single path to build those parts
Speaker 7: that you actually supply to Boeing and Airbus, and so
Speaker 7: if one part's missing, then you can't actually put together
Speaker 7: a net engine that goes onto a plane. And so
Speaker 7: for the aerospace industry, hiring has been a major challenge,
Speaker 7: and that's been something that they've been doing and they've
Speaker 7: been trying to work on for the last couple of years.
Speaker 7: But I don't think they're out of the woods yet.
Speaker 3: Stay with us. More from Bloomberg Intelligence coming up after this.
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Speaker 3: What a couple of three days.
Speaker 2: And Davos kind of went into the week thinking maybe
Speaker 2: we talked about big, big items like AI.
Speaker 3: Well it all came down to Terrace Greenland and boy,
Speaker 3: we've had a bumpy ride this week. So we try
Speaker 3: to forget what's going on there.
Speaker 2: Gota Maconda, he does his stuff for living, his a
Speaker 2: lecture at the Yale School of Management. He's a Bloomberg
Speaker 2: opinion contributor.
Speaker 3: Got them, you know.
Speaker 2: I guess this is a little bit of President Trump
Speaker 2: starting off the week with some very big rhetoric and
Speaker 2: then backing off a little bit. That's at least how
Speaker 2: the markets have been kind of gauging it here. Has
Speaker 2: there been any long term impact positive ord negative?
Speaker 5: Here?
Speaker 3: From what's happened the last several days.
Speaker 4: There's been significant long term impact, and it's sadly all negative.
Speaker 4: So let's just break this out. The framework that the
Speaker 4: Trump administration is saying they have gotten. And it's to
Speaker 4: be clear, it's not clear they have actually gotten it,
Speaker 4: because the Europeans don't seem to be agreeing with that statement.
Speaker 4: But let's say the Trump administration got everything they said
Speaker 4: They got. Everything they said they got they could have
Speaker 4: gotten with a phone call six months ago. Right like
Speaker 4: if we had told the Danes we want to put
Speaker 4: more bases in Greenland, we want more mineral rights in Greenland.
Speaker 4: We want you to you know, do more to keep
Speaker 4: the Chinese out of Greenland. Whatever, that means they would
Speaker 4: have said, awesome, we love the idea of you doing that.
Speaker 4: So there's no so like everything they got was on
Speaker 4: the table just for the asking. The downside is we
Speaker 4: have now reached a situation where the Prime Minister of Canada,
Speaker 4: the United States is oldest, best, and most important ally
Speaker 4: is saying that the United States is a predator that
Speaker 4: is taking advantage of other countries, and that he needs
Speaker 4: to make allies alliances with other countries, including China, judging
Speaker 4: by his actions to protect himself from the United States. Like,
Speaker 4: it's almost impossible to overstate the level of the damage there.
Speaker 4: If the United States had somehow managed to extract ownership
Speaker 4: of Greenland, that would not have been even close to
Speaker 4: being worth destroying the trust that the United States has
Speaker 4: built up with pretty much every other developed country in
Speaker 4: the world over the course of more than a century.
Speaker 6: You go ahead, no, no, no, So this trust that
Speaker 6: the United States has built up, is it the trust
Speaker 6: that the White House is now put you know, putting
Speaker 6: at risk or this particular White House, I should say,
Speaker 6: versus the US government overall, because in three years time,
Speaker 6: in eight years time, you know, we could have a
Speaker 6: very different government in charge, and do we go back
Speaker 6: to the old ways.
Speaker 4: Yeah, I think it started with this administration. And if
Speaker 4: it had, and if it we were just talking about
Speaker 4: one Trump administration, it would have been just that. And
Speaker 4: then I think that's exactly what would happened. We would
Speaker 4: have reset the old ways and everybody would have said, Look,
Speaker 4: every country has a hiccop once in a while.
Speaker 3: These things happen.
Speaker 4: But now you will hear Europeans say straight up that
Speaker 4: Trump is a reflection of some thing deep about what's
Speaker 4: happening in the United States right now. That is, it
Speaker 4: is not just the case that they do not trust
Speaker 4: the Trump administration. It is they do not trust the
Speaker 4: American public to not keep electing people like the Trump administration,
Speaker 4: and that creates a completely different set of constraints and circumstances.
Speaker 2: Are you surprised, I guess going down that thread Gotham
Speaker 2: that we haven't heard really anything from members of Congress
Speaker 2: over the past week or were the last year.
Speaker 4: Even I wish I could say I was, but but
Speaker 4: I'm not. And I think what's really striking is even
Speaker 4: members of Congress who said that they are who are
Speaker 4: not running for reelection, are still unwilling to criticize the
Speaker 4: president directly with you know, like a tiny handful of exceptions,
Speaker 4: but in the Revolican party. So even Fon Tillas, who's like,
Speaker 4: I'm out right, like he said, i am not running
Speaker 4: for reelection because I want to be able to speak
Speaker 4: truth to Trump. The president Trump is saying, Hey, I
Speaker 4: don't actually have any criticisms as the president. It's all
Speaker 4: about his advisors. And just just be clear, like his
Speaker 4: advisors are not the people pushing the Greenland on this.
Speaker 4: You know, that appears to be sort of from within
Speaker 4: the president, the from within the president's own head. And
Speaker 4: so I'm not surprised, both because there's you know, his
Speaker 4: control of the Republican Party's total and people want to
Speaker 4: get re elected. But more than that, I think people
Speaker 4: are scared, right Like, if you stand up to the president,
Speaker 4: if you are seen as his enemy, you are deluged
Speaker 4: by death threats and you know, things that are not
Speaker 4: a normal part of American politics. In some sense, I
Speaker 4: guess you could say that January sixth worked because there
Speaker 4: are quite a few Republicans who are in fear for
Speaker 4: their lives, not just their puular seats.
Speaker 6: So got them, you know, Moving forward, with all of this,
Speaker 6: I'm curious, you know, you mentioned Mark Carney and the
Speaker 6: speech that he gave declaring there's a new world order here,
Speaker 6: the old world order has ruptured. How does Europe respond
Speaker 6: to this moment? Because they seem as disorganized and frankly
Speaker 6: as weak as ever, and you know, when President Trump
Speaker 6: pointed them as weak, it's hard to see how they
Speaker 6: can come to agreement on how to stand up to him.
Speaker 4: So so I mean, I would never I would never
Speaker 4: underestimate the Europeans ability to fold under pressure. And I
Speaker 4: like that is that, I mean that is but I
Speaker 4: think first as you did see like they started to
Speaker 4: put troops into Greenland, right, like that is not a
Speaker 4: minor signal, right, I mean, so there's a lot of
Speaker 4: like we are really starting to push back in that
Speaker 4: way in a way that we hadn't seen before. And
Speaker 4: I think if it had actually come down to an
Speaker 4: American use of force, that has a clarifying right, you know,
Speaker 4: as Oscar walt to the prospect of hanging clarifies the mind, right,
Speaker 4: that I think would have solidified the Europeans together. And second,
Speaker 4: the few gestures they did make, I mean it's very clear,
Speaker 4: right the Trump administration has backed down, right. They made
Speaker 4: lots of threats, they made lots of bluster, they got
Speaker 4: nothing in their declaring victory.
Speaker 3: That is a back down.
Speaker 4: So they are they were backing down from from your
Speaker 4: even what little counter push the Europeans did. But I
Speaker 4: think what you will see is you'll start to see
Speaker 4: real pushback on American companies, right because at this you know,
Speaker 4: no European country could seriously look at American defense contractors
Speaker 4: a trustworthy about the purchaser, right, Like Microsoft is already
Speaker 4: facing pressure from Europeans because there's some things that it did.
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