WEBVTT - BI Weekend: Nike, Carnival Earnings, EA Sale 0:00:00.280 --> 0:00:11.680 Bloomberg Audio, Studios, podcasts, radio news. This is Bloomberg Intelligence 0:00:11.760 --> 0:00:13.800 with Scarletfoo and Paul Sweeney. 0:00:13.920 --> 0:00:16.040 How do you think the FED is looking at tariffs? 0:00:16.160 --> 0:00:17.360 The uncertainty of terriffs. 0:00:17.440 --> 0:00:19.560 Let's take a look at the sectors and how they. 0:00:19.520 --> 0:00:22.520 Performed a lot of investors getting whipsaled every day by news. 0:00:22.320 --> 0:00:26.439 Events, breaking market headlines and corporate news from across the globe. 0:00:26.480 --> 0:00:29.040 Could we see a market disruption of market events? 0:00:29.160 --> 0:00:31.200 So people just too exuberant out there? 0:00:31.280 --> 0:00:33.839 You see some so called low quality stocks driving this 0:00:33.920 --> 0:00:34.720 short term rally. 0:00:34.760 --> 0:00:39.560 Bloomberg Intelligence with Scarletfoo and Paul Sweeney on Bloomberg Radio, 0:00:39.720 --> 0:00:41.640 YouTube and Bloomberg Originals. 0:00:42.520 --> 0:00:45.200 On today's Bloomberg Intelligence Show, we tag inside the big 0:00:45.200 --> 0:00:47.800 business story is impacting Wall Street and the global markets. 0:00:47.840 --> 0:00:50.080 Each and every week we provide in depth research and 0:00:50.159 --> 0:00:52.080 data on some of the two thousand companies and one 0:00:52.159 --> 0:00:54.720 hundred and thirty industries are analysts cover worldwide. 0:00:54.800 --> 0:00:57.120 Today, we'll look at why the energy company exon Mobil 0:00:57.200 --> 0:00:59.680 is cutting three to four percent of its global workforce, 0:01:00.120 --> 0:01:00.320 us a. 0:01:00.280 --> 0:01:02.800 Look at why the AI cloud computing startup core Weave 0:01:02.960 --> 0:01:05.040 is signing a deal with tech giant Meta platforms. 0:01:05.120 --> 0:01:06.880 But first we begin with the news from the athletic 0:01:06.920 --> 0:01:08.080 footwear company Nike. 0:01:08.319 --> 0:01:10.399 This week, the company said that efforts to roll out 0:01:10.440 --> 0:01:13.360 new products, boost marketing efforts, and clear out old inventory 0:01:13.560 --> 0:01:15.480 helped ease a long time sales slump. 0:01:15.760 --> 0:01:17.760 Nick You said it's sales fell one percent on a 0:01:17.800 --> 0:01:20.720 currency neutral basis in its most recent quarter, and that 0:01:20.880 --> 0:01:23.039 was a smaller job that investors anticipated. 0:01:23.240 --> 0:01:25.760 For the analysis, we were joined by Punam Goyel, senior 0:01:25.840 --> 0:01:28.640 US e Commerce and retail analysts at Bloomberg Intelligence. 0:01:28.800 --> 0:01:31.800 We first ask Poonam if Nike's turnaround plant is working. 0:01:32.400 --> 0:01:36.679 It's working, Nike is able to pick up momentum. Sales 0:01:36.680 --> 0:01:40.920 on a reported basis were up a one percent, Inventories 0:01:40.959 --> 0:01:44.120 were down two percent. This is exactly what we wanted 0:01:44.120 --> 0:01:47.520 to see. We wanted to see inventories aligned with sales. 0:01:47.800 --> 0:01:50.520 So while the work isn't done and it's not over 0:01:50.600 --> 0:01:53.919 and it's not a straight lineup, we do see momentum building. 0:01:54.160 --> 0:01:57.320 What they're doing is working, the new products, the innovation, 0:01:57.520 --> 0:02:01.080 the focus on wholesale, it's all coming together. There are 0:02:01.160 --> 0:02:04.840 still some pitfalls. China is still sluggish and we'll need 0:02:04.880 --> 0:02:06.720 to wait and see what happens there as well as 0:02:06.800 --> 0:02:08.120 with its Converse brand. 0:02:08.880 --> 0:02:12.840 Okay, so China's definitely an issue. Converse is work in progress. 0:02:13.040 --> 0:02:15.200 When I look at the revenue line, the top line, 0:02:15.560 --> 0:02:18.040 what I see is direct revenue fell four percent, wholesale 0:02:18.040 --> 0:02:20.560 revenue rows seven percent. Just break that down for us 0:02:20.600 --> 0:02:23.560 in terms of what that means direct revenue versus wholesale revenue. 0:02:24.600 --> 0:02:28.200 Sure, so direct revenue composers of stores, which were actually 0:02:28.280 --> 0:02:30.639 up one percent. So that shows us that the innovation 0:02:30.680 --> 0:02:33.200 and the new products which are flowing through their own 0:02:33.240 --> 0:02:36.920 stores is working. What made the DTC revenue go down 0:02:36.960 --> 0:02:40.720 four percent was that digital was down twelve percent. No 0:02:40.880 --> 0:02:43.320 surprise here if this is where they're clearing all that 0:02:43.360 --> 0:02:46.480 access inventory, so this channel will be pressured for a 0:02:46.520 --> 0:02:50.240 couple of quarters. Still, wholesale up seven percent a great, 0:02:50.320 --> 0:02:52.960 great number. I mean, it just shows that coming back 0:02:53.000 --> 0:02:55.720 into partnerships with folt Locker in a more meaningful way, 0:02:55.760 --> 0:02:59.520 getting on Amazon dot Com, all these efforts are paying off, 0:02:59.600 --> 0:03:01.960 and they're where the customer is. They're gaining their shelf 0:03:02.000 --> 0:03:04.840 space back and the customers that are responding favorably. 0:03:05.120 --> 0:03:07.079 You know, the Nike brand is such a powerful brand. 0:03:07.080 --> 0:03:09.760 I think of it like Coca Cola or Apple. It's 0:03:10.000 --> 0:03:14.160 so powerful. Yet some of those American brands in China 0:03:14.280 --> 0:03:16.960 under pressure. And I'm wondering, just with the geopolitics, is 0:03:17.080 --> 0:03:20.400 Nike a brand where that might be feeling some anti 0:03:20.440 --> 0:03:22.240 American sentiment from consumers. 0:03:22.520 --> 0:03:24.680 Well, that has happened in the past, there have been 0:03:24.720 --> 0:03:28.040 boycotts against you know, US American brands. We don't think 0:03:28.120 --> 0:03:31.200 that's the issue yet from what we're hearing, but we 0:03:31.280 --> 0:03:34.800 do think that the issue is more product at Nike 0:03:35.000 --> 0:03:36.920 in China, So they do need to ramp a product 0:03:36.960 --> 0:03:39.000 and they do have a lot of access inventory there, 0:03:39.040 --> 0:03:41.200 more so than they do in the US today, So 0:03:41.280 --> 0:03:43.080 that's also a work in progress that they need to 0:03:43.120 --> 0:03:43.560 get through. 0:03:44.280 --> 0:03:45.720 Let's talk about profitability. 0:03:45.840 --> 0:03:48.880 Margins declined due to higher discounts and then also the 0:03:48.960 --> 0:03:52.040 higher tariffs in North America. I look at gross margin 0:03:52.120 --> 0:03:54.680 forty two point two percent last year. At this time 0:03:54.760 --> 0:03:57.160 it was more than forty five percent. Now the forty 0:03:57.200 --> 0:04:00.080 two point two percent was better than estimated. How How 0:04:00.120 --> 0:04:01.800 long is it going to take for Nike to turn 0:04:01.840 --> 0:04:02.400 that around. 0:04:03.040 --> 0:04:05.520 I think we have quite some time. They said that 0:04:05.600 --> 0:04:09.520 they do still aspire to reach double digit EBIT margin 0:04:09.760 --> 0:04:12.880 EBIT margins in the quarter that they just reported was 0:04:12.960 --> 0:04:16.599 only at seven point one percent, So that's a long runway. 0:04:16.640 --> 0:04:19.000 We don't think it's any time soon. And the hit 0:04:19.040 --> 0:04:22.680 from tariffs is building, not reducing. They had expected a 0:04:22.800 --> 0:04:25.200 billion dollars the last time they spoke to us, and 0:04:25.279 --> 0:04:28.600 that one to one point five billion dollars and access 0:04:29.600 --> 0:04:30.840 costs from teriffs. 0:04:31.320 --> 0:04:34.359 How much are they passing along to the retailer versus 0:04:34.400 --> 0:04:36.880 taking it in their margin, because I mean, Nike's probably 0:04:37.040 --> 0:04:39.240 just a great example of how companies are trying to 0:04:39.240 --> 0:04:40.040 deal with the tariffs. 0:04:40.279 --> 0:04:42.960 Yes, I think they're doing this actually very smartly. They're 0:04:43.000 --> 0:04:46.640 not increasing prices on products that are under one hundred dollars, 0:04:46.960 --> 0:04:50.320 but they are taking prices up on sneakers that are 0:04:50.360 --> 0:04:53.400 above that price point. So if you think about moving 0:04:53.440 --> 0:04:55.719 prices up, it's very easy to say the price of 0:04:55.760 --> 0:04:58.080 milk went up from three dollars to three point fifty. 0:04:58.279 --> 0:05:00.320 But when you're looking at a pair of sneakers actually 0:05:00.320 --> 0:05:02.800 a new launch, you have no comparison, So you can 0:05:02.839 --> 0:05:06.080 go ahead and price up your new innovation and the 0:05:06.160 --> 0:05:08.640 customer may not even recognize that there was a material 0:05:08.680 --> 0:05:11.240 price increase, and that customer has a little bit more 0:05:11.279 --> 0:05:14.200 flexibility to stretch their wallets at that price point. 0:05:14.440 --> 0:05:18.880 Pam, if you are heading up on Holdings or Adidas 0:05:19.000 --> 0:05:22.640 or Sketchers or you know, any of the Hoka, what 0:05:22.720 --> 0:05:25.000 would you be thinking looking at this set of results. 0:05:25.440 --> 0:05:28.479 So Sketchers, I think is in a different league than Nike. 0:05:28.760 --> 0:05:31.320 It's a little bit different. It's a value play, and 0:05:31.600 --> 0:05:34.560 I think they don't compete directly like an Adidas or 0:05:34.600 --> 0:05:37.159 an On or a Hoka would with them. Adidas is 0:05:37.200 --> 0:05:41.680 doing really well on its franchise lifestyle shoes, and I 0:05:41.680 --> 0:05:44.440 think Nike, what you've heard, was doing well in performance. 0:05:44.760 --> 0:05:48.320 So two still very distinct categories. Though for On and Hoka, 0:05:48.360 --> 0:05:50.040 I think it's a little bit of a different story 0:05:50.080 --> 0:05:55.080 because Running was back on It's doing phenomenally well and 0:05:55.200 --> 0:05:58.679 that is where hogaing On both took share from Nike. 0:05:59.080 --> 0:06:01.440 So I would be just, you know, a little concerned 0:06:01.520 --> 0:06:03.760 and just make sure that I keep my game on 0:06:03.880 --> 0:06:05.680 when it comes to innovation, because at the end of 0:06:05.680 --> 0:06:08.239 the day, product is what's going to drive how sales 0:06:08.279 --> 0:06:09.880 momentum will go moving forward. 0:06:10.320 --> 0:06:12.640 Our thanks to Punam goy Alva, senior US e Commerce 0:06:12.680 --> 0:06:14.800 and retail analysts at Bloomberg Intelligence. 0:06:15.080 --> 0:06:16.719 We move next to some news in the media and 0:06:16.800 --> 0:06:20.360 entertainment space. This week, we heard that Spotify CEO Daniel 0:06:20.400 --> 0:06:22.880 Eck is stepping down after two decades at the company. 0:06:23.040 --> 0:06:25.720 Spotify will leave the leadership of the music streaming company 0:06:25.760 --> 0:06:29.280 in the hands of two trusted executives, their Gustaf Soderstrom, 0:06:29.360 --> 0:06:33.440 Chief Product and Technology Officer and Alex Norstrom, chief business Officer. 0:06:33.640 --> 0:06:35.880 This move will go into effect on January first. 0:06:36.160 --> 0:06:38.000 For more, we were joined by Githa Rang and Athen, 0:06:38.240 --> 0:06:41.760 Bloomberg Intelligence analyst on US Media. Well first asked Githa 0:06:41.839 --> 0:06:44.600 to explain why CEO Daniel Ck stepping down. 0:06:44.600 --> 0:06:46.800 Now, this is, you know, one of your classic cases 0:06:46.839 --> 0:06:49.640 of the founder finally kind of establishing a really good 0:06:50.000 --> 0:06:52.480 transition plan and handing it off to his you know, 0:06:52.960 --> 0:06:57.320 to lieutenants here. So we're having a co CEO structure. 0:06:57.360 --> 0:06:59.200 And really, I mean the first when I heard this, 0:06:59.240 --> 0:07:01.599 I mean, this really kind of hearkens back to what 0:07:01.800 --> 0:07:05.159 Reed Hastings did with Netflix, you know, kind of left 0:07:05.240 --> 0:07:08.039 right at the peak, right when the companies, you know, 0:07:08.520 --> 0:07:11.120 everything was kind of you know, all cylinders were firing 0:07:11.160 --> 0:07:14.440 away and left it to Greg Peters and Ted Sorrandos 0:07:14.480 --> 0:07:17.600 to kind of take charge, and it seems like Spotify 0:07:17.760 --> 0:07:20.240 is in a very similar position. So they had a 0:07:20.240 --> 0:07:22.360 couple of things that had to get done this year, 0:07:22.360 --> 0:07:25.360 which was new contracts with all of the music labels. 0:07:25.400 --> 0:07:29.000 It looks like Daniel Eck has you know, accomplished all 0:07:29.040 --> 0:07:31.280 of that, and I think he's really kind of left 0:07:31.280 --> 0:07:33.960 the company in a good position for for its next 0:07:34.000 --> 0:07:36.720 phase of growth. And this is really, you know, a 0:07:36.800 --> 0:07:39.960 huge story in the internet space, the possibility to get 0:07:40.240 --> 0:07:43.040 to a billion users very very quickly. They already have 0:07:43.040 --> 0:07:44.400 about seven hundred million. 0:07:44.360 --> 0:07:47.160 Okay, so there are almost three quarters of the way there. 0:07:47.840 --> 0:07:50.640 He's leaving on top as George Costanza wood in Seinfeld. 0:07:50.960 --> 0:07:53.800 But my question, Keita is you talk about the new 0:07:53.840 --> 0:07:56.800 phase of growth, how much of that will rely on 0:07:56.960 --> 0:08:01.280 continued price increases. Unlike Paul, I do subscribe, and it's 0:08:01.360 --> 0:08:03.560 alarming how frequently the price changes come. 0:08:04.800 --> 0:08:07.640 Yeah, and it is going to keep coming, Scariot, There's 0:08:07.680 --> 0:08:10.320 absolutely no doubt about it. I mean, this whole story 0:08:10.480 --> 0:08:13.640 is kind of predicated on those price increases. Remember though, 0:08:13.720 --> 0:08:16.760 that they never took up prices for the first ten 0:08:16.800 --> 0:08:19.960 to twelve years, and then it started coming fast and furious. 0:08:20.040 --> 0:08:20.160 Right. 0:08:20.200 --> 0:08:22.240 We had one price increase in twenty twenty three, another 0:08:22.280 --> 0:08:24.200 in twenty twenty four, We're going to have probably another 0:08:24.240 --> 0:08:26.280 one in twenty twenty six. But if you kind of 0:08:26.320 --> 0:08:28.600 look at all of the streaming services out there, you know, 0:08:28.640 --> 0:08:31.720 Spotify is of course the leader in audio streaming. They 0:08:31.720 --> 0:08:34.000 have a thirty five percent global market share in terms 0:08:34.040 --> 0:08:36.559 of subscribers. You kind of look at their price, Let's 0:08:36.559 --> 0:08:39.760 say in the US, it's twelve dollars for an individual plan. 0:08:40.120 --> 0:08:43.640 You compare that to let's say the video leader Netflix. Again, 0:08:43.679 --> 0:08:45.640 I go back to the Netflix example, They're priced at 0:08:45.679 --> 0:08:48.720 eighteen dollars. So I think Spotify still has quite a 0:08:48.720 --> 0:08:50.679 lot of runway when you kind of compare it to 0:08:50.840 --> 0:08:52.880 the rest of the field. And the other thing that 0:08:52.880 --> 0:08:54.480 I like to point out here is when you're kind 0:08:54.480 --> 0:08:57.120 of subscribing to an audio service, it's typically only one 0:08:57.200 --> 0:08:59.600 service that you're subscribing to, as opposed to a video service. 0:09:00.000 --> 0:09:02.160 I think people really like their you know, if they 0:09:02.280 --> 0:09:04.440 like Spotify, they're absolutely going to hold on to it 0:09:04.480 --> 0:09:07.880 at any cost. And the other thing is, you know, 0:09:07.920 --> 0:09:11.679 Spotify is adding new features all the time, so they 0:09:11.720 --> 0:09:15.920 are like really getting down on you know, monetizing more 0:09:15.960 --> 0:09:19.240 and more, but it's not They are innovating also constantly, 0:09:19.280 --> 0:09:22.480 so I think I think people don't mind paying for it. 0:09:22.840 --> 0:09:25.400 What's the biggest challenge to them on the cost side 0:09:25.400 --> 0:09:26.119 of the business. 0:09:25.920 --> 0:09:30.200 KEITHA music royalty is all. I mean, that's you know, 0:09:30.320 --> 0:09:32.880 for every dollar that they make, they're paying out about 0:09:32.920 --> 0:09:37.040 seventy cents in terms of musical royalties back to the labels. 0:09:37.320 --> 0:09:40.719 So it is definitely a very you know, from that perspective, 0:09:40.760 --> 0:09:42.880 the model is hard. But one of the things that 0:09:42.920 --> 0:09:46.920 they've done very well is, you know, they've obviously renegotiated 0:09:46.960 --> 0:09:49.000 a lot of the deals kind of try to provide 0:09:49.040 --> 0:09:52.080 investors with a lot more visibility into the cost space. 0:09:52.320 --> 0:09:55.600 But more importantly for them, they're really trying to go 0:09:55.720 --> 0:09:59.480 away from you know, licensed content to more owned content, 0:09:59.559 --> 0:10:02.240 so kind of going into you know, podcasts, going to 0:10:02.360 --> 0:10:04.760 more non music content, where again they have a lot 0:10:04.800 --> 0:10:08.719 more leverage, you know, whether it's audiobooks, whether it's video podcasts, 0:10:09.080 --> 0:10:11.600 getting away from you know, just being a core music 0:10:11.640 --> 0:10:14.760 service to more of kind of an global kind of 0:10:14.800 --> 0:10:17.720 an audio service, and they're doing that really well, and 0:10:17.760 --> 0:10:20.680 that's going to help them with their margin expansion story 0:10:20.720 --> 0:10:22.840 as they get better unit economics right. 0:10:22.720 --> 0:10:25.360 And introducing premium tiers on top of that you have 0:10:25.440 --> 0:10:28.200 to unlock in order to unlock some of the more 0:10:28.520 --> 0:10:30.640 I don't know, high profile podcasts, you then have to 0:10:30.679 --> 0:10:34.080 pay extra. Keith talk a little bit about AI because 0:10:34.080 --> 0:10:37.440 I keep reading about how AI generated music is a challenge, 0:10:37.440 --> 0:10:39.959 but in what way? And could it actually become an 0:10:39.960 --> 0:10:42.319 opportunity as well for Spotify? 0:10:43.440 --> 0:10:45.560 I think so. I think it is going to become, 0:10:46.160 --> 0:10:48.200 you know, an opportunity as we go. They're already actually 0:10:48.440 --> 0:10:50.640 using you know, a lot of AI features when it 0:10:50.679 --> 0:10:54.120 comes to curation, you know, when it comes to music discovery, 0:10:54.160 --> 0:10:58.440 when it comes to providing better features, and they're already 0:10:58.440 --> 0:11:01.360 and you just brought up the super premium tier and 0:11:01.400 --> 0:11:03.240 a lot of that is actually going to be having 0:11:03.280 --> 0:11:06.920 like an AIDJ type of a feature there, you know, 0:11:07.080 --> 0:11:10.240 for both listeners as well as music creators. So I 0:11:10.240 --> 0:11:12.400 think it is definitely going to be you know, a 0:11:12.440 --> 0:11:15.200 good opportunity for them to present a much better product. 0:11:15.200 --> 0:11:18.280 I mean, we've already seen AI being used by a 0:11:18.320 --> 0:11:20.120 lot of the other platforms. Again, I go back to 0:11:20.200 --> 0:11:22.600 Netflix because they've done this really well in terms of 0:11:22.920 --> 0:11:25.679 you know, having a much better algorithm now to serve 0:11:25.760 --> 0:11:28.400 up better content. And I think that's exactly what Spotify 0:11:28.480 --> 0:11:30.240 is doing in terms of its playlists as well. 0:11:30.480 --> 0:11:33.080 Where's Apple in this audio game? 0:11:34.400 --> 0:11:37.880 So just in terms of subscribers share, Paul, I mean Spotify, 0:11:37.960 --> 0:11:40.360 as I said, leads with about thirty five percent share 0:11:40.360 --> 0:11:42.400 of the market. Apple is really far behind. They have 0:11:42.440 --> 0:11:46.400 about a ten percent share, so very very hard for 0:11:46.400 --> 0:11:48.199 them to catch up in terms of in terms of 0:11:48.200 --> 0:11:49.600 subscribers at least. 0:11:49.440 --> 0:11:52.240 Are Thanks to Getha Rong and Aathan, Bloomberg Intelligence analysts 0:11:52.320 --> 0:11:54.760 on US Media coming up a look at why the 0:11:54.840 --> 0:11:57.720 video game maker Electronic Arts has agreed to sell itself 0:11:57.760 --> 0:11:58.880 to a group of investors. 0:11:58.960 --> 0:12:01.920 You're listening to Bloomberg and Intelligence on Bloomberg Radio, providing 0:12:01.960 --> 0:12:04.120 in depth research and data on two thousand companies and 0:12:04.120 --> 0:12:05.400 one hundred and thirty industries. 0:12:05.520 --> 0:12:08.559 You can access Bloomberg Intelligence via Bigo on the terminal. 0:12:08.640 --> 0:12:09.800 I'm Scarlet Foo and. 0:12:09.679 --> 0:12:11.800 I'm Paul Sweeney. This is Bloomberg. 0:12:15.520 --> 0:12:20.040 This is Bloomberg Intelligence with Scarlet Foo and Paul Sweeney 0:12:20.360 --> 0:12:21.680 on Bloomberg Radio. 0:12:22.720 --> 0:12:24.960 We move next to the electronic gaming space. 0:12:25.480 --> 0:12:28.520 This week, the video game maker Electronic Arts or, EA 0:12:28.559 --> 0:12:31.120 agreed to sell itself to a group of investors. They 0:12:31.160 --> 0:12:34.080 include a firm managed by Jared Kushner and Saudi Arabia's 0:12:34.080 --> 0:12:35.079 Sovereign Wealth Fund. 0:12:35.280 --> 0:12:38.120 The deal values EA at about fifty five billion dollars, 0:12:38.160 --> 0:12:40.400 with the investors agreeing to pay two hundred and ten 0:12:40.440 --> 0:12:43.400 dollars per share in cash. This makes it the largest 0:12:43.480 --> 0:12:44.840 leverage buyout on record. 0:12:45.040 --> 0:12:47.840 For more, we were joined by Nathan Natu Bloomberg Intelligence 0:12:47.840 --> 0:12:49.200 Technology Research Analysts. 0:12:49.280 --> 0:12:52.440 We first asked Nathan to break down the EA's recent valuation. 0:12:53.240 --> 0:12:56.200 The valuation is at a twenty to thirty percent premium 0:12:56.280 --> 0:12:59.360 versus the last three quorder market cab before this deal 0:12:59.520 --> 0:13:03.400 was now and it seems like, you know, it is 0:13:03.720 --> 0:13:06.400 a premium deal, but actually, you know, EA has a 0:13:06.440 --> 0:13:10.400 lot going for it. It is actually launching a new 0:13:10.440 --> 0:13:13.960 batterfield game, and there's a strong prospect for this game. 0:13:14.040 --> 0:13:16.920 And actually the game is now in prely release, and 0:13:16.960 --> 0:13:20.480 even then, he has already smashed all prior records set 0:13:20.520 --> 0:13:23.160 by the biggest game in that genre, and that genre 0:13:23.240 --> 0:13:26.160 is first person should and that game that's dominated that 0:13:26.240 --> 0:13:30.160 genre is called Duty from Microsoft. So Betterview six is 0:13:30.440 --> 0:13:33.240 looking to be a successful launch. And next year we 0:13:33.280 --> 0:13:36.160 have FIFA and obviously we know that EA has the 0:13:36.200 --> 0:13:39.240 biggest soccer game in the industry, and that's FIFA. What 0:13:39.280 --> 0:13:41.559 was called FIFA but now it's called EA Sports FC. 0:13:42.080 --> 0:13:44.400 And next year FIFA World Cup will be a special 0:13:44.400 --> 0:13:48.000 one because it will be hosted across three cities, including 0:13:48.040 --> 0:13:51.560 the US, and if people don't know, US is actually 0:13:51.600 --> 0:13:54.120 the biggest market in terms of revenue for all kinds 0:13:54.120 --> 0:13:56.480 of sports games. So that's the second thing going for 0:13:56.520 --> 0:13:59.480 EA that I think it's going to lead to at 0:13:59.559 --> 0:14:04.240 least two round circumstensus beat on EPs share. So I 0:14:04.240 --> 0:14:07.440 think for e A, this is a this is actually 0:14:07.440 --> 0:14:09.840 a good deal, and we can talk about the common 0:14:09.880 --> 0:14:13.400 struggles faced by you know, game publishers and how these 0:14:13.440 --> 0:14:15.760 deals would make sense for e A as well as 0:14:15.840 --> 0:14:18.520 the the investors in this context. 0:14:18.760 --> 0:14:20.760 So yeah, let's do that because you mentioned a bunch 0:14:20.880 --> 0:14:24.400 of the titles and these are you know, very valuable franchises. 0:14:24.400 --> 0:14:26.920 These this is a top quality ip, whether it's E 0:14:27.040 --> 0:14:31.360 Sports FC, madd in NFL, the SIMS battlefield. What does 0:14:31.560 --> 0:14:35.920 ownership by private equity, by private investors allow e A 0:14:36.080 --> 0:14:39.200 to do that it can't do as a publicly traded company. 0:14:39.360 --> 0:14:42.880 I think it's all down to funds. So publishers. Game 0:14:42.880 --> 0:14:46.200 publishers in general have been have been facing two struggles. 0:14:46.360 --> 0:14:49.800 First one is gamers attention spend and playtime are increasingly 0:14:49.800 --> 0:14:54.000 getting limited. The reason is people are sticking to brands 0:14:54.200 --> 0:14:56.800 or franchises that they have played for a long time. 0:14:57.080 --> 0:14:59.640 And in fact, new Zoo published data saying that a 0:15:00.000 --> 0:15:03.280 percent of playtime tend to go back to the sixty 0:15:03.400 --> 0:15:06.920 or so titles, leaving only eight percent of playtime for 0:15:07.080 --> 0:15:09.840 brand new IP. And this is actually in favor of 0:15:09.880 --> 0:15:13.400 EA because we mentioned those valuable IP. In fact, if 0:15:13.440 --> 0:15:17.680 we look at global unit sales, EA has topped twenty 0:15:18.360 --> 0:15:22.640 has four of those top twenty selling IP globally, he 0:15:22.680 --> 0:15:25.400 has four out of the twenty. So that is actually 0:15:25.640 --> 0:15:29.760 a pretty enticing deal thing for companies like private equity 0:15:29.800 --> 0:15:32.760 because you know, profit generation is key, and what this 0:15:33.000 --> 0:15:36.480 means that is that EA has franchises that can bring 0:15:36.480 --> 0:15:39.760 in recurring revenue. We talked about EA Sports FC, we 0:15:39.800 --> 0:15:42.720 talk about MED and MFL and they actually revived a 0:15:42.760 --> 0:15:45.880 new franchise, College Football, and you know, it was one 0:15:45.920 --> 0:15:48.320 of the best selling titles in the US last year. 0:15:48.720 --> 0:15:51.800 So recurring revenue is key here. And the second struggle 0:15:51.800 --> 0:15:54.080 that I was going to go into is development cost 0:15:54.560 --> 0:15:57.520 is really high, especially in the US, So that means 0:15:57.520 --> 0:16:00.960 that we publishers actually have a cost is advantage when 0:16:01.000 --> 0:16:04.800 compared to Eastern developers. For example, you know, salaries for 0:16:04.880 --> 0:16:09.080 game engineers in China is more than half the level 0:16:09.120 --> 0:16:13.240 in California, and personnel cost game engineers is a huge 0:16:13.280 --> 0:16:16.840 part of developing a game. So you know, tens and 0:16:16.880 --> 0:16:19.720 actually launched a new game in the same genre as 0:16:19.720 --> 0:16:23.160 Better Few six and that's Deltalk Force is doing really well. 0:16:23.400 --> 0:16:27.840 And what that costs disadvantage is stopping EA from is 0:16:27.960 --> 0:16:32.160 continuously to push out a stronghalence of content to essentially 0:16:32.200 --> 0:16:35.680 extending the shelf life of any game, and Eastern developers 0:16:35.720 --> 0:16:38.240 can do that better because of that cost edge. 0:16:38.600 --> 0:16:41.920 Our thanks to Nathan Native, Bloomberg Intelligence technology research analyst. 0:16:42.360 --> 0:16:44.480 We move next to some news in the energy industry. 0:16:44.920 --> 0:16:47.520 This week, the energy company Exon Mobile said it plans 0:16:47.520 --> 0:16:50.080 to cut about two thousand jobs globally as part of 0:16:50.080 --> 0:16:51.560 its long term restructuring plan. 0:16:51.920 --> 0:16:54.600 The reductions represent about three to four percent of Xcellon's 0:16:54.600 --> 0:16:57.680 global workforce and are part of the company's ongoing efficiency drive. 0:16:58.040 --> 0:17:01.280 For the analysis, we're joined by Vincent Pas, Bloomberg Intelligence, 0:17:01.320 --> 0:17:03.520 senior equity research analyst of oil and gas. 0:17:03.960 --> 0:17:06.800 First ask Vincent for his take on this Exon news. 0:17:07.080 --> 0:17:10.640 Well, I think it's part of managing through the cycle. 0:17:10.760 --> 0:17:14.920 Right in prior cycles, the sector was exposed to more 0:17:14.960 --> 0:17:20.960 extreme volatility, higher highs, lower lows. The industry is trying 0:17:21.000 --> 0:17:25.560 to manage through what seems to be a rather clouded 0:17:26.560 --> 0:17:30.600 backdrop right now. So we're sitting here and you got 0:17:31.040 --> 0:17:33.720 NAT gas somewhere around three point thirty Henry Hubb. You 0:17:33.800 --> 0:17:37.800 got WTI in the low sixties. You have OPEC bringing 0:17:37.840 --> 0:17:43.200 back on capacity and maybe even speeding up that capacity. 0:17:43.240 --> 0:17:43.560 Ads. 0:17:43.960 --> 0:17:49.200 You have a more clouded, broader economic backdrop across the globe. 0:17:49.240 --> 0:17:53.639 You have geopolitical issues, so lots of uncertainty, and not 0:17:53.680 --> 0:17:56.840 only Exon. Exon's probably going to cut somewhere about two 0:17:57.040 --> 0:18:01.080 three four percent of its global workforce, its affiliate a 0:18:01.160 --> 0:18:05.320 much more substantial cut, roughly about twenty percent over the 0:18:05.359 --> 0:18:09.160 next two years or so. You're seeing it at Conico Phillips, 0:18:09.160 --> 0:18:13.679 You're seeing it at Chevron, even BP, the major European 0:18:14.560 --> 0:18:17.920 energy conglomerate. You're seeing it across the board. And so Paul, 0:18:18.480 --> 0:18:20.720 as you know, when you're not growing revenue, right, you're 0:18:20.720 --> 0:18:23.719 not getting the revenue increase on price, you're not growing 0:18:23.920 --> 0:18:26.960 production because your investor base does not want to see 0:18:26.960 --> 0:18:31.200 that production growth. You are looking at very steady revenue, 0:18:31.200 --> 0:18:34.320 maybe even declining revenue. You have to manage that netback 0:18:34.359 --> 0:18:37.439 from the cost perspective, and you have to support that 0:18:37.560 --> 0:18:40.400 cash flow stream. And so you're doing it via these 0:18:40.440 --> 0:18:43.640 cost cuts over a number of years too, maybe even 0:18:43.720 --> 0:18:47.119 three years, to sort of bring that cost structure in 0:18:47.280 --> 0:18:50.360 line with a new reality of uncertainty in the marketplace, 0:18:50.640 --> 0:18:52.120 to reduce that volatility. 0:18:52.160 --> 0:18:54.840 Well, there's cost cuts, and then there's exon mobiles cost cuts. 0:18:54.880 --> 0:18:58.520 Since twenty nineteen, it's trimmed thirteen and a half billion 0:18:58.560 --> 0:19:00.679 dollars in annual cost That is more than all the 0:19:00.720 --> 0:19:04.040 other big oil companies combined. How much more room is 0:19:04.080 --> 0:19:06.440 there for Exxon to slash expenses. 0:19:07.200 --> 0:19:14.200 Well, it bought Pioneer, so it has a relatively sizable workforce. 0:19:14.320 --> 0:19:16.639 In general, it doesn't necessarily mean that those cuts are 0:19:16.680 --> 0:19:19.600 going to come there, but there are ways you cut 0:19:20.320 --> 0:19:24.080 you gain efficiency. In this technological era where we have 0:19:24.320 --> 0:19:30.600 advancements across the energy value chain. You will consistently and 0:19:30.680 --> 0:19:36.040 continually seek out ways to get efficiency, to bring down 0:19:36.119 --> 0:19:39.560 that cost structure and to bring unit costs in line 0:19:40.400 --> 0:19:45.520 with a very anemic outlook for global energy prices in general, 0:19:45.600 --> 0:19:50.200 and also a very clouded outlook for the global economy too. 0:19:50.920 --> 0:19:53.159 So Vince kind of looking out, you know, one in 0:19:53.240 --> 0:19:55.199 two years, what is the view of the companies you 0:19:55.240 --> 0:19:58.000 talk to about energy prices, oil and gas? Is it 0:19:58.080 --> 0:19:59.560 still going to be a challenge market here? 0:20:00.400 --> 0:20:02.240 It looks like it. It looks like it's going to 0:20:02.240 --> 0:20:05.240 be a very challenge market, especially for the WTI side, 0:20:05.240 --> 0:20:08.359 for the oil side of the equation. On natural gas, Paul, 0:20:08.400 --> 0:20:10.840 I know you and I have talked about this numerous times. 0:20:10.880 --> 0:20:15.120 You have a structural growth trajectory for natural gas here 0:20:15.160 --> 0:20:19.720