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Speaker 1: Bloomberg Intelligence with Scarlettfoo and Paul Sweeney on Bloomberg Radio,
Speaker 1: YouTube and Bloomberg Originals.
Speaker 2: On today's Bloomberg Intelligence Show, we dig inside the big
Speaker 2: business stories impacting Wall Street and the global markets.
Speaker 4: Each and every week, we provide in depth research and
Speaker 4: data on some of the two thousand companies and one
Speaker 4: hundred and thirty industries our analysts cover worldwide.
Speaker 2: Today, we'll explain how the global business of sports is
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Speaker 4: Plus a look at the yearly Bloomberg BusinessWeek's ranking of
Speaker 4: the best business schools in the country.
Speaker 2: But first, this week, President Trump pushed for a six
Speaker 2: month reporting schedule for publicly traded US companies. This would
Speaker 2: in the current quarterly format to quote, save money and
Speaker 2: allow managers to focus on properly running their companies for more.
Speaker 4: Scarlet Foo and guest host Isabell Lee were joined by
Speaker 4: Michael Casper, Bloomberg Intelligence US equity strategists. They first asked
Speaker 4: Michael to break down what this would mean for earning season.
Speaker 5: Certainly has been an idea that's been floated for quite
Speaker 5: some time among ESG circles, even if you go back
Speaker 5: to the twenty sixteen election, I believe Hillary was floating
Speaker 5: this idea. But it does have some validity in terms
Speaker 5: of aligning you know, shareholder ideas with long term performance
Speaker 5: and management incentives. Right, if management doesn't have to beat
Speaker 5: a quarterly number every quarter, they can more easily focus
Speaker 5: on the longer term, and that certainly has its merits.
Speaker 5: But again, I don't think chan is the best analog
Speaker 5: to make right.
Speaker 6: There, talk to us about the risks that semi annual
Speaker 6: reporting could post, because why haven't we done it? Obviously,
Speaker 6: I'm sure that our regulators and policymakers have way into
Speaker 6: pros and cons.
Speaker 5: Yeah, so it's a it's less flow of information, right,
Speaker 5: So you think about the quarterly reporting schedule, you're getting
Speaker 5: information every three months. As an investor, you can process
Speaker 5: that information more accurately priced things in the market, And
Speaker 5: with a six month time frame, you lose a little
Speaker 5: bit of that, right, And obviously I think consensus estimates
Speaker 5: will be a little bit less let's say, accurate, because
Speaker 5: they have to forecast a six month time period instead
Speaker 5: of a three month time period. So that there are
Speaker 5: some bumps in the road with adopting this, But again,
Speaker 5: if it can align shareholder value with management centis, maybe
Speaker 5: you do get a benefit out of it.
Speaker 3: Would CEOs necessarily like this, I mean, I'm sure everyone
Speaker 3: wants to save time and save money that that was
Speaker 3: something that the President cited as a benefit of moving
Speaker 3: to six months reporting as opposed to three months, But
Speaker 3: in general, is this something that CEOs would favor.
Speaker 5: I don't know if they would favor it. I think
Speaker 5: they'd be pretty indifferent to it. It's still the same
Speaker 5: scheme of you know, you've got a number every six months,
Speaker 5: you've got to beat that number. It's just more aligning
Speaker 5: that goal with with shareholder value, right, So I don't
Speaker 5: know necessarily if they favor one over the other. They
Speaker 5: might think their life is a little bit easier trying
Speaker 5: to beat on a six month time frame than a
Speaker 5: three month timeframe. But I don't know if it really
Speaker 5: affects cost too much. As the President pointed.
Speaker 6: Out, do you think that under the current SEC regime
Speaker 6: that this would actually be approved because to Scarlett's point earlier,
Speaker 6: and we all know this wasn't the first time this
Speaker 6: was floated, But yeah, maybe it will be approved.
Speaker 5: Maybe, I don't know. There's again, it's been a really
Speaker 5: long push of this and back and forth. Should we
Speaker 5: do six months? Should we do annually? Evens there's some
Speaker 5: countries out there that do annual, and it really hasn't
Speaker 5: gained a lot of traction. I think investors in the
Speaker 5: US are really set on the quarterly reporting schedule. They
Speaker 5: really look for those quarterly numbers to drive their analysis,
Speaker 5: and so it's going to meet a lot of resistance
Speaker 5: amongst the investor.
Speaker 3: Community, I think, yeah, especially as more retail investors are
Speaker 3: now investing in the market too. They want to hear
Speaker 3: from the companies directly, and a lot of those companies
Speaker 3: are tailoring their commentary to this new investor class as well.
Speaker 3: Not so much institutional investors, but the individual investors out there.
Speaker 5: Yeah, certainly you've got this huge flow of zero day
Speaker 5: trading options and everybody trading around earnings events, especially in
Speaker 5: the retail space. That's huge. So maybe amongst the constituency,
Speaker 5: obviously they don't have as much of a lobbying voice
Speaker 5: as you know, your big institutional investors, but amongst his constituency,
Speaker 5: maybe there's a little bit of resistance there as well
Speaker 5: from the retail community.
Speaker 6: Would there be a sector or industry that would benefit
Speaker 6: from a semi annual report, good question.
Speaker 5: Oh yeah, I don't know necessarily, if I could pick
Speaker 5: a sector that would benefit the most. I think tech
Speaker 5: obviously has gained the most from the quarterly reporting schedule.
Speaker 7: Right.
Speaker 5: They've done a really good job of managing their earnings
Speaker 5: and consistently beating and you know, we've seen it time
Speaker 5: and time again. IBM was the bastion of this back
Speaker 5: in the nineties and early two thousands financial engineering to
Speaker 5: beat the quarterly number. It's since, I would argue it's
Speaker 5: been Apple and Microsoft have been very good at it.
Speaker 5: So I think Tech's been the biggest beneficiary, So maybe
Speaker 5: the biggest.
Speaker 2: Our Thanks to Michael Casper Bloomberg Intelligence US equity strategist and.
Speaker 4: Speaking of earnings, Paul, we got results from Cracker Barrel
Speaker 4: this week.
Speaker 2: The company offered sales guidance that missed expectation, showing the
Speaker 2: brand is still dealing with a fallout from its controversial
Speaker 2: and short lived logo change.
Speaker 4: For details, we caught up with BI restaurant analyst Michael Halen.
Speaker 8: They were recorded a great quarter. You know, Same Star
Speaker 8: sales were up five point four percent in the restaurants,
Speaker 8: a couple hundred basis points ahead of the street. But
Speaker 8: sales have decelerated pretty significantly here, you know, since August
Speaker 8: in the logo controversy. So you know, thought Julie Messino
Speaker 8: did a great job. I think she's running a steady
Speaker 8: ship right now. And you know, they're focusing on the
Speaker 8: things that they've been focused on from the beginning, which
Speaker 8: is providing better service and higher quality food at a
Speaker 8: good price point. I would say it seems like they
Speaker 8: may have sandbag guidance as well. They basically are extrapolating
Speaker 8: current track grafic trends throughout the rest of the quarter.
Speaker 8: You know, when second measure data that that Bloomberg owns
Speaker 8: that that we follow is showing that traffic may be
Speaker 8: stabilizing here. So I guess, I guess we'll see.
Speaker 2: All right, let's move on to what's going on with
Speaker 2: our friends that darted.
Speaker 8: Yeah, you know Darden. It was an interesting quarter. Sales
Speaker 8: were fantastic, but slightly below you know, very high expectations,
Speaker 8: and the most interesting part of their report was that
Speaker 8: their margins contracted, largely due to beef costs and Uber
Speaker 8: fees because they did this one million free delivery promotions
Speaker 8: supported by you know, Uber eats marketing dollars, right, and
Speaker 8: so it actually made up five percent of sales, and
Speaker 8: that's very impressive for something that's been instituted, you.
Speaker 9: Know, within a year.
Speaker 8: So, yeah, the margins, you know this, this company has
Speaker 8: best in class margins. They've always protected their margins and
Speaker 8: so seeing a same store sales gain that, you know,
Speaker 8: a very strong same star sales gain without the margin expansion,
Speaker 8: I think shocked some investors.
Speaker 4: So what are they planning to do to widen those margins?
Speaker 4: I heard the portions might not be as big? Are
Speaker 4: they looking at possibly raising prices on the menu.
Speaker 8: Well, they're going to raise prices, but not too aggressively.
Speaker 8: So they're very careful about increasing their prices. A big
Speaker 8: reason why we think they're outperforming is that they've increased
Speaker 8: their prices a lot less than competitors since the pandemic, right,
Speaker 8: and so they don't want to lose that advantage. So
Speaker 8: they are going to raise prices this year, but it's
Speaker 8: going to be modest and less than peers. You know,
Speaker 8: you mentioned the smaller entrees. That's really a move to
Speaker 8: boost traffic. So what they're doing is they're taking seven
Speaker 8: of their popular entrees. They're making an additional, lighter menu
Speaker 8: with those seven items. They're shrinking the portion and they're
Speaker 8: lowering the price, and they're hoping that actually brings in
Speaker 8: greater traffic with low income consumers. So shrinking the size
Speaker 8: of the entrees isn't isn't a major plan in terms
Speaker 8: of saving the margins. With the margins, it's going to
Speaker 8: be you know, executing rights. That's what they're known for,
Speaker 8: you know, consistently becoming more productive in their restaurants. That's
Speaker 8: how they're going to try to fund this. You know,
Speaker 8: there will be some slight price increases, and they mentioned
Speaker 8: they could be a little bit more aggressive. If you know,
Speaker 8: the higher beef prices remain stubborn.
Speaker 2: Thanks to bi's Michael Halen.
Speaker 4: We also got earnings from General Mills this week.
Speaker 2: The maker of curios reported a solid quarter but was
Speaker 2: cautious about the road ahead.
Speaker 4: We spoke with b I Consumer Stables analyst Diana rosso Penya.
Speaker 10: They were mainly in line with expectations. It wasn't that
Speaker 10: much of a surprise, but still, you know, the stock
Speaker 10: is a little bit on the south side. People expected
Speaker 10: better news than what they disclosed.
Speaker 4: Yeah, I mean North America sales came under pressure. What
Speaker 4: was the drag there?
Speaker 10: It was mainly on volume. We expected volume declines but
Speaker 10: not to the magnitude that they did. It was down
Speaker 10: four percent on organic on the organic part, so obviously
Speaker 10: consumers are still trading down. They are mentioning that, you know,
Speaker 10: about eight brands of theirs. It was positive, but it's
Speaker 10: still it wasn't enough for the whole segment two to
Speaker 10: pull through.
Speaker 2: What are they doing or what are they saying about
Speaker 2: tariffs and the impact on their costs versus maybe what
Speaker 2: they're trying to pass along to customers.
Speaker 10: So they are upsetting some of the costs with cost savings.
Speaker 10: It's usually going to be They expected to be about
Speaker 10: one to two percent of cogs this year, which is
Speaker 10: a little bit lower than for example, Campbell's expected they
Speaker 10: expected around four percent.
Speaker 4: So you know, they're not there.
Speaker 10: They do not want to raise prices. They want to
Speaker 10: be competitive because obviously volume growth is not happening.
Speaker 4: So yeah, I mean, they're getting competition from more folks.
Speaker 4: I mean, on the one hand, they're benefiting from the
Speaker 4: fact that more people are eating at home, right, but
Speaker 4: yet when we're going to the supermarket, more people are
Speaker 4: choosing those private label brands. What's their sort of you know,
Speaker 4: plan of attack there.
Speaker 10: Yeah, so they're increase in marketing, They're they're hoping for innovation.
Speaker 7: Uh.
Speaker 10: They mentioned that twenty five percent of sales growth will
Speaker 10: come in North America retail will probably come from innovation
Speaker 10: this year. And this is what all everybody's trying to
Speaker 10: get to the problem is. And that was mentioned on
Speaker 10: the call as well, was that even the price increases
Speaker 10: are not as significant as it used to be, they're
Speaker 10: still high.
Speaker 4: So on a basket size.
Speaker 10: You're still paying a lot more than the used to
Speaker 10: two years ago.
Speaker 2: Talk to us about store brands versus kind of the
Speaker 2: the brands. We all grew up with. Here, tell us
Speaker 2: how that's changed over time. Our store brands are becoming
Speaker 2: a bigger, bigger part of the average cart.
Speaker 10: Yes, well, retailers are investing more on their private label.
Speaker 10: It allows them to bring people into the store. Some
Speaker 10: of the brands are have a cult following. I will say, hello,
Speaker 10: Costco so exactly, so people are going to the store
Speaker 10: to buy that particular brand. They're more profitable than national brands,
Speaker 10: So obviously they're still incentive for retailers to deploy some
Speaker 10: of that some of their own I think.
Speaker 4: Some people take it cheek to buy private label, right, Well,
Speaker 4: we're at like a badge of honor.
Speaker 2: Certainly. I was shocked at the price differential.
Speaker 4: Yeah, because they have that pricing power right These stores
Speaker 4: to you know, make their products a lot more attractive.
Speaker 4: Really quick Blue Buffalo, it's their pet food. I was
Speaker 4: surprised to see that that that was not a leader
Speaker 4: for them.
Speaker 10: Yeah, so Wilderness was not is not doing as well
Speaker 10: as they are hoping. Dog food in general has been
Speaker 10: a headwind, not only for them but also for the
Speaker 10: overall industry. Cat food seems to be the leading indicator here,
Speaker 10: which is surprising, but.
Speaker 4: Cat food is outpacing dog food.
Speaker 10: Yes, correct, We have seen this for the past year.
Speaker 10: There seems to be a growth in the cat population
Speaker 10: more than the dog population.
Speaker 2: Thanks to Diana coming out.
Speaker 4: We look at Elon's purchase of one billion dollars worth
Speaker 4: of Tesla shares.
Speaker 2: Listening to Bloomberg Intelligence on Bloomberg Radio, providing in depth
Speaker 2: research and data on two thousand companies and one hundred
Speaker 2: and thirty industries.
Speaker 4: You can access Bloomberg Intelligence via bi go on the terminal.
Speaker 4: I'm Alexis Christophers and now Paul Sweeney.
Speaker 9: This is Bloomberg.
Speaker 1: This is Bloomberg Intelligence with Scarlett Foo and Paul Sweeney
Speaker 1: on Bloomberg Radio.
Speaker 2: I'm Paul Sweeney. Join this week by Alexis Christophers. We
Speaker 2: moved to news from the ev giant Tesla. This week
Speaker 2: Elon Musk purchased about one billion dollars worth of Tesla shares.
Speaker 4: And this comes after the billionaire was awarded one of
Speaker 4: the biggest pay packages in corporate history. For details, host
Speaker 4: Scarlett Foo and guest host Isabelle Lee were joined by
Speaker 4: Bloomberg Global Autos editor Craig Trudell.
Speaker 11: There was an all out push with Robin Denholm the
Speaker 11: chair of the company, speaking with us at Bloomberg Television,
Speaker 11: speaking with you know, the New York Times, the Wall
Speaker 11: Street Journal, all sorts of major news organizations about the
Speaker 11: merits of this pay package that the board is proposing.
Speaker 11: There's going to be a big shareholder vote in November
Speaker 11: on handing you know, Musk, this this potentially up to
Speaker 11: one trillion dollars worth of stock. There's a lot of
Speaker 11: caveats all that that Musk would have to sort of
Speaker 11: you know, pull a rabbit out of the hat again
Speaker 11: after you know, doing so after a twenty eighteen pay
Speaker 11: package where the board laid out out all these really
Speaker 11: ambitious you know, market value and performance milestones. Musk, you know,
Speaker 11: at that time it was kind of perceived as this
Speaker 11: moonshot pay package. He proceeded to knock them all out,
Speaker 11: and they're now calling this next pay package a mark
Speaker 11: shot pay package. So, you know, I think there's this
Speaker 11: This is all sort of part of a piece, right
Speaker 11: of trying to get investors to sort of, you know,
Speaker 11: focus on you know, far out there targets objectives from
Speaker 11: Musks that would make shareholders a whole lot of money.
Speaker 11: And it comes amid you know, real signs of stress
Speaker 11: for the core here and now business for Tesla, where
Speaker 11: their sales have just really struggled this year and there
Speaker 11: haven't really been signs of of sort of meaningful change
Speaker 11: in that trend even into this quarter.
Speaker 3: Right, So this will properly motivate him. I'm so glad
Speaker 3: you brought up the twenty eighteen pay package and some
Speaker 3: of the moonshot milestones that laid out for Elon Musk.
Speaker 3: What was the most I don't want to use the
Speaker 3: word outrageous, but the most ambitious of those milestones, And
Speaker 3: did he s each and every one of them?
Speaker 11: Yeah, I mean in terms of the milestones there, I
Speaker 11: mean just even the market cap figures. I think you know,
Speaker 11: when when they were laid out, you know, it was
Speaker 11: it was just sort of unfathomable that, you know, a
Speaker 11: car company could be, you know, a trillion dollar company,
Speaker 11: and you know, give give the guy credit. He went
Speaker 11: out there and made it happen. You know. I think
Speaker 11: Tesla now is trying to sort of, you know, incentivize
Speaker 11: him to turn Tesla into a company that is many
Speaker 11: multiples of even the VIDIA, the most valuable company in
Speaker 11: the world in the here and now, and yet you know,
Speaker 11: the sort of path to getting there is really uncertain
Speaker 11: because you know, you've heard Musk make these pitches about
Speaker 11: robotaxis and about humanoid robots. But you know, he is
Speaker 11: a long way from accomplishing some of these new objectives
Speaker 11: that the board has set for him.
Speaker 6: This must buying shares personally, is governance concerns or could
Speaker 6: it even actually reinforce skepticism about how closely Tesla's board
Speaker 6: is aligned with his self interest.
Speaker 11: Generally, whenever a CEO or an insider of a company
Speaker 11: is buying shares, that's taken as a good thing and
Speaker 11: not necessarily you know, something to look at skins at
Speaker 11: from a corporate governance perspective. It does, however, I think
Speaker 11: it's worth sort of you know, thinking about this billion
Speaker 11: dollar purchase and context. This is a guy who's you know,
Speaker 11: sort of you know, a billion dollars can be found
Speaker 11: in his couch cushions, right he is is the top
Speaker 11: person on the Bloomberg Billionaire's Index. He's worth about you know,
Speaker 11: four hundred and twenty billion dollars at the moment, and
Speaker 11: so you know just how meaningful this is. With any
Speaker 11: other CEO, you would look at a billion dollar Stoft
Speaker 11: purchase and maybe take you know, take real note of
Speaker 11: that with Musk, Is it that huge a show of confidence?
Speaker 11: Maybe not in the context of, you know, just how
Speaker 11: much wealth he has.
Speaker 2: Our thanks to Craig Drudell, Bloomberg Global Autos Editor.
Speaker 4: Keeping with Tesla, we're going to move now to door safety.
Speaker 2: This week, US auto safety regulators open an investigation into
Speaker 2: whether Tesla door handles are defective.
Speaker 4: And this comes after a Bloomberg exclusive saying NHTSA received
Speaker 4: complaints that Tesla's design features like the door handles are
Speaker 4: confusing occupants and first responders.
Speaker 2: For more, Scarlett Fille and Stacey Vandock Smith were joined
Speaker 2: by Steve Man Bloomberg Intelligence, Global Autos and Industrials Research Channels.
Speaker 12: Well, it is a very serious situations, serious safety situation. Now,
Speaker 12: first of all, there is a manual release from the
Speaker 12: interior of the vehicle. But the safety issue is that
Speaker 12: you can't manually override the electronics and open the door
Speaker 12: from the outside. Now, this is an issue that's I'm
Speaker 12: plaguing the whole industry. It's not just Tesla, okay, and
Speaker 12: you know there's there's a number of automakers have solved
Speaker 12: the issue, and I think Tesla does need to solve
Speaker 12: this issue because you know, you know, people have died
Speaker 12: because of this problem. Here, I think from the investor's perspective,
Speaker 12: there is a solution. There is a number of vehicles.
Speaker 12: For example, the Aldi they have actually solved that issue,
Speaker 12: and they they solved it by you know, having a
Speaker 12: double pull on the latch to actually open the vehicle manually.
Speaker 12: So I think from an investor perspective, it is an issue.
Speaker 12: It needs to be solved, and it's solvable. As you know,
Speaker 12: the trillion dollar pay package and uh and the reieration
Speaker 12: of the company moving towards AI is really getting the
Speaker 12: investor very excited. The robo taxi is rolling out, apparently
Speaker 12: the extended the model Y is selling really well in China.
Speaker 12: So and then in Europe, where we saw a lot
Speaker 12: of decline in ev sales seems to be ticking up.
Speaker 3: But the pay package rewards Elon Musk for thinking really big,
Speaker 3: not dealing with how to unlock car doors. In the
Speaker 3: event of some kind of problem, you say that Audi
Speaker 3: has solved this, Are Tesla engineers going to take their
Speaker 3: queue from Audi?
Speaker 12: Possibly? Really? Yeah, I mean it's it's it's important. It's
Speaker 12: important that they solve this because Tesla, when they roll
Speaker 12: out the robo taxi, safety is an important issue for them,
Speaker 12: and it's an important issue not just for Tesla, I
Speaker 12: think for the whole industry, and it's a reputation that
Speaker 12: they're trying to build, especially you know they're they try
Speaker 12: to roll out robo taxi and you know, they want
Speaker 12: to project themselves as a safe automaker. So I think
Speaker 12: it's going to be a priority list for for Elon
Speaker 12: Musk and the rest of the organization there.
Speaker 13: It does also seem that that people are feeling quite
Speaker 13: optimistic about this stock, but also there's there does seem
Speaker 13: to be a liability issue in addition to a need
Speaker 13: to solve this problem issue. Is that at all concern?
Speaker 7: Yeah, it is.
Speaker 12: It is a liability and I wouldn't be surprised that,
Speaker 12: you know, there's going to be other legal issue that
Speaker 12: that come up. I think from an investor perspective, this
Speaker 12: is normal. Business recalls are normal and there are other
Speaker 12: safety issues that has been recall not just at Tesla,
Speaker 12: but and other automakers. So I think the investor are
Speaker 12: taking this. I don't want to say lightly, but it's
Speaker 12: normal business that we're going to get over this.
Speaker 3: It's a work in progress. Yes, are there other safety
Speaker 3: issues in particular that Tesla needs to focus on pay
Speaker 3: attention to that could, if left unresolved, could become legal
Speaker 3: liability issues.
Speaker 12: Robotaxi there's still a safety driver sitting on a passenger
Speaker 12: seat pretty much on every Robotaxi. I think there is
Speaker 12: discussions of taking the safety driver out at the end
Speaker 12: of the year, but I think they need to tread
Speaker 12: very very carefully, especially for Tesla. It's a high profile company.
Speaker 12: Anything negative is going to damage the reputation, and so
Speaker 12: if they don't take up the safety driver at the
Speaker 12: end of year, I wouldn't be surprised. I think they
Speaker 12: do need to take it one step at a time
Speaker 12: and make sure everything goes well before they do a
Speaker 12: full launch without the safety driver.
Speaker 2: Our thanks to Steve Mann Bloomberg Intelligence, the global autos
Speaker 2: and industrials research analysts, and.
Speaker 4: Each week we look at research from Bloomberg n EF
Speaker 4: previously known as New Energy Finance.
Speaker 2: They're the team at Bloomberg that tracks and analyzes the
Speaker 2: energy transition from commodities to power, transport, industries, buildings, and
Speaker 2: agricultural sectors. This week, look that data center Demand and
Speaker 2: R Plus north America's biggest renewable energy conference.
Speaker 4: For more, host Scarlett Food and guest hosts Isabelle Lee
Speaker 4: were joined by Derek flackl BNEF, lead US policy analyst.
Speaker 14: Ri E Plus and Real Energy Plus is one of
Speaker 14: the biggest conferences in North America. You see battery manufacturers,
Speaker 14: transform manufacturers, energy storage manufacturers from all over the world
Speaker 14: hawking their wares, and basically what everybody is trying to
Speaker 14: do is rush to build, rush to safe harbor in
Speaker 14: order to get legal compliance, to get tax credits in
Speaker 14: the US government before rules change at the end of
Speaker 14: the year. Now, as a reminder, those who are following
Speaker 14: the Trump administration will recall the one big Beautiful bill,
Speaker 14: a big budget act passed to the middle of the
Speaker 14: year that has substantial changes for the way that you
Speaker 14: can claim tax credits. If you're a window solar project,
Speaker 14: you have to get under construction by a certain deadline
Speaker 14: or you face an even harder cut off or when
Speaker 14: your project can enter service, and at the beginning of
Speaker 14: next year, suddenly you've gotten new foreign entity of concern
Speaker 14: rules that could make you in eligible for tax credits
Speaker 14: based on your exposure to mostly Chinese firms, whether through
Speaker 14: corporate ownership, through supply chains, or through intellectual property and
Speaker 14: other agreements. You're seeing firms restructure themselves in order to
Speaker 14: avoid getting hit by those rules. You're seeing developers build
Speaker 14: up massive stocks of solar and energy storage in order
Speaker 14: to try and have equipment that allows them to claim
Speaker 14: those credits before the rules come into effect. And you
Speaker 14: also have massive growth in US battery factories and new
Speaker 14: players entering the market to try and ser more domestic demand.
Speaker 14: So you see this combination of a rush with the
Speaker 14: possibility of a cliff afterwards. And I think everybody is
Speaker 14: waiting for new rules to come out to provide some
Speaker 14: clarity on exactly how much of the market can survive
Speaker 14: the shift.
Speaker 3: How anxious were the companies and the executives at this
Speaker 3: event because, as you mentioned, they are moving quickly because
Speaker 3: the rules could change on them. The goalposts could change
Speaker 3: at any point. What is the one certainty that they
Speaker 3: have in operating through this uncertainty.
Speaker 14: I think the one certainty that they have besides that
Speaker 14: more change is coming, is that there is going to
Speaker 14: be load growth in the grid as a kind of
Speaker 14: tailwind supporting the market in phase of other headwinds. Right,
Speaker 14: we all know that data centers, among other applications like
Speaker 14: new manufacturing and electrification, are causing electricity demand to rise
Speaker 14: for the first time in the US in about two decades,
Speaker 14: and at very fast, kind of chunky rates. So that
Speaker 14: in turn means that electricity prices are going to have
Speaker 14: to go up, especially given that the tax credits that
Speaker 14: were sort of subing new power build are going away
Speaker 14: or at least being severely reduced. That in turn is
Speaker 14: going to make the economic case work out for more projects.
Speaker 14: But that is filled with uncertainties in and of itself. Right,
Speaker 14: you have different utility markets, different states trying to change
Speaker 14: the way that power is paid for by large load
Speaker 14: customers like data centers, and where the cost falls, how
Speaker 14: many projects get built, how much public utility comissions allow
Speaker 14: given the cost increases that most rate payers are going
Speaker 14: to see. That's a source of uncertainty even within that certainty,
Speaker 14: And so you see at riplus there was a lot
Speaker 14: of talk of virtual power plants or special timing on
Speaker 14: electric vehicle charging, anything to sort of keep the electricity
Speaker 14: system from being overbuilt because as a reminder, way the
Speaker 14: electricity system is structured is for the hottest and coldest
Speaker 14: days of the year, when there's the largest amount of
Speaker 14: electricity demand. A huge amount of cost is driven by that,
Speaker 14: and there's extra capacity that goes unused. A lot of
Speaker 14: the time. People are trying to get creative about how
Speaker 14: you use more capacity it's already on the grid to
Speaker 14: prevent things from getting more expensive for customers, or if
Speaker 14: you do need to build new stuff, basically putting those
Speaker 14: costs on two data centers themselves. Nevertheless, there is still
Speaker 14: a key tailwind in the face of this policy uncertainty.
Speaker 14: It's just a question of what that actually means for
Speaker 14: every other customer.
Speaker 2: Thanks to Derek Flack will be n EF lead at
Speaker 2: US Policy Analyst.
Speaker 4: Coming up, we look at how the global sports industry
Speaker 4: is huge and growing rapidly.
Speaker 2: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in
Speaker 2: depth research and data on two thousand companies and one
Speaker 2: hundred and thirty industries.
Speaker 4: You can access Bloomberg Intelligence via Big on the terminal.
Speaker 4: I'm Alexis Christoffers and I'm Paul Sweeney.
Speaker 2: This is Bloomberg.
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Speaker 1: This is Bloomberg Intelligence with Scarlet Foo and Paul Sweeney
Speaker 1: on Bloomberg Radio.
Speaker 2: Paul Sweeney joined this week by Alexis Christopher's. Franchise valuations
Speaker 2: are surging across the two point sixty five trillion dollar
Speaker 2: global sports industry, with three year analyzed growth rates running
Speaker 2: at it double digit pace across the majors.
Speaker 4: A loosening of ownership restrictions is driving an influx of
Speaker 4: institutional capital into professional sports franchises, enabling access to a
Speaker 4: deeper pool of potential investors.
Speaker 2: We broke down the numbers with BI analysts and Business
Speaker 2: of Sports co hosts Damian Sasauer.
Speaker 16: Two point six five trillion is revenue generated or expected
Speaker 16: revenue to be generated just this year alone from the
Speaker 16: global business of sports. So let's put some color around it,
Speaker 16: and really it's everything from the sixty billion dollars a
Speaker 16: year that's generated from METIA rights, the thirty billion dollars
Speaker 16: in advertising spend. But if you want to take that
Speaker 16: two point six five trillion and it's recreational vehicles, it's
Speaker 16: a parrel. It's everything. What we focus on is fan engagement,
Speaker 16: and fan engagement is roughly seven hundred and fifty billion
Speaker 16: in revenue generator per year, and there's no better mechanism
Speaker 16: to take advantage of that segment than to own a
Speaker 16: professional sports team.
Speaker 11: But you cannot.
Speaker 16: Everyone can own one, right they're privately listed or I'm sorry,
Speaker 16: they're not publicly listed. They're private entities. You just can't
Speaker 16: invest in them easily. So together with Brian Dougherty, get
Speaker 16: the Raganathan, Kevin Niar and the whole team here at BI,
Speaker 16: we came up with some way is that you know,
Speaker 16: your everyday investor might be able to take advantage of
Speaker 16: the opportunity set in the global business of sports. And
Speaker 16: we wrote a huge research report on it and it's
Speaker 16: really good.
Speaker 6: We did watch your twelve minutes segment and then you
Speaker 6: said that the difference is the sports industry has limited
Speaker 6: public access.
Speaker 17: Is that for the better?
Speaker 16: So it's changing, So the rules changes, specifically with regard
Speaker 16: to private equity investment in the NFL. I mean the
Speaker 16: NFL is first among equals. I mean their national media
Speaker 16: deal is eleven years, one hundred and ten billion, something
Speaker 16: along those lines. It's twelve billion and average annual value
Speaker 16: per team. It dominates professional sports. But really, at the
Speaker 16: end of the day, you know what you are seeing
Speaker 16: here from some of the recent transactions that have taken
Speaker 16: place in the private space. Talking the Philadelphia Eagles, the
Speaker 16: Buffalo Bills, a lot of these teams have sold small
Speaker 16: minority interests in their teams to private equity. It's driven
Speaker 16: the entire the entire universe higher so to put some
Speaker 16: some numbers around it, since year end alone, the average
Speaker 16: NFL team has gone up by thirty five percent in valuation.
Speaker 16: So the top twenty five teams across all of professional
Speaker 16: sports I'm including international sports like soccer, the NFL now
Speaker 16: comprises twenty two of the top twenty five slots alone,
Speaker 16: led by the Dallas Cowboys of course, but the Jets
Speaker 16: are up there. So yeah, no, I mean like it
Speaker 16: used to have a sparring of the yeah, right, despite
Speaker 16: their best effort, Scarlett, but you know, used to have
Speaker 16: FC Barcelona, Real Madrid, you have, you know, some baseball
Speaker 16: teams like the Yankees, Dodgers in Red Sox that used
Speaker 16: to be up there, and a lot of them have
Speaker 16: kind of fallen back due to the fact that private
Speaker 16: equity is now and allowed to invest in the NFL.
Speaker 3: Okay, I mean private equity being allowed to invest in
Speaker 3: the NFL was definitely a watershed moment, but private equity
Speaker 3: was allowed to invest in European football clubs for a
Speaker 3: lot longer before.
Speaker 15: We're different sport, yeah.
Speaker 7: Very different sport.
Speaker 3: But I'm curious in terms of the breakdown of that
Speaker 3: two point sixty five trillion dollar number, how much of
Speaker 3: that is tied to the NFL. How much of that
Speaker 3: is tied to things like European soccer.
Speaker 16: Well, I mean it's a much smaller percentage than that, right,
Speaker 16: because I mean that two point six to five trillion
Speaker 16: that's generated a year. I mean, again, it has everything
Speaker 16: to do with recreational vehicles, the footwear in a parrel.
Speaker 16: But if you're just talking about a sports team and
Speaker 16: how they generate their money, it's just really national media
Speaker 16: rights or local sports media rights, and it's gate receipts primarily,
Speaker 16: you know, ticketing, parking concessions, the things that you pay
Speaker 16: for when you go to an event. Right, So you know,
Speaker 16: if you just want to talk about gate receipts, I
Speaker 16: mean one hundred and sixty two game schedule for the
Speaker 16: Major League Baseball, they dominate in gate receipts, but in
Speaker 16: national media rights, which is the real animal that everyone's
Speaker 16: chasing right now. You hear about the NBA's new media
Speaker 16: rights deal F one UFC. The Major League Baseball just
Speaker 16: did something new there as well. You know, it's the NFL.
Speaker 16: I mean, the NFL is first among equals and national
Speaker 16: media deals. It represents seventy five percent of every team's
Speaker 16: average annual value revenue that's generated every year. So yeah,
Speaker 16: you know, I mean, you know, these national media deals
Speaker 16: are huge, and now that the NBA just did its
Speaker 16: big deal, we expect that, you know, come, I believe
Speaker 16: twenty twenty eight, Scarlet, the NFL is going to re up.
Speaker 16: It has the ability to buy out of its existing
Speaker 16: contract and renegotiate it, and it definitely is going to
Speaker 16: do that. And I think that's what's commanding a lot
Speaker 16: of these valuations because in specifically private equity investors, they
Speaker 16: see this and they want to take.
Speaker 9: Advantage of it.
Speaker 6: Can you talk about the revenue mix, because it varies
Speaker 6: across major leagues. I'm looking at this really pretty table
Speaker 6: you have for NFL, the biggest driver is national media.
Speaker 2: Yep.
Speaker 6: For NHL, and I'm eyeballing here, it's ticket sales and
Speaker 6: it seems like concessions slash parking. Who would have thought
Speaker 6: is kind of a significant chunk across all of them.
Speaker 6: What do you think will be the single biggest driver
Speaker 6: or is it really going to be different?
Speaker 16: Well, that's only because the average franchise value to revenue
Speaker 16: multiple for the NHL is just seven point seven times.
Speaker 16: I mean, in the NFL's case, it's twelve and a
Speaker 16: half times.
Speaker 3: NFL isn't a league of it, nothing else even compares, correct.
Speaker 16: I mean, but you might argue, I mean, look, despite
Speaker 16: the fact that the NHL generates you know, call it,
Speaker 16: I don't know, two billion dollars in revenue per year
Speaker 16: on average, you know, it's still it's multiple still smaller
Speaker 16: than that of Major League Soccer, which generates much less.
Speaker 16: And again that just has to do with the fact
Speaker 16: that you have all these MLS valuations now on the
Speaker 16: back of you know, some great European players like Messi
Speaker 16: who are now coming to play in places like Miami.
Speaker 16: Just try up a lot of these valuations and so yeah,
Speaker 16: you know, I mean, you know, we're still in early days.
Speaker 16: But really it's the entrance of institutional capital, Isabelle, that's
Speaker 16: really driving everything higher. You know, for the first time ever,
Speaker 16: you know, institutional investors are gaining access to these sports
Speaker 16: teams and they are looking to you know, get a
Speaker 16: high return on investment from them. And just to be
Speaker 16: very clear, you mentioned soccer before, because of relegation on
Speaker 16: all these things. In soccer, in the fact that there's
Speaker 16: no salary cap is very very difficult to extract a
Speaker 16: profit from owning a EPL team, a European Premier League team,
Speaker 16: whereas the salary cap allows for you know, I guess
Speaker 16: better profit generation in the US. And so I think
Speaker 16: that's one element to why you're seeing a lot of
Speaker 16: the evaluations for these real Madrid FC, Barcelona come off
Speaker 16: relative to the NFL.
Speaker 3: So owning a European soccer club is more about bragging
Speaker 3: rights than actually making money. Is that Is that what
Speaker 3: I'm saying.
Speaker 16: I would say no, not entirely. I would say yes,
Speaker 16: it's definitely a trophy asset, but they all are. I
Speaker 16: would just say the playing field for soccer, the fact
Speaker 16: that there really isn't any way to you know, to
Speaker 16: just cap with with with Middle East money that's come
Speaker 16: into a lot of it. You know, it's just very,
Speaker 16: very difficult to extract a profit and continue to pay
Speaker 16: these players and compete for these salaries with with the
Speaker 16: likes of you know, uh, you know, Man City and
Speaker 16: some of the others who have really really deep pocketed investors.
Speaker 16: And I think that's what's kind of skewing all the
Speaker 16: revenue generation, all the valuation multiples to the downside.
Speaker 6: In Europe any projection or outlook on the future of esports.
Speaker 16: So, esports and sports betting are two of the biggest
Speaker 16: drivers of our you know. So Bloomberg's created the Bloomberg
Speaker 16: equal Weight Sports Basket, which is a way that your
Speaker 16: average sort of investor can take advantage of any number
Speaker 16: of publicly traded stocks that have, you know, exposure to
Speaker 16: the sports industry. And Breed Dowerdies and her team have
Speaker 16: done a great job of developing this and sports betting
Speaker 16: and esports are wow, such a big part of it.
Speaker 16: And esports, especially if you look at the purse from
Speaker 16: like the I'm not an esports you know, expert here,
Speaker 16: but but but Nathan n I do. My colleague in
Speaker 16: Singapore is and he said that the purse from like
Speaker 16: the World Championship of East Sports is on par or
Speaker 16: higher than that of Wimbledon. I mean, can you imagine
Speaker 16: higher than the Masters here here, I'm talking to golf here.
Speaker 16: You know, it's just amazing how much money is being
Speaker 16: funneled into that specific sort of subsector of the sports industry.
Speaker 16: And it's growing. It's growing at a cager of like
Speaker 16: double digits over the past five years, which is just
Speaker 16: astronomical and I think there's more to come our.
Speaker 2: Thanks to bi analysts and Business of Sports co host
Speaker 2: Damian Sasaur.
Speaker 4: This week, Bloomberg Business Week reported in their annual ranking
Speaker 4: of full time MBA program that Stanford Graduate School of
Speaker 4: Business is again number one.
Speaker 2: Why Stanford host Scarlettfoo and guest host Stacy Vanick Smith
Speaker 2: were joined by Demitra kesinid's Bloomberg News Senior.
Speaker 17: Editor, Stanford came out top of our US rankings. We
Speaker 17: have rankings across regions, so it's not globally the number
Speaker 17: one school, just to clarify, but uh, you know, it
Speaker 17: certainly points to resilience and strength of the programs. Stanford,
Speaker 17: as we know in Silicon Valley, with all its focus
Speaker 17: on technollogy and entrepreneurism and more, has been very, very
Speaker 17: strong for years. You know that maybe to some degree
Speaker 17: masks some of the problems that we see that especially
Speaker 17: in the US, but globally, schools are confronting. I mean,
Speaker 17: there are a lot of challenges today. There are geopolitical challenges,
Speaker 17: there are challenges that are more specific to the US.
Speaker 17: With what we've seen play out over several months, given
Speaker 17: the current administration stance towards international students, towards issues of diversity.
Speaker 17: So there are certainly a lot of things that are
Speaker 17: just making tensions a little heightened right now and are
Speaker 17: really raising the level of discussion and concern among deans
Speaker 17: in a way that has them trying to come together
Speaker 17: from around the world and really think about how do
Speaker 17: we best support each other to support education, because what
Speaker 17: we ultimately are in the business of is education.
Speaker 13: Well, clearly some of those challenges have to do with
Speaker 13: some of the some of the Trump administrations policies and
Speaker 13: stances going after certain colleges and universities. How has that
Speaker 13: factored in to business schools, to enrollment and to some
Speaker 13: of the concerns that you're mentioning that deans of different
Speaker 13: business schools are taking on.
Speaker 17: I mean, it's starting very slowly, you know. It's not
Speaker 17: as though we're seeing some great exodus from people interested
Speaker 17: in schools in the US. We still have a very
Speaker 17: strong system of business schools in this country, also in
Speaker 17: Europe and in Asia, and there are very particular facets
Speaker 17: to each of them that appeal to students depending on
Speaker 17: what they're looking for. But I think that international students
Speaker 17: who have come to this country in very large numbers
Speaker 17: to business schools are starting to really question whether this
Speaker 17: is the best option for them given the opportunities available elsewhere.
Speaker 17: And part of that mix also has to do with
Speaker 17: factors that aren't so specifically about the administration right now
Speaker 17: in the US, but about jobs and opportunities and growth
Speaker 17: are schools in the US. In addition to some of
Speaker 17: the factors that they're facing that are more about some
Speaker 17: of these issues around diversity and international students, they're also
Speaker 17: confronting a situation in which, you know, more graduates are
Speaker 17: finishing their programs with no job in hand. The share
Speaker 17: of students that are finishing and that have a job
Speaker 17: offer within three months. While it's not again a huge shift,
Speaker 17: but it is a shift we're seeing, is really it's,
Speaker 17: you know, that sort of percentage is being cut away.
Speaker 17: We've seen so many cuts in technology, We've seen cuts
Speaker 17: in many other industries that are leading. Consulting is really
Speaker 17: a big one that draws business school students historically in
Speaker 17: very large numbers. Consulting is going through a huge shift
Speaker 17: right now, largely because of AI. We've seen many stories
Speaker 17: about this, the way it affects the work that they're
Speaker 17: doing the way that they're recruiting, how many people they
Speaker 17: need to hire. So it's affecting all schools in various ways.
Speaker 17: International programs have a lot of partnerships with US programs.
Speaker 17: US programs send a lot of students abroad. The visa
Speaker 17: issues are also, you know, very very touchy right now.
Speaker 17: So it feels like it's on many fronts and just
Speaker 17: coming together in a way that's more sort of pronounced.
Speaker 4: And our thanks to demetri Kecndes, Bloomberg News Senior Editor.
Speaker 2: That's this week's edition of Bloomberg Intelligence on Bloomberg Radio,
Speaker 2: providing in depth research and data on two thousand companies
Speaker 2: and one hundred and thirty industries.
Speaker 4: And remember you can access Bloomberg Intelligence via bi Go
Speaker 4: on the terminal. I'm Alexis Christophers and I'm Ball Sweeney.
Speaker 2: Stay with us. Today's top stories and global business headlines
Speaker 2: are coming up right now.