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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the

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Speaker 1: Bloomberg Intelligence podcast. Catch us live weekdays at ten am

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Speaker 1: Eastern on Applecarclay and Android Auto with the Bloomberg Business app.

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Speaker 1: Listen on demand wherever you get your podcasts, or watch

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Speaker 1: us live on YouTube.

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Speaker 2: All right, let's get back to Amazon.

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Speaker 3: There's a stock that's working, and it's working because the

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Speaker 3: cloud business for them and the AI play and that's

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Speaker 3: been the story behind Amazon and in stock for a

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Speaker 3: better part of ten to fifteen years. Here, it's not

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Speaker 3: so much the retail the stuff that we interact with

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Speaker 3: Amazon with getting the packages at the door. It's all

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Speaker 3: about their cloud business. On Rock Rana, he's a technology

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Speaker 3: analyst for Bloomberg Intelligence. The technology analysts for Bloomberg Intelligence,

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Speaker 3: an rap talk to us about the Amazon Web Services.

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Speaker 3: How did they do last quarter?

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Speaker 4: Yeah?

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Speaker 5: I think this is the one that really changed the

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Speaker 5: tone or the narrative. O fate of was because when

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Speaker 5: you look at over the last six months or so,

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Speaker 5: there is a there is you know, you could say

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Speaker 5: a fear out there that AWS is losing market share

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Speaker 5: to the likes of Oracle, the likes of you know, Google,

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Speaker 5: and Microsoft because the other three are showing momentum with

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Speaker 5: their AI workloads, but it wasn't as it was absent

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Speaker 5: for AWS. In fact, their capex went down a little bit,

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Speaker 5: lost quarter or you know when they reported last time,

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Speaker 5: stock was down the you know when when they had

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Speaker 5: reported their second quarter results. But finally they came out

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Speaker 5: yesterday AWS Acceleration. They were very confident about how it's

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Speaker 5: going to do next year. Capex is going up, their

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Speaker 5: chip business is doing well. So I think from that

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Speaker 5: point of view, that's a big overhang away from the stock.

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Speaker 4: People should be happy with this.

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Speaker 6: And when it comes to AWS, I feel like that's

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Speaker 6: the og of the cloud computing. I mean, whenever we

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Speaker 6: talk about cloud it's really Amazon leading the way and

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Speaker 6: then of course Alphabet Microsoft, but their growth rates were

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Speaker 6: much faster than Amazon because Amazon had a bigger base. Overall,

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Speaker 6: where does the put this latest quarter put AWS versus

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Speaker 6: Azure versus Alphabet.

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Speaker 5: See, that's what I'm saying. The others cloud providers are

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Speaker 5: so good at marketing that they have been beating up

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Speaker 5: on AWS for I would say almost two years, and

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Speaker 5: last night they came out I think with guns blazing

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Speaker 5: explaining their entire strategy in a far better way. And

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Speaker 5: I think that's what you resonate when you look at

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Speaker 5: the market share.

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Speaker 4: You're absolutely right.

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Speaker 5: Just from the infrastructure side, AWS is so much bigger

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Speaker 5: than everybody else, so much wider, much more entrenched with

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Speaker 5: enterprises than any of the others. But you know what's

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Speaker 5: happening is the first part of the first growth phase

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Speaker 5: of AI has been through chat GPT and that product

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Speaker 5: is hosted on Microsoft Azure. AWS doesn't have a consumer

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Speaker 5: product like that which is hosted on them. They're all

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Speaker 5: about enterprising adding more AI capabilities and that growth cycle

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Speaker 5: is only beginning. So I think this really puts us

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Speaker 5: very confident that AWS growth rate is going to continue

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Speaker 5: in this good trajectory, not just for next year, but

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Speaker 5: the year after that also.

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Speaker 6: And anurag, I know that this is something that happened

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Speaker 6: more recently, but of course there was a big outage

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Speaker 6: of AWS that seem to affect everyone across the nation.

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Speaker 6: Schools and students couldn't get online, businesses couldn't do things,

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Speaker 6: and they couldn't log into the websites that they needed to.

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Speaker 6: Did Amazon talk about that at all and give any reassurances.

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Speaker 5: See I think this is one of the biggest risks

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Speaker 5: for all cloud providers, not just Amazon, but Microsoft also

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Speaker 5: Microsoft also had a similar breakdown. Now think of these

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Speaker 5: cloud providers as electricity providers and it can happen to anybody.

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Speaker 5: One of our big thesis is that we know AI

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Speaker 5: is a big growth story for cloud. I think one

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Speaker 5: of the biggest stories later on is going to be

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Speaker 5: a multi cloud strategy. Every company, every enterprise is going

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Speaker 5: to go out and have a backup cloud provider similar

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Speaker 5: to what they do in electricity, and I think that

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Speaker 5: is going to add far more to the total addressable

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Speaker 5: market of this important service.

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Speaker 3: I know you guys at Bloomberg Intelligence wrote I think

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Speaker 3: the definitive research report on AI.

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Speaker 2: So, folks, if you want to learn about what this.

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Speaker 3: Whole AI thing is, go to big on your terminal

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Speaker 3: and that's where you'll find it.

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Speaker 2: If you don't have it, call your salesperson. But it's

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Speaker 2: what's the bare case? Is there a bare case for AI?

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Speaker 7: Here?

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Speaker 4: Anarak?

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Speaker 2: Because there's certainly spending a ton of money.

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Speaker 5: Yeah, the bear case is spending a lot of the money,

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Speaker 5: and I think that is something to be extremely careful

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Speaker 5: about because see one of the things I have to see,

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Speaker 5: is will enterprise suddenly say, you know what, I like

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Speaker 5: this thing. It is good to summarize a handful of emails.

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Speaker 5: It will give me so much a productivity. But that's

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Speaker 5: where it ends. It's not going to lead to massive layoffs.

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Speaker 4: You know. It's like another tool you and I have.

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Speaker 5: We have Excel, now we have chag GPT on the

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Speaker 5: side that I think is the bare case on it

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Speaker 5: is how much productivity somebody can get out of it.

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Speaker 5: And at the same time, you know, you when you're

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Speaker 5: spending let's say five hundred plus billion dollars a year

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Speaker 5: in adding more capacity, a lot of people are borrowing

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Speaker 5: that money. Private credit is involved. You have a lot

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Speaker 5: of that coming from one customer that's Opening Eye. You

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Speaker 5: know what if something happens and somebody else comes up

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Speaker 5: with a better model and Opening Eye is no longer

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Speaker 5: able to see that kind of growth momentum. So there

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Speaker 5: are enough bare cases out there. That's why, almost to

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Speaker 5: be very frank, almost on a weekly basis, you have

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Speaker 5: to track these things very carefully.

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Speaker 6: Yeah, that circular financing you just reference raises a lot

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Speaker 6: of concerns because so much of the economic growth that

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Speaker 6: we're seeing now is tied to investment in spending on AI,

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Speaker 6: So if anyone stops spending just a moment, or maybe

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Speaker 6: slows things down, that could have huge ramifications. Anurag always

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Speaker 6: appreciate your joining us on our g Rana is one

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Speaker 6: of our Bloomberg Intelligence senior technology analysts giving us the

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Speaker 6: low down here on Amazon Amazon Web Services, fastest cloud

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Speaker 6: growth in years for Amazon Web Services, providing some relief

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Speaker 6: to those investors.

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Speaker 3: Stay with us. More from Bloomberg Intelligence coming up after this.

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Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live

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Speaker 1: weekdays at ten am. He's done on Apple, Cocklay and

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Speaker 1: Android Auto with the Bloomberg Business App. Listen on demand

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Speaker 1: wherever you get your podcasts, or watch us live on YouTube.

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Speaker 6: It is Halloween, so I think about haunted houses, and

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Speaker 6: there's a great story on the Bloomberg Paul about a

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Speaker 6: real estate developer in Pennsylvania who wants to turn his

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Speaker 6: haunted house attraction, which is actually a former Penhurst asylum

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Speaker 6: into what else a data center?

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Speaker 2: Ah, of course, I mean it's.

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Speaker 6: Right white line with the times right. AI is the

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Speaker 6: only thing anyone cares about these days. Everyone's trying to

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Speaker 6: make money off of it, profit off demand for it.

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Speaker 6: But can the grid actually sustain all of this? It's

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Speaker 6: not clear.

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Speaker 4: With the guy he lives in an asylum.

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Speaker 6: No, he owns the asylum and he's turned it into

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Speaker 6: a haunted house. But now he wants to turn it

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Speaker 6: into a data center.

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Speaker 2: You think it's like really wired for that?

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Speaker 8: There show all good questions. All right, Let's bring in

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Speaker 8: Ryan Mallory.

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Speaker 6: He is president and CEO of flex Cential, which is

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Speaker 6: a private company that is tied in to this idea

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Speaker 6: of whether we have enough power to power all this

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Speaker 6: AI that everyone wants.

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Speaker 8: Ryan, thanks for joining us today.

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Speaker 7: Good morning, Scarlett and Paul. Thanks for the opportunity to

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Speaker 7: speak with you.

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Speaker 6: So just give us a primer first on what flex

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Speaker 6: Central does and how it ties in with whether our

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Speaker 6: grid can support all this demand for AI.

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Speaker 7: Yeah, so flex Cential is a national data center operator.

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Speaker 7: We've got a dynamic platform forty two data centers across

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Speaker 7: eighteen markets and so you know we're you know, right

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Speaker 7: at the cornerstone of that AI on ramp trend that's

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Speaker 7: out there. So we're seeing some of these big deployments

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Speaker 7: like you guys are talking about in Pennsylvania, and other places.

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Speaker 7: Flex cential is really that on ramp capability from that

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Speaker 7: network ingress.

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Speaker 3: So ran you say power availability is the new real estate,

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Speaker 3: What do you mean by that?

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Speaker 7: Yeah, you know, you know, it used to be trying

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Speaker 7: to find the land, so a piece of you know,

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Speaker 7: property that could support a data center was where everybody started.

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Speaker 7: Now it's really where where is the power at? You know,

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Speaker 7: in twenty twenty three, there was one hundred and seventy

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Speaker 7: six tear lots of power being you know, generated out

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Speaker 7: there for the data center marketplace. Twenty twenty eight, there's

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Speaker 7: going to be five hundred and eighty tara watts. And

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Speaker 7: so what we're seeing is this massive increase in power demand,

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Speaker 7: and you know, they're not making any more land close

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Speaker 7: to you know, the generation and transmission. So being able

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Speaker 7: to have access to that power is that really that

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Speaker 7: real estate mantra of location, location, location, So you've got

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Speaker 7: to find the power first.

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Speaker 3: I wouldn't know what a tear WoT is if I

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Speaker 3: tripped over, but what I do know sounds like a

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Speaker 3: lot five hundred and eighty terrawts. By twenty twenty eight,

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Speaker 3: that's twelve percent of the national electricity demand is going

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Speaker 3: to be gone for these AI things.

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Speaker 6: Yeah, sometimes we don't even have enough electricity just to

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Speaker 6: do what we do right now exactly. So that's the

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Speaker 6: question rian which parts of the country have this power

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Speaker 6: availability they're for this new revolution, and which have massive

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Speaker 6: backlogs and can't afford to have anything more plugged into

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Speaker 6: their grid.

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Speaker 4: Yeah.

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Speaker 7: You know, we've really seen some shifting in the game

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Speaker 7: board over the past several years where you know, the

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Speaker 7: Northern Virginia's and the California markets and even Georgia has

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Speaker 7: become power constrained just because of this massive shift to

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Speaker 7: those markets because of at that point in time power availability.

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Speaker 7: Now we're starting to see it turn to net new markets,

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Speaker 7: you know, Oregon, Utah, Colorado, Texas, North Carolina. These are

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Speaker 7: areas that you know, you know, from a legacy data

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Speaker 7: center market had been overlooked because they didn't have a

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Speaker 7: lot of the infrastructure. But they've caught up and those

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Speaker 7: markets are really primed to take off. That's where Flexential

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Speaker 7: spending a lot of its focus right now, and we

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Speaker 7: see a lot of others in the AI industry doing

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Speaker 7: the same.

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Speaker 3: All Right, so I need power to power these things up,

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Speaker 3: but I probably also need some water to cool them down.

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Speaker 2: Talk to us about water.

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Speaker 7: Yeah, you know, water is something that is a hot

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Speaker 7: topic in the data center industry because you know, when

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Speaker 7: you're talking about these high density compute workloads with AI,

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Speaker 7: we've seen them. You know, the actual you know, densities

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Speaker 7: per rack go up, you know, one hundred two hundred

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Speaker 7: three hundred percent over the past several years. You have

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Speaker 7: to have water, you know, from from a heat rejection standpoint,

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Speaker 7: and so a lot of companies historically had just used

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Speaker 7: evaporative water cooling to you know, to be able to

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Speaker 7: cool and empower these data centers. That's just not efficient,

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Speaker 7: and so it's really about utilizing you know, closed loop

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Speaker 7: systems where you can you know, put a liquid across

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Speaker 7: the chip you know, in the rack to be able

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Speaker 7: to dissipate that heat or reject that heat that's out

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Speaker 7: of there. There is a you know, there is a

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Speaker 7: little bit of a nuance out there. Companies that are

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Speaker 7: looking at operating at a zero w U E or

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Speaker 7: water U sufficiency are really what's needed in today's environment

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Speaker 7: so we don't become burdens on those local communities.

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Speaker 6: Let me ask a dumb question here. We have climate

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Speaker 6: change which is causing extreme weather. Here in the New

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Speaker 6: York region. We just had flash floods that resulted in

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Speaker 6: the death of two people and have really inundated the infrastructure.

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Speaker 6: Does that matter when you're looking at water as a

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Speaker 6: valuable resource in making sure that we can keep these

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Speaker 6: data centers running.

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Speaker 7: Yeah, I mean, climate change is a topic that's near

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Speaker 7: and dear to everybody in the data center's data center

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Speaker 7: world's heart because we have big footprint impacts in communities.

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Speaker 7: But when you're looking at how we're building the data

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Speaker 7: centers in today's environment with these closed loop systems, we're

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Speaker 7: just not drawing off of those off of those water

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Speaker 7: sources that are out there because they're closed and contained,

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Speaker 7: so it's not the same impact that historically was happening

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Speaker 7: in the industry.

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Speaker 3: I'm all about nuclear here, particularly small modular reactors SMRs.

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Speaker 3: Talk to us about that technology and is that going

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Speaker 3: to be a solution in any time in the near future.

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Speaker 7: You know, SMRs are are the future of the data

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Speaker 7: center world, as is nuclear in general.

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Speaker 2: You know, we've got to be focused.

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Speaker 7: To the you know, to the climate comment that scarlet

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Speaker 7: me just a second ago, around how we're impacting the environment.

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Speaker 7: SMRs are small footprint reactors. We've been doing those for

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Speaker 7: thirty forty years, you know, for you know, government based use,

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Speaker 7: and you know they're tried and true from a performance perspective.

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Speaker 7: What we've really got to get through is just the

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Speaker 7: permitting you know process and being able to deploy them.

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Speaker 7: You know, you can deploy anywhere from a fifty megawatt

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Speaker 7: to three hundred megawatt reactor and a small form factor

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Speaker 7: and that's going to really deliver that that capability that's

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Speaker 7: out there to be able to power these data centers

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Speaker 7: in a more rapid fashion. You know, a ten year

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Speaker 7: permitting process is just not going to going to help

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Speaker 7: anybody in the industry, whether it's you know, the home

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Speaker 7: consumer or the data center.

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Speaker 6: All right, good stuff, Ryan, thank you so much for

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Speaker 6: joining us todaying sharing your expertise with us. Ryan Mallory,

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Speaker 6: a CEO of Flexsential on the growing streen on power

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Speaker 6: due to this AI boom and he joins us from Denver, Colorado.

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Speaker 6: So a lot to think about there as everyone it

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Speaker 6: feels like it wants to find some way in on AI.

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Speaker 2: Stay with us. More from Bloomberg Intelligence coming up after this.

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Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live

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Speaker 1: weekdays at ten am. He's done on Apple, Cocklay and

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Speaker 1: Android Auto with the Bloomberg Business App. Listen on demand

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Speaker 1: wherever you get your podcasts, or watch us live on YouTube.

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Speaker 2: I think it near and dear to my heart. We

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Speaker 2: were just talking about that.

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Speaker 3: You know, what are some of these companies in these

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Speaker 3: industries that are kind of slowly decaying, like the cable

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Speaker 3: television industry, what do they do?

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Speaker 4: But it's also.

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Speaker 6: Declined, but they're not dead and they're not going to

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Speaker 6: be dead anytime soon, right, Well, No, and I think.

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Speaker 3: The other one here is just kind of what some

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Speaker 3: of these big legacy cable media companies do, and that

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Speaker 3: certainly you know true with when you look at Warner Brothers, Discovery, Paramount.

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Speaker 3: All these companies are trying to figure out what to

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Speaker 3: kind of do, and.

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Speaker 6: They're teaming up as a one solution, right because maybe

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Speaker 6: scale gets them somewhere that they can't get on their

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Speaker 6: own exactly.

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Speaker 3: Our next guest has got a really interesting opinion piece

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Speaker 3: out on this, Paul Hardart. He's a Distinguished Clinical Professor

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Speaker 3: of Marketing at New York University Stern School of business.

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Speaker 3: By the way, I think Stern has Basically they're half

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Speaker 3: of Global Wall Street.

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Speaker 2: Came out of the Stern School of business. I'm convincing

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Speaker 2: these people are everywhere.

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Speaker 3: Paul, thanks for so much for joining us here. Talk

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Speaker 3: to us about Warner Brothers. You know, it's a legacy

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Speaker 3: media company now part of Warner Brothers, the Discovery. You know,

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Speaker 3: the question is should they be sold, should they merge

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Speaker 3: with another company. It's a proud company with a lot

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Speaker 3: of just legacy media assets.

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Speaker 2: What do you think they should do?

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Speaker 4: That's a great question. Thanks for having me, Bob, Paul

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Speaker 4: and scholar. Nice to be with you.

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Speaker 9: You know, it's a challenging so from a business standpoint,

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Speaker 9: it seems like they have a lot of debt. I

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Speaker 9: think the plan was always to sell as you know that.

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Speaker 9: You know, they were originally Time Warner. Then there was

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Speaker 9: a sort of disastrous AOL Time Warner merger. Then they

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Speaker 9: were sold to AT and T, which didn't go well.

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Speaker 9: AT and T then spun it off with Discovery led

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Speaker 9: by David Zaslaw, and now here we are just a

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Speaker 9: few years later, once again they're for sale. So first

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Speaker 9: of all, I feel very bad for the people that

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Speaker 9: work there. It's been a really tumultuous history. But they

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Speaker 9: have to optimize the assets, right, that's their job as

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Speaker 9: it relates to the shareholders.

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Speaker 4: So I think they're trying to figure out and the exit.

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Speaker 9: I think there was a period of time where a

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Speaker 9: lot of people felt that ultimately they could wrap these

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Speaker 9: up and sell it to a big tech.

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Speaker 4: Firm that was same.

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Speaker 9: I think that was the viewpoint of Sherry Redstone, originally

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Speaker 9: with Viacom and CBS and then ultimately Paramount. So I

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Speaker 9: think they're trying to get the most value for what

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Speaker 9: they have originally. Like you had just talked earlier about

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Speaker 9: the cable assets, the plan was sort of reflecting exactly

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Speaker 9: what Comcast is doing is spinning off its cable assets versant.

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Speaker 9: The plan had been for Warner Brothers Discovery to split

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Speaker 9: the company, with their CFO taking the cable assets and

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Speaker 9: the other assets, the Warner Brothers Discovery the studio and

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Speaker 9: the HBO Max platform, the streaming platform staying as one entity.

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Speaker 9: So in that time, David Ellison has come out and

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Speaker 9: made a three successive offers. The value the soccer price

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Speaker 9: has gone up is effectively tripled since April, so you know,

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Speaker 9: their job is to do optimize the value for their shareholders,

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Speaker 9: and so I think that's what they're trying to do

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Speaker 9: right now.

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Speaker 6: So what's the value here to a Skydance Paramount or

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Speaker 6: to a Comcast or to a Netflix.

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Speaker 8: Is the IP of Warner Brothers.

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Speaker 6: You just go to the HBO app and you see

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Speaker 6: friends there, you see Game of Thrones, you see all

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Speaker 6: kinds of assets that the company owns.

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Speaker 8: That IP is valuable, But does it diminish over time?

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Speaker 6: I mean does it need to be folded into something

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Speaker 6: bigger to maximize its value?

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Speaker 7: Yeah?

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Speaker 9: Well, so you know, in anything in media, we sort

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Speaker 9: of always talked about the content and the distribution, right,

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Speaker 9: you sort of need both. You can't just have great content.

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Speaker 9: It has to be to be able to be discovered.

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Speaker 9: And as we all know from you know, following the pandemic,

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Speaker 9: our habits have changed and a lot of us now

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Speaker 9: we stream content.

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Speaker 4: So scale is helpful in that.

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Speaker 9: So one of the things the value propositions for any

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Speaker 9: of these buyers, whether it's Comcast, whether it's Netflix, whether

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Speaker 9: it's possibly Apple or certainly Paramount is you know, Paramount

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Speaker 9: plus has struggled a little bit. So pairing that with

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Speaker 9: HBO Max. You'd get a huge subscriber base, you'd get

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Speaker 9: extra content. It's not that different than what Disney did

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Speaker 9: by merging with Fox, realizing that to compete with Netflix

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Speaker 9: they need a huge amount of content. So I think

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Speaker 9: it's sort of the same playbook of scaling up having

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Speaker 9: a large, deep library that some people when you know,

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Speaker 9: we all have credit card builds, we all everyone has

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Speaker 9: to check and see how they are spending their money.

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Speaker 9: And if we're all subscribing to five or six or

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Speaker 9: seven streaming services, it becomes you know, on economics. So

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Speaker 9: I think the idea is you want to be one

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Speaker 9: of those two or three streaming services that you know

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Speaker 9: the family needs.

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Speaker 3: And Paul, what I think is one of the unique

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Speaker 3: aspects of a potential deal with Warner Brothers Discover is

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Speaker 3: you've got a CEO and a board that says basically, hey,

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Speaker 3: we're open to doing a deal.

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Speaker 4: We're for sale.

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Speaker 2: Kind of how does that play into it?

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Speaker 9: Absolutely well, well, they've they've basically said that, you know,

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Speaker 9: they've they've turned down three offers, and again the stock

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Speaker 9: price is more than tripled, so at some point they

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Speaker 9: are you know, the board is also going to have

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Speaker 9: to sort of base the music and say, you know

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Speaker 9: why they're not accepting this offer. So I think what

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Speaker 9: they're looking for, right, they're trying to, you know, elevate

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Speaker 9: you know, having more parties interested is always good in

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Speaker 9: any dynamics. So it's unclear exactly how interested Netflix or

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Speaker 9: Comcast is, but some of those assets, just like you know,

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Speaker 9: if you go to a consignment shop, there's definitely something

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Speaker 9: that would be interesting. And I think that the benefit

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Speaker 9: fit to Comcasts, Netflix, any other people, you know, giving

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Speaker 9: access to the data room there is first of all,

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Speaker 9: you learn a lot about what your competitor is doing,

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Speaker 9: so you get access to information. Two, there there is

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Speaker 9: a deal, right they may only want HBO Max, they

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Speaker 9: may only want certain IP but there's probably a deal

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Speaker 9: worth looking at. And then lastly is sort of what

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Speaker 9: Comcasts did with Disney is you might also elevate the

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Speaker 9: price for one of your competitors.

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Speaker 4: So that's not a bad thing.

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Speaker 9: It's so you sort of you know what, you're sort

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Speaker 9: of the skunk at the picnic a little bit. And

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Speaker 9: so I think all of those factor into it in

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Speaker 9: a way. But there's no reason I think it would

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Speaker 9: be it would be an obligation of duty from these

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Speaker 9: other companies not to look at it, you know, just

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Speaker 9: kick the.

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Speaker 4: Tires a little bit.

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Speaker 6: Paul Hardart does Sting Whish, Clinical Professor at nyuster In

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Speaker 6: School of Business. He is a Bloomberg Opinion contributor as well.

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Speaker 6: You can check out what he writes on the Bloomberg Terminal.

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Speaker 1: This is the Bloomberg Intelligence podcast, available on Apple, Spotify,

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