WEBVTT - Amazon Soars on Fastest Cloud Growth in Years 0:00:02.720 --> 0:00:10.280 Bloomberg Audio Studios, podcasts, radio news. You're listening to the 0:00:10.280 --> 0:00:14.240 Bloomberg Intelligence podcast. Catch us live weekdays at ten am 0:00:14.320 --> 0:00:18.200 Eastern on Applecarclay and Android Auto with the Bloomberg Business app. 0:00:18.320 --> 0:00:21.560 Listen on demand wherever you get your podcasts, or watch 0:00:21.640 --> 0:00:22.760 us live on YouTube. 0:00:23.400 --> 0:00:24.880 All right, let's get back to Amazon. 0:00:24.880 --> 0:00:28.560 There's a stock that's working, and it's working because the 0:00:28.600 --> 0:00:31.639 cloud business for them and the AI play and that's 0:00:31.640 --> 0:00:35.440 been the story behind Amazon and in stock for a 0:00:35.440 --> 0:00:37.400 better part of ten to fifteen years. Here, it's not 0:00:37.440 --> 0:00:40.199 so much the retail the stuff that we interact with 0:00:40.320 --> 0:00:42.440 Amazon with getting the packages at the door. It's all 0:00:42.479 --> 0:00:46.199 about their cloud business. On Rock Rana, he's a technology 0:00:46.240 --> 0:00:49.600 analyst for Bloomberg Intelligence. The technology analysts for Bloomberg Intelligence, 0:00:49.760 --> 0:00:53.559 an rap talk to us about the Amazon Web Services. 0:00:53.560 --> 0:00:54.640 How did they do last quarter? 0:00:56.000 --> 0:00:56.160 Yeah? 0:00:56.200 --> 0:00:58.400 I think this is the one that really changed the 0:00:58.520 --> 0:01:01.080 tone or the narrative. O fate of was because when 0:01:01.120 --> 0:01:03.760 you look at over the last six months or so, 0:01:04.080 --> 0:01:05.959 there is a there is you know, you could say 0:01:06.760 --> 0:01:09.880 a fear out there that AWS is losing market share 0:01:10.200 --> 0:01:12.920 to the likes of Oracle, the likes of you know, Google, 0:01:13.080 --> 0:01:16.280 and Microsoft because the other three are showing momentum with 0:01:16.319 --> 0:01:19.080 their AI workloads, but it wasn't as it was absent 0:01:19.120 --> 0:01:22.280 for AWS. In fact, their capex went down a little bit, 0:01:22.440 --> 0:01:24.839 lost quarter or you know when they reported last time, 0:01:25.000 --> 0:01:26.960 stock was down the you know when when they had 0:01:27.000 --> 0:01:29.920 reported their second quarter results. But finally they came out 0:01:30.000 --> 0:01:33.679 yesterday AWS Acceleration. They were very confident about how it's 0:01:33.680 --> 0:01:36.440 going to do next year. Capex is going up, their 0:01:36.520 --> 0:01:38.920 chip business is doing well. So I think from that 0:01:39.040 --> 0:01:41.640 point of view, that's a big overhang away from the stock. 0:01:42.080 --> 0:01:43.240 People should be happy with this. 0:01:43.800 --> 0:01:45.679 And when it comes to AWS, I feel like that's 0:01:45.720 --> 0:01:48.160 the og of the cloud computing. I mean, whenever we 0:01:48.280 --> 0:01:52.280 talk about cloud it's really Amazon leading the way and 0:01:52.320 --> 0:01:55.840 then of course Alphabet Microsoft, but their growth rates were 0:01:55.920 --> 0:01:59.040 much faster than Amazon because Amazon had a bigger base. Overall, 0:01:59.480 --> 0:02:03.320 where does the put this latest quarter put AWS versus 0:02:03.880 --> 0:02:05.480 Azure versus Alphabet. 0:02:06.880 --> 0:02:09.359 See, that's what I'm saying. The others cloud providers are 0:02:09.400 --> 0:02:11.440 so good at marketing that they have been beating up 0:02:11.440 --> 0:02:14.480 on AWS for I would say almost two years, and 0:02:14.600 --> 0:02:16.800 last night they came out I think with guns blazing 0:02:16.960 --> 0:02:20.240 explaining their entire strategy in a far better way. And 0:02:20.320 --> 0:02:22.120 I think that's what you resonate when you look at 0:02:22.120 --> 0:02:22.720 the market share. 0:02:22.760 --> 0:02:23.720 You're absolutely right. 0:02:24.160 --> 0:02:27.560 Just from the infrastructure side, AWS is so much bigger 0:02:27.560 --> 0:02:31.600 than everybody else, so much wider, much more entrenched with 0:02:31.919 --> 0:02:34.680 enterprises than any of the others. But you know what's 0:02:34.720 --> 0:02:37.920 happening is the first part of the first growth phase 0:02:38.040 --> 0:02:41.320 of AI has been through chat GPT and that product 0:02:41.400 --> 0:02:45.359 is hosted on Microsoft Azure. AWS doesn't have a consumer 0:02:45.400 --> 0:02:47.920 product like that which is hosted on them. They're all 0:02:47.960 --> 0:02:51.880 about enterprising adding more AI capabilities and that growth cycle 0:02:51.919 --> 0:02:55.000 is only beginning. So I think this really puts us 0:02:55.360 --> 0:02:59.000 very confident that AWS growth rate is going to continue 0:02:59.440 --> 0:03:02.080 in this good trajectory, not just for next year, but 0:03:02.120 --> 0:03:03.320 the year after that also. 0:03:03.840 --> 0:03:07.040 And anurag, I know that this is something that happened 0:03:07.080 --> 0:03:09.320 more recently, but of course there was a big outage 0:03:09.320 --> 0:03:12.680 of AWS that seem to affect everyone across the nation. 0:03:13.400 --> 0:03:17.000 Schools and students couldn't get online, businesses couldn't do things, 0:03:17.080 --> 0:03:19.480 and they couldn't log into the websites that they needed to. 0:03:19.880 --> 0:03:23.760 Did Amazon talk about that at all and give any reassurances. 0:03:24.520 --> 0:03:26.480 See I think this is one of the biggest risks 0:03:26.480 --> 0:03:29.960 for all cloud providers, not just Amazon, but Microsoft also 0:03:30.040 --> 0:03:33.680 Microsoft also had a similar breakdown. Now think of these 0:03:33.720 --> 0:03:37.840 cloud providers as electricity providers and it can happen to anybody. 0:03:38.320 --> 0:03:41.000 One of our big thesis is that we know AI 0:03:41.040 --> 0:03:43.360 is a big growth story for cloud. I think one 0:03:43.400 --> 0:03:45.720 of the biggest stories later on is going to be 0:03:45.960 --> 0:03:49.520 a multi cloud strategy. Every company, every enterprise is going 0:03:49.560 --> 0:03:52.560 to go out and have a backup cloud provider similar 0:03:52.560 --> 0:03:54.560 to what they do in electricity, and I think that 0:03:54.680 --> 0:03:57.400 is going to add far more to the total addressable 0:03:57.440 --> 0:03:59.120 market of this important service. 0:04:00.040 --> 0:04:02.360 I know you guys at Bloomberg Intelligence wrote I think 0:04:02.400 --> 0:04:04.960 the definitive research report on AI. 0:04:05.160 --> 0:04:07.160 So, folks, if you want to learn about what this. 0:04:07.120 --> 0:04:10.760 Whole AI thing is, go to big on your terminal 0:04:10.760 --> 0:04:11.480 and that's where you'll find it. 0:04:11.480 --> 0:04:15.440 If you don't have it, call your salesperson. But it's 0:04:15.760 --> 0:04:18.520 what's the bare case? Is there a bare case for AI? 0:04:18.600 --> 0:04:18.760 Here? 0:04:18.839 --> 0:04:19.279 Anarak? 0:04:19.520 --> 0:04:21.640 Because there's certainly spending a ton of money. 0:04:23.000 --> 0:04:25.320 Yeah, the bear case is spending a lot of the money, 0:04:25.320 --> 0:04:28.600 and I think that is something to be extremely careful 0:04:28.640 --> 0:04:30.520 about because see one of the things I have to see, 0:04:30.680 --> 0:04:34.080 is will enterprise suddenly say, you know what, I like 0:04:34.160 --> 0:04:36.839 this thing. It is good to summarize a handful of emails. 0:04:37.080 --> 0:04:39.240 It will give me so much a productivity. But that's 0:04:39.240 --> 0:04:42.600 where it ends. It's not going to lead to massive layoffs. 0:04:42.720 --> 0:04:44.440 You know. It's like another tool you and I have. 0:04:44.839 --> 0:04:47.359 We have Excel, now we have chag GPT on the 0:04:47.440 --> 0:04:50.240 side that I think is the bare case on it 0:04:50.279 --> 0:04:52.800 is how much productivity somebody can get out of it. 0:04:53.160 --> 0:04:54.719 And at the same time, you know, you when you're 0:04:54.760 --> 0:04:57.760 spending let's say five hundred plus billion dollars a year 0:04:58.040 --> 0:05:01.360 in adding more capacity, a lot of people are borrowing 0:05:01.400 --> 0:05:04.240 that money. Private credit is involved. You have a lot 0:05:04.279 --> 0:05:06.760 of that coming from one customer that's Opening Eye. You 0:05:06.800 --> 0:05:09.200 know what if something happens and somebody else comes up 0:05:09.240 --> 0:05:11.520 with a better model and Opening Eye is no longer 0:05:11.560 --> 0:05:14.040 able to see that kind of growth momentum. So there 0:05:14.040 --> 0:05:17.159 are enough bare cases out there. That's why, almost to 0:05:17.200 --> 0:05:19.960 be very frank, almost on a weekly basis, you have 0:05:20.000 --> 0:05:21.520 to track these things very carefully. 0:05:22.120 --> 0:05:25.400 Yeah, that circular financing you just reference raises a lot 0:05:25.400 --> 0:05:27.839 of concerns because so much of the economic growth that 0:05:27.839 --> 0:05:31.119 we're seeing now is tied to investment in spending on AI, 0:05:31.200 --> 0:05:33.840 So if anyone stops spending just a moment, or maybe 0:05:33.880 --> 0:05:38.320 slows things down, that could have huge ramifications. Anurag always 0:05:38.320 --> 0:05:40.240 appreciate your joining us on our g Rana is one 0:05:40.279 --> 0:05:43.839 of our Bloomberg Intelligence senior technology analysts giving us the 0:05:43.839 --> 0:05:47.839 low down here on Amazon Amazon Web Services, fastest cloud 0:05:47.839 --> 0:05:51.200 growth in years for Amazon Web Services, providing some relief 0:05:51.200 --> 0:05:52.040 to those investors. 0:05:52.560 --> 0:05:55.640 Stay with us. More from Bloomberg Intelligence coming up after this. 0:05:59.320 --> 0:06:03.039 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:06:03.120 --> 0:06:05.800 weekdays at ten am. He's done on Apple, Cocklay and 0:06:05.800 --> 0:06:09.080 Android Auto with the Bloomberg Business App. Listen on demand 0:06:09.120 --> 0:06:13.120 wherever you get your podcasts, or watch us live on YouTube. 0:06:13.800 --> 0:06:16.800 It is Halloween, so I think about haunted houses, and 0:06:16.960 --> 0:06:19.279 there's a great story on the Bloomberg Paul about a 0:06:19.320 --> 0:06:21.479 real estate developer in Pennsylvania who wants to turn his 0:06:21.720 --> 0:06:26.240 haunted house attraction, which is actually a former Penhurst asylum 0:06:26.600 --> 0:06:28.760 into what else a data center? 0:06:28.960 --> 0:06:30.799 Ah, of course, I mean it's. 0:06:30.920 --> 0:06:33.800 Right white line with the times right. AI is the 0:06:33.800 --> 0:06:36.040 only thing anyone cares about these days. Everyone's trying to 0:06:36.080 --> 0:06:37.920 make money off of it, profit off demand for it. 0:06:38.320 --> 0:06:41.680 But can the grid actually sustain all of this? It's 0:06:41.720 --> 0:06:42.120 not clear. 0:06:42.680 --> 0:06:44.840 With the guy he lives in an asylum. 0:06:45.160 --> 0:06:47.599 No, he owns the asylum and he's turned it into 0:06:47.600 --> 0:06:49.080 a haunted house. But now he wants to turn it 0:06:49.120 --> 0:06:49.919 into a data center. 0:06:50.200 --> 0:06:52.799 You think it's like really wired for that? 0:06:52.920 --> 0:06:55.560 There show all good questions. All right, Let's bring in 0:06:55.640 --> 0:06:56.280 Ryan Mallory. 0:06:56.440 --> 0:06:59.840 He is president and CEO of flex Cential, which is 0:06:59.880 --> 0:07:03.320 a private company that is tied in to this idea 0:07:03.320 --> 0:07:06.960 of whether we have enough power to power all this 0:07:07.080 --> 0:07:08.360 AI that everyone wants. 0:07:08.640 --> 0:07:09.920 Ryan, thanks for joining us today. 0:07:10.960 --> 0:07:13.440 Good morning, Scarlett and Paul. Thanks for the opportunity to 0:07:13.440 --> 0:07:13.960 speak with you. 0:07:14.200 --> 0:07:16.920 So just give us a primer first on what flex 0:07:16.920 --> 0:07:19.720 Central does and how it ties in with whether our 0:07:19.760 --> 0:07:22.360 grid can support all this demand for AI. 0:07:23.560 --> 0:07:26.760 Yeah, so flex Cential is a national data center operator. 0:07:27.000 --> 0:07:30.400 We've got a dynamic platform forty two data centers across 0:07:30.480 --> 0:07:33.320 eighteen markets and so you know we're you know, right 0:07:33.360 --> 0:07:37.320 at the cornerstone of that AI on ramp trend that's 0:07:37.360 --> 0:07:40.200 out there. So we're seeing some of these big deployments 0:07:40.240 --> 0:07:42.720 like you guys are talking about in Pennsylvania, and other places. 0:07:42.920 --> 0:07:46.240 Flex cential is really that on ramp capability from that 0:07:46.280 --> 0:07:47.440 network ingress. 0:07:48.720 --> 0:07:52.680 So ran you say power availability is the new real estate, 0:07:52.920 --> 0:07:53.720 What do you mean by that? 0:07:54.880 --> 0:07:57.239 Yeah, you know, you know, it used to be trying 0:07:57.240 --> 0:08:00.240 to find the land, so a piece of you know, 0:08:00.320 --> 0:08:04.520 property that could support a data center was where everybody started. 0:08:05.280 --> 0:08:07.920 Now it's really where where is the power at? You know, 0:08:08.040 --> 0:08:10.320 in twenty twenty three, there was one hundred and seventy 0:08:10.360 --> 0:08:13.720 six tear lots of power being you know, generated out 0:08:13.720 --> 0:08:17.200 there for the data center marketplace. Twenty twenty eight, there's 0:08:17.200 --> 0:08:18.920 going to be five hundred and eighty tara watts. And 0:08:19.000 --> 0:08:22.720 so what we're seeing is this massive increase in power demand, 0:08:23.120 --> 0:08:25.559 and you know, they're not making any more land close 0:08:25.600 --> 0:08:28.920 to you know, the generation and transmission. So being able 0:08:29.000 --> 0:08:31.920 to have access to that power is that really that 0:08:32.360 --> 0:08:36.200 real estate mantra of location, location, location, So you've got 0:08:36.240 --> 0:08:37.240 to find the power first. 0:08:37.360 --> 0:08:39.240 I wouldn't know what a tear WoT is if I 0:08:39.280 --> 0:08:41.400 tripped over, but what I do know sounds like a 0:08:41.400 --> 0:08:44.040 lot five hundred and eighty terrawts. By twenty twenty eight, 0:08:44.120 --> 0:08:47.760 that's twelve percent of the national electricity demand is going 0:08:47.800 --> 0:08:49.840 to be gone for these AI things. 0:08:50.040 --> 0:08:53.040 Yeah, sometimes we don't even have enough electricity just to 0:08:53.080 --> 0:08:54.839 do what we do right now exactly. So that's the 0:08:54.920 --> 0:08:58.840 question rian which parts of the country have this power 0:08:58.840 --> 0:09:03.480 availability they're for this new revolution, and which have massive 0:09:03.480 --> 0:09:06.280 backlogs and can't afford to have anything more plugged into 0:09:06.320 --> 0:09:06.680 their grid. 0:09:07.960 --> 0:09:08.160 Yeah. 0:09:08.440 --> 0:09:11.480 You know, we've really seen some shifting in the game 0:09:11.480 --> 0:09:14.520 board over the past several years where you know, the 0:09:14.559 --> 0:09:19.000 Northern Virginia's and the California markets and even Georgia has 0:09:19.040 --> 0:09:23.040 become power constrained just because of this massive shift to 0:09:23.120 --> 0:09:26.880 those markets because of at that point in time power availability. 0:09:27.240 --> 0:09:30.520 Now we're starting to see it turn to net new markets, 0:09:30.559 --> 0:09:35.400 you know, Oregon, Utah, Colorado, Texas, North Carolina. These are 0:09:35.480 --> 0:09:38.000 areas that you know, you know, from a legacy data 0:09:38.040 --> 0:09:41.720 center market had been overlooked because they didn't have a 0:09:41.760 --> 0:09:45.040 lot of the infrastructure. But they've caught up and those 0:09:45.080 --> 0:09:49.000 markets are really primed to take off. That's where Flexential 0:09:49.080 --> 0:09:51.560 spending a lot of its focus right now, and we 0:09:51.640 --> 0:09:53.560 see a lot of others in the AI industry doing 0:09:53.559 --> 0:09:54.000 the same. 0:09:54.320 --> 0:09:56.480 All Right, so I need power to power these things up, 0:09:56.840 --> 0:09:59.320 but I probably also need some water to cool them down. 0:09:59.320 --> 0:10:00.240 Talk to us about water. 0:10:01.600 --> 0:10:04.080 Yeah, you know, water is something that is a hot 0:10:04.160 --> 0:10:07.439 topic in the data center industry because you know, when 0:10:07.640 --> 0:10:11.839 you're talking about these high density compute workloads with AI, 0:10:12.400 --> 0:10:16.359 we've seen them. You know, the actual you know, densities 0:10:16.400 --> 0:10:19.200 per rack go up, you know, one hundred two hundred 0:10:19.240 --> 0:10:22.800 three hundred percent over the past several years. You have 0:10:22.840 --> 0:10:26.439 to have water, you know, from from a heat rejection standpoint, 0:10:26.520 --> 0:10:30.240 and so a lot of companies historically had just used 0:10:30.280 --> 0:10:33.200 evaporative water cooling to you know, to be able to 0:10:33.200 --> 0:10:36.480 cool and empower these data centers. That's just not efficient, 0:10:36.600 --> 0:10:40.080 and so it's really about utilizing you know, closed loop 0:10:40.200 --> 0:10:43.319 systems where you can you know, put a liquid across 0:10:43.360 --> 0:10:45.679 the chip you know, in the rack to be able 0:10:45.720 --> 0:10:49.240 to dissipate that heat or reject that heat that's out 0:10:49.240 --> 0:10:51.400 of there. There is a you know, there is a 0:10:51.480 --> 0:10:54.560 little bit of a nuance out there. Companies that are 0:10:54.600 --> 0:10:57.640 looking at operating at a zero w U E or 0:10:57.679 --> 0:11:01.439 water U sufficiency are really what's needed in today's environment 0:11:01.520 --> 0:11:04.439 so we don't become burdens on those local communities. 0:11:04.720 --> 0:11:07.079 Let me ask a dumb question here. We have climate 0:11:07.160 --> 0:11:09.440 change which is causing extreme weather. Here in the New 0:11:09.520 --> 0:11:12.280 York region. We just had flash floods that resulted in 0:11:12.320 --> 0:11:15.880 the death of two people and have really inundated the infrastructure. 0:11:16.240 --> 0:11:19.520 Does that matter when you're looking at water as a 0:11:19.640 --> 0:11:22.560 valuable resource in making sure that we can keep these 0:11:22.640 --> 0:11:23.560 data centers running. 0:11:24.760 --> 0:11:27.440 Yeah, I mean, climate change is a topic that's near 0:11:27.480 --> 0:11:30.480 and dear to everybody in the data center's data center 0:11:30.480 --> 0:11:34.880 world's heart because we have big footprint impacts in communities. 0:11:35.160 --> 0:11:37.760 But when you're looking at how we're building the data 0:11:37.800 --> 0:11:41.920 centers in today's environment with these closed loop systems, we're 0:11:41.960 --> 0:11:45.320 just not drawing off of those off of those water 0:11:45.360 --> 0:11:48.800 sources that are out there because they're closed and contained, 0:11:49.120 --> 0:11:52.280 so it's not the same impact that historically was happening 0:11:52.360 --> 0:11:53.040 in the industry. 0:11:53.559 --> 0:11:58.479 I'm all about nuclear here, particularly small modular reactors SMRs. 0:11:58.520 --> 0:12:01.000 Talk to us about that technology and is that going 0:12:01.040 --> 0:12:03.360 to be a solution in any time in the near future. 0:12:04.600 --> 0:12:07.960 You know, SMRs are are the future of the data 0:12:07.960 --> 0:12:10.160 center world, as is nuclear in general. 0:12:10.440 --> 0:12:12.160 You know, we've got to be focused. 0:12:11.800 --> 0:12:14.880 To the you know, to the climate comment that scarlet 0:12:14.920 --> 0:12:18.360 me just a second ago, around how we're impacting the environment. 0:12:19.120 --> 0:12:22.880 SMRs are small footprint reactors. We've been doing those for 0:12:23.080 --> 0:12:26.560 thirty forty years, you know, for you know, government based use, 0:12:26.840 --> 0:12:30.640 and you know they're tried and true from a performance perspective. 0:12:30.840 --> 0:12:33.280 What we've really got to get through is just the 0:12:34.000 --> 0:12:37.240 permitting you know process and being able to deploy them. 0:12:37.480 --> 0:12:40.640 You know, you can deploy anywhere from a fifty megawatt 0:12:40.679 --> 0:12:43.679 to three hundred megawatt reactor and a small form factor 0:12:44.000 --> 0:12:47.480 and that's going to really deliver that that capability that's 0:12:47.520 --> 0:12:49.840 out there to be able to power these data centers 0:12:50.120 --> 0:12:52.720 in a more rapid fashion. You know, a ten year 0:12:52.880 --> 0:12:55.839 permitting process is just not going to going to help 0:12:55.880 --> 0:12:58.360 anybody in the industry, whether it's you know, the home 0:12:58.440 --> 0:13:00.440 consumer or the data center. 0:13:01.000 --> 0:13:02.760 All right, good stuff, Ryan, thank you so much for 0:13:02.880 --> 0:13:06.240 joining us todaying sharing your expertise with us. Ryan Mallory, 0:13:06.280 --> 0:13:09.679 a CEO of Flexsential on the growing streen on power 0:13:10.040 --> 0:13:13.400 due to this AI boom and he joins us from Denver, Colorado. 0:13:13.520 --> 0:13:16.400 So a lot to think about there as everyone it 0:13:16.400 --> 0:13:19.040 feels like it wants to find some way in on AI. 0:13:19.559 --> 0:13:22.720 Stay with us. More from Bloomberg Intelligence coming up after this. 0:13:26.600 --> 0:13:30.319 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:13:30.400 --> 0:13:33.080 weekdays at ten am. He's done on Apple, Cocklay and 0:13:33.080 --> 0:13:36.360 Android Auto with the Bloomberg Business App. Listen on demand 0:13:36.400 --> 0:13:39.960 wherever you get your podcasts, or watch us live on YouTube. 0:13:40.679 --> 0:13:42.160 I think it near and dear to my heart. We 0:13:42.160 --> 0:13:43.079 were just talking about that. 0:13:43.200 --> 0:13:44.680 You know, what are some of these companies in these 0:13:44.720 --> 0:13:47.120 industries that are kind of slowly decaying, like the cable 0:13:47.160 --> 0:13:48.559 television industry, what do they do? 0:13:49.600 --> 0:13:50.520 But it's also. 0:13:50.559 --> 0:13:52.680 Declined, but they're not dead and they're not going to 0:13:52.679 --> 0:13:54.880 be dead anytime soon, right, Well, No, and I think. 0:13:54.760 --> 0:13:56.600 The other one here is just kind of what some 0:13:56.600 --> 0:13:59.199 of these big legacy cable media companies do, and that 0:13:59.400 --> 0:14:04.560 certainly you know true with when you look at Warner Brothers, Discovery, Paramount. 0:14:04.600 --> 0:14:06.600 All these companies are trying to figure out what to 0:14:06.679 --> 0:14:07.360 kind of do, and. 0:14:07.280 --> 0:14:10.199 They're teaming up as a one solution, right because maybe 0:14:10.240 --> 0:14:12.520 scale gets them somewhere that they can't get on their 0:14:12.559 --> 0:14:13.280 own exactly. 0:14:13.520 --> 0:14:15.959 Our next guest has got a really interesting opinion piece 0:14:16.000 --> 0:14:19.320 out on this, Paul Hardart. He's a Distinguished Clinical Professor 0:14:19.360 --> 0:14:21.760 of Marketing at New York University Stern School of business. 0:14:21.840 --> 0:14:25.280 By the way, I think Stern has Basically they're half 0:14:25.320 --> 0:14:26.320 of Global Wall Street. 0:14:26.080 --> 0:14:27.800 Came out of the Stern School of business. I'm convincing 0:14:27.800 --> 0:14:28.760 these people are everywhere. 0:14:29.160 --> 0:14:31.000 Paul, thanks for so much for joining us here. Talk 0:14:31.000 --> 0:14:34.200 to us about Warner Brothers. You know, it's a legacy 0:14:34.240 --> 0:14:38.760 media company now part of Warner Brothers, the Discovery. You know, 0:14:38.800 --> 0:14:41.000 the question is should they be sold, should they merge 0:14:41.000 --> 0:14:44.320 with another company. It's a proud company with a lot 0:14:44.360 --> 0:14:45.880 of just legacy media assets. 0:14:45.920 --> 0:14:46.880 What do you think they should do? 0:14:48.880 --> 0:14:50.600 That's a great question. Thanks for having me, Bob, Paul 0:14:50.640 --> 0:14:52.840 and scholar. Nice to be with you. 0:14:51.920 --> 0:14:55.119 You know, it's a challenging so from a business standpoint, 0:14:55.600 --> 0:14:57.200 it seems like they have a lot of debt. I 0:14:57.240 --> 0:15:00.720 think the plan was always to sell as you know that. 0:15:00.760 --> 0:15:03.520 You know, they were originally Time Warner. Then there was 0:15:03.560 --> 0:15:07.160 a sort of disastrous AOL Time Warner merger. Then they 0:15:07.160 --> 0:15:09.840 were sold to AT and T, which didn't go well. 0:15:09.920 --> 0:15:14.120 AT and T then spun it off with Discovery led 0:15:14.120 --> 0:15:16.520 by David Zaslaw, and now here we are just a 0:15:16.520 --> 0:15:19.120 few years later, once again they're for sale. So first 0:15:19.120 --> 0:15:21.080 of all, I feel very bad for the people that 0:15:21.160 --> 0:15:25.360 work there. It's been a really tumultuous history. But they 0:15:25.400 --> 0:15:27.760 have to optimize the assets, right, that's their job as 0:15:27.760 --> 0:15:29.480 it relates to the shareholders. 0:15:29.520 --> 0:15:32.120 So I think they're trying to figure out and the exit. 0:15:32.200 --> 0:15:33.760 I think there was a period of time where a 0:15:33.800 --> 0:15:36.000 lot of people felt that ultimately they could wrap these 0:15:36.080 --> 0:15:38.160 up and sell it to a big tech. 0:15:37.960 --> 0:15:39.640 Firm that was same. 0:15:39.720 --> 0:15:43.360 I think that was the viewpoint of Sherry Redstone, originally 0:15:43.400 --> 0:15:48.680 with Viacom and CBS and then ultimately Paramount. So I 0:15:48.720 --> 0:15:50.640 think they're trying to get the most value for what 0:15:50.720 --> 0:15:53.080 they have originally. Like you had just talked earlier about 0:15:53.080 --> 0:15:57.040 the cable assets, the plan was sort of reflecting exactly 0:15:57.120 --> 0:16:00.640 what Comcast is doing is spinning off its cable assets versant. 0:16:01.360 --> 0:16:04.640 The plan had been for Warner Brothers Discovery to split 0:16:04.680 --> 0:16:08.640 the company, with their CFO taking the cable assets and 0:16:09.560 --> 0:16:13.040 the other assets, the Warner Brothers Discovery the studio and 0:16:13.120 --> 0:16:18.040 the HBO Max platform, the streaming platform staying as one entity. 0:16:18.280 --> 0:16:21.680 So in that time, David Ellison has come out and 0:16:21.720 --> 0:16:25.800 made a three successive offers. The value the soccer price 0:16:25.840 --> 0:16:30.600 has gone up is effectively tripled since April, so you know, 0:16:30.680 --> 0:16:33.880 their job is to do optimize the value for their shareholders, 0:16:33.880 --> 0:16:35.400 and so I think that's what they're trying to do 0:16:35.480 --> 0:16:35.880 right now. 0:16:36.720 --> 0:16:40.480 So what's the value here to a Skydance Paramount or 0:16:40.520 --> 0:16:42.840 to a Comcast or to a Netflix. 0:16:42.960 --> 0:16:44.760 Is the IP of Warner Brothers. 0:16:45.160 --> 0:16:47.240 You just go to the HBO app and you see 0:16:47.280 --> 0:16:49.680 friends there, you see Game of Thrones, you see all 0:16:49.720 --> 0:16:51.840 kinds of assets that the company owns. 0:16:52.520 --> 0:16:54.960 That IP is valuable, But does it diminish over time? 0:16:55.000 --> 0:16:56.760 I mean does it need to be folded into something 0:16:56.760 --> 0:16:58.520 bigger to maximize its value? 0:17:00.040 --> 0:17:00.200 Yeah? 0:17:00.200 --> 0:17:02.040 Well, so you know, in anything in media, we sort 0:17:02.040 --> 0:17:04.160 of always talked about the content and the distribution, right, 0:17:04.200 --> 0:17:06.760 you sort of need both. You can't just have great content. 0:17:06.800 --> 0:17:08.560 It has to be to be able to be discovered. 0:17:09.480 --> 0:17:12.400 And as we all know from you know, following the pandemic, 0:17:12.440 --> 0:17:14.720 our habits have changed and a lot of us now 0:17:14.800 --> 0:17:15.840 we stream content. 0:17:16.320 --> 0:17:19.159 So scale is helpful in that. 0:17:19.320 --> 0:17:22.160 So one of the things the value propositions for any 0:17:22.200 --> 0:17:24.840 of these buyers, whether it's Comcast, whether it's Netflix, whether 0:17:24.920 --> 0:17:29.120 it's possibly Apple or certainly Paramount is you know, Paramount 0:17:29.119 --> 0:17:31.720 plus has struggled a little bit. So pairing that with 0:17:31.880 --> 0:17:35.000 HBO Max. You'd get a huge subscriber base, you'd get 0:17:35.040 --> 0:17:38.040 extra content. It's not that different than what Disney did 0:17:38.080 --> 0:17:41.720 by merging with Fox, realizing that to compete with Netflix 0:17:41.720 --> 0:17:45.080 they need a huge amount of content. So I think 0:17:45.119 --> 0:17:47.960 it's sort of the same playbook of scaling up having 0:17:48.040 --> 0:17:51.760 a large, deep library that some people when you know, 0:17:51.800 --> 0:17:54.120 we all have credit card builds, we all everyone has 0:17:54.160 --> 0:17:56.960 to check and see how they are spending their money. 0:17:56.960 --> 0:18:00.159 And if we're all subscribing to five or six or 0:18:00.320 --> 0:18:04.000 seven streaming services, it becomes you know, on economics. So 0:18:04.080 --> 0:18:05.840 I think the idea is you want to be one 0:18:05.840 --> 0:18:08.560 of those two or three streaming services that you know 0:18:08.720 --> 0:18:09.679 the family needs. 0:18:10.080 --> 0:18:11.720 And Paul, what I think is one of the unique 0:18:11.720 --> 0:18:14.399 aspects of a potential deal with Warner Brothers Discover is 0:18:14.440 --> 0:18:17.920 you've got a CEO and a board that says basically, hey, 0:18:17.920 --> 0:18:18.920 we're open to doing a deal. 0:18:18.960 --> 0:18:19.560 We're for sale. 0:18:19.640 --> 0:18:21.360 Kind of how does that play into it? 0:18:21.400 --> 0:18:25.000 Absolutely well, well, they've they've basically said that, you know, 0:18:25.000 --> 0:18:27.760 they've they've turned down three offers, and again the stock 0:18:27.800 --> 0:18:31.920 price is more than tripled, so at some point they 0:18:31.960 --> 0:18:33.639 are you know, the board is also going to have 0:18:33.720 --> 0:18:35.760 to sort of base the music and say, you know 0:18:35.800 --> 0:18:39.520 why they're not accepting this offer. So I think what 0:18:39.560 --> 0:18:43.200 they're looking for, right, they're trying to, you know, elevate 0:18:43.280 --> 0:18:45.480 you know, having more parties interested is always good in 0:18:45.520 --> 0:18:50.639 any dynamics. So it's unclear exactly how interested Netflix or 0:18:50.680 --> 0:18:53.760 Comcast is, but some of those assets, just like you know, 0:18:53.760 --> 0:18:57.640 if you go to a consignment shop, there's definitely something 0:18:57.680 --> 0:18:59.960 that would be interesting. And I think that the benefit 0:19:00.040 --> 0:19:03.280 fit to Comcasts, Netflix, any other people, you know, giving 0:19:03.359 --> 0:19:05.680 access to the data room there is first of all, 0:19:05.720 --> 0:19:07.920 you learn a lot about what your competitor is doing, 0:19:08.040 --> 0:19:11.760 so you get access to information. Two, there there is 0:19:11.840 --> 0:19:14.600 a deal, right they may only want HBO Max, they 0:19:14.640 --> 0:19:17.600 may only want certain IP but there's probably a deal 0:19:17.640 --> 0:19:20.040 worth looking at. And then lastly is sort of what 0:19:20.119 --> 0:19:24.080