Speaker 1: From Mahard where Innovation of money and power Collie in
Speaker 1: Silicon Valley NBN.
Speaker 2: This is Bloomberg Technology with Caroline Hyde and Ed.
Speaker 3: Ludlow Amed Ludlow in San Francisco. Caroline hides off today.
Speaker 3: This is Bloomberg Technology and water show we have for you.
Speaker 3: Disney's capital spending and production costs coming in lower than
Speaker 3: projected and saving three billion dollars for the entertainment company.
Speaker 4: Will bring you all the details.
Speaker 3: Plus, President Biden imposes limits on US investments in China. Meanwhile,
Speaker 3: Ali Baba returns to growth across all the main divisions,
Speaker 3: defying China's economic turbulence.
Speaker 4: What this all means for the Chinese tech.
Speaker 3: Sector Finally, will take a deeper look at the Supreme
Speaker 3: Court ruling in the epic case siding with Apple. At
Speaker 3: least for now, the single day we're watching in the
Speaker 3: earning story is Disney, so many stories within it, raising
Speaker 3: prices for streaming basically really outperforming the loss on the
Speaker 3: streaming business much narrower than forecasts five hundred and twelve million.
Speaker 4: But this is the Eiger effect.
Speaker 3: Cost discipline and cost cutting is work. The headline spending
Speaker 3: this year will be twenty seven billion dollars for content
Speaker 3: principally instead of the thirty billion they normally spend.
Speaker 4: That is something the market reacted to.
Speaker 3: As lot, as well as some of the financial forecasts
Speaker 3: they gave going forward. Let's get to our Media and
Speaker 3: Entertainment editor Chris Powmery, who joins us from La Chris
Speaker 3: Cost Discipline. Iiger the market likes it. What were some
Speaker 3: of the other key takeaways from that Disney print.
Speaker 5: Well, the the big headliners. Yeah, they've implemented as big
Speaker 5: cost cutting effort. It's dovetailing with the writers and actors strike,
Speaker 5: so they're saving money on production there. And you know
Speaker 5: the resistant general feeling on Maaster. These companies were ill
Speaker 5: spending too much on content. The lower than expected losses
Speaker 5: on streaming half a billion dollars, if you can call that, good,
Speaker 5: and dramatic price increases for the Disney plus and Who
Speaker 5: Services twenty seven percent hike as they try to get
Speaker 5: to profitability next year in streaming as they promised.
Speaker 3: You mentioned the lost half a billion dollars five hundred
Speaker 3: and twelve million on the streaming business in the quarter
Speaker 3: a year ago it was one billion, and I think
Speaker 3: the executives have guided us to seven hundred and fifty million.
Speaker 3: We're still obsessed with subscribe account So Disney Plus subscribers
Speaker 3: overall fell seven point four percent right in the course
Speaker 3: had gone. But the main story there is Disney Plus
Speaker 3: hot Star explains to what's what happened?
Speaker 5: Well, they lost the streaming rights to India Premier Cricket League,
Speaker 5: which was a big deal, big source of subscriber growth
Speaker 5: in India and a couple other countries, and so that
Speaker 5: is really you know, you're seeing the impact of that
Speaker 5: now for a few quarters, just a dramatic decrease and
Speaker 5: subscribers locally there.
Speaker 3: Hey, Chris, what did Igo and co say about the
Speaker 3: writers and actors strike and how that's going to impact
Speaker 3: the content s late.
Speaker 5: It was mord into the three billion dollars in content reduction,
Speaker 5: so they didn't specify it how much was due to
Speaker 5: the strikes as opposed to just an overall reduction in
Speaker 5: spending that they've been implementing. But it's a significant enough
Speaker 5: number and we've seen these similar numbers from all the.
Speaker 1: Big media companies in recent weeks.
Speaker 5: Billions of dollars collectively in savings as they don't have
Speaker 5: to make new TV shows and films right now, All.
Speaker 3: Right, Bloomberg's Media entertainment editor, Chris Palmery. The other big
Speaker 3: piece of news is Disney raising streaming prices right there,
Speaker 3: it's a twenty seven percent hike for the ad free
Speaker 3: version of Disney Plus it goes from fourteen to fourteen
Speaker 3: dollars a month from eleven. Really interesting, the story of
Speaker 3: Disney keeping up with Netflix in that sense. Let's keep
Speaker 3: a conversation going ross Gerba, president and CEO and co
Speaker 3: founder of Gerber Kawasaki, an investor in Disney. That's a
Speaker 3: lot to take in, right, It's very rare you see
Speaker 3: four red headlines on the Bloomberg terminal from a single
Speaker 3: earnings report. But what was the main point for you?
Speaker 1: Russ?
Speaker 2: I think the main point is exactly what you guys
Speaker 2: have been focused on, is right sizing the amount of
Speaker 2: spending that's being done in Hollywood with the actual revenue
Speaker 2: coming in from direct to consumer sources. So you know,
Speaker 2: they started out really in a race for subscribers. I'm
Speaker 2: very similar to online gambling. Lots of acquisition costs, and
Speaker 2: now the business has matured and they have you know, well,
Speaker 2: almost two hundred million plus subscribers, you know, and when
Speaker 2: you look at the business, they're very close to profitability.
Speaker 2: So these are the changes that need to be made
Speaker 2: to make streamers profitable like Netflix. So when you look
Speaker 2: at Netflix's profitability with over three and a half billion
Speaker 2: of free cash flow and growing, you know what the
Speaker 2: potential is for Disney, even if they don't add subscribers,
Speaker 2: is to see profits actually come from these streamers in
Speaker 2: the next year.
Speaker 4: Russ.
Speaker 3: Just for the benefit of our audience, I'm looking on
Speaker 3: the Bloomberg terminal. Gerbak Kawasaki has around one hundred and
Speaker 3: fifty thousand Disney shares as of June thirtieth, So.
Speaker 4: You've got skin in the game.
Speaker 3: You're a big EIGA fan, right, has your perception of
Speaker 3: him and his job changed based on what you heard
Speaker 3: last night.
Speaker 2: Not that his job has changed. He has a very
Speaker 2: challenging job, but he's got the help that I was
Speaker 2: hoping and praying he would with Kevin Mayer and Tom SAgs.
Speaker 2: You know, I know Kevin Maher and I am always
Speaker 2: impressed by his aggressiveness, his connections, his ability to get
Speaker 2: projects done in Hollywood.
Speaker 1: And I see, you know, Iiger.
Speaker 2: Making a move on Candle Media and bringing these executives
Speaker 2: back in the fold. And the big news about ESPN
Speaker 2: getting into the gambling business.
Speaker 1: With Penn Gaming.
Speaker 2: You know, they kicked port Nooy out and they added
Speaker 2: ESPN and this is a huge win for ESPN, not
Speaker 2: only with new revenue streams, but getting out to the
Speaker 2: consumers in a meaningful way and ultimately building a standalone
Speaker 2: sports app that could rival any app out there. So
Speaker 2: there are some exciting things out there, but ultimately Eiger
Speaker 2: needs to focus on content.
Speaker 1: They need good movies. That really is the fuel of.
Speaker 2: Disney and that's really what I think Iigers really, you know,
Speaker 2: main goal is besides just cutting costs, but improving content.
Speaker 3: There's like two competing forces here where they're trying to
Speaker 3: have cost discipline but you know, and reduce content spending.
Speaker 4: But the content slate is impacted because of the strikes.
Speaker 4: People want good stuff to watch.
Speaker 3: So how does Disney get the balance right making sure
Speaker 3: they've got things that get eyeballs without overspending.
Speaker 2: Well, unfortunately, the movie business is very you know, hit
Speaker 2: and miss and somewhat random, and there's no real formula
Speaker 2: for success.
Speaker 1: As we've seen over the years.
Speaker 2: Disney's had a great run over its long term in
Speaker 2: finding tremendous talent. So what's happening now with the strike,
Speaker 2: And we're hoping that the strike ends at the end
Speaker 2: of summer, once everybody's done with their vacations realize they
Speaker 2: need to make money again. So I do think that
Speaker 2: the strike will end soon and we won't see too
Speaker 2: much of a hiccup. But there's been so much content
Speaker 2: made over the last two years. None of us have
Speaker 2: seen even close to all of it. And this is
Speaker 2: what I think the writers and the actors are miscalculating,
Speaker 2: and maybe there's a short term effect of their strike,
Speaker 2: but there's just so much content in the hopper.
Speaker 1: There's international content.
Speaker 2: They are even green lighting independent projects right now. They're
Speaker 2: over one hundred productions that were green lighted by SAG
Speaker 2: even during the strike, and some of them are for
Speaker 2: big streamers like Apple TV.
Speaker 1: So the strike is really just posturing in the industry.
Speaker 2: After having just an amazingly profitable period of time, now
Speaker 2: these companies need to make money. It's a bad time
Speaker 2: for a strike, and they're going to cut costs into
Speaker 2: what's necessary to right size their businesses. So it's a
Speaker 2: changing time and We're seeing it in technology, and we're
Speaker 2: seeing it now in entertainment.
Speaker 1: As we write size in the post pandemic era.
Speaker 3: Michael Morris, an analyst at Guggenheim who covers the company,
Speaker 3: asked for on the call, what are the chances of
Speaker 3: a big technology company buying Disney? And I said, I'm
Speaker 3: not gonna I'm not gonna comment about that, but the rumor,
Speaker 3: the idea has been there for so long.
Speaker 4: What do you think about that?
Speaker 1: US? Well, I think if Apple had, you know, the
Speaker 1: I didn't.
Speaker 2: Well, I think if they did, they would have bought
Speaker 2: Netflix in the day, they would have bought Tesla in
Speaker 2: the day. And they've had several attempts at Disney, and
Speaker 2: they certainly should take this opportunity right now, but they're
Speaker 2: not going to. So Apple isn't that company, and they're
Speaker 2: wholly focused on Vision pro. I think the one to
Speaker 2: look at is really Amazon and Google. I do think
Speaker 2: the future of entertainment is very much going to be
Speaker 2: led by tech giants, not traditional media companies.
Speaker 1: And so as we see.
Speaker 2: This transition, you know, there's a very high likelihood that
Speaker 2: somebody might bid for all or parts of Disney. That said,
Speaker 2: I think the company is fine the way it is,
Speaker 2: and they just need to you know, fix the problems
Speaker 2: they have, which are fixable, and the stock has tremendous
Speaker 2: value in my mind for long term investors, despite you know,
Speaker 2: it's poor performance over the last two years.
Speaker 1: If you look at the ten years.
Speaker 2: Before it, it's been a phenomenal performer under Eiger. So
Speaker 2: we've had a big step back, but I think it's
Speaker 2: an opportunity for investors. In my fun GK it's a
Speaker 2: top holding for us. It's in the top fifteen holdings
Speaker 2: for US. And I'm you know, a long term investor
Speaker 2: in Disney and I'm not, you know, planning on changing
Speaker 2: that really quick.
Speaker 3: On the tech perspective, Disney was talking about how they
Speaker 3: have the technology to assess password sharing and that you know,
Speaker 3: going into the next fiscal year would be more of
Speaker 3: a priority. That was a factor for Netflix and its earnings.
Speaker 3: How do you think about password sharing in the context
Speaker 3: of Disney plus Well.
Speaker 2: I was surprised how successful Netflix was in getting users
Speaker 2: to sign up in the password sharing and having little backlash,
Speaker 2: as I thought possibly they could have some pretty severe
Speaker 2: backlash and lose subscribers because of it. But in in hindsight.
Speaker 2: If the content's good, people will pay for it. And
Speaker 2: that's the bottom line, you know, sort of the debate
Speaker 2: over you know, will people pay for X and will
Speaker 2: people pay for social media platforms versus paying for entertainment
Speaker 2: platforms like Netflix or Disney Plus. And what we're seeing
Speaker 2: is people will pay and we have the technology to
Speaker 2: you know, hold people accountable. And I think that's you know,
Speaker 2: a win win for all involved. I think giving away
Speaker 2: the product, you know, at the beginning, it's served everybody,
Speaker 2: but now it doesn't.
Speaker 3: All right, ros Gerba, President, CEO and co founder of
Speaker 3: Gerber Kawasaki with the Disney reaction, thank you very much.
Speaker 3: Coming up here on Bloomberg Technology, what President Biden's executive
Speaker 3: order means for China tech and the US tech sector.
Speaker 3: We're going to talk about that and more with Joannetheny
Speaker 3: Advises Capital Management.
Speaker 4: That's coming up next. This is Bloomberg.
Speaker 3: President Joe acted in executive order yesterday placing stringent restrictions
Speaker 3: on specific US investments in China's sensitive tech sectors, for example, Chips,
Speaker 3: quantum Tech, and select AI systems. This is part of
Speaker 3: a push to restrict the company's ability to develop next
Speaker 3: generation military and surveillance technologies that could potentially threaten US
Speaker 3: national security.
Speaker 4: That is the news.
Speaker 3: Let's bring in Joan Fini, partner and portfolio manager at
Speaker 3: Advisor's Capital Management.
Speaker 4: You know you're an investor.
Speaker 3: With a global view, but we also know you as
Speaker 3: somebody with a long history with the chip sector. The
Speaker 3: chip sector a target of this Biden initiatives. What's your
Speaker 3: reaction to the executive order?
Speaker 4: First of all, you.
Speaker 6: Know, this is yet another move by the US government
Speaker 6: over the last many years, spanning administrations, to try to
Speaker 6: limit the flow of technology to China.
Speaker 7: You know, for many years we basically gave our technology
Speaker 7: away by looking the other way when China was acquiring
Speaker 7: technology through dubious means, through trade relations, through manufacturing operations
Speaker 7: in China. And now you know with the previous administration
Speaker 7: in this one, the professionals within those departments are trying
Speaker 7: to curtail that and.
Speaker 8: This is yet another way so by.
Speaker 7: Restricting venture capitalist's ability to make new investments in China
Speaker 7: and private equity ability to make new investments in China.
Speaker 7: The hope isn't so much that the deprivation of that
Speaker 7: bit of capital, that bit of money will really slow
Speaker 7: China innovation. It's more the stopping of those people providing
Speaker 7: help to those companies. So it's really the technology transfer,
Speaker 7: the knowledge transfer that they want to stop. It's not
Speaker 7: really about the money involved, because it's very little as
Speaker 7: the whole of China investment in new technology.
Speaker 3: You make a good point that's so relevant to the
Speaker 3: Bloomberg Technology or audience that this is essentially a restriction
Speaker 3: on private capital investment VC private equity. But as a
Speaker 3: public market investor, does it sound were the attractiveness of
Speaker 3: any of the Chinese ADRs that trade on US exchanges?
Speaker 7: Well, there are a lot of reasons to be concerned
Speaker 7: about specific Chinese ADRs.
Speaker 8: You know, we recognize.
Speaker 7: That the political tension between the US and China is
Speaker 7: not likely to ease anytime soon, and that does help
Speaker 7: to guide the sorts of investments we're willing to make
Speaker 7: in China in other parts of Asia.
Speaker 8: But it doesn't discourage us entirely.
Speaker 7: You know, our international group is on the ground looking
Speaker 7: for ideas there.
Speaker 8: You know, in our balance strategy, which I'm responsible for, we.
Speaker 7: Still like Taiwan semi Conductor despite the political risks that
Speaker 7: we obviously acknowledge are out there because Taiwan Semi serves
Speaker 7: the global demand for semiconductors, and they're at the forefront
Speaker 7: through at the leading.
Speaker 8: Edge of advanced manufacturing, and they.
Speaker 7: Serve so many US designers of chips and they're an
Speaker 7: integral part of that, from Nvidia.
Speaker 8: To A and D to Broadcom and others.
Speaker 3: Yeah, later in the show, we're going to act you
Speaker 3: talk a little bit about Tokyo Electron, which is a
Speaker 3: Japanese chip gear maker equipment maker, but they're getting a
Speaker 3: lot of demand from China because at the same time,
Speaker 3: China is trying to react to this, right, So think
Speaker 3: about some of the names we're interested in. In Vidia
Speaker 3: has circumvented the other US restrictions on technic knowlogy export
Speaker 3: by producing a lower power GPU.
Speaker 4: What is your.
Speaker 3: Perspective on how US technology names who want to do
Speaker 3: business in China can get around some of these executive orders.
Speaker 7: Yeah, so for a while, I think US companies like Nvidia, AMD,
Speaker 7: Cisco and others will continue to be able to sell
Speaker 7: into China. But as Invidia has done, they'll have to
Speaker 7: sell less capable chips than the leading is that they've
Speaker 7: got to sell elsewhere in the world.
Speaker 8: And as you saw not just what.
Speaker 7: Tokyo Electron said about the continued demand for equipment are
Speaker 7: into China, because you know, China is going to want
Speaker 7: to build and it's going to continue to build up
Speaker 7: its own semiconductor manufactur string capabilities, encouraged in part by
Speaker 7: all these restrictions not just from the US but from
Speaker 7: Europe as well the Netherlands. And in addition, we saw
Speaker 7: also that according to the Financial Times in videos receiving
Speaker 7: like five billion dollars worth of orders from Chinese companies
Speaker 7: now because they're afraid that the restrictions are only going
Speaker 7: to get more severe. So China remains an opportunity even
Speaker 7: if they are constrained, because they're going to want to
Speaker 7: get as high level chips and as high level equipment
Speaker 7: in the semiconductor industry as they possibly can.
Speaker 8: And it's pretty clear that China.
Speaker 7: Is going to be making its own investments in design capabilities,
Speaker 7: in manufacturing capabilities, and a lot of the people they
Speaker 7: have on staff right at Smith and at other locations
Speaker 7: in the design world as well as manufacturing have been
Speaker 7: trained in the US and have worked for US companies,
Speaker 7: so they have a lot of knowledge.
Speaker 1: To work with.
Speaker 3: Joan All told on any metric or scale you like,
Speaker 3: what is your assessment on the warmthful health of the
Speaker 3: US China relationship.
Speaker 4: Where do we stand?
Speaker 7: Oh, well, on a scale of one to ten, one
Speaker 7: being least healthy, I'd say we're around a three right now.
Speaker 8: I mean, it is not a good place because of
Speaker 8: our goals in the.
Speaker 7: US to prevent China from you know, creating military capabilities
Speaker 7: that would be a threat to US are essentially in
Speaker 7: conflict with China's goals and that level of tension.
Speaker 8: You know, I'm not a military a political.
Speaker 7: Expert, but I don't see that level of tension easy
Speaker 7: from everything I've read, that's not going to really get
Speaker 7: any better. Can we cooperate on fronts outside of those
Speaker 7: sensitive areas, Yes, obviously, and we should, you know, hope
Speaker 7: for the sake of our companies and our consumers, by
Speaker 7: the way, who benefit from getting cheaper goods out of China,
Speaker 7: that the restrictions don't spread beyond those essential areas.
Speaker 8: Where the US finds, you know, it's needed for our security,
Speaker 8: and clearly that's the case.
Speaker 7: I mean, what Nvidia continues to sell, Look at what
Speaker 7: other companies can take you to be able to sell,
Speaker 7: whether it's Tokyo Electron or Applyed Materials or KOA or
Speaker 7: LAMB Research.
Speaker 8: Right, there's still plenty of opportunity in China.
Speaker 7: It's just a bit narrower now, a bit lower margin
Speaker 7: now than it was before.
Speaker 3: The US China relationship on a three out of ten
Speaker 3: on the Juan Feeni Advisors Capital Management Scale.
Speaker 4: Thank you so much for your time.
Speaker 3: Going to catch up here on Bloomberg Technology.
Speaker 4: Time for talking tech.
Speaker 3: Chinese chip makers are speeding up investments in mature semiconductor
Speaker 3: equipment as the US and its allies Titan Export controls to.
Speaker 4: Cut Asia's tech edge.
Speaker 3: Asia's biggest semiconductor gear maker is seeing extremely strong investment
Speaker 3: in China quote and is winning new customers there. That
Speaker 3: all according to the name Tokyo Electron and its CEO.
Speaker 4: And something else we're tracking is Ali.
Speaker 3: Barber returning to growth across all its main divisions, defying
Speaker 3: China's economic turbulence. This a first step forward to a
Speaker 3: long or comeback after more than a year of malaise.
Speaker 3: China's online shopping leader reported a better than expected fourteen
Speaker 3: percent rise in revenues during a quarter when the world's
Speaker 3: number two economy struggle to gain momentum after years of
Speaker 3: COVID zero restriction shares up more than five percent in
Speaker 3: US trading today.
Speaker 4: Those are the US listed ADRs. Let's head to Space
Speaker 4: three two one release release release.
Speaker 3: That's the first set of private tourism passengers embarking on
Speaker 3: the ride of a lifetime two out of space on
Speaker 3: Virgin Galactic's second commercial spaceflight, joining us now.
Speaker 4: Bloomberg News reporter on.
Speaker 3: All Things Space, Lauren grush Hey seventh successful launch. Finally,
Speaker 3: twenty years later, Virgin Galactic gets some tourists into space.
Speaker 4: Give us the details.
Speaker 8: Yeah, I mean, if you think about it, really has
Speaker 8: been leading to this moment.
Speaker 9: I know I probably said that during their last flight,
Speaker 9: but this is the one that sent private pain space
Speaker 9: tourists to space, and that is ultimately why Virgin Galactic
Speaker 9: was founded in the first place, nearly twenty years ago.
Speaker 9: In fact, one of the passengers on today's flight, John Goodwin,
Speaker 9: has been waiting almost two decades, He's had his ticket
Speaker 9: that long, and he finally got to make good on
Speaker 9: that promise that Virgin Galactic made for him all.
Speaker 8: Those years ago.
Speaker 9: So this is why it was such a big moment.
Speaker 9: It's capping off nearly two decades of development for the company,
Speaker 9: and from here on out it's going to be monthly
Speaker 9: flights of these paying space tourists hereafter.
Speaker 3: So there's some things we have to clarify here. Originally
Speaker 3: ticket prices were two hundred and fifty thousand dollars, right,
Speaker 3: they closed them while they basically put a pause on operations.
Speaker 3: When they reopened they rose to four hundred and fifty.
Speaker 4: Thousand on board.
Speaker 3: We had three essentially customer tourist astronauts, but two of
Speaker 3: them were.
Speaker 4: Not paying customers.
Speaker 1: Right.
Speaker 4: They won these tickets in a charity draw.
Speaker 8: Yes, that's correct.
Speaker 9: Only John was really the that was one of the early.
Speaker 3: Ticket holders, and he competed at the nineteen seventy two Olympics.
Speaker 3: The big question is what happens next. What do we
Speaker 3: know about the cadence of launches now the last one
Speaker 3: was in June one today?
Speaker 4: How do they get going?
Speaker 9: So the ideal goal is to do monthly launches from.
Speaker 8: Here on out.
Speaker 9: So we should see one of these flights with you know,
Speaker 9: six passengers on board, two pilots for passengers go into space.
Speaker 9: I think for the foreseeable future, Virgin Galactic wants to
Speaker 9: have a support astronaut on board, so someone from within
Speaker 9: the company to kind of guide the passengers along. But
Speaker 9: you know, if on these flights we should should see
Speaker 9: about three ticket holders, you know, get to finally fulfill
Speaker 9: their dream of seeing space.
Speaker 8: And that's a big deal because.
Speaker 9: As far as we're aware, the company has a backlog
Speaker 9: of eight hundred customers that have been holding onto tickets,
Speaker 9: some for many years.
Speaker 3: Bloomberg Space Correspondent Lauren Grush, thank you very much. Welcome
Speaker 3: back to Bloomberg Technology. Ed Ludlow here in San Francisco.
Speaker 3: Apple is a key name that we're watching in the markets.
Speaker 3: We're actually basically treading water now completely flat on the
Speaker 3: stock it did fall twenty four hours ago. And you'll
Speaker 3: remember the headline broke during Bloomberg Technology that in the
Speaker 3: context of Apple, the US Supreme Court is allowing the
Speaker 3: iPhone maker to keep its app store payment rules in
Speaker 3: place for the time being. This is dismissing a request
Speaker 3: from Epic Games that would have let developers direct iPhone
Speaker 3: users to other lower priced alternative stores online.
Speaker 4: Remember the context here.
Speaker 3: The ninth US Circuit Court of Appeals had sided with
Speaker 3: Epic and said that Apple's app store rules contravened California
Speaker 3: competition law. What the Supreme Court is doing simply here
Speaker 3: is intervening, saying for the time being, Epic's request, which
Speaker 3: was to immediately allow users to be redirected other stores,
Speaker 3: has been rejected.
Speaker 4: Apple is expected.
Speaker 3: To appeal the original decision later in the year, but
Speaker 3: if the judges won't hear it, then then it's size
Speaker 3: of Epic. Anyway, We've got to discuss what this means
Speaker 3: for epics prospects of enforcing the original rule. And bring
Speaker 3: in Sarah o'lamb. She's a senior fellow at the Tech
Speaker 3: Policy Institute.
Speaker 4: That was a lot.
Speaker 3: It's a difficult one to explain, Sarah. But at a
Speaker 3: high level, what does the Supreme Court intervention mean at
Speaker 3: this stage?
Speaker 1: Sure?
Speaker 10: So, Justice Kagan denied an application by Epic to overturn
Speaker 10: the Ninth Circuit stay on the District Court's order, pending
Speaker 10: Apple's petition for Sercchi orri to the Supreme Court this fall.
Speaker 10: As you said, so, basically, the Federal Appellate Court said
Speaker 10: that Apple doesn't need to lift yet it's anti steering provisions. Basically,
Speaker 10: the buttons, external leans or other calls to action that
Speaker 10: direct customers to alternative purchasing mechanisms in their app store.
Speaker 10: They don't need to lift that restriction. Yet Epic charges developers'
Speaker 10: lower fees on their own app store, and so they
Speaker 10: want a way to tell folks that, oh, you can
Speaker 10: click this button to go to our store. So that's
Speaker 10: what's that issue here.
Speaker 3: So just to remind our audience, the Appeals Court has
Speaker 3: put its decision on hold so that Apple has time
Speaker 3: to file a Supreme Court appeal later in the year.
Speaker 4: But the ruling only.
Speaker 3: Kicks in if the Justices refuse to hear the case.
Speaker 4: So it's complicated.
Speaker 3: What is the Tech Policy Institute's kind of big picture
Speaker 3: stance on this battle and the idea at the heart
Speaker 3: of it.
Speaker 10: Well, what's interesting is that it's about this state law,
Speaker 10: California's unfair competition law, and it's focused only on the
Speaker 10: anti steering provisions. Basically, can other app stores put links
Speaker 10: and buttons in Apple's app store to say, user, you
Speaker 10: can click this link to go to another store to
Speaker 10: buyer in app purchases. That's what we're talking about here.
Speaker 10: There are other items that are in Actually another trial
Speaker 10: with Epic versus Google coming up this fall, and so
Speaker 10: that'll be interesting to watch as well. What's interesting to
Speaker 10: me also is looking at Epic and Fortnite. So Epic
Speaker 10: it has three different lines of business itself. It's a
Speaker 10: multi billion dollar company that is a game developer but
Speaker 10: also an app store and also a distributor. And so
Speaker 10: what's really interesting is to see how these two app
Speaker 10: stores are competing in the courts.
Speaker 3: The technology story here is about developers and the app store.
Speaker 3: Do you see any merit in kind of Apple's argument,
Speaker 3: which in summary essentially is that it is a relief
Speaker 3: to developers. You know, Apple feel like they're giving a
Speaker 3: lot of business and visibility opportunity with the rules such
Speaker 3: as they are.
Speaker 10: Yes, well, I think, I mean personally, I think it
Speaker 10: makes sense that Apple would say on their own app
Speaker 10: store that we don't want links to other app stores
Speaker 10: that are competing with us, and so on that point,
Speaker 10: it makes sense that a store wouldn't want to be
Speaker 10: able to promote other stores in their own store. So
Speaker 10: that's what it is that issue here. There are other
Speaker 10: claims in other lawsuits, and actually there are the two
Speaker 10: other claims that Epic made at trial were denied were failed.
Speaker 10: So what's really at issue here is that disclosure rule,
Speaker 10: the anti steering rule, and California's unfair competition law. And
Speaker 10: so you know, there was a sixteen day bench trial.
Speaker 10: There were dozens of witnesses, nine hundred exhibits in September
Speaker 10: twenty twenty one, and so they thoroughly went through all
Speaker 10: the different claims. The only one that survived, which is
Speaker 10: that issue here is are those buttons or the links
Speaker 10: to other stores? And that seems you know, that's a
Speaker 10: very contained question. What's interesting as well is the appeal
Speaker 10: that Apple might file or will file with the Supreme
Speaker 10: Court raises some interesting federalism issues, and so that'll be
Speaker 10: good to watch.
Speaker 3: Well, that's what I want to ask you next. You know,
Speaker 3: we love having you on the show, Sarah. You have
Speaker 3: such a deep knowledge in the area. But I appreciate
Speaker 3: you don't have a crystal ball, right, But what do
Speaker 3: you think will be the outcome if the Justices choose
Speaker 3: not to hear the Supreme appeal? What are the other
Speaker 3: avenues that either party can go down?
Speaker 10: Well, so it's sounded like we'll have to wait and
Speaker 10: see what Apple files in their serciari appeal, But it
Speaker 10: sounded like they they will raise questions about, you know,
Speaker 10: ken a ruling on a state law effect by a
Speaker 10: federal court affect broadly parties outside of the lawsuit. So
Speaker 10: that'll be an interesting question to ask when it comes
Speaker 10: to the ecosystem of game gaming. I think there are
Speaker 10: a lot of questions about antitrust theory and about competition
Speaker 10: in the marketplace that are unanswered and that are good
Speaker 10: to go through discovery and litigation to actually look at
Speaker 10: the numbers the market shares. So we'll we'll be watching
Speaker 10: the Epic versus Google trial as well to see, you know,
Speaker 10: how much competition is there in this marketplace. And yeah,
Speaker 10: it makes sense for gaming platforms to have have rules.
Speaker 3: Sarah, this is epics response to the Supreme decision twenty
Speaker 3: four hours ago. The result will be to inge not
Speaker 3: only Epic, but innumerable consumers and other app developers for
Speaker 3: a significant period of time. Just very quickly, in the
Speaker 3: thirty seconds we have left. What do your response I
Speaker 3: suppose to Epic's position on this, Well.
Speaker 10: My question for them would be, you know, how can
Speaker 10: you measure injury? And so they have to prove losses
Speaker 10: and that's a counterfactual.
Speaker 8: It's not clear to.
Speaker 10: Me that there would be a lot of losses. I mean,
Speaker 10: people know that they can go outside of different stores
Speaker 10: to reach Fortnite and Epic content. They can go to
Speaker 10: Epics app store themselves, and so it's a matter of
Speaker 10: discovering what that number is, having experts weigh in, and
Speaker 10: doing some economic analysis.
Speaker 3: Sarah Olam, Senior fellow at the Tech Policy Institute, thank
Speaker 3: you for coming here on Bloomberg Technology, reacting what's been
Speaker 3: a big story in the last twenty four hours. Alright,
Speaker 3: coming up here on Bloomberg Technology. Is it a good
Speaker 3: time to expand your investments outside of the US. That
Speaker 3: has been the question of this program. We're going to
Speaker 3: talk all things from the venture capital perspective in the domestic,
Speaker 3: US and abroad with Christine Zi, CEO of five hundred Global.
Speaker 4: That's coming up next. This is Bloomberg.
Speaker 3: You know, amid the flood of big tech layoffs, it's
Speaker 3: becoming harder than ever to try and enter y Combinator,
Speaker 3: the famous Silicon Valley startup accelerator where Airbnb, Coinbase, and
Speaker 3: Reddit all got their start. Bloomberg Original's host and executive
Speaker 3: producer Emily Chang sat down with y Combinator CEO Gary
Speaker 3: tan to talk about the state of tech markets and
Speaker 3: venture capital have listened.
Speaker 11: We're seeing tens of thousands of people getting laid off
Speaker 11: from tech companies.
Speaker 4: How does this play out?
Speaker 12: I think a lot of large companies started treating their
Speaker 12: employee base almost as a place to park resources and
Speaker 12: almost as a competitive moat versus the other giants. And
Speaker 12: when I think about the amount of talent that was
Speaker 12: sort of locked up in cushy jobs that you could
Speaker 12: have been actually out there in the market making new technology,
Speaker 12: pushing things forward. I'm hoping a lot of them actually
Speaker 12: come over to startups and they realize, oh, this is
Speaker 12: what it's like to run fast again.
Speaker 11: What's your advice for these workers who are getting laid off.
Speaker 11: It does sound a little trite to just say it's
Speaker 11: time to build, right it Sure it does.
Speaker 12: I mean I think some of it is like a
Speaker 12: take stock right, Like getting much more connected to the
Speaker 12: problems out there, I think will lead to just a
Speaker 12: lot more direct access to I mean, building equity, building
Speaker 12: businesses that really matter.
Speaker 11: Well, speaking of equity, for years, tech workers have been
Speaker 11: paid in stock and that was sort of you know,
Speaker 11: the ticket, You're taking a risk on this company. It
Speaker 11: could be worth ero or it could you know, be
Speaker 11: worth millions. Right, we're seeing kind of the dark side
Speaker 11: of RSUs are getting paid in stock.
Speaker 7: Now.
Speaker 11: Do you think that's still the way it should work.
Speaker 4: In Silicon Valley?
Speaker 12: I mean that's some of the magic of startups. I
Speaker 12: think this is about labor being able to access actual capital,
Speaker 12: and this is like one of the most direct and
Speaker 12: most awesome versions of it. Some of the bad behavior
Speaker 12: we saw from startup founders was trying to reach for
Speaker 12: that billion dollar valuation because they wanted the headline out
Speaker 12: there saying that they're a unicorn now. But that comes
Speaker 12: at a cost, right, the focus on valuation and getting
Speaker 12: that next notch of valuation above all else. That comes
Speaker 12: at both a great personal cost to the founders themselves
Speaker 12: but also to the employees.
Speaker 11: So what do you think needs to change?
Speaker 12: I think some of it is already happening, right. You know,
Speaker 12: the revaluation of startups right now is starting and it
Speaker 12: will continue. People are going to be a lot more
Speaker 12: mindful about do I really need to do that fifty
Speaker 12: to two hundred million dollar rays.
Speaker 3: That was why Combinator CEO Gary Tam watch more of
Speaker 3: the circuit with Emily Chang tonight ten pm Eastern Time
Speaker 3: on Bloomberg Television, or if you're a modern day person,
Speaker 3: stream it at eight pm Eastern on Bloomberg Originals. Let's
Speaker 3: stick with the venture capital story now, and for today's
Speaker 3: VC Spotlight, let's bring in Christine's side. She's the founding
Speaker 3: partner and CEO of five hundred Global, a multi stage
Speaker 3: venture capital firm two point five billion dollars in assets
Speaker 3: under management. The big story of the show has been
Speaker 3: President Biden's executive order on limiting US investment privately VC
Speaker 3: or PE into mainland China. Now I don't think five
Speaker 3: hundred Global does invest into mainland China, But what is
Speaker 3: your reaction to that executive order?
Speaker 13: Well, thanks so much Ed for having me, and it
Speaker 13: really makes me reflect back to the early days of
Speaker 13: five hundred. We just celebrated our thirteenth anniversary a couple
Speaker 13: of weeks ago, so go back to twenty ten, very
Speaker 13: different era in Silicon Valley and technology and venture capital.
Speaker 13: What has really evolved over the last thirteen years that
Speaker 13: five hundred has been investing globally is certainly huge growth
Speaker 13: in venture funding tech penetration worldwide, but also and particularly
Speaker 13: in the US this intersection between tech, venture and policy,
Speaker 13: so I think this will only increase. As you mentioned
Speaker 13: five hundred global we aren't active in China.
Speaker 4: Our focus has.
Speaker 13: Largely been investing US and globally, and for US that
Speaker 13: really means what we've actually referred to as the rise economies,
Speaker 13: So twenty five of what we see as the largest
Speaker 13: fastest growing economies in markets like Indonesia, Malaysia, Turkey, Mexico,
Speaker 13: and so forth, and we've seen great opportunities there.
Speaker 3: At the heart of the Biden story, though, is the
Speaker 3: merits and benefits of investing in US tech versus international markets.
Speaker 3: So some of those countries you listed, what is it
Speaker 3: about them that makes them as attractive as a venture back,
Speaker 3: investment into a founder or even a largest startups you're
Speaker 3: at multi stage right, yes.
Speaker 13: Well, early on we began investing both in the US
Speaker 13: Silicon Valley but outside of the US. Since twenty ten
Speaker 13: and today our portfolio is more than twenty eight hundred companies,
Speaker 13: about half of that portfolio is non US, specifically in
Speaker 13: those rise economies that I mentioned, like in Indonesia or
Speaker 13: Mexico or Turkey or so forth. What we have seen
Speaker 13: early on is that these are very large economies, fast
Speaker 13: growing from both population growth as well as GDB growth.
Speaker 13: And we took a bet very early on that because
Speaker 13: of the many trends that we were seeing in technology.
Speaker 13: If you remember twenty ten, costs to start a company
Speaker 13: were coming down dramatically online platforms like a Google Meta previously, Facebook, Twitter,
Speaker 13: Mobile was really taking off in terms of Apple and Android,
Speaker 13: that all of this would make it just much more
Speaker 13: cost effective and the barrier to start a company would down.
Speaker 13: So as a result, we would start seeing a lot
Speaker 13: of big opportunities from founders building all around the world.
Speaker 13: And so that is really our belief. It continues to
Speaker 13: hold true and for us, I think we're going to
Speaker 13: just continue to deepen that exposure.
Speaker 3: Christine, you sound very busy, I mean, and I mean
Speaker 3: that kindly. Here on VC Spotlight, you know, we have
Speaker 3: a number of vcs that are sort of narrowly focused
Speaker 3: on early stage or growth stage, or the firm might
Speaker 3: have one early stage fund, one growth stage fund, but
Speaker 3: within geographic narrow focus twenty eight hundred portfolio companies, eighty countries,
Speaker 3: multi stage just from an industry respective, how do you
Speaker 3: manage that as a firm well.
Speaker 13: You know, from the early days, a lot of that
Speaker 13: vision was really to find great opportunities great founders in
Speaker 13: all corners of the world. Because of that bet we took,
Speaker 13: and our roots are certainly in early stage, and that
Speaker 13: continues to be an area we're very active in. However,
Speaker 13: a lot of the opportunity we saw was that a
Speaker 13: lot of these markets that we took a bet on
Speaker 13: early coming online have now generated a number of big
Speaker 13: outcomes either regional or global category leaders, and we've had
Speaker 13: a great opportunity because of the early relationships we've established
Speaker 13: with founders from you know, early on as either one
Speaker 13: of or the first institutional backer to really follow the
Speaker 13: founder's journey and help back them from pre seed to
Speaker 13: pre IPO. So for us, it's really in line with
Speaker 13: our certainly the original vision and thesis. But you know,
Speaker 13: we're excited to keep supporting the founders in all corners
Speaker 13: of the world where they may actually need it more
Speaker 13: In terms of the development of venture the venture ecosystem, we.
Speaker 3: Showed some of your port photo companies a moment Ago, Canva,
Speaker 3: get Lab, Credit, Calm, and the names that jump out.
Speaker 3: The story of twenty twenty three, though, has been ours
Speaker 3: ficial intelligence. Are you focused on AI native companies or
Speaker 3: more AI adjacent startups that kind of want to jump
Speaker 3: in and gain benefit from the tool of generative AI
Speaker 3: or a large language model.
Speaker 13: It's definitely not never a dull moment, especially as it
Speaker 13: relates to AI and against the stark backdrop of the
Speaker 13: macro markets and valuations falling and funding dropping. But for us,
Speaker 13: because we have our roots in investing in a larger
Speaker 13: number of companies across a number of sectors, one of
Speaker 13: the big benefits of that, and really an advantage for us,
Speaker 13: is to be able to spot what we see our
Speaker 13: emerging innovation not just in the US, but in all
Speaker 13: corners of the world. So as it relates specifically to AI,
Speaker 13: we have been investing in companies in the AI space
Speaker 13: for a number of years, and I think as we
Speaker 13: see the uptick in terms of companies building either like
Speaker 13: you said, they're going after the AI tech stack itself
Speaker 13: or kind of AI adjacent or really going after existing
Speaker 13: sectors from kind of an AI perspective, we definitely are
Speaker 13: leaning in and looking at all of those opportunities and
Speaker 13: then writing investments. And I think what's quite unique again
Speaker 13: from our perspective is that this is not just a Silicon.
Speaker 8: Valley story or just a US story.
Speaker 4: It's really a global story.
Speaker 13: Oftentimes, what we've seen in the early days is that
Speaker 13: certain business models will start in the US and then
Speaker 13: we see them happen in other parts of the world.
Speaker 13: But for AI, it really is happening in parallel in
Speaker 13: many different markets.
Speaker 3: Christine si Founding Partners, CEO of five hundred global twenty
Speaker 3: eight hundred portfolio companies in eighty countries. That is global
Speaker 3: reach here on VC Spotlight. So look, online dating can
Speaker 3: be just as tough as dating in person, from ghosting
Speaker 3: and harassment to chats that don't lead to dates. Now
Speaker 3: AI chatbots could help solve that issue, at least that's
Speaker 3: what a number of these startups are saying.
Speaker 1: Here.
Speaker 3: To unpack more is Bloomberg's ear Nakano and you've been
Speaker 3: reporting on this and specific apps that are tool to
Speaker 3: help in dating, But what's the big picture story here?
Speaker 3: What are the apps purporting to be able to do?
Speaker 14: Yeah, so my colleague Kiln Punder and I we downloaded
Speaker 14: three relatively new apps that are marketed to be AI driven.
Speaker 14: So this is beyond the machine learning that you see
Speaker 14: in traditional dating apps like Tinder and Hinge, and these
Speaker 14: apps are marketed to rid the inefficiencies that you see
Speaker 14: in the dating world. These are things like ghosting and ghosting,
Speaker 14: which is when your matches ignore you, and inefficient matches
Speaker 14: that are just.
Speaker 4: Not they're not good.
Speaker 3: Right, So I actually met my wife on a dating app,
Speaker 3: but it was me doing the work the conversation.
Speaker 4: Right.
Speaker 3: Some of the functionality of the technology is to mimic
Speaker 3: you or to do things on your behalf. Just explain
Speaker 3: how it works and you actually tested it out.
Speaker 14: Yeah, absolutely so. Teaser AI, which is the app that
Speaker 14: gets rid of the small talk, essentially jumps to the
Speaker 14: part where your chatbot talks to your match, so they
Speaker 14: have full license over your conversations and they will break
Speaker 14: the ice with quirky conversations. But to our extent, we
Speaker 14: found out that a lot of them were false facts
Speaker 14: about ourselves.
Speaker 3: One debate for the industry broadly is the cost of
Speaker 3: dating apps. You know, it was the one that I
Speaker 3: used was free, but there's a premium element as well.
Speaker 3: Do these AI driven apps cost What are the fees involved?
Speaker 14: Yeah, so they're free for the most part, but like
Speaker 14: other traditional dating apps, there's a free subscription and the
Speaker 14: premium subscription, and the premium features include things like better matches,
Speaker 14: more matches, or finding out why people didn't like you,
Speaker 14: which is a mystery to a lot of people. And
Speaker 14: these range from four to sixty dollars a month.
Speaker 3: I think that the bit that we got hung up
Speaker 3: on is the mimicking and flirting bit.
Speaker 4: Is it realistic?
Speaker 3: The experience that the AI generated content does it come
Speaker 3: across as a human.
Speaker 14: So we found that they were very very awkward. Sometimes
Speaker 14: the a I would send pictures avatar pictures of themselves
Speaker 14: which are very awkwardly posed, so I wouldn't think that
Speaker 14: they were you know, there was a human behind it.
Speaker 14: But some people seem to really like it. And there's
Speaker 14: also a breakup Buddy app which will help you guide
Speaker 14: through your heel and self journey when a robot breaks
Speaker 14: your heart.
Speaker 4: All right, Bloomberg's Area and Nikano, this is AI irl
Speaker 4: right here.
Speaker 3: On Bloomberg Technology. Unfortunately, that does it for this edition
Speaker 3: of Bloombog Technology.
Speaker 4: Tune in Friday tomorrow.
Speaker 3: We're going to be joined by Kyle Vott, the CEO
Speaker 3: of driverless car company Cruise. A lot of news coming
Speaker 3: out in the self driving space in recent weeks new markets.
Speaker 3: We're still kind of waiting for the real deal, something
Speaker 3: we've talked about here on this program. It has been
Speaker 3: a mega week. We're just four days in. Earnings have
Speaker 3: been a big part of the story, so don't forget that.
Speaker 3: You can recap everything we've talked about on the show,
Speaker 3: a big emphasis on Biden's executive order when it comes
Speaker 3: to investment in China. Check out the podcast wherever you
Speaker 3: get your podcasts. We're on Apple, we're on Spotify, and
Speaker 3: we're on iHeart, and of course the podcast also on
Speaker 3: the Bloomberg platforms. Four days in, Guys, one day to
Speaker 3: go from San Francisco.
Speaker 4: This is Bloomberg Technology