1 00:00:00,240 --> 00:00:11,480 Speaker 1: Bloomberg Audio, Studios, podcasts, radio news. This is Bloomberg Intelligence 2 00:00:11,560 --> 00:00:13,640 Speaker 1: with Scarletfoo and Paul Sweeney. 3 00:00:13,720 --> 00:00:15,800 Speaker 2: How do you think the FED is looking at tariffs? 4 00:00:15,960 --> 00:00:17,160 Speaker 2: The uncertainty of terriffs. 5 00:00:17,280 --> 00:00:19,240 Speaker 3: Let's take a look at the sectors and how they 6 00:00:19,320 --> 00:00:21,800 Speaker 3: performed a lot of investors getting whipsaled every day by 7 00:00:21,840 --> 00:00:24,520 Speaker 3: news events, breaking market headlines. 8 00:00:24,000 --> 00:00:26,239 Speaker 1: And corporate news from across the globe. 9 00:00:26,280 --> 00:00:28,800 Speaker 3: Could we see a market disruption of market event? 10 00:00:28,960 --> 00:00:31,000 Speaker 2: So people just too exuberant out there? 11 00:00:31,120 --> 00:00:33,640 Speaker 3: You see some so called low quality stocks driving this 12 00:00:33,760 --> 00:00:34,520 Speaker 3: short term rally. 13 00:00:34,560 --> 00:00:39,360 Speaker 1: Bloomberg Intelligence with Scarletfoo and Paul Sweeney on Bloomberg Radio, 14 00:00:39,520 --> 00:00:41,440 Speaker 1: YouTube and Bloomberg Originals. 15 00:00:42,320 --> 00:00:44,599 Speaker 2: On today's Bloomberg Intelligence Show, we dig inside the big 16 00:00:44,600 --> 00:00:46,920 Speaker 2: business story is impacting Wall Street and the global markets. 17 00:00:47,120 --> 00:00:49,400 Speaker 3: Each and every week we provide in depth research and 18 00:00:49,479 --> 00:00:51,319 Speaker 3: data on some of the two thousand companies and one 19 00:00:51,400 --> 00:00:54,240 Speaker 3: hundred and thirty industries are analysts cover worldwide today? 20 00:00:54,280 --> 00:00:56,240 Speaker 2: Well, look at why you turnaround at the footwear giant 21 00:00:56,320 --> 00:00:58,560 Speaker 2: Nike is beginning to take hold in North America. 22 00:00:58,600 --> 00:01:00,920 Speaker 3: Plus a look at why Amazon cloud sales may get 23 00:01:00,920 --> 00:01:02,720 Speaker 3: a push from AI in twenty twenty six. 24 00:01:02,960 --> 00:01:07,000 Speaker 2: But first recently on Bloomberg Intelligence, we discussed HBO show Industry. 25 00:01:07,160 --> 00:01:10,280 Speaker 3: Industry is a high six drama following young graduates competing 26 00:01:10,280 --> 00:01:12,960 Speaker 3: for careers in a prestigious London investment bank. 27 00:01:13,160 --> 00:01:15,760 Speaker 2: Now in season four, this year the bank has folded 28 00:01:15,840 --> 00:01:18,000 Speaker 2: and some of these junior bankers have become power players 29 00:01:18,000 --> 00:01:19,920 Speaker 2: in finance, business and politics. 30 00:01:19,959 --> 00:01:21,840 Speaker 3: For more on the show, we sat down with Mickey 31 00:01:21,880 --> 00:01:25,360 Speaker 3: Down and Conrad k co creators, writers and executive producers 32 00:01:25,400 --> 00:01:28,959 Speaker 3: of the HBO show Industry. We began by asking Mickey 33 00:01:28,959 --> 00:01:31,200 Speaker 3: Down about the theme for season four. 34 00:01:31,520 --> 00:01:34,680 Speaker 4: Wow, what a big question. I think the theme season 35 00:01:34,680 --> 00:01:37,559 Speaker 4: four is as you said, you know, these kindacters didn't 36 00:01:37,600 --> 00:01:39,520 Speaker 4: have power, and it was about the recruing power. Now 37 00:01:39,520 --> 00:01:41,280 Speaker 4: they have power, what do they decide to do with it? 38 00:01:41,560 --> 00:01:44,680 Speaker 4: And how does it corrupt them? How does it mutate them? 39 00:01:44,800 --> 00:01:48,080 Speaker 4: And is there a way out of this institution, this life, 40 00:01:48,240 --> 00:01:49,520 Speaker 4: this industry. 41 00:01:49,640 --> 00:01:52,320 Speaker 2: You know, I spent thirty five years on Wall Street, 42 00:01:52,320 --> 00:01:53,920 Speaker 2: you and the many years on a trading desk. You 43 00:01:53,960 --> 00:01:56,040 Speaker 2: guys get it. I mean you got it. I don't 44 00:01:56,040 --> 00:01:57,880 Speaker 2: know how you guys did that. Did you guys work 45 00:01:57,920 --> 00:01:59,640 Speaker 2: on in the financial services before? 46 00:01:59,680 --> 00:02:00,280 Speaker 5: Conrade? I did? 47 00:02:00,400 --> 00:02:00,600 Speaker 2: Yeah? 48 00:02:00,600 --> 00:02:03,000 Speaker 6: After I graduated college. I was. I was a US 49 00:02:03,120 --> 00:02:07,680 Speaker 6: equity sales guy Morgan Stanley for three years and I 50 00:02:07,720 --> 00:02:09,480 Speaker 6: was famously when my boss let me go, he said 51 00:02:09,480 --> 00:02:10,639 Speaker 6: I was the worst salesman he'd. 52 00:02:10,480 --> 00:02:11,440 Speaker 4: Ever met Wall Street. 53 00:02:11,919 --> 00:02:13,440 Speaker 6: So it was like, go and do something else because 54 00:02:13,440 --> 00:02:14,400 Speaker 6: you're pretty useless of this. 55 00:02:14,840 --> 00:02:16,679 Speaker 2: Well that's a true Wall Street career, yet kind of 56 00:02:16,720 --> 00:02:18,480 Speaker 2: Wall Street career until you've been fired from Wall Street. 57 00:02:19,080 --> 00:02:24,360 Speaker 2: That's what I've been there myself. You guys, what's the 58 00:02:24,440 --> 00:02:26,799 Speaker 2: state of the industry in London these states? I mean, 59 00:02:26,800 --> 00:02:28,760 Speaker 2: how are people how are the young people feeling in 60 00:02:28,800 --> 00:02:31,680 Speaker 2: the industry, Because you guys reflect that with your show 61 00:02:31,880 --> 00:02:32,280 Speaker 2: very well. 62 00:02:32,480 --> 00:02:34,959 Speaker 4: Well, I think I'll show is a reflection of almost 63 00:02:35,160 --> 00:02:37,000 Speaker 4: like ten years ago when we were in it, and 64 00:02:37,040 --> 00:02:39,040 Speaker 4: I feel like people like me and Cornell would never 65 00:02:39,040 --> 00:02:39,920 Speaker 4: have been all out in the industry. 66 00:02:39,919 --> 00:02:40,079 Speaker 5: Now. 67 00:02:40,080 --> 00:02:42,320 Speaker 4: I think it's become a lot more technocratic. We both 68 00:02:42,360 --> 00:02:43,280 Speaker 4: did art subjects. 69 00:02:43,280 --> 00:02:46,160 Speaker 6: It's so underqualified you don't believe we were. 70 00:02:47,120 --> 00:02:50,560 Speaker 4: I'm not a great mathematician, but you speaking to a 71 00:02:50,600 --> 00:02:52,640 Speaker 4: literature graduate and a theologian. 72 00:02:52,160 --> 00:02:55,600 Speaker 6: So derivetis exalted. 73 00:02:55,639 --> 00:02:58,200 Speaker 4: Derivatives were not strong in England? Is that allowed? 74 00:02:58,960 --> 00:03:01,760 Speaker 3: So there's no room for the arts majors on Global 75 00:03:01,800 --> 00:03:03,919 Speaker 3: Wall Street anymore. And what's apparent is the show has 76 00:03:03,960 --> 00:03:07,000 Speaker 3: become less about banking and more about wealth and resources 77 00:03:07,760 --> 00:03:08,720 Speaker 3: and the leveraging of that. 78 00:03:08,800 --> 00:03:11,440 Speaker 7: So, sure, Comrad, what are you saying about. 79 00:03:11,200 --> 00:03:14,200 Speaker 3: Capitalism and how it interacts with politics with media? 80 00:03:14,200 --> 00:03:15,840 Speaker 6: I don't know. I mean the thing is that as 81 00:03:15,840 --> 00:03:17,720 Speaker 6: we've written the show, we've realized that more and more 82 00:03:17,760 --> 00:03:20,280 Speaker 6: we're writing really about the class system in the UK. 83 00:03:20,520 --> 00:03:23,680 Speaker 6: Who has power, who doesn't have power, who's born into power, 84 00:03:23,680 --> 00:03:26,480 Speaker 6: and the sort of relative different class ceilings people face. 85 00:03:26,600 --> 00:03:28,600 Speaker 6: Like I think season one was a kind of experiment 86 00:03:28,680 --> 00:03:31,240 Speaker 6: because they were the main characters were from such different 87 00:03:31,240 --> 00:03:34,200 Speaker 6: socioeconomic backgrounds that they were always bumping up against different 88 00:03:34,960 --> 00:03:36,800 Speaker 6: different ceilings. And then in terms of like me and 89 00:03:36,840 --> 00:03:39,160 Speaker 6: Mickey never set out every season to say something, did 90 00:03:39,200 --> 00:03:41,720 Speaker 6: I take about capitalism? Like I think the show is, 91 00:03:42,280 --> 00:03:44,560 Speaker 6: the show has something to say if you're looking underneath 92 00:03:44,560 --> 00:03:46,600 Speaker 6: it. It has like a very strong subtext. But like we 93 00:03:46,640 --> 00:03:48,480 Speaker 6: set out to make eight hours and the most entertaining 94 00:03:48,520 --> 00:03:51,600 Speaker 6: thing we can, like nine pm on HBO really means something. Still, 95 00:03:52,120 --> 00:03:53,720 Speaker 6: all we care about is entertaining an audience. 96 00:03:53,760 --> 00:03:56,680 Speaker 2: Really, how was it getting a show on the air. 97 00:03:56,720 --> 00:04:00,240 Speaker 2: Of these days, there's so many different platforms to be 98 00:04:00,320 --> 00:04:02,920 Speaker 2: pitched to a handful of networks and hope for the best. 99 00:04:03,000 --> 00:04:05,320 Speaker 2: Now you can go anywhere on these streaming platforms. How 100 00:04:05,360 --> 00:04:08,160 Speaker 2: does that impact from the creator's perspective. 101 00:04:08,280 --> 00:04:11,000 Speaker 4: Well, I think there's there are fewer options than there 102 00:04:11,040 --> 00:04:13,080 Speaker 4: were at least five years ago. I think there's been 103 00:04:13,080 --> 00:04:15,200 Speaker 4: a massive contraction in the industry. I think it's actually 104 00:04:15,280 --> 00:04:17,000 Speaker 4: much harder to get something on TV than it was 105 00:04:17,080 --> 00:04:20,080 Speaker 4: when we started. You know, we were two guys x financiers, 106 00:04:20,160 --> 00:04:23,840 Speaker 4: grandiose term who were given an opportunity to make something 107 00:04:23,839 --> 00:04:26,159 Speaker 4: on a relatively small budget by the biggest network, most 108 00:04:26,160 --> 00:04:28,560 Speaker 4: prestigious network. I just think that wouldn't happen now. I 109 00:04:28,560 --> 00:04:31,120 Speaker 4: think we were No, it's an original show. It's it's 110 00:04:31,120 --> 00:04:34,040 Speaker 4: not IP driven. We don't have any fat fans to surface, 111 00:04:34,120 --> 00:04:36,159 Speaker 4: it's not a comic book. That kind of show is 112 00:04:36,240 --> 00:04:39,279 Speaker 4: just they're few in part between now and there are 113 00:04:39,320 --> 00:04:41,880 Speaker 4: lots of different training platforms and not different outlets. But 114 00:04:41,880 --> 00:04:43,760 Speaker 4: I think actually we're just making a lot less stuff. 115 00:04:43,760 --> 00:04:44,960 Speaker 6: We were really in the right place at the right 116 00:04:45,000 --> 00:04:46,880 Speaker 6: time when we started developing the show about ten years ago, 117 00:04:46,880 --> 00:04:48,440 Speaker 6: because it was the real goal rush of team Yeah 118 00:04:48,440 --> 00:04:50,039 Speaker 6: in terms of the amount of content getting created. 119 00:04:50,080 --> 00:04:51,000 Speaker 4: Netflix came in. 120 00:04:51,320 --> 00:04:54,479 Speaker 6: Disrupted the whole model by flooding, flooding the zone with 121 00:04:54,560 --> 00:04:57,599 Speaker 6: cash and quantity, and we were just in the right 122 00:04:57,640 --> 00:04:58,400 Speaker 6: place at the right time. 123 00:04:58,520 --> 00:05:00,920 Speaker 3: Someone you know, Season four is rolling out right when 124 00:05:01,040 --> 00:05:03,840 Speaker 3: HBO's parent company, Warner Brothers, is in the middle of 125 00:05:03,880 --> 00:05:06,120 Speaker 3: a drawn out bidding war, something that Paul and I 126 00:05:06,120 --> 00:05:08,480 Speaker 3: have joked about would make a really worthy Sunday Night 127 00:05:08,560 --> 00:05:11,279 Speaker 3: series of its own. Were you ever tempted to draw 128 00:05:11,320 --> 00:05:14,080 Speaker 3: any parallels between the show and the real life drama 129 00:05:14,120 --> 00:05:17,520 Speaker 3: that's going on to your corporate parent I. 130 00:05:17,520 --> 00:05:18,880 Speaker 4: Think another HBO show what he did? 131 00:05:19,120 --> 00:05:21,960 Speaker 6: Yeah, very successful one more emmy than us. 132 00:05:22,400 --> 00:05:23,160 Speaker 4: Will leave it to them. 133 00:05:23,320 --> 00:05:24,880 Speaker 7: Yeah, but you know, you could have made it really matter. 134 00:05:24,960 --> 00:05:27,920 Speaker 4: For instance, for sure, surprisingly they don't consult on something 135 00:05:27,960 --> 00:05:30,200 Speaker 4: in the other maybe I should. 136 00:05:30,360 --> 00:05:32,239 Speaker 3: The other thing that I noticed is that you introduced 137 00:05:32,240 --> 00:05:34,480 Speaker 3: a lot of new characters this season played by American 138 00:05:34,520 --> 00:05:38,600 Speaker 3: actors Kieran and Shipka, formerly of Mad Men maximin Gilla. 139 00:05:38,600 --> 00:05:40,720 Speaker 3: He's English, but he plays an American character. Why do 140 00:05:40,800 --> 00:05:43,080 Speaker 3: you put so much of a focus on Americans? In London, 141 00:05:43,720 --> 00:05:45,480 Speaker 3: given that you're both British, I mean, and it takes 142 00:05:45,480 --> 00:05:46,200 Speaker 3: place in London. 143 00:05:46,320 --> 00:05:48,159 Speaker 7: It's interesting, Well, finance. 144 00:05:47,920 --> 00:05:50,560 Speaker 4: Is a global industry. I think obviously there's a lot 145 00:05:50,560 --> 00:05:53,200 Speaker 4: of you know, international people who finance was my experience 146 00:05:53,200 --> 00:05:56,560 Speaker 4: working in the financial services industry. And the show was 147 00:05:56,680 --> 00:05:59,719 Speaker 4: originally conceived as a kind of outside the status show. 148 00:05:59,760 --> 00:06:02,279 Speaker 4: It was about someone coming into an inside world, and 149 00:06:02,400 --> 00:06:04,880 Speaker 4: you know, that was encapsulated by Harper, who's a black 150 00:06:04,920 --> 00:06:08,000 Speaker 4: American woman from coming into the UK, which is obviously 151 00:06:08,040 --> 00:06:11,200 Speaker 4: rigidly class based, and that felt really interesting. We just 152 00:06:11,320 --> 00:06:13,120 Speaker 4: like to I know, we like a mishmash of voices. 153 00:06:13,160 --> 00:06:14,800 Speaker 4: I mean, there was some people complain about the show 154 00:06:14,960 --> 00:06:17,160 Speaker 4: and his accents and an amount of different accents that 155 00:06:17,200 --> 00:06:18,360 Speaker 4: are in the show, but we just love. 156 00:06:18,680 --> 00:06:21,119 Speaker 6: I think I'm just thinking of giving an American audience 157 00:06:21,120 --> 00:06:22,680 Speaker 6: and access point to the show because, as Mickey said, 158 00:06:22,680 --> 00:06:25,719 Speaker 6: it's very jarg and heavy show. It's loaded with Britishism, slag, 159 00:06:25,800 --> 00:06:28,719 Speaker 6: British slang, British codes of conduct. We wanted to give 160 00:06:28,800 --> 00:06:30,719 Speaker 6: Americans a bit of a foothold into what we're trying 161 00:06:30,720 --> 00:06:31,360 Speaker 6: to do. 162 00:06:31,400 --> 00:06:33,840 Speaker 2: Just real quickly, who's your audience like what's a typical 163 00:06:33,960 --> 00:06:35,080 Speaker 2: viewer of your show. 164 00:06:35,400 --> 00:06:39,600 Speaker 6: I'm talking very wide, very wide in terms of demographically, 165 00:06:39,600 --> 00:06:41,760 Speaker 6: in terms of age. I mean, i'd say Casus to 166 00:06:41,800 --> 00:06:43,560 Speaker 6: everyone from eighteen to eighty. 167 00:06:43,520 --> 00:06:44,360 Speaker 5: Really really does. 168 00:06:44,600 --> 00:06:46,120 Speaker 4: My ninety four year old grandmother loves it. 169 00:06:46,920 --> 00:06:50,560 Speaker 7: You guys, email you guys all the time. What's the 170 00:06:50,760 --> 00:06:51,600 Speaker 7: number one feedback? 171 00:06:52,480 --> 00:06:53,400 Speaker 5: You're getting us wrong? 172 00:06:53,880 --> 00:06:56,880 Speaker 4: Or ride or you're getting your ride I could do better. 173 00:06:57,360 --> 00:07:00,320 Speaker 4: Or it's really become a bit of a recruitment tool. 174 00:07:00,480 --> 00:07:01,720 Speaker 4: If people was saying that that's the reason they go 175 00:07:01,760 --> 00:07:03,520 Speaker 4: into wool Street reach, Oh my gosh, that's actually what 176 00:07:03,520 --> 00:07:03,840 Speaker 4: I wanted. 177 00:07:04,360 --> 00:07:07,680 Speaker 2: My mine was Wall Street with Michael Douglas. 178 00:07:08,080 --> 00:07:09,240 Speaker 4: That was mine as well. 179 00:07:10,280 --> 00:07:13,320 Speaker 2: Our thanks to Mickey Down and Conrad k co creators, writers, 180 00:07:13,320 --> 00:07:16,000 Speaker 2: and executive producers of the HBO show industry. 181 00:07:16,280 --> 00:07:17,880 Speaker 3: We move next to the world of sports. With the 182 00:07:17,920 --> 00:07:20,240 Speaker 3: Super Bowl less than five weeks away, the run up 183 00:07:20,280 --> 00:07:22,160 Speaker 3: to the Big Game on February eighth could be a 184 00:07:22,240 --> 00:07:25,120 Speaker 3: key window for sports spreading companies like Draft Kings and FanDuel. 185 00:07:25,320 --> 00:07:28,200 Speaker 2: According to Bloomberg Intelligence, this time period could allow the 186 00:07:28,200 --> 00:07:31,560 Speaker 2: companies to expand distribution of the new prediction markets apps 187 00:07:31,760 --> 00:07:33,160 Speaker 2: available in seventeen States. 188 00:07:33,160 --> 00:07:36,120 Speaker 3: We're joined by Brian Egger, Bloomberg Intelligence senior gaming and 189 00:07:36,160 --> 00:07:37,000 Speaker 3: lodging analysts. 190 00:07:37,320 --> 00:07:39,760 Speaker 2: We first asked Brian about how DraftKings and Fandel have 191 00:07:39,840 --> 00:07:42,160 Speaker 2: been positioning themselves for the NFL playoffs. 192 00:07:42,560 --> 00:07:42,760 Speaker 5: Yeah. 193 00:07:42,800 --> 00:07:45,720 Speaker 8: So, DraftKings and FanDuel, among other things, recently rolled out 194 00:07:45,800 --> 00:07:48,840 Speaker 8: these prediction market apps which are separate from their sports books. 195 00:07:48,920 --> 00:07:51,240 Speaker 8: And this is really to could peep our head on 196 00:07:51,320 --> 00:07:54,440 Speaker 8: against kle Shee and Robinhood and other of these financial 197 00:07:54,480 --> 00:07:57,560 Speaker 8: firms that offer these event contracts in a number of states. 198 00:07:57,800 --> 00:07:59,520 Speaker 2: How big is I'm hearing more and more about this 199 00:07:59,560 --> 00:08:02,520 Speaker 2: prediction market market. How big is this thing? 200 00:08:02,560 --> 00:08:04,880 Speaker 8: I mean, this is potentially really large. I don't have 201 00:08:04,960 --> 00:08:06,600 Speaker 8: numbers in front of me, But the key thing is 202 00:08:06,600 --> 00:08:08,520 Speaker 8: that call she and Robin ad are trying to do 203 00:08:08,600 --> 00:08:11,560 Speaker 8: this in all fifty states. They're about a dozen states 204 00:08:11,600 --> 00:08:15,680 Speaker 8: that either told them cease and desist because they effectively 205 00:08:15,680 --> 00:08:18,160 Speaker 8: are engaging in illegal sports betting according to the states, 206 00:08:18,760 --> 00:08:21,440 Speaker 8: or a couple of states have warned DraftKings, fandle don't 207 00:08:21,480 --> 00:08:23,440 Speaker 8: do the same thing if you've got a sports book license. 208 00:08:23,920 --> 00:08:26,760 Speaker 8: So what DraftKings of Fandal did was try to go 209 00:08:26,800 --> 00:08:30,320 Speaker 8: into states with this product where they don't operate sports books, 210 00:08:30,360 --> 00:08:33,920 Speaker 8: they can do prediction markets on politics or entertainment events 211 00:08:34,200 --> 00:08:37,680 Speaker 8: in any state, but the real issue is with respective sports. 212 00:08:37,960 --> 00:08:39,240 Speaker 8: That's where they limit themselves. 213 00:08:40,440 --> 00:08:42,280 Speaker 3: Let me ask you dumb question, and maybe we don't 214 00:08:42,320 --> 00:08:44,880 Speaker 3: know the answer to this yet. Who is the target 215 00:08:45,000 --> 00:08:48,320 Speaker 3: audience for a contract and in production market setting versus 216 00:08:48,720 --> 00:08:51,800 Speaker 3: you know, just a regular parlay or some bet in. 217 00:08:52,200 --> 00:08:54,400 Speaker 8: Resources of the type of person in terms of the 218 00:08:54,440 --> 00:08:56,439 Speaker 8: type of area or territory. 219 00:08:56,600 --> 00:08:56,920 Speaker 7: Uh huh. 220 00:08:57,040 --> 00:08:59,360 Speaker 8: Think about the fact that you've got mobile sports books 221 00:08:59,360 --> 00:09:02,839 Speaker 8: in almost thirty states, thirty some odd states, draftings Fandel 222 00:09:02,880 --> 00:09:05,680 Speaker 8: and twenty five of them other states, big states like 223 00:09:05,720 --> 00:09:08,839 Speaker 8: Texas and California, they don't have legal sports books and 224 00:09:08,880 --> 00:09:12,800 Speaker 8: sports betting. That's a logical market for call She and 225 00:09:13,400 --> 00:09:15,480 Speaker 8: Robinhood to go in there and say you can do 226 00:09:15,520 --> 00:09:18,720 Speaker 8: these prediction markets and engage in that even though sports 227 00:09:18,760 --> 00:09:21,560 Speaker 8: betting isn't active and legal in the state. That's really 228 00:09:21,559 --> 00:09:22,319 Speaker 8: the big. 229 00:09:22,559 --> 00:09:24,800 Speaker 2: So what Texas and Florida say about that? 230 00:09:24,880 --> 00:09:25,040 Speaker 9: Right? 231 00:09:25,120 --> 00:09:28,520 Speaker 8: So, without going through every state, they're about a dozen 232 00:09:28,559 --> 00:09:31,920 Speaker 8: states that either specifically told cal She and poly Market 233 00:09:32,400 --> 00:09:35,520 Speaker 8: or Robinhood season Assist don't do this a few others 234 00:09:35,520 --> 00:09:39,480 Speaker 8: have issued Wetter's warning. Draftings of Fandel do not offer 235 00:09:39,520 --> 00:09:41,920 Speaker 8: a sports prediction market in a state where you've got 236 00:09:41,960 --> 00:09:44,840 Speaker 8: a sports bet license. So what Fando and Draftings did 237 00:09:44,920 --> 00:09:47,960 Speaker 8: is you know, seventeen states for Draftings five or Fandel. 238 00:09:48,679 --> 00:09:51,320 Speaker 8: They're offering this product in states where they don't have 239 00:09:51,320 --> 00:09:53,839 Speaker 8: sports books and where sports betting isn't quote legal. 240 00:09:54,840 --> 00:09:57,640 Speaker 7: Who regulates the sports markets? So it's confused. 241 00:09:57,679 --> 00:10:00,800 Speaker 8: It's very confusing because the sports book are regulated by 242 00:10:00,800 --> 00:10:04,400 Speaker 8: state gaming regulatory authorities. The prediction markets are regulated by 243 00:10:04,400 --> 00:10:08,000 Speaker 8: the CFTC, so it's state versus federal And that's been 244 00:10:08,000 --> 00:10:10,480 Speaker 8: the argument of Kolch that you know, we're a financial 245 00:10:10,600 --> 00:10:14,640 Speaker 8: futures contract, we're not sports betting. We are federally regulated. 246 00:10:14,920 --> 00:10:16,760 Speaker 8: The states have pushed back and said no, this is 247 00:10:16,800 --> 00:10:20,280 Speaker 8: a form of effectively on licened sports betting, and ultimately 248 00:10:20,280 --> 00:10:22,240 Speaker 8: I think this heads to the Supreme Court. That's certainly 249 00:10:22,240 --> 00:10:24,560 Speaker 8: in the view of Elia Steine or litigation analyst. 250 00:10:25,480 --> 00:10:29,200 Speaker 2: So what are the casino companies say these days are 251 00:10:29,400 --> 00:10:31,840 Speaker 2: what do they say? Does that impact their sports book 252 00:10:31,880 --> 00:10:32,920 Speaker 2: and their sports betting and. 253 00:10:32,960 --> 00:10:36,200 Speaker 8: On the margin to the extent that MGM and Caesars 254 00:10:36,200 --> 00:10:39,000 Speaker 8: have mobile products. It's very possible to look into this 255 00:10:39,080 --> 00:10:42,240 Speaker 8: type of product as well. Again in those states where 256 00:10:42,280 --> 00:10:44,440 Speaker 8: sports betting is at legal, so everyone's going to be 257 00:10:44,440 --> 00:10:47,160 Speaker 8: thick about it. And the real other other wrinkle is 258 00:10:47,840 --> 00:10:50,920 Speaker 8: Texas and California once they realize we may not have 259 00:10:51,080 --> 00:10:53,520 Speaker 8: sports betting. What we have effectively sports betters. If you 260 00:10:53,559 --> 00:10:55,880 Speaker 8: believe that's what prediction markets are, we might as well 261 00:10:56,000 --> 00:10:59,760 Speaker 8: legalize it. And so there's a whole bunch of ram 262 00:10:59,800 --> 00:11:00,840 Speaker 8: of cations to this. 263 00:11:01,040 --> 00:11:05,440 Speaker 3: What about Native American tribes in states like California in Connecticut, 264 00:11:05,720 --> 00:11:06,840 Speaker 3: where do they fit it? 265 00:11:07,240 --> 00:11:11,240 Speaker 8: I mean in California, although sports betting isn't legal in California, 266 00:11:11,679 --> 00:11:16,480 Speaker 8: the tribes have themselves challenged and through legally the Whites 267 00:11:16,480 --> 00:11:18,760 Speaker 8: of call She and Robin Hood I don't remember which one. 268 00:11:19,200 --> 00:11:21,920 Speaker 8: So you know to the extent that tribes have opportunities 269 00:11:21,960 --> 00:11:25,440 Speaker 8: to operate sports books, which effectively Florida has the Seminole 270 00:11:25,480 --> 00:11:30,079 Speaker 8: Tribe operating operating hard rock betting site even though draftings 271 00:11:30,280 --> 00:11:32,920 Speaker 8: and or are not involved. So the tribes very much 272 00:11:33,000 --> 00:11:36,360 Speaker 8: will care to the extent that this is effectively a 273 00:11:36,400 --> 00:11:39,120 Speaker 8: competing product as consumers might perceive it. 274 00:11:39,960 --> 00:11:43,160 Speaker 2: So is betting just going crazy the total dollar amount. 275 00:11:43,600 --> 00:11:48,760 Speaker 2: I see kids, high school kids having conversations in detail, 276 00:11:49,040 --> 00:11:53,280 Speaker 2: showing a level of expertise which really blows me away. 277 00:11:53,480 --> 00:11:57,040 Speaker 2: Kids high school kids, and I don't know, it just 278 00:11:57,040 --> 00:11:58,240 Speaker 2: doesn't feel it's surprising. 279 00:11:58,280 --> 00:12:01,280 Speaker 8: And it's also gets very problem at when you have college. 280 00:12:01,000 --> 00:12:02,359 Speaker 5: Kids college games. 281 00:12:02,720 --> 00:12:06,480 Speaker 8: Yep, college players. So but yeah, there's a big national 282 00:12:06,559 --> 00:12:09,160 Speaker 8: draw to that draw to this, and I think the 283 00:12:09,200 --> 00:12:13,000 Speaker 8: real I don't think draftings of find will get as 284 00:12:13,400 --> 00:12:16,600 Speaker 8: affected as some might fear in states where they've got 285 00:12:16,640 --> 00:12:18,839 Speaker 8: a sports book, but in states where they can't operate 286 00:12:18,880 --> 00:12:22,559 Speaker 8: a sports book. But Kyle she and Robinhood and Polymarket 287 00:12:22,559 --> 00:12:25,320 Speaker 8: others whore offering prediction markets. That's where I think they 288 00:12:25,400 --> 00:12:28,520 Speaker 8: see risk as well as opportunity. 289 00:12:28,200 --> 00:12:31,600 Speaker 3: Are Thanks to Brian Egger, bi's senior Gaming and Lodging analyst, 290 00:12:31,800 --> 00:12:34,280 Speaker 3: coming up a look at Bloomberg Intelligence's outlook for North 291 00:12:34,280 --> 00:12:36,080 Speaker 3: American airlines in twenty twenty six. 292 00:12:36,280 --> 00:12:39,120 Speaker 2: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in 293 00:12:39,160 --> 00:12:41,280 Speaker 2: depth research and data on two thousand companies and one 294 00:12:41,360 --> 00:12:42,440 Speaker 2: hundred and thirty industries. 295 00:12:42,559 --> 00:12:45,600 Speaker 3: You can access Bloomberg Intelligence via BI go on the terminal. 296 00:12:45,679 --> 00:12:46,839 Speaker 3: I'm Scarlett Foo and. 297 00:12:46,800 --> 00:12:48,800 Speaker 2: I'm Paul Sweeney and this is Bloomberg. 298 00:12:53,720 --> 00:12:58,240 Speaker 1: This is Bloomberg Intelligence with Scarlet Foo and Paul Sweeney 299 00:12:58,559 --> 00:13:00,079 Speaker 1: on Bloomberg Radio. 300 00:13:00,720 --> 00:13:03,559 Speaker 2: We move next to research Bloomberg Intelligence recently put out 301 00:13:03,559 --> 00:13:04,720 Speaker 2: on the floor Giant Nike. 302 00:13:04,920 --> 00:13:08,160 Speaker 3: According to BI, Nike's turnaround is beginning to take hold, 303 00:13:08,280 --> 00:13:11,560 Speaker 3: notably in North America, but China remains a challenge for more. 304 00:13:11,640 --> 00:13:14,160 Speaker 2: We were joined by Punam Goyle, senior US e Commerce 305 00:13:14,160 --> 00:13:16,000 Speaker 2: and retail analyst at Bloomberg Intelligence. 306 00:13:16,040 --> 00:13:18,520 Speaker 3: We began by asking Poonam to break down Bei's most 307 00:13:18,520 --> 00:13:19,280 Speaker 3: recent research. 308 00:13:19,840 --> 00:13:23,800 Speaker 9: Basically, we think that Nike turnaround is possible. We see 309 00:13:23,880 --> 00:13:26,600 Speaker 9: finally some light at the end of the tunnel. Their 310 00:13:26,679 --> 00:13:31,000 Speaker 9: North America business has improved and is going to improve 311 00:13:31,040 --> 00:13:35,720 Speaker 9: as they rationalize inventories. The issue still is China and 312 00:13:35,960 --> 00:13:39,760 Speaker 9: the struggle in China we don't think will end anytime soon. 313 00:13:40,320 --> 00:13:43,400 Speaker 9: In my mind, it's a one to two year turnaround. 314 00:13:43,840 --> 00:13:46,839 Speaker 9: But that said, if they can get everything else right, 315 00:13:46,920 --> 00:13:49,760 Speaker 9: which I think they are doing, and we'll get to 316 00:13:50,440 --> 00:13:53,040 Speaker 9: I do think that Nike's turnaround as well under way 317 00:13:53,200 --> 00:13:55,400 Speaker 9: and investors will begin to appreciate it. 318 00:13:55,880 --> 00:13:58,240 Speaker 3: So let's dig into the struggles in China. I mean, 319 00:13:58,240 --> 00:14:01,120 Speaker 3: you're talking about a long time frame here for things 320 00:14:01,200 --> 00:14:03,840 Speaker 3: to turn around. Is it just that Nike has lost 321 00:14:04,040 --> 00:14:08,360 Speaker 3: its appeal to the Chinese consumer? Is it competition that's 322 00:14:08,400 --> 00:14:11,040 Speaker 3: really stepped up in the last couple of years. 323 00:14:12,000 --> 00:14:15,160 Speaker 9: So it's a few things. Number One, Nike in the 324 00:14:15,280 --> 00:14:18,000 Speaker 9: US and other parts of the world is perceived as 325 00:14:18,440 --> 00:14:22,320 Speaker 9: a more affluent at leisure brand. In China, it is not. 326 00:14:22,880 --> 00:14:25,560 Speaker 9: What's been happening in China is that Nike has been 327 00:14:25,600 --> 00:14:30,040 Speaker 9: selling at a discount to clear inventory as the vicious 328 00:14:30,120 --> 00:14:34,080 Speaker 9: cycle of weaker sales has led to more discounting. So 329 00:14:34,120 --> 00:14:36,840 Speaker 9: it's more seen as an off price brand that needs 330 00:14:36,880 --> 00:14:39,320 Speaker 9: to change. They know that needs to change. I think 331 00:14:39,320 --> 00:14:42,040 Speaker 9: that's the first step in solving the problem. And I 332 00:14:42,080 --> 00:14:44,560 Speaker 9: think what they will do now and what they've said 333 00:14:44,600 --> 00:14:46,360 Speaker 9: that they do, and I do believe they will because 334 00:14:46,360 --> 00:14:48,360 Speaker 9: they did it in the US, is they will clean 335 00:14:48,400 --> 00:14:51,720 Speaker 9: out that aged inventory. But as we know, that will 336 00:14:51,720 --> 00:14:54,440 Speaker 9: take time. In the US alone, in the last year, 337 00:14:54,480 --> 00:14:57,640 Speaker 9: we've seen that it takes anywhere from twelve to eighteen months. 338 00:14:57,640 --> 00:15:00,320 Speaker 9: The US is finally in a place where in the 339 00:15:00,360 --> 00:15:03,360 Speaker 9: next three to six months they should be clean. So 340 00:15:03,480 --> 00:15:05,840 Speaker 9: which is why we think you'll take eighteen months. Once 341 00:15:05,880 --> 00:15:08,560 Speaker 9: they can do that, the new pipeline of products that 342 00:15:08,600 --> 00:15:12,160 Speaker 9: they're building, I do think will resonate with shoppers and 343 00:15:12,200 --> 00:15:14,800 Speaker 9: it will sell at full price. But once again, it's 344 00:15:14,800 --> 00:15:17,920 Speaker 9: an eighteen to twenty four month turnaround in China in my. 345 00:15:18,000 --> 00:15:21,000 Speaker 2: View, talk to us about you know, new product development 346 00:15:21,040 --> 00:15:24,160 Speaker 2: and new product introduction. Are there certain verticals that they're targeting, 347 00:15:24,200 --> 00:15:27,280 Speaker 2: whether it's running or lifestyle or you know, other types 348 00:15:27,320 --> 00:15:27,920 Speaker 2: of activities. 349 00:15:28,480 --> 00:15:31,280 Speaker 9: So running is a core category that they're focused on. 350 00:15:31,640 --> 00:15:35,080 Speaker 9: They have launched a new innovation in running. Running actually 351 00:15:35,080 --> 00:15:39,240 Speaker 9: with their new pipeline, has done very well in the US. 352 00:15:39,320 --> 00:15:42,720 Speaker 9: We saw that running was up nicely, whereas the rest 353 00:15:42,720 --> 00:15:45,400 Speaker 9: of the business was down slightly to up slightly depending 354 00:15:45,440 --> 00:15:47,240 Speaker 9: on the quarter that you look at over the last 355 00:15:47,600 --> 00:15:50,640 Speaker 9: twelve months. We also think that they're focused on sport. 356 00:15:50,960 --> 00:15:53,080 Speaker 9: So when you think about Nike and if you compare 357 00:15:53,080 --> 00:15:55,000 Speaker 9: it to audiit US, you know, I think there's a 358 00:15:55,040 --> 00:15:57,800 Speaker 9: big difference in the way that they're approaching their businesses, 359 00:15:57,840 --> 00:16:01,560 Speaker 9: which allows both of them to succeed. Nike is focused 360 00:16:01,640 --> 00:16:06,200 Speaker 9: solely and most importantly on sports and performance, whereas Adidas 361 00:16:06,360 --> 00:16:10,720 Speaker 9: has owned for the last few years the lifestyle category, 362 00:16:11,320 --> 00:16:14,120 Speaker 9: and I do think that Nike's focus on sports is 363 00:16:14,120 --> 00:16:16,200 Speaker 9: the right one and that is where they should be 364 00:16:16,240 --> 00:16:17,320 Speaker 9: to drive this turnaround. 365 00:16:17,880 --> 00:16:22,240 Speaker 3: What about TARIFFSNA terrafts is certainly something that affects Nike. 366 00:16:22,760 --> 00:16:25,080 Speaker 3: I know that Vietnam and the US is research trade deal. 367 00:16:25,160 --> 00:16:28,120 Speaker 3: Most of the footwear in this country is manufactured in Vietnam. 368 00:16:28,160 --> 00:16:31,000 Speaker 3: But how is Nike managing through this headwind? 369 00:16:31,840 --> 00:16:33,800 Speaker 9: So the headwind is here and it's here to stay. 370 00:16:34,160 --> 00:16:38,440 Speaker 9: Nike has to selectively increased prices to combat the tariff impact. 371 00:16:38,720 --> 00:16:42,640 Speaker 9: It's also negotiated supply relationships and found efficiencies internal. Just 372 00:16:42,680 --> 00:16:45,840 Speaker 9: like the rest of the space, Nike isn't alone in 373 00:16:45,880 --> 00:16:49,520 Speaker 9: the tariff situation. We do think that you know, tariffs 374 00:16:49,560 --> 00:16:53,000 Speaker 9: will continue to impact margin in twenty twenty six, as 375 00:16:53,040 --> 00:16:56,800 Speaker 9: well as the shift from DTC to wholesale. The wholesale 376 00:16:56,840 --> 00:16:59,480 Speaker 9: business is doing better and Nike is more focused on 377 00:16:59,520 --> 00:17:02,880 Speaker 9: it today because it had lost focus years ago, So 378 00:17:03,480 --> 00:17:07,000 Speaker 9: that mixshift is negative. That said, as more full price 379 00:17:07,040 --> 00:17:10,520 Speaker 9: selling takes hold, as we see signs of China improving 380 00:17:10,560 --> 00:17:13,560 Speaker 9: over the next twelve to eighteen months, those are both 381 00:17:13,960 --> 00:17:18,320 Speaker 9: areas where they can help to recover lost margin. Twenty 382 00:17:18,359 --> 00:17:21,280 Speaker 9: twenty six calendar is not a margin story for Nike, 383 00:17:21,400 --> 00:17:24,120 Speaker 9: It's a top line story. I think twenty twenty seven 384 00:17:24,160 --> 00:17:27,119 Speaker 9: is where we can start to talk about margin expansion. 385 00:17:27,600 --> 00:17:30,879 Speaker 2: Put on your discussions with Nike and other consumer products 386 00:17:30,920 --> 00:17:34,200 Speaker 2: makers and peril makers. What's the consensus today about the consumer? 387 00:17:35,400 --> 00:17:38,960 Speaker 9: The consumer is mixed. The luxury or the affluent consumer 388 00:17:39,000 --> 00:17:42,239 Speaker 9: is clearly doing better than the low income consumer. And 389 00:17:42,320 --> 00:17:45,160 Speaker 9: we do think the consumer will continue to make choices 390 00:17:45,200 --> 00:17:48,199 Speaker 9: and where they shop. But we think the consumer is 391 00:17:48,240 --> 00:17:51,239 Speaker 9: looking for fashion, it's looking for newness, it's looking for 392 00:17:51,280 --> 00:17:54,199 Speaker 9: what's hot in the market. And as long as brands 393 00:17:54,240 --> 00:17:58,119 Speaker 9: and retailers can be on trend, they will drive sales 394 00:17:58,160 --> 00:18:01,200 Speaker 9: of those products because that is where the consumer is shopping. 395 00:18:01,400 --> 00:18:02,400 Speaker 9: On trend product. 396 00:18:03,640 --> 00:18:09,680 Speaker 3: How much rope Oar investors willing to give Elliott Hill. 397 00:18:08,720 --> 00:18:10,760 Speaker 9: I mean, I think, like you do need to give 398 00:18:10,800 --> 00:18:13,240 Speaker 9: him another year. We need to give him six to 399 00:18:13,280 --> 00:18:17,840 Speaker 9: twelve months to start to see China inventory moderating and 400 00:18:17,880 --> 00:18:21,480 Speaker 9: the situation beginning to unfold for the rest of the world. 401 00:18:21,560 --> 00:18:25,520 Speaker 9: I think he's proven that things are becoming stable and 402 00:18:25,600 --> 00:18:28,880 Speaker 9: that they are on the uptick in twenty twenty six, 403 00:18:29,000 --> 00:18:31,240 Speaker 9: especially later in twenty twenty six our. 404 00:18:31,119 --> 00:18:34,080 Speaker 2: Thanks to Punamgoyle, senior US e Commerce and retail analyst 405 00:18:34,119 --> 00:18:35,200 Speaker 2: at Bloomberg Intelligence. 406 00:18:35,560 --> 00:18:37,960 Speaker 3: We move next to research that BI recently put out 407 00:18:37,960 --> 00:18:39,920 Speaker 3: on North American airlines in twenty twenty six. 408 00:18:40,080 --> 00:18:42,800 Speaker 2: According to BI, slowing capacity growth in the first quarter, 409 00:18:42,960 --> 00:18:46,119 Speaker 2: including cuts from some low cost carriers, looks set to 410 00:18:46,160 --> 00:18:49,200 Speaker 2: moderate airfare declines, but weaker economies of scale will likely 411 00:18:49,240 --> 00:18:50,880 Speaker 2: then gain any benefits to profits. 412 00:18:50,920 --> 00:18:53,840 Speaker 3: For more, we brought in George Ferguson, our senior Aerospace, 413 00:18:53,880 --> 00:18:55,119 Speaker 3: defense and airlines analyst. 414 00:18:55,320 --> 00:18:58,120 Speaker 2: We first asked George about how healthy the airline industry 415 00:18:58,240 --> 00:19:00,640 Speaker 2: is and what the outlook looks like for twenty twenty six. 416 00:19:01,000 --> 00:19:02,720 Speaker 10: Look, I think you know, as we get into twenty 417 00:19:02,720 --> 00:19:05,400 Speaker 10: twenty six, we're looking at schedules. We're seeing a lot 418 00:19:05,440 --> 00:19:07,960 Speaker 10: of the growth coming from the big full service carriers. 419 00:19:08,640 --> 00:19:11,679 Speaker 10: United especially continues to sort of pour on the gas 420 00:19:11,720 --> 00:19:14,119 Speaker 10: here and put a lot of capacity in the marketplace. 421 00:19:14,600 --> 00:19:16,919 Speaker 10: Delta a bit less than them, America even a bit 422 00:19:17,040 --> 00:19:20,560 Speaker 10: less than them. We're going to have a Southwest starting 423 00:19:20,600 --> 00:19:24,080 Speaker 10: to sell premium seats, and everybody's got a plan for 424 00:19:24,160 --> 00:19:26,480 Speaker 10: bringing more premium seats to the marketplace. 425 00:19:26,920 --> 00:19:29,760 Speaker 5: So you know, when we just look at the full service. 426 00:19:29,440 --> 00:19:33,320 Speaker 10: Carriers, we're going to see like three four percent seat 427 00:19:33,359 --> 00:19:36,080 Speaker 10: growth in the first half from those big full service carriers. 428 00:19:36,640 --> 00:19:40,080 Speaker 10: I think that means there's probably a risk premium seats 429 00:19:40,119 --> 00:19:43,000 Speaker 10: are going to start to feel some pressure on fares, 430 00:19:43,000 --> 00:19:45,679 Speaker 10: and that's been you know, the really big driver of 431 00:19:45,720 --> 00:19:49,359 Speaker 10: this business, especially for those big full service carriers, has 432 00:19:49,359 --> 00:19:53,320 Speaker 10: been driving their profitability on the on the you know, 433 00:19:53,560 --> 00:19:58,399 Speaker 10: economy end. We're seeing spirit airlines there sort of between 434 00:19:58,440 --> 00:20:00,159 Speaker 10: this world and that world a little bit, which to 435 00:20:00,160 --> 00:20:02,680 Speaker 10: figure out if they're going to survive, might get bought 436 00:20:02,680 --> 00:20:05,960 Speaker 10: by frontier. They've dropped a bunch of airplanes. We're seeing 437 00:20:05,960 --> 00:20:09,320 Speaker 10: some of these carriers cut capacity because of weakness in 438 00:20:09,359 --> 00:20:13,080 Speaker 10: those seat prices. So I think we'll start to see 439 00:20:13,240 --> 00:20:16,159 Speaker 10: at least some you know firming up of that of 440 00:20:16,200 --> 00:20:19,080 Speaker 10: that basic economy as the market tries to get that 441 00:20:19,160 --> 00:20:19,840 Speaker 10: back in balance. 442 00:20:19,840 --> 00:20:21,040 Speaker 5: So I think that's what we're going to see in 443 00:20:21,160 --> 00:20:22,120 Speaker 5: first half of the new year. 444 00:20:22,280 --> 00:20:24,040 Speaker 3: So it sounds like there's gonna be a surplus of 445 00:20:24,080 --> 00:20:27,360 Speaker 3: those premium seats and then that leaves big empty hole 446 00:20:27,400 --> 00:20:28,520 Speaker 3: here for the frontiers. 447 00:20:28,520 --> 00:20:29,200 Speaker 7: And the spirits. 448 00:20:29,600 --> 00:20:32,359 Speaker 3: Are they going to be forced to offer also some 449 00:20:32,520 --> 00:20:35,800 Speaker 3: kind of premium version of what they currently have unoffer. 450 00:20:36,720 --> 00:20:37,119 Speaker 5: I don't know. 451 00:20:37,240 --> 00:20:39,440 Speaker 10: I mean, I think everybody's trying to figure out a 452 00:20:39,480 --> 00:20:42,160 Speaker 10: way to get more premium in their airplane. They're they're 453 00:20:42,160 --> 00:20:44,920 Speaker 10: not you know, they're not forced, but they want they 454 00:20:44,960 --> 00:20:48,200 Speaker 10: want that premium travel that's gonna just keep flying through, 455 00:20:48,680 --> 00:20:51,480 Speaker 10: you know, through good and bad economic times and not 456 00:20:51,560 --> 00:20:53,840 Speaker 10: have the challenges of inflation on their budget and things 457 00:20:53,920 --> 00:20:56,000 Speaker 10: like that. So I don't know if they're forced, but 458 00:20:56,040 --> 00:20:59,760 Speaker 10: we're we're definitely seeing all of them look at ways 459 00:20:59,800 --> 00:21:01,879 Speaker 10: to increase the price they can get the customer to 460 00:21:01,880 --> 00:21:04,240 Speaker 10: pay for a seat, whether it's block a middle seat, 461 00:21:04,280 --> 00:21:06,400 Speaker 10: you know, so it might be three by three kind 462 00:21:06,440 --> 00:21:06,960 Speaker 10: of airplane. 463 00:21:06,960 --> 00:21:08,240 Speaker 5: They might block the middle seat. 464 00:21:08,520 --> 00:21:11,400 Speaker 10: Some of them are talking about putting, you know, more 465 00:21:11,440 --> 00:21:13,840 Speaker 10: reclined and nicer seats in the front of the airplane. 466 00:21:14,080 --> 00:21:17,119 Speaker 5: So everybody, I think everybody. 467 00:21:16,480 --> 00:21:19,439 Speaker 10: Has a plan for how to get more premium in 468 00:21:19,480 --> 00:21:22,520 Speaker 10: their airplane. And again that's going to mean like everything 469 00:21:22,520 --> 00:21:25,159 Speaker 10: in the airline business will get off sides on premium 470 00:21:25,480 --> 00:21:28,159 Speaker 10: before it's all done. I think it begins in the 471 00:21:28,160 --> 00:21:31,040 Speaker 10: first half. I don't think premium seat prices are going 472 00:21:31,080 --> 00:21:32,720 Speaker 10: to create Unfortunately, we're not gonna be able to go 473 00:21:32,760 --> 00:21:35,320 Speaker 10: anywhere really super cheap fly in front of the airplane 474 00:21:35,359 --> 00:21:37,400 Speaker 10: in the first half of but I don't think it'd 475 00:21:37,440 --> 00:21:38,040 Speaker 10: be as good as. 476 00:21:37,920 --> 00:21:39,160 Speaker 5: It was in twenty twenty five. 477 00:21:39,560 --> 00:21:42,480 Speaker 2: Wages, that's a big cost component for these airlines. I 478 00:21:42,480 --> 00:21:45,520 Speaker 2: want my pilots happy. I want them feeling like they're 479 00:21:45,800 --> 00:21:49,080 Speaker 2: well paid. Talk to those about the wage the dynamic in 480 00:21:49,119 --> 00:21:49,880 Speaker 2: the industry. 481 00:21:50,440 --> 00:21:52,840 Speaker 10: Yeah, I mean, look, you know, we still see you know, 482 00:21:53,040 --> 00:21:54,800 Speaker 10: I don't know that I want to call it a shortage, 483 00:21:54,840 --> 00:21:58,320 Speaker 10: but you know, it's a difficult balance between the number 484 00:21:58,320 --> 00:22:01,320 Speaker 10: of pilots out there and what's needed by the airlines 485 00:22:02,080 --> 00:22:05,520 Speaker 10: and the you know, the number of people coming into 486 00:22:05,520 --> 00:22:09,440 Speaker 10: the industry and getting air transport licenses and things like that, 487 00:22:09,800 --> 00:22:12,960 Speaker 10: and so the pilots are still decently paid. You know, 488 00:22:13,000 --> 00:22:17,040 Speaker 10: they came off years decades ago. They just had many, 489 00:22:17,080 --> 00:22:17,920 Speaker 10: many bad years. 490 00:22:17,960 --> 00:22:19,040 Speaker 5: There was a surplus of them. 491 00:22:19,440 --> 00:22:21,480 Speaker 10: So they've been catching up and they got these twenty 492 00:22:21,520 --> 00:22:24,840 Speaker 10: percent increases in the last couple of contracts. And in 493 00:22:24,880 --> 00:22:27,040 Speaker 10: the last contract we saw a twenty percent increase and 494 00:22:27,080 --> 00:22:29,879 Speaker 10: then a four percent, five percent so actually it was 495 00:22:29,880 --> 00:22:32,240 Speaker 10: a couple, it was a five and a couple of fours. 496 00:22:32,640 --> 00:22:37,439 Speaker 10: But four percent salary gains increases, they're pretty nice in 497 00:22:37,440 --> 00:22:40,880 Speaker 10: this economy. And the airlines really can't afford that kind 498 00:22:40,920 --> 00:22:43,159 Speaker 10: of inflation in their cost base. The pilots are a 499 00:22:43,160 --> 00:22:45,520 Speaker 10: big part of it, and so they keep rolling out 500 00:22:45,520 --> 00:22:47,360 Speaker 10: bigger airplanes. 501 00:22:46,960 --> 00:22:48,680 Speaker 5: And that's another challenge in the marketplace. 502 00:22:48,760 --> 00:22:51,560 Speaker 10: Right as you put a bigger airplane behind the pilot 503 00:22:51,600 --> 00:22:54,600 Speaker 10: so you could defray their costs over more seats, you 504 00:22:54,680 --> 00:22:57,000 Speaker 10: got to fly all those seats into these markets, and 505 00:22:57,359 --> 00:23:00,520 Speaker 10: sometimes you're discounting more to fill the airplane. So that's 506 00:23:00,560 --> 00:23:04,600 Speaker 10: a challenge and continues in the new year. We think 507 00:23:04,640 --> 00:23:08,440 Speaker 10: the airlines would be managing cost inflation there and maintenance 508 00:23:08,480 --> 00:23:09,560 Speaker 10: and gates everywhere. 509 00:23:09,880 --> 00:23:12,359 Speaker 3: So wagers a big part of the airlines. Costs the 510 00:23:12,400 --> 00:23:16,000 Speaker 3: biggest part, but then fuel is the second biggest, or 511 00:23:16,000 --> 00:23:18,960 Speaker 3: it can be. And Jeff, fuel has actually come down 512 00:23:19,000 --> 00:23:21,720 Speaker 3: in twenty twenty five. Is that going to continue to 513 00:23:21,760 --> 00:23:23,600 Speaker 3: be a tailwind in twenty twenty six. 514 00:23:24,160 --> 00:23:26,360 Speaker 10: So you know, we kind of we looked at it recently, 515 00:23:26,480 --> 00:23:29,440 Speaker 10: put it out on the Bloomberg Terminal BI Space AI RLN. 516 00:23:29,480 --> 00:23:32,720 Speaker 10: We did some scenario analysis on this look. I have 517 00:23:32,720 --> 00:23:36,800 Speaker 10: a hard time seeing fuel prices dip significantly lower than here. 518 00:23:36,880 --> 00:23:40,280 Speaker 5: But I am no oil man. Right. If I was, 519 00:23:40,320 --> 00:23:41,960 Speaker 5: i'd own a football team, But. 520 00:23:42,920 --> 00:23:45,680 Speaker 10: I'm not oil man. I don't necessarily where those prices 521 00:23:45,680 --> 00:23:46,959 Speaker 10: are going. All I can tell you is if they 522 00:23:47,000 --> 00:23:49,760 Speaker 10: stick around two dollars, the airlines will get. 523 00:23:50,080 --> 00:23:51,800 Speaker 5: Airlines had a nice tailwind. 524 00:23:51,440 --> 00:23:54,920 Speaker 10: From fuel are as fuel prices fell, it buffered their margins. 525 00:23:55,640 --> 00:23:57,520 Speaker 10: If they stick around two dollars, they probably get a 526 00:23:57,520 --> 00:24:01,000 Speaker 10: bit of a tailwind in the first core, but they're 527 00:24:01,080 --> 00:24:02,879 Speaker 10: not going to get a lot of gains from fuel 528 00:24:03,240 --> 00:24:05,080 Speaker 10: that's not going to buffer their margins. 529 00:24:05,680 --> 00:24:08,560 Speaker 2: Did the airlines hedge their fuel exposure, because boy, I 530 00:24:08,560 --> 00:24:11,240 Speaker 2: think I'd be hedging right here if I were CFO. 531 00:24:12,400 --> 00:24:13,040 Speaker 5: Not anymore. 532 00:24:13,280 --> 00:24:16,000 Speaker 10: I think every so often they surprise you and so 533 00:24:16,240 --> 00:24:17,760 Speaker 10: I hear what you're saying, Like, you know, you could 534 00:24:17,800 --> 00:24:20,600 Speaker 10: see one of those crazy CFOs out there, going, hey, 535 00:24:20,600 --> 00:24:22,960 Speaker 10: we might as well edge here, could be as good 536 00:24:23,000 --> 00:24:25,400 Speaker 10: as we get. We saw Southwest do that a number 537 00:24:25,400 --> 00:24:28,040 Speaker 10: of times in their history and win big. But for 538 00:24:28,080 --> 00:24:31,320 Speaker 10: the most part recently, what we've seen is almost the 539 00:24:31,520 --> 00:24:35,520 Speaker 10: entire field does not hedge fuel prices anymore. If you 540 00:24:35,560 --> 00:24:38,040 Speaker 10: think about it, they kind of sell tickets out six 541 00:24:38,240 --> 00:24:40,480 Speaker 10: eight weeks, so they have sort of a future commitment 542 00:24:40,800 --> 00:24:44,879 Speaker 10: for fuel prices out that far. If fuel prices rise dramatically, 543 00:24:44,880 --> 00:24:48,359 Speaker 10: I think everybody in the marketplace adjusts fares fairly quickly 544 00:24:48,400 --> 00:24:49,560 Speaker 10: because they're not edged. 545 00:24:49,920 --> 00:24:51,760 Speaker 5: And so I think you know, when they look. 546 00:24:51,640 --> 00:24:55,359 Speaker 10: At the pack that they're flying in, maybe the airlines, 547 00:24:55,440 --> 00:24:57,320 Speaker 10: they think no one else hedging fuel. 548 00:24:57,640 --> 00:24:59,120 Speaker 5: I'm not going to run the risk to be wrong 549 00:24:59,160 --> 00:24:59,639 Speaker 5: in a hedge. 550 00:25:00,080 --> 00:25:03,280 Speaker 3: Stay onhead our thanks to George Ferguson, our in house 551 00:25:03,359 --> 00:25:07,280 Speaker 3: senior aerospace, defense and Airlines analyst. Coming up, we continue 552 00:25:07,280 --> 00:25:09,320 Speaker 3: with travel and look at how cruise lines may fare 553 00:25:09,320 --> 00:25:10,640 Speaker 3: against theme parks next year. 554 00:25:10,760 --> 00:25:13,480 Speaker 2: You're listening to Bloomberg Intelligence on Bloomberg Radio for riding 555 00:25:13,520 --> 00:25:15,639 Speaker 2: in depth research and data on two thousand companies and 556 00:25:15,640 --> 00:25:16,880 Speaker 2: one hundred and thirty industries. 557 00:25:16,920 --> 00:25:19,800 Speaker 3: You can access Bloomberg Intelligence through Bigo on the terminal. 558 00:25:19,880 --> 00:25:21,000 Speaker 3: I'm Scarlett Foo and. 559 00:25:20,960 --> 00:25:26,320 Speaker 2: I'm Paul Sweeney, and this is Bloomberg. 560 00:25:30,280 --> 00:25:34,800 Speaker 1: This is Bloomberg Intelligence with Scarlet Foo and Paul Sweeney 561 00:25:35,119 --> 00:25:36,439 Speaker 1: on Bloomberg Radio. 562 00:25:37,280 --> 00:25:39,919 Speaker 2: Move next to research Bloomberg Intelligence recently put out on 563 00:25:40,000 --> 00:25:42,160 Speaker 2: cruise lines versus them parks in twenty twenty six. 564 00:25:42,240 --> 00:25:45,120 Speaker 3: According to BI six Flags and United parks may see 565 00:25:45,160 --> 00:25:47,679 Speaker 3: more customer visits this year, but this may not equate 566 00:25:47,720 --> 00:25:48,600 Speaker 3: to in park spending. 567 00:25:48,880 --> 00:25:52,000 Speaker 2: Cruise line customers, by comparison, are booking longer trips. Further 568 00:25:52,080 --> 00:25:53,960 Speaker 2: in advance for more on all of this, we were 569 00:25:54,000 --> 00:25:56,600 Speaker 2: joined by Jody Lorie Bloomberg, intelligence credit analyst. 570 00:25:56,800 --> 00:25:59,359 Speaker 3: We began by asking Jody to give us an analysis 571 00:25:59,400 --> 00:26:00,640 Speaker 3: on how cruises are performing. 572 00:26:01,280 --> 00:26:04,000 Speaker 11: So, the cruise lines always have a dedicated base, but 573 00:26:04,280 --> 00:26:06,479 Speaker 11: cruising is sort of interesting because it's only two percent 574 00:26:07,040 --> 00:26:09,639 Speaker 11: of the travel industry. It really is such a small 575 00:26:09,720 --> 00:26:13,080 Speaker 11: portion of it. Where we've been watching is for those 576 00:26:13,119 --> 00:26:15,480 Speaker 11: new Dow cruisers, which I don't know if I'm necessarily 577 00:26:15,520 --> 00:26:19,760 Speaker 11: convinced that they're going as often or they're attracting the 578 00:26:19,800 --> 00:26:22,919 Speaker 11: new cruisers, but the cruisers are still very much cruising 579 00:26:23,160 --> 00:26:25,080 Speaker 11: and they're spending more than the average consumer. 580 00:26:25,920 --> 00:26:28,800 Speaker 3: They're also spending more than the people who go to 581 00:26:28,960 --> 00:26:32,800 Speaker 3: theme parks, according to your research, and partly that might 582 00:26:32,840 --> 00:26:35,639 Speaker 3: be because the cruise line industry attracts a different kind 583 00:26:35,680 --> 00:26:39,040 Speaker 3: of customer than the theme park industry, theme. 584 00:26:38,880 --> 00:26:41,040 Speaker 7: Parks, skews younger cruises, skew. 585 00:26:40,920 --> 00:26:44,760 Speaker 3: Older easy, Which would you prefer if you are an operator? 586 00:26:44,760 --> 00:26:46,280 Speaker 7: Which would you prefer if you're an investor. 587 00:26:48,119 --> 00:26:50,960 Speaker 11: So we don't make full recommendations, but I will tell 588 00:26:51,000 --> 00:26:53,359 Speaker 11: you a couple of things based on our research findings. 589 00:26:53,560 --> 00:26:54,400 Speaker 9: So first of. 590 00:26:54,359 --> 00:26:57,680 Speaker 11: All, you have to think about how people book cruising 591 00:26:57,840 --> 00:26:59,439 Speaker 11: versus how they book theme parks. 592 00:27:00,040 --> 00:27:01,760 Speaker 7: When you're talking about cruises. 593 00:27:01,359 --> 00:27:03,359 Speaker 11: They book far in advance, they book a year or 594 00:27:03,359 --> 00:27:05,679 Speaker 11: two well in advance. And what the cruise lines have 595 00:27:05,720 --> 00:27:08,639 Speaker 11: been doing, particularly post pandemic, is they've been locking people 596 00:27:08,680 --> 00:27:12,080 Speaker 11: in on the drink packages, on the experiences. They've been 597 00:27:12,080 --> 00:27:15,679 Speaker 11: giving these steal of deals excursion ideas, and when you 598 00:27:15,720 --> 00:27:19,000 Speaker 11: get on the boat, it's more expensive. So people say, Okay, 599 00:27:19,040 --> 00:27:20,879 Speaker 11: I'm going to book my cruise, but I'm also going 600 00:27:20,920 --> 00:27:23,479 Speaker 11: to book the snorkeling and I'm gonna book this. I'm 601 00:27:23,480 --> 00:27:25,200 Speaker 11: going to book that, the ones that I definitely want 602 00:27:25,240 --> 00:27:27,879 Speaker 11: to do. They also book the drink packages, which you know, 603 00:27:27,920 --> 00:27:30,080 Speaker 11: I think you can go either way on that personally, 604 00:27:30,240 --> 00:27:32,600 Speaker 11: because I don't think I drink enough, but maybe other 605 00:27:32,640 --> 00:27:35,919 Speaker 11: people do, and it really sort of just helps their 606 00:27:35,960 --> 00:27:40,000 Speaker 11: cash flows Now theme parks people book much later. They 607 00:27:40,040 --> 00:27:44,160 Speaker 11: are younger, they are lower income than the US median household. 608 00:27:44,760 --> 00:27:47,600 Speaker 11: And the key for them is they can get people 609 00:27:47,680 --> 00:27:49,879 Speaker 11: in the door. They can get them with season passes, 610 00:27:49,960 --> 00:27:51,600 Speaker 11: or they can just get them for the one day pass. 611 00:27:51,840 --> 00:27:54,440 Speaker 11: But they're not necessarily convincing them to spend in park 612 00:27:54,480 --> 00:27:54,920 Speaker 11: the same way. 613 00:27:54,960 --> 00:27:56,600 Speaker 7: But there's higher volume in theme park. 614 00:27:56,680 --> 00:27:59,120 Speaker 11: Right, there's pretty high volume in theme parks. But if 615 00:27:59,160 --> 00:28:01,960 Speaker 11: they're just paying for the admission, it might not necessarily 616 00:28:02,040 --> 00:28:05,119 Speaker 11: cover the costs per se. Right, They'll get in the door, 617 00:28:05,480 --> 00:28:08,240 Speaker 11: but they have high capex. They have high just high 618 00:28:08,280 --> 00:28:10,240 Speaker 11: costs in general, and they have all the employees that 619 00:28:10,240 --> 00:28:11,000 Speaker 11: they're paying for. 620 00:28:11,480 --> 00:28:14,159 Speaker 2: Six Flags, that's a theme park that got some local 621 00:28:14,320 --> 00:28:18,920 Speaker 2: Jersey flavor. Here six lags Great Adventure. How's the capital 622 00:28:18,960 --> 00:28:20,600 Speaker 2: structure for these theme parks? 623 00:28:21,000 --> 00:28:24,280 Speaker 11: They are high capex, so high capital intensive companies. 624 00:28:24,320 --> 00:28:27,720 Speaker 7: They have high level right, exactly. 625 00:28:27,400 --> 00:28:30,159 Speaker 11: And similar to cruise lines. So where we sort of 626 00:28:30,160 --> 00:28:32,520 Speaker 11: see it interesting is theme parks and cruise lines are 627 00:28:32,560 --> 00:28:36,240 Speaker 11: constantly they have to get the new experience in, right, 628 00:28:36,320 --> 00:28:39,440 Speaker 11: so they have to spend not just on maintaining their products, 629 00:28:39,440 --> 00:28:42,280 Speaker 11: so not not just maintaining the ship or maintaining the ride. 630 00:28:42,560 --> 00:28:45,160 Speaker 11: They also have to get new ones in so people say, 631 00:28:45,200 --> 00:28:46,320 Speaker 11: I want to go to a Great Adventure because I 632 00:28:46,360 --> 00:28:49,120 Speaker 11: want to ride Superman, right, So they they do this 633 00:28:49,280 --> 00:28:52,520 Speaker 11: to get people excited, draw them in so that they're going. 634 00:28:52,560 --> 00:28:54,920 Speaker 11: I mean, you know, the biggest example that we don't cover. 635 00:28:55,000 --> 00:28:58,400 Speaker 11: I don't cover Universal or Comcast, but you know, Universal's 636 00:28:58,440 --> 00:29:00,840 Speaker 11: new theme park was a big drive to Florida. It 637 00:29:00,920 --> 00:29:04,000 Speaker 11: wasn't as big as expected necessarily, but it's still pretty big. 638 00:29:04,200 --> 00:29:05,920 Speaker 11: Now if you're talking about the regional theme parks is 639 00:29:05,960 --> 00:29:10,520 Speaker 11: a little bit more difficult because people aren't necessarily planning 640 00:29:10,560 --> 00:29:13,280 Speaker 11: these long term vacations around Great Adventure. 641 00:29:14,480 --> 00:29:19,320 Speaker 3: Do the theme parks attract more domestic consumers than the cruises? 642 00:29:19,360 --> 00:29:22,720 Speaker 3: I mean, I'm just curious in terms of the sustainability 643 00:29:22,720 --> 00:29:24,480 Speaker 3: and the stability of your customer base. 644 00:29:24,920 --> 00:29:27,680 Speaker 11: So it depends on the brand. Because if you look 645 00:29:27,840 --> 00:29:31,640 Speaker 11: pre pandemic and now going into a few years post pandemic, 646 00:29:31,960 --> 00:29:35,280 Speaker 11: the cruise lines they segment so Norwegian most of their 647 00:29:35,280 --> 00:29:38,560 Speaker 11: customer bases US their US customers. When you get to 648 00:29:38,680 --> 00:29:40,760 Speaker 11: Royal Caribbean, it's a little bit less. It's about so 649 00:29:40,800 --> 00:29:42,719 Speaker 11: I think it's about eighty percent for Norwegian. I'm doing 650 00:29:42,760 --> 00:29:45,040 Speaker 11: this off the top of my head memory, but eighty 651 00:29:45,040 --> 00:29:47,760 Speaker 11: percent Norwegian. You get to about it's like seventy or 652 00:29:47,800 --> 00:29:50,160 Speaker 11: sixty five for Royal, and then you get to Carnival 653 00:29:50,160 --> 00:29:51,280 Speaker 11: and it's even less than that. 654 00:29:51,320 --> 00:29:52,320 Speaker 7: It's closer to half. 655 00:29:52,360 --> 00:29:56,520 Speaker 11: It's not quite half that are US versus international. They 656 00:29:56,520 --> 00:29:59,360 Speaker 11: have a much larger international presence. Brian Egger and I 657 00:29:59,360 --> 00:30:02,560 Speaker 11: my Equit account park. We were on the Aida, which 658 00:30:02,600 --> 00:30:05,120 Speaker 11: is one of the one of their brands that they 659 00:30:05,200 --> 00:30:09,680 Speaker 11: market to international customers, specifically in Germany, and it was 660 00:30:09,800 --> 00:30:12,840 Speaker 11: a one hundred and thirty three round. 661 00:30:12,600 --> 00:30:14,400 Speaker 7: The world cruise. 662 00:30:14,760 --> 00:30:17,320 Speaker 11: Nice they were stopping in New York for the day, 663 00:30:17,600 --> 00:30:19,600 Speaker 11: and they brought a bunch of US on, a bunch 664 00:30:19,640 --> 00:30:22,600 Speaker 11: of US equity and credit nerds, and took us around 665 00:30:22,640 --> 00:30:25,880 Speaker 11: the ship and everything was in German, as expected because 666 00:30:25,920 --> 00:30:28,800 Speaker 11: most of their customers were German. So that's Carnival has 667 00:30:28,840 --> 00:30:31,560 Speaker 11: a much more diversified customer base if you talk about 668 00:30:31,600 --> 00:30:35,320 Speaker 11: theme parks, SeaWorld or United Parks as they go by now. 669 00:30:35,720 --> 00:30:38,640 Speaker 11: Their Florida parks, which make up about half their revenue, 670 00:30:39,080 --> 00:30:43,360 Speaker 11: is international about ten twenty percent. But when you get 671 00:30:43,440 --> 00:30:44,120 Speaker 11: to six flags. 672 00:30:44,120 --> 00:30:45,080 Speaker 7: It's much more domestic. 673 00:30:45,520 --> 00:30:49,120 Speaker 2: We were off the Amafi coast last fall, oh fancy, 674 00:30:49,600 --> 00:30:52,440 Speaker 2: and I saw this big yacht thats like either navy 675 00:30:52,480 --> 00:30:54,480 Speaker 2: blue or black, and I said, what is who owns that? 676 00:30:54,840 --> 00:30:58,880 Speaker 2: It's the rich Carlton Ritz Carlton. Yes, actually on it 677 00:30:59,000 --> 00:30:59,600 Speaker 2: just parked. 678 00:30:59,360 --> 00:31:01,520 Speaker 7: In those are though, I mean in terms of the 679 00:31:02,400 --> 00:31:05,400 Speaker 7: five hundred people, Yeah, I mean that looked pretty cool. 680 00:31:05,480 --> 00:31:08,960 Speaker 11: Yeah, that's for the people who want to be on 681 00:31:09,040 --> 00:31:12,160 Speaker 11: a luxury yacht but don't want to actually own a 682 00:31:12,240 --> 00:31:12,760 Speaker 11: luxury yacht. 683 00:31:12,880 --> 00:31:13,080 Speaker 5: Right. 684 00:31:13,240 --> 00:31:14,920 Speaker 7: The joke about boats is. 685 00:31:14,800 --> 00:31:17,120 Speaker 11: Bring on another thousand, Right. My mother in law likes 686 00:31:17,160 --> 00:31:20,080 Speaker 11: to always say that, and that's why it's called boat. 687 00:31:20,280 --> 00:31:24,720 Speaker 11: So but the uh, you know, the thing about cruising 688 00:31:24,960 --> 00:31:28,560 Speaker 11: is that there's a perception about who the typical cruiser is. Right, 689 00:31:28,840 --> 00:31:32,680 Speaker 11: it's the you know, older people who are retired, who 690 00:31:32,760 --> 00:31:35,560 Speaker 11: likes who like to bring basically the cat skills on 691 00:31:35,600 --> 00:31:39,000 Speaker 11: the water. But really, I mean it's changed over time. 692 00:31:39,040 --> 00:31:41,959 Speaker 11: And what's interesting about our credit research and our travel 693 00:31:41,960 --> 00:31:44,920 Speaker 11: survey that we do every half a year is we're 694 00:31:44,960 --> 00:31:47,160 Speaker 11: seeing that it's actually really really spread out. If you 695 00:31:47,160 --> 00:31:50,680 Speaker 11: look into the buckets that we've segmented, it's really, you know, 696 00:31:50,720 --> 00:31:52,640 Speaker 11: it's one third of each, so it's one third eighteen 697 00:31:52,680 --> 00:31:55,520 Speaker 11: to thirty four year old one third that like middle 698 00:31:55,520 --> 00:31:57,600 Speaker 11: aged group and fifty five and older one third, So 699 00:31:57,640 --> 00:32:00,800 Speaker 11: it's really not specifically the old yea our. 700 00:32:00,720 --> 00:32:03,200 Speaker 2: Thanks to Jerdy Lourie Bloomberg Intelligence Credit Analysts. 701 00:32:03,400 --> 00:32:06,320 Speaker 3: We move next to research that Bloomberg Intelligence recently published 702 00:32:06,320 --> 00:32:08,920 Speaker 3: on the cloud computing platform Amazon Web Services. 703 00:32:09,120 --> 00:32:12,160 Speaker 2: According to BIAWS, sales can improve in twenty twenty six 704 00:32:12,160 --> 00:32:14,840 Speaker 2: by twenty two point five percent in constant currency or 705 00:32:14,840 --> 00:32:16,680 Speaker 2: two hundred basis points above consensus. 706 00:32:16,840 --> 00:32:19,680 Speaker 3: This would be aided by widening enterprise AI adoption and 707 00:32:19,760 --> 00:32:23,160 Speaker 3: more data center capacity coming online. A potential ten billion 708 00:32:23,200 --> 00:32:26,880 Speaker 3: dollars investment in open AI could also be another sales catalyst, 709 00:32:27,080 --> 00:32:29,960 Speaker 3: assuming it comes with more cloud infrastructure commitments for. 710 00:32:29,960 --> 00:32:31,880 Speaker 2: More and all. This I was joined by anurag Rana, 711 00:32:31,880 --> 00:32:35,600 Speaker 2: Bloomberg Intelligence technology analyst. First asked ONNAROG where we are 712 00:32:35,680 --> 00:32:37,600 Speaker 2: in the growth trajectory of AWS. 713 00:32:37,800 --> 00:32:40,320 Speaker 12: When you look at DAWs, you know one of the 714 00:32:40,440 --> 00:32:42,760 Speaker 12: narratives of what the law studios has been that they 715 00:32:42,760 --> 00:32:45,520 Speaker 12: have been laggered in AI and large portion of data 716 00:32:45,520 --> 00:32:49,880 Speaker 12: is beco's chagpt before the contract changed with Microsoft was 717 00:32:49,920 --> 00:32:54,960 Speaker 12: only hosted on Microsoft azured. As the capacity constraints started, 718 00:32:55,440 --> 00:32:59,160 Speaker 12: Microsoft farmed outside some of that business to COVI even 719 00:32:59,160 --> 00:33:03,000 Speaker 12: then Auticle and so fourth. But in the most recent agreement, 720 00:33:03,200 --> 00:33:05,280 Speaker 12: you know, you can see that chat GPD can be 721 00:33:05,320 --> 00:33:08,120 Speaker 12: hosted in other cloud providers. So that's one area to 722 00:33:08,200 --> 00:33:12,000 Speaker 12: focus on. But the big thing for AWS is it's 723 00:33:12,040 --> 00:33:15,800 Speaker 12: an enterprise business. It's not so much a consumer chat operate. 724 00:33:16,240 --> 00:33:18,760 Speaker 12: So this is the year where we think that thing 725 00:33:18,840 --> 00:33:22,320 Speaker 12: kicks off. And what we are thinking is the growth 726 00:33:22,400 --> 00:33:26,720 Speaker 12: rate for AWS improves successively every quarter going into the 727 00:33:26,720 --> 00:33:27,360 Speaker 12: the end of the year. 728 00:33:27,760 --> 00:33:30,880 Speaker 2: Has Amazon invested in open ai or any of that 729 00:33:30,920 --> 00:33:32,600 Speaker 2: type of thing? Is that are they part of those 730 00:33:32,760 --> 00:33:34,640 Speaker 2: what people refer to as circular deals. 731 00:33:35,800 --> 00:33:38,760 Speaker 12: So Amazon is not directly invested in open Ai. They 732 00:33:38,840 --> 00:33:41,200 Speaker 12: have a new contract with them right now. They have 733 00:33:41,280 --> 00:33:44,080 Speaker 12: invested in Anthropic, So that's an area where you know, 734 00:33:44,080 --> 00:33:47,600 Speaker 12: when you are partnering with the second largest LM provider. 735 00:33:47,800 --> 00:33:49,960 Speaker 12: I mean, I'm not counting Google because that's it's part 736 00:33:49,960 --> 00:33:53,320 Speaker 12: of a big conglomerate, but a pure play you know, vendor, 737 00:33:53,360 --> 00:33:55,720 Speaker 12: which is Anthropic. So they have invested in that, They 738 00:33:55,840 --> 00:33:59,160 Speaker 12: partnered with them and we think that actually workloads also 739 00:33:59,560 --> 00:34:02,360 Speaker 12: go up. We recently did an AI survey and part 740 00:34:02,400 --> 00:34:05,320 Speaker 12: of what we've found out was software companies are using 741 00:34:05,360 --> 00:34:08,160 Speaker 12: anthropic more and more, mostly for the coding reasons. And 742 00:34:08,239 --> 00:34:11,040 Speaker 12: I think if that ACCEL rates, that actually helps out 743 00:34:11,120 --> 00:34:14,080 Speaker 12: Amazon as well because some of those workloads do get 744 00:34:14,160 --> 00:34:17,640 Speaker 12: up to AWS. The big part of the AWS story 745 00:34:17,719 --> 00:34:20,400 Speaker 12: is it is the largest cloud provider. So the successive 746 00:34:20,440 --> 00:34:23,640 Speaker 12: growth rate or to see a big number jump over there, 747 00:34:23,840 --> 00:34:27,239 Speaker 12: unlike a Google, you know that has the delta is 748 00:34:27,320 --> 00:34:29,840 Speaker 12: huge or the growth rates are not the same. But 749 00:34:29,960 --> 00:34:33,200 Speaker 12: what we think this year some of those enterprise workloads 750 00:34:33,520 --> 00:34:36,760 Speaker 12: start to flow in as more their capacity comes online. 751 00:34:36,800 --> 00:34:39,680 Speaker 12: They have invested heavily in data centers and some of 752 00:34:39,680 --> 00:34:42,960 Speaker 12: that actually shows up this year and that we think 753 00:34:43,040 --> 00:34:45,880 Speaker 12: is going to help us help them improve their growth rates. 754 00:34:46,000 --> 00:34:48,359 Speaker 2: So from a competitive landscape position, how do you think 755 00:34:48,400 --> 00:34:50,520 Speaker 2: of AWS in the AI space? 756 00:34:50,960 --> 00:34:53,480 Speaker 12: Yeah, so when you look at the traditional space, there 757 00:34:53,520 --> 00:34:55,399 Speaker 12: quick clear leader. But when you look at the AI 758 00:34:55,520 --> 00:34:59,279 Speaker 12: infrastructure space, that lead is starting with Microsoft because they 759 00:34:59,320 --> 00:35:02,000 Speaker 12: got chat cheap to begin with, so that's one. Then 760 00:35:02,040 --> 00:35:04,800 Speaker 12: you have Google doing very well with their TPU stuff, 761 00:35:05,120 --> 00:35:07,359 Speaker 12: you know, Oracle and core Vi also getting into that. 762 00:35:07,480 --> 00:35:10,399 Speaker 12: But Amazon still has a very large portfolio over there. 763 00:35:10,600 --> 00:35:12,520 Speaker 12: And what we think is going to happen this year 764 00:35:12,680 --> 00:35:14,640 Speaker 12: is going they have been spending a lot of money 765 00:35:14,640 --> 00:35:16,879 Speaker 12: to expand that data centers. They're going to get more 766 00:35:16,920 --> 00:35:19,480 Speaker 12: and more AI infrastructure orders because you know, at the 767 00:35:19,600 --> 00:35:21,640 Speaker 12: end of the day, they have the capital, they also 768 00:35:21,680 --> 00:35:24,480 Speaker 12: get the same chips from Nvidia, they have the luxury 769 00:35:24,560 --> 00:35:26,719 Speaker 12: or they know how to build those data centers and 770 00:35:26,760 --> 00:35:28,880 Speaker 12: plug these things together. So I think this is the 771 00:35:28,920 --> 00:35:31,000 Speaker 12: air where they kind of break through from a lot 772 00:35:31,000 --> 00:35:33,359 Speaker 12: of this narrative of being an AI laggard. 773 00:35:33,800 --> 00:35:35,640 Speaker 2: And that that's kind of reflected in the stockown rock. 774 00:35:35,680 --> 00:35:37,799 Speaker 2: I'm just looking at over the trailing twelve months, you know, 775 00:35:37,880 --> 00:35:40,560 Speaker 2: only up about five percent is the reason because they 776 00:35:40,600 --> 00:35:43,960 Speaker 2: just haven't necessarily got the full AI you know, kind 777 00:35:44,000 --> 00:35:45,040 Speaker 2: of win in their sale. 778 00:35:45,440 --> 00:35:47,759 Speaker 12: No, because they the kind of work that doing is 779 00:35:47,880 --> 00:35:51,520 Speaker 12: very different. The first phase of AI boom that we 780 00:35:51,560 --> 00:35:53,879 Speaker 12: have seen is in the consumer app It's in the Chat, 781 00:35:53,920 --> 00:35:57,520 Speaker 12: GPT and the Gemini. What we have seen they're not enterprises. 782 00:35:57,560 --> 00:36:01,800 Speaker 12: They're not large banks that are adding more AI capabilities, 783 00:36:02,000 --> 00:36:04,920 Speaker 12: but we are in that phase of enterprising adding more 784 00:36:04,960 --> 00:36:07,400 Speaker 12: AI capabilities, and when that happens, you know, they have 785 00:36:07,480 --> 00:36:09,440 Speaker 12: the large infrastructure, plus they have a lot of the 786 00:36:09,560 --> 00:36:14,400 Speaker 12: data that these big companies reside in the Amazon ecosystem. 787 00:36:14,480 --> 00:36:16,200 Speaker 12: I think that's where they benefit the most. 788 00:36:16,520 --> 00:36:18,239 Speaker 2: I mean it's not very often in the last I 789 00:36:18,239 --> 00:36:20,520 Speaker 2: don't know, fifteen years where we could say Amazon is 790 00:36:21,360 --> 00:36:24,319 Speaker 2: cheap or Amazon looks like a good buy relative to 791 00:36:24,360 --> 00:36:26,560 Speaker 2: its peer set. But I mean, if you have a 792 00:36:26,560 --> 00:36:29,160 Speaker 2: certain time horizon, is that what the bulls are saying here? 793 00:36:29,920 --> 00:36:31,920 Speaker 12: Yeah, I think that's where it is that. You know, 794 00:36:32,000 --> 00:36:34,719 Speaker 12: so far, the narrative has only been about OpenAI and 795 00:36:34,800 --> 00:36:38,120 Speaker 12: JAGGPT and Microsoft. I think that narrative starts to change 796 00:36:38,120 --> 00:36:41,440 Speaker 12: this year with more and more enterprise adoption. And you know, 797 00:36:41,480 --> 00:36:43,520 Speaker 12: you and I talked about it just a few weeks 798 00:36:43,520 --> 00:36:46,400 Speaker 12: ago that we did in AI survey where enterprises are 799 00:36:46,600 --> 00:36:50,239 Speaker 12: really looking forward to deploy some of these AI tools internally, 800 00:36:50,440 --> 00:36:52,480 Speaker 12: and that's not going to happen in isolation. They have 801 00:36:52,560 --> 00:36:55,719 Speaker 12: to build that on some data framework, some kind of 802 00:36:55,920 --> 00:36:58,320 Speaker 12: AI framework, and that's where AWS comes. 803 00:36:58,080 --> 00:37:01,560 Speaker 3: In our thanks to anor Agrana, bloom Intelligence Technology Analyst. 804 00:37:01,840 --> 00:37:04,560 Speaker 2: That's this week's edition of Bloomberg Intelligence on Bloomberg Radio, 805 00:37:04,640 --> 00:37:07,080 Speaker 2: providing in depth research and data on two thousand companies 806 00:37:07,120 --> 00:37:08,480 Speaker 2: and one hundred and thirty industries. 807 00:37:08,560 --> 00:37:11,160 Speaker 3: And remember you can access Bloomberg Intelligence via b I 808 00:37:11,280 --> 00:37:13,440 Speaker 3: go on the terminal. I'm Scarlett Foo and. 809 00:37:13,400 --> 00:37:15,799 Speaker 2: I'm Paul Sweeney. Stay with us. 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