Latest / Bloomberg Intelligence / DOJ Opens Probe Into NFL’s Sports TV Deals

Transcript

DOJ Opens Probe Into NFL’s Sports TV Deals · Bloomberg Intelligence

• 0:02
  Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the
• 0:10
  Speaker 1: Bloomberg Intelligence Podcast. Catch us live weekdays at ten am
• 0:14
  Speaker 1: Eastern on Apple, Cocklay and Android Auto with the Bloomberg
• 0:17
  Speaker 1: Business app. Listen on demand wherever you get your podcasts,
• 0:21
  Speaker 1: or watch us live on YouTube.
• 0:23
  Speaker 2: Really interesting headline came across the tape just a couple
• 0:26
  Speaker 2: of minutes ago. According to a Wall Street Journal, the
• 0:29
  Speaker 2: Department of Justice opens probe into the NFL on anti
• 0:32
  Speaker 2: competitive concerns.
• 0:34
  Speaker 3: I mean, who wants to mess with the NFL? I
• 0:36
  Speaker 3: guess the federal government.
• 0:37
  Speaker 4: You can. But let's break it down a little bit
• 0:39
  Speaker 4: if we can.
• 0:40
  Speaker 2: Randa Williams, Bloomberg Business of Sports reporter, random, what's the
• 0:43
  Speaker 2: story here?
• 0:44
  Speaker 5: So basically Senator Mike Lee, he's from Utah. He sent
• 0:48
  Speaker 5: a letter about a month ago, maybe a little bit
• 0:50
  Speaker 5: longer than that, and he encouraged the Federal Trade Commission,
• 0:54
  Speaker 5: the SEC in the Department of Justice to review this
• 0:57
  Speaker 5: Sports Broadcasting Act because of the fact that it cost
• 1:00
  Speaker 5: over one thousand dollars to watch NFL games. Now, rising
• 1:03
  Speaker 5: costs over broadcasting gals is pretty normal. I mean we've
• 1:07
  Speaker 5: seen every single time a league goes to the negotiating table.
• 1:10
  Speaker 5: Normally the costs are passed down to the consumer, but
• 1:12
  Speaker 5: also the games grow and so I think that it'll
• 1:15
  Speaker 5: be interesting to see how they approach this if anything changes.
• 1:18
  Speaker 5: But the NFL still has four years left on its
• 1:21
  Speaker 5: broadcasting rights agreement. There have been reports that they want
• 1:23
  Speaker 5: to opt out of that and negotiate early.
• 1:26
  Speaker 4: Those talks are very very early, so we'll see.
• 1:29
  Speaker 6: Could there be possible political motivations behind this.
• 1:34
  Speaker 5: I think with everything happening in the country right now,
• 1:37
  Speaker 5: you never know who is setting your sights on the NFL.
• 1:40
  Speaker 5: And I mean, you see what's happening with the Rooney Rule.
• 1:43
  Speaker 5: There is a Florida Attorney General who has turned his
• 1:46
  Speaker 5: sites towards the NFL and saying that the Rooney Rule
• 1:48
  Speaker 5: goes against federal law. We'll see how that plays out.
• 1:51
  Speaker 5: And I mean, there are no reports right now that
• 1:53
  Speaker 5: those two things are connected, but we've seen different areas
• 1:58
  Speaker 5: of this administration set the sites on sporting leagues and
• 2:01
  Speaker 5: other organizations out there, so it wouldn't surprise me, but
• 2:04
  Speaker 5: it hasn't been reported yet.
• 2:05
  Speaker 2: So Randa, this is focusing primarily on the media rights
• 2:08
  Speaker 2: deals for the NFL.
• 2:09
  Speaker 3: Now most of those.
• 2:11
  Speaker 4: Even going back.
• 2:12
  Speaker 3: Thirty years, forty years, there's.
• 2:14
  Speaker 2: Been some paid component to it because even if I want
• 2:16
  Speaker 2: to watch my CBS game, I'm probably getting it through
• 2:19
  Speaker 2: my cable package as opposed to having my rabbit ears that.
• 2:22
  Speaker 2: So it's always been some consumers directly paying for sports.
• 2:27
  Speaker 2: Is it different now that it's streaming?
• 2:30
  Speaker 4: There are more partners now.
• 2:32
  Speaker 5: So Amazon has a Thursday night football game you can
• 2:34
  Speaker 5: stream on Peacock. Occasionally YouTube has streamed the game before.
• 2:38
  Speaker 5: The NFL has been selling rights to these streamers and
• 2:42
  Speaker 5: these broadcasting companies for many, many years, and as the
• 2:46
  Speaker 5: game has grown, as the business has grown, the costs
• 2:48
  Speaker 5: have grown as well. And I think in reference to
• 2:51
  Speaker 5: what it costs to watch all NFL games, yes, it
• 2:54
  Speaker 5: would be expensive because you would then be paying for
• 2:57
  Speaker 5: NFL Sunday ticket, you could be paying for red Zone,
• 2:59
  Speaker 5: you could be paying for each individual subscription of you know,
• 3:04
  Speaker 5: some of these games. With that in mind, of course,
• 3:06
  Speaker 5: the costs have gone up because they've added partners, they've
• 3:08
  Speaker 5: added games, you know, all of those things.
• 3:11
  Speaker 4: But again, like we're talking about.
• 3:13
  Speaker 5: ABC, NBCCBS, i'm ESPN, all of these things are you
• 3:17
  Speaker 5: could walk into a bar or just subscribe to your
• 3:20
  Speaker 5: local cable and they would be right there. Now, you
• 3:22
  Speaker 5: wouldn't be able to choose a game. And here in
• 3:24
  Speaker 5: New York you would probably be subject to the Jets
• 3:27
  Speaker 5: and Giants and other places. It would be the local
• 3:29
  Speaker 5: markets there. So it really depends on if the customer
• 3:32
  Speaker 5: wants to pay for all of these games that the
• 3:34
  Speaker 5: NFL broadcast.
• 3:36
  Speaker 6: In the letter here by Senator Mike Lee, he said
• 3:38
  Speaker 6: to watch every NFL game during the past season, football
• 3:41
  Speaker 6: fans spent almost one thousand dollars on cable and streaming descriptions. Yeah,
• 3:46
  Speaker 6: I guess if you're a fan, Yeah.
• 3:47
  Speaker 3: It's with it.
• 3:47
  Speaker 4: I mean, it depends.
• 3:48
  Speaker 5: I would just say this that the last Super Bowl
• 3:50
  Speaker 5: was twelve to zero and then had one hundred and
• 3:52
  Speaker 5: twenty five million viewers, And it was twelve to zero
• 3:55
  Speaker 5: at one point heading I believe, heading into the fourth
• 3:57
  Speaker 5: or you know, fairly well into the game. And it
• 3:59
  Speaker 5: was the second most watched Super Bowl of all time.
• 4:02
  Speaker 5: And with that in mind, if you're the NFL, of
• 4:04
  Speaker 5: course you would like to go back to the negotiating
• 4:07
  Speaker 5: table to try to get more money. Now, if let's
• 4:10
  Speaker 5: just say that this investigation kicks things down the road.
• 4:14
  Speaker 5: If your Super Bowl is twelve to zero and it's
• 4:16
  Speaker 5: the second most watched game ever four years down the
• 4:19
  Speaker 5: line might not be a bad thing. You just want
• 4:21
  Speaker 5: that money right now. So evidently I do think that
• 4:23
  Speaker 5: the NFL will get their money. It's just about when to.
• 4:26
  Speaker 3: Get even more money.
• 4:27
  Speaker 2: There's obviously very advanced talks to add an eighteenth game,
• 4:31
  Speaker 2: and that would be that would be it.
• 4:32
  Speaker 4: And that would well, see, I mean that is I
• 4:36
  Speaker 4: would say it happen.
• 4:36
  Speaker 3: You have to open up the whole agreement with the players.
• 4:38
  Speaker 5: Of course, yeah, And the Players Association has been in
• 4:42
  Speaker 5: flux for over a year. They've had three executive directors
• 4:46
  Speaker 5: in under a year. And when you have three executive directors,
• 4:48
  Speaker 5: the NFL then has to go to the players Association,
• 4:52
  Speaker 5: rip up the collective bargaining agreements, and then they have
• 4:54
  Speaker 5: to come to terms on a deal. Those negotiations have
• 4:57
  Speaker 5: not started at all. So an eighteenth game, a six
• 5:00
  Speaker 5: sixteen international game package that the NFL could sell, those
• 5:03
  Speaker 5: negotiations haven't started at all. So I think that Roger,
• 5:06
  Speaker 5: I've heard Jerry Jones, I've heard Robert Kraft. And those
• 5:09
  Speaker 5: are the Patriots and the Cowboys owners all talk about
• 5:11
  Speaker 5: adding these things, and I do think that they want to,
• 5:14
  Speaker 5: but it's so so early, which is why, you know,
• 5:16
  Speaker 5: going back to this investigation, in a worst case scenario
• 5:18
  Speaker 5: for the NFL, if they had to wait four years,
• 5:21
  Speaker 5: it might work out in their favor because of the
• 5:23
  Speaker 5: fact that they haven't negotiated as CBA.
• 5:25
  Speaker 4: So you know, I think that we'll see how this
• 5:27
  Speaker 4: plays out.
• 5:28
  Speaker 5: But right now, I think that if I'm the NFL
• 5:31
  Speaker 5: watching this, it's like, Okay, we'll see.
• 5:33
  Speaker 6: Yeah, what could possibly be the endgame here?
• 5:38
  Speaker 4: I'm not exactly sure.
• 5:40
  Speaker 5: I think that it could be to congregate some of
• 5:43
  Speaker 5: these costs to make sure that the CBS and the
• 5:47
  Speaker 5: ABC that there are less streamers involved, that it is
• 5:50
  Speaker 5: not passed down to the customer as much. But again,
• 5:53
  Speaker 5: like you got to think, this was one of the
• 5:54
  Speaker 5: most watched NFL seasons of all time, So really, are
• 5:57
  Speaker 5: the streamers hurting and I mean, excuse me, are the
• 5:59
  Speaker 5: customer is hurting if they're continuing to tune in that
• 6:02
  Speaker 5: That is what I think the NFL's defense to this
• 6:05
  Speaker 5: would be is that people are watching regardless and they're paying.
• 6:10
  Speaker 3: Stay with us. More from Bloomberg Intelligence coming up after this.
• 6:16
  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
• 6:20
  Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android
• 6:23
  Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever
• 6:26
  Speaker 1: you get your podcasts, or watch us live on YouTube.
• 6:31
  Speaker 2: One of the news that we covered earlier today, I
• 6:32
  Speaker 2: want to cover it from a different angles the NFL.
• 6:35
  Speaker 2: The DJ is investigating the NFL on anti competitive terrifs
• 6:38
  Speaker 2: and it relates to the media rights deals that they have,
• 6:42
  Speaker 2: and the media rights deals are so important to these leagues.
• 6:44
  Speaker 4: It is a.
• 6:45
  Speaker 2: Primary driver of value for the franchises across pretty much
• 6:49
  Speaker 2: all sports. And it's equally valuable to the broadcast networks
• 6:54
  Speaker 2: and to the cable networks and to the streamers that
• 6:55
  Speaker 2: put this stuff out there, because boy, advertisers love live programming.
• 6:59
  Speaker 2: Ethan Ynek, and she's the expert here, she's a US
• 7:02
  Speaker 2: media analyst here. So Keitha just talk to us a
• 7:04
  Speaker 2: little bit about this dooja investigation into the NFL. What
• 7:08
  Speaker 2: are the big media companies who are so vested into this,
• 7:11
  Speaker 2: What are they saying?
• 7:13
  Speaker 7: This is actually good news, Paul, for the media companies.
• 7:16
  Speaker 7: So remember we are right smack in the middle of
• 7:19
  Speaker 7: what is expected to become a very very contentious media
• 7:23
  Speaker 7: rights renegotiation process with the NFL. So the NFL is
• 7:27
  Speaker 7: seeking something like about a sixty percent increase in its
• 7:31
  Speaker 7: rights fees basically from companies like Fox, Paramount Skuidance from Comcasts,
• 7:36
  Speaker 7: and be Seeing from Walt Disney. Those are the companies
• 7:38
  Speaker 7: that are the most exposed.
• 7:40
  Speaker 3: And with the.
• 7:40
  Speaker 7: DOJ going after the NFL on anti competitive practices, it
• 7:45
  Speaker 7: looks like what they're saying is that the NFL is
• 7:47
  Speaker 7: trying to harm consumers by basically making it more and
• 7:51
  Speaker 7: more difficult to access their programming. So we know that
• 7:53
  Speaker 7: the NFL in the past has tried to sell these
• 7:56
  Speaker 7: smaller packages to streamers, you know, whether it's Christmas Day
• 8:00
  Speaker 7: games to Netflix or the Thursday night football package to Amazon.
• 8:04
  Speaker 7: They try to carve out these smaller deals basically in
• 8:07
  Speaker 7: a move to kind of maximize you know, monetization. But
• 8:12
  Speaker 7: obviously that's not sitting well with the DOJ. But this
• 8:14
  Speaker 7: is good news for the broadcasters because I think, you know,
• 8:16
  Speaker 7: we think it gives them definitely better negotiating leverage when
• 8:20
  Speaker 7: they go back to renegotiate deals this year with the NFL.
• 8:24
  Speaker 6: What about let's now head to Disney, they're reading to
• 8:27
  Speaker 6: cut a thousand jobs, largely in marketing. You've talked a
• 8:30
  Speaker 6: lot about efficiency, So where exactly are these job cuts
• 8:33
  Speaker 6: happening and how do you make sure that or as
• 8:36
  Speaker 6: an analyst, how do you make sure that these don't
• 8:39
  Speaker 6: hit the creative engines of Disney and really affect the
• 8:43
  Speaker 6: future of the company.
• 8:45
  Speaker 7: Yeah, so it looks like it's about these job cuts
• 8:48
  Speaker 7: are really happening in the marketing departments. So let's just
• 8:51
  Speaker 7: look at you know, if you kind of take a
• 8:52
  Speaker 7: step back and look at the whole Disney engine. I mean,
• 8:55
  Speaker 7: they have over two hundred and thirty thousand employees, so,
• 8:59
  Speaker 7: you know, cutting about one thousand jobs, it's less than
• 9:01
  Speaker 7: one percent. It's really just a drop in the bucket.
• 9:04
  Speaker 7: But you know, the layoffs are really part of this
• 9:07
  Speaker 7: whole cost cutting and as you just said, the efficiencies.
• 9:10
  Speaker 7: You know, Ever since Barb Byger returned to Disney as
• 9:14
  Speaker 7: the CEO in November of twenty twenty two, he embarked
• 9:17
  Speaker 7: on this whole efficiency cost cutting program. He eliminated about
• 9:20
  Speaker 7: eight thousand jobs, which resulted in about seven and a
• 9:24
  Speaker 7: half billion dollars of cost cuts. And really this latest
• 9:28
  Speaker 7: wave of another thousand layoffs is just part of that.
• 9:31
  Speaker 7: So it is not in any of the creative parts
• 9:34
  Speaker 7: of the company. This is really more in the marketing department.
• 9:38
  Speaker 7: So we already know that, you know, Disney has many
• 9:41
  Speaker 7: multiple operations, so they have like a whole team supporting
• 9:45
  Speaker 7: Disney Plus. They have a very similar team supporting Hulu,
• 9:48
  Speaker 7: which is basically, you know, a product that is very
• 9:51
  Speaker 7: soon going to be integrated. So Disney Plus and Hulu
• 9:53
  Speaker 7: are going to become one consolidated, integrated product, which means
• 9:57
  Speaker 7: there's really no need to have two separate treat teas teams,
• 10:00
  Speaker 7: and so this is just really a process of streamlining
• 10:03
  Speaker 7: and removing redundancies and increasing the efficiency in the business.
• 10:09
  Speaker 2: KEITHA, what's the latest on the Paramount Skydiance and Warner
• 10:13
  Speaker 2: Brothers Discovery.
• 10:14
  Speaker 3: When is that deal going to close?
• 10:16
  Speaker 2: And what's some of the feedback you're getting from investors
• 10:18
  Speaker 2: about this deal?
• 10:20
  Speaker 7: The deal Paul is expected to get regulatory approval and
• 10:24
  Speaker 7: to close by September thirtieth of this year, so we
• 10:28
  Speaker 7: have a few more months. It looks like some of
• 10:31
  Speaker 7: the biggest investors are recommending that Warner Brothers shareholders obviously
• 10:36
  Speaker 7: vote in favor of the deal. That vote is set
• 10:38
  Speaker 7: for April twenty third, So it definitely looks like they're
• 10:41
  Speaker 7: not going to head into any big regulatory problem, something
• 10:45
  Speaker 7: that we were kind of anticipating with Netflix. This path
• 10:48
  Speaker 7: seems a lot more cleaner, a lot more smoother, and
• 10:52
  Speaker 7: in good news for Paramount, what they've done is they've
• 10:54
  Speaker 7: kind of secured the Middle Eastern funding, so they've got
• 10:57
  Speaker 7: about twenty four billion dollars, you know, some sovereign wealth
• 11:01
  Speaker 7: management funds. This was kind of a little bit of
• 11:04
  Speaker 7: an investor concern just kind of given all of the
• 11:06
  Speaker 7: geopolitical tensions and the regional conflicts there. But with that
• 11:09
  Speaker 7: kind of locked and loaded, I think investors are definitely
• 11:12
  Speaker 7: kind of heaving a sigh of relief here, and it
• 11:15
  Speaker 7: looks like everything will go, you know, as per plan.
• 11:20
  Speaker 7: The question, really, Paul, is whether they're going to be
• 11:23
  Speaker 7: able to deliver after the deal closes. That's really what
• 11:26
  Speaker 7: investors are going to be looking for, especially with the
• 11:29
  Speaker 7: six billion dollars of synergies that they've outlined and.
• 11:33
  Speaker 2: A lot of debt on the boundaryt talked to us
• 11:34
  Speaker 2: just real quickly how the market's thinking about their leverage
• 11:36
  Speaker 2: profile because they're gonna be the most or one of
• 11:38
  Speaker 2: the most levered media companies out.
• 11:40
  Speaker 7: There, absolutely right, Paul seven times leverage about eight billion
• 11:44
  Speaker 7: dollars in debt when the deal closes. So that is
• 11:47
  Speaker 7: really what you know, the market is worried about, as
• 11:49
  Speaker 7: you pointed pointed out, and you know, again we have
• 11:53
  Speaker 7: so many different parts here, but I think the biggest
• 11:55
  Speaker 7: worry is really the exposure to the linear TV ecosystem.
• 11:59
  Speaker 7: It's you know, at fifty five percent of revenue still
• 12:02
  Speaker 7: is going to come from, you know, the linear TV bundle,
• 12:06
  Speaker 7: and really it's about how well they can manage that.
• 12:08
  Speaker 7: So this is going to be a wait and wat story.
• 12:11
  Speaker 7: We've not seen very good results in the past, so
• 12:13
  Speaker 7: fingers crossed.
• 12:14
  Speaker 3: Stay with us. More from Bloomberg Intelligence coming up after this.
• 12:21
  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
• 12:25
  Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android
• 12:28
  Speaker 1: Auto with the Bloomberg Business app, Listen on demand wherever
• 12:32
  Speaker 1: you get your podcasts, or watch us live on YouTube.
• 12:36
  Speaker 2: You know, it seems like a lot of these big
• 12:37
  Speaker 2: tech companies are almost tripping over themselves to get press
• 12:40
  Speaker 2: releases out, saying how big their AI revenue is, how
• 12:43
  Speaker 2: fast it's growing, and.
• 12:45
  Speaker 3: Amazon's no difference.
• 12:46
  Speaker 2: Amazon CEO Andy Jase, in a shareholder letter set aws's
• 12:50
  Speaker 2: AI revenue run rate is over twenty billion dollars, as
• 12:53
  Speaker 2: Selections was just reporting. That's up from fifteen billion just
• 12:56
  Speaker 2: in first quarter. So that's pretty good. Stocks trading higher
• 12:59
  Speaker 2: on rog ranaj here technology channels for Bloomberg Intelligence. He's
• 13:03
  Speaker 2: out there in Chicago anrah Amazon twenty billion.
• 13:07
  Speaker 3: It seems big to me, how about you?
• 13:10
  Speaker 8: Yeah, no, it's a very big deal. In fact, this
• 13:11
  Speaker 8: is the first time they are actually putting a number
• 13:13
  Speaker 8: around it, because if you remember a couple of years ago,
• 13:16
  Speaker 8: Microsoft was throwing its number out and everybody else was
• 13:19
  Speaker 8: asking Amazon, where is your number? Where are you? But
• 13:22
  Speaker 8: you know, one of the things we talked about at
• 13:23
  Speaker 8: that point, Amazon's writing on the chat GPT wave where
• 13:27
  Speaker 8: Amazon's more enterprise focus, and now those enterprise workloads are
• 13:30
  Speaker 8: coming in and that's where we see the AI revenue
• 13:33
  Speaker 8: for Amazon.
• 13:35
  Speaker 6: How does this change the calculus for the outlook of
• 13:38
  Speaker 6: the company, like the are you more bullish than you
• 13:40
  Speaker 6: already are?
• 13:42
  Speaker 8: That's a very good question. In fact, we published a
• 13:44
  Speaker 8: note yesterday saying that we anticipate aw's growth to pick
• 13:48
  Speaker 8: up this year, in fact even in the first quarter,
• 13:50
  Speaker 8: because one of the things we saw just now it's
• 13:53
  Speaker 8: two days ago was Anthropics revenue went from I think
• 13:55
  Speaker 8: nine billion to thirty billion within no time. And AWS
• 13:59
  Speaker 8: is one of the preferred partners. And if you remember
• 14:02
  Speaker 8: two years ago, it was all Opening II Microsoft. Now
• 14:05
  Speaker 8: we are seeing Anthropic doing really well and that helps
• 14:07
  Speaker 8: Amazon Web Services. So this year we think Amazon Web
• 14:11
  Speaker 8: Service is going to do better than what most people anticipate.
• 14:14
  Speaker 2: And rag updates on kind of the competitive landscape. Now
• 14:18
  Speaker 2: where is Amazon fit in these days?
• 14:21
  Speaker 8: Yeah, so you go back and look at it. Prior
• 14:24
  Speaker 8: to the AI era, Amazon Web Services was the largest.
• 14:27
  Speaker 8: It's still the largest, but it was the largest by
• 14:30
  Speaker 8: a massive amount compared to Microsoft and Google. Since then,
• 14:34
  Speaker 8: after charge GPT, Microsoft really closed the gap with them
• 14:37
  Speaker 8: and became a much bigger cloud vendor, you know, compared
• 14:41
  Speaker 8: to Google, but not as big as Amazon. But all
• 14:45
  Speaker 8: three of them are doing phenomenally well. Because remember, this
• 14:48
  Speaker 8: is a business where you need to put in a
• 14:50
  Speaker 8: lot of CAPEX and data centers in order to gain
• 14:54
  Speaker 8: this revenue. This is not something you and I can
• 14:56
  Speaker 8: build in house using you know, either Claude or anything,
• 14:59
  Speaker 8: because you need physical infrastructure, data center chips. Amazon talked
• 15:04
  Speaker 8: about their chip business for example. So Amazon still is
• 15:07
  Speaker 8: in the driver's seat with the largest market share, but
• 15:10
  Speaker 8: both the others I would say Microsoft and Google are
• 15:13
  Speaker 8: catching up fairly faster at this point.
• 15:15
  Speaker 6: So speaking of this flu of deals, we also have Core.
• 15:17
  Speaker 6: We've expanding their metadal for AIA computing the twenty one
• 15:20
  Speaker 6: billion dollars. At a headline level, what does the deal
• 15:24
  Speaker 6: tell you the size and duration was what is that
• 15:26
  Speaker 6: signal and does it tell you METASAI demand is stronger
• 15:29
  Speaker 6: than expected?
• 15:31
  Speaker 8: I think Beta is spending so much because they need
• 15:34
  Speaker 8: to be relevant. Also in the large language model space,
• 15:37
  Speaker 8: it seems to me that this particular deal is tied
• 15:40
  Speaker 8: more so for the training of the model rather than infancing.
• 15:43
  Speaker 8: Because one of the things what we are seeing is
• 15:45
  Speaker 8: when it comes to even hyperskid cloud providers, whether that's
• 15:48
  Speaker 8: Microsoft or Google, they're doing some of the work in
• 15:51
  Speaker 8: house with their own data centers, but as they can't
• 15:53
  Speaker 8: expand that rapidly, they're going out to these neoclouds, whether
• 15:57
  Speaker 8: it's Nebeis or code and renting out their capacity so
• 16:02
  Speaker 8: that they can parse out some of that work to
• 16:04
  Speaker 8: them as well. So this is just a continuation of that.
• 16:07
  Speaker 8: The bottom line is AI infrastructure demand is very strong
• 16:10
  Speaker 8: and it actually helps out everybody, not just the hyperscal
• 16:13
  Speaker 8: cloud providers, but also the neoclouds.
• 16:16
  Speaker 4: And you cover all the software providers.
• 16:19
  Speaker 2: They've had a tough go over it over the last
• 16:21
  Speaker 2: several months, four or five months as investors try to
• 16:23
  Speaker 2: sense which one of these software companies and sectors and
• 16:26
  Speaker 2: verticals could be at risk from AI.
• 16:29
  Speaker 3: Where are we now? Where Where's what's the market selling
• 16:31
  Speaker 3: these days?
• 16:32
  Speaker 8: So you can see them. I mean the index is
• 16:34
  Speaker 8: down quite a bit even today. Every software company is down,
• 16:37
  Speaker 8: and yesterday we heard that, you know, there's going to
• 16:39
  Speaker 8: be some new model by Clouds. So every time there
• 16:41
  Speaker 8: is a brand new model from Anthropic or anybody else,
• 16:44
  Speaker 8: there is pressure on these names, and I don't think
• 16:46
  Speaker 8: that's going to change anytime soon. What these companies have
• 16:49
  Speaker 8: to do is show that they are not going to
• 16:51
  Speaker 8: get cannibalized by these large language models, but actually embed
• 16:55
  Speaker 8: them in their core product and can continue with that
• 16:58
  Speaker 8: profitabil growth that they have. But that's not an argument
• 17:01
  Speaker 8: that gets settled in the next twelve months. It's going
• 17:04
  Speaker 8: to take a few years to build that out. What
• 17:06
  Speaker 8: we want to see from companies like Salesforce is to
• 17:09
  Speaker 8: go out and buy back a lot of the shares,
• 17:10
  Speaker 8: which they did twenty five billion dollar buy back that
• 17:13
  Speaker 8: they have announced. If these guys are able to embed
• 17:17
  Speaker 8: some of these models in their own products and protect
• 17:20
  Speaker 8: what they have, I think this is going to be
• 17:22
  Speaker 8: a change around in sentiment. But again, that's not going
• 17:24
  Speaker 8: to happen anytime soon. It's going to be a few
• 17:27
  Speaker 8: years before that shows up.
• 17:29
  Speaker 3: Stay with us more from Bloomberg Intelligence coming up there
• 17:32
  Speaker 3: for this.
• 17:35
  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
• 17:39
  Speaker 1: weekdays at ten am Eastern on Apple Coarclay, and Android
• 17:42
  Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever
• 17:46
  Speaker 1: you get your podcasts, or watch us live on YouTube.
• 17:50
  Speaker 3: Bernie's they're out there.
• 17:51
  Speaker 2: Constellation Brands was last night after the close, stock straining
• 17:55
  Speaker 2: higher here. I thought some of the guidance was a
• 17:57
  Speaker 2: little soft, but I guess the street says, hey, it's
• 17:59
  Speaker 2: better than we thought it was to be able. Let's
• 18:00
  Speaker 2: break it down with the red Brown Bloomberg consumer reporter
• 18:04
  Speaker 2: read what do we hear from Constellation about their business.
• 18:07
  Speaker 9: Yeah, you're right, the guidance was a little soft last night,
• 18:10
  Speaker 9: but I think this morning on the call, the company
• 18:12
  Speaker 9: kind of made the case that March sales were quite strong.
• 18:17
  Speaker 9: They feel like that momentum in this early part of
• 18:19
  Speaker 9: the year is going to kind of carry on through
• 18:21
  Speaker 9: the summer, and with that, they're planning to kind of
• 18:24
  Speaker 9: support the early momentum with I think the word they
• 18:27
  Speaker 9: use was an aggressive marketing campaign. So if you think
• 18:30
  Speaker 9: about the big events we have in the summer, makes
• 18:32
  Speaker 9: a lot of sense. Of the World Cup, the company
• 18:33
  Speaker 9: expects that to be kind of a growth driver, especially
• 18:36
  Speaker 9: for their bigger brands Modello Corona, you know, we associate
• 18:39
  Speaker 9: those with the summer as well, so makes a lot
• 18:41
  Speaker 9: of sense. So I think that's kind of explaining a
• 18:43
  Speaker 9: little bit of the share move that we're seeing. The
• 18:45
  Speaker 9: question now, I guess, becomes whether or not that this
• 18:47
  Speaker 9: is just a blip or they're still kind of subject
• 18:49
  Speaker 9: to the sort of secular decline we're seeing in the
• 18:51
  Speaker 9: other parts of the alcohol industry.
• 18:53
  Speaker 6: How much of this softer outlook is macro driven. We
• 18:55
  Speaker 6: know that it's not really a good economy consumers are
• 18:58
  Speaker 6: feeling pinch as opposed to with the products themselves.
• 19:01
  Speaker 9: Yeah, no, the company is making the case with the
• 19:05
  Speaker 9: when they kind of justified their guidance and it is
• 19:07
  Speaker 9: the lack of economic visibility. They also withdrew their twenty
• 19:11
  Speaker 9: twenty eight guidance as well for the same reason. They say,
• 19:14
  Speaker 9: we just can't see that far out in advance at
• 19:16
  Speaker 9: the moment. But again, it kind of comes back to
• 19:18
  Speaker 9: this question about whether or not it is an economic
• 19:20
  Speaker 9: situation that they're kind of dealing with right now or
• 19:23
  Speaker 9: it is just their subject to the kind of consistent
• 19:26
  Speaker 9: decline we see in the beer market. Analysts are kind
• 19:29
  Speaker 9: of split on what the real situation is.
• 19:32
  Speaker 2: You mentioned some of their brands, Modello and Corona, brands
• 19:37
  Speaker 2: that identify with the Hispanic audience in this country.
• 19:40
  Speaker 3: The companies in the past has.
• 19:42
  Speaker 2: Caught out the change in immigration policy is impacting having
• 19:45
  Speaker 2: an impact what they have.
• 19:46
  Speaker 3: They updated their thoughts there.
• 19:47
  Speaker 9: So during the call they said they actually saw a
• 19:49
  Speaker 9: sequential improvement and those zip codes that have.
• 19:52
  Speaker 4: A higher Hispanic population.
• 19:56
  Speaker 9: So you know, I guess it doesn't tell us a
• 19:58
  Speaker 9: ton if it just a sequential improvement from sort of
• 20:01
  Speaker 9: a lower start.
• 20:02
  Speaker 4: Right.
• 20:03
  Speaker 9: They didn't give any sort of specific details on just
• 20:05
  Speaker 9: how much of an improvement it was, so I guess
• 20:07
  Speaker 9: it's something that we still need to kind of keep
• 20:08
  Speaker 9: an eye on.
• 20:09
  Speaker 6: What about I mean, the company in general has benefited
• 20:12
  Speaker 6: from premiumization. Are we seeing customers trade down and what
• 20:16
  Speaker 6: trends are they pointing to?
• 20:18
  Speaker 9: Yeah, the company said that that trend is continuing, so
• 20:21
  Speaker 9: they're still seeing some strength within their premium brands. I
• 20:24
  Speaker 9: think what may be going on is that people are
• 20:26
  Speaker 9: drinking less, but when they do drink, you know, maybe
• 20:28
  Speaker 9: I'll reach for the nicer options. So we've seen that
• 20:31
  Speaker 9: in other parts of the alcohol industry as well, So,
• 20:33
  Speaker 9: like you know, Spirits tend To has been pushing premiumization
• 20:37
  Speaker 9: as well, so that that trend might you know, maybe
• 20:40
  Speaker 9: we don't think of beer as necessarily always like a
• 20:42
  Speaker 9: premium option, but there are sort of ways to trade
• 20:44
  Speaker 9: within the category.
• 20:46
  Speaker 3: All Right, you're of that demo, a younger demo, Thank you?
• 20:49
  Speaker 4: Are you guys drinking beer?
• 20:51
  Speaker 2: Drinking the Red White Claws and all that iced tea
• 20:54
  Speaker 2: stuff and all that.
• 20:55
  Speaker 9: Yeah, No, it's I guess when you go. I mean,
• 20:57
  Speaker 9: obviously in New York's a specific you know beer, I
• 21:00
  Speaker 9: mean alcohol culture, bar culture. But I guess when you
• 21:03
  Speaker 9: do go out there, you do see more people kind
• 21:04
  Speaker 9: of holding cans. A lot of the times, it's less
• 21:09
  Speaker 9: a white claw, that's it's more less seltzers. These days,
• 21:11
  Speaker 9: it's more theas ready to drink. So think of like
• 21:13
  Speaker 9: a serf side, which is like a spiked lemonade, a
• 21:15
  Speaker 9: spiked ice tea. Those are really popular right now. And
• 21:18
  Speaker 9: it all kind of comes back to this idea that
• 21:19
  Speaker 9: people are just changing the way they drink. They're being
• 21:22
  Speaker 9: more conscientious with how they drink. You know, they still
• 21:24
  Speaker 9: want to be social, be out talking to people, you know,
• 21:27
  Speaker 9: like their inhibitions go, but they want to not deal
• 21:31
  Speaker 9: with all that all of the health consequences when it
• 21:33
  Speaker 9: comes to drinking. They don't want they want something that's
• 21:35
  Speaker 9: a lower calorie. They want something that's lighter, easier to drink.
• 21:38
  Speaker 9: So I guess you know, that's it's a debate that's
• 21:42
  Speaker 9: been going on for a long time of like our
• 21:43
  Speaker 9: younger people actually drinking less. It's it's really kind of
• 21:46
  Speaker 9: hard to like tease out in the data or they're
• 21:48
  Speaker 9: just like changing, like we're saying, they're just picking difference
• 21:51
  Speaker 9: in constellation.
• 21:51
  Speaker 2: Are they happy with their portfolio of brands or they
• 21:54
  Speaker 2: think are they always buying and selling stuff?
• 21:56
  Speaker 3: But I think right now they should be happy.
• 21:58
  Speaker 9: They have some of the most popular brands like Modella
• 22:01
  Speaker 9: obviously unseated bud Light a few years ago as the
• 22:03
  Speaker 9: most popular beer brand in the country. Corona, I think
• 22:07
  Speaker 9: is fifth. They also have Pacifico is one of the
• 22:10
  Speaker 9: highest growing brands as well, So I think that they
• 22:13
  Speaker 9: should be pretty happy with that stable. But you know,
• 22:16
  Speaker 9: we've seen deals happening in obviously the sort of rumors
• 22:19
  Speaker 9: around Brown Foreman potentially merging in a couple of weeks ago,
• 22:24
  Speaker 9: so they're, you know, in this sort of shrinking market
• 22:26
  Speaker 9: to gain growth, there's going to be probably more of
• 22:29
  Speaker 9: these sort of swaps, you know, in portfolios.
• 22:33
  Speaker 1: This is the Bloomberg Intelligence podcast, available on Apple, Spotify,
• 22:38
  Speaker 1: and anywhere else you get your podcasts. Listen live each
• 22:41
  Speaker 1: weekday ten am to noon Eastern on Bloomberg dot Com,
• 22:45
  Speaker 1: the iHeartRadio app, tune In, and the Bloomberg Business app.
• 22:49
  Speaker 1: You can also watch us live every weekday on YouTube
• 22:52
  Speaker 1: and always on the Bloomberg terminal