Latest / Bloomberg Intelligence / BI Weekend: US Bank Earnings, Toyota’s EV Future

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BI Weekend: US Bank Earnings, Toyota’s EV Future · Bloomberg Intelligence

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Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.
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Speaker 2: This is Bloomberg Intelligence with Alex Steele and Paul Sweeney.
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Speaker 3: The real our performance has been the US corporate high yields.
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Speaker 4: Are the companies lean enough? Have they trimmed all the fats?
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Speaker 3: The semiconductor business is a really cyclical.
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Speaker 2: Business, breaking market headlines and corporate news from across the globe.
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Speaker 4: Do investors like the M and A that we've seen?
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Speaker 3: These are two big time blue chip companies.
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Speaker 4: Window between the peak and cut changing super fast.
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Speaker 2: Bloomberg Intelligence with Alex Steele and Paul Sweeney on Bloomberg Radio.
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Speaker 5: On Today's Bloomberg Intelligence Show, We're going to dig inside
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Speaker 5: the big business stories impacting Wall Street and global markets.
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Speaker 5: Each and every week we provide in depth research and
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Speaker 5: data on some of the two thousand companies and one
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Speaker 5: hundred and thirty industries our analysts cover worldwide, And today
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Speaker 5: we'll look at what to expect in the media streaming
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Speaker 5: space in twenty twenty five. Plus we'll discuss why Toyota's
1:01
Speaker 5: recent success may be getting in the way of its
1:03
Speaker 5: evy future. But first we turn to US bank earnings.
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Speaker 5: The four giant lenders that reported full year results Wednesday
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Speaker 5: notch their second most profitable year ever in twenty twenty four.
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Speaker 5: They include JP Morgan, City, Goldman Sachs, and Wells Fargo.
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Speaker 5: The results were driven by interest rate moves, investment banking fees,
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Speaker 5: and trading revenue. For more, guest host Matt Miller and
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Speaker 5: Nora Melinda spoke with Alison Williams Bloomberg Intelligence, senior analysts
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Speaker 5: for global banks and asset managers, and they started by
1:31
Speaker 5: asking Allison about City Group's outlook for twenty twenty five.
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Speaker 6: Well, I think they sort of notched down their return
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Speaker 6: on tangible equity target in the near term, but I
1:40
Speaker 6: think it's realistic. You know, it's interesting, even Goldman Sachs,
1:45
Speaker 6: who had like a blowout quarter, really strong numbers. It's
1:49
Speaker 6: tough to see them. You know, they say they have
1:53
Speaker 6: a path to reach their target. But I think what
1:56
Speaker 6: all these banks did was after twenty twenty one, which
1:59
Speaker 6: was a blowout year, you saw a lot of people
2:01
Speaker 6: raise their targets, but at these very bullish targets. And
2:05
Speaker 6: JP Morgan has met their targets. But for everybody else,
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Speaker 6: you know, it's tough and even with the markets as
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Speaker 6: strong as.
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Speaker 3: They are, so.
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Speaker 7: But targets were pretty high, right, yeah, I mean Shannali
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Speaker 7: keeps telling me that JP Morgan missed on equities trading,
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Speaker 7: but equities trading rose.
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Speaker 6: Right I think because I think because they restated their numbers,
2:27
Speaker 6: and so if you look at the restatement, what happened
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Speaker 6: was they shifted a little bit from equities to thick
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Speaker 6: and so I think that's why it appears that they
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Speaker 6: missed on the equities line but really beat on FICK
2:43
Speaker 6: and explained to her fixed income.
2:46
Speaker 8: Okay, what's acronym?
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Speaker 9: Thank you?
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Speaker 7: Yeah, it's an acronym that also doesn't do well in Germany.
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Speaker 6: Yeah, I'm not sure what it would be, although Deutsche
2:55
Speaker 6: Bank only does fick with oneesay because.
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Speaker 9: They're not that good man.
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Speaker 8: So who's the front runner here and who are the laggards?
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Speaker 6: So you know, JP Morgan really continues to post the
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Speaker 6: leading returns of the group. As I said, there, you know,
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Speaker 6: exceeding their target in the near term. We expect they'll
3:13
Speaker 6: meet their target again next year. But I would say
3:17
Speaker 6: that for I say you that all the banks really
3:20
Speaker 6: had a good quarter. And it's not just the quarter,
3:22
Speaker 6: it's the guidance and so net interest income coming in
3:26
Speaker 6: better than expected.
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Speaker 1: You know, WELLS.
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Speaker 6: Fargo and JP Morgan in particular raising their guidance for
3:33
Speaker 6: a net interest income for next year. With the City Group,
3:37
Speaker 6: as we pointed out, you know, they had the buyback
3:41
Speaker 6: is about fourteen percent of their market cap, So that's
3:44
Speaker 6: pretty significant. I mean, keep in mind the valuation at
3:47
Speaker 6: City and so that's why I think investors are even
3:51
Speaker 6: more excited about that.
3:52
Speaker 7: Well, you know what, that brings up an interesting question.
3:56
Speaker 7: We have the inauguration and will be a different regulatory regime.
4:01
Speaker 7: Not just throwing out the Basil three endgame, but I
4:05
Speaker 7: wonder if these banks are going to be able to
4:08
Speaker 7: do more buybacks, Are they going to be able to
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Speaker 7: pay more in dividend? Are they gonna be able to
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Speaker 7: return more cash?
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Speaker 6: To show that is that is definitely the thesis.
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Speaker 3: If you will.
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Speaker 6: And so a lot of the run up that we
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Speaker 6: saw in the banks was due to this lighter regulatory environment.
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Speaker 6: A big part of that, to your point, is the
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Speaker 6: capital rules. So Basil three endgame as we call it.
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Speaker 2: Sounds like a movie.
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Speaker 6: Yes, right, so it will eventually happen.
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Speaker 9: I mean.
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Speaker 6: For the banks, it's probably a good thing actually, if
4:39
Speaker 6: it happens under the current administration, because the current administration,
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Speaker 6: as we know, is very US focused, and a lot
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Speaker 6: of the issues that the banks had with the capital
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Speaker 6: rules was that it was very punitive versus some other jurisdictions.
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Speaker 6: So it felt like it put them at a disadvantage.
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Speaker 6: Especially it's something like prime brokerage, and that's not a
5:02
Speaker 6: business that regulators are necessary. You know, regulators generally they're
5:06
Speaker 6: looking to protect the smaller banks and do things, and
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Speaker 6: you know they're not as concerned with trading and prime brokerage.
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Speaker 6: But to the extent that this at this administration, you know,
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Speaker 6: we would see the lighter rules come through.
5:22
Speaker 3: It could be good to get them solidified.
5:24
Speaker 6: The other thing M and A less antitrust should be
5:28
Speaker 6: good for M and A. It's actually a little bit
5:30
Speaker 6: of a.
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Speaker 7: How many banks are there in the US and the
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Speaker 7: United States of America.
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Speaker 10: How many banks do we have?
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Speaker 3: Well, it's not it's not five thousand.
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Speaker 6: It's not necessarily even the bank insolidation. It's the fees
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Speaker 6: that they'll make advising other people.
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Speaker 7: Right. Okay, So you're saying advising M and A for
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Speaker 7: other industries. Okay, I thought you were talking about in banks,
5:47
Speaker 7: because you know, in some countries they have like.
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Speaker 8: Four or five, but just a couple that you can
5:52
Speaker 8: count on your hand.
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Speaker 3: And this country, we have we have a lot, a lot.
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Speaker 7: I mean, I'm not far off with five thousand.
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Speaker 6: Right, yes, so you're not far off. But I mean
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Speaker 6: the size of these g SIPs as we call them,
6:04
Speaker 6: which globally systemically important banks. I mean, the big really
6:08
Speaker 6: have gotten bigger. They have consolidated share, and they've gotten
6:11
Speaker 6: bigger globally.
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Speaker 7: I don't know if Nora remembers, but there was a
6:16
Speaker 7: time when we were concerned about banks being too big
6:20
Speaker 7: to fail. Okay, I mean you were probably in middle
6:22
Speaker 7: school at the time, but now they're even bigger. I
6:25
Speaker 7: don't know that I shouldn't assume that your age is.
6:28
Speaker 7: But you know, twenty ten now is fifteen years ago,
6:31
Speaker 7: so into two thousand and eight, right, seventeen years ago.
6:34
Speaker 1: What grade were you in seventeen years ago?
6:37
Speaker 7: I don't think I'm allowed to ask, Actually forget that.
6:40
Speaker 7: In any case, these g sibs are g sibbier than ever.
6:43
Speaker 11: Right.
6:43
Speaker 8: I'm also so I keep an eye on real estate stocks,
6:45
Speaker 8: so I'm covering office rates, and one thing that I'm
6:48
Speaker 8: always looking at is return to office. So we did
6:50
Speaker 8: have JP Morgan saying that they're pushing people back into
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Speaker 8: the office. What has been the general mandate and what
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Speaker 8: has been the conversation for the banking industry in general?
6:59
Speaker 1: In general?
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Speaker 6: You know those that are front office, if you will,
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Speaker 6: that are out there. You know, we have this banking
7:04
Speaker 6: fee recovery. Banks are competing with each other, so a
7:07
Speaker 6: lot of those senior people happen in office or traveling again, right,
7:12
Speaker 6: so a lot of for investment bankers, a lot of
7:14
Speaker 6: it is not necessarily sitting in your office, but being
7:17
Speaker 6: out there and visiting clients. So we definitely saw that
7:20
Speaker 6: return to travel and JP Morgan, even though the five
7:24
Speaker 6: days a week is getting a lot of headlines, you know,
7:26
Speaker 6: the senior people at JP.
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Speaker 3: Morgan have already been back.
7:30
Speaker 6: You know, people that I talked to at the company
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Speaker 6: were back, you know, May of twenty twenty. They were
7:35
Speaker 6: back in their office five days a week. So yeah,
7:38
Speaker 6: so definitely there is the return to office.
7:41
Speaker 12: Office.
7:41
Speaker 6: Commercial real estate, as you know, was a big concern,
7:45
Speaker 6: but we're we're definitely seeing some stabilization there all right.
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Speaker 5: Thanks to Alison Williams, Bloomberg Intelligence Senior Analyst, global banks
7:53
Speaker 5: and asset managers. We move next to the streaming business.
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Speaker 5: We heard recently that Walt Disney, Fox, and Warner Brothers
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Speaker 5: Discovery scrapped plans to create a joint sports streaming service
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Speaker 5: called Venue Sports, and the company said they instead want
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Speaker 5: to focus on their existing online offerings instead. For more
8:09
Speaker 5: host Paul Sweeney and Normal Linda were joined by Gethera
8:11
Speaker 5: Monkannathan Bloomberg intelligence analyst on US Media, and they first
8:15
Speaker 5: asked Etha what Venue was to be and why the
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Speaker 5: parties decided not to go through with it.
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Speaker 13: So Venue was really this skinny sports service that that
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Speaker 13: was having content from Disney, Fox, and Warner Brothers. It
8:28
Speaker 13: was supposed to launch last year. But Fubo, which is
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Speaker 13: another player in the space, they're a digital PayTV service provider,
8:37
Speaker 13: they actually had filed a lawsuit against Venues saying that
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Speaker 13: it kind of blocks competition, and so you know, because
8:44
Speaker 13: of that, there was an injunction which had blocked the
8:47
Speaker 13: launch of Venue. Now, in a somewhat of a surprising move,
8:51
Speaker 13: Disney actually merged Hulu Live Tv, which is its own
8:55
Speaker 13: digital PATV service, with Fubo, and as part of that deal,
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Speaker 13: Fubo actually agreed to drop litigation, which potentially, i mean theoretically,
9:03
Speaker 13: on paper, it kind of cleared the way for the
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Speaker 13: launch of venues.
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Speaker 9: So this move, or this announcement rather is somewhat.
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Speaker 13: Of a head scratcher because we really thought that they had,
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Speaker 13: you know, kind of put everything in place to actually
9:15
Speaker 13: go ahead with the launch of venue. But you know,
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Speaker 13: Direct TV and Dish had also come up with their
9:20
Speaker 13: own concerns, and they had said that, you know, antitrust
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Speaker 13: concerns regarding Venue were actually still very much in place,
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Speaker 13: which kind of suggests to us that maybe Disney, Fox
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Speaker 13: and Warner Brothers said that it's really not worth all
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Speaker 13: of this, you know, legal and time resources being spent
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Speaker 13: on Venue, so let's just crap the whole thing.
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Speaker 1: We're in also expecting this.
9:38
Speaker 9: Nobody was really expecting this.
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Speaker 13: I mean, first of all, nobody was really expecting that
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Speaker 13: whole fuboat Disney move, but really that kind of seemed
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Speaker 13: like this perfect setup for actually a go ahead on Venue.
9:47
Speaker 13: So this obviously, this is the kind of our second
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Speaker 13: big shock this week, but it really kind of goes
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Speaker 13: to prove to us, you know, despite everybody kind of
9:55
Speaker 13: wanting to make this transition into you know, streaming pauls.
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Speaker 13: You very well know there are so many legal and
10:02
Speaker 13: logistical complications associated with it.
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Speaker 9: I mean we've seen that time and time again.
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Speaker 13: You know, there was this short form video service called Queebi,
10:09
Speaker 13: which basically was kind of dead or arrival. We had
10:11
Speaker 13: CNN Plus again never really took off the ground. So
10:14
Speaker 13: so many of these services, Yes, theoretically they're good, but
10:17
Speaker 13: practically it becomes almost impossible to implement.
10:20
Speaker 14: Can you update us on what disney strategy is for
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Speaker 14: ESPN in the streaming world?
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Speaker 13: Yeah, Now, I think all eyes now that this whole
10:29
Speaker 13: venue thing is off, I think all eyes are on ESPN.
10:33
Speaker 13: So the big move that happens this year, it happens
10:36
Speaker 13: in fall of twenty twenty five, when Disney is preparing
10:40
Speaker 13: to launch what they call the flagship ESPN product, which
10:44
Speaker 13: is all of the ESPN content, all of the Marquee
10:46
Speaker 13: Sports content actually going direct to consumer. Now, the big
10:50
Speaker 13: news that we're still kind of waiting for Paul is
10:53
Speaker 13: what the price point is going to be. So we
10:55
Speaker 13: knew that Venue Sports was priced at about forty three
10:59
Speaker 13: dollars a month, but that included, you know, obviously content
11:02
Speaker 13: from Fox Waterer Brothers and Disney just kind of looking,
11:06
Speaker 13: you know, crunching some numbers. We think that this new
11:09
Speaker 13: Disney ESPN service could be priced anywhere from about twenty
11:13
Speaker 13: two to twenty five dollars a month. So then the
11:15
Speaker 13: question is, you know, how many people are going to
11:17
Speaker 13: subscribe to the service and will it potentially help Disney
11:22
Speaker 13: to offset all of the losses that they're seeing on
11:25
Speaker 13: the linear TV side. We think over time it will,
11:28
Speaker 13: but it's still a little bit of a weight and
11:30
Speaker 13: wash because we really need that price point.
11:32
Speaker 8: So how big could this really be if they were
11:35
Speaker 8: to launch this ESPN product.
11:37
Speaker 9: We think it can be really really big.
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Speaker 13: So remember right now we have about seventy million PayTV households,
11:45
Speaker 13: but there are totally one hundred and thirty million TV households,
11:48
Speaker 13: so that means sixty million households are actually not even
11:51
Speaker 13: subscribing to a PATV service. So we think that, you know,
11:54
Speaker 13: the ESPN product potentially can capture a lot of both
11:58
Speaker 13: the PATV household on as well as the ones that
12:01
Speaker 13: we call cord never's or you know, cord cutters who
12:04
Speaker 13: have just completely left the TV ecosystem. So the way
12:07
Speaker 13: that we're kind of modeling it out is we think
12:09
Speaker 13: that this service gets about, you know, ten twelve million
12:12
Speaker 13: subscribers by the end of next year, potentially reaches almost
12:15
Speaker 13: thirty forty million subscribers over the next few years. But
12:18
Speaker 13: again no, a lot of that is going to depend
12:20
Speaker 13: on exactly where they price the product and also what
12:23
Speaker 13: content would they offer. Do they go out and license
12:26
Speaker 13: more content from let's say some of their peers like
12:28
Speaker 13: you know Fox or Warden Brothers.
12:30
Speaker 5: Thanks to gethr Maranganathan, Bloomerg Intelligence analyst on US Media.
12:34
Speaker 5: Coming up, We're going to break down why the investment
12:36
Speaker 5: company black Rock attracted record client cash last year. You're
12:40
Speaker 5: listening to Bloomberg Intelligence on Bloomberg Radio, providing in depth
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Speaker 5: research and data on some of the two thousand companies
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Speaker 5: and one hundred and thirty industries. You can access Bloomberg
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13:13
Speaker 5: We moved next to earnings results from the investment company
13:15
Speaker 5: black Rock. This week, we heard the black Rock attracted
13:18
Speaker 5: an annual record of six hundred and forty one billion
13:21
Speaker 5: dollars in client cash. The number show the firm's global
13:24
Speaker 5: reach as it integrates multi billion dollar acquisitions and reshapes
13:28
Speaker 5: its leadership. For more, guest host John Tucker and Normal
13:31
Speaker 5: Linda spoke to Neil Sipes, Bloomberg Intelligence financials analyst, and
13:35
Speaker 5: they asked him how much assets under management Blackrock had now.
13:38
Speaker 10: The number now is eleven point six trillion. Wow, that's
13:42
Speaker 10: chilling with the tee, right the t And what's really
13:45
Speaker 10: interesting is you know that number, you know, blows people's
13:48
Speaker 10: minds away, especially if they're not following the name closely.
13:51
Speaker 10: You think about the rule of seventy two, how many
13:53
Speaker 10: years it takes to double. Their assets have grown ten
13:56
Speaker 10: percent a year over the past seven years, So that
14:00
Speaker 10: how we've sort of gotten here. Twenty seventeen we were
14:02
Speaker 10: at six trillion. Now we're at eleven point six trillion, so,
14:07
Speaker 10: you know, effectively doubling a lot of that of course's markets,
14:10
Speaker 10: but with black Rock, what we know is sort of
14:12
Speaker 10: premium organic growth that's net inflows of client assets. That's
14:17
Speaker 10: been their strong suit.
14:18
Speaker 8: Neil, As we look at earnings, what were your biggest
14:21
Speaker 8: takeaways for this company?
14:22
Speaker 10: Yeah, I think the biggest takeaway was that at eleven
14:26
Speaker 10: point six trillion dollars, the question of can you still
14:29
Speaker 10: grow at that scale is sort of answered here and
14:33
Speaker 10: we've seen that, you know, the two hundred billion in
14:36
Speaker 10: long term flows in client assets, that's eight percent long
14:39
Speaker 10: term organic growth. That's one of their best quarters in
14:43
Speaker 10: a handful of years, and it's at the point where
14:46
Speaker 10: they've been the biggest they've ever been. So they're proving that,
14:49
Speaker 10: you know, the bigger they get, the growth is still there.
14:52
Speaker 10: And a lot of that speaks to sort of the
14:54
Speaker 10: breadth of that franchise where we know they have the
14:56
Speaker 10: massive eye shares franchise, the legacy sort of active mutual
15:01
Speaker 10: fund franchise, and now that push into private markets.
15:04
Speaker 15: As a client of Blackrock, how much money am I
15:06
Speaker 15: making with my stuff?
15:09
Speaker 13: Yeah?
15:09
Speaker 10: Well, I guess it's going to depend what sort of
15:12
Speaker 10: products you're investing in, but a lot of what they've
15:15
Speaker 10: sort of typically done or legacy when you think of
15:18
Speaker 10: Blackrock as a lot of those beta type products, the
15:21
Speaker 10: simple I shares ETFs that are going to track an
15:24
Speaker 10: index or an index mutual fund that you might find
15:27
Speaker 10: in your four oh one K or in your retirement plans.
15:30
Speaker 10: So that's going to vary buy product. But what I
15:33
Speaker 10: think is a bigger story in asset management as well
15:36
Speaker 10: is the fees that are associated with those types of products.
15:39
Speaker 10: So we know that Blackrock is huge in that sort
15:42
Speaker 10: of passive realm. That's where fees are lowest, but we
15:45
Speaker 10: know that's where investor demand is, so that's where those
15:48
Speaker 10: assets are growing quickest. On the other side, in the
15:51
Speaker 10: asset management industry, we call it the Barbell strategy.
15:54
Speaker 1: Passive.
15:54
Speaker 10: On one side, that's low fee, high growth. On the
15:57
Speaker 10: other side, you have the higher fee, high growth, and
16:00
Speaker 10: that's private market.
16:01
Speaker 15: I guess what I'm asking is what is the secret
16:03
Speaker 15: sauce that attracts so many clients to them? Is it
16:06
Speaker 15: the low fee aspect of this?
16:09
Speaker 10: Yeah, I think it's a combination of both both performance
16:12
Speaker 10: and sort of competition on price. Right, Blackrock has the
16:15
Speaker 10: scale to be competitive on price, so they can effectively
16:19
Speaker 10: either undercut competitors or at least justify you know, the
16:23
Speaker 10: fees with performance where necessary, and you have Blackrock, that's
16:28
Speaker 10: pretty much embedded with all financial services, all at financial
16:32
Speaker 10: institutions across the world, wealth advisors down to the self
16:36
Speaker 10: directed brokers, you know, defined contribution providers, all of that
16:40
Speaker 10: sort of makes their products permeate pretty much everyone's portfolios,
16:45
Speaker 10: from retail all the way up to institutional.
16:47
Speaker 8: So Neil Blackrock also mentioned the announced that we were
16:51
Speaker 8: going to be having a shake up and management. So
16:53
Speaker 8: one of its most senior executives, Mark Weedman, will be
16:56
Speaker 8: exiting this spring.
16:58
Speaker 15: And why would shake things up are going so well, right,
17:01
Speaker 15: don't shake anything.
17:02
Speaker 8: He was also seen as a potential successor for Larry Fink,
17:06
Speaker 8: the CEO.
17:07
Speaker 1: So what are.
17:08
Speaker 8: Conversations like, what are you hearing in terms of how
17:11
Speaker 8: people think about who could potentially replace the CEO? And
17:13
Speaker 8: if there's any sort of you know, instability there.
17:16
Speaker 10: Yeah, I don't necessarily view these headlines as as a
17:20
Speaker 10: you know, indication of instability. I think we know that
17:24
Speaker 10: Blackrock has a pretty strong bench. You are, you know,
17:28
Speaker 10: at times going to see higher profile people depart certain firms.
17:32
Speaker 10: You know, Larry's been at the Helm for you know,
17:34
Speaker 10: over thirty years at this point, since co founding Blackrock,
17:38
Speaker 10: So that's always sort of been a question that's sort
17:41
Speaker 10: of in the back of investors' minds. It doesn't sound
17:43
Speaker 10: like it's you know, on the verge of being announced
17:47
Speaker 10: or anything changing, but you know, ultimately that's one person
17:51
Speaker 10: out that may have been a sort of potential heir
17:54
Speaker 10: to the CEO. But we view the bench as pretty
17:57
Speaker 10: solid and don't see that as a negative.
17:59
Speaker 15: Right, So what do you do for an encore? Larry
18:02
Speaker 15: finks this is just the beginning, I think.
18:04
Speaker 4: He said, or seventy two years old.
18:07
Speaker 10: Yeah, right, And some may even call the past twelve
18:11
Speaker 10: months the encore where he strung together three pretty sizable
18:15
Speaker 10: transactions in private markets, Global Infrastructure Partners, Prequeen, the private
18:20
Speaker 10: market's data provider, and then just recently HPS that has
18:24
Speaker 10: significantly shaken up the firm in terms of how those
18:28
Speaker 10: fees are going to be generated, where the growth is
18:30
Speaker 10: ultimately going to come from. So that's perhaps sort of
18:33
Speaker 10: the latest in the legacy of Larry Fink, and ultimately
18:37
Speaker 10: where that goes is going to be the question. But
18:40
Speaker 10: it feels like more of the same, more on the
18:42
Speaker 10: passive etf side of the business as well as now
18:46
Speaker 10: into private markets.
18:47
Speaker 5: Our thanks to Neil Sipes, Bloomberg Intelligence financials analyst, we
18:51
Speaker 5: move next to the renewable energy space. There's been growing
18:54
Speaker 5: concern that changes under a new Trump administration could undercut
18:57
Speaker 5: US policies that have spurred renewable energy, but according to
19:01
Speaker 5: Bloomberg Intelligence, greater private equity involvement and much of the
19:04
Speaker 5: S and P five hundred seeking emission cuts could offer
19:07
Speaker 5: support for more. Co host Paul Sweenie and I were
19:10
Speaker 5: joined by Margo Wenzel, Bloomberg Intelligence Senior ESG research associate.
19:15
Speaker 5: We first asked Margaret to talk about the renewable space
19:17
Speaker 5: and if it's right for some m and A and consolidation.
19:20
Speaker 16: It's a really small market. I will say it's only
19:23
Speaker 16: about two percent of total deals currently, but it's growing
19:28
Speaker 16: pretty quickly. It's grown around sixty five percent if we
19:32
Speaker 16: compare twenty twenty to twenty twenty four versus the prior decade,
19:36
Speaker 16: and if we look at the overall market zooming out
19:38
Speaker 16: a little bit that has grown around thirty percent. So
19:41
Speaker 16: there's definitely some focus there for this particular part of
19:45
Speaker 16: the market and.
19:45
Speaker 11: Does it slow down under President like Trump and administration.
19:49
Speaker 16: I think there's certainly risk for that the changing administration
19:54
Speaker 16: definitely presents some challenges. We saw President Trump talk about
19:58
Speaker 16: how there will be no wind bild out under his
20:01
Speaker 16: off show wind offshore wind YEP, which it presents a challenge.
20:06
Speaker 16: But I think we do see some longer term key
20:09
Speaker 16: drivers that could continue to propel the momentum of this market,
20:13
Speaker 16: especially things like companies have set decarbonization goals. Ninety eight
20:18
Speaker 16: percent of the S and P five hundred have set
20:21
Speaker 16: emissions reduction targets, a lot of those ending term in
20:23
Speaker 16: twenty thirty they've cited M and A is a key
20:26
Speaker 16: strategy for that. And then secondly something that everyone is
20:30
Speaker 16: talking about AI data center build out. We are going
20:33
Speaker 16: to need so much energy for that. IA is saying
20:37
Speaker 16: demand's going to increase four percent just this year compared
20:40
Speaker 16: to last year, with renewables meeting like seventy five percent
20:44
Speaker 16: of that. So I think those long term drivers are
20:47
Speaker 16: important to know.
20:48
Speaker 14: So generally speaking, in the renewable space, where is the
20:52
Speaker 14: growth here?
20:54
Speaker 16: It's interesting because renewable energy costs have actually dropped quite
20:58
Speaker 16: a lot. We look at SOUL, Solar costs has come
21:01
Speaker 16: down over eighty percent since twenty ten, wind over forty
21:05
Speaker 16: percent I think it's important to note what Alex mentioned
21:09
Speaker 16: about it's offshore wind. Offshore wind has faced a lot
21:13
Speaker 16: of challenges recently with regards to supply chain issues and
21:17
Speaker 16: rising costs. It's interesting because last year three of the
21:21
Speaker 16: biggest deals that we saw in the renewable energy M
21:23
Speaker 16: and A space were actually electric utilities selling off stakes
21:26
Speaker 16: and their offshore wind and private equity buying that. And
21:31
Speaker 16: that was so that they could generate some cash flow
21:33
Speaker 16: to pay off those costs.
21:34
Speaker 11: It's interesting, where do you think in renewables we'll see
21:37
Speaker 11: the most action, because renewables is a huge bucket. Like
21:40
Speaker 11: we might wind, you got renewable natural gas. I mean,
21:43
Speaker 11: is nuclear now included in renewables with natural gas included
21:46
Speaker 11: in renewables? I think it depends on who you ask, right, right,
21:49
Speaker 11: clean coal, that's a thing, right.
21:52
Speaker 16: I think from a cost standpoint, solar has been adopted
21:56
Speaker 16: pretty widely. We're seeing a lot of companies acquiring solar assets,
22:01
Speaker 16: so I think solar is a place to watch. And
22:03
Speaker 16: as you mentioned, nuclear energy has been a huge focus recently.
22:07
Speaker 16: There's still opportunity for costs to come down there, but
22:10
Speaker 16: definitely a focus.
22:11
Speaker 14: So where are we in terms of you think kind
22:15
Speaker 14: of just the evolution to deploying renewable energy, where are
22:20
Speaker 14: we VISA v the goals as the US and as
22:22
Speaker 14: US different from other parts of the world.
22:25
Speaker 16: Yeah, I think the IRA has definitely improved adoption in
22:30
Speaker 16: the US. We're probably seeing a little bit more adoption
22:33
Speaker 16: in Europe just from a policy standpoint. But yeah, I
22:37
Speaker 16: guess it'll be interesting to see what happens.
22:39
Speaker 11: Yeah, it feels like the two areas. Definitely, EVIS is
22:43
Speaker 11: going to be a risk and the Department of Loan
22:45
Speaker 11: programs right and that, but that would go to fund
22:48
Speaker 11: many different things, Like it wouldn't just be like super
22:50
Speaker 11: weird green Techi's things, It was like real projects. Also,
22:54
Speaker 11: those threats impact M and A or as you pointed out,
22:57
Speaker 11: are these like longer term, multi year dis.
23:01
Speaker 16: I think they could impact renewable energy emity in the
23:04
Speaker 16: short term. I mean the IRA is it's a broad
23:07
Speaker 16: piece act.
23:10
Speaker 1: Yeah.
23:10
Speaker 14: Sorry, but is there rich that President Trump could unwind
23:14
Speaker 14: the Inflation Reduction Act?
23:16
Speaker 16: Yeah, I mean it's such a broad piece of legislation.
23:19
Speaker 16: There are so many policies involved. He's been pretty vocal
23:22
Speaker 16: about rolling back certain parts of it, like the ev
23:25
Speaker 16: tax credits, for example, but it's pretty unclear exactly how
23:29
Speaker 16: that would work, and it would take a lot of
23:31
Speaker 16: time to really unwind policies within the and.
23:35
Speaker 11: Some of it you can't do unless you have Congress too,
23:37
Speaker 11: So there is right, So there is that as well.
23:41
Speaker 11: Last question, Paul didn't ask it, so I will is
23:43
Speaker 11: ESG still a thing?
23:45
Speaker 4: Yes, but there's a butt. I can look at our
23:48
Speaker 4: face and see there's a butt.
23:49
Speaker 16: I think ESG is still a thing. At the end
23:51
Speaker 16: of the day. I think esg's broad it's it's good investing.
23:56
Speaker 16: We have a ESG team here within BI and the
23:59
Speaker 16: research we do and we'll continue to do, is going
24:03
Speaker 16: to be around. Are their investment risks and opportunities associated
24:06
Speaker 16: with ESG themes. So I think it's here to stay,
24:09
Speaker 16: but we are weathering some challenges associated with the changing administration.
24:13
Speaker 5: Our thanks to Margot Wenzel, Bloomberg Intelligence and your ESG
24:17
Speaker 5: research associate. Coming up on the program, a look at
24:19
Speaker 5: how the world's number one auto maker has kept its
24:21
Speaker 5: focus on hybrids and gas guzzlers for better and worse.
24:25
Speaker 5: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in
24:28
Speaker 5: depth research and data on some two thousand companies in
24:31
Speaker 5: one hundred and thirty industries. You can access Bloomberg Intelligence
24:34
Speaker 5: through Bigo on the terminal. I'm Alex Steel, and this
24:37
Speaker 5: is Bloomberg.
24:43
Speaker 2: You were listening to the Bloomberg Intelligence podcast. Catch the
24:46
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24:50
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24:53
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24:56
Speaker 2: York station. Just say Alexa play Bloomberg eleven.
25:00
Speaker 5: We take a look next at the media streaming space.
25:03
Speaker 5: Co host Paul Sweenie and I were recently joined by
25:05
Speaker 5: Mark Douglas, President and CEO of Mountain, and he joined
25:09
Speaker 5: to discuss what he expects in the media streaming landscape
25:11
Speaker 5: this year. We began the conversation with live sports and
25:14
Speaker 5: ask Mark how that will migrate into streaming moving forward.
25:18
Speaker 12: Well, I think you're seeing a few things happening at
25:21
Speaker 12: the same time what you just mentioned, which is Netflix
25:24
Speaker 12: getting into sports. Also ESPN is coming like fully to streaming.
25:28
Speaker 12: So I think the advertisers really like they still are
25:33
Speaker 12: addicted to kind of like big audiences watching at the
25:36
Speaker 12: same time, so they can create big moments and so
25:40
Speaker 12: these networks they want to commodate that, but they're going
25:43
Speaker 12: to start accommodating that on streaming in twenty and twenty five.
25:45
Speaker 1: It's already happening.
25:46
Speaker 12: But now you hear from Disney, you hear from Netflix,
25:49
Speaker 12: they're really going all in on it. I think ESPN
25:51
Speaker 12: on streaming, really going full in on streaming is a
25:54
Speaker 12: big deal.
25:55
Speaker 11: Will the ad revenue for that live streaming of sports
25:58
Speaker 11: follow I.
25:59
Speaker 1: Think it will. I think the.
26:02
Speaker 12: Netflix in particular is a big advantage because so many
26:05
Speaker 12: people go to Netflix as their first source, so they
26:08
Speaker 12: can turn something that might not have been that big
26:12
Speaker 12: into a big moment. They did that with the Tyson
26:15
Speaker 12: Jake Paul fight. I think they're gonna do that with
26:18
Speaker 12: WWE on Monday, where people who normally wouldn't watch WWE
26:23
Speaker 12: are going to turn on the TV and that's what
26:25
Speaker 12: they see and they're gonna, you know, click and watch,
26:27
Speaker 12: and so they able to kind of amplify these sports events.
26:32
Speaker 12: But Disney, with ABC and all their other and especially ESPN,
26:36
Speaker 12: also has ability to deliver a big audience.
26:39
Speaker 1: I think they'll do the same.
26:40
Speaker 3: You were really early on on the Netflix story, Mark,
26:43
Speaker 3: Are you still as bullish about them, because one could
26:47
Speaker 3: argue it's a whole new competitive landscape here these days.
26:51
Speaker 12: Yeah, I think where you go first, you know, in
26:55
Speaker 12: some sense, the modern day TV guy is a really,
26:59
Speaker 12: really big and as long as Netflix owns that spot,
27:03
Speaker 12: I think there's data to show that well more than
27:07
Speaker 12: fifty percent of people when they turn on the TV,
27:09
Speaker 12: the first app because now you like start an app
27:12
Speaker 12: rather than change the channel, the first app they go
27:15
Speaker 12: to is Netflix. As long as you own that spot,
27:19
Speaker 12: you will own, you know, kind of be the leader
27:22
Speaker 12: in streaming. But it requires a big investment in content.
27:27
Speaker 12: People go there first because that's the first place they
27:30
Speaker 12: think there's.
27:30
Speaker 1: Going to be new content.
27:32
Speaker 12: So Netflix is going to have to keep beating that machine.
27:34
Speaker 12: And they're doing it now, and they're doing it profitably,
27:37
Speaker 12: so you know, all of that combined I think keeps
27:39
Speaker 12: them in the lead until they they until they make
27:43
Speaker 12: a strategic error essentially, and maybe you know, get cheap
27:46
Speaker 12: about how much you're willing to spend on content people
27:49
Speaker 12: abandon them.
27:50
Speaker 9: Mark.
27:50
Speaker 5: When it comes to the next step, then are we
27:53
Speaker 5: going to see bundles? Like you said, it's Netflix is
27:56
Speaker 5: like basically raced to lose at the end of the day.
27:58
Speaker 12: Yeah, I mean bundles in the form of acquisitions.
28:02
Speaker 1: I think.
28:04
Speaker 12: So there's some loose bundles now that don't involve acquisitions.
28:07
Speaker 12: But I mean what's happening in twenty twenty five is
28:10
Speaker 12: every network is all in on streaming. I mean I
28:14
Speaker 12: talk to executives at all these networks. W this is
28:16
Speaker 12: pretty regularly all that I mean, linear doesn't even come
28:19
Speaker 12: out of their mouth anymore.
28:20
Speaker 1: That's a legacy business.
28:23
Speaker 12: You know, the viewers are still there, so they still
28:25
Speaker 12: have to migrate them, but they only want to talk
28:27
Speaker 12: about streaming and the you know, the big winners I've
28:31
Speaker 12: said this many times are the ones where I can
28:33
Speaker 12: name them and you can.
28:34
Speaker 1: Tell me why you go there and watch them.
28:36
Speaker 12: And so those winners are going to started consolidating the
28:39
Speaker 12: buy content and it's already under way, and that that
28:43
Speaker 12: that's kind of what's going to have that bundles in
28:45
Speaker 12: the form of let's just start buying content and buying
28:49
Speaker 12: these brands which are going to disappear like old you know,
28:52
Speaker 12: car companies that that you never hear about anymore.
28:56
Speaker 1: Something you know, similar to that.
28:58
Speaker 3: Are the economics Are they as good in streaming?
29:01
Speaker 1: Mark?
29:01
Speaker 3: Do we know that. I mean, it seems like they're
29:03
Speaker 3: pretty good for Netflix.
29:04
Speaker 12: They're good for Netflix, and I think starting to get
29:07
Speaker 12: good for Disney. And you know, it's when do you
29:10
Speaker 12: reach a critical mass of subscribers that is more than
29:15
Speaker 12: your cost of acquisition for the consumers and the costs
29:18
Speaker 12: of the content. And Netflix is clearly at that point.
29:21
Speaker 12: I think Disney is. If not, I think I think
29:25
Speaker 12: Disney Plus is now profitable. I hope they don't underinvest
29:29
Speaker 12: in content to maintain that profitability, and so and a
29:33
Speaker 12: few others are going to follow it. I think the
29:35
Speaker 12: business is going to become very, very profitable, and it's
29:38
Speaker 12: going to go back to being a growth business. That's
29:40
Speaker 12: been the story of Linear is it grows at one
29:43
Speaker 12: percent a year, and streaming has obviously grown a lot faster.
29:47
Speaker 12: So hopefully the whole industry is going to grow a
29:49
Speaker 12: lot faster.
29:50
Speaker 11: If everyone's talking about streaming, are the ad pricing that
29:53
Speaker 11: a streamer can get as good as Linear? And then
29:57
Speaker 11: if not, when does that ship turn?
29:59
Speaker 1: Yeah, it is as good.
30:02
Speaker 12: The ad load is not quite as high, and so
30:05
Speaker 12: consumers are probably happy about that. They see fewer ads,
30:08
Speaker 12: but the ad load will probably catch up and so
30:11
Speaker 12: the pricing is about the same, meaning how much money
30:13
Speaker 12: can you make per consumer is about the same. One
30:18
Speaker 12: thing also just switching back ear so, you know, kind
30:21
Speaker 12: of the previous topic. The interesting thing about Netflix is
30:24
Speaker 12: they're profitable while they're bringing one out of every two
30:27
Speaker 12: subscribers is paying the lowest possible price with ads supported,
30:32
Speaker 12: and they're not selling many ads right, They're still relatively
30:35
Speaker 12: small in the ad game, and so it bodes well
30:39
Speaker 12: for how profitable this company is going to become. I
30:41
Speaker 12: think it's five pot ninety nine price point is the
30:43
Speaker 12: cheapest price point to join Netflix, and they remain profitable,
30:49
Speaker 12: not actually expanding profits at that price point, and the
30:52
Speaker 12: media dollars are going to show up and make this
30:55
Speaker 12: company incredibly profitable. So that's back to the question about
30:59
Speaker 12: you know, is the industry going to grow?
31:02
Speaker 1: Is the profitability going to be there?
31:03
Speaker 12: Yeah, it's going to be there pretty big, and the
31:05
Speaker 12: particularly pretty large for Netflix.
31:07
Speaker 3: Is there a sense mark how many streamers can be
31:09
Speaker 3: economically supported in this marketplace?
31:13
Speaker 12: I wouldn't call it unlimited demand for TV advertising, but
31:16
Speaker 12: there's a lot of demand. The pricing has been coming
31:19
Speaker 12: down a bit because of the competition. You had you know,
31:22
Speaker 12: like Netflix started to really come on board, Disney plus
31:26
Speaker 12: Amazon Prime. Now every subscriber receives ads. There's not even
31:30
Speaker 12: a way to opt out, and so all of that
31:33
Speaker 12: new inventory is definitely bringing prices down, triggering a little
31:38
Speaker 12: bit of a price war. But I think that'll shake
31:41
Speaker 12: out when you combine that with the acquisition spree that's
31:43
Speaker 12: probably gonna happen over the next few years. I think
31:46
Speaker 12: pricing will temporarily dip then start to go back up.
31:49
Speaker 12: And the main thing is you have a lot of
31:51
Speaker 12: new advertisers comeing in market, a lot smaller, younger, mid
31:55
Speaker 12: sized companies, smaller companies and bringing new revenue that will
31:58
Speaker 12: will drive up revenue for the whole industry.
32:01
Speaker 5: Mark are we ever going to see the streamers get
32:03
Speaker 5: really into news talking about live? I know that some
32:06
Speaker 5: of them have their own streaming news part, right like
32:09
Speaker 5: CBS Now, et cetera.
32:11
Speaker 4: How do you think that part evolves.
32:12
Speaker 12: I think probably not, And the reason is is because
32:16
Speaker 12: no one really, I think fully understood in their recent
32:20
Speaker 12: years that like social media is a big competitor in news,
32:24
Speaker 12: so they get the kind of news that people are
32:26
Speaker 12: getting literally right now listening to you, I think that's
32:29
Speaker 12: going to remain relatively independent. I don't see like Netflix
32:33
Speaker 12: and Disney getting into that and so and I've never,
32:38
Speaker 12: honestly never hear from any of these companies about news.
32:41
Speaker 12: They only want to talk about sports and entertainment.
32:44
Speaker 5: Thanks to Mark Douglas, President and CEO of Mountain, this
32:48
Speaker 5: week we focus on a Bloomberg Big Take story titled
32:50
Speaker 5: Toyota's recent success is getting in the way of its future.
32:54
Speaker 5: You can find it on Bloomberg dot Com and on
32:56
Speaker 5: the Terminal, and the story looks at how the world's
32:58
Speaker 5: number one automaker has came. It's focused on hybrids and
33:01
Speaker 5: gas guzzlers for better and worse For more. Guest hosts
33:05
Speaker 5: Matt Miller and normal Inda spoke with Chester Dawson, Bloomberg
33:08
Speaker 5: Senior editor tode Is.
33:10
Speaker 17: You know they're kicking it and taking names right. I mean,
33:12
Speaker 17: they're the world's largest automaker, full stop. They're highly profitable,
33:17
Speaker 17: and they've got you know, business growing and markets right
33:22
Speaker 17: around the world. But they too haven't quite figured out
33:25
Speaker 17: eves and you know, it's it's it's keeping them up
33:29
Speaker 17: at night because they realized that, you know, by looking
33:31
Speaker 17: over their shoulder. The Tesla's and about three dozen Chinese
33:35
Speaker 17: ev makers that nobody in this country's ever heard of,
33:38
Speaker 17: are are quickly creeping up with products that cost a
33:42
Speaker 17: lot less and have just as much, if not better,
33:45
Speaker 17: you know, cockpit technology, and are flooding into work at markets,
33:49
Speaker 17: you know, in places like Africa and Southeast Asia and
33:53
Speaker 17: the Middle East, among others. And and they've got to
33:56
Speaker 17: figure out what to do about it. So yeah, the
33:58
Speaker 17: scene that that that you describe it, you know, they
34:01
Speaker 17: have it's actually a specially reverse engineering company that that
34:07
Speaker 17: has these facilities. And you know, the fact that they
34:09
Speaker 17: put one in Japan, you know, uh is is I
34:14
Speaker 17: think telling you know, they realize that the world's largest
34:16
Speaker 17: dottomaker and Japan's largest automaker by the way, you know,
34:20
Speaker 17: it was kind of interested in and peeling apart the
34:22
Speaker 17: onion and finding out how it is that Tesla and
34:24
Speaker 17: the Chinese can make these things so darn cheaply. By
34:28
Speaker 17: the way, I'll just mention that there's also a facility
34:31
Speaker 17: right here in suburban Detroit. It's in a former milk
34:34
Speaker 17: processing facility, so not a not a junior high school gymnasium,
34:38
Speaker 17: but but they do the same thing for the Detroit
34:41
Speaker 17: three to show them.
34:42
Speaker 7: So they take they take a by d seagull apart
34:45
Speaker 7: there and say, like, how did they do this so
34:48
Speaker 7: well for so little?
34:49
Speaker 17: Exactly? They take it, they literally strip it part by part,
34:53
Speaker 17: piece by piece. They X ray, you know, each piece
34:56
Speaker 17: to determine, you know, what it's made of, how much
34:59
Speaker 17: it weigh. You know, some of the interior things that
35:02
Speaker 17: can't be seen, but I saw, for example, they had
35:05
Speaker 17: a cyber truck in there and they had the battery
35:07
Speaker 17: pack and they ripped off the top of it and
35:09
Speaker 17: you could literally see all those prismatic cylinder batteries stacked up,
35:14
Speaker 17: you know, like so many bowling pins, which I'd never
35:17
Speaker 17: seen before. I mean, it's kind of cool, but it's
35:20
Speaker 17: also very frightening to these executives at companies who are
35:22
Speaker 17: trying to figure out, you know, because I mean the
35:25
Speaker 17: other thing about this is and this we get into
35:27
Speaker 17: this in the story. You know, Toyda knows how to
35:29
Speaker 17: make an internal combustion engine vehicle or even a hybrid
35:33
Speaker 17: very very well. They are in many ways the world's
35:36
Speaker 17: leading experts on it, and.
35:37
Speaker 7: People says from Toyota right their their production their production
35:42
Speaker 7: methods are have been world famous since the since the
35:46
Speaker 7: eighties exactly.
35:47
Speaker 17: Yeah, and we get into that too, the kind of
35:49
Speaker 17: somewhat mystical may the Force be with you, Toyta Production
35:52
Speaker 17: System and Kaizen and just in Time and lean manufacturing,
35:56
Speaker 17: all that stuff, you know, comes straight out of Toda City.
36:00
Speaker 17: But it's not. It just turns out it's not so
36:02
Speaker 17: relevant in the world of you know, modular manufacturing vehicles
36:07
Speaker 17: that have many fewer parts and you know, a lot
36:11
Speaker 17: different technology. So trying to you know, Toda's trying to
36:14
Speaker 17: put a square peg into a round hole and it's
36:18
Speaker 17: not alone, right, I mean, and we chronicled how other automakers,
36:21
Speaker 17: you know, Volkswagen, Ford, General Motors, they're all struggling to
36:25
Speaker 17: figure this out. But in some ways TPS Tota Production
36:29
Speaker 17: System actually seems to kind of get in Toto's own
36:31
Speaker 17: way because they're so imbued with this there. It's almost
36:35
Speaker 17: this reverential philosophy that permeates everything in Toyota. You know,
36:40
Speaker 17: how do you kind of think outside the box when
36:43
Speaker 17: everyone in the company is trying to think a certain
36:45
Speaker 17: way to kind of hone and shape and incrementally improve things.
36:50
Speaker 17: You know, that doesn't help when you're looking at a
36:52
Speaker 17: revolutionary change, how.
36:54
Speaker 8: Important is it that Toyota catches up in the EV transition?
36:57
Speaker 8: If you're thinking from a US perspective, maybe there isn't
36:59
Speaker 8: as much demand for EV's, but more globally, how important
37:02
Speaker 8: is it that they catch up?
37:03
Speaker 17: Well, Laura, that's a good question. You know, it isn't
37:06
Speaker 17: super relevant in this market right here and now, except
37:10
Speaker 17: for one thing. They've invested thirteen billion dollars in a
37:14
Speaker 17: giant lithium ion battery factory in a rural part of
37:18
Speaker 17: North Carolina. So if they're not going to be selling evs,
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Speaker 17: they got to figure out what to do with that
37:23
Speaker 17: sunk investment, all right.
37:24
Speaker 5: Thanks to Chester Dawson, Bloomberg Senior Editor.
37:27
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