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New Kraft Heinz CEO Pauses Split to Focus on Boosting Profit · Bloomberg Intelligence

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  Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the
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  Speaker 2: It is earning season right now, and one of the
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  Speaker 2: most anticipated results set of results that came out today
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  Speaker 2: came from Craft Highs, mainly because the food company had
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  Speaker 2: been on this mission to split itself up into two
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  Speaker 2: in order to really free up its faster growing business
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  Speaker 2: from its slower growing business. Christina Peterson is our food
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  Speaker 2: industry reporter and has been reporting on Craft Times, and Christina,
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  Speaker 2: the new CEO over at Craft Times, surprise everyone by saying,
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  Speaker 2: you know what, I'm not going to split up the company.
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  Speaker 2: What's the thinking here?
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  Speaker 3: That's right.
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  Speaker 4: He's only been on the job since January first, so
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  Speaker 4: I think this came as a surprise to folks at
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  Speaker 4: The split was called off about five months after it
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  Speaker 4: was announced or paused. There is no end date to
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  Speaker 4: the pause, so we don't know if it will at
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  Speaker 4: some point rezuom, but the CEO, Steve Kahleane said that
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  Speaker 4: he came on the job knowing that there had been
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  Speaker 4: levels of under investment in Kraft Heins's brands and decided
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  Speaker 4: that after reviewing all of them, that there were brands
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  Speaker 4: that would respond to more investment. So they announced that
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  Speaker 4: they would be putting six hundred million dollars into things
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  Speaker 4: like R and D marketing and lowering some prices in
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  Speaker 4: hopes that that would bolster the entire company and that
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  Speaker 4: that would be in a better position put them in
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  Speaker 4: a better position to evaluate whether they should move forward
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  Speaker 4: with the split.
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  Speaker 5: So what a most investors want? Did they you think
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  Speaker 5: they want the split up? Sometimes split ups work, a
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  Speaker 5: lot of times they don't. What if investor's been saying
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  Speaker 5: over the past months, There's.
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  Speaker 4: Clearly been some anxiety among investors since the news of
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  Speaker 4: the split was announced. I think that the new CEO
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  Speaker 4: was seen as there were hopes that he would do
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  Speaker 4: what he had done with the Kellgg company, which split
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  Speaker 4: into two publicly traded entities and then where both both
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  Speaker 4: of those companies were bought by privately held entities. So
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  Speaker 4: there was some speculation that the same thing would occur
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  Speaker 4: at Kraft Higns, and Kaylaine said basically not yet real.
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  Speaker 2: There's another twist to all of this, which is that
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  Speaker 2: Kraft Tigns's biggest shareholder is Berkshire Hathway and Warren Buffett,
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  Speaker 2: who runs Berkshire Hathway until he handed the raise to
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  Speaker 2: Greg Abel, said he was never a fan of that
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  Speaker 2: idea to split up the company. I mean, he was
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  Speaker 2: kind of mastermind behind craft Higns becoming the behemoth it was,
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  Speaker 2: and that didn't work out so well. But he made
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  Speaker 2: clear that the split was not a good thing in
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  Speaker 2: his mind. Do we think that has anything to do
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  Speaker 2: with this about face?
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  Speaker 4: I don't know. It is clear that he had publicly
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  Speaker 4: expressed disappointment in the split, and his successor had said
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  Speaker 4: in a filing that Berkshire Hathaway was taking steps to
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  Speaker 4: sell its twenty eight percent stake in craft Tigns. So
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  Speaker 4: clearly they were nervous about this and not fans of
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  Speaker 4: the news.
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  Speaker 5: So do we have any idea how long this pause
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  Speaker 5: will last? I mean, is he trying to turn stuff around,
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  Speaker 5: make it maybe better, so if when they do split
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  Speaker 5: it up it be worth more. What do we know?
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  Speaker 4: They clearly are not going to make the decision this year.
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  Speaker 4: They talked about returning to growth in twenty twenty seven,
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  Speaker 4: So it seems like this is a month's away decision.
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  Speaker 5: Oh the investment bankers who had that on their deal
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  Speaker 5: sheet for twenty twenty six.
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  Speaker 2: But they get paid in the meantime for the work
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  Speaker 2: that they've done.
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  Speaker 6: Right now.
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  Speaker 3: You don't get paid to closes.
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  Speaker 2: Oh really, you can't build them along the way.
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  Speaker 6: We're not lawyers. Okay, we get paid.
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  Speaker 2: We take the I like how you still say we yeah, yeah,
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  Speaker 2: exactly cause you feel for these guys.
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  Speaker 5: Yeah, what's next for Kellogg? What what's the company want
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  Speaker 5: to do now? Is as a standalone company.
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  Speaker 4: For craft Hens. Yeah, well, they've talked about releasing some
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  Speaker 4: healthier products. They are launching a craft Heines Mac and
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  Speaker 4: cheese PowerMac nice protein it. I knew iber, I knew it.
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  Speaker 2: I knew it.
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  Speaker 4: And they will be lowering prices. They talked about the
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  Speaker 4: opening price points being important for low income families. So
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  Speaker 4: those are some of the areas that they're going to
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  Speaker 4: be focusing on, some healthier options, more affordable price points.
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  Speaker 2: So Kellogg was the example of a company that split
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  Speaker 2: into two and then both got taken private. I mean,
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  Speaker 2: is that a trend overall? In the food industry to
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  Speaker 2: split yourself up after being kind of a big overall
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  Speaker 2: food company.
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  Speaker 4: You know, I think we're seeing examples of both of
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  Speaker 4: companies getting smaller and bigger. There's obviously a lot more
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  Speaker 4: criticism and focus on ultra processed foods. Packaged food companies
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  Speaker 4: are dealing with this. We saw the Super Bowl ad
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  Speaker 4: this weekend saying processed food kills. So I think big food,
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  Speaker 4: generally speaking, is trying to figure out what to do
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  Speaker 4: with these headwinds.
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  Speaker 6: So what is the story there?
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  Speaker 5: Is this a short term blip, this whole processed food thing,
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  Speaker 5: or is it's been brewing because I hear more and
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  Speaker 5: more and more about that being a cause for so
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  Speaker 5: many the ills in healthcare and people's health.
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  Speaker 4: I think this is the first time we've seen an
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  Speaker 4: administration come down so harshly on ultra processed food. That's
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  Speaker 4: clearly been a huge focus of Health Secretary Kennedy and
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  Speaker 4: the White Houses backed him up on this. Of course,
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  Speaker 4: Americans don't always eat the way they say they want
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  Speaker 4: to eat, so you know, there's plenty of Dorito's still
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  Speaker 4: being eaten even as people say they're trying to move
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  Speaker 4: away from process foods.
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  Speaker 6: Stay with us. More from Bloomberg Intelligence coming up after this.
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  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
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  Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android
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  Speaker 1: you get your podcasts, or watch us live on youtubelt.
• 5:55
  Speaker 5: In Hotel reporting some numbers here today beat expectation.
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  Speaker 6: You know, people can't get a room anywhere.
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  Speaker 5: If you do, you got to pay through the nose,
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  Speaker 5: and the consumer seems to be doing finding.
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  Speaker 3: Look at some of that stuff.
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  Speaker 6: Brian Egger, Senior Gaming and Lodging Analysts.
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  Speaker 5: Joints is here in our Bloomberg Interactive Brooker Studio.
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  Speaker 6: Hilton Worldwide stocks up about one percent today, fifty two
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  Speaker 6: week high today, so pretty good for them. It's got
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  Speaker 6: a market cap ISS seventy five billion. What did Hilton
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  Speaker 6: report from an earning perspective.
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  Speaker 7: Yeah, so, I mean what we saw in the quarter
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  Speaker 7: was kind of mixed in terms of US being down
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  Speaker 7: a little bit or maybe a little blow of rep
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  Speaker 7: part in the fourth quarter, mostly because of the government shutdown,
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  Speaker 7: So a bit weaker in bound travel to the US,
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  Speaker 7: a little bit weaker government travel, but the ALC for
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  Speaker 7: next year. I should say for this year one twenty
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  Speaker 7: six is pretty good. One to two percent rep part growth.
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  Speaker 3: That's revenue per available per available room.
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  Speaker 7: Yeah, and so leisure group, luxury all kind of strong international,
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  Speaker 7: a little stronger than the US. But although this is
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  Speaker 7: an aging up cycle in the lodging industry, it's still
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  Speaker 7: got some WI.
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  Speaker 3: Likes to it.
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  Speaker 4: Now.
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  Speaker 2: Hilton, along with many of the other hotel company like Marriott,
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  Speaker 2: has an asset light business model, which means that it's
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  Speaker 2: brand licensing right. They don't actually own and manage any
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  Speaker 2: of their own properties, and that, you know, allows it
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  Speaker 2: to move more nimbly. The profit margins are much higher.
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  Speaker 2: What's the downside of that, Brian?
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  Speaker 7: So, I mean, there's some benefit to actually owning the
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  Speaker 7: real estate when you're really in an up cycle. But
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  Speaker 7: this kind of feebase model is a very capital efficient
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  Speaker 7: way to expand and grow. You get your franchise fees
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  Speaker 7: and management fees. They've got a little bit of own
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  Speaker 7: hotel exposure as well. But most of the lodging companies
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  Speaker 7: separate from the reads are actually asset light manager franchisers
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  Speaker 7: with some own assets.
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  Speaker 5: Yeah, I'm looking at you know, you've got a company
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  Speaker 5: with you know, thirteen billion of revenue call it, you know,
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  Speaker 5: four billion of EBATA, one hundred million of cappecs.
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  Speaker 6: Are you kidding me?
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  Speaker 3: That is awesome?
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  Speaker 6: So we who builds a If Hilton wants to.
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  Speaker 5: Build a new hotel in South Beach, they don't build it.
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  Speaker 5: Somebody else builds it.
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  Speaker 7: Yeah, so you're you have like ownership entities. Obviously you've
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  Speaker 7: got the ds like park hotels, resorts and others that
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  Speaker 7: own the real estate. So this is, as you said,
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  Speaker 7: like an asset white franchised management, tree driven business with
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  Speaker 7: some own hotels. There is some otel exposure.
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  Speaker 5: So what do they do with all the free cashal
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  Speaker 5: review they get? You know, most of that debada goes
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  Speaker 5: down to the free cashle line.
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  Speaker 7: They have been returning capital, right, so they've got capital returns. Uh.
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  Speaker 7: And you know there is real opportunity for growth within
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  Speaker 7: their business model, and a while of that is international,
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  Speaker 7: a lot of conversions, a lot of conversions from other
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  Speaker 7: assets that fit very well under their brand flags. And
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  Speaker 7: they have also been launching some new brands as well,
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  Speaker 7: and kind of that white style category.
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  Speaker 2: How many brands do they have right now?
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  Speaker 7: So where are they now I know Marriott's thirty one.
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  Speaker 7: I'm turning to remember, well, that's all those thirty one
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  Speaker 7: is such a slice it is. I mean, yeah, I
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  Speaker 7: think over all of you slice the market segment wise,
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  Speaker 7: Hyatt and Marriott are more prominent in the luxury high stand.
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  Speaker 7: Hilton has some luxury, but it's also got a very
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  Speaker 7: solid kind of mid scale women as service portfolio. And
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  Speaker 7: so what you tend to see is that in this environment,
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  Speaker 7: luxury upscale is tends to outperforming, and the limited services
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  Speaker 7: is somewhat weaker, partly because that's where you've got the
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  Speaker 7: government travel, you've got the transit, independent business travel, but
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  Speaker 7: stuff like leisure group luxury, particularly international markets UA, Europe,
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  Speaker 7: Non China, Asia, all have been really quite strong.
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  Speaker 2: I wonder, Brian, do you I know you don't cover
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  Speaker 2: air Andbnb as a company, but do you ever see
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  Speaker 2: any correlation between the performance of Airbnb and you know,
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  Speaker 2: a Hilton or Marriott, Because I'm sure in markets where
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  Speaker 2: Airbnb is not allowed, like New York City for instance,
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  Speaker 2: Hilton benefits.
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  Speaker 3: Yeah.
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  Speaker 7: I tend to think of, you know, the the OTAs
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  Speaker 7: the Airbnb's of the world, as being a factor with
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  Speaker 7: respect to both las Vegas watching particularly and kind of
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  Speaker 7: the value conscious consumer women at service. You know, you've
• 9:52
  Speaker 7: got some extra invagery there where it's good for that
• 9:55
  Speaker 7: kind of last minute imagery management. But the big focus
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  Speaker 7: of Hilton Marriott High has been for loyalty programs and
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  Speaker 7: a strong correlation between loyalty members and kind of booking directly.
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  Speaker 7: So there's there's that aspect as well.
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  Speaker 5: The Walt Disney Company called out in their theme park
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  Speaker 5: business some weakness on inbound international travel.
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  Speaker 6: Is that are the hotels seeing.
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  Speaker 7: There as well? There are some of that, I mean,
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  Speaker 7: some of it's from Canada terriff related. I think kind
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  Speaker 7: of that globally, the weaker areas maybe your inbound US travel,
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  Speaker 7: US governor travel, China's kind of flat as strong areas
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  Speaker 7: or all the other categories we talked about, you know,
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  Speaker 7: luxuries group travel.
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  Speaker 6: I always stayed in my Canadian fans.
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  Speaker 5: You know, the first time it drops like below twenty
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  Speaker 5: degrees or ten degrees in like November, you guys are
• 10:41
  Speaker 5: booking your flights down the Florida.
• 10:42
  Speaker 2: It can be Holling a different too, sing it different, Brian.
• 10:45
  Speaker 2: How exposed are the Hilton's and the Mariots of the
• 10:48
  Speaker 2: world to you know, the whole credit card debate. You
• 10:51
  Speaker 2: know the President wanting to cap interest rates to ten
• 10:55
  Speaker 2: percent on credit card companies and that putting at risk
• 10:57
  Speaker 2: all these reward credit cards.
• 10:59
  Speaker 7: Right well, I mean it's a consideration partly because a
• 11:03
  Speaker 7: big part of that franchise fee line you see for
• 11:06
  Speaker 7: health and merit is actually fees from co branded credit cards.
• 11:10
  Speaker 7: That's actually a big kind of fee source. So all
• 11:13
  Speaker 7: us being the same, the royalty rates and the level
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  Speaker 7: of credit card activity are somewhat of a driver for
• 11:20
  Speaker 7: these franchise fees. These i should say co branded credit
• 11:23
  Speaker 7: card license fees, which which kind of find their way
• 11:26
  Speaker 7: into the franchise fee line.
• 11:27
  Speaker 3: So it is important stay with us.
• 11:30
  Speaker 6: More from Bloomberg Intelligence coming up after this.
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  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
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  Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android
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  Speaker 1: you get your podcasts, or watch us live on YouTube.
• 11:51
  Speaker 2: Let's get back to earnings right now, because plenty of
• 11:53
  Speaker 2: companies reporting. We're past the point where big tech is reporting.
• 11:56
  Speaker 2: Now it's consumer related companies. We have a telecom name
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  Speaker 2: reporting one of the biggest. T Mobile adding fewer subscribers
• 12:04
  Speaker 2: that anticipated, yet the stock is moving higher. John Butler
• 12:07
  Speaker 2: is our senior telecom analyst, and John, in terms of
• 12:11
  Speaker 2: the actual growth in its subscribers, this was a disappointing
• 12:15
  Speaker 2: quarter for T Mobile.
• 12:17
  Speaker 8: It was a bit of a disappointment for T Mobile Scarlet.
• 12:20
  Speaker 8: I think one of the things that really impacted them
• 12:23
  Speaker 8: is we've seen Verizon, which now has a new CEO
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  Speaker 8: who's come in. He's very volume focused, so he's out there.
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  Speaker 8: They're promoting heavily. They're trying to win new subscribers, and
• 12:36
  Speaker 8: I think it took a bit of a den out
• 12:38
  Speaker 8: of T Mobile's growth in the fourth quarter. I think
• 12:42
  Speaker 8: one thing T Mobile did which was smart is they
• 12:45
  Speaker 8: combined the four Q report with a capital market stay update.
• 12:50
  Speaker 8: They updated their twenty twenty seven guidance, and they increased
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  Speaker 8: their free cash flow outlook for twenty seven by one
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  Speaker 8: point five billion. And so when you saw them do that,
• 13:02
  Speaker 8: you saw an inflection and investor sentiment almost instantly, because
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  Speaker 8: again this has this has gone from a story of
• 13:13
  Speaker 8: revenue growth. Now they're pivoting more to free cash flow growth.
• 13:16
  Speaker 8: They're really pointing investors to that bottom line to to
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  Speaker 8: you know, get the focus off of revenue growth as
• 13:25
  Speaker 8: things get more promotional and as industry growth slows.
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  Speaker 5: So is this a new wave of just I guess
• 13:33
  Speaker 5: across the board. If you know, Verizon is getting a
• 13:34
  Speaker 5: little bit more promotional this T Mobile to AT and T,
• 13:38
  Speaker 5: do they have to respond or the other things they
• 13:40
  Speaker 5: can do?
• 13:42
  Speaker 8: So great question, Paul. Right, We're in a mature industry backdrop. Now,
• 13:47
  Speaker 8: growth overall is slowing for everyone. T Mobile is not
• 13:52
  Speaker 8: alone in point pointing to pree cash flow growth. You've
• 13:56
  Speaker 8: got AT and T and Verizon doing the same thing.
• 13:59
  Speaker 8: And so I think again, with that new CEO in place,
• 14:03
  Speaker 8: now you've got T Mobiles sort of driving a growth
• 14:07
  Speaker 8: story that centers on not only smart promotion, but also
• 14:13
  Speaker 8: driving into adjacent markets like advertising and even credit cards.
• 14:20
  Speaker 9: Yeah.
• 14:20
  Speaker 2: I'm a Team Mobile subscriber, and there's always a ton
• 14:22
  Speaker 2: of emails from the company offering all kinds of different
• 14:25
  Speaker 2: services and deals, and it really feels like they're just
• 14:27
  Speaker 2: trying to develop you into their ecosystem. John, I kind
• 14:30
  Speaker 2: of call the effort to sell internet access to AT
• 14:34
  Speaker 2: broadband customers a side hustle for these telecoms companies. But
• 14:37
  Speaker 2: this is how they can make sure that they continue
• 14:40
  Speaker 2: to build out their customer base even as they try
• 14:43
  Speaker 2: to fight for market share when it comes to mobile
• 14:46
  Speaker 2: phone subscribers. How is that side hustle going for TEA Mobile.
• 14:51
  Speaker 8: So the side hustle, as you call it, and I
• 14:53
  Speaker 8: think that's a good word for it, is still small
• 14:57
  Speaker 8: right now. I think they're real opportunity for them in
• 15:00
  Speaker 8: the near term. Scarlet lies in the broadband business. They're
• 15:04
  Speaker 8: pushing into fiber, another side hustle. It's small, but I
• 15:09
  Speaker 8: think over the next couple of years it could increasingly
• 15:12
  Speaker 8: contribute to growth. And then at the core of the
• 15:16
  Speaker 8: broadband business is their fixed wireless access business, so delivering
• 15:21
  Speaker 8: broadband to the home over cellular spectrum. That's been very
• 15:26
  Speaker 8: popular and T Mobile remains a real leader there. It
• 15:30
  Speaker 8: continues to be a growth engine for them. And so
• 15:33
  Speaker 8: I think when you pair that with the the ad business,
• 15:38
  Speaker 8: the credit card business, and more importantly the fiber business,
• 15:42
  Speaker 8: it all adds up to help sustain that free cash
• 15:46
  Speaker 8: flow growth and call it the five to six percent range,
• 15:51
  Speaker 8: maybe even more as we go forward over the next
• 15:54
  Speaker 8: three years.
• 15:55
  Speaker 5: John about thirty seconds dividend policy. T Mobile's got a
• 15:58
  Speaker 5: one point eight percent yield, Verizon five point six percent
• 16:02
  Speaker 5: and eight and T three point nine percent, So there's
• 16:04
  Speaker 5: something for everybody. In terms of investors, does T Mobile
• 16:06
  Speaker 5: DoD They worry about their dividend yield.
• 16:10
  Speaker 8: Little less so than share buybacks. In fact, one of
• 16:13
  Speaker 8: the things they did with Capital Markets Day was announced
• 16:16
  Speaker 8: that they're buying back five billion in shares over the
• 16:19
  Speaker 8: course of the first quarter here, which is double the
• 16:23
  Speaker 8: normal rate. So you know, I think they're leaning more
• 16:26
  Speaker 8: into that than dividend growth, although it's part of that
• 16:30
  Speaker 8: share buyback program and it's going to continue to be
• 16:33
  Speaker 8: as we go forward here.
• 16:35
  Speaker 6: Stay with us. More from Bloomberg Intelligence coming up.
• 16:41
  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
• 16:45
  Speaker 1: weekdays at ten am Eastern on Applecarplay and Android Auto
• 16:48
  Speaker 1: with the Bloomberg Business App. Listen on demand wherever you
• 16:52
  Speaker 1: get your podcasts, or watch us live on YouTube.
• 16:55
  Speaker 5: Let's check in with somebody who's in the TV business,
• 16:57
  Speaker 5: in the TV advertising business, trying to make it easier
• 17:01
  Speaker 5: for smaller midsized businesses to really get their message out
• 17:04
  Speaker 5: there versus via all these digital opportunities here, including television.
• 17:08
  Speaker 5: Mark Douglas, President and CEO of Mountain that is a
• 17:11
  Speaker 5: publicly traded company, a newly publican traded company tickers and
• 17:15
  Speaker 5: the reported numbers just today, I think stocks up thirty percent,
• 17:19
  Speaker 5: so I guess them just today, So I guess the
• 17:21
  Speaker 5: market likes what they heard here. Mark, appreciate you coming
• 17:24
  Speaker 5: in our studio here talk to us about Mountain. I
• 17:27
  Speaker 5: know you guys are trying to work with small and
• 17:28
  Speaker 5: mid sized businesses and help them get their advertising message
• 17:32
  Speaker 5: out in the world. That's got tons of digital and
• 17:34
  Speaker 5: analog opportunities.
• 17:35
  Speaker 6: So what's going on in your business?
• 17:37
  Speaker 2: Yeah?
• 17:37
  Speaker 9: Absolutely, So what we do is television and streaming television
• 17:42
  Speaker 9: in particular has been underserved, but for small businesses. It's
• 17:46
  Speaker 9: just been very hard, very expensive for small mid sized
• 17:50
  Speaker 9: businesses to use that medium. And what we did is
• 17:52
  Speaker 9: we turned it into performance marketing channel, like something that
• 17:56
  Speaker 9: they can add to their marketing mix a long search
• 17:59
  Speaker 9: along social and use streaming TV to get the next customers.
• 18:03
  Speaker 9: And we've been consistently growing. And you know, we did
• 18:06
  Speaker 9: earnings last night and I had a very strong quarter
• 18:10
  Speaker 9: in Q four, very strong, ended a very strong year,
• 18:13
  Speaker 9: and we're you know, our focus is on continuing to
• 18:17
  Speaker 9: just exeget the business and do the same.
• 18:19
  Speaker 2: And I am assuming for even the small businesses, the
• 18:22
  Speaker 2: opportunities lie in things like live sporting events, because those
• 18:25
  Speaker 2: are must view, appointment watching that you don't get from
• 18:29
  Speaker 2: other shows.
• 18:29
  Speaker 3: Yeah.
• 18:30
  Speaker 9: Absolutely, Well, the nice thing about streaming is you can
• 18:32
  Speaker 9: everyone can find whatever is their you know, thing that
• 18:36
  Speaker 9: they love to watch. For me, actually, one of the
• 18:39
  Speaker 9: things I love talking about in this business is just
• 18:42
  Speaker 9: like the shows I like.
• 18:43
  Speaker 3: So, I'm a big fan of Traders right now.
• 18:46
  Speaker 9: I love that show on Peacock cannot wait till they
• 18:49
  Speaker 9: only released one episode of the week. I'm like, kind
• 18:52
  Speaker 9: of damn, well, I just get all tet episodes and once.
• 18:56
  Speaker 9: But you know live sports, I watch the super Bowl,
• 18:58
  Speaker 9: you have March and it's coming up. You have a
• 19:01
  Speaker 9: lot of dating shows for Valentine's say.
• 19:03
  Speaker 3: So all of that.
• 19:04
  Speaker 9: We give our customers access to all of that kind
• 19:06
  Speaker 9: of content, get their message and really target it and
• 19:10
  Speaker 9: most importantly, measure the impact how much revenue that drive
• 19:14
  Speaker 9: to their business. And so we pioneered this space. We
• 19:17
  Speaker 9: call it performance TV. We literally created the term performance TV.
• 19:21
  Speaker 9: It's now ubiquitous in the advertising industry, and we just
• 19:24
  Speaker 9: kind of keep growing into the scaley opportunity, which we
• 19:27
  Speaker 9: think is enormous.
• 19:29
  Speaker 6: Talk to about AI.
• 19:30
  Speaker 5: How's AI impacting the advertising business? Meta calls it out.
• 19:34
  Speaker 5: Google calls it out as.
• 19:36
  Speaker 6: Relates to their YouTube business and or search business.
• 19:38
  Speaker 5: How do you see it impacting it?
• 19:40
  Speaker 9: It's having an impact across the board. The obvious is
• 19:43
  Speaker 9: on the creative the time they get creative, like meaning
• 19:47
  Speaker 9: what does it take to get a TV commercial? Used
• 19:50
  Speaker 9: to be a lot of costs, very time consuming, lots
• 19:53
  Speaker 9: of people involved. That still occurs for some of the creative,
• 19:56
  Speaker 9: but increasingly there's AI creative. We ourselves are now putting
• 20:00
  Speaker 9: out two to three Mountain branded TV commercials a week
• 20:04
  Speaker 9: that are being created like in the under a day.
• 20:08
  Speaker 9: We have what we now refer to as AI creators
• 20:11
  Speaker 9: using our own tools to do that, and it's just
• 20:15
  Speaker 9: substantially lowered the cost. We did a video last week
• 20:19
  Speaker 9: for around the show Heated Rivalry, which is kind of
• 20:22
  Speaker 9: a hot show right now. So video has hockey players
• 20:25
  Speaker 9: in it and so forth got created. An under a
• 20:28
  Speaker 9: day costs five hundred dollars. If we tried to do
• 20:31
  Speaker 9: that in the physical world, that would have been like
• 20:34
  Speaker 9: six weeks fifty grand one hundred grand to film that,
• 20:38
  Speaker 9: And so I think there's a mixture of still filmed
• 20:41
  Speaker 9: video AI video and you use like you use what's
• 20:46
  Speaker 9: appropriate for exactly what you're trying to do.
• 20:49
  Speaker 2: Does that mean that the images that the viewer sees
• 20:51
  Speaker 2: is AI generated?
• 20:53
  Speaker 3: Yes, fully, AI generated thirty second?
• 20:56
  Speaker 2: Do you have to put a disclaimer disclosure on that
• 20:58
  Speaker 2: or that that doesn't come up?
• 21:00
  Speaker 3: You don't have to, I actually would like to.
• 21:03
  Speaker 9: My personal view is all AI videos should be labeled
• 21:05
  Speaker 9: AI period. I actually, you know there's a can Spam
• 21:08
  Speaker 9: Act for email. I think there should be a similar
• 21:11
  Speaker 9: act for AI content that if I'm on Instagram or
• 21:15
  Speaker 9: watching commercial on TV, I should know that this is
• 21:18
  Speaker 9: you know, AI created. And that's that's kind of a
• 21:21
  Speaker 9: personal opinion. I don't see a downside to that, And
• 21:23
  Speaker 9: I think people would appreciate the transparency. They don't want
• 21:26
  Speaker 9: to guess what they're looking at, you know, is it
• 21:29
  Speaker 9: kind of real? Ironically, we ran another ad campaign the
• 21:33
  Speaker 9: other day with Jamil White, who's u a famous child
• 21:39
  Speaker 9: actor and now is involved in a lot of projects
• 21:42
  Speaker 9: as an adult, and the campaign was is it AI?
• 21:46
  Speaker 9: So yeah, yeah, yeah, and so.
• 21:51
  Speaker 6: I know you guys are with your company.
• 21:52
  Speaker 5: You guys are so involved in the media space in
• 21:54
  Speaker 5: general from the advertising site. What do you make of
• 21:57
  Speaker 5: what's going on with Warner Brothers Discovery? It just seems
• 22:00
  Speaker 5: to be kind of out there. I don't know if
• 22:01
  Speaker 5: Netflix is gonna buy him, Paramoun's gonna buy him. If
• 22:03
  Speaker 5: Paramount doesn't buy them, what happens to Paramount? What do
• 22:06
  Speaker 5: you guys, what's the scot about out there?
• 22:08
  Speaker 9: Well, for full disclosure, I worked for Larry Ellison liter
• 22:13
  Speaker 9: early in my career, and I didn't see him lose
• 22:16
  Speaker 9: very often, and so I mean, when he's determined, he's ferocious.
• 22:23
  Speaker 9: But obviously Netflix is very capable. They have an incredible
• 22:26
  Speaker 9: management team. I think ultimately it comes down the dollars.
• 22:30
  Speaker 9: I don't know how it doesn't. I mean, and at
• 22:33
  Speaker 9: the moment, I believe that, you know, Paramount has a
• 22:35
  Speaker 9: bigger offer on the table, but unless there's elements of
• 22:39
  Speaker 9: the offer that haven't been published, so you know, and
• 22:43
  Speaker 9: I think paramount strategy is let's take let's literally take
• 22:46
  Speaker 9: it to the streets and do a tender offer, so
• 22:49
  Speaker 9: we'll see how that plays out. I'm pretty bullish on Paramount,
• 22:52
  Speaker 9: but I know a lot of people on Netflix and
• 22:54
  Speaker 9: they determined also, so unless they're going to come in
• 22:57
  Speaker 9: over the top, I think Paramount has a real shot there.
• 23:00
  Speaker 3: Can I just jump in here absolutely, Matt Miller.
• 23:03
  Speaker 10: I just wanted to swing by Matt Miller from Bloomberg Television.
• 23:07
  Speaker 6: I anchor Open Interest every weekday from nine to eleven,
• 23:11
  Speaker 6: and as friends of the program.
• 23:12
  Speaker 10: Yes, I've been friends with Mark Douglass for a number
• 23:15
  Speaker 10: of years, and I feel like you're being really diplomatic.
• 23:19
  Speaker 10: This does not look good for Paramount at all. Even
• 23:23
  Speaker 10: if they get it across the line. At this level,
• 23:25
  Speaker 10: they're so levered up that they're going to have trouble
• 23:27
  Speaker 10: meeting their payments. I mean, freak cash flow isn't going
• 23:29
  Speaker 10: to be that strong. So it seems like a dead
• 23:33
  Speaker 10: deal like Netflix has won.
• 23:35
  Speaker 3: Well. I mean Netflix certainly.
• 23:38
  Speaker 9: Has access to a tremendous amount of capital and they
• 23:41
  Speaker 9: have the capitol. But I mean, Larry Ellison, if he's guaranteed,
• 23:45
  Speaker 9: you know, if he's providing guarantees, I think that carries
• 23:47
  Speaker 9: a lot of weight.
• 23:48
  Speaker 2: But he hasn't raised his price yet. That's what everyone's
• 23:50
  Speaker 2: waiting for.
• 23:51
  Speaker 5: Nobody can I think that he can and why isn't
• 23:53
  Speaker 5: he well, because he's he's doing everything but that, and
• 23:57
  Speaker 5: he has the ability to do that. But his Matt
• 24:00
  Speaker 5: was pointing out, you still got to do something to
• 24:02
  Speaker 5: improve the pro former capital structure.
• 24:04
  Speaker 6: That's just a banker speaking. I don't know.
• 24:06
  Speaker 9: I Also my thoughts on the deal is the deal
• 24:08
  Speaker 9: is a nice half for Netflix. It's a must have
• 24:11
  Speaker 9: for parents, Like it just literally is a must have
• 24:14
  Speaker 9: for parent. Yeah, and so so, you know, I think
• 24:19
  Speaker 9: when some things must have for that way you kind
• 24:23
  Speaker 9: of get to the finish line.
• 24:26
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