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Why A TikTok-Microsoft Deal Solves A Lot of Problems · Bloomberg Intelligence

• 0:01
  Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, along
• 0:04
  Speaker 1: with my co host of Bonnie Quinn. Every business day,
• 0:06
  Speaker 1: we bring you interviews from CEOs, A, market pros, and
• 0:09
  Speaker 1: Bloomberg experts, along with essential market moving news. Find the
• 0:12
  Speaker 1: Bloomberg Markets Podcast on Apple podcast or wherever you listen
• 0:16
  Speaker 1: to podcasts, and on Bloomberg dot com. Alright, so, the
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  Speaker 1: Microsoft TikTok President Trump triumvirate is a really interesting little grouping.
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  Speaker 1: And obviously this story started at the end of last
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  Speaker 1: week and then there was all sorts of reports coming
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  Speaker 1: out over the weekend. Today, the latest is that it
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  Speaker 1: looks like Microsoft is now trying to buy TikTok with
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  Speaker 1: Trump's approval and is trying to get back in the game,
• 0:45
  Speaker 1: so to speak. So let's bring in a Bloomberg opinion
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  Speaker 1: columnist who's been writing about this. Take him. Thanks for
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  Speaker 1: joining us. Take him. What is this all about? It's obviously,
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  Speaker 1: I mean, very tenuously about national security. What would you
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  Speaker 1: say the reason behind this whole escapade on the part
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  Speaker 1: of President Trump is, um, it's tough to say. I mean,
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  Speaker 1: it all started at the beginning of July last month,
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  Speaker 1: when Secretary Stayed from Pale said, they're looking at it
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  Speaker 1: concerning banning all these Chinese apps based on national security ascerns.
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  Speaker 1: And I'm sure part of this political because everyone has
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  Speaker 1: opinion on TikTok, and every time they talked about TikTok,
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  Speaker 1: they dominate the headlines, so that that's the issue national
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  Speaker 1: and gaty privacy concernance according to the government, UM there
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  Speaker 1: hasn't been any faster evidence that they proved or presented
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  Speaker 1: uh to substant substantiate those concerns. But it looks like
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  Speaker 1: with this latest Trump phone call with the CEO of Microsoft,
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  Speaker 1: they're gonna have forty five days to come to some
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  Speaker 1: kind of agreement and this would actually solve a lot
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  Speaker 1: of the concerns that people have and actually makes sense
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  Speaker 1: for Microsoft too. So today is this kind of the
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  Speaker 1: latest step and maybe the most important step, and what
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  Speaker 1: is appearing to be evolving a cold war, a technology
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  Speaker 1: cold war between China and the West. I think so
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  Speaker 1: I mean this for some reason, TikTok, and like I said,
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  Speaker 1: it is because it's a very popular topic has become
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  Speaker 1: like defront in this rising political and economic tension war
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  Speaker 1: between the US and China. Trump has repeatedly said that
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  Speaker 1: he's considering getting the app to retaliate against China over
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  Speaker 1: how they handle the virus. So it's becoming that key
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  Speaker 1: vector in the rising tensions between the two countries. But
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  Speaker 1: you know, just taking everything that China has innovated, let's say,
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  Speaker 1: or in taking Chinese companies and having US companies buy
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  Speaker 1: them for parts, is that really a solution here? I
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  Speaker 1: think it's a solution in the short term. Um, it
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  Speaker 1: does make sense for Microsoft to take over the US
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  Speaker 1: stuff basically ensure there will be no privacy issues, no
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  Speaker 1: security issues, but also opens the door, like you said,
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  Speaker 1: to other potential retaliation. And you know what's the stop.
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  Speaker 1: The main issue with TikTok is because it's owned by
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  Speaker 1: a Chinese company, right, Does that mean every Chinese company
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  Speaker 1: that owns something that becomes popular in the US or
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  Speaker 1: buy something in the US? Is that like in play now?
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  Speaker 1: So it opens the cannon worms that we're really going
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  Speaker 1: to see how it turns out in the next few
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  Speaker 1: months to a year. So to your column is out
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  Speaker 1: and it's in uh, you know, it's a title, the
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  Speaker 1: TikTok Microsoft deal might solve everything. How do you feel
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  Speaker 1: what's what's your thesis behind that. So, like like we said,
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  Speaker 1: if Microsoft does consummate this transaction, they could protect the
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  Speaker 1: US consumer privacy. It's a hundred million Americans now TikTok
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  Speaker 1: came out with that number on Saturday for the first time,
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  Speaker 1: so that's a huge portion of the American population. So
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  Speaker 1: data security wise, it protects UM Americans data it And
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  Speaker 1: then from Microsoft, it really helps their advertising business which
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  Speaker 1: has kind of been floundering. They have the being searchtensined
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  Speaker 1: and the big question last week with the antitrust hearing
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  Speaker 1: everyone saying oh there's big tech is they have all
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  Speaker 1: this market power and anti trust. What this deal does
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  Speaker 1: from Microsoft and kind a strangely for the ad market,
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  Speaker 1: is that adds a big third player the digital ad
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  Speaker 1: market that's dominated by Google and Facebook. So it counterintruvely
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  Speaker 1: makes UM the market more competitive in terms of the
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  Speaker 1: anti trust issues. And then from Microsoft this huge base
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  Speaker 1: of a hundred million consumers, they could cross promoted across
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  Speaker 1: their other consumer businesses where they have the Xbox gaming
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  Speaker 1: constable business, they could use this as a key tenant
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  Speaker 1: of their cloud service where they're the number two player
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  Speaker 1: ask for Amazon. And they also have this thing where
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  Speaker 1: on TikTok right now, a lot of the creators can
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  Speaker 1: do video sprains very similar to Amazon Twitch. So this
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  Speaker 1: is like a new market where creators can do streaming
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  Speaker 1: of whatever they want and they get paid the small gifts.
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  Speaker 1: It's clearly a great deal from Microsoft, right, I mean
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  Speaker 1: we have we have snapped now as well also trying
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  Speaker 1: to develop something quickly that would compete with it. I mean,
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  Speaker 1: obviously it's a great deal for Microsoft. But how unusual
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  Speaker 1: is it that a president would get involved to this extent.
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  Speaker 1: I mean, if we're concerned about national security and you know,
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  Speaker 1: Americans privacy and so on, are we really just handing
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  Speaker 1: over those concerns to another private company will be at
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  Speaker 1: a US one. Isn't this a regulator's job? I agree
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  Speaker 1: with you, it's a total regulators shop. And this is
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  Speaker 1: very strange in the way Trump has been unilaterally making
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  Speaker 1: these decisions, and traditionally it's been much more of a
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  Speaker 1: multilateral do process oriented process. And this is kind of
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  Speaker 1: strange where all of a sudden they've been looking at
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  Speaker 1: TikTok league last year in the sixty story view and
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  Speaker 1: then right before election, you know, they're really bringing up
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  Speaker 1: to the forefront. So the timing is strange, and the
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  Speaker 1: d process death only questionable in terms of what's going on,
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  Speaker 1: and they still haven't presented clear cut evidence that TikTok,
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  Speaker 1: which the company thoroughly denies, has data process the issues.
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  Speaker 1: So you do you think this is kind of a
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  Speaker 1: done deal with Microsoft or we're gonna get other bidders
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  Speaker 1: coming in here, because I'm sure a lot of other
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  Speaker 1: tech companies would love to get the US operations of TikTok.
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  Speaker 1: I think if it happens, it's going to be Microsoft because,
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  Speaker 1: like I said, the anti trust issues with I'm sure Amazon, Facebook,
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  Speaker 1: all these guys who love to buy TikTok, but they
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  Speaker 1: have for the anti trust issues. So the one that
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  Speaker 1: makes sense is Microsoft because they have the whole in
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  Speaker 1: their consumer social media segment, and they have the technical
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  Speaker 1: know how, the financial resources to get down quickly. And
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  Speaker 1: the funny thing is TikTok's founder used to work on Microsoft,
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  Speaker 1: so there's a lot of connections there. That's not The
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  Speaker 1: deal that I was talking about was the deal with
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  Speaker 1: music companies to add songs to videos. So just this
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  Speaker 1: morning we heard that a snap and secured rights from
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  Speaker 1: Warner Universal Publishing and Merlin which sounds very close to
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  Speaker 1: what the TikTok experience would be right to ten seconds,
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  Speaker 1: and you can add sort of songs and so on.
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  Speaker 1: Is there any guarantee that all of these users that
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  Speaker 1: loved TikTok when it was a Chinese owned company would
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  Speaker 1: stay with TikTok wants a Microsoft own company, I mean something,
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  Speaker 1: there's something different about Microsoft own TikTok. TikTok then bye
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  Speaker 1: Dance TikTok. I think they're definitely gonna stay. My I'm
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  Speaker 1: slightly less confident in TikTok stability in a date like
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  Speaker 1: two or three years out as Microsoft buys them, because
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  Speaker 1: it was a different engineering team in different sense, but
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  Speaker 1: at least in the mix short and intermediate term, there's
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  Speaker 1: no doubt TikTok us static. Microsoft buys them because it
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  Speaker 1: means they're app survived. Um, they're basically like crying and
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  Speaker 1: depressed over over the weekend thinking that it's going to
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  Speaker 1: get banned because Trump said he was going to ban
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  Speaker 1: on Saturday and that hasn't happened. So yeah, Microsoft buying
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  Speaker 1: it would be the apps users will be very happy. Interesting,
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  Speaker 1: well fascinating story to follow in the coming week and
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  Speaker 1: months as you suggested take take him technology calumnists for
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  Speaker 1: Bloomberg Opinion. You can read all of Tay's work and
• 8:05
  Speaker 1: that of our fine Bloomberg opinion columnists at Bloomberg dot com,
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  Speaker 1: slash Opinion or O. P. I. N. Go on the terminal.
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  Speaker 1: Lots of great work there, and again the very interesting deal,
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  Speaker 1: a lot of folks saying this really, you know, sets
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  Speaker 1: down the marker for a cold war and technology be
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  Speaker 1: team between China and the West um and that could
• 8:25
  Speaker 1: have ramifications for years to come. And Bloomberg will certainly
• 8:28
  Speaker 1: follow that story. This is Bloomberg Markets with Paul Sweeney
• 8:34
  Speaker 1: and Bunny Quinn on Bloomberg Radio. Well, we got some
• 8:38
  Speaker 1: better than expected manufacturing dated this morning, so that's a
• 8:42
  Speaker 1: great time to chat about the auto business. Alan Baum,
• 8:46
  Speaker 1: auto analysts and principal Bauman Associates, joins us this morning. Alan,
• 8:50
  Speaker 1: thanks so much for joining us here. Let's step back
• 8:53
  Speaker 1: just give us Allen maybe the thirty thousand foot view
• 8:55
  Speaker 1: of the US auto industry. And I want to start
• 8:57
  Speaker 1: with production. What are the factories doing terms of production?
• 9:00
  Speaker 1: How open are they? Well? Production has actually done much
• 9:04
  Speaker 1: better uh than expected and frankly better than the market needs.
• 9:10
  Speaker 1: It to do. Now, that's obviously not true in the
• 9:13
  Speaker 1: area of the vehicles that are doing the best, trucks
• 9:16
  Speaker 1: and SUVs, But in general, UH production is getting the
• 9:22
  Speaker 1: inventories back to a reasonable level, again with some exceptions
• 9:27
  Speaker 1: in pickups where you you generally like to have a
• 9:29
  Speaker 1: lot of inventory because there's a lot of diversity within
• 9:32
  Speaker 1: the product line. UM. That's said, that means that we're
• 9:36
  Speaker 1: in a position where as we expect sales to be
• 9:40
  Speaker 1: quite shoppy now through the next couple of months because
• 9:43
  Speaker 1: of the virus, UH production will will start to pull
• 9:47
  Speaker 1: back a little bit unless the automakers go ahead and
• 9:52
  Speaker 1: make those vehicles and then get themselves in a in
• 9:55
  Speaker 1: a bit of a pickle because of H too much
• 9:58
  Speaker 1: inventory and then apps to need to go to incentives.
• 10:02
  Speaker 1: Who will surprise us today, Well, unfortunately, not that many
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  Speaker 1: automakers report UH. This is something that was started by
• 10:13
  Speaker 1: General Motors a couple of years ago, and most of
• 10:15
  Speaker 1: the industry has has followed. All we're gonna see today
• 10:19
  Speaker 1: is Hyundai, Toyota, Honda, Mazdao, UM and I might have
• 10:24
  Speaker 1: might have missed UH company or or so UM what
• 10:30
  Speaker 1: we've already seen Hyundai and and Toyota and Mazda report UM,
• 10:34
  Speaker 1: and Toyota uh was down. Uh. There the the group
• 10:40
  Speaker 1: they're they're certainly the full line automakers, very much exposed
• 10:44
  Speaker 1: to both the car and the truck market, whereas Hyundai
• 10:47
  Speaker 1: is increasingly moving over to the crossover side. They had
• 10:52
  Speaker 1: a one percent gain UM, which is in large part
• 10:56
  Speaker 1: the same story as the last few months. New product
• 10:58
  Speaker 1: has helped them a lot, particularly on the crossover side. So, Allen,
• 11:04
  Speaker 1: where are we on the demand side? I have some
• 11:06
  Speaker 1: anecdotal evidence from a buddy mine who manages a dealership
• 11:09
  Speaker 1: here in New Jersey, and he was kind of surprised
• 11:10
  Speaker 1: that how strong the sales have been as they reopened
• 11:14
  Speaker 1: their dealership. Um, how are you viewing the demand side? Well,
• 11:19
  Speaker 1: we've got short term pent up demand from the March
• 11:22
  Speaker 1: April May period. Uh that has has really propelled the market.
• 11:27
  Speaker 1: You know, a lot of lease leases were extended, UM
• 11:31
  Speaker 1: and Uh it became a good deal, particularly in the
• 11:35
  Speaker 1: earlier part of the of this May June July period
• 11:39
  Speaker 1: to come in and and get a get a product,
• 11:42
  Speaker 1: as I say, particularly with high incentives. Those incentives have
• 11:45
  Speaker 1: actually backed off dramatically because they're they're simply in the
• 11:50
  Speaker 1: high uh demand uh segments. Uh, there's not as much
• 11:55
  Speaker 1: product uh and so no reason for the automakers or
• 11:58
  Speaker 1: the dealers to offer those high incentives. In fact, the
• 12:02
  Speaker 1: automakers and the and the dealers are making more per
• 12:05
  Speaker 1: vehicle right now than they do normally, again, because those
• 12:09
  Speaker 1: incentives are down, and because fleet sales have almost dropped
• 12:12
  Speaker 1: to to to nothing uh and of course those were
• 12:16
  Speaker 1: less generally less profitable UH sales. That said, I'm expecting
• 12:23
  Speaker 1: a rather uh poor uh fall period. Um. Again, going back,
• 12:29
  Speaker 1: of course to the virus, what we're also seeing is
• 12:33
  Speaker 1: that UM, you know, there there's a lot of talk,
• 12:36
  Speaker 1: even uh from me a few months ago that might
• 12:39
  Speaker 1: have said, well, this is not going to be quite
• 12:41
  Speaker 1: as bad as it might otherwise be because new cars
• 12:45
  Speaker 1: are bought by upper income people. In fact, we are
• 12:49
  Speaker 1: seeing the luxury carmakers, particularly the Mercedes and and the
• 12:55
  Speaker 1: BMW's of the world, not doing well at all uh
• 12:59
  Speaker 1: and and I think that's attributed to the fact, not
• 13:02
  Speaker 1: necessarily the buyers don't at the income but because they're
• 13:06
  Speaker 1: they're they're so concerned about what the process of recovery
• 13:11
  Speaker 1: is going to be, either for their own businesses or
• 13:15
  Speaker 1: for the the economy as a whole. And how uh
• 13:19
  Speaker 1: they clearly don't have to buy. And with the decline
• 13:22
  Speaker 1: and uh in availability in some cases and incentages in
• 13:26
  Speaker 1: the other, uh, they're not. So if that's the case
• 13:30
  Speaker 1: with wealthy buyers, what's the case with less wealthy buyers
• 13:34
  Speaker 1: that might be hoping for a new stimulus check or
• 13:37
  Speaker 1: waiting on you know, the extension of federal benefits to
• 13:40
  Speaker 1: add too unemployment benefits statewise in order just to live,
• 13:43
  Speaker 1: never mind drive well. Yeah, and and those less wealthy buyers,
• 13:48
  Speaker 1: as you say, very correctly, uh, the the almost the
• 13:51
  Speaker 1: last thing that they're going to think about is a
• 13:53
  Speaker 1: new car, and even a late model used car. I mean,
• 13:58
  Speaker 1: this is this is the time. Uh. And and those
• 14:01
  Speaker 1: those volumes are a little depressed, as some people hold
• 14:05
  Speaker 1: onto their lease cars beyond uh the expiration of their lease. Uh.
• 14:11
  Speaker 1: And so clearly, as you say, you're gonna be paying
• 14:14
  Speaker 1: the rent and uh and giving yourself uh fed and
• 14:18
  Speaker 1: and uh in your home as opposed to buying even
• 14:23
  Speaker 1: a used car. And and uh, as as I said
• 14:26
  Speaker 1: a minute ago, uh, increasingly that new car buyer is
• 14:30
  Speaker 1: the upper income buyers. So those uh now that's not
• 14:34
  Speaker 1: to say, of course that uh the unemployment search has
• 14:37
  Speaker 1: not affected across the board, but it certainly has a
• 14:41
  Speaker 1: greater impact on that lower income person. So, Allen, let's
• 14:46
  Speaker 1: just real quickly here. What's the impact of any so
• 14:49
  Speaker 1: far on the electric vehicle market stemming from the pandemic? Well,
• 14:54
  Speaker 1: you know, the problem is UH that uh a number
• 15:00
  Speaker 1: of new vehicles have been delayed a little bit new
• 15:03
  Speaker 1: launches um, and the volumes were pretty modest, uh even
• 15:09
  Speaker 1: with the launches, with the obvious exception of Tesla. UH
• 15:13
  Speaker 1: and and Tesla, just as its stock seems to be
• 15:16
  Speaker 1: on another plane, uh, some of its sales are on
• 15:19
  Speaker 1: another plane as well. UM because uh and and I
• 15:23
  Speaker 1: will be one of the first pisode that the uh
• 15:26
  Speaker 1: the competition the Tesla faces is a lot less obvious
• 15:30
  Speaker 1: than it than it might seem. And what I mean
• 15:32
  Speaker 1: by that is as other automakers UH introduce electric vehicles,
• 15:38
  Speaker 1: some of them frankly with a lot less uh interest
• 15:42
  Speaker 1: or excitement if you will, UH than a player like Tesla,
• 15:47
  Speaker 1: UM with their own marketing efforts, UH leading the way
• 15:50
  Speaker 1: in that lack of excitement if you will, UM that
• 15:54
  Speaker 1: those those sales are not gonna be great. Uh and uh.
• 15:58
  Speaker 1: We've also seen UM in part because of regulatory issues
• 16:02
  Speaker 1: here in the US, where they at least temporarily have
• 16:05
  Speaker 1: backed away, and in Europe where those requirements are quite strong.
• 16:10
  Speaker 1: Uh and uh, the automakers have focused on the markets
• 16:14
  Speaker 1: where they need to meet regulations. Alan, thank you, always
• 16:17
  Speaker 1: a pleasure to speak with you. That's allan Bomb, a
• 16:20
  Speaker 1: Bomb and associates. And don't forget a little later on
• 16:22
  Speaker 1: we get July auto sales numbers. This is Bloomberg. Robert
• 16:32
  Speaker 1: Thompson is CEO of Clinical Reference Laboratory. It's one of
• 16:36
  Speaker 1: the largest privately held clinical testing labs in the US.
• 16:39
  Speaker 1: Well now it's developing a rapid response COVID test, basically
• 16:43
  Speaker 1: one with the forty eight hour turnaround period. Let's check
• 16:47
  Speaker 1: in with Mr Thompson now to see how the development
• 16:49
  Speaker 1: of this test is going, not only development of the test,
• 16:52
  Speaker 1: but also FDA emergency approval. Robert, thank you for joining us.
• 16:56
  Speaker 1: First of all, how does your rapid response test differ
• 17:00
  Speaker 1: from others that are almost on the market. So our
• 17:05
  Speaker 1: test is a saliva based test. Um It's called CRL
• 17:09
  Speaker 1: rapid response and saliva allows for easy, frequent testing. It's
• 17:14
  Speaker 1: much more pleasant than the traditional nasal swabs, and it
• 17:17
  Speaker 1: allows for the testing of large populations quickly and cost effectively. Alright, So, Robert,
• 17:24
  Speaker 1: one of the key things is turnaround times. Um, you know,
• 17:27
  Speaker 1: we talk about we're doing millions and millions of tests,
• 17:30
  Speaker 1: but they're really, for many people ineffectual because the turnaround
• 17:33
  Speaker 1: times can take you know, seven, eight, nine days and
• 17:35
  Speaker 1: therefore kind of defeats the whole purpose. Give us a
• 17:38
  Speaker 1: sense of how sure, how much confident do you have
• 17:41
  Speaker 1: in your hour turnaround time? Well, I have a great
• 17:46
  Speaker 1: degree of confidence in it. We have invested heavily in automation,
• 17:51
  Speaker 1: which has allowed us to really radically expand the number
• 17:54
  Speaker 1: of tests that we can do in any given day. Um,
• 17:57
  Speaker 1: we're planning on fifty US per day and actually have
• 18:02
  Speaker 1: the ability to scale beyond that if need be. So,
• 18:06
  Speaker 1: how does the FDA emergency approval work? Are there stag disolves?
• 18:10
  Speaker 1: How do you sort of distinguish yourself from you know,
• 18:15
  Speaker 1: I'm sure tens, if not hundreds of other companies trying
• 18:17
  Speaker 1: to do various things in terms of testing. So the
• 18:22
  Speaker 1: FDA processes is a rigorous multi month process where they
• 18:26
  Speaker 1: make you, uh, you go through a set of clinical
• 18:29
  Speaker 1: trials where you're comparing your product to other approved products
• 18:33
  Speaker 1: on the market. We compared ourselves to those sort of
• 18:36
  Speaker 1: six inch deep UH deep sinus and pea swabs um
• 18:40
  Speaker 1: and we showed a hundred percent agreement with those, so
• 18:43
  Speaker 1: we're uh as accurate as the n P swab is.
• 18:48
  Speaker 1: The goal here is really to provide a service to
• 18:53
  Speaker 1: get America back to work and school. So we paired
• 18:56
  Speaker 1: the the test itself with a with a web application
• 19:01
  Speaker 1: which uh sort of pre registers a test whether you're
• 19:04
  Speaker 1: doing it at home, or you're doing it in a
• 19:07
  Speaker 1: school cafeteria, or you're doing um, doing it in a workplace,
• 19:12
  Speaker 1: and we deliver the result back to the you know,
• 19:16
  Speaker 1: the employee or the student back over that that same
• 19:20
  Speaker 1: app So we've wrapped an entire solution around the very accurate,
• 19:24
  Speaker 1: quick and easy test UM. All right, so you received
• 19:28
  Speaker 1: the clinical research laboratory received the approval. What are next steps?
• 19:33
  Speaker 1: We've been able to operate as a lab developed test
• 19:36
  Speaker 1: for some time, so we have we have aggressively built
• 19:40
  Speaker 1: out our capacity. So at this point, there were a
• 19:43
  Speaker 1: bunch of our clients that were waiting for the eu
• 19:46
  Speaker 1: A before they started testing. So we've really the phones
• 19:50
  Speaker 1: have been ringing off the hook. Here we have banks, airlines,
• 19:53
  Speaker 1: sports teams, auto manufacturers, retailers, financial organizations, and universe cities
• 20:01
  Speaker 1: all under contractor in the process of contracting with us UM.
• 20:06
  Speaker 1: As an example, University of Kansas, we will be handling
• 20:10
  Speaker 1: over twenty five students as they returned to to school
• 20:15
  Speaker 1: over the next three weeks. We'll be testing all of
• 20:17
  Speaker 1: them upon entry. So, Robert, I mean, this sounds amazing.
• 20:21
  Speaker 1: And you know, if everyone in the country were to
• 20:23
  Speaker 1: get one, you know, on a twice weekly basis, we'd
• 20:25
  Speaker 1: probably really tump down this thing. What are the barriers
• 20:29
  Speaker 1: to something like that happening? Really, the restriction on capacity
• 20:35
  Speaker 1: is more about the availability of the testing equipment than
• 20:38
  Speaker 1: anything else. Most of these tests at our lab and
• 20:42
  Speaker 1: a QUEST and lab corps as well, we rely on
• 20:45
  Speaker 1: automation in the form of liquid handling robots, and those
• 20:49
  Speaker 1: have been very hard to come by. Uh. Gradually, the
• 20:53
  Speaker 1: supply chains are expanding and we're beginning to see not
• 20:56
  Speaker 1: only in our lab but in other labs UM the
• 20:58
  Speaker 1: ability to ramp up for auctions significantly. The f t
• 21:02
  Speaker 1: A also recently approved pooling, which I know QUEST and
• 21:05
  Speaker 1: lab corps are going to be using which will expand
• 21:08
  Speaker 1: their capacity to test, especially in low prevalence areas, by
• 21:12
  Speaker 1: four to five times. So, Robert, is a scenario for you.
• 21:16
  Speaker 1: You mentioned a test as a capacity that you could
• 21:20
  Speaker 1: increase from. There is it does it make sense to
• 21:22
  Speaker 1: you to license your technology out to maybe some of
• 21:25
  Speaker 1: these bigger testing companies UM. We are having conversations with
• 21:31
  Speaker 1: some additional laboratories UM, in particular in the university space.
• 21:37
  Speaker 1: There have been some labs that have that have expressed
• 21:40
  Speaker 1: an interest. There are other labs working on saliva based testing.
• 21:43
  Speaker 1: You'll be hearing more about it in the coming weeks,
• 21:46
  Speaker 1: just because of the ease of use and the and
• 21:49
  Speaker 1: the accuracy of the test. We partnered with a couple
• 21:53
  Speaker 1: of companies or Shure Technologies for the collection device which
• 21:57
  Speaker 1: preserves the sample for shipping to the labrary tory for
• 22:00
  Speaker 1: up to twenty one days, and with Codiagnostics, who's our
• 22:03
  Speaker 1: partner for probes and primers, which is you know, sort
• 22:07
  Speaker 1: of think of it as the chemicals that that detect
• 22:10
  Speaker 1: the viral nucleic acid UM and both of them together
• 22:15
  Speaker 1: it creates a very unique and sensitive tests were more
• 22:19
  Speaker 1: sensitive statistically than the other products on the market, Robert,
• 22:22
  Speaker 1: how much does it cost and how long does it
• 22:24
  Speaker 1: stay valid for? So if I'm tested today and I
• 22:26
  Speaker 1: meet somebody later that hazard, you know, will I need
• 22:29
  Speaker 1: another test tomorrow? It is always. All of these viral
• 22:33
  Speaker 1: tests are a spot in time. So the most companies
• 22:38
  Speaker 1: are creating and universities are creating sort of a regular
• 22:42
  Speaker 1: frequency of testing, a cadence of testing to try to
• 22:47
  Speaker 1: keep you know, as you were calling it tamped down
• 22:49
  Speaker 1: on the on the number of outbreaks. The other aspect
• 22:52
  Speaker 1: of this is that we have to respond quickly when
• 22:55
  Speaker 1: there is an outbreak. We can't wait fourteen days or
• 22:58
  Speaker 1: even seven days for results, as you were saying earlier,
• 23:00
  Speaker 1: they have to get results back in twenty four forty
• 23:03
  Speaker 1: eight hours. Okay, Robert, really really exciting news. The best
• 23:05
  Speaker 1: of luck to you in the company. Robert Thompson, CEO
• 23:07
  Speaker 1: of Clinical Reference Lab talking about a rapid COVID nineteen
• 23:11
  Speaker 1: tests using saliva, key thing, twenty four hour turnaround. Very
• 23:19
  Speaker 1: excited to speak with our next guest. He is known
• 23:22
  Speaker 1: the country over after the very popular documentary on cheer
• 23:27
  Speaker 1: leading called Cheer but also because many people need to
• 23:30
  Speaker 1: buy his stuff Adam Bloominfeld is CEO at Varsity Brands
• 23:35
  Speaker 1: and he joins us now from Pharmas, Texas. Adam, thanks
• 23:38
  Speaker 1: for joining. Talked to us about how the pandemic has
• 23:41
  Speaker 1: impacted sales and also subscriptions, for example to your internal
• 23:46
  Speaker 1: TV service. Well, thank you Vannie and Paul for having me. Um.
• 23:50
  Speaker 1: I will tell you that the pandemic has been no
• 23:52
  Speaker 1: friend to anybody that serves schools, as you will probably imagine.
• 23:56
  Speaker 1: But that being said, we have pivoted pretty hard to
• 24:00
  Speaker 1: a virtual world here at Varsity Brands. For those who
• 24:03
  Speaker 1: don't know, we're comprised of b Sen Sports does sporting
• 24:06
  Speaker 1: goods apparel across the country, Varsity Spirit as cheered dancing
• 24:10
  Speaker 1: band as your reference, and Hearth Jones is our achievement
• 24:13
  Speaker 1: arm that does class rings, caps and gowns and diplomas.
• 24:17
  Speaker 1: And I will tell you that post pandemic, we have
• 24:20
  Speaker 1: really started engaging with our clients a different way, UH,
• 24:23
  Speaker 1: most notably to a program called Impact Now, which launches
• 24:27
  Speaker 1: this week. Actually, we're helping fifty five million kids across
• 24:30
  Speaker 1: the country, UH with masks, signage both inside the school
• 24:35
  Speaker 1: and outside the school, and empowerment journals so that kids
• 24:38
  Speaker 1: can get used to journaling and dealing with the problems
• 24:41
  Speaker 1: attendant to anxiety, depression, isolation during the kinds of events
• 24:46
  Speaker 1: that we're seeing right now. So it's curriculum for schools
• 24:49
  Speaker 1: to get through back to school, get there safely and securely.
• 24:53
  Speaker 1: And it's been the biggest pivot that we've made so far, uh,
• 24:56
  Speaker 1: in the sixteen weeks of the pandemic. So, Adam, what's
• 24:59
  Speaker 1: your sense from the schools that you deal with. What
• 25:02
  Speaker 1: percentage would you say are going to try to reopen
• 25:05
  Speaker 1: virtually versus physically or maybe even a hybrid. Yeah, it's
• 25:09
  Speaker 1: a total hybrid. In the checkerboard. We have schools in
• 25:12
  Speaker 1: Georgia that are opening today, we have schools on the
• 25:15
  Speaker 1: West Coast that have deferred or gone virtual for the
• 25:18
  Speaker 1: entire fall season, and then we have many schools as
• 25:20
  Speaker 1: you mentioned, that are in between. Um. I've seen a
• 25:23
  Speaker 1: lot of schools in the last two weeks announced a
• 25:26
  Speaker 1: hybrid model where kids will be on campus two to
• 25:28
  Speaker 1: three days in high schools per week and then virtual
• 25:32
  Speaker 1: the other times. Interestingly, we're seeing a number of districts
• 25:36
  Speaker 1: use extracurricular activities its sport, cheer outside of school activities
• 25:41
  Speaker 1: as a way to keep the kids engaged outside of
• 25:44
  Speaker 1: the classroom, even if they can't stay engaged inside the classrooms.
• 25:48
  Speaker 1: So Vaine acquired you back in two thousand eighteen. Right,
• 25:51
  Speaker 1: how much has Beyan been involved since the beginning of
• 25:53
  Speaker 1: the pandemic? And you know, how much has your actual
• 25:56
  Speaker 1: revenue been impacted? So Bank Capital, which bought the business
• 26:01
  Speaker 1: about two years ago, Uh, majority of the business, Charles
• 26:03
  Speaker 1: Bank Capital Partners still thing has been extremely involved. Um.
• 26:07
  Speaker 1: You know, they sit on our board as you would imagine,
• 26:10
  Speaker 1: and have been incredible thought partners for the last sixteen
• 26:13
  Speaker 1: to twenty weeks but also the last two years. I
• 26:16
  Speaker 1: can't tell you. I've been in the public markets before
• 26:19
  Speaker 1: our business was public, before going private twenty years ago,
• 26:23
  Speaker 1: and the the amount of progress and change you can
• 26:27
  Speaker 1: make with private equity, thought leadership and that kind of
• 26:31
  Speaker 1: attention to detail is unmatched, in my opinion, compared to
• 26:34
  Speaker 1: other ways of running a business. So I'm grateful to
• 26:37
  Speaker 1: have them. Having said that, we've seen revenue to your
• 26:41
  Speaker 1: question down as much as when the pandemic started, and
• 26:46
  Speaker 1: it's improved gradually. So I would tell you that revenue
• 26:48
  Speaker 1: is down in the range now depending on division and
• 26:52
  Speaker 1: it varies between b SM Sports, Varsity Spirit and herf shones.
• 26:56
  Speaker 1: But what we have done is important is kept our
• 26:59
  Speaker 1: two thousand cell in the marketplace. Uh not on furlough,
• 27:02
  Speaker 1: but in the market this entire pandemic. It's been expensive,
• 27:06
  Speaker 1: it's been a real investment by the company, but it's
• 27:08
  Speaker 1: increased the engagement. We're using these tools like virtual graduation.
• 27:12
  Speaker 1: We had never nearly a thousand virtual graduations. This year
• 27:15
  Speaker 1: they help two hundred and fifty kids graduated virtually, and
• 27:18
  Speaker 1: virtual fittings and cheer competitions that are online um through
• 27:23
  Speaker 1: Varsity Spirit. These kind of events helped the schools stay
• 27:25
  Speaker 1: engaged with the kids. Were doing virtual press conferences through
• 27:29
  Speaker 1: sport and through the athletic directors and the coaches, so
• 27:31
  Speaker 1: they look like a college coach or a professional coach
• 27:34
  Speaker 1: when they're having these meetings with their kids and they're
• 27:36
  Speaker 1: talking to their parents. All of these tools, which have
• 27:38
  Speaker 1: been candidly invented over the last three months, would have
• 27:42
  Speaker 1: taken us three years during normal times. Has been kind
• 27:44
  Speaker 1: of the secret sauce to stay engaged with these schools
• 27:47
  Speaker 1: and keep the kids engaged with their coaches and their administrators.
• 27:52
  Speaker 1: How about on the sports side. What what are you
• 27:54
  Speaker 1: finding the schools are thinking about their fall sports schedule.
• 27:57
  Speaker 1: You know, it's a mixed bag. Um, We've got an
• 28:00
  Speaker 1: number of delays. So I will tell you that the
• 28:01
  Speaker 1: pre eminent thought is to delay until the middle of
• 28:04
  Speaker 1: September end of September, but still have the sports season.
• 28:08
  Speaker 1: Some schools are talking about having the games without the fans,
• 28:11
  Speaker 1: or having the fans socially distanced. Um. There are other
• 28:14
  Speaker 1: parts of the country, namely the Southeast, where sports are
• 28:18
  Speaker 1: starting on time and there are no restrictions with respect
• 28:21
  Speaker 1: to who plays or who comes to the games and watches.
• 28:24
  Speaker 1: And then in the Northeast you have examples of some
• 28:26
  Speaker 1: schools that are differring uh sports until later in the
• 28:30
  Speaker 1: fall or into the winter. So you know, to the
• 28:32
  Speaker 1: earlier comment, it really is a mixed bag out there.
• 28:35
  Speaker 1: I think over the next thirty days, if there's a
• 28:37
  Speaker 1: stabilization with what's going on with infection rates, hospitalization, mortality,
• 28:42
  Speaker 1: I think you're going to see schools come to a
• 28:44
  Speaker 1: firm conclusion they have to by nature of the academic calendar,
• 28:47
  Speaker 1: and by the middle the end of August, I think
• 28:49
  Speaker 1: you're gonna need decisions be made on how to actually
• 28:52
  Speaker 1: come back with the sports in the fall. And I'm
• 28:53
  Speaker 1: real quick because we're out of time, but you do employe.
• 28:56
  Speaker 1: Varsity itself employs around about nine thou have you had
• 28:59
  Speaker 1: to make offs? Are you considering furlows layoffs? We have
• 29:03
  Speaker 1: had layoffs. We have had furloughs. We are doing everything
• 29:06
  Speaker 1: we can to keep employees employed and bring people back
• 29:10
  Speaker 1: to the business. And our number one focus beyond safety
• 29:13
  Speaker 1: and security is getting all of our teammates back into
• 29:15
  Speaker 1: the family as fast as possible. Very interesting, Adam Blumenfeld,
• 29:20
  Speaker 1: CEO of Varsity Brands. We really appreciate that UH schools
• 29:23
  Speaker 1: trying to figure this out, um and both from an
• 29:26
  Speaker 1: academic perspective and then an extracurricular perspective, And as Adam
• 29:30
  Speaker 1: was mentioning, kind of a patchwork across the country, no
• 29:32
  Speaker 1: real consistency, but I think the local communities are trying
• 29:35
  Speaker 1: to figure out what works best for them and as
• 29:38
  Speaker 1: well as you know, again academically than sports and all
• 29:40
  Speaker 1: the extra curriculars. Very interesting perspectively there. Thanks for listening
• 29:45
  Speaker 1: to the Boomberg Markets podcast. You can subscribe and listen
• 29:48
  Speaker 1: to interviews at Apple Podcasts or whatever podcast platform you
• 29:52
  Speaker 1: prefer I'm Bonnie Quinn, I'm on Twitter at Bonnie Quinn.
• 29:56
  Speaker 1: And I'm Paul Sweeney. I'm on Twitter at pt Sweeney.
• 29:58
  Speaker 1: Before the podcast, You Can oh Is, catch us worldwide
• 30:01
  Speaker 1: at Bloomberg Radio m