Latest / Bloomberg Intelligence / BI Weekend: Disney Earnings, Metsera Bidding War, Visa-Mastercard Deal

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BI Weekend: Disney Earnings, Metsera Bidding War, Visa-Mastercard Deal · Bloomberg Intelligence

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  Speaker 2: Today, we'll look at how Pfizer won a bidding war
• 0:56
  Speaker 2: against the Danish drugmaker Novo Nordisk for an obesity startup.
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  Speaker 3: Plus, we'll break down how Visa and MasterCard reached a
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  Speaker 3: deal with retailers after twenty years of litigation.
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  Speaker 2: But first we begin with earnings from the media and
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  Speaker 2: entertainment giant Walt Disney.
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  Speaker 3: This week, Disney reported fourth quarter sales that fell short
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  Speaker 3: of Wall Street estimates. The company also said expenses from
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  Speaker 3: a slate of big budget movies, including a new Avatar picture,
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  Speaker 3: will weigh on results for the coming quarter.
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  Speaker 2: For more, we were joined by Githa rang Anathan, Bloomberg
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  Speaker 2: Intelligence Senior media analyst.
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  Speaker 3: We first asked Etha for her take on Disney's most
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  Speaker 3: recent earnings report.
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  Speaker 4: It came off as a little bit of a lackluster report.
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  Speaker 4: I mean everything. If you look at the fundamental drivers
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  Speaker 4: of the company, which is really the parks business brings
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  Speaker 4: in about sixty percent of profits, things seem to be
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  Speaker 4: going pretty strong there. We saw a thirteen percent jump
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  Speaker 4: in operating profit for the fiscal fourth quarter. Again, the
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  Speaker 4: guidance for twenty twenty six seems pretty good as well.
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  Speaker 4: But really, you know, Disney really has this very very
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  Speaker 4: tough balancing act. So on the one hand, they have
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  Speaker 4: the parks business, they have the streaming business, which is
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  Speaker 4: doing really well from a profitability standpoint, but to drag
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  Speaker 4: it down, you have the linear TV networks, and then
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  Speaker 4: you have the hit and misnature of you know, the
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  Speaker 4: boy in the Hollywood studio business. So you know, they
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  Speaker 4: have to contend with all of those different moving parts,
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  Speaker 4: and I think that the dragged down from the TV
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  Speaker 4: networks and the studios is kind of weighing a lot
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  Speaker 4: on the narrative.
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  Speaker 2: He can talk to us about some of their bundling
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  Speaker 2: of all their streaming services, particularly that ESPN app, that
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  Speaker 2: really they put a lot of their real valuable sports
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  Speaker 2: programming on that ESPN app. How are the early results
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  Speaker 2: from in terms of subscriber growth?
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  Speaker 4: So they didn't give us any hard number there, Paul,
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  Speaker 4: in terms of the number of subscribers that they got
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  Speaker 4: on the ESPN Ultimate product, which is priced at you know,
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  Speaker 4: twenty nine to ninety nine a month. But they did
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  Speaker 4: talk about, you know, in general, that the traction has
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  Speaker 4: been pretty good. They talked about the whole bundling strategy
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  Speaker 4: because that is where Disney really wins. I mean, if
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  Speaker 4: we've seen some of the numbers, you know, from Disney,
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  Speaker 4: we know that forty percent of new subscribers actually take
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  Speaker 4: the Disney bundle, and this is really going to be
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  Speaker 4: the strategy for them going forward. Right. You get people
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  Speaker 4: in with the bundle, and that's how you kind of
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  Speaker 4: stem chin you're able to take price increases. So it's
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  Speaker 4: really going to be the main driver for earnings growth
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  Speaker 4: for them going forward. And that's exactly what they indicated, Paul.
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  Speaker 3: I can't remember who said this, but it's so true
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  Speaker 3: that the history of media is about bundling and unbundling.
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  Speaker 3: We went through this period where everyone cut the cord
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  Speaker 3: and everyone unbundled, and now we're back to bundling again.
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  Speaker 3: Although it's you know, in these discrete groups where Disney
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  Speaker 3: might bundle Disney Plus an ESPN Plus together and then
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  Speaker 3: if you are a T mobile subscriber, you might get
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  Speaker 3: some other options.
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  Speaker 2: And here, but here's my point. That's fine. Is the
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  Speaker 2: consumer better off? And my answer is absolutely not.
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  Speaker 3: It's too confusing. It's way too confusing, Gita when it
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  Speaker 3: comes to bundling. How much more can they do? Though,
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  Speaker 3: I mean, I see what you're saying about how it's
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  Speaker 3: paying off right now, but I mean, can they continue
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  Speaker 3: to innovate on their bundling or is have we reached
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  Speaker 3: the limits of it?
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  Speaker 4: I don't think we've reached the limits at all. Scarletts.
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  Speaker 4: So I think what they're ultimately what they're ultimately aiming
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  Speaker 4: for with their ESPN product, and you know, they just
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  Speaker 4: introduced the streaming product of months ago. I think ultimately
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  Speaker 4: they wanted to kind of become the premier sports destinations.
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  Speaker 4: So you know, ultimately, I wouldn't be surprised if you
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  Speaker 4: see a Fox or an NBC or you know, even
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  Speaker 4: maybe an Amazon kind of feeding in all of their
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  Speaker 4: apps so that you go to this one stop shop
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  Speaker 4: for you know, ESPN and you're able to see all
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  Speaker 4: different kinds of sports content. Because you're absolutely right, there's
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  Speaker 4: way too much of fragmentation becoming a great source of
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  Speaker 4: friction for you know, the average consumer. And so I
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  Speaker 4: think they're going to seek out a lot more different
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  Speaker 4: bundling opportunities. We're already seeing them kind of do something
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  Speaker 4: with ESPN Ultimate and Fox One, which is Fox's streaming
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  Speaker 4: product that they also just introduced a few months ago.
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  Speaker 4: So they're going to look to partner with different media
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  Speaker 4: platforms across the ecosystem, and I think that is going
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  Speaker 4: to be a source of, you know, a great upside
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  Speaker 4: opportunity for them. Eventually.
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  Speaker 3: Is everyone willing to play ball on something like that, Kita.
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  Speaker 3: Or is there someone who's going to say, you know what,
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  Speaker 3: you can't get me in here, and I own or
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  Speaker 3: I have the rights over X number of NFL games.
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  Speaker 4: Actually that that's what we're seeing right now. There is
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  Speaker 4: the standoff going going on between Disney and YouTube TV,
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  Speaker 4: and it's really all again, it's just a you know,
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  Speaker 4: game of chicken here. So you know, when it comes
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  Speaker 4: to sports content, I have to say Disney has the
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  Speaker 4: upper hand a little bit. So if you just kind
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  Speaker 4: of look at sports viewing in the United States, Disney
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  Speaker 4: has about forty percent of sports viewing just with you know,
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  Speaker 4: Markie rights tied to all major leagues, you know, college football, NFL, NBA, MLB,
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  Speaker 4: they have it all. So I think it becomes a
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  Speaker 4: little harder to say no to them. But again, never
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  Speaker 4: say never.
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  Speaker 2: All right, Keith, I'm reluctant to ask this question, but
• 5:36
  Speaker 2: I feel like I have to. What's the latest on
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  Speaker 2: Bob Iger's succession plan.
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  Speaker 4: Yeah, this is the big thing that we're all looking
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  Speaker 4: at in fiscal twenty twenty six. So James Gorman, who's
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  Speaker 4: kind of heading up this whole succession planning committee Paul
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  Speaker 4: has said that you know the board will be out
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  Speaker 4: with the decision by the end of March, so Bob
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  Speaker 4: Eiger's contract comes to an end by the end of
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  Speaker 4: twenty twenty six, so hopefully we do have some kind
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  Speaker 4: of clarity on that. Right now, it's really looking like
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  Speaker 4: it's going to be internal candidates. I mean, there was
• 6:08
  Speaker 4: some rumors and buzz about whether they were looking externally,
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  Speaker 4: but I think they're going to kind of keep it
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  Speaker 4: internal our.
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  Speaker 2: Thanks to GEITHA. Rongorath and Bloomberg Intelligence Senior Media analyst.
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  Speaker 3: We move next to the retail space, and with the
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  Speaker 3: holiday shopping season now upon us, it is the most
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  Speaker 3: important time of the year for these retailers.
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  Speaker 2: For more on what we can expect in this sector,
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  Speaker 2: I was joined by Mary Ross Gilbert Bloomberg Intelligence senior
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  Speaker 2: equity anamals covering retail. First, ask Mary how the holiday
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  Speaker 2: season is shaping up and what companies are saying.
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  Speaker 5: If you look at how the holiday shopping is shaping up,
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  Speaker 5: I think it looks I think it looks very positive.
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  Speaker 5: So I think we are going to see an increase
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  Speaker 5: and particularly for apparel retailers, that's usually like the largest
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  Speaker 5: category that consumers. If you look at those that have
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  Speaker 5: been pulled by all the holiday service surveys that have
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  Speaker 5: been conducted, including the National Retail Federation, then they have
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  Speaker 5: over eight hundred over eight eighty two hundred respondents in
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  Speaker 5: their surveys, and the other ones are pretty sizable, you know,
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  Speaker 5: relatively speaking, around five thousand. So they're showing that there's
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  Speaker 5: definitely a higher percentage of shoppers wanting at peril and
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  Speaker 5: accessories for gifts. So that should be good news for apparel.
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  Speaker 5: But gen Z is planning to cut back on their
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  Speaker 5: overall holidays spending by that, you know, by twenty three percent.
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  Speaker 5: Millennials just one percent.
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  Speaker 2: Wow, So the gen Z these are the younger folks,
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  Speaker 2: maybe tougher time finding a job maybe, you know, student
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  Speaker 2: debt is that kind of the driver there.
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  Speaker 5: I think that could be part of it. Yeah, it
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  Speaker 5: could be the job market situation that might be happening
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  Speaker 5: there because these are really like the seventeen to twenty
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  Speaker 5: eight year olds. So we have been hearing some you know,
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  Speaker 5: talk about some of these latest graduates, you know, having
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  Speaker 5: it finding a job. I think it's just probably going
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  Speaker 5: to take longer because generally unemployment is still very low.
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  Speaker 5: But we're seeing resilience. If you look at the data
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  Speaker 5: so far with Bloomberg Second measure for apparel retailers and
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  Speaker 5: department stores and off Price, we're seeing good sales coming
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  Speaker 5: in for the third quarter, and they'll start reporting their
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  Speaker 5: numbers in the next few weeks. So I think we're
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  Speaker 5: off to a good start, and I think Black Friday
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  Speaker 5: sales are already happening. Macy's US out with fifty percent
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  Speaker 5: off on their private label brand product and they expect
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  Speaker 5: to have other drops every week. Wow, So everyone's focused
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  Speaker 5: on starting now yep, with promotions.
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  Speaker 2: So Mary, you know, economists talk about a K shaped
• 8:45
  Speaker 2: economy out there, some consumers, maybe the ones that own
• 8:48
  Speaker 2: assets like stocks and bonds in real estate doing more
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  Speaker 2: than good and kind of everybody else struggling a little bit,
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  Speaker 2: particularly with inflation. How does that get reflected in retail sales?
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  Speaker 2: Does it mean you just kind of if you're an investor,
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  Speaker 2: look at on Amazon Target where I can get some
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  Speaker 2: some some deals.
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  Speaker 5: Yeah, and that's actually what's happening, and that's why you
• 9:09
  Speaker 5: see let's say, pretty robust sales overall coming out of
• 9:14
  Speaker 5: off Price, you know, so think of TJ Max, Ross
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  Speaker 5: stores and Burlington stores, and Burlington's at the very low end.
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  Speaker 5: If you look at credit card delinquencies or you know,
• 9:25
  Speaker 5: those rates, and a lot of these companies that we're
• 9:28
  Speaker 5: tracking represent the credit cardholders for like department stores and
• 9:33
  Speaker 5: for some select apparel brands such as Gap et cetera.
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  Speaker 5: And when you look at that data, delinquencies are actually
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  Speaker 5: lower this year versus a year ago, but not for
• 9:45
  Speaker 5: the very low income, which kind of speaks to what
• 9:47
  Speaker 5: you're talking about and inflation. Actually those are up in
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  Speaker 5: the teams, you know, for the very low income consumer,
• 9:56
  Speaker 5: So think like under fifty K.
• 9:58
  Speaker 2: How about e commerce, Mary, I know the pandemic folks
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  Speaker 2: are saying kind of pulled forward maybe four or five
• 10:04
  Speaker 2: years of share shift from bricks and mortar to a
• 10:08
  Speaker 2: digital what's the e commerce growth story look like these days?
• 10:13
  Speaker 5: You know, econ growth is looking strong when we look
• 10:16
  Speaker 5: at the data, like I said, for the third quarter
• 10:19
  Speaker 5: that we're seeing from Bloomberg second measure, it's showing actually
• 10:23
  Speaker 5: online sales were stronger at the department stores except for
• 10:27
  Speaker 5: Coals Coals online businesses, I mean not their online business,
• 10:31
  Speaker 5: but actually their credit customer is shopping less, like in
• 10:37
  Speaker 5: the double digits less, so that's kind of an issue
• 10:39
  Speaker 5: for them, but generally we're seeing stronger pool with online
• 10:43
  Speaker 5: sales there. Now, there is also a delineation between the
• 10:47
  Speaker 5: type of consumer. If it's gen Z, they tend to
• 10:51
  Speaker 5: prefer shopping more in store, and we see that with
• 10:56
  Speaker 5: Abercrombie and Fitch's Hollister brand, so they are about seventy
• 11:00
  Speaker 5: percent of their sales are generated online. And then it's
• 11:03
  Speaker 5: the inverse when you look at their namesake brand, Abercrombie,
• 11:08
  Speaker 5: because that consumer is those are millennials, and millennials prefer
• 11:13
  Speaker 5: to shop online, so sixty percent of their sales are
• 11:17
  Speaker 5: being generated online versus in store.
• 11:19
  Speaker 3: That was Mary Ross Gilbert Bloomberg Intelligence, senior equity analyst
• 11:22
  Speaker 3: who covers retail. Coming up, we'll take a look at
• 11:25
  Speaker 3: why Tyson Foods says it expects flat profits for twenty
• 11:28
  Speaker 3: twenty six.
• 11:28
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  Speaker 1: This is Bloomberg Intelligence with Scarletfoo and Paul Sweeney on
• 11:51
  Speaker 1: Bloomberg Radio.
• 11:53
  Speaker 2: We move now to some news in the pharmaceutical space.
• 11:55
  Speaker 3: This week, Pfizer won the bidding war against the Danish
• 11:57
  Speaker 3: drugmaker Novo Nordisk for the obesity start up.
• 12:00
  Speaker 2: Met Sarah.
• 12:00
  Speaker 3: It's a bid to catch up to rival drug makers
• 12:03
  Speaker 3: after failing to compete with its own weight loss medications
• 12:06
  Speaker 3: for moret We were joined.
• 12:07
  Speaker 2: By Sam Fazelli, Bloomberg Intelligence, director of Research for Global
• 12:10
  Speaker 2: Industries and senior pharmaceuticals analyst.
• 12:12
  Speaker 3: We began by asking Sam to tell us why Fiser
• 12:14
  Speaker 3: one this deal.
• 12:16
  Speaker 6: Nova's deal had the risk of not being able to
• 12:18
  Speaker 6: pass due to competition competition issues FTC issues, and it
• 12:22
  Speaker 6: sounds like the FTC had had given metzera call saying look,
• 12:26
  Speaker 6: if you go with that, there is a risky won't close.
• 12:29
  Speaker 6: So do whatever you think is the right thing for
• 12:31
  Speaker 6: your shareholders. And they did. In the end, the files
• 12:33
  Speaker 6: it did a bit spit.
• 12:34
  Speaker 3: Right, So Novo Nordisk one in a way in that
• 12:37
  Speaker 3: Pfizer is paying up more. Does that actually work in
• 12:40
  Speaker 3: Nova Nordisks favor or does it? Is it still as
• 12:44
  Speaker 3: desperate as it was before to look for some new
• 12:46
  Speaker 3: catalysts in the obesity market.
• 12:50
  Speaker 6: I mean, I'm not going to call Novo desperate. I
• 12:53
  Speaker 6: think they have assets in there. I think they wanted
• 12:55
  Speaker 6: to add some more options to the their their sales
• 13:01
  Speaker 6: reps bags over time, So I wouldn't call them desperate.
• 13:05
  Speaker 6: But they're obviously by going after this, they did say
• 13:08
  Speaker 6: that we need more assets in our bag. So and
• 13:11
  Speaker 6: Lily wasn't in the game. So it just gives them.
• 13:13
  Speaker 6: That gives you that flavor that they are and I
• 13:17
  Speaker 6: think the market's telling you that. Look at the divergence
• 13:20
  Speaker 6: of the share price performance of Lily versus never noticed
• 13:23
  Speaker 6: that there's the market favoring the drugs that Lily's got
• 13:28
  Speaker 6: on the market, and to compete they needed to get
• 13:30
  Speaker 6: some more. So I think this is not the end
• 13:33
  Speaker 6: for Novo at all in this place. There's lots of
• 13:35
  Speaker 6: other interesting Obviously, the assets coming up with different mechanisms.
• 13:40
  Speaker 6: That's the thing that I think the company is now
• 13:42
  Speaker 6: going to have to think about rather than trying to
• 13:44
  Speaker 6: go after the same mechanism all the time.
• 13:46
  Speaker 2: So, Sam, all these big big cap pharmaceutical companies that
• 13:50
  Speaker 2: you've covered for decades, I kind of always thought they
• 13:53
  Speaker 2: were big, diversified portfolios of lots of different drugs and therapeutics.
• 13:57
  Speaker 2: And you know, but wait, when I look at your
• 13:59
  Speaker 2: stocks year, it seems like there's halves and have nots.
• 14:02
  Speaker 2: If you have obesity exposure, the stocks are up, and
• 14:06
  Speaker 2: if you don't, they're down. Is that kind of how
• 14:09
  Speaker 2: your world's evolved into over the last several years.
• 14:12
  Speaker 6: I would just give you one little caveat to the
• 14:14
  Speaker 6: Astrosenica Sosenica. I think it's doing fine. And then they
• 14:18
  Speaker 6: have an obesity asset, but it's not their major game.
• 14:21
  Speaker 6: Their big plays in oncology. Cardiovascular is coming is there
• 14:25
  Speaker 6: and they're adding it to it. So, yes, obesity has
• 14:30
  Speaker 6: been the talk of this past twenty twenty five. I
• 14:34
  Speaker 6: think you will still be the talk of twenty twenty six.
• 14:36
  Speaker 6: But there's a lot more going on in fharma, neuroscience,
• 14:39
  Speaker 6: diseases of the brain, diseases of mental health are getting
• 14:42
  Speaker 6: much more attention. Cardiovascular aside from obesity, is getting quite
• 14:49
  Speaker 6: a lot of attention in heart to treat hype atension,
• 14:51
  Speaker 6: et cetera. I have to tell you, I don't think
• 14:53
  Speaker 6: there's an area, perhaps antibiotics set aside that is not
• 14:57
  Speaker 6: getting a significant amount of progress across some former company
• 15:02
  Speaker 6: somewhere is.
• 15:03
  Speaker 3: What happened with Metsarah, Novo, Nordisk Andfiser, an unabashed victory
• 15:07
  Speaker 3: for Eli Lilly. I mean, does it just kind of
• 15:09
  Speaker 3: keep on moving forward or does any of this kind
• 15:12
  Speaker 3: of hurt Eli Lilly's market position?
• 15:14
  Speaker 6: No. I mean, at the end of the day, there'll
• 15:16
  Speaker 6: be multiple players in this space as that are now
• 15:19
  Speaker 6: too at least, and I think Eli Lily is currently
• 15:22
  Speaker 6: very well placed with the assets that they have to compete,
• 15:25
  Speaker 6: and they're showing that they're competing very very effectively and
• 15:29
  Speaker 6: in some cases winning market share from Nova not disc our.
• 15:32
  Speaker 2: Thanks to Sam Fazelli, Bloomberg Intelligence Director of Research for
• 15:35
  Speaker 2: Global Industries and senior pharmaceuticals.
• 15:37
  Speaker 3: Analyst, we moved to news from the multinational food company
• 15:40
  Speaker 3: Tyson Foods.
• 15:41
  Speaker 6: This week.
• 15:41
  Speaker 2: Tyson said it expects flat profits for twenty twenty six.
• 15:44
  Speaker 2: This comes as a company's chicken segment continues to help
• 15:47
  Speaker 2: offset its beef losses.
• 15:48
  Speaker 3: So we had to check in with Jen Bartashi's Bloomberg
• 15:51
  Speaker 3: Intelligence senior analysts for retail, staples and packaged food.
• 15:54
  Speaker 2: First, they asked Jen for her take on Tyson foods
• 15:56
  Speaker 2: guidance for twenty twenty six.
• 15:58
  Speaker 6: Nova's deal had the risk of not being able to
• 16:01
  Speaker 6: pass due to competition competition issue with FTC issues, and
• 16:05
  Speaker 6: it sounds like the FTC had had given Metzera call saying, look,
• 16:08
  Speaker 6: if you go with that, there is a risky won't close,
• 16:11
  Speaker 6: So do whatever you think is the right thing for
• 16:13
  Speaker 6: your shareholders. And they did in the end, and fires
• 16:15
  Speaker 6: it did up its bit.
• 16:16
  Speaker 3: Right, So Novo Nordisk one in a way in that
• 16:19
  Speaker 3: Pfizer is paying up more. Does that actually work in
• 16:22
  Speaker 3: Nova nordisks favor or does it? Is it still as
• 16:26
  Speaker 3: desperate as it was before to look for some new
• 16:28
  Speaker 3: catalysts in the obesity marketing.
• 16:31
  Speaker 6: I mean, I'm not going to call Novo desperate. I
• 16:34
  Speaker 6: think they have assets in there. I think they wanted
• 16:36
  Speaker 6: to add some more options to the their sales reps
• 16:41
  Speaker 6: bags over time, So I wouldn't call them desperate. But
• 16:45
  Speaker 6: they're obviously by going after this, they did say that
• 16:48
  Speaker 6: we need more assets in our bag. So and Lily
• 16:51
  Speaker 6: wasn't in the game. So it just gives them. That
• 16:53
  Speaker 6: gives you that flavor that they are and I think
• 16:57
  Speaker 6: the market's telling you that. Look at the divergence of
• 16:59
  Speaker 6: the press performance of Lily Versus never noticed that there's
• 17:05
  Speaker 6: the market favoring the drugs that Lily has got on
• 17:07
  Speaker 6: the market, and to compete they needed to get some more.
• 17:10
  Speaker 6: So I think this is not the end for Novo
• 17:13
  Speaker 6: at all. In this place. There's lots of other interesting
• 17:15
  Speaker 6: OBCD acids coming up with different mechanisms. That's the thing
• 17:20
  Speaker 6: that I think the company is now going to have
• 17:22
  Speaker 6: to think about rather than trying to go after the
• 17:23
  Speaker 6: same mechanism all the time.
• 17:25
  Speaker 2: Sam, all these big cap pharmaceutical companies that you've covered
• 17:29
  Speaker 2: for decades, I kind of always thought they were big
• 17:31
  Speaker 2: diversified portfolios of lots of different drugs and therapeutics and
• 17:35
  Speaker 2: you know, but boy, when I look at your stocks
• 17:37
  Speaker 2: this year, it seems like there's halves and have nots.
• 17:40
  Speaker 2: If you have obesity exposure, the stocks are up, and
• 17:44
  Speaker 2: if you don't, they're down. Is that kind of how
• 17:46
  Speaker 2: your world's evolved into over the last several years.
• 17:49
  Speaker 6: I would just give you one little caveat to that. ASA. So, Senica,
• 17:53
  Speaker 6: I think it's doing fine. And then they have an
• 17:55
  Speaker 6: OBCD asset, but it's not their major game. They're they're
• 17:58
  Speaker 6: they're big plays in oncology. Cardiovascular is there and they're
• 18:03
  Speaker 6: adding it to it. So, yes, obesity has been the
• 18:08
  Speaker 6: talk of this past twenty twenty five. I think you'll
• 18:11
  Speaker 6: still be the talk of twenty twenty six. But there's
• 18:13
  Speaker 6: a lot more going on in pharma, neuroscience. Diseases of
• 18:17
  Speaker 6: the brain, diseases of mental health are getting much more attention.
• 18:21
  Speaker 6: Cardiovascular aside from obesity, is getting quite a lot of
• 18:26
  Speaker 6: attention in heart to treat hype potension, et cetera. I
• 18:29
  Speaker 6: have to tell you, I don't think there's an area,
• 18:31
  Speaker 6: perhaps antibiotics set aside, that is not getting a significant
• 18:37
  Speaker 6: amount of progress across some farmer company somewhere.
• 18:40
  Speaker 3: Is what happened with Matsarah, noad, Artisk Andfiser an unabashed
• 18:44
  Speaker 3: victory for Eli Lilly. I mean, does it just kind
• 18:46
  Speaker 3: of keep on moving forward or does any of this
• 18:49
  Speaker 3: kind of hurt Eli Lilly's market position.
• 18:52
  Speaker 6: No. I mean, at the end of the day, there'll
• 18:53
  Speaker 6: be multiple players in this space as that are now
• 18:56
  Speaker 6: too at least, and I think Eli Lily is currently
• 19:00
  Speaker 6: very well placed with the assets that they have to compete,
• 19:03
  Speaker 6: and they're showing that they're competing very very effectively and
• 19:06
  Speaker 6: in some cases winning market share from Romer.
• 19:09
  Speaker 3: Notice our thanks to Jen Bartashis Bloomberg Intelligence senior analysts
• 19:12
  Speaker 3: covering retail staples and packaged foods.
• 19:15
  Speaker 2: We move now to quarterly earnings from the global fintech
• 19:17
  Speaker 2: company Circle Internet Group.
• 19:19
  Speaker 3: This week, shares of the company fell on concern that
• 19:21
  Speaker 3: declining interest rates will weigh on future returns, and this
• 19:25
  Speaker 3: overshadowed better than expected third quarter sales and earnings.
• 19:28
  Speaker 2: For more. We were joined by Emily Mason, Bloomberg Fintech
• 19:30
  Speaker 2: and crypto reporter.
• 19:31
  Speaker 3: We began by asking Emily why lower interest rates from
• 19:34
  Speaker 3: the Federal Reserve would be a concern for a company
• 19:36
  Speaker 3: like Circle.
• 19:37
  Speaker 7: So Circle issues USDC and that's a stable quin peg
• 19:41
  Speaker 7: to the US dollar and they maintain that peg by
• 19:43
  Speaker 7: holding reserves in cash and short term treasuries. They keep
• 19:47
  Speaker 7: the yield from the treasuries and that's kind of how
• 19:49
  Speaker 7: they make money and that's where most of their revenue
• 19:52
  Speaker 7: comes from. So if interest rates go down, you know,
• 19:55
  Speaker 7: that shows up in earnings and that causes some concern
• 19:58
  Speaker 7: for investors and analysts.
• 20:00
  Speaker 2: What have their recent results been like.
• 20:01
  Speaker 7: I mean, this is their second time reporting since going public.
• 20:04
  Speaker 7: They benefited heavily from all the hype around stable coin,
• 20:08
  Speaker 7: especially before the Genius Act was passed, and their stock
• 20:10
  Speaker 7: performed really well. It's kind of been down since their
• 20:14
  Speaker 7: summer highs, and that's kind of because of the concern
• 20:17
  Speaker 7: from the interest revenue, but also because of some of
• 20:20
  Speaker 7: the distribution partners that they have they pay. They have
• 20:23
  Speaker 7: revenue sharing agreements with coinbase, for example, who helps distribute
• 20:26
  Speaker 7: their coin.
• 20:28
  Speaker 3: So if this company for now is kind of a
• 20:31
  Speaker 3: proxy for a money market fund because it's earning's track
• 20:34
  Speaker 3: short term treasury yields, it must need to do more
• 20:37
  Speaker 3: to diversify its revenue streams. What is it looking at?
• 20:41
  Speaker 7: Yeah, that's what they're doing. And then if you talk
• 20:43
  Speaker 7: to Jeremy Alaiir, who's the CEO, he'll kind of say
• 20:45
  Speaker 7: that lower interest rates are actually good for the company
• 20:47
  Speaker 7: because it means that there's higher velocity of money, there's
• 20:50
  Speaker 7: more investment, and then people want faster moving money like
• 20:53
  Speaker 7: stable coins, and they also might want to use products
• 20:55
  Speaker 7: like their Circle Payments network, which recently is experimenting with
• 20:59
  Speaker 7: like a staplecoin payouts product, which like helps people can
• 21:03
  Speaker 7: helps people to pay out globally with USDC, and they're
• 21:06
  Speaker 7: trying to move more USDC volume onto their own platform
• 21:09
  Speaker 7: instead of working with distribution partners like coinbase, and that
• 21:12
  Speaker 7: kind of could help them as well. But they see
• 21:15
  Speaker 7: the lower interest rates as a positive thing. And also
• 21:18
  Speaker 7: the USD circulating supply is increasing very heavily as they
• 21:22
  Speaker 7: add new partners, so that also kind of could potentially
• 21:24
  Speaker 7: offset the lower interest rates.
• 21:26
  Speaker 2: Emily, your beat is fintech and crypto reporter, two things
• 21:31
  Speaker 2: that didn't exist even just a handfull of years ago.
• 21:36
  Speaker 2: Talk to us about broadly the kind of the intersection
• 21:39
  Speaker 2: of the growing crypto market and applications like fintech.
• 21:44
  Speaker 7: Yeah, I mean, I think what's kind of the most
• 21:46
  Speaker 7: interesting right now is like fintech when it came onto
• 21:49
  Speaker 7: the scene was sort of like building very sleek interfaces
• 21:53
  Speaker 7: on top of his existing financial infrastructure, and then crypto's
• 21:56
  Speaker 7: pitch is much more sort of like rebuilding the financial
• 22:00
  Speaker 7: infrastructure with things like blockchains, and now the conversation is
• 22:03
  Speaker 7: kind of about bringing the traditional world and the traditional
• 22:06
  Speaker 7: financial institute infrastructure together with crypto rails and circles. Really
• 22:11
  Speaker 7: kind of sitting at the center of that and trying
• 22:13
  Speaker 7: to bring stave a coin and like integrate that with
• 22:17
  Speaker 7: how traditional markets work, and that involves the coming together
• 22:21
  Speaker 7: on both sides, Like traditional firms kind of have to
• 22:23
  Speaker 7: upgrade and make their systems interoperable with cryptotechnology, and then
• 22:27
  Speaker 7: crypto firms also have to kind of move into a
• 22:30
  Speaker 7: regulated environment. And that's been something that Jeremy Alaier has
• 22:32
  Speaker 7: talked about for a long time, like he really thinks
• 22:34
  Speaker 7: that crypto needs to be regulated and Circle that's been
• 22:37
  Speaker 7: a big part of their narrative is like we are
• 22:38
  Speaker 7: kind of like the suits in the room, and we're
• 22:40
  Speaker 7: going to be regulated and that's how we're going to
• 22:42
  Speaker 7: go about doing business.
• 22:43
  Speaker 3: You're kind of the most tradify of the DeFi world.
• 22:46
  Speaker 3: In other words, if we want to get technical, this
• 22:49
  Speaker 3: is going to be a dumb question, Emily, But we've
• 22:51
  Speaker 3: seen how bigcoin and the rest of the cryptocurrencies had
• 22:54
  Speaker 3: a pretty rough October. They're struggling to regain momentum. All
• 22:58
  Speaker 3: these digital coins are not the same as stupid coins.
• 23:00
  Speaker 3: But is that shift in sentiment and conviction on Bitcoin
• 23:05
  Speaker 3: and all coins, especially from institutions, affecting demand it off
• 23:08
  Speaker 3: for stable coins or are those two just not linked.
• 23:11
  Speaker 7: I mean, stable coin is used a lot of the times,
• 23:13
  Speaker 7: like anytime there's a lot of trading happening in crypto
• 23:16
  Speaker 7: like and in crypto tokens like stable coin's kind of
• 23:18
  Speaker 7: benefit because they're used to like move in and out
• 23:21
  Speaker 7: of those markets. The stable coin the whole point is
• 23:23
  Speaker 7: that it's like a stable currency. It's pegged to the dollar,
• 23:26
  Speaker 7: it's one for one, so the price of it really
• 23:29
  Speaker 7: shouldn't be impacted at all by like crypto market movements.
• 23:32
  Speaker 8: But it does.
• 23:32
  Speaker 3: It does demand affect it or does sorry, does the
• 23:36
  Speaker 3: spillover involve like demand waning for stable corn or increasing
• 23:40
  Speaker 3: for stable coin.
• 23:41
  Speaker 7: I think where like the demand growth for stable coin
• 23:43
  Speaker 7: is going to come from is like it moving out
• 23:45
  Speaker 7: of a tool just for crypto trading. It's going to
• 23:48
  Speaker 7: be like people in countries where the local currency is
• 23:51
  Speaker 7: volatile wanting to hold stable coin, or people wanting to
• 23:53
  Speaker 7: actually use it for payments or like stable coin payouts.
• 23:56
  Speaker 7: Like if you're a US based company and you're employing
• 23:59
  Speaker 7: a bunch of people around the word world who want
• 24:01
  Speaker 7: to hold a stable currency like the dollar, the stablecoin
• 24:03
  Speaker 7: is the best way to access it, then you can
• 24:05
  Speaker 7: pay them that way. Like that's where growth from. That's
• 24:09
  Speaker 7: where demand for stable coin is going to come from.
• 24:11
  Speaker 7: I don't think it's like super tied to the trading necessarily,
• 24:14
  Speaker 7: Like people use staplecoin to get in and out of
• 24:17
  Speaker 7: crypto market, so you know they might see more volume
• 24:19
  Speaker 7: of trading activity is high, but their journeys are kind
• 24:23
  Speaker 7: of becoming less linked o.
• 24:26
  Speaker 2: Right thanks to Emily Mason, Bloomberg Fintech and Crypto.
• 24:28
  Speaker 3: Reporter coming up, It's the end of an era at
• 24:30
  Speaker 3: Berkshire Hathway, we'll break down why. CEO and billionaire investor
• 24:33
  Speaker 3: Warren Buffett says he is quote going quiet.
• 24:36
  Speaker 2: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in
• 24:39
  Speaker 2: depth research and data on two thousand companies in one
• 24:41
  Speaker 2: hundred and thirty industries.
• 24:42
  Speaker 3: You can access Bloomberg Intelligence via big on the terminal.
• 24:45
  Speaker 2: I'm Scarlet Foo and I'm Paul Sweeney, and this is Bloomberg.
• 24:56
  Speaker 1: This is Bloomberg Intelligence with Scarlet Foo and to Paul
• 25:00
  Speaker 1: Sweeney on Bloomberg Radio.
• 25:03
  Speaker 2: The move next to news at Berkshire Hathaway.
• 25:05
  Speaker 3: Berkshire Hathaway CEO and billionaire investor Warren Buffett said he
• 25:08
  Speaker 3: is quote going quiet, marking the end of an era.
• 25:11
  Speaker 3: Buffett also announced his plan to donate more than one
• 25:13
  Speaker 3: point three billion dollars to four family foundations, with plans
• 25:17
  Speaker 3: to quote step up.
• 25:18
  Speaker 2: The pace for more. I was joined by Matthew Palozola,
• 25:20
  Speaker 2: Bloomberg Intelligence senior analyst covering the insurance business. I first
• 25:24
  Speaker 2: asked Matthew his thoughts on Buffett's latest announcement.
• 25:27
  Speaker 9: We've known it, I mean this, so we knew this
• 25:29
  Speaker 9: letter was coming out. He does this every year around Thanksgiving.
• 25:32
  Speaker 9: We also knew he was stepping down as CEO, so
• 25:36
  Speaker 9: not huge surprise in this letter. I think the going
• 25:40
  Speaker 9: quiet thing was kind of to everyone a little bit
• 25:43
  Speaker 9: by surprise. I think maybe the thought was, hey, he's
• 25:47
  Speaker 9: going to he's stepping back a CEO, but maybe he'll
• 25:50
  Speaker 9: kind of be out there in the public and he's
• 25:52
  Speaker 9: still chairman, so maybe we'd still hear more from him.
• 25:55
  Speaker 9: A little while ago he said he wasn't going to
• 25:56
  Speaker 9: speak at the meeting, and now he's going to kind
• 25:58
  Speaker 9: of focus on his philanthropic work. And he's also a
• 26:02
  Speaker 9: ninety five years old, he's maybe a little tired.
• 26:03
  Speaker 2: Yeah, exactly. And he's going to donate more than one
• 26:06
  Speaker 2: point three billion dollars to four family foundations and plans
• 26:10
  Speaker 2: to quote step up the pace of his Childable giving
• 26:12
  Speaker 2: to his kids' foundations while he's still alive. So that
• 26:15
  Speaker 2: seems to be the point of life. He is any
• 26:17
  Speaker 2: reason to think that the business strategies the operations of
• 26:22
  Speaker 2: Hathaway may change now that he has kind of stepped
• 26:25
  Speaker 2: back on another step, I guess, so, I don't.
• 26:26
  Speaker 9: Think so right away. So he is always praising his successor,
• 26:30
  Speaker 9: greg Abel, talking about how he maintains the ethos of Berkshire,
• 26:34
  Speaker 9: and they'll be doing the same thing. I think Abel
• 26:36
  Speaker 9: walks a fine line now where I think over the
• 26:40
  Speaker 9: next couple of years he will want to put his
• 26:42
  Speaker 9: own stamp and make a name for himself, but also
• 26:45
  Speaker 9: not stray too far from what has led to this
• 26:50
  Speaker 9: massive value creation of Berkshire. So I don't think anything
• 26:53
  Speaker 9: dramatic happens in the near term. You know, we talked
• 26:57
  Speaker 9: about this. I think in the past the amount of
• 26:59
  Speaker 9: capital they're sitting on and Able is a good capital allocator,
• 27:03
  Speaker 9: at least according to Buffett. Ye, maybe something happens there
• 27:06
  Speaker 9: special dividend or something like that. You know, no guarantees
• 27:08
  Speaker 9: on any of that stuff, but I could see able
• 27:11
  Speaker 9: wanting to put that kind of stamp on the company.
• 27:13
  Speaker 2: Because again what we learned I guess from the last
• 27:14
  Speaker 2: quarterly released was the cash is now three hundred and
• 27:17
  Speaker 2: eighty two billion dollars. You know, it's a number that's
• 27:20
  Speaker 2: you know, most portfolio matters. What would know where to
• 27:23
  Speaker 2: start get boggles of mine. I think even in the
• 27:26
  Speaker 2: letter he had mentioned, uh, there's just not a lot
• 27:29
  Speaker 2: of things that move the needle for them. So they
• 27:31
  Speaker 2: bought a twelve billion dollar company in Alleghany a couple
• 27:34
  Speaker 2: of years ago, doesn't really move the needle that much.
• 27:36
  Speaker 2: Help the insurance businesses grow a little bit, but overall
• 27:40
  Speaker 2: for the company, not dramatic. They bought this eleven billion
• 27:43
  Speaker 2: dollar chemical business from Occidental. You know these are these
• 27:46
  Speaker 2: are ten and twelve billion dollar deals, but they're just
• 27:49
  Speaker 2: not moving the needle for the company. So there's not
• 27:51
  Speaker 2: not a ton they can do too dramatically. Historically, why
• 27:55
  Speaker 2: is Warren and the company what's been their thought about
• 27:59
  Speaker 2: returning cash this sh shareholders?
• 28:00
  Speaker 9: The thought has been, we don't want to do that,
• 28:02
  Speaker 9: right even said, you know, Berkshire shareholders have foregone dividends
• 28:07
  Speaker 9: for a reinvestment in America. Something that I forgot the
• 28:09
  Speaker 9: exact line, and that was Buffets.
• 28:12
  Speaker 4: Uh.
• 28:13
  Speaker 9: He likes collecting dividends, he doesn't like paying them. I
• 28:15
  Speaker 9: think he always thought we are the best allocators of this.
• 28:19
  Speaker 9: So if you're if you're a owner of Berkshire shares,
• 28:22
  Speaker 9: would you rather have some money or would you rather
• 28:24
  Speaker 9: have warm Buffett invest that money for you? I think
• 28:27
  Speaker 9: over the past couple of years, again, they've had so
• 28:29
  Speaker 9: much money that it's been tough for them to invest
• 28:31
  Speaker 9: it in effective ways. But that's that's been the philosophy.
• 28:34
  Speaker 2: Yeah, because I mean it's I guess my response would
• 28:37
  Speaker 2: be I can put it in cash too and get
• 28:40
  Speaker 2: similar rates of return to you. And I guess that
• 28:44
  Speaker 2: when it's ten twenty fifty hundred million dollars line around,
• 28:47
  Speaker 2: not that big of account argument.
• 28:48
  Speaker 9: Now, it's you know, you know, it's significant, and it
• 28:51
  Speaker 9: helped their earnings over the past couple of years. Just
• 28:53
  Speaker 9: getting four percent on that was a dramatic tailwind to
• 28:57
  Speaker 9: their earnings. So you know, it didn't do much for
• 29:01
  Speaker 9: the stock. After Buffett said he was leaving, that's been
• 29:04
  Speaker 9: the thing that's weighed on it more than anything else.
• 29:06
  Speaker 9: But an you'll see short term rates going down, so
• 29:11
  Speaker 9: that tail wind diminishing. I mean, I think there is
• 29:13
  Speaker 9: a school of thought that Berkshire, you know, not the
• 29:17
  Speaker 9: same without Buffett, but just maybe not as good at
• 29:21
  Speaker 9: almost all of their things. That's one school of thought.
• 29:25
  Speaker 9: I could see other ones where you know, still able,
• 29:29
  Speaker 9: maybe takes a different direction. So that's another maybe catalyst
• 29:32
  Speaker 9: for the shares. But you know, it's it's a kind
• 29:34
  Speaker 9: of darker time for Burshure.
• 29:36
  Speaker 2: And what's Warren's ownership stake in the company.
• 29:40
  Speaker 6: So I don't know this of my head.
• 29:41
  Speaker 9: I don't remember controlling, Yeah, oh for sure.
• 29:44
  Speaker 2: And you're not gonna have an activist investor come in
• 29:46
  Speaker 2: here and say this is just a poor allocation.
• 29:48
  Speaker 9: Though it would be impossible. He owns too much in
• 29:51
  Speaker 9: the The A shares I believe are ten thousand votes
• 29:55
  Speaker 9: to a B share, he owns most of them. He
• 29:58
  Speaker 9: will he's going to step up the amount he's giving away,
• 30:01
  Speaker 9: but he still owns too much for anyone else to
• 30:03
  Speaker 9: step in. And should he die in his will, he
• 30:08
  Speaker 9: would I think it's over ten years. His ownership goes
• 30:12
  Speaker 9: to these foundations run by his children, who I can't
• 30:16
  Speaker 9: imagine would you let them kind of immediately fall into
• 30:20
  Speaker 9: the hands of some sort of actives investor. I think
• 30:22
  Speaker 9: he'd set a time frame of over ten years that
• 30:24
  Speaker 9: he'd want that stuff divested. But he does want to
• 30:26
  Speaker 9: divest it. He doesn't want them to just hold on
• 30:28
  Speaker 9: to it.
• 30:29
  Speaker 3: Our thanks to Matthew Polozola, Bloomberg Intelligence Senior analyst covering insurance.
• 30:33
  Speaker 2: We move next to the credit card space.
• 30:35
  Speaker 3: This week Visa MasterCard. We should deal with retailers after
• 30:38
  Speaker 3: twenty years of litigation, so for more we'd brought in
• 30:40
  Speaker 3: Justin Teresi, Bloomberg Intelligence antitrust litigation and policy analyst.
• 30:44
  Speaker 2: We first asked Justin to break down Visa MasterCard case.
• 30:48
  Speaker 8: This case has been going on for about twenty years now.
• 30:51
  Speaker 8: I started before I went to law school, which was
• 30:53
  Speaker 8: a long time ago. There are salt and pepper in
• 30:55
  Speaker 8: my hair, so we're talking about a really, really ancient case.
• 30:58
  Speaker 8: But basically with a lot of folks don't know is
• 31:01
  Speaker 8: when you have those really valuable premium cards, right the
• 31:03
  Speaker 8: airline miles cards or the cash back cards, there's a
• 31:06
  Speaker 8: fee associated with those, and it's the merchants who are
• 31:09
  Speaker 8: eating that fee, typically around three or four percent, depending
• 31:12
  Speaker 8: on the varying swipe fee when you use it at
• 31:14
  Speaker 8: a register. So merchants, no surprise, they're upset about that, right.
• 31:18
  Speaker 8: So Visa, you know, big litigation here, the accusation being
• 31:21
  Speaker 8: that they fix those fees and that you know, the
• 31:23
  Speaker 8: merchants are basically the ones eating the costs there. So
• 31:26
  Speaker 8: big deal announced between Visa, master Card and merchants would
• 31:29
  Speaker 8: make a little bit more flexibility on the part of
• 31:32
  Speaker 8: merchants here. They could basically say, hey, we're going to
• 31:35
  Speaker 8: take the lower tier version of a Visa or a
• 31:37
  Speaker 8: master Card, but we're maybe not going to accept airline
• 31:40
  Speaker 8: miles cards or cash back cards. And then alternatively, they
• 31:43
  Speaker 8: also might have the option of passing those fees onto you,
• 31:46
  Speaker 8: the consumer at the register if they do take them.
• 31:48
  Speaker 8: So some big changes here and how things are shaping up.
• 31:51
  Speaker 2: Well, I've noticed in the last couple of three years
• 31:53
  Speaker 2: they are doing that. Yeah, I mean almost every merchant
• 31:56
  Speaker 2: I go to now, I don't know if it's just
• 31:57
  Speaker 2: a state of New Jersey thing, but they're saying, hey,
• 31:59
  Speaker 2: here's a cash price, here's the credit card price.
• 32:01
  Speaker 8: Yeah, Paul, this is actually a really interesting issue here
• 32:04
  Speaker 8: because state by state there's a lot of differences in
• 32:07
  Speaker 8: how this actually plays out in New York, and I
• 32:09
  Speaker 8: see this too when I go to my dry cleaner.
• 32:11
  Speaker 8: It's like, oh, maybe that's four percent more if I'm
• 32:13
  Speaker 8: going to use my credit card here. That's actually illegal
• 32:16
  Speaker 8: in New York right now to do that, But the
• 32:18
  Speaker 8: enforcement seems to be lacking that this is a new
• 32:20
  Speaker 8: law pass in twenty twenty four. There has to be
• 32:22
  Speaker 8: an upfront kind of price on a tag if they're
• 32:25
  Speaker 8: going to pass a surch charge onto the consumer. In
• 32:27
  Speaker 8: New York, Massachusetts, Connecticut, you can't serve charge at all.
• 32:30
  Speaker 8: So if this settlement goes through, you know, that's a
• 32:33
  Speaker 8: big question mark.
• 32:34
  Speaker 3: Too interesting that you say that the surcharge is illegal
• 32:36
  Speaker 3: in New York, because what I've seen is the dry
• 32:39
  Speaker 3: cleaner will say, we'll give you a discount if you
• 32:40
  Speaker 3: pay in cash. Here's the regular price, but you get
• 32:43
  Speaker 3: the discount if you pay cash. So it's no longer
• 32:45
  Speaker 3: a surcharge. Justin You said that this has been a
• 32:48
  Speaker 3: case that's been you know, around for twenty some odd years. Yes,
• 32:51
  Speaker 3: this settlement, is it just going to get caught up
• 32:53
  Speaker 3: a more legal lightmire.
• 32:55
  Speaker 8: You know, it really could. So. Last year there was
• 32:57
  Speaker 8: a first attempt to this This is the second try now, right,
• 32:59
  Speaker 8: And the big issue that blew up the deal last
• 33:02
  Speaker 8: year is that the smaller merchants kind of pushed for
• 33:04
  Speaker 8: the terms that they set in the first place, and
• 33:06
  Speaker 8: big folks like Walmart, et cetera kind of got ice
• 33:09
  Speaker 8: out from the discussions on that. It seems like that
• 33:12
  Speaker 8: might have happened again here. The National Retail Federation was
• 33:15
  Speaker 8: out saying, wait a minute, what kind of business practice
• 33:17
  Speaker 8: would this be for us to say, hey, we're going
• 33:20
  Speaker 8: to take these cards and not those cards. And they're
• 33:22
  Speaker 8: also criticizing the feed concessions that were part of this
• 33:25
  Speaker 8: deal too for the next five years or so. So
• 33:27
  Speaker 8: I think there's still a lot of questions here. There's
• 33:29
  Speaker 8: probably enough changes from last year's deal to get it
• 33:32
  Speaker 8: over the finish line, but there's a big period here
• 33:35
  Speaker 8: with objectors who are going to be weighing, you know,
• 33:37
  Speaker 8: what they think of the deal. And honestly, the judge
• 33:39
  Speaker 8: last year she said, look, you guys can do a
• 33:41
  Speaker 8: lot more than you're offering to do in this deal.
• 33:44
  Speaker 8: So is this enough? That's going to be a huge
• 33:46
  Speaker 8: question moving into an approval hearing.
• 33:48
  Speaker 2: What are the dollars dollar amounts we're talking about here.
• 33:51
  Speaker 8: Yeah, you know, so it's quadrupled according to the National
• 33:53
  Speaker 8: Retail Federation since two thousand and nine. But if you
• 33:56
  Speaker 8: said MasterCard, they've got eighty percent of this market for
• 33:59
  Speaker 8: the card fees, right, One hundred eleven billion dollars last
• 34:03
  Speaker 8: year alone collected in these wipe fees according to the NRF,
• 34:06
  Speaker 8: So really massive, massive. But you know, these companies are
• 34:09
  Speaker 8: also diversifying their streams, right, They're looking into digital wallets
• 34:13
  Speaker 8: and other payment platforms too. So there's a lot more
• 34:16
  Speaker 8: on the table now than there was when this was
• 34:17
  Speaker 8: first brought back in two thousand and five.
• 34:19
  Speaker 3: And to be clear, this is Visa and MasterCard and merchants.
• 34:23
  Speaker 3: What about American Express? Where does it sit here?
• 34:25
  Speaker 8: Yeah, so that's another great question. American Express basically settled
• 34:29
  Speaker 8: a version of this lassit or one a version of
• 34:31
  Speaker 8: this lawsuit years ago. Their card acceptance terms are a
• 34:34
  Speaker 8: little bit different. Search charging doesn't really allowed with those
• 34:37
  Speaker 8: when it's not applied to all card types, right, But
• 34:40
  Speaker 8: that begs the question if you start allowing surcharging through
• 34:43
  Speaker 8: card holder through acceptance agreements for Visa MasterCard, does AMEX
• 34:47
  Speaker 8: now have to allow us for charging on its card.
• 34:49
  Speaker 8: So that's another big question mark. If this deal goes through,
• 34:52
  Speaker 8: it really has the potential to impact everything, not just
• 34:54
  Speaker 8: Visa MasterCard, Paul.
• 34:56
  Speaker 3: I remember when MX used to be accepted everywhere, and
• 34:59
  Speaker 3: then after a while it was like, oh, we'll take
• 35:00
  Speaker 3: Visa master Card, but not American Express yes, because it
• 35:03
  Speaker 3: was always for the merchants.
• 35:04
  Speaker 2: Too expensive, too expensive. Okay, yeah, I haven't. I can't
• 35:07
  Speaker 2: remember the last time I used my AMEX card, literally can't.
• 35:10
  Speaker 2: It's there in your pocket, though it's in my pocket.
• 35:11
  Speaker 4: Okay.
• 35:12
  Speaker 3: See that's the thing. I mean, what does this mean
• 35:14
  Speaker 3: for companies that have corporate cards justin.
• 35:17
  Speaker 8: So that's one of the different brackets here too. So
• 35:20
  Speaker 8: the way the settlement works is that it's going to
• 35:21
  Speaker 8: divide cards into three different types, so it be commercial cards,
• 35:25
  Speaker 8: standard customer cards, and then premium customer cards. I think
• 35:28
  Speaker 8: the commercial and standard cards you know you want that
• 35:31
  Speaker 8: corporate business. I think those two really are of the
• 35:33
  Speaker 8: less concerned. It's those premium cards I think, with the
• 35:37
  Speaker 8: rewards that really are on the line here in terms
• 35:39
  Speaker 8: of whether or not they continue to have that universal
• 35:41
  Speaker 8: acceptance everywhere.
• 35:43
  Speaker 2: So there's so.
• 35:44
  Speaker 3: Many businesses built around how to gamify your points.
• 35:47
  Speaker 2: Oh yeah, I love it. You do that question.
• 35:50
  Speaker 8: I absolutely love it. I mean every day it's like, oh,
• 35:53
  Speaker 8: these ANX offers, you know, what can I get here
• 35:55
  Speaker 8: for this discount.
• 35:56
  Speaker 3: Paper and redsheet tracking?
• 35:57
  Speaker 8: But I really should, honestly, I mean it's that good,
• 36:00
  Speaker 8: I think.
• 36:00
  Speaker 3: So Paul's like, I cannot get into this, but the kids.
• 36:04
  Speaker 2: Are because I mean I've noticed it that they really
• 36:07
  Speaker 2: are good at gaming the system and to the point where,
• 36:10
  Speaker 2: you know, I'm going to Barcelona for the weekend on points,
• 36:13
  Speaker 2: you know, right exactly.
• 36:14
  Speaker 3: And these premium credit cards are almost like coupon books
• 36:17
  Speaker 3: in any ways, right, because they offer you know, like
• 36:20
  Speaker 3: fifty dollars a quarter at well, actually it's seventy five
• 36:23
  Speaker 3: dollars a quarter at Lululemon for instance, right, the Cammic's
• 36:25
  Speaker 3: Platinum card, and then people try to buy gift card
• 36:28
  Speaker 3: and stack them and use them like a year later.
• 36:30
  Speaker 6: Pall's laughing.
• 36:31
  Speaker 8: I mean, that'solutely true. And they carry those really high
• 36:33
  Speaker 8: annual fees. But I always think to myself, look how
• 36:36
  Speaker 8: much I'm getting back for this, and that waghs the
• 36:37
  Speaker 8: fees sometimes at least in my mind.
• 36:39
  Speaker 3: So there you go, what are what are Visa MasterCards
• 36:43
  Speaker 3: saying about this?
• 36:44
  Speaker 8: So they are they signed onto this deal, they reach
• 36:46
  Speaker 8: this agreement. I think they're pretty happy with the terms
• 36:49
  Speaker 8: of it because you know, they kind of lets them
• 36:51
  Speaker 8: walk away. The issuing banks like JP, Morgan, Bank of America,
• 36:54
  Speaker 8: all of them are also defendants. They get to walk
• 36:56
  Speaker 8: away from this litigation. The overhang would be removed, right,
• 36:59
  Speaker 8: So it's really the merchants. Are all of the merchants
• 37:01
  Speaker 8: going to sign on and what do those objections look
• 37:04
  Speaker 8: like in the coming months to the court?
• 37:06
  Speaker 3: Our thanks to Justin Teresa, Bloomberg Intelligence, antitrust litigation and
• 37:09
  Speaker 3: policy analyst.
• 37:10
  Speaker 2: That's this week's edition of Bloomberg Intelligence on Bloomberg Radio,
• 37:13
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• 37:16
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• 37:17
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• 37:21
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