Latest / Bloomberg Intelligence / Nvidia, AMD to Pay US 15% of China Chip Sales in Trump Deal

Transcript

Nvidia, AMD to Pay US 15% of China Chip Sales in Trump Deal · Bloomberg Intelligence

• 0:02
  Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the
• 0:10
  Speaker 1: Bloomberg Intelligence Podcast. Catch us live weekdays at ten am
• 0:14
  Speaker 1: Eastern on Applecarclay, and Android Auto with the Bloomberg Business App.
• 0:18
  Speaker 1: Listen on demand wherever you get your podcasts, or watch
• 0:21
  Speaker 1: us live on YouTube.
• 0:23
  Speaker 2: One of the names that Tatiana was talking about was Nvidia, AMD.
• 0:29
  Speaker 2: These companies, chip companies cutting a deal potentially with President
• 0:34
  Speaker 2: Trump to pay fifteen percent on China AI chip sales
• 0:38
  Speaker 2: and to deal with the US government. And I can't
• 0:40
  Speaker 2: recall seeing similar type deals before. But let's get the
• 0:44
  Speaker 2: latest on this. Ed loved though he covers all the
• 0:47
  Speaker 2: technology stuff for Bloomberg. He's out there in London, but
• 0:52
  Speaker 2: he's back home in London right now. Ed, thanks so
• 0:56
  Speaker 2: much for joining us here. Can you break down kind
• 0:58
  Speaker 2: of this deal for Nvidian AMD.
• 1:01
  Speaker 3: How did this whole thing come about?
• 1:04
  Speaker 4: Yeah, I mean, it's an unprecedented arrangement if you consider
• 1:07
  Speaker 4: it simply an export tax. You know, what we understand
• 1:11
  Speaker 4: from sourcing is like this is a quid pro quo
• 1:13
  Speaker 4: that export licenses for Nvidia and AMD to be permitted
• 1:17
  Speaker 4: to sell a specific chip that each of the companies
• 1:20
  Speaker 4: had designed for the Chinese market. They will give up
• 1:23
  Speaker 4: fifteen percent of future revenues. And you know that the
• 1:27
  Speaker 4: math's important. You know, historically those numbers you were going
• 1:31
  Speaker 4: over in the past segment prior segment twenty four percent
• 1:35
  Speaker 4: for AMD, thirteen percent from video. Those are from the
• 1:38
  Speaker 4: last fiscal year. And the state of player has been
• 1:41
  Speaker 4: that in Vidia and AMD have not been allowed to
• 1:43
  Speaker 4: sell product directly into China. They haven't done. You know,
• 1:47
  Speaker 4: in Vidia has the only company that's commented on this
• 1:50
  Speaker 4: reporting and story, and they did so very purposefully, saying
• 1:53
  Speaker 4: we have not yet shipped any of our so called
• 1:56
  Speaker 4: H twenty chip. But you know that the market in
• 2:01
  Speaker 4: one hand sees this is really positive. You know, they
• 2:03
  Speaker 4: have been campaigning to be able to sell into China.
• 2:07
  Speaker 4: And on the other hand, you know there's a caution
• 2:09
  Speaker 4: retail because they'll pay a levy on it, you know,
• 2:12
  Speaker 4: in the billions of dollars on a fiscal year basis,
• 2:15
  Speaker 4: and China may have something to say about it. But
• 2:18
  Speaker 4: this is all according to people familiar of course.
• 2:20
  Speaker 5: Hey, and what could this mean for in video and
• 2:22
  Speaker 5: AMD pushing i mean even deeper into the Chinese market.
• 2:27
  Speaker 4: So video in particular, Jens Among the CEO, has been
• 2:30
  Speaker 4: very consistent that it's important to have access to the
• 2:34
  Speaker 4: Chinese market because fifty percent of all of the research
• 2:38
  Speaker 4: in the world that goes into AI is either being
• 2:40
  Speaker 4: done in China or it's being done by a Chinese national.
• 2:44
  Speaker 4: You know, there is a deep research R and D
• 2:47
  Speaker 4: development footprint. Call it what you will, and if you
• 2:52
  Speaker 4: look at the cell side reaction this morning, they the
• 2:55
  Speaker 4: analysts all back Jensen on this line of argument that
• 2:58
  Speaker 4: if you're not allowed to sell American technology into China,
• 3:02
  Speaker 4: you're handing that market over to a domestic champion. In
• 3:06
  Speaker 4: this case it's Huawei, and that's not a new warning.
• 3:09
  Speaker 4: Jensen Wang has come on Bloomberg Television and made a
• 3:12
  Speaker 4: very explicit warning on that behind closed doors. As we've reported,
• 3:15
  Speaker 4: he's met with President Trump in the White House and
• 3:18
  Speaker 4: discussed that. But before all of these restrictions came into place,
• 3:22
  Speaker 4: the important bit was that China was a really big
• 3:25
  Speaker 4: end market and the policy of the current administration kind
• 3:28
  Speaker 4: of took that away with immediate effect. From in Nvidia's case,
• 3:32
  Speaker 4: America's most important technology company. They would love to be
• 3:35
  Speaker 4: getting back to booking billions of dollars of revenues on
• 3:38
  Speaker 4: a fiscal quarter basis. But the really key they're not
• 3:41
  Speaker 4: yet currently able to this reporting around a deal that
• 3:45
  Speaker 4: would allow them to is very interesting, but again unprecedented.
• 3:50
  Speaker 2: It seems like there's a thread here if you think
• 3:52
  Speaker 2: about President Trump and his ability or willingness or need
• 3:58
  Speaker 2: to generate revenue from some of our exports from the
• 4:02
  Speaker 2: technology companies, whether it's a direct investment by Apple into
• 4:05
  Speaker 2: US manufacturing or these export type taxes. Here is this
• 4:09
  Speaker 2: kind of a theme that's developing in Silicon Valley.
• 4:13
  Speaker 4: The administration loves big round numbers, especially when it comes
• 4:17
  Speaker 4: to investments by technology companies into domestic operations. The thing
• 4:21
  Speaker 4: about this specific piece of reporting fifteen percent of China
• 4:25
  Speaker 4: specific revenues is you can model for it. You know
• 4:29
  Speaker 4: this pool, you know better than anyone. The cell side
• 4:31
  Speaker 4: must be having a field day this morning because they
• 4:33
  Speaker 4: can start doing the math and they'll say, okay. In
• 4:37
  Speaker 4: the most bullish scenario, Nvidia might book seven billion dollars
• 4:40
  Speaker 4: of revenue in fiscal two Q twenty twenty six. Oh
• 4:43
  Speaker 4: my goodness, America is going to book one billion dollars
• 4:46
  Speaker 4: of tax or one billion dollars of costs on that,
• 4:49
  Speaker 4: and so you know, the President is getting it done
• 4:53
  Speaker 4: his way. But you know, the question that we don't
• 4:56
  Speaker 4: know and we don't have the reporting on it, is
• 4:58
  Speaker 4: whose idea? Is this the companies themselves or was it
• 5:01
  Speaker 4: some deal making by the president. You'd expect that giving
• 5:04
  Speaker 4: up fifteen percent is better than having zero, and they'd
• 5:07
  Speaker 4: rather have that China market access.
• 5:09
  Speaker 5: So how is China expected to react to all this?
• 5:13
  Speaker 4: So in two different ways, there is the concern that
• 5:16
  Speaker 4: is emerging out of China that having a American technology
• 5:22
  Speaker 4: come into the country in the form of a high
• 5:25
  Speaker 4: performance GPU or an AI chip gives some security risk
• 5:29
  Speaker 4: to China's national security because of the accusation that Nvidia
• 5:34
  Speaker 4: and AMD have engineered some sort of backdoor access into
• 5:37
  Speaker 4: that technology, something that both companies dispute and refute unwaveringly.
• 5:43
  Speaker 4: So that's the first part, and then you go back
• 5:45
  Speaker 4: to the domestic champion bit. You know, the H twenty
• 5:48
  Speaker 4: and in Vidia's case, and the mi I THREEH eight
• 5:50
  Speaker 4: in AMD's case, were specifically engineered for the Chinese market
• 5:55
  Speaker 4: to make compromises to both sides. They're very low performance
• 5:58
  Speaker 4: chips relative to what is at the cutting edge for
• 6:01
  Speaker 4: both of those companies, and Huawei is the leader in
• 6:06
  Speaker 4: China domestically speaking, it has chips that are better than
• 6:10
  Speaker 4: those chips that our American companies have for export, so
• 6:13
  Speaker 4: they also don't want to give up some of that momentum.
• 6:17
  Speaker 4: And it will be interesting to see because you guys
• 6:20
  Speaker 4: probably will have seen what's going on with lithium and
• 6:22
  Speaker 4: c ATL in the markets this morning as well. This
• 6:25
  Speaker 4: has become a point of bargaining and negotiation between two countries.
• 6:29
  Speaker 4: Technology going into China in exchange for raw materials going
• 6:32
  Speaker 4: the other way. But there are pros and cons that
• 6:35
  Speaker 4: each side's weighing up, and it's not a perfect swap
• 6:37
  Speaker 4: right now.
• 6:39
  Speaker 3: So we have any sense of timing here?
• 6:41
  Speaker 2: Ed this kind of came out of nowhere when is
• 6:44
  Speaker 2: implement Yeah.
• 6:46
  Speaker 4: Really great question. It did kind of come out of nowhere.
• 6:49
  Speaker 4: And again AMD have not commented publicly on this. Nvidia
• 6:53
  Speaker 4: put out a very purposeful and pointed statement. They don't
• 6:57
  Speaker 4: address the fifteen percent at all. They're they're neither acknowledging
• 7:00
  Speaker 4: it or denying it, but they do say we follow
• 7:03
  Speaker 4: us rules, which they say every single week at the moment,
• 7:06
  Speaker 4: but there's a part in the statement that says, we
• 7:08
  Speaker 4: haven't shipped AGE twenty to China for months, but we
• 7:12
  Speaker 4: hope export control rules will let America compete in that market.
• 7:16
  Speaker 4: So that makes it sound like they're saying, just to
• 7:19
  Speaker 4: Wall Street, don't don't don't model this into your top
• 7:23
  Speaker 4: line assumptions just yet. But we think that we're getting
• 7:27
  Speaker 4: closer for sure.
• 7:28
  Speaker 5: Now you mentioned timing, so I mean the US China
• 7:30
  Speaker 5: trained two truth that's expected to expire tomorrow.
• 7:33
  Speaker 4: Correct, yes, but again you know, Okay, guys, give me
• 7:38
  Speaker 4: a break. I'm in London usually San Francisco technology focused.
• 7:42
  Speaker 4: I ain't covering this White House necessarily. But the point
• 7:47
  Speaker 4: is that semiconductors have had an ad hoc arrangement, haven't they,
• 7:50
  Speaker 4: Not just in the context of China, but in other
• 7:53
  Speaker 4: markets as well. India and electronics has been one. And
• 7:56
  Speaker 4: what's so interesting about Nnvidia and AMD and semi conductors
• 8:00
  Speaker 4: is that we have so much reporting about the rest
• 8:03
  Speaker 4: of the technology sector, where American officials have been flying
• 8:06
  Speaker 4: around the world saying to our trade partners, don't do
• 8:09
  Speaker 4: business with China except in the case of chips. So
• 8:13
  Speaker 4: you know, the deadlines I think the President's about being
• 8:15
  Speaker 4: extended in various cases anyway, but it is to pardon
• 8:19
  Speaker 4: the pun, that that's where we stand. AI chips are
• 8:22
  Speaker 4: Trump's bargaining chip right in what he wants to achieve
• 8:26
  Speaker 4: with China.
• 8:27
  Speaker 2: So, ed, when you talk to people in the valley,
• 8:29
  Speaker 2: are they just saying, this is the new world order?
• 8:31
  Speaker 3: We need to.
• 8:33
  Speaker 2: Be open to cutting deals with this administration. Again, whether
• 8:38
  Speaker 2: it's a commitment to invest in the US or you know,
• 8:42
  Speaker 2: paying attacks, is this kind of the new world order?
• 8:45
  Speaker 6: Do you think?
• 8:47
  Speaker 4: Yeah, it's a difference between the companies that are zigging
• 8:50
  Speaker 4: with the president and those that are zagging against the president.
• 8:53
  Speaker 4: You know, Intel is a good example of that. You know,
• 8:55
  Speaker 4: the reporting is that Intel's CEO will be headed to
• 8:57
  Speaker 4: the White House to get a good old fashioned dressing
• 8:59
  Speaker 4: day today. You know, their strategy has not been in
• 9:03
  Speaker 4: line with what's happening with Nvideo and Apple, which is
• 9:06
  Speaker 4: we're committing, mister President, here's hundreds of billions of dollars.
• 9:09
  Speaker 4: Actually those numbers are worth looking at with the microscope.
• 9:13
  Speaker 4: They're a little bit sort of made up, but you
• 9:16
  Speaker 4: know that's kind of what corporate America's got on board with.
• 9:19
  Speaker 4: But with the Huawei example, really quick because I look
• 9:21
  Speaker 4: over my shoulders, see where the president's at. It's not
• 9:24
  Speaker 4: just that if you don't sell American tech into China,
• 9:27
  Speaker 4: they won't use it. They'll use Chinese tech. China wants
• 9:30
  Speaker 4: to sell US tech into international markets as well. And
• 9:33
  Speaker 4: so you know the position of the valley is flood
• 9:36
  Speaker 4: the world with American technology and just drown out the
• 9:39
  Speaker 4: competition wherever it comes from.
• 9:41
  Speaker 3: Stay with us. More from Bloomberg Intelligence coming up after this.
• 9:46
  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
• 9:50
  Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android
• 9:53
  Speaker 1: Otto with the Bloomberg Business app. Listen on demand wherever
• 9:56
  Speaker 1: you get your podcasts, or watch us live on YouTube.
• 10:00
  Speaker 5: All right, so we've been hearing a lot about the
• 10:02
  Speaker 5: impact of tariffs on big businesses, right, but small US
• 10:05
  Speaker 5: companies they are really getting squeezed with President Trump's new levies.
• 10:08
  Speaker 5: Here to break it down for us is Brendan Murray.
• 10:10
  Speaker 5: He's Global Bloomberg Global Trade Editor. He's joining us from London,
• 10:16
  Speaker 5: So thanks for joining us.
• 10:17
  Speaker 3: Brendan.
• 10:17
  Speaker 5: First off, I got to ask you how much of
• 10:19
  Speaker 5: a financial hit are we talking about?
• 10:22
  Speaker 6: Well, the US Chamber of Commerce recently put a number
• 10:25
  Speaker 6: on this and they're saying that there are about two
• 10:28
  Speaker 6: hundred and thirty six thousand small business importers in the US.
• 10:33
  Speaker 6: Now those are companies that have less than five hundred employees,
• 10:37
  Speaker 6: and they say that if you apply the amount that
• 10:40
  Speaker 6: they import and you combine that with the tariff right
• 10:44
  Speaker 6: that they would be paying, they're looking at about two
• 10:46
  Speaker 6: hundred billion dollars a year the tariff bill for these
• 10:52
  Speaker 6: small importers that have to pay these new tariffs that
• 10:56
  Speaker 6: present Trump rolled out. So that works out too, about
• 11:00
  Speaker 6: nine hundred thousand dollars per company per year. So you know, imagine,
• 11:06
  Speaker 6: you know, if that were if that bill suddenly arrived
• 11:08
  Speaker 6: on your on your desk at your at your retail
• 11:11
  Speaker 6: shop or other small business, you know, and yet that's
• 11:15
  Speaker 6: you know, oftentimes would wipe out any sort of profit
• 11:18
  Speaker 6: margin you might have. So, uh, the small businesses have
• 11:23
  Speaker 6: are speaking to two politicians in Washington through the National
• 11:28
  Speaker 6: Retail Federation and the US Chamber of Commerce and trying
• 11:31
  Speaker 6: to have their voices heard because all anybody can hear
• 11:35
  Speaker 6: these days is the stock market is is is ignoring
• 11:38
  Speaker 6: the trade war, but it certainly isn't you know? The
• 11:42
  Speaker 6: trade war is certainly having an impact on these small
• 11:45
  Speaker 6: companies that don't have the wherewithal to absorb the higher
• 11:49
  Speaker 6: costs and the higher administrative duties that that that they
• 11:53
  Speaker 6: have to that they're facing now.
• 11:54
  Speaker 2: So, Brendan, we've seen we just finished up the second quarter,
• 11:58
  Speaker 2: are about to finish up the second quarter uh earnings period,
• 12:01
  Speaker 2: and it seems like most of the companies, when they
• 12:04
  Speaker 2: talk about tariffs are saying, hey, we're eating it in
• 12:06
  Speaker 2: our margin for the most part.
• 12:09
  Speaker 7: Uh.
• 12:09
  Speaker 3: Can small businesses do that?
• 12:13
  Speaker 4: Not?
• 12:13
  Speaker 6: Really, not in the long term. They are also trying to, uh,
• 12:18
  Speaker 6: you know, get creative with putting putting good. You know,
• 12:21
  Speaker 6: a lot of them stockpiled up before the tariffs took effect.
• 12:25
  Speaker 6: A lot of them are doing things like these bonded
• 12:27
  Speaker 6: warehouses where you don't owe the tariff bill until later on. Uh.
• 12:31
  Speaker 6: So there are there are ways to kind of uh
• 12:34
  Speaker 6: put off the tariff payment that you're going to owe
• 12:38
  Speaker 6: the government, uh, but not forever, and eventually it's going
• 12:42
  Speaker 6: to have to be passed on to the consumer. Maybe
• 12:45
  Speaker 6: the exporter that you buy it from will cut you
• 12:47
  Speaker 6: a little break, but between the exporters, the importers and
• 12:50
  Speaker 6: the consumers, you know, this this this extra cost is
• 12:54
  Speaker 6: just going to get distributed throughout the supply chain.
• 12:57
  Speaker 5: Hey, Bernnie, can you get a little bit into why
• 12:59
  Speaker 5: why this is so important, because small businesses are really
• 13:02
  Speaker 5: the source of more than half the country's job creation
• 13:04
  Speaker 5: right in recent years.
• 13:06
  Speaker 6: Yeah, exactly. I mean, you know, as small as the
• 13:10
  Speaker 6: small businesses, you know, they they're not the ones we
• 13:13
  Speaker 6: read about in headlines all the time, but they are.
• 13:15
  Speaker 6: They are the ones that are where, you know, lots
• 13:18
  Speaker 6: of new jobs are being created. And you know, we
• 13:22
  Speaker 6: we read a lot about the you know, the big
• 13:24
  Speaker 6: publicly traded companies that lay off tens of thousands of workers,
• 13:27
  Speaker 6: but you know, we've got millions of small businesses that
• 13:29
  Speaker 6: are hiring just a couple every day, and and so
• 13:32
  Speaker 6: it is a it is a big constituency for economic
• 13:36
  Speaker 6: activity that's often overlooked because we think of the American
• 13:40
  Speaker 6: economy as being driven by uh, you know, s and
• 13:43
  Speaker 6: p five hundred companies, when in fact, it's the uh
• 13:47
  Speaker 6: you know, it's these companies with you know, less than
• 13:50
  Speaker 6: fifty employees often that that are that are driving a
• 13:54
  Speaker 6: lot of the employment and uh and investment in the
• 13:58
  Speaker 6: you know, in various you know, regions, across the country.
• 14:01
  Speaker 2: So I think what I'm what I'm also hearing from
• 14:04
  Speaker 2: and seeing in your reporting and is just I guess
• 14:06
  Speaker 2: the uncertainty.
• 14:07
  Speaker 3: If you're I guess, if.
• 14:08
  Speaker 2: You're a big wal Mart or just a big corporation
• 14:11
  Speaker 2: Parcter and Gamble, you probably got teams of people who
• 14:14
  Speaker 2: can deal with all these changing UH tariffs. Small businesses,
• 14:19
  Speaker 2: I'm guessing don't have those resources, So I guess they're
• 14:23
  Speaker 2: just left to fend for themselves.
• 14:26
  Speaker 6: Yeah, pretty much. I mean, or they're or they're you know,
• 14:28
  Speaker 6: they're calling up you know, a customs broker or someone
• 14:32
  Speaker 6: some expert who it's you know, imagine if you're you know,
• 14:35
  Speaker 6: if your tax you know, you're filling out your taxes
• 14:37
  Speaker 6: went from one one page you know, uh a one
• 14:40
  Speaker 6: pager to the I R S too, you know, fifty pages.
• 14:43
  Speaker 6: You know you're gonna you're gonna probably need some help
• 14:46
  Speaker 6: figuring that out if you want to do it right,
• 14:48
  Speaker 6: you know, want to be audited later. So this is
• 14:50
  Speaker 6: essentially what these companies, these small businesses are facing, is
• 14:54
  Speaker 6: all this extra administrative uh paperwork, electronic paperwork, but it's
• 15:00
  Speaker 6: still you know, you still have to fill out the
• 15:02
  Speaker 6: forms correctly. Otherwise the Customs Bureau is going to come
• 15:05
  Speaker 6: is going to come at you and penalize you if
• 15:08
  Speaker 6: you if you, if you misclassify a good under one
• 15:13
  Speaker 6: HS code, you know when that that a teriff applies
• 15:17
  Speaker 6: to that when it doesn't. So it can get really complicated,
• 15:20
  Speaker 6: especially when you know eighty different countries have different different
• 15:25
  Speaker 6: tariff levels now, and then you know on top of
• 15:27
  Speaker 6: that you have the sectoral specific care of steel aluminum cars,
• 15:33
  Speaker 6: it's coming on pharmaceuticals and chips. So it's just creating
• 15:37
  Speaker 6: this this real complex web of bureaucracy that that small
• 15:43
  Speaker 6: businesses just don't have the capacity to handle.
• 15:46
  Speaker 5: Yeah, and what are some especially being here with those
• 15:48
  Speaker 5: higher import costs. I mean you gave some big figures
• 15:51
  Speaker 5: earlier in the last thirty seconds or so, can you
• 15:53
  Speaker 5: explain kind of breakdown into detail about where those costs
• 15:56
  Speaker 5: are coming from?
• 15:58
  Speaker 6: Yeah, I mean basically, if you if if you're an importer,
• 16:01
  Speaker 6: you have to put up a customs what's called a
• 16:03
  Speaker 6: customs bond, and that is basically a guarantee. It's a
• 16:05
  Speaker 6: type of insurance that the customs bureau is going to
• 16:09
  Speaker 6: get paid down the road. And so it's a bit
• 16:11
  Speaker 6: of it's sort of like cash and reserve, and now
• 16:15
  Speaker 6: you suddenly have to put up about twenty percent maybe
• 16:17
  Speaker 6: fifty percent more, and so that really kind of drains
• 16:20
  Speaker 6: your It comes right out of your your cash flow,
• 16:23
  Speaker 6: your working capital, and it you know, can essentially, you know,
• 16:29
  Speaker 6: paralyze your your your operation if you don't have that
• 16:33
  Speaker 6: to draw on. So yeah, so if you add all
• 16:36
  Speaker 6: of these, you know, hundreds of thousands of incidents together,
• 16:40
  Speaker 6: you know, what you wind up with is about half
• 16:43
  Speaker 6: of new job creation created by these small businesses, you know,
• 16:47
  Speaker 6: feeling the real pain from this, from these new tariffs.
• 16:51
  Speaker 3: Stay with us. More from Bloomberg Intelligence coming up after this.
• 16:56
  Speaker 1: You're listening to the Bloomberg Intelligence podcast Catch us a
• 16:59
  Speaker 1: low weekdays at ten am. He's done on Apple, Cocklay
• 17:02
  Speaker 1: and Android Auto with the Bloomberg Business App. Listen on
• 17:05
  Speaker 1: demand wherever you get your podcasts, or watch us live
• 17:09
  Speaker 1: on YouTube.
• 17:10
  Speaker 3: Well, in the media front today we had Paramount.
• 17:14
  Speaker 2: It's actually called Paramount or sky Dance, because Skydance acquired Paramount,
• 17:19
  Speaker 2: which what used to be Viacom, which used to be
• 17:21
  Speaker 2: free about it anyway, so it's Paramount sky Dance. They're
• 17:24
  Speaker 2: buying the UFC rights for seven points seven billion dollars
• 17:28
  Speaker 2: Ultimate Fighting Championship. I'm not a fan, but I know
• 17:32
  Speaker 2: there's ga jillions of people out there that love that
• 17:34
  Speaker 2: stuff and they're paying a big penny for Let's see
• 17:37
  Speaker 2: what it means for the company. Keitha Ranganath and joins
• 17:40
  Speaker 2: this year. She covers all the big media companies. Gith,
• 17:45
  Speaker 2: does this make sense? Is this a good deal for Paramount?
• 17:50
  Speaker 7: You know, Paul, it's really no one saw this coming.
• 17:53
  Speaker 7: I mean, the Paramount Skydance Dance transaction just closed last
• 17:57
  Speaker 7: week August seventh, and we were still kind of waiting
• 17:59
  Speaker 7: for some inkling of what the go to strategy or
• 18:02
  Speaker 7: the go forward strategy would be from you know, David
• 18:04
  Speaker 7: Ellison's team, and here you go with a bang, you know,
• 18:08
  Speaker 7: paying almost eight billion dollars for UFC rights. Now they
• 18:12
  Speaker 7: are premier sports rights, so they're definitely making a big
• 18:15
  Speaker 7: statement here. Yes, you're absolutely right. UFC has over one
• 18:20
  Speaker 7: hundred million fans in the United States. Their current deal
• 18:23
  Speaker 7: is with ESPN. They were getting paid about five hundred
• 18:26
  Speaker 7: million a year, so this is you know, more than
• 18:28
  Speaker 7: one hundred and twenty percent search. So it is definitely
• 18:30
  Speaker 7: a pretty Penny. And what Paramount is hoping is that
• 18:33
  Speaker 7: this really gets them onto the sports arena, so makes
• 18:36
  Speaker 7: them a must have platform. And we're talking here about
• 18:39
  Speaker 7: Paramount Plus, which is their streaming platform, which is known
• 18:43
  Speaker 7: for really some great scripted content and some sports, but
• 18:47
  Speaker 7: this is really a big way for them to kind
• 18:49
  Speaker 7: of make a statement, make a really bold splash on
• 18:52
  Speaker 7: the sports streaming stage.
• 18:54
  Speaker 5: All right, KEITHA, I'm trying to check this in stride
• 18:56
  Speaker 5: because my husband is a big UFC fan, so he
• 18:59
  Speaker 5: watches it on ESPN. So does this mean that I
• 19:01
  Speaker 5: have to get Paramount Plus on time?
• 19:04
  Speaker 3: Don't don't tell me that, get.
• 19:05
  Speaker 7: The sorry, Lisa, Yes you do. Because everything all of
• 19:10
  Speaker 7: the UFC contents. So, you know, what we'd initially thought
• 19:14
  Speaker 7: was that UFC was kind of going to split these packages.
• 19:17
  Speaker 7: You know, they have the Fight Night, which is the
• 19:19
  Speaker 7: weekly bi weekly kind of uh you know, matchups that
• 19:22
  Speaker 7: you see, and then they have their big marquee events,
• 19:25
  Speaker 7: which are the numbered events with you know, the likes
• 19:27
  Speaker 7: of o Connor McGregor all these other big superstar players
• 19:30
  Speaker 7: and you got to pay out of your pocket for
• 19:32
  Speaker 7: that pay per view. They're actually now making all of
• 19:35
  Speaker 7: that content both the market events as well as the
• 19:38
  Speaker 7: fight nights all available to Paramount Plus subscribers. So there's
• 19:42
  Speaker 7: no pay per view anymore. But yeah, unfortunately your husband's
• 19:45
  Speaker 7: going to have to subscribe to Paramount Plus.
• 19:49
  Speaker 3: This is what I think you do.
• 19:50
  Speaker 2: You every streamer you put on, you have to take
• 19:53
  Speaker 2: one off, go to the family.
• 19:54
  Speaker 3: Okay, we're putting on Paramount Plus. What are you giving back?
• 19:57
  Speaker 5: What are we giving back?
• 19:58
  Speaker 3: Yeah, exactly, that's how you do it.
• 19:59
  Speaker 7: Thank you.
• 20:00
  Speaker 3: The stock market doesn't care.
• 20:02
  Speaker 2: The stocks off one point two percent today, it's at
• 20:04
  Speaker 2: a fifty two week low. What is realistically the bold
• 20:08
  Speaker 2: case for Paramount Skydance Corporation?
• 20:12
  Speaker 7: Yes, I think you know, we really need of course,
• 20:15
  Speaker 7: you know, this kind of tells us that they're definitely
• 20:17
  Speaker 7: going to keep the streaming platforms. See some of the
• 20:19
  Speaker 7: some of the concerns Paul, before, you know, before the
• 20:23
  Speaker 7: deal actually closed, was what is sky Dance really interested in?
• 20:26
  Speaker 7: So they don't really have any expertise in running TV assets.
• 20:30
  Speaker 7: All that they really cared about was the Paramount studio
• 20:32
  Speaker 7: because you know, sky Dance is a big studio and
• 20:34
  Speaker 7: they were really really interested in the studio assets. So
• 20:36
  Speaker 7: we really didn't have any direction in terms of what
• 20:39
  Speaker 7: they were going to do with the cable networks. Viacom
• 20:43
  Speaker 7: has a bunch of those. You have the CBS broadcast network,
• 20:46
  Speaker 7: you have the Paramount plus streaming platform. What this deal
• 20:49
  Speaker 7: signals is they're definitely interested in the streaming platform and
• 20:51
  Speaker 7: the CBS broadcast network. Because you know, they did say
• 20:55
  Speaker 7: that they're going to simulcast some of those UFC games
• 20:57
  Speaker 7: on the CBS broadcast networks. I think that is going
• 20:59
  Speaker 7: to be a core part of their portfolio. What we're
• 21:02
  Speaker 7: still not clear about is what they're going to do
• 21:03
  Speaker 7: with some of the cable networks. So you know, whether
• 21:06
  Speaker 7: it's a BET or an MTV or a Comedy Central,
• 21:09
  Speaker 7: we really don't know what the strategy is there. Chances
• 21:11
  Speaker 7: are they might look to monetize those assets, you know,
• 21:15
  Speaker 7: sell them, but really I think the big play for
• 21:17
  Speaker 7: a Paramount is going to come down to make these
• 21:21
  Speaker 7: bigger and bigger investments. If they really want to be
• 21:24
  Speaker 7: a credible, you know, streamer, they have to obviously go
• 21:27
  Speaker 7: after these big deals, which is exactly what they did
• 21:29
  Speaker 7: today with the UFC. We'll have to wait and watch
• 21:31
  Speaker 7: and see exactly what their aspirations are, but It depends
• 21:35
  Speaker 7: if they're if they're willing to kind of make these
• 21:38
  Speaker 7: big investments, they could become, you know, arguably one of
• 21:42
  Speaker 7: the top three or one of the top four platforms.
• 21:44
  Speaker 5: And is this just another sign of the impact of
• 21:46
  Speaker 5: sports live events on streaming? I mean, Apple, Netflix, YouTube, Amazon,
• 21:51
  Speaker 5: I mean you name it. Talk more about the impact
• 21:54
  Speaker 5: of sports and live events on streaming.
• 21:57
  Speaker 7: Yeah, I'm really glad you bring that up, Lisa, because
• 21:59
  Speaker 7: this seer actually is. I would say it's a watershed
• 22:03
  Speaker 7: moment for media because this is the very first time
• 22:06
  Speaker 7: in the history of media that you have all sports
• 22:09
  Speaker 7: becoming available on a streaming service. So previously you needed
• 22:13
  Speaker 7: your PATV subscription in order to get access to sports.
• 22:16
  Speaker 7: You won't need that anymore. Starting August twenty first.
• 22:19
  Speaker 1: This is the Bloomberg Intelligence podcast, available on Apple, Spotify,
• 22:24
  Speaker 1: and anywhere else you get your podcasts. Listen live each
• 22:28
  Speaker 1: weekday ten am to noon Eastern on Bloomberg dot Com,
• 22:32
  Speaker 1: the iHeartRadio app, tune In, and the Bloomberg Business app.
• 22:36
  Speaker 1: You can also watch us live every weekday on YouTube
• 22:39
  Speaker 1: and always on the Bloomberg terminal