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Zuckerberg Plans to Cut Metaverse Group's Budget Up to 30% · Bloomberg Intelligence

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  Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. You're listening to the
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  Speaker 1: Bloomberg Intelligence Podcast. Catch us live weekdays at ten am
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  Speaker 1: or watch us live on YouTube.
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  Speaker 2: And one of the bigger I think stock news stories
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  Speaker 2: today Kurt Wagner Bloomberg News breaking the story that the
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  Speaker 2: folks at Meta cutting back some of their spending on
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  Speaker 2: the Metaverse, in particular by as much as thirty percent,
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  Speaker 2: which is a big number because remember, folks, this company pivoted,
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  Speaker 2: pivoted hard to the metaverse several years ago, to the
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  Speaker 2: point where they changed their name from Facebook to Metaverse.
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  Speaker 2: This was a big, big pivot for Mark Zuckerberg and
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  Speaker 2: now kind of dialing it back a little bit.
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  Speaker 3: So we want to get some more reporting on that.
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  Speaker 2: We turned to Caroline I'd she joins us here in
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  Speaker 2: study Bloomberg Tech co anchor.
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  Speaker 3: So this is kind of a big I think from
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  Speaker 3: mister Zuckerberg, don't you, Carolyn.
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  Speaker 4: It's a signal.
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  Speaker 5: And what's interesting about it is, as usual as they
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  Speaker 5: think about the budget for twenty twenty six, they're going
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  Speaker 5: to make layoffs.
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  Speaker 4: They're going to cut about ten percent across the entire business.
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  Speaker 4: That tends to be what happens at this time of year.
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  Speaker 5: But he gathered his top executives in his house in
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  Speaker 5: Hawaii to discuss, Okay, where should most of the resources be
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  Speaker 5: coming from, because remember they're spending a ton on AI
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  Speaker 5: and people have been worried about that.
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  Speaker 4: How can he offset that?
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  Speaker 5: Well, thirty percent more cuts therefore going to this particular
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  Speaker 5: part of reality labs. Now, Reality Labs are still going
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  Speaker 5: to be making your ray bound meta glasses. They've seen
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  Speaker 5: real interest in the AI use in augmented reality, but
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  Speaker 5: virtual reality, we're not living in it yet. He really
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  Speaker 5: thought we'd all be doing our workouts there, would be
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  Speaker 5: working there, and it just hasn't caught on in the
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  Speaker 5: way that was expected. So of course, pull out resources
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  Speaker 5: from there, reallocate them, and I do think that it's interesting.
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  Speaker 5: Of course they rebranded under this name for now it's
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  Speaker 5: becoming sort of a metaverse of AI and augmented reality
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  Speaker 5: rather than virtual reality right here right now.
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  Speaker 6: So was meta just to earlier? Were not ready for
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  Speaker 6: a virtual reality?
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  Speaker 2: Or we are?
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  Speaker 4: Okay, I mean, are you using it.
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  Speaker 5: I'm I mean, my husband loved getting He got the
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  Speaker 5: one of the original sort of Ocunus versions of the headset,
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  Speaker 5: and yeah, he was doing workouts.
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  Speaker 4: And then he sold it in a Gara set.
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  Speaker 5: Because I think and it got to a point where
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  Speaker 5: it's like, what are the applications of this. I love
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  Speaker 5: the idea of when I'm in working abroad and I
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  Speaker 5: need to not have I need access to lots of screens,
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  Speaker 5: but I can't have just lots of screens. It was
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  Speaker 5: great to see how that could have been used, but
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  Speaker 5: I wasn't going to spend that many thousands on the.
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  Speaker 4: Piece of hardware.
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  Speaker 5: They've really got to understand the integration here. That's kind
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  Speaker 5: of why it's so interesting. It comes at that time.
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  Speaker 5: We've also understand Aland from Apple. One of the key
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  Speaker 5: interface design team leads the person who's been behind the
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  Speaker 5: iPhone X and behind the operating system, behind the applications
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  Speaker 5: of Apple.
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  Speaker 4: He's jumping ship to Meta.
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  Speaker 5: This is a huge coup. He's going to be thinking
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  Speaker 5: about the design of these things in the future.
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  Speaker 7: You bring that up about the Apple thing I seen.
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  Speaker 2: That's not the first person we've seen Leu the Apple
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  Speaker 2: AI stream going on there.
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  Speaker 4: Yeah, they've really been shutting people in many ways.
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  Speaker 5: This is tied more back to Johnny I's departure back
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  Speaker 5: in twenty nineteen and they lost a lot of their
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  Speaker 5: design prowess people. Then this is also turning of the guard.
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  Speaker 5: A lot of these people have in an Apple for
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  Speaker 5: a very long time. And we think about Tim Cook
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  Speaker 5: himself coming to an age where he might be retiring.
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  Speaker 5: Many are wondering how executives shift. But you're right, the
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  Speaker 5: real deluge, the real loss has been in the AI area,
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  Speaker 5: particularly in the large language model department, where they've just
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  Speaker 5: taken so many hits in terms of morale because look,
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  Speaker 5: they might have been turning to Google for its large
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  Speaker 5: language model rather than building in house, and they've been
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  Speaker 5: recently losing out or sort of waving goodbye to John
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  Speaker 5: Jian Andrea.
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  Speaker 4: That's the main lead of the.
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  Speaker 2: Issuers at the assumption that they're going to farm this
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  Speaker 2: their AI out to Google. Perhaps, And that's perhaps. And
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  Speaker 2: I think we'll talk to Anna k Gran in just
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  Speaker 2: a moment. He'll say, from a stock perspective, that's what
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  Speaker 2: investors kind of want. Yeah, I mean it's well, why
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  Speaker 2: spend a good jillion dollars to be just what you
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  Speaker 2: do a search.
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  Speaker 5: And it's been self limiting for Apple in many ways
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  Speaker 5: because they're all about safety on the phone.
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  Speaker 4: This is all about edjai. It's not about.
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  Speaker 5: Therefore sending all your data into the cloud and doing
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  Speaker 5: enormous amounts of data analysis and therefore feeding it through
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  Speaker 5: large language models.
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  Speaker 4: There they want.
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  Speaker 5: To be secure. That means you have to only be
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  Speaker 5: able to really do the compute on your own phone.
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  Speaker 5: That's very limiting at the moment. So you're just not
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  Speaker 5: getting the parameters that you need to have a really
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  Speaker 5: effective large language model. So therefore maybe they do have
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  Speaker 5: to shift to a part third party at least while
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  Speaker 5: they get their ducks in a row.
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  Speaker 6: So how are we thinking about how Meta is scaling
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  Speaker 6: against a lot of its competitors right now as we
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  Speaker 6: think about this AI race.
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  Speaker 5: Why isn't it interesting all dogtails together in the same way.
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  Speaker 5: For many Meta is showing that it's putting AI first.
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  Speaker 5: And we've understand the impact because everyone loves these ray
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  Speaker 5: band metaglasses.
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  Speaker 4: They've been selling very well.
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  Speaker 5: We've seen that people have really seen the revenue streams
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  Speaker 5: galvanize the advertising offering. The market is loving how they've
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  Speaker 5: used generator of AI within the product. We're all getting
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  Speaker 5: fed a content more specific to us that's going to
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  Speaker 5: be the help of Generator AI. But are we really
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  Speaker 5: downloading Meta AI's own individual AI app.
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  Speaker 4: I haven't. I'm using it more in WhatsApp.
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  Speaker 5: But then we've also got the EU worrying about how
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  Speaker 5: they're fending off competition in WhatsApp because they're saying, look,
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  Speaker 5: chatchbt even though you can put your chatchybut within your
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  Speaker 5: meta and WhatsApp at the moment, they're making it too difficult.
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  Speaker 4: They don't want to be straining their own APIs.
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  Speaker 5: Yeah, they don't want to be basically marketing Open AI's chatchibt.
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  Speaker 5: They're only marketing well co pilot for Microsoft. They want
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  Speaker 5: you to use Meta AI. So I think they've still
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  Speaker 5: got to show that they're the place that you're going
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  Speaker 5: to use large aguage models. They're the place you're going
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  Speaker 5: to come from a chatbot, and I think more broadly,
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  Speaker 5: they're the place that all of this ends up working
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  Speaker 5: from a capital EXPENDITSHI perspective. So I think for many
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  Speaker 5: over at BI they love the idea that they're going
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  Speaker 5: to maybe use Google's TPUs because that's a cost saving Yeah.
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  Speaker 2: Absolutely, Carolin, Hi, thank you so much for joinings. Caroline Hyde,
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  Speaker 2: b Tech co anchor along with Ed Ludlow Bloomberg News.
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  Speaker 2: They are on top of everything happening out there in
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  Speaker 2: the world of technology in a Silicon valley. You appreciate
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  Speaker 2: getting a few minutes of Caroline's time here.
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  Speaker 7: Stay with us. More from Bloomberg Intelligence coming up after this.
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  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
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  Speaker 1: get your podcasts, or watch us live on YouTube.
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  Speaker 2: Piece of news coming out of the tech space is
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  Speaker 2: meta you know, stepping back a little bit from their
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  Speaker 2: investments in the metaverse, and as Lisa Mitaylo's just reporting,
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  Speaker 2: that's pushing a stock up four percent today, which is
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  Speaker 2: a pretty big move here there's talks only a bit
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  Speaker 2: about thirteen percent year to day. Let's check in with
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  Speaker 2: Honor rog Ran and we'll talk about a lot of
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  Speaker 2: tech issues out there. Honor rog Ron is a senior
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  Speaker 2: technology annls from Bloomberg Intelligence out there in Chicago. Honra,
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  Speaker 2: what do you make of this announcement or this report
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  Speaker 2: from Bloomberg News, Kurt Wagner's reporting that Meta may cut
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  Speaker 2: back investments on its metaverse by as much as thirty percent.
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  Speaker 3: What do you make of that?
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  Speaker 8: See, when you have to invest billions in the EI
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  Speaker 8: sight of it, you gotta find that money somewhere. I
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  Speaker 8: know they have good cash flow, but you know, right
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  Speaker 8: now everything is going towards building your AI infrastructure, So
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  Speaker 8: I think it makes sense for them to cut in
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  Speaker 8: other regions or areas to fund this particular project.
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  Speaker 6: It seems as though investors are clearly celebrating this. I
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  Speaker 6: mean we're seeing it up more than three point eight
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  Speaker 6: percent right now, and earlier a lot higher. What do
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  Speaker 6: you think about next steps from here? I mean, clearly
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  Speaker 6: they're trying to redistribute their funds into AI development. What
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  Speaker 6: are investors looking for from that?
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  Speaker 8: So the same way they were looking at you know,
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  Speaker 8: metaverse a few years ago, they want to see an ROI.
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  Speaker 8: They will ask, you know, the management team as to
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  Speaker 8: you're investing all these billions to create new data center
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  Speaker 8: super intelligence team. What do I have to c ine
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  Speaker 8: terms of the return on the core business? And I
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  Speaker 8: think that those questions are not just for meta but
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  Speaker 8: the entire ecosystem as to what is the net effect
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  Speaker 8: addition to your revenue or reduction to your expenses down
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  Speaker 8: the road. And I think that is not going to
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  Speaker 8: end anytime soon, all right.
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  Speaker 2: So I don't know, I'm just I think most shareholders
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  Speaker 2: are like, I don't really get the whole metaverse thing.
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  Speaker 2: So to the extent you can scale back investment there
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  Speaker 2: and put it anywhere else, that's probably a good thing.
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  Speaker 6: All right.
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  Speaker 2: We also had the salesforce reporting results. Talk to us
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  Speaker 2: about that name because that name's been under pressure I think,
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  Speaker 2: maybe potential threats from AI in general.
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  Speaker 8: Yeah, there's say the results did come in, I mean
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  Speaker 8: almost in line with how we were looking at it
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  Speaker 8: in terms of that the core business is still struggling,
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  Speaker 8: but when it comes to some of their AI products
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  Speaker 8: that has started to do well, they've gained momentum. But
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  Speaker 8: when you look at somebody like a Salesforce, when you
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  Speaker 8: have a revenue base of forty one billion dollars, it
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  Speaker 8: takes a lot to move the needle. So even though
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  Speaker 8: these products are very small and you know, growing triple digits,
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  Speaker 8: but they are not you know, right there in order
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  Speaker 8: to take down what is happening on the core business,
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  Speaker 8: which is a decline in seat growth or the less
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  Speaker 8: addition of seats because of macro it spending, and that
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  Speaker 8: is probably going to be the story at least for
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  Speaker 8: the near term.
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  Speaker 6: So it seems as though analysts are still generally positive
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  Speaker 6: on in terms of AI adoption trends when we think
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  Speaker 6: about this company though.
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  Speaker 8: Yes, absolutely, and that's you know, one of the things.
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  Speaker 8: We saw really good numbers on both the data cloud
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  Speaker 8: side of Fate and also the agent force. But when
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  Speaker 8: you look at the stock reaction last night, you know,
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  Speaker 8: it was up five six percent. And finally people have
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  Speaker 8: when you really scrape the numbers and see that their
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  Speaker 8: commercial remaining performance obligations, which is the order book for
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  Speaker 8: next quarter, which they expect to grow about thirteen percent
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  Speaker 8: in constant currency. Four percentage of point of that is informatica.
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  Speaker 8: So when you strip that out, you will see that
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  Speaker 8: that particular backlock number goes from eleven percent this quarter
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  Speaker 8: to let's say nine or ten percent. So the core
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  Speaker 8: is still declining or the core is still under pressure.
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  Speaker 2: So the stock down twenty seven percent year to date
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  Speaker 2: on a rock is that does that reflect the fact
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  Speaker 2: that it's just it budgets are tight, or that AI
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  Speaker 2: poses an existential threat to certain providers like a Salesforce.
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  Speaker 8: I don't think that's the case, because it's going to
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  Speaker 8: be very difficult for an established Fortune two thousand company
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  Speaker 8: to get rid of their core system of record, you know,
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  Speaker 8: whether that's an HR sales customer service and just deploy
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  Speaker 8: a model in there. At least, we are not there yet.
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  Speaker 8: Maybe you know, five years down the road, we may
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  Speaker 8: see a scenario like this, but that's not really why
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  Speaker 8: Salesforce is struggling. It is basically, we are the largest
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  Speaker 8: provider of sales automation tool and customer service tool to
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  Speaker 8: Fortune two thousand companies. It's those companies that are not
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  Speaker 8: hiring at that same rate that they used to because
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  Speaker 8: outside of AI and AI infrastructure, everything else is still
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  Speaker 8: weak at this point.
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  Speaker 2: All right, Dona our good stuff as always, Honor Agrana.
• 10:45
  Speaker 2: He is our senior technology analyst, Bloomberg Intelligence from the
• 10:49
  Speaker 2: burgeoning tech hub of Chicago, Illinois. We appreciate gtting a
• 10:52
  Speaker 2: few minutes of your time stay with us. More from
• 10:54
  Speaker 2: Bloomberg Intelligence coming up after this.
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  Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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• 11:14
  Speaker 2: Dick Sporting Goods reported some numbers here the stocks off
• 11:17
  Speaker 2: about one percent, but.
• 11:21
  Speaker 3: Boy they put up I thought they were some pretty
• 11:22
  Speaker 3: decent numbers. But what do I know about this stuff?
• 11:24
  Speaker 2: Lindsay Dutch Consumer Hardline senior analy She's the expert, and
• 11:27
  Speaker 2: she's a Bloomberg Intelligence.
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  Speaker 3: She joins us here.
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  Speaker 7: Lindsay, talk to us about Dick's Sporting Goods.
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  Speaker 3: What did you learn with their earnings release?
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  Speaker 4: Positive?
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  Speaker 9: I think that there's, you know, continued strength in the
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  Speaker 9: legacy business, and sometimes that that's being overshadowed by their
• 11:41
  Speaker 9: Footlocker acquisition, which close in early September. But there's certainly
• 11:46
  Speaker 9: pressure on this retailer to execute a very quick turnaround
• 11:49
  Speaker 9: at Footlocker, and they are already planning to aggressively offload
• 11:55
  Speaker 9: some stale inventory and close some stores. And we even
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  Speaker 9: saw some of that change is already over the Black
• 12:01
  Speaker 9: Friday and Cyber Monday shopping weekend.
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  Speaker 6: What's really in the focus, They were with foot Locker
• 12:06
  Speaker 6: would have been the issues at play.
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  Speaker 9: So Footlocker is a little bit of a different animal
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  Speaker 9: for Dix. They have a lifestyle focus. They also have
• 12:16
  Speaker 9: to be more on trend with their assortment and they
• 12:19
  Speaker 9: really have to carry sort of the top of the
• 12:21
  Speaker 9: line items, you know, across a variety of brands running
• 12:26
  Speaker 9: shoes have been in lately. Dix does have expertise sort
• 12:30
  Speaker 9: of in that more sports focused arena. And so you know,
• 12:34
  Speaker 9: Dix is looking to bring its strong partnerships with a
• 12:37
  Speaker 9: Nike for example, and other brands like that to elevate
• 12:41
  Speaker 9: the assortment, which should help. They're also looking to bring
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  Speaker 9: in more apparel to the stores and I saw that
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  Speaker 9: when I was out on Black Friday.
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  Speaker 8: You know, my.
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  Speaker 9: Footlocker had a lot more apparel this year. They also
• 12:51
  Speaker 9: had lots of other brands that were being highlighted, Crocs, Timberland,
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  Speaker 9: so all more doing a lot more than just Nike.
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  Speaker 2: Dick's calls the World Cup quote the biggest sports moment
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  Speaker 2: the US has ever had. What are they telling us
• 13:07
  Speaker 2: about the World Cup and maybe how it might impact
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  Speaker 2: their company.
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  Speaker 9: Yeah, so they mentioned that at the Morgan Stanley conference yesterday.
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  Speaker 9: All of these sports moments have been really big for
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  Speaker 9: their legacy business. People are really leaning into sport. They
• 13:23
  Speaker 9: saw over the shopping weekend interest in their products that
• 13:29
  Speaker 9: were marketed for the World Cup, and that could be
• 13:32
  Speaker 9: a key event to dry sales going forward. But they
• 13:35
  Speaker 9: touch lots of aspect of sport. Their golf business is
• 13:38
  Speaker 9: doing excellent this year. They also do very well in
• 13:42
  Speaker 9: just team sports when you think about getting your NFL
• 13:44
  Speaker 9: gear for your favorite teams and things like that. They're
• 13:47
  Speaker 9: really seeing success across the board. But those big events
• 13:51
  Speaker 9: just give them an opportunity to advertise and bring people
• 13:54
  Speaker 9: into their store.
• 13:55
  Speaker 6: Who are their main competitors right now? Who do you
• 13:57
  Speaker 6: see within this landscape?
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  Speaker 4: Yeah?
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  Speaker 9: Yeah, So that's a very difficult question, given that I
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  Speaker 9: think that they've done a really good job sort of
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  Speaker 9: breaking out of lifestyle and really focused on athletes, and
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  Speaker 9: that's what makes them different than a foot locker, than
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  Speaker 9: a JD Sport. I think one of their closer competitors
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  Speaker 9: could be Academy Sports and Outdoors. They're much smaller in size,
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  Speaker 9: but that retailer Academy, you know, does compete with Dix
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  Speaker 9: and is looking to more focus on athletes and bringing
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  Speaker 9: sort of that athletic assortment to their customer as well.
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  Speaker 7: Linda, what is Dix telling you?
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  Speaker 2: What are some of the other consumer hardlines companies telling
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  Speaker 2: you about the consumer right now?
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  Speaker 9: So Dix is also unique in that they typically cater
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  Speaker 9: to a higher income consumer, so you know, they have
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  Speaker 9: seen resilient demand. They have seen both ticket and transactions
• 14:56
  Speaker 9: continue to rise, which is rather unique. A lot of
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  Speaker 9: other retailers are only seeing the transaction front rather than
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  Speaker 9: the ticket front. So it tells me that the demand
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  Speaker 9: from that higher income consumer you know, is steadied to strong.
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  Speaker 9: We do also see that demand for new products that's
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  Speaker 9: being rolled out. People are willing to pay a high
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  Speaker 9: price point for that. We also see that in footwear
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  Speaker 9: right like On has a very high price point they
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  Speaker 9: haven't discounted. Dix is also not discounting on those premium
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  Speaker 9: products and so that consumer is willing to splurge on
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  Speaker 9: those items. There is a little bit more pressure on
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  Speaker 9: the lower income consumer this year. I think that affects
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  Speaker 9: footlocker a little bit more. But the way Dix is
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  Speaker 9: approaching sort of the turnaround and offering greater discounts, it
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  Speaker 9: might be an opportunity, you know, to continue to cater
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  Speaker 9: to that customer this holiday season.
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  Speaker 6: How are you thinking about the discretionary space. I mean,
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  Speaker 6: I know Alta is reporting after the bell today.
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  Speaker 4: I assume maybe the beauty space.
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  Speaker 6: Can we call it discretionary?
• 15:59
  Speaker 9: Some people might call it A said, yeah, I would agree.
• 16:04
  Speaker 7: I think, you know ALTA is.
• 16:05
  Speaker 9: There are a lot of connections I can draw between
• 16:07
  Speaker 9: Alta and Dix. You know, both of them had you know,
• 16:11
  Speaker 9: very conservative outlooks for the back half of the year,
• 16:14
  Speaker 9: you know, baking in a lot of uncertainty about you know,
• 16:17
  Speaker 9: where demand would go. So Alta, you know, better than
• 16:21
  Speaker 9: expected results in the first half, very similar to Dicks.
• 16:24
  Speaker 9: We get third quarter results later today, but that outlook
• 16:27
  Speaker 9: again is very low, so there's a low bar for
• 16:30
  Speaker 9: them to hit, at least on the top line. And
• 16:33
  Speaker 9: they're coming off a two year best same store sales
• 16:36
  Speaker 9: comp of almost seven percent growth in the second quarter,
• 16:39
  Speaker 9: So I'm optimistic for some strong top line numbers there.
• 16:43
  Speaker 9: But I do think the number to watch for Alta
• 16:45
  Speaker 9: today is going to be on the profit line. They
• 16:47
  Speaker 9: already have some pressure on profit within reinvesting in the business,
• 16:51
  Speaker 9: and we've seen some of the retailer stocks even if
• 16:54
  Speaker 9: you know the quarter was good. If that profit line
• 16:57
  Speaker 9: is missing, you know, investors aren't really liking that.
• 17:00
  Speaker 2: Lindsay, we're not hearing a whole lot about tariffs this quarter.
• 17:05
  Speaker 3: What are your companies saying?
• 17:08
  Speaker 9: So, most of my companies have low direct exposure, meaning
• 17:12
  Speaker 9: they weren't directly importing a lot of goods, so the
• 17:16
  Speaker 9: direct impact on them is low. They're working with suppliers
• 17:21
  Speaker 9: and raising prices where they need to to manage that.
• 17:25
  Speaker 9: You know, the biggest company in MySpace that that's most
• 17:27
  Speaker 9: exposed would be elf Beauty, so also in the beauty space,
• 17:31
  Speaker 9: seventy five percent of their product, at least their namesake
• 17:33
  Speaker 9: product is made in China, so highly exposed there to
• 17:38
  Speaker 9: the China tariffs. But we'll have to wait and see
• 17:41
  Speaker 9: because you know, there are some legal action out there,
• 17:44
  Speaker 9: you know, looking to get those costs back on the
• 17:48
  Speaker 9: retailer side. But you're right, earnings calls have sort of
• 17:51
  Speaker 9: left that topic mostly out of the third quarter commentary.
• 17:55
  Speaker 6: What are the top major trends that you're keeping an
• 17:57
  Speaker 6: eye on as we head into the next year.
• 18:00
  Speaker 9: So I do think costs in general, you know, still
• 18:03
  Speaker 9: are facing some upward pressure going into next year and
• 18:07
  Speaker 9: discretionary as a whole. You know, demand has been quite
• 18:10
  Speaker 9: soft since the back half of twenty two, so you
• 18:13
  Speaker 9: know we're looking to see, you know, when is that
• 18:15
  Speaker 9: going to turn. When are we going to see stronger
• 18:18
  Speaker 9: discretionary demand across the board. And that will help a
• 18:20
  Speaker 9: lot of these, you know, more secondary retailers in the space,
• 18:24
  Speaker 9: someone like an academy who's sort of struggling to see growth.
• 18:28
  Speaker 9: We can see a lot stronger of a year, you know,
• 18:30
  Speaker 9: with a pickup in that discretionary spend.
• 18:32
  Speaker 2: All right, Lindsay, thanks so much, appreciate it. Lindsay Dutch
• 18:35
  Speaker 2: Consumer Hardlines. She's a senior analyst at Bloomberg Intelligence down
• 18:39
  Speaker 2: there in our Princeton office talking to us about Dick
• 18:42
  Speaker 2: Sporting Goods has some pretty decent numbers.
• 18:44
  Speaker 7: Stay with us. More from Bloomberg Intelligence coming up after this.
• 18:51
  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
• 18:55
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• 18:58
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• 19:01
  Speaker 1: get your podcasts, or watch us live on YouTube.
• 19:06
  Speaker 2: Well, there's a lot going on in the world of media.
• 19:09
  Speaker 2: I mean, we're waiting for a big m and a
• 19:11
  Speaker 2: trade to happen. We've also got a lot of streaming
• 19:15
  Speaker 2: services jocking for competitive position relative to Netflix. We've got
• 19:20
  Speaker 2: Ai impacting advertising, a lot going on in there. So
• 19:22
  Speaker 2: let's check with somebody who does this stuff for living.
• 19:25
  Speaker 2: Mark Douglas, President and CEO of Mountain. He's zooming in
• 19:28
  Speaker 2: from one of my favorite towns in this country, San Antonio, Texas,
• 19:32
  Speaker 2: home of my former biggest client, Clear Channel Communications.
• 19:36
  Speaker 3: That was a good company back back in the day.
• 19:38
  Speaker 2: Mark, how do you think you talked a lot of advertisers,
• 19:42
  Speaker 2: You talked a lot of agencies, You talked to a
• 19:44
  Speaker 2: lot of folks in the media business. How do you
• 19:46
  Speaker 2: think this Warner Brothers Discovery thing is going to go down?
• 19:49
  Speaker 2: Do you think anybody's got the inner track here?
• 19:52
  Speaker 10: Well, I mean we're literal word on the street is
• 19:55
  Speaker 10: Netflix kind of has the inside track. But it's some
• 19:59
  Speaker 10: pretty serious bidders, you know, kind of the Ellison family
• 20:02
  Speaker 10: who I us work for, Larry Ellison, Netflix. I mean
• 20:06
  Speaker 10: a lot of people with resources and who seem to
• 20:09
  Speaker 10: have a lot of vision and really are in building modes.
• 20:12
  Speaker 10: So I think it's like exciting times watching this go down.
• 20:16
  Speaker 6: I mean, as we're thinking about this potential deal. If
• 20:19
  Speaker 6: Netflix were to actually come out on the winning end,
• 20:23
  Speaker 6: what does this mean potentially about antitrust concerns. Have you
• 20:26
  Speaker 6: been hearing any conversation about that.
• 20:29
  Speaker 10: I don't think so. I mean, there are somewhat around
• 20:32
  Speaker 10: two hundred streaming networks, almost all of whom are billion
• 20:35
  Speaker 10: dollar companies. I think it's pretty hard even to look
• 20:39
  Speaker 10: at this from a trust perspective, even if it's two
• 20:42
  Speaker 10: of the largest. I think the library that and honestly,
• 20:47
  Speaker 10: you know, some of those companies are hurting, and so
• 20:50
  Speaker 10: you know, having some consolidation I think is a healthy thing.
• 20:53
  Speaker 10: And Warner Brothers Discovery, I think it's just a fantastic asset.
• 20:58
  Speaker 10: I think in terms of acquisitions or mergers in the
• 21:03
  Speaker 10: media space, I think it's kind of being number one
• 21:06
  Speaker 10: our list. I think the way people are responding to
• 21:09
  Speaker 10: the opportunity is kind of validating that.
• 21:11
  Speaker 2: Yeah, with Terry Quadra back of Salmas Smith Brothers, Salmas
• 21:15
  Speaker 2: Smith Barney, he was the first one to treade this
• 21:17
  Speaker 2: asset when he represented AOL buying Time Warner back in
• 21:20
  Speaker 2: the day. So this is not the first go round
• 21:22
  Speaker 2: for these Time Warner people.
• 21:24
  Speaker 10: And look and look at the program they have Harry Potter,
• 21:27
  Speaker 10: Game of Thrones, White Loaded. I mean, it's it's in
• 21:30
  Speaker 10: a lot of ways. HBO was kind of the original Netflix.
• 21:33
  Speaker 10: You know, it wasn't obviously on net, but it had
• 21:36
  Speaker 10: like this incredible original content, which it continues to still
• 21:40
  Speaker 10: have along with just this broad library of content and
• 21:44
  Speaker 10: we all watched it on cable. Netflix kind of brought
• 21:47
  Speaker 10: that formula to the Internet and obviously it's you know,
• 21:51
  Speaker 10: kind of been become this massive company as a result
• 21:54
  Speaker 10: of that. But I think that's why that library of
• 21:56
  Speaker 10: content and that ability to kind of keep doing it.
• 21:58
  Speaker 10: Like they haven't really lost meaning Warner Brothers, Discovery, I
• 22:03
  Speaker 10: haven't really lost their mojo in terms of creating content
• 22:06
  Speaker 10: like that. And I think Discovery is under underappreciated in
• 22:10
  Speaker 10: terms of the value you know that that it brings.
• 22:14
  Speaker 10: Shark Yeah, Shark Week and kind of like like documentary
• 22:19
  Speaker 10: style and and they turned kind of showing and they
• 22:23
  Speaker 10: turned that also into like reality TV with with what's
• 22:27
  Speaker 10: the show up in Alaska?
• 22:28
  Speaker 7: The fishing shows. Yeah, I mean it's a lot to watch.
• 22:34
  Speaker 10: It's a lot to watch, and I think that's why
• 22:36
  Speaker 10: people want the essence.
• 22:37
  Speaker 6: I've forgotten about Shark Week.
• 22:39
  Speaker 3: Yes, that's a big.
• 22:42
  Speaker 10: Just imagine any of these players, especially on Netflix, who
• 22:46
  Speaker 10: has you know, the resource to do it, bringing back
• 22:49
  Speaker 10: Game of Thrones, bringing back a lot of program I
• 22:52
  Speaker 10: think it's still going to play really, really well, and
• 22:54
  Speaker 10: and it might also play really well outside the United States,
• 22:58
  Speaker 10: so you know where a lot of these company need
• 23:00
  Speaker 10: to expand to.
• 23:01
  Speaker 6: So we talked about Netflix, what about Paramount's guidance. How
• 23:05
  Speaker 6: big of a deal could this be for them?
• 23:08
  Speaker 10: I think it makes a lot of sense. I mean,
• 23:11
  Speaker 10: the Paramount is a good asset. I think this is
• 23:16
  Speaker 10: kind of meaning there's a lot of programming there and
• 23:19
  Speaker 10: obviously they pick up CBS and things like that. But
• 23:22
  Speaker 10: adding Warner Brothers Discovery, I kind of think puts them
• 23:26
  Speaker 10: in a much stronger position to challenge a Netflix and
• 23:30
  Speaker 10: challenge a Disney. And that may be one of the
• 23:33
  Speaker 10: reasons Netflix is interested is more is somewhat as a
• 23:36
  Speaker 10: you know, kind of to hold their ground, hold their
• 23:39
  Speaker 10: turf by not allowing someone to put together a library
• 23:43
  Speaker 10: of content that is put you know, potentially as in
• 23:47
  Speaker 10: the range or strength as theirs is, so that you know,
• 23:50
  Speaker 10: this could be as much of a defensive move as
• 23:52
  Speaker 10: a defensive move, but I think it makes a lot
• 23:54
  Speaker 10: of sense for Paramoun. I mean, once they committed to
• 23:57
  Speaker 10: to getting Paramount, I think, you know, the acquisitions can't stop.
• 24:02
  Speaker 10: They have to kind of double down. And so you know,
• 24:06
  Speaker 10: we'll see how this plays out.
• 24:07
  Speaker 3: Mark for twenty twenty six.
• 24:09
  Speaker 2: In the streaming business, you mentioned there's you know, a
• 24:10
  Speaker 2: couple hundred streamers out there.
• 24:13
  Speaker 7: Are there too many? Does there need to be consolidation
• 24:16
  Speaker 7: or bundling or how do.
• 24:18
  Speaker 3: You think the streaming landscape is going to evolve mature?
• 24:21
  Speaker 10: Yeah, I mean it has to consolidate. I've always thought,
• 24:24
  Speaker 10: I mean kind of one of the things I've always
• 24:25
  Speaker 10: said on this topic is we can play a game.
• 24:28
  Speaker 10: If I name a streaming network and you can't tell
• 24:31
  Speaker 10: me immediately why why you will watch it, then it
• 24:35
  Speaker 10: probably should not exist in a network. And so and
• 24:40
  Speaker 10: we played that game. You know, if I say Discovery,
• 24:43
  Speaker 10: you would say documentary. If I say Netflix, you would say,
• 24:45
  Speaker 10: you know, new shows every Tuesday, and there'd be a
• 24:49
  Speaker 10: range of things you want to watch. If I say
• 24:51
  Speaker 10: ESPN and you'd say sports, and so you know, when
• 24:53
  Speaker 10: you get into sum of the names, you can clearly
• 24:56
  Speaker 10: say that then I think there has to be a
• 24:58
  Speaker 10: consolidation both in terms of the health of those businesses
• 25:02
  Speaker 10: as well as just what consumers are willing to spend
• 25:06
  Speaker 10: and tolerate. We've gotten to this point where pre much,
• 25:09
  Speaker 10: you know, we went back to the future in terms
• 25:10
  Speaker 10: of ad supporting content. At this point, I think every
• 25:13
  Speaker 10: streaming network except for Apple TV Plus now has adds,
• 25:17
  Speaker 10: so you can you can do an ad model and
• 25:20
  Speaker 10: do well. You're not as relying on subscriptions, but you
• 25:23
  Speaker 10: still have to have a reason for people to come
• 25:25
  Speaker 10: and watch you, and that's the key.
• 25:27
  Speaker 6: What are your major themes for twenty twenty six as
• 25:29
  Speaker 6: you're looking at the media landscape?
• 25:32
  Speaker 10: The I mean, this is the year where like it's
• 25:35
  Speaker 10: kind of the official death of cable in a sense.
• 25:39
  Speaker 10: I mean, obviously it's a legacy business, but like there's
• 25:42
  Speaker 10: nothing like live sports is moving on the streaming as
• 25:47
  Speaker 10: fast as it possibly can. It's a topic of the day,
• 25:50
  Speaker 10: it's what everyone wants. We got the I think Netflix
• 25:54
  Speaker 10: continues to expand in terms of their ad supported business,
• 25:57
  Speaker 10: which is great for advertisers and great for consumers. But
• 26:01
  Speaker 10: it's kind of that, like all content consumption is streaming.
• 26:06
  Speaker 10: I think with the live live sports in particular.
• 26:08
  Speaker 3: Yeah, and.
• 26:11
  Speaker 10: One of the things that's really interesting about streaming is
• 26:13
  Speaker 10: you can turn content that's not the NBA and not
• 26:17
  Speaker 10: the NFL into content consumers want to watch and.
• 26:20
  Speaker 2: Just work to the NFL reopens its contract with its
• 26:23
  Speaker 2: media partners, that's gonna be seismic.
• 26:24
  Speaker 7: Mark Douglas, President CEO of Mountain.
• 26:28
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