Amazon Agrees to Buy MGM Film Studio

You can also listen to our radio show at two pm Eastern Time on Bloomberg Radio or watch us on YouTube search Bloomberg Global News. Let's get to the remarks in the current issue of Bloomberg Business Week magazine coming out. It's a double issue. It's about how America has a housing mess and President Biden wants to fix it. Let's get into it. The story by Bloomberg News Finance reporter no ble Hire with us in Seattle along with Bloomberg Business Week at her Joe Webber in our interactive broker

studio in New York. It is so true when you think of housing policy here in the United States, Joel. It's it's broken and has been for a while. Um, and Noah did a really amazing job of writing a story that UM, I think really uh helps you make sense of it and where it's been and still yet maybe maybe how it might change a little bit. Um. But you know, part of it is just rooted in, UM. You know, the fact that we've had a housing market

that is on has been on fire. Uh. Inventory is incredibly low, Affordable housing is nonexistent in a lot of places. And that's the thing that looks like a growing mess and a growing problem. So so UM, no uh uh talk to us about what a solution might look like. Yeah, Well, I don't think it's I don't think it's uh necessarily

going to be just one solution. Um. But part of why I wanted to write this article is to try and make sense, um of where we've been and some of these proposals that the Biden administration is putting forward to fix it. Um. First and foremost, uh, what the administration is trying to do um with more than fifty billion dollars that Congress has already allocated, is it fixed the immediate problem, which is just the enormous amount of

financial strain um that the pandemic has caused. Mostly for renters, but but also for some homeowners. So there's there's more than fifty billion dollars out there. They're trying to to get out to people, UM to help them cover back rent racked up during the pandemic. UM and if they've missed mortgage payments, to do that as well. So that's

part one. But UM, what's really interesting and what a lot of housing policy experts UM I talked with I want to discuss was was what's in the Infrastructure Plan and the American Families Plan, which is with the Biden administration, UM has has tried it out to you know, help the country and their words build back better UM and embedded in there are a lot of strategies to fix

different parts of the housing system. So just for instance, UM, one of them, UH, which we talk about in the story is a surge in UH the Low Income Housing tax credit. These are tax credits at the federal government. What's out there. They're used by affordable housing developers and they've really been an engine for affordable housing production in this country for a long time. Hey, no, UH, to what extent does the US government actually have power? The

federal government have power to do this? If if there are zoning laws and regulations and is you write in your story, um, expanding the supply of homes in some of these places we require taking on the nimbies, you know,

not in my backyard. Yeah, that's that's certainly a huge issue. Um. And uh, it's it's something that you've seen, uh in places like Minneapolis, where the whole state of Oregon they've they've passed laws and were made zoning changes in the last couple of years to allow for more housing development. But you you hit the nail on the head. I mean,

the federal government can own do so much here. A lot of what's holding back housing production in this country, especially in really prosperous places, it's just the fact that you can't build there or I mean, we make it so much harder for people to add more density and more housing. And so the Biden administration's planned there, um, which has been criticized is too timid, is to give municipalities grants to help them rezone and clear away some

of these barriers. Um. But they're not you know, at some economists point out really, uh, you know, they're giving a carrot, but there's not so much of a stick. Involved here. Um, some folks pointed out to me that, you know, a more effective way to deal with this would basically be the high transportation dollars from the federal government. Um, you know, getting those to making these sorts of zoning reforms.

One of the things I thought was interesting Noah in the story that talked about, you know, right now the mortgage market, you can get government back loans to buy homes and parts of South Florida that are already experiencing seasonal flooding because of rising sea levels. I know the magazine has done stories about this. We're in some communities the local governments are actually buying up the homes and taking them off the market because we know it's not

a good home to own. I mean, there are just parts of the existing infrastructure and housing law and policy that just doesn't make sense anymore. Yeah, And I think

that's a that's that's a really good point. It's sort of underscores how some things we do in certain parts of our government, uh promote a certain kind of activity, but while at the same time we're trying to like, uh maybe not develop in these areas that are going to be prone to climate change and and that I think is really um the very hard work that has to be done, which is how do you align all of these policies, be they at the federal level of

the state level or the local level, local level, so they were actually working towards um goals, you know, whether they be around climate change or racial equity or affordability. And it's it's just we have this very complex system that's been built up over decades in decades, and just making sense of that is going to be a challenge, right especially in politics who are also involved in all of this good stuff. Nobu Hire Finance Report at Bloomberg News.

These are the remarks in the new issue of Bloomberg Business Week magazine. Till Webb, thank you so much. This is Bloomberg Business Week with Carol Masser and Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. All right, Tim, safe to say it's one of the more telegraphed de yields in a while. And today we got confirmation Amazon buying the MGM Movie Company eight point forty five billion dollars. Really a bet that a nearly central old Hollywood icon

can feed an insationable demand for streaming content. Feed me, feed me. It's all about that machine exactly. We've got a great pair to talk about the really the two sides of this story, the media and content side, as well as what this move means for Amazon. Kitaathan is technology and media analyst re Bloomberg Intelligence, our in house research team. She's on the phone in New Jersey. Spencer. Soaper is Limberg, news technology and e commerce reporter on

the phone in Seattle. So let's start with you, Gita. We knew this was coming. So, um, I don't know what's the key takeaways? How do we need to as investors maybe look at what this means and what what else might be out there and what might be to come. Yeah, I think Carol of Virsual, Caroline Tim, thank you so much for having me. And I just want to say that, um, you know, this is really part of this whole vast reshaping of the media business, of the media landscape. The

big are obviously looking to compete by getting bigger. We had the Disney Fox acquisition a few years ago, just a couple of weeks ago, we had Discovery with Warner and now you have Amazon and MGM and and it's really I think it really speaks to uh, you know the power of content and how everybody is kind of looking to consolidate their position in the streaming space. Talking about what this means for the other companies, I think, uh, it really kind of now separates the halves and the half.

Not that you will, so obviously the independent studios, a few of them being you know, the Lions Gaze of

the world, probably even a Sony. Obviously they might see their valuations go up as it's kind of, I think, almost to make or a great moment now in media when the other remaining players have to really kind of take take a step back, look where they are positioned and if they really have enough firepower to last the streaming shake out, if you will, they Spencer Souper, come on in here and give us the Amazon perspective, because for for years, when I've looked at what Amazon has

done with Amazon Prime Instant Video or Amazon Prime Video or whatever iteration of it is now, I've always looked at it through the lens of of Amazon Prime and and sweetening the deal for that year Amazon Prime subscription, because the research has shown that people who are Prime members they buy more, they buy more expensive items, and they shot more frequently. Is it to the point though, where you have to look at Amazon's video ambitions beyond

Amazon Prime. Uh, that's what they're trying. And there are people who are subscribing for the standalone video sub scription. So that's part of the play is Amazon needs to offer more to unbundle. But I think the big thing here with Amazon and this acquisition is Amazon traditionally tries to build it on its own. It's spent a lot of time and you know, several years and in a boatload of money in Hollywood trying to create its own

hits and and really doesn't have any. And so they finally had to capitulate and say, you know what, we gotta buy James Bond, we gotta buy Rocky Balboa. Uh and kind of, you know, use our purse to get into this business. That that we've been kind of you know, trying to get in on our own without without a big hit to show for it. It was really about buying legally Blonde. Come on, Spencer, we know interesting how they highlighted that film in the press release? Who what not?

L come on? Well two questions real quickly. I mean, Spencer, go ahead. I was gonna say it was eight billion for RoboCop and then I think half a million for the rest of it. Alright, alright, but but two questions I have. First of all, um, well, let me let me bring you back eight almost eight and a half billion dollars. Did they pay too much or they're going to get you know, a lot for that amount of money. Um, So, I don't necessarily think they paid too much. So we

ran some numbers. It's a twenty five x multipost for MGM. That's pretty much in line with what we've seen in the past. So just a few years ago, we had Comcast Coops go out and buy Dreamwork for almost thirty five times either it to you kind of look at some of those deals, not too bad. Then again you had Comcasts and Apple who came in and take took a look at MGM and said they really didn't think

it was worth more than six billion dollars. So so from that context, yes, I think Amazon paid up a little bit, but I think they're they're they're getting the bank for their part. You just look at what they've done during the pandemic. They paid millions for coming to America. They paid eighty million for the boor app pequels. Right, so you look at all of those individual movies and you look here at a studio library that they're getting. I think it's definitely uh uh you know a bank

for their book. Well, and you me, you beautifully set me up for what I wanted to ask Spencer, and that is Spencer, is this all about Jeff and franchise development? Right? You own these brands now and you can just kind of run with them. They're remaking everything, right, It's like so it's it's kind of like, you know, it's a safe bet. It's formula Hollywood. They've taken the risk, they've tried to create their own hits. Uh, they haven't created them.

So let's let's buy what people love to watch in the past and try to try to uh make new versions of new iterations of it for the future. Knowing that we have that big groad appeal fan base cooked in. So that's definitely a big, a big piece. And we know that Jeff Zos does see hollow even though Hollywood seen is this creative place that he does see a lot of the hits as being fairly formulaic. So this kind of appeals more to his his you know, the

math part of his brain. Yeah, Ga, come on in here and talk a little bit about what this means for consumers of of Hulu and consumers who have been used to watching some of this content in other places. The Handmaids sale, for example, it was touted in the press release today announcing the acquisition, and I'm wondering if that means that handmaid still leaves it leaves Hulu if it goes to Amazon, or is this all about the future future content and less about what exists now. So

I think him that's an excellent point. I think what would be really seeing over the at least past few years is that you have all of these studios that are part of conglomerates, and they're all now trying to use their studios to feed their own streaming platforms. So Disney obviously doing that with Disney Class. They also own two thirds of Hulu. Uh. We're seeing Warner kind of do that with HBO Max. So it's all about, you know, using that studio content. Amazon obviously did not have that.

Now they're getting that with MGM. So we're really gonna have to wait and watch and see what they do. But I think we can pretty much count on the fact that they are going to take the handmade sailor at least future um, you know, seasons of the handmade sale and definitely to it on Prime as a way to kind of turbo charge their subscribe to me. All right, well, great stuff and certainly a company that is always on

the move. Amazon. Great to get so many multiple sides to this story and get them from our own guitar Ranganath on Tech and Media analyst of Bloomberg Intelligence are in house group of analysts, and Spencer Soper we go to him when it comes to Amazon. He is Bloomberg News Technology and e Commerce reporter on the phone in Seattle. It's a big deal. Eight half biggs after well and if you think right exactly like they do smaller acquisitions.

This is Bloomberg Business Week with Carol Masser and Bloomberg Quick Takes Tim Stenovic on Bloomberg Radio. So a lot going on on this Wednesday. No doubt the world has reopened, certainly when it comes to the business and financial world.

We're feeling it. We also are noticing a story on the Bloomberg first time activist investor Tiny Tiny Steak in x on Mobile scoring a historic win in its proxy fight with the oil giants, signaling the growing importance of climate change to invest is this is a big deal Bloomberg deal Reporter Scott Devote here in our Interactive Brokers studio. Um, it does feel like a big deal. Are we putting

it in perspective in the right way? Yeah? I think like what we're seeing out of this one in particular, and we've started to see this a little bit lately, is that, UM, it doesn't really matter how big of a steak an investor has in a company, UM, if they have a really good argument. So at Exxon, what they argued was there was uh an engine number one is by the way, the fun they bought a thirty seven million dollar steak and xxon which is a two

billion dollar company point zero two steak. Yeah, basically nothing. They basically spend as much on the proxy fight as

they did on the initial steak. But they came with an argument that said, you know you've been underperforming your peers, your climate goals are not aggressive enough, and you know you're putting your dividend in at risk basically, you know, based on this strategy, So you have to make some some you know, significant changes and I think you know, well the company probably was not you know, open to

these ideas. The other investors were, and they got some momentum and obviously, you know today they got at least two seats on the board. So Scott, what what are they going for? What's engine number one going for? In terms of changes? What do they want to see? Well, basically what they argued was up until this point that and I think you know, there's a lot of evidence of that. You know, Excellon was a leader in the oil and gas industry UM, but then started to trail

behind some of its piers, Chevron in particular, UM. And then uh they also argued that there was a climate angle on this, that Exxon was entrenched in carbon based UM, the carbon based fuels, and wasn't doing it enough to reach the goals or the Paris Agreement, and that you know, a lot of what they were saying and when it came to climate was lip service, and so they called

them on it. And you know, we've seen obviously the institutional investors like black Rock and whatnot been very vocal this year about how they were going to vote based on E s G issues and so it really struck

a chord with a lot of these institutions. UM, and I think, you know, I think a lot of people that you know, follow activism didn't think that Engine Number one had much of a shot at this, but um, they really did have their finger on the pulse of the simmering tension between x on itself and its investors. How much is Black Rock pushing kind of the whole

momentum here with that? You know, Larry Fink has been so vocal in terms of the importance of climate specifically, and listen, they're the second largest shareholder institutional shareholder when it comes to ex On Mobile. Um. Kathy would told me that that she kind of speculated that maybe some of what Elon Musk and his kind of pulled back on bitcoin because of its impact, uh and on energy usage and impact on the environment, that maybe Black Rocks

a big investor in Tesla. How much are they kind of moving the needle on this cam station. Well, I think there's no doubt that they're moving the needle on the conversation. I think that you know, you wouldn't have I cover a lot of activism campaigns and I'll put it in the perspective from an activist perspective. Now, when you see one of these letters go out criticizing a company, there is always going to be an E s G

angle on it. And what they're trying to do is not only attract investment from funds that want to invest in you know, these hedge funds, but want to make sure that they're doing an E S G angle. They're also trying to win over the institutions who have you know, these these bents on making sure that they're supportive of boards that are implementing these E S G issues. Are we going to look back on today, on this period of time as being just a turning point when it

comes to E S G? As you point out in your piece. On the same day, management at Chevron were reviewed by their shareholders, who voted a proposal to reduce emissions from the company's to pont recently stuffer vote against management on plastic pollution disclosures. Are we to turning point here? I think you're I think what you're seeing is something that's been simmering from a little while, like, but there was a very fine point put on a lot of

these institutions. You think pension funds, all these other institutions. They're very serious about climate change now, and that's something that the oil and gas industries are going to have to deal with. Well, it's also to be fair, like, we know at some point there's going to be probably increasingly greater regulation. We're seeing it globally, we're seeing it here in the United States. I mean, the dynamics of this company. Eventually, I'm assuming we will transition to from

a carbon based economy. I mean that's where the world's going. May not happen overnight, right, Well, that was that was the argument. I mean, if you don't start now, you're going to be left behind. I mean, I think Engine Number one said something along the lines of, you know, you there have been great American companies that have missed the way the world's going and you know, fall into the wayside. And so they were they were saying, you're

risking becoming one of these like defunct iconic brands. Well, I think it's funny, funny, is it the right? And like the companies that were in the Dow initially or over it tunder twenty five year lifespan, there are those companies that aren't around anymore, and you do wonder about the fate of something like an exent. Yeah, I mean that's that was the argument. So we'll see, we'll see what happens. Well, it's amazing we ran out of time, but I've got to just tell you. Your story and

your interview with Carl Icon really a killer. It's among the most read on the Bloomberg terminal, and I know our TV team also caught up with him, but it was greased thanks to your story. So thank you. Everybody can check it all out all of Scott's work at Bloomberg dot com. I'm bro journal Yeah, but you let me drive none please, I want to drive. Just drive good questions. Here is the drive to the globe. Thanks,

We'll drying us Dawn on Bloomberg Radio. I just got about ten and a half minutes left in today's trading session. Is time for the drive to the close? And Amy Saying is with us. She is executive vice president portfolio manager over it at Alger. She oversees several small cap and MidCap stenogies. She is with us on the phone from Connecticut. Amy, nice to have you here, How are you great? Thank you, Carol, thank you for having me

here today. Well, it's good to have you here in an interesting day, interesting week, and maybe partly because of the holiday, we had a fair amount of news flow. But it does feel like investors kind of not quite sure where to go next. And maybe it's because we're in this Netherlands between earning cycles. But how do you see and how do you see the market environment, especially

for the midcake MidCap space that you play within. Yeah, well, I think I feel very constructive overall equity market, and I am very bullish UM makehaps now, especially UH makehap growth stocks. I think we can make a strong cage

now for those stocks UM. As you know, there's been a significant you know rotation from UH growth to value, but I think over the long term, you know, value is more of a trade not investment in the sense that also a lot of value stocks now have built in a lot of great expectations going forward, whereas a lot of UM growth stocks the structural secular till wings for them UH still are intact and the valuation wise

they come down a lot. But more unfortunately in that algier we are UM stock pickers and we think you can really you know, have your growth cake and either recovery too. So those are the company that we have exposure to a the growth, high quality growth stock with cyclic coal and markets exposure. UM. You know today, well we want to talk picks. I just want to give our audience on YouTube and also here at Bloomberg Radio

just a little perspective. If I look at the Russell Russell two thousand small camps, it's up almost fourteen percent on the year. The SMP five hundred big cap companies, it's up just shy of twelve percent. And if I look at the SMP MidCap four hundred index, looking at that mid radio sector, it is up about seventeen almost eighteen percent on the year. So Amy, let's let's drill down a little bit. One of the names that you like specifically is US Food Stickers U s f T.

What's the fundamental story as to why you like it? Uh? Right. US Food is the second largest food service distributor in the United States. It's also the most innovative food distributor and most tax saving savvy. So it really fit into you know what I talked about. You know, they both

have the segular trends UH and cyclic covidc RAY. And here's why First of all, you know, there's a multi decade secular trends for dining outside of home UM and with the pandemic, unfortunately that that number, you know, that sort of regress you know, before the pandemic is almost like fifty fifty inside home and outside of home and during at this moment is roughly about say thirty five

percent by industry reports. So now as you know, we have a lot of pendemy men as people have been cooper at cooper at home, and it is also you know, restaurants also have a lot of benefits from government support, you know, with the twenty nine billion restaurants revitalizzation found recently. So so that's a very strong secular trend is still

in play. And you are, too, specifically as a company, is extremely well positioned in all of those you know, in the hospitality and a restaurant, So it's really a pixel shovel play for us. They also have the scale capital technolog a GM product offerings to really um meet customers needs. And you know, in the indus continue to gain market share from the weaker smaller players because the

industry is consolidating. And also it's just great catch up play because US Food still trades as a discount to its piers Cisco and Performance Foods. So we think the company is really well positioned at this point. And takular, let me just correct. I think I said U s f T M at U s F D just to make sure our audiencewer that rate. Yeah, I'm curious, Amy about another company that's in that's one of your picks that's somewhat in the restaurant industry. Middleby Corporation ticker m

I D D so far this year up more. Why are you bullish on it? Yeah? Which Middleby has been a you know, compounder for US and it's a market leader in the food service equipment industry. Um, you know, was a very well diversified portfolio and customer. Uh. It's definitely recovery play because restaurants have been hit hard by COVID. Uh. You know, almost all chain restaurants as their customers. Right.

You may it may not be a household name, but I think we all come across Middleby every day if you're in Starbucks, Dunkin Donuts, you know Chiefecakes for extra McDonald's. So so that Um, but the man is really very very strong that they just reached the back you know, last quarter. They have a very strong quarterback lot is record high, the manage very strong, supply is very tight,

so they actually institute you know, price increases. Uh, they're going to continue to have like more price increases this year. And the company also has a very strong segulative when it's been always been very innovative that you know, it's levered to the secular trend of automation within restaurants, right and also in the kitchens, so they generate a lot of savings in terms of labor, energy, and other carts

for restaurants and food processing companies. A great the examples Middlebie's recently launched open Kitchen, uh Internet Things based platform, so that's really one of its kind and really can automate the whole intel restaurant. And also you know, recently the company um I had a transformative um acquisition um you know acquired it's a competitor, well built and that's you know, really going to be very accreative to them and it's going to make them more dominant in the industry.

And the last but not leastic, the company has very high financial quality. Was actually with low cyclicality. You know, overall, so very strong margins and free cash flow. So it's really a compoundel that can really transcend sort of economic you know, volatility. But clearly it's extremely well positioned, uh to capitalize the cyclical recovery. Now, yeah, and the start that was up almost eighteen percent last year, I'm assuming as things started to recover a little bit, uh, and

it's up about so are this year? Um, are you finding lots of opportunity in the MidCap space right now? And just got about a minute or so, Yes, definitely, because mixcap has you know, part of the past twenty years, really has outperformed both small large cats because it has

the best of both worlds. Like small caps, they are less covered and operating an inefficient market, which is a very fertile ground for us at Algiers because we're stock pickers, and they also offer similar gross potential to small caps. On the other hand, they are less risky than small caps because they are more similar to large caps in

terms of financial quality and liquidity. But at this point, you know, they are cheaper than large cap growth piers and also on a fundamental basis, they are projected to have higher earnings growth compared to the large cap piers. Uh, there are a lot less. I think on average there's only ten analysts covering, you know, mikecap gross companies, where it's twenty twenty analysts covering a large cap growth company. So so I think it's very attractive at this point,

and we're very bulish on that. And we just recently launched Alger mickcap boody, got it? Yes, all right? And yeah, and as you said, MidCap versus large caps versus small caps, you've definitely seen the out performance so far here in Amy, Thank you so much, love talking specific names, Amy saying, portfolio manager over at Alger during us on the phone from Connecticut. Thanks for listening to Bloomberg Business Week. Download

the podcast on iTunes, SoundCloud, or Bloomberg dot com. And you can also listen to our radio show at two pm Eastern on Bloomberg Radio or watch us on YouTube search Bloomberg Global News