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Our focus shifts now to the latest development when it comes to Russia's invasion of Ukraine. The two countries wrapped up a second round of talks, these happening in Istanbul, but they failed to bring the two sides closer to ending the war. They laid the groundwork for a new exchange of prisoners. However, the Russian delegation handed over peace proposals that include Kiev surrendering control of territory it still holds in four partially occupied regions. This according to a
Ukrainian official. We did also hear from the Ukrainian Defense Minister who said that Key demanded an unconditional truce for more. We bring in doctor angelas Stent. She's senior fellow at the Brookings Institution. She's also former National Intelligence Officer for Russia and Your Asia at the National Intelligence Council. She also served in the Office of Policy and Planning at the US Department of State, and she's author of the
book that came out in twenty nineteen. It's called Putin's World, Russia against the West and with the Rush. She joins us from Washington, DC, Doctor Stent, good to see you. It's been about a month since we last connected. I do want to start with peace negotiations, but before that kind of get to the context of what happened over the weekend, the drone attack, so called Operations Spiderweb. Russia and Ukraine are each saying different things about what exactly happened,
the damage, what was destroyed. Zelenski did say that about a third of the strategic cruise missile carriers at airfields were hit. How does this complicate negotiations, Well.
I think you may remember that President Trump told the President Zelensky at that unfortunate meeting in the Oval Office that Ukraine quote unquote had no cards. I think this was really an amazing operation. It had been planned for one and a half years, we heard from the President Zelenski, and it shows that Ukraine does have some cards. It was capable of destroying these Russian strategic bombers that were being used to hail bombs on civilian and targets and
infrastructure in Ukraine. And these, by the way, are old Soviet era planes and they can't be replaced, so it'll take Russia some time to rebuild to acquire some more of these strategic bombers. It doesn't necessarily change the course of the whole war, but it certainly shows that Ukraine can fight back, that it's very good at this kind of advanced warfare, using the drones and trucks if you're like the Trojan trucks as they've been called, and really
apparently taking the Russians and everyone else by surprise. But as you said, you know today's talks, they exchange agreed to exchange more prisoners, which is very important. But there's been absolutely no more progress made on approaching a ceasefire, any kind of an end to the fighting than that was, you know, when President Trump first took office.
I want to get to that ceasefire, but just briefly, were there are there. I'm wondering if there's geopolitical implications of this attack beyond just how it affects Russia's war with Ukraine, but how this could potentially affect Russia's relationships with other countries.
Well, it has major implications for warfare in general. Some people are now saying that what Ukrainian really did was to help NATO, because it makes it less likely at least that in the immediate future, Russia would be able to attack a DATO member. But it has implications even for the United States. I mean, if you can now destroy planes and other military hardware through the use of drones like that, people are going to have to rethink
where they position things and how they conduct warfare. So it potentially has major implications really for the way that countries fight wars in the twenty first century.
But this was a difficult thing for Ukraine to pull off. I mean, some of the reporting around it indicates that this was over a year in planning processes. They were able to get drones into the country and then have them take off simultaneously to attack different strategic assets of the country. This is not an easy thing to do, doctor sten.
No, no, no, I mean it took a lot of meticulous planning. Obviously, the Ukrainians had people inside Russia who helped with this. President Zelenski last night and his address said that some of these people were located very close to a major headquarters for the Russian domestic intelligence services.
But it just shows you that this is a war that partly resembles World War One and trench warfare, but it is also a very high tech, twenty first century, cutting edge type of warfare, of which we will see more in the future.
So where does this leave us now? Because the two nations spoke today, but it doesn't seem like they're any closer to making progress towards a ceasefire.
No they are not. I mean Vadimia Putin is not interested in a ceasefire at the moment. Russia has been taking incrementally more territory in the past few months. It's also sustained very high numbers of casualties as it takes this territory. But he is, I think determined to continue with this war. Most people believe it's going to go on at least for this year, if not into next year.
But the negotiations will continue because Putin has understood that if Russia doesn't take part in negotiations, than the prospects for improving US Russian relations, which President Trumpet promised him go down significantly. So I think we'll see. I know they've already said they're going to have another negotiation, not in a not too distant future. They may continue to talk about these humanitarian issues again, very important issues, the
exchange of prisoners, particularly disabled ones. But that doesn't mean that the fighting is going to stop anytime soon.
Doctor Stam, We're getting a question from some folks who are watching listening right now, want your view on over three years in on your four of this war, when many thought it would last a couple of weeks, what you view as the original cause of this war.
The original cause of this war is that Vladimir Putin has never accepted the collapse of the Soviet Union. He has never accepted that Ukrainians are a separate people, that they should have a separate country. He believes that they should be part of Russia. He wrote that explicitly in a July twenty twenty one five thousand word essay that
he penned about Ukraine. So the root cause of the war is that the Russia believes and the Putin believes, that it should control Ukraine and that Ukraine shouldn't have any choice in moving westward, in joining Western institutions. So that's the original cause of the war. A lot of the discussion we hear about NATO enlargement causing it, that's
not the cause of the war. I mean, the reason that Putin didn't like NATO, didn't want NATO to enlarge is because if Ukraine had been a member of NATO and Russia had attacked Ukraine, then it would have been involved potentially in a large scale, possibly nuclear war with NATO. So that's not NATO is not the root cause of the war. It's Putin's desire and the desire of many people around him to reconquer Ukraine.
Doctor Sten, you know, we started the interview by you saying that this drone strike over the weekend was proof that Ukraine does indeed have the cards. Do they have the cards to force Russia to negotiate in a way that does not include actually giving up part of its Ukraine's owned territory.
So I would say they do not have those cards. I think what they had the cards is to make Russia understand that it's going to be more difficult as the fight goes on. But I think the only way to get the Russians to negotiate more seriously would be two things. One, there is a fairly robust sanctions bill that eighty one senators bipartisan in the Senate support, and that Senators Graham and Bloomothal who were just in Kiev,
said that they would possibly pass this week. Hasn't happened yet, we'll see, but they would be Those would be very punishing sanctions on Russia. And it would be for the Trump administration to resume supplying Ukraine with the weapons and the financial assistance it needs to continue fighting Russia in such a way that Putin might have to understand that his maximum demands cannot be met and that he would be willing to make some compromises in the demands that the Russians are making.
Just thirty seconds, but what's your current thinking on how the war ends.
Eventually, it will end in a negotiation, and there will be a negotiation clearly where both sides will have to compromise and both sides will have to move back from their maximum demands. But I think neither side is at the situation yet where they're willing to make those compromises.
Doctor stan always appreciate you taking the time in joining us here on a Bloomberg Business Weekdaily. Doctor Angela Stent, Senior Fellow at the Brookings Institution, also the author of the twenty nineteen book Putin's World, Russia.
Against the West and with the Rest.
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President Donald Trump and Chinese President Shiji Ping are likely to speak this week, the White House said, as the world's two largest economies remain locked in trade at turmoil. From where we bring in Jennifer Welch, Bloomberg Economics Chief geoeconomics analyst.
She joins us from Washington.
Jennifer, I just want to start with the lay of the land right now, because we're a little over a month away from the end of this ninety day pause that the President had laid out for every country that it's negotiating with around the world. What is the average tariff rate that we should keep in mind for goods that are coming from China into the US right now.
Well, the moment, the US effective terif rate on China is closer to forty percent with the ninety day pause on the higher reciprocal tariffs that came into play after April second, after the tip for tap between Washington and Beijing. But as the calls lead up has indicated, those wheels are starting to fall off of that truth and we might see tensions come to a boil well before that
ninety day period is to end. And I think the threatening there is whether or not terror rates are going to go back up again once that ninety day truth ends, will there be an extension of it to allow for a larger deal on trade. At the moment, the lines are pointing pretty negative.
You know, I was sitting in the studio with Tom Kane doing Bloomberg surveillance a couple of weeks ago, and in one single day we spoke to two analysts and this was before this was before the ninety day truce. We spoke to two analysts who told us that within weeks we were going to see empty shelves here in the US. It doesn't seem like that has materialized. Yes,
there's been a pause at this point. Are you based on the research that you see the folks that you talk to, are you seeing that still a concern given that so much of what we buy in the US comes from China.
I think the ninety day pause allowed for companies that had already been surging orders in advance of Liberation Day, anticipating that terrorists were going to go up, allows them to continue to make orders and through at least this ninety day period. So it has bought some space, and
it has bought some time. They are facing higher prices, but they are not facing the kinds of exorbitant prices at one hundred and forty five percent teriffreight that we were in mad to late April that would have made many of those orders cost prohibitive. So I think it has bought some space, and that's why we haven't seen empty shells. We may still see price pikes though, because that's thirty eight percent effective terriff. That's a high rate,
higher certainly than where we were before a second. But I think it has avoided some of the shortages that we're concerned about before this truce was reached in Geneva.
I'm wondering if in your observations these you know maybe some cracks in the trade truce beginning to show how much of that is just a normal part of a negotiation between two of the world's largest economies.
I think given the experience of the first years China trade war at this point in time, I would say history suggest that this isn't surprising. In that trade war, we saw multiple what I would call potential off MPs where both parties had the opportunity to take a step down from trade tension, that were either bypassed or only lasted a temporary period of time. And we also saw multiple rounds of escalation and tit for tat even when it seemed likely that the two parties are maybe reaching
an agreement of stories. Ultimately, it took two years from the initiation of tariffs to the conclusion of the deal in the form of the Phase one deal and that trade war for terrorists to come down, and even then the Phase one deal didn't last very long before attension starts to psych again. I think that helps explain the backdround for today's trade talks, where there's deep levels of
distrust on both sides. Both sides, as you're applying, are still looking to gain leverage even though they've agreed to this truce, and that's probably part of the reason Beijing has been slow to peel back these expert controls on rare earth and other critical minerals of the US has
complained about. That's leverage that Beijing wants to continue to retain in addition to the administrative challenges appealing back expert controls, and on the US side, there are a number of stats in the United States wants to take as part of its competition with China outside the trade domain. And from Washington's perspective, a trade truth doesn't mean that a
degree to pause all of that. But from Beijing's perspective, I'm not going to agree to something in the trade arena when you're hitting me on expert controls or on student pieces. At the same time.
House White House Press Secretary Caroline Lovett told reporters today that I'm just going to quote it. I can confirm that the two leaders will likely talk this week. Of course, referring to Trump and Chinese President Jiji and paying this would be the first time since they spoke, correct since Trump took office. What would this mean.
It would be the first time that we know of they've spoken since he took office. President Trump has indicated that they spoke at some other point in time, but he hasn't provided specifics of it, and there was never a readout from it, so we don't really know if that call ever happened. I think it's highly unlikely that Beijing, in this atmosphere would agree to a leader level call.
From Beijing's perspective, that's just incredibly risky. They don't want to put President Being in a position where he could be embarrassed or surprised in the way that some other foreign leaders in meeting or talking with Trump happened. Their preferred mo is for the leaders to meet and to talk once they have something to announce, which usually requires
more progress thant working levels. Obviously, that flies in the face of President Trump's preferred approach, where he likes to work things out with his counterparts, and that often is a faster path to resolving differences. And so if a phone call happens this week, I think that is a
good thing for trade negotiations. That probably will help restart momentum or at least clear the error in a way in which these tensions are kind of boiling on the back burner, But I think a call is unlikely, and what that means is that tensions could continue to boil because they're only being addressed really at lower levels, and it would take a higher level engagement to put them to rest or at least to put them into the background to the point where they're not interfering with talks further.
So my anticipation is, despite what the White House Press Secretary saide, I'd be very surprised if a phone called, did it happen, And I'd be, as a result, very surprised if we had a quick resolution to this current period of tividual first of decision kind of containing the left things boil and works them out.
At the lower levels.
Hey, Jennifer, we're going to try to fix your mic a little bit. But Emily, one thing that I wanted to talk about with Jennifer we've got a couple minutes left, hoping we can fix the connection is who has leverage in this negotiation. I mean, China has the rare earth capacity for refining these rare earth elements. We've talked about that with Jodo quite a bit, and Gracelyn Baskren over
at the Centerer for Strategic and international studies. They also have the stuff that we want to buy as consumers, but we have the consumers, Jennifer, I want to go back to you and bring you back in here. Who has the leverage when it comes to this negotiation.
So in a sense, both sides have leverage. Obviously from the US perspective, they are China's single largest market in the world, and there are very limited options for Beijing to shift those goods to other locations. At the same time, manufacturing is increasingly a very important part of the Chinese economy. It has been for decades, but especially in light of their property bubble and some of the other challenges that
they have had with consumer sentiment. At this moment in time, with their other economic weaknesses, manufacturing becomes an even more important part of China's growth hopes. On the other hand, for the US, the weakness is really in terms of consumer dependence on Chinese goods that there aren't a lot of alternative options or it is certainly not within US consumers price preferences, and so both sides are going to
face incredible pain here if terrists resume. Higher levels for China will be in the form of dropped exports, as a result, the impact it's likely to have on factories, and in course of that and impact on jobs. On the US side, it's going to be in terms of much higher prices for US consumers, to the point where some goods might not be available and there aren't ready alternatives for those goods. So both sides certainly have an
incentive to avoid a return to higher attentions here. But at the same time, the depth and deep persistence of these trade tensions against the backdrop of distress makes avoiding that outcome a real challenge.
Jennifer Welch, Bloomberg Economics Chief geoeconomics analyst, joining us this afternoon from Washington.
I'll bet you let me drive. Oh no, no, no, no, this is not a toy, honey, please hovels. I want to try it.
It's a good question, good tribes, this is the drive to the clothes.
Punk's amusing well, Trier run to dawn.
On Bloomberg Radio, and look at that.
We're just about nineteen minutes from the close of equity trading, as we just heard from Jordan Fitzgerald, about three tens of one percent. But a strong day for tech right now. The NASDAC Hire by six tens of one percent.
The Dow is flat.
Let's bring in Allan Zaffern. He's co founder and managing partner at i EQ Capital about thirty six point eight billion dollars in assets under management. He joins us once again from Foster City, California. Good to have you back on the program. We haven't spoken since Wow, just after the tariff pause, so mid April twenty or no, yeah, just after the tariff pause, I should say, Allen, it's been quite a while since we've last spoken with you.
Good to have you with us this afternoon. That's exactly where I want to start, because we're gonna get to the FED in a minute. We're going to get to sort of acid allocation. Now, maybe it's different than a few months ago, but with regard to US trade negotiations, in your view, how do you thinks stand right now?
Well, first of all, Tim and anially, thanks for having me on the show. Look, it's unclear. Right on the one hand, our administration is talking to China and arguing that they're going to delay the imposition of some of these terrorists. But then the next thing you hear is there's again conversations about maybe it's not going to be so easy. So the last we heard is President Trump will talk with the head of China later this week, and the intention is to get the conversations back on track.
If you have the two largest economies in the globe not acting well with one another, clearly that's a negative globally. And so I think on a short term basis, where this market is headed. Stock market is measuring the ability of our administration to get its way to some degree with some imposition to terifts while not being too problematic or hurtful to other countries administrations, so that we can work out face saving agreements on both sides of the
oceans or both sides of the country. So that's that's the game. Are we going to find some middle ground that enables the US to argue it's one in the imposition of some tariffs for the benefit of protecting our domestic industries, but to the same token in a way such that other countries administrations can have face saving agreements on behalf of their own cities. That's the game to play right now in terms of tariffs.
I saw a note this morning. I'm blanking on who who wrote it, but the analyst was mentioning how it seems like markets aren't reacting as strongly on Monday mornings when we get news over the weekend about US China relations, which we did get this weekend. It's not like we saw a massive drop coming in Monday morning. What do you make of that? Are are investors getting tired of all of the headlines about tariffs and the trade war?
Are or are there actually real developments here that kind of signal meaningful progress that could be good for the equity market.
I think it's a little of both. First of all, I actually think there's a tremendous amount of cash still on the sidelines, which just goes all the way back to the stimulus that was created as an effort to fight COVID.
You you still think there's still cash on the sideway sidelines?
Yeah?
I do, I do.
Who's got it?
There's like a record in money market Yes, right, I.
Know there's it did money market funds.
But I'm thinking it more of like like who has who still has you know, thousand dollars or whatever we got from PPP or from those emergency COVID funds.
Well, that's a whole nother conversation. We could get into. But I think the most affluent portions of the US citizenry have significant well which has only grown since COVID, and they have ample amounts of cash to put to
work on dips. That's why I think he keeps seeing the buy the dip mentality on top of that, As to your question, Emily, on top of that, I think what you're seeing is people are coming to a conclusion that the current US administration is it only has a tolerance for so much pain in the markets before it's going to revert back to a more amenimal set of
tariffs that the global economies can tolerate. In a world in which we have ten percent on average tariffs imposed by the US not ideal, but it's a global economy that can still grow, if even at a slightly lower rate than it would have otherwise. That's dramatically different than a world with thirty percent tariffs, which puts probably US into a global recession.
So I think.
Investors have concluded the administration is teasing out the middle ground and therefore is not reacting to the day to day headlines as to fifty percent tariffs on steel or whatever product or service of the week that they're going to talk about. I think the investors are more discerning and realizing it's probably not going to be as bad as it was feared when we had our dramatic drop in early April.
Allan, when do we start to see those those actual tariffs make their way into actual prices that we're paying for stuff.
You're actually starting to see it a bit because producers are in service providers already anticipating some of that, but we haven't seen the bulk of that yet.
And in fact, is that just because we're making our way through inventory, Like you know, we heard from the retailers earlier this week or earlier that last month, I should say in this most recent earnings round that they're still working through inventory that they had pre tariffs.
Is that why?
That's a large part of it?
Okay.
The other issue concerned though, is imagine a world in which everyone's holding off on offering the products out of a concern if and when and how the terriffs show up. So there's also a bit of front running right where products are going out the door as quickly as possible in avoidance of the tariff being imposed on that. So when you may see some dramatic step step shifts up in prices if in fact TIFFs become legislated into law. So there it depends on the product and service from the country.
What do you think is most at risk?
Well, I think most at risk are really where we're trying to protect, are a creator of a fair playing field. So it's anything from importation of energy services too oddly enough things at risk like the notion that maybe foreigners are going to get taxed on investments in the US. That's an easy one to impose on foreigners. It doesn't hurt us, so you're going to see the reverse, and then we don't know how to predict if other countries will impose those costs back on US investors to non
US investments. That might be the next step we haven't seen yet.
Hey, I want to shift cares a little bit before we go. Just get your word on what you're seeing with alternatives right now. Private credit and private equity. Venture capital certainly is a relatively large portion of the way you invest the money that you manage. What's the opportunity there right now and how has it changed in the recent months.
As really it's to private credit, we have not seen a lot so. Interestingly enough, despite concerns about economic slowdowns, let alone recession fears, we're seeing little if any evidence that there's any degradation or decline, and the ability of private companies to pay their debts, meaning private credit, in our mind, still is a highly attractive asset class, yielding much higher annual income streams than what you can buy
from the public bond markets. In the privates arena secondary investments, when you're the buyer of someone else's illiquid investment, we think you're going to see more and more of it
for two reasons. Most recently, there's news that a lot of the universities are finding themselves having too much ill liquidity, finding a need to raise cash for potential will increase in tax rates on their returns on their investments, and so they're coming to the markets with portfolios of investments that secondary en buyers, the second investors can buy at a discount.
Okay, that's we're seeing a lot more of that.
We're probably going to see it.
Alan zaffrin Ieq Capital, thanks for joining us.
You're listening to the Bloomberg Business Week Daily Podcast. Catch us live weekday afternoons from two to five eastering. Listen on Applecarplay and Android Auto with the Bloomberg Business app, or watch us live on YouTube.
Shares of Stars sored twenty seven percent on a Friday, this after the company set it out at five hundred and thirty thousand streaming subscribers in the US during the fiscal fourth quarter. The company is now a standalone entity. It separated from Lionsgate Studios and began trading independently last month. It's got a market cap now just north of three hundred million dollars. Today, it gives back some of those gains from Friday chars following as much as fourteen percent,
down nine point four percent as we speak. We're joined here in the Bloomberg Business Week studio by Jeffrey Here. She's president and CEO of Stars. Jeffrey, good to see you, Welcome investors, welcomed the streaming additions in the fourth quarter. You increase total subscribers in the US by close to two percent. You attributed that to the premiere of the fourth season of Raising Canaan. What's in the product pipeline right now, the content pipeline that will continue with the growth.
Well, thanks for having me. It's good to be here this afternoon. We have a great slate in twenty five. You know, we're coming off a strike effected year where we only had three big tempole shows and so that created a little kind of gaps in our content. And so what you see as we roll into twenty five is we've got five big shows coming. We have BMF which premieeres this weekend, which is a fifty cent show, one of our biggest shows. So we're excited about that
premiere this weekend. We rolled that into Outlander prequel called Bood of My Blood, which I think the fans will really like.
This is why Carol is going to be so mad she's not here today. She's like, the biggest Outlander fan are out Yeah, that's okay, this tell her.
We'll tell her the prequels.
You know, twenty years prior to the first season of Outlander. It's back in Scotland. It's Clan Lauren. It's two romance stories, so it's how each of the leads of Outlander's parents met and fell in love. So one of the stories of Romeo and Juliette story rival Clans Forbidden Love. The other is a World War one you know, with a gentleman on the front and a woman reading the letters, and it's a phenomenal tale.
There aren't any.
Books, and so the fan base it's all new to them, and so I think it's gonna be a really great show. We come back with a fan favorite from twelve years of called and Spartacus, which is going to be you know, I was talking to a producer on the way down here. He's because it's coming back. I'm like this fall and so that's gonna be and the Stephen D. Knight's doing that, it's gonna be as good as, if not better than
the original. We come back with Force, which is one of our power spin offs, and then back into Canaan, so real strong ear of content. We wrap that with you know, big movies from Lionsgate like Ballerina, and then Universal has a couple of movies coming off Penheimer. So it's really great portfolio of content coming this.
You were pretty excited.
Talk about your target demographic because it's it's not every single person that wants to watch TV, right.
Yeah, Look, we're really trying to be complementary to all the broad Bay streamers. We've in twenty sixteen when we launched our app. What we saw from the data, and it was the first time we really got data Honor subscribers, it was that women was driving our business and so we leaned in significantly into that. And so our content is really only focused on women and underrepresented audiences, and not only on screen, but in the director's chair, in
the writer's room, all the way through the office. Seventy percent of my direct reports of women in eighty percent of women of color. And so it's really a network for buying about women and underrepresented audience is run by women and underrepresented audiences.
So you see yourself trying to broaden out the content to bring in more people, or I make it a bigger tent, or is this the niche you want to focus on.
Look, it's not.
I'm not saying it's a niche. It's a huge target market. But like Emily said, the other streamers want to have everything.
Yeah, Look, they want to be all things that everybody and they're competing with themselves, and we really are focused on, like I said, women are underrepresented audience. We think that TAM and the US is about eighty million households. We're sitting at twenty million households today, So we think there's
a lot of room to go. And if women in is a niche, which are forty nine point six percent of the planet small, then I'm happy to have everybody else focus everywhere else and let us do what we're doing. So we'll continue to be complementary. We'll continue to really be the destination of content, our rated adult scripted content for women, and so we feel good about that.
So you don't have ads right now on the streaming correct platform, how do you grow revenue then if you don't have ads, So.
I think there's really three ways we can go revenue, and we'll think we'll grow revenue one to three percent over in you know, in the next short term period. Want to subscriber growth. Like I said, we've got a
lot of tam still out there today. You saw that in the first quarter we were the base one point eight percent in the US, and so we think there's a lot of opportunity and as these broadbay streamers continue to compete, it'll look a lot like the old world where you have stars sold as an add on or buy this service and get stars included. So we think there's a real opportunity for us to kind of replicate that unique position we had in the traditional world on in the new digital world we are today.
So you're saying, look out for bundles.
Lookout for bunchs.
Do you have any Now?
We are the most bundled service in the space today. We have five bundles. We are about to launch another one this week. In the first quarter, we had a be Et Stars bundle on Amazon. We had an HBO Max Stars Bundle on Amazon. We've actually bundled BritBox into The Stars app was the first one we've bundled into ourselves. So where we are, we are set up to bundle with almost everyone.
What's a bundle you're working on? I can't tell you that today, but in your but describe it.
For us, Like in an ideal world, these are these you know, we went through a few years, about a decade ago, where the major telecom companies were bundling this stuff. If you subscribe to AT and tier Verizon, you get you know, X or Y for free. That was that was unique in the context of Okay, you're paying for a cell phone plan, you're getting content for free.
What world do you want to see?
I think the nice thing about bundles I think everybody looks at it and says, well, for the consumer, they get a discount and the companies get stickier. What really makes the bundle unique and special for the companies is you're lining at your content slates together. So for example, last quarter with HBO Max, the White Lotus launched in February. They didn't have a big show launch in March, but we had raising Canaan launch in March.
So when you put those.
Together, you have two big premiers working with each other to continue to drive subscribeer acquisition. So when we look at the landscape that's out there today, we look at content that's either complementary or you know, folks that are servicing the other side of the household that we're not. And if you can put our service with their service and complete the loop for the household, it's a really compelling bundle for consumers.
Tim mentioned this is your relatively new as a public company. It's been not even a month right from separating from Lionsgate Studios. Talk a little bit more about just how that split is going to help Stars now.
You know, I think the board three years ago looked at the combined company and said investors like a simplicity and story, and the fact that you had a studio and a network together wasn't then simple, and it was hard to figure out where to put your investment dollars. I think investors like to invest in content or distribution and not kind.
Of a hybrid.
And if they are going to put it in a hybrid, such a small cap company, the point you put money into Comcast or NBC Universal as a higher Disney as a hybrid there and so rightly so made the decision to put the two companies to put value back on each of the companies. I think you've seen that in the stock performance on both Line and Stars over the last.
Couple of weeks.
But ultimately allows us to focus on what we do best, which is really put great content on the air, own our own content, and drive our subscriber base to ultimately drive profit and return money. We've got a fifteen percent margin today. When we get into a steady state in twenty six, we'll convert seventy percent of that to un lever free cash flow. So profitable business generating a lot of cash for investors, and we think it's a very investable business.
Go ahead.
I'm curious when you say own your own content, what does it actually mean in practice that it's only on your platform and you would never sell it to others? Do you own the production supply chain as well?
How does that work?
So today everything that we have on Stars is exclusive to Stars for a period of time. It's a window that when you like Lin's Outlander from Sony, you get an exclusive window where they can't sell it to somebody else domestically against you because we're only us in Canada, but your license, you're renting that content for a period of time. When you have ownership economics, not only can you control costs better because you're actually in their daily making it controlling the cost.
But you create other revenue streams.
So for today, I don't if Outlander gets to be sold internationally, that money gets to Sony. If I own then the show, I can actually put revenue streams on international sales and second window domestically, or I can net the cost down so it allows us as we turn the slate over and get to half the slate in twenty seven, being Stars owned, we can start to drive margin for the business, which ultimately should be multiple expansion.
You're coming to this business or you're at the helm of this as an independent business at a time when cord cutting is just absolutely rampant right now. I mean when just a few years ago this was for you, it was a one hundred percent PayTV supported business, That's what Stars was was. Now seventy percent of the revenue comes from You're still exposed to cord cutting headwinds for about thirty percent of the company.
How do you combat that?
Like, how do you make up for the cord cutting revenue that you will inevitably lose with streaming?
So two things.
One, I still think there's a lot of opportunity for us on the linear side because remember we're not a fully distributed ad supported network, and so there's still opportunity for us trying to grow the business. And as you see with DirecTV, with skinning your bundles and Charter now leaning back into video, I still think there's an opportunity for us to play in the bundle world on the
linear side to drive growth for the business. There eighty percent of all of our customers, whether they're on digital, linear or a la carte or revshare, which means two things. One, we're making money for our partners, but two people chose Stars because they wanted the content, and so the content has to work. And so at the end of the day, as long as the content continues to outperform and be some of the biggest shows on television, will grow the business on both sides.
Emily mentioned that you don't have advertising. There were years when I was covering Netflix when they were saying, we're never going to do advertising. We're never going to do advertising. And look what they're doing now, they're doing advertise. Are you ever going to do advertising?
I don't think we're going to ever do advertising with the Stars content. It's you know, we don't have a lot of content. We have about ten originals so called one hundred hours of content. It's called six hundred minutes of advertising. It's very our rated, it's very adult. So it cuts a lot of the advertisers that won't advertise
on our service. But I do think, you know, we build our own app, we have our own data stacked, is very scalable, and that gives us the opportunity to actually help other linear networks that are marooned on the linear side, that don't have a digital future, and actually use some commercial deals where we could actually take the linear feed, turn it into digital, launch it next to the Stars app, and have an advertising supported business next
to our subscription business and take some of the economics on behalf of our partners.
So essentially, what you're saying is you could have maybe a less expensive consumer version that is ad supported in certain areas.
When when would that be?
You know, right now we're like we said, we're three or four weeks. It's about separation.
Right now, we're really focused on set of making sure we're setting up the business, talking to investors, making sure everybody understands the growth story.
And I think eventually the two to dot zero will come pretty soon.
Cool.
Do you feel in this environment that you have pricing power because this is a space where consumers there's so many options for what you get for your streaming.
I know some people it's like.
I already have Max, I already have Netflix, and I have Hulu. There's just a lot of choice and a lot of times people judge on price.
Yeah, so you know, as a complimentary service, we've always wanted to be prices significantly below the broad bay streamer. So you know, Netflix without ads is twenty four dollars. I think Hulus around eighteen or nineteen, we're at eleven. So as long as they keep continuing to raise that price, it gives us the ability to raise underneath it. Because in the consumer's mind, anything that is you know that much, it has that much gap. People see that as a
complementary decision versus the competitive decision. So we always want to be significantly below the broad based streamer. So I do think we'll have some pricing power. We've done two rat increases over the last two years. I think that's something will take a pause on for a while and get back to just pure subscriber growth for a way to grow, but we reserve the right to do some increases.
In the future.
Emily raises the question about pricing power when it comes to consumers. What about the pricing power that you have to compete with the huge companies such as Amazon, Netflix, Max and the likes. When you're out there bidding up content, how do you compete?
So it's interesting.
I think we have a specific mission, you know, we really focus on women and underrepresented audiences, and we were just out in a very competitive bid for a book called All Fours, which has really taken America by storm, and the forty something women in America.
And when we went out and met with Mirandos.
July, who's the author, because we are so are rated, we are adult, we allow the author and the writers to go where they naturally, authentically would go, versus pulling stuff back for her the only destination to really put her book to bring it to life on TV as authentically as she wanted to do with Stars. And so we are able to win that competitive bid because of the mission that we have and I think you see that not only in content, but when we hire folks.
People come to Stars because they understand that we have a point of view and we have a mission, and they want to be a part of that. And so it's been very helpful having a specific lane and really kind of leaning into that in a way that is very deep and authentic.
Jeffrey Hirsh, thanks for joining us, for having me.
Yeah, goodness to you, everybody, President and CEO of Stars joining us here in the Bloomberg BusinessWeek Studio.
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