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There was a headline today about how Amazon and Google are being probed by the Federal Trade Commission on their search advertising practices.
This is according to.
Bloomberg reporting, citing people who are familiar with the matter. So we need to bring in Justin Treesi. He is the anti trust litigation and policy analyst here for us at Bloomberg Intelligence. Justin just walk us through what these headlines mean to you when you look at it through your anti trust lens.
Hi Scarlett, Happy Friday to you. So interestingly enough, here in this case, it really looks like more of a consumer protection investigation, not an anti trust kind of investigation.
So what I mean by that here is that we're really looking at the pricing and the terms that perhaps were set forth by Amazon and by Google in their workings with advertisers, and when the or not that pricing and those terms was misleading in any way, So a different kind of series of facts here from what we're seeing in the anti trust cases route advertising, with a big one coming up in about a week the Remedies trial and the Google ad Tech case starts in Virginia
very soon. More risk there, if you ask me. But this one here really focused on those pricing policies. It looks like at those companies and the remedies here are probably nowhere near the kind of breakup risk that we would see in a more antitrust aligned case.
That's what I was going to ask justin is whether or not you know this makes the case to bolsters the case to break up these tech giants. I also want to make clear that these allegations are now different from what both Google and Amazon are facing. They're facing trials this month, right with separate lawsuits brought by federal agencies.
Yep, that's right.
So you're hit the nail on the head there too. This is really more related to search issues and search advertising, which, interestingly enough, that's what we just had that huge remedies ruling on in the Google search case, right. And in that case, there was a lot of discussion in the remedies about increasing transparency and pricing for the text based search ads, right, So one could actually say a lot of those remedies are already on their way to being
implemented as part of that ruling Number one. Number two, Yeah, absolutely, the Google case that's pending, that's about open web advertising on websites, you know, little ads you see when you might go to Bloomberg dot com or CNN dot com for example, that pop up on the side, separated apart from search ads. And then the Amazon trial coming up this month that's about Amazon Prime terms, right, and whether or not there was misleading kind of behavior and how that was sold to consumers.
We should note that the FDC and Google declined to comment on our reporting in Amazon did not respond to requests for comment. So justin when you look at all of this, what does this mean in terms of how much of an overhang this will be for the companies? Is this something that's going to be a month long investigation or months long maybe years long investigation?
Right?
And I think the latter definitely scarlet right, So I think just now you know, and great reporting by the way, as usual by our colleagues Leahoniland and Josh Cisco over at Bloomberg News. But I would say, you know, we're really early on here, I think, is the story if they're just starting to look into these these allegations, These things can take years absolutely to pan out. A lot of times there's no case that's even broad at the
end of them. It's really about ascertaining the facts, figuring out what, if anything, happened, and moving on from there. So I don't think we'll see any more announcements from the FTC about how this is proceeding either. Typically all of this is confidential, so as it moves forward, we may or may not see updates that come out, you know, in different ways about the case. But it's a long term risk absolutely.
Is this just another example though, of how the Trump administration is deal with big tech? Do you think justin.
Yeah, you know, I find this a little interesting too, right, So I think, you know, you look back to the AI Action Plan that came out earlier in the summer, and you know, in that plan language the White House said, hey, FTC, stay away from investigations that might inhibit the growth of
AI in any way. So that leads me to believe, you know, are we looking to areas like advertising as a car veut from that messaging, right, are we looking to different areas of tech there there might be a problem that falls out of that.
Ambit of AI.
But it seems like, you know, and there is that whiplash right where the White House might have one statement on things and there might be a visit to the White House right by certain CEOs on the other hand, But then you said the FTC file pursuing an investigation like this, So there certainly is a back and forth. But I would say if it doesn't fall within the ambit of AI, there's still is a possibility and some risk that things could be subject to investigations.
Okay, so very much moving goalposts and a TBD kind of scenario. Justin you and Jennifer Ree, who's our senior litigation analysts, have also done some research on Live Nation and how its dominance in events is at risk because of a lawsuit. And this is a lawsuit that will is scheduled to lead to an antitrust jury trial that will begin I think in the first quarter.
Just walk us through what we'd need to know there.
Yeah, So alter for Jennifer on the nuts and bolt of that particular case, she's been following from the start,
she's really been knee deep in that litigation. But what I will say is that it's not just the courts we're looking at here from the aspect of ticketing right Really recently, we've seen legislation introduced at the federal and state levels where we're looking at the secondary marketplace for ticketing too, and what's happening there things like increased price price transparency for consumers when they're going through that ticket purchasing process, a whole host of issues there, but perhaps
capping the fees that are allowed on the secondary sale of tickets. So there's a lot happening in that particular area. You're right, there is a monopolization suit that precedes next spring, and I think that's going to be a really you know, bet the company kind of litigation in many ways for Live Nation. But there also is this kind of political risk that's out there too, really more focused, I would say, on those secondary resale tickets, ticket resellers, you know what, I'm.
Curious, So have consumers really felt the difference yet when it comes to ticketing and pricing regarding Live Nation. I mean, I know they're sort of embroiled in a lot of a.
Lot of lawsuits.
Actually, sure, I'd say probably not yet, right. I think we saw some activity around a class action case just
really recently there. But you know, the FTC's rule mandating these price transparency issues for consumers when they're in that kind of ticket prison purchasing process that just wanted to effect a few months ago, right, So, really it's a trickle out, trickle down here, a slow moving kind of issue here with politics and with litigation, and of course, you know, we haven't even gotten to the liability phase of that Live Nation trial, much less remedies that would
be imposed if there were a finding of liability in that case. Right, So, I think we're at the beginning of a lot of activity, but certainly no real outcomes are developing just yet.
I mean, I'm a very imperfect example of you know what you see when you actually try to buy tickets, But I've noticed when I do try to buy tickets on secondary markets, there's a lot more text about how this is. You know, every single fee included, so we're not going to add anything more to your final price tag. And that's something that's only really started to roll out, I would see in the last couple of months.
Yep, you're right, and that's the FTC rule right there in play right. You're seeing them with ticketing applications. We're also seeing that in kind of travel travel websites as well, right where you kind of get to the checkout page and wait a minute, there's all these fees for things like baggage that maybe you didn't know about upfront when you saw the fairs. So that's kind of how those
are rolling out there too. And i'd say to your point, that's really the impact you've had so far on the consumer. More likely yet to come.
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Lots of news in tech, Adobe's earnings beat open AI closer to becoming a for profit company. Want to break some of this down now with any rog Rana Bloomberg Intelligence technology analysts coming to us from our Chicago bureau. So a rog, let's break down Adobe first, because I know it was sort of the step child of the AI craze for a long time. But I think with this earnings report it sort of has Wall Street rethinking.
That, Yeah, I know, it's still the stepchild. It's still not up.
I mean you could see that, you know, imagine what would have happened even if they would have missed the numbers.
So this is definitely the one that.
Has the biggest AI cloud in terms of being disrupted. And it's going to take some multiple quarters like this for people to get comfortable with the story.
I think last night they showed.
Really good numbers, really good AI adoption, but they really have to do continue to do that for a long period of time.
I think you hit it on the hit the nail on the head.
That's going to take multiple quarters of this to convince Wall Street that this is a story where Adobe has figured out AI and how to monetize off of it. Up until this point, and until very recently, it feels like investors were souring on app software makers. Why is that and how does Adobe's results start to push back against that idea?
See there again that Halo is not going to again go for multiple quarters. The concept is very simple because of large language models, you can spin up a software very quickly, which means if you do not, you don't need to go to app software vendors. You know, whether it's be salesforce, workday, or any any function that you're looking at where your large language model can do for it. We think it's a bit false narrative over there, but it's going to take some time again for people to
get comfortable. We think it is not going to be easy to get rid of the system of record for finance, for HR for sales. People are not just going to get rid of those software and just put in a prompt and let you know, let somebody take care of it. So but again, the software industry is declining right now. That is not tied to AI. But that has to do with macro spending being bad, the overall economy being bad when it comes to enterprise IT spending. So I
think those are the two opposing factors that are happening there. Oracle, I mean Adobe's results do help them a little bit, but I think it's going to be multiple years before we get comfortable with that.
And Eric, I want to switch gears and talk a little open AI because we know the company is trying to move closer to becoming a for profit company. We know that it is, you know, facing criticism from Elon Musk, who's accusing the company of defrauding investors about its commitment to its charitable mission. Just tell us how this might work, How might this conversion work?
Yeah, so again we don't have any details of what happened, but the only good thing is that Microsoft and Opening I have in principle agreed that they will move forward with this. The question, you know, for us, the biggest thing is will Microsoft still have access to open aiyes, you know, top of the line mode models or not.
So that's the biggest thing.
And second, what kind of revenue shared they will have with Microsoft on the inferencing side, so when people are using more chat GPT, whether that operation will run on Microsoft Cloud or not. So those are the things if and we think Microsoft will be willing to give some equity for these kinds of deals for these two factors, and you know that would be in the best interest of Microsoft sharedholders.
Let me ask you presently as that John had mentioned, which is about Apple delaying the launch of its new iPhone Air in mainland China. These are regulatory approval issues that are holding that up. Is that on the side of the US or on the side of China. And how big of a knock is this for on Apple's revenue line.
Yeah, it sounds like it's more from the you know, the China side of it. Now, the big question is what happens is the iPhone's going to be available, you know, a week from now, so from September nineteenth to October you know thirty first is you could say, a few days of revenue recognition of the newest model that you get in the current quarter. Most likely that gets pushed out in the next quarter. So that's the only difference
it's going to have. I know, it's a you know for the Chinese users who are looking forward to this phone, they may not get it in the next ten to fifteen days, but you know, I don't think it's going to be longer before they'll be able to get.
That in the about forty five seconds we have left. Just want to get your take on Microsoft teams basically avoiding a hefty fine with the EU. Bring us up to speed on that.
Yeah, So this has been a case that's been around for a while, and the question is to use aggreg disaggregate teams versus Slack. So Microsoft has to do it. There's always a tying aspect of Microsoft products. It bundles in these things, and competitors think, you know, that's an unfair advantage for them, and you know they have to do with they're frankly speaking otherwise. You know this is a you know, the lawsuits otherwise that they will face because of it.
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I'm Alexis Kristoffers along with Scarlett Foo and Paramount sky Dance Boy wasting no time when it comes to making acquisitions right The Hollywood Studio taken over just last month by the independent filmmaker David Ellison, now reportedly preparing a bid for Warner Brothers. Discovery and Wall Street seems to like the news because Warner Brothers up about fourteen percent right now. We've even got Paramount sky Dance on the plus side by nearly three percent. Let's break it down
with Geetha Ranganathan Bloomberg, intelligence analyst on US Media. He's watching it all for us from his perch in Princeton, GI. The great to see you. I guess Bloomberg was the first to report this, but we should make clear no official offer made yet. So what do we know?
Yeah, so what we know right now, alexis is that Paramount is definitely interested in making a bid for Warner Brothers Discovery. And what's interesting. I mean, you pointed out the timing. That's definitely a very very critical aspect here. The second thing that's very interesting about this offer is that it's going to be for the entire company.
Now.
The reason I bring that up is because Warner Brothers Discovery was actually planning to split off its different assets. So, you know, the company owns TV networks like a CNN, a TVs at TNT. They also own one of you know, the biggest Hollywood movie and TV studios, and of course they have their you know, iconic HBO Max streaming platform.
So there's a whole you know, portfolio of different assets there, and they were planning to separate out the TV assets which have been challenged for the past few years by cord cutting, and separate that out from the studio and the streaming part of the business. And so really what we were kind of thinking was that there would be a lot of and interest, a lot of appetite for the studio and streaming portion of the business, just given that, you know, those are kind of the crown jewels of
the business, if you will. But you know, having Paramount kind of come in for the entire company is obviously a little bit of a surprise. There's no deal or dollar value yet, though, Alexis and.
You are saying Etha that this, if it were to happen, would be a cash offer, like an all cash offer.
That is what has been reported. It would be a majority cash offering for all of Warner Brothers Discovery.
So I'm wondering if if Paramount Skydance is interested in all of Warner Brothers Discovery, what might regulators have to say about that.
Yeah, normally it would have been a problem. I think, you know, you do have two of the biggest studios kind of combining it will become a top studio with about a twenty five percent box office share, Not that such deals haven't gone through, you know, the regulatory process before. So if you just remember if years ago Disney bought the Fox studio that gave them about a twenty five twenty six percent share of the box office. So it
has been done. But I think what gives us more confidence in the whole regulatory process here is that David Ellison and you know, the family, the whole Sky Dance A team just went through this whole approval process for the Paramount merger with the Trump administration just about a month ago, so they obviously know their way around around the system. They know how to navigate all of the different challenges that come with, you know, a deal of
this size. So I think that gives us plenty of confidence. And the other thing that I would mention is that there is no broadcast there's no combination of broadcast assets, So combining two broadcast networks like a CBS or an NBC that would be problematic. In this case, there is no broadcast asset from Warner Brothers, Discovery.
Good good point, Githa. So I'm just wondering about the synergies here bouncing off of that, and you know, would there be a fair amount of overlap in the center that we may see a bunch of layoffs if and when this deal happens.
Well, that is absolutely bound to happen. So we were actually already seeing that at both companies separately. So remember Warner Brothers Discovery is actually a combination of Warner Brothers and Discovery, and they had like mentioned or they had announced a lot of synergies and a lot of cost savings at the time that they you know, merged those two companies. We're going to see the same thing with
Paramount and sky Dance. And now when you kind of see this mega merger, there absolutely is going to be a ton of layoffs just kind of given you know, the duplicative systems in place here. You know, you're talking about a studio business. Again, a lot of positions there can be eliminated, you know, the streaming platforms, the TV networks. You're going to have multiple teams kind of performing the same functions. So, yes, we do project something like about
four or five billion dollars in potential cost savings. A lot of those, of course would be you know, with the elimination of jobs. So the Hollywood unions definitely would not be happy here.
Yeah, I bet, and I just want to ask you a little bit about the market reaction we're seeing. Again, again, no deal has been made. This is Bloomberg reporting out there that's actually moving these stocks today. Warner Brothers Discovery up about fourteen percent, but we also got Paramount sky Dance up about three percent. Usually the acquirer comes under a little bit of pressure in the thirty seconds I have. Why do you think we're seeing both stocks higher?
Yeah, that's a really interesting point you bring up, Alexis. The reason we're seeing Paramount trade higher is because remember this is a subscale streamer, so they have only about seventy five million streaming subscribers right now. Merging with Warner Brothers Discovery really kind of puts them on the map along with Netflix and Disney makes them a really formidable player. And so this is why we're kind of seeing a lot of enthusiasm for this bid.
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