Could See CBS Looking To Buy, Following Disney-Fox Deal

Century Fox. In here to tell us more is Gita Rana nathan Our, senior media analyst for Bloomberg Economics, and tar La Chapelle, deal's columnist for Bloomberg Gadfly. Gita, what has to go right in order for this merger to show that it is a smart deal, not just now whenever one is happy and stock prices are moving up, but in times when perhaps they're not going to be so many hit movies. What kinds of synergies or combinations

make this a potential success? Um suptem. There are plenty of synergies because both of the companies are in such similar businesses. There are significant cost savings. Obviously on the TV and film production side with all of the sports programming. But I think really for them for the deal itself to be successful, there are two primary considerations. Number one is execution. Disney has absolutely stellar record when it comes to acquiring assets and then integrating them. We've seen that

time and time again with Pixar, with Marvel, with Lucasfilm. Um, Fox, of course is going to be a little bit different. It's a much bigger asset. But I'm confident they're going to do a great job in execution. I think the issue where um, you know they're not going to have as much control, is going to be on the regulatory side. Um, given all of the recent uncertainty with the Department of Justice blocking the Time Warner and the A T and T deal. So, um, those are the two things that

we are really looking at. So Tara, come on in here exactly on that point. I mean, how big of a hurdle is this going to be the cross to

actually get this deal done. I mean, it's funny because it used to be that horizontal mergers like this, meaning that a company buying a competitor, were the kind that we're most sort of fraught in the regulatory process, and now we're seeing a T and T time Warner run into hurdles, which is a vertical merger, meaning they're not buying competitor, they're buying an adjacent business and that's facing

all kinds of issues. So it seems like the sentiment has been, well, maybe this will have an easier shot, which just doesn't make sense when you look at history. So I think it could be really interesting to see how the government looks at this. I mean I think they're going to have some issues on the sports side. UM Sky TV, perhaps that's a Sky PLC. Maybe that's a little bit easier. Now we'll see easier for Fox to complete the deal because that would be uh sort

of what would happen before Disney would acquire Sky. So concerns about proper being a fit, improper broadcaster, and you know the scandals that Fox has had. Disney is probably a more preferable buyer in that case. Keith, what does the competition make of all this? I mean, it's not as if they're going to sit idly by while Bob Iger tries to combine two huge companies. Yeah, I mean this move itself has kind of been um widely viewed as, um, you know, creating a Netflix killer. Now, I'm not really

sure whether they're actually going to be able to do that. Um. Netflix is already far ahead, UM, so you know they It's going to obviously take some time for Disney to to ramp up its presence in the streaming world. But I think the bigger question is going to be what happens to all of the smaller media companies. What happens to a CBS, Viacom, all of these names um now in play with Disney becoming such a dominant force in the media world. I mean, I think CBS is going

to be really interesting to watch. And we just did a Gadfly piece this week on the three different sort of logical deal options that they have on the table now. And I think Sherry Redstone could look at a Viacom merger again, which is their other property that they control. UM, I don't know how much sense that makes with Viacom going through such a tough turnaround. But the other ideas

are Verizon. Verizon could copy a T and T once we get a better sense of how this trial is going to go over the Time Warner deal, Uh, they would you know, be adding content in the same way that A. T and T is doing with Time Warner. Or there's lions Gate, which has John Malone involved dealmaker obviously, um I make I think it makes sense that lions Gate, the film studio, would get rolled up into something at some point or buy other things. They bought Stars not

all that long ago. So I think CBS not having a film studio, and clearly Disney seeing a lot of value in film studios buying Foxes and seeing how Netflix has had so much success on the on the movie side as well, I think it only makes sense that CBS could look at something like that. Next I'm gonna throw something crazy out Terra. Would the bigger and improve Disney plus Fox be interested in buying Netflix roll them up, makes them behemous? It's interesting. I mean, I always thought

that Disney would be a logical buyer for Netflix. It could even solve disney succession question obviously, But I think now with this deal, they're kind of going up against Netflix and they're trying to take more control of Hulu. So I think it depends what happens with Hulu. Does Comcast fight Disney if Disney tries to take full control of it and try to break that up and take it themselves, or if if Disney does keep it, I think they'd be more focused on the streaming services that

they're keeping rather than going after a Netflix. What do you think, Yeah, I think so. You know, one of them factors is also going to be international. So Disney by buying um Star India um gets a significant exposure internationally. No Star India actually has a very big streaming presence through its app there, which is called hot Star, which is siles ahead of Netflix. So Netflix is still kind of trying to gain a foothold in the Indian streaming market.

For instance, Disney through this hot Star app is already going to be miles ahead. So internationally they they're probably already a little bit ahead of the game there. The problem is really going to be in the domestic market, and as Tara pointed out, UM, you know, we're going to have to see what happens with Hulu they have, I mean, the scale that they have there is absolutely not comparable to netflixes at all. It's only about sixteen

million subs or so. Um So we'll have to see how that that plays out with com Cash once their consent decree and some time next year. Well, thanks to both of you for breaking this down. We will be talking more about that throughout the day. The fact that Disney is indeed buying parts of Fox for fifty two billion dollars. Guita around Nathan, senior media analyst for Bloomberg Intelligence, as well as Tara la Chapelle, are Bloomberg gad Fly columnists who covers all things tech and deals that has

been following this for quite a while. Really at the big question now has to do with Netflix. How they respond This is Bloomberg strong jobs data, Well it may falter. According to our next guest, Danielle DiMartino Booth is the founder of money Strong and a Bloomberg profit and she joins us here in our eleven three oh studio. Danielle, always a pleasure, Thanks for being here. What do you mean by this strong demand in jobs may actually falter? You don't think that the job the hiring spree is

going to continue. I think that the hiring spree for skilled workers is certainly going to continue. Um. But by the same token, I don't think that people are paying near enough attention to some of the distress um signals emanating from the restaurant industry right now. Restaurants followed brick and mortar retail into the abyss of over expansion, and

now they're starting to shrink that footprint. If you look at the current economic recovery, as long as it has been going on, the main hiring sector has been in these restaurants, restaurant, leisure, entertainment. They've all over expanded. Danielle, You've been a phenomenal over the decades of predicting the early signs of a problem, certainly leading up to the housing boom and bust that we saw lead to the

two and eight failure of Lehman Brothers. And I'm just wondering right now, we see a dramatic consensus around global synchronized growth, healthy consumer everything is hunky dory, and yet consumer debt levels are rising if you strip out mortgages rising to record levels. Does this concern you? Is this a warning sign? Are you seeing rising delinquencies that are

also a warning sign? I absolutely am. Consider something we have seen twenty three back to back months of in lation adjusted credit card spending growth outpaced that of incomes, and the gap between the two is widening. Credit card delinquencies are going up. Major banks are setting aside lost provisions at a faster clips. City group actually expressed surprise at how quickly they're having to build up their lost provisions.

And we're seeing a continuation, a very quiet continuation of sub prime auto delinquencies and the beginnings of f h A Mortgage delinquencies take up from O nine and ten. So f f h A is the one agency that allows UH allows borrowers home buyers to put down much less for their down pays, the only three percent game in town, and it was really the only open mortgage entity in the immediate years following the housing crisis where people could go and put very little down to buy home.

Do you feel like policymakers UH sufficiently recognize the increase in fixed costs that a lot of consumers are facing. I mean, I was looking at a Moody's report on consumer asset bacts securitizations that they put out yesterday. As the share of renters paying more than fifty percent of their incomes towards rent climbs to almost from twenty four point one percent in two thousand seven, home ownership slumped

towards a fifty year low. Meanwhile, health insurance costs some thirty two faster than a twelve percent increase in workers wages five years. These are astounding statistics. We just had the CPI report come out that policymakers perceive as being benign. How could they see it any other way? If if rent inside the c p I are only eight percent of the index, and yet they are at least a third, if not fifty percent of a given households balance sheet.

They're running upwards of four percent. If you think back to the peak of the housing boom, that was what home price appreciation was doing at the time. But right now home ownership and renting are more prohibitively expensive than they've ever been. And no, I don't think this is on federal reserves radar screen. I just want to go through some items that people may actually purchase, such as gasoline. Right, gasoline prices they are up. We're seeing about two dollars

and fifty cents a gallon for a national average. That compares to two dollars and twenty one cents same time last year, So that's an increase. We've also been speaking, as you have, about the delinquency for subprime auto loans, and we're talking about a figure that it's about ten percent of all of those loans are at least ninety

days or greater delinquent. What happens then, if the Federal Reserve actually goes ahead and raises interest rates in three times and indeed even four times, as many economists say that they're going to do well, this is uh. We we've read this book before and we actually know how

it ends. The FED will always over tighten into late cycle signs, and right now we could possibly see a four percent handle coming on g d P, and it is going to be the biggest head fake, and the FED is going to end up chasing that head fake and over tightening. If Powell is not astute to the fact that still waters run deep so underneath the biggest natural disaster year in how long two thousand seventeen. Of course,

building materials have gone through the roof. Of course, there were two good years of of of of car sales. All of this rebuilding effort has no precedent. You can't compare three hurricanes and two massive wildfires to Hurricane Katrina. It doesn't work. But that's the only thing in the fed's models. Just to push back a little bit. We're not seeing inflation pickup. We're not seeing some of the other signs of a late stage in the credit cycle.

Investors will they have flown into the riskiest assets. They have shown some discretion this year. You are seeing some potholes and credit markets, some losers amid the froth. So you know, what are you looking at when somebody says to you, look, yes, all that understood. Still in the scheme of things, consumer debt relative to GDP isn't necessarily at to record high. We aren't seeing the same kinds of default rates as you would leading up to a problem.

What do you say to them? I think that the Fed has left the p p I for dead at its peril. We saw the producer prices came out at a six year high, and it was it was completely wholesale disregarded after the CPI came out by policymakers. A lot of that was gasoline, right, I mean the gas I think about two thirds of the jump in November

were gasoline related. It was up more than fift But if you look at transportation, if you look at manufacturing, if if you look at anything related to the supply chain, disruption, which is unprecedented following these natural disasters, and you listen to every you can look at ten surveys, this is my upcoming Bloomberg View column. You can look at ten regional manufacturing surveys, and all of the managers are complaining about the fact that their prices have gone through the roof.

They're actually having to leverage up to cover them if they can't pass along these price increases, if they don't have pricing power. It's building in the pipeline, it's it exists. So what do you think the FEED should do next year? I think the FED is in a very difficult place. I really do. I'm hoping that I'm hoping that there are some eagle eyed staffers who can look through this

supply chain disruption. Maybe hike in March, maybe, but they really do need to step back and study the household sector and figure out where inflations really going to be after all of these natural disasters. Work their way through the data, because at the end of it, you will have millions of households who remain devastated by these natural disasters and don't have the wherewithal financially to rebuild and

replace all of these assets. They will add on to the existing the pre existing defaults and delinquencies that we have seen already in the household sector before Hurricane Harvey landfall. Danielle di Martino Booth, thank you so much. Always a pleasure speaking with you. She is founder of money Strong, a Bloomberg profit. Also, for nine years, she was the AID Direct Advisor to President Fisher. The Federal Communications Commission

is currently meeting. They are widely expected to reverse net neutrality rules that were instated during a former President Obama's reign. Here to talk about what the implications are is Jerry Smith, media reporter for Bloomberg News. Jerry, it's almost a foregone conclusion that this committee will indeed vote to reverse not

neutrality rules. Is that correct? Yeah, I mean the hearing is happening right now as we speak, but it is pretty much um, you know, on along party lines, and the Republican UM FCCS commissioners have the majority, so they're going to um you know, they've made it pretty clear that they're going to vote to remove these rules. So, Jerry, I've seen a couple of polls and it looks like the majority of Americans polled art not for rolling back

some of these net neutrality rules. Uh. The argument from the industry is that the big broadband behemoths would invest more in their infrastructure if they knew that they could earn more from it. Can you lay out both sides and UH and and sort of why this is happening now? Yeah, I mean, the the internet service providers were talking about

companies UM like Comcast and Verizon. UH. That's the crux of their argument that if there's extra regulations on how they how they manage their internet service, then that, UM, you know, that gives them less incentive to invest in their networks. UM. You know, there is some skepticism about

that argument. Craig Moffatt, who's probably one of the more respected UH analysts in the in the industry, UH, you know, he said, there's a lot other there's a lot more factors that go into the decision of whether a Comcast or Verizon invest in their broadband network than just whether

there's UH neutrality rules. I mean, one key thing about the you know, the future of these companies UM Comcast in particular, UH, then their video services declining, and so the future of their business is selling you internet service and they do not want the government to have any ability to tell them how much they can charge you for internet service, which is what these rules do, and

that that's really the bigger fear. It would be very, very surprising to see Comcast or Verizon or E T and T slow down people's web traffic or block certain web traffic. The big concern for these companies and their investors is can the government have the ability to tell them, you know, how much you charge for broad band because that's really where their future profits are going to be. Drey, have we seen this before in the wireless industry with

I guess it's what called zero rating. Yeah, I mean, that's another thing that's happening. I mean, the wireless side of internet service has sort of been overlooked in this whole debate. It's really been more about, um, the high speed Internet that you use on your desktop computer, uh and your WiFi at home top computer. That's an old that that I can't remember what is that agetting all? Yeah, No, but wireless is I mean, that's something that you're seeing

the wireless companies do. Is zero rating is an industry term for saying we are not For example, if you want to watch Netflix on UM on your phone through a wireless network. Uh, that wireless provider would not count that data usage towards the limit that you have. I mean, some people have unlimited data usage. And I think T Mobile did this with Facebook and Facebook Messenger. They said, you know, free access to that that was. That's just one of there's a few examples of this where you

they say this won't count. Uh, this particular service won't count towards your your data cap and and that's controversial because then you're sort of in some ways, these wireless providers can pick winners and losers. So, Jerry, I guess if you said worst case scenario, what happens if all of these internet providers jack up their prices sky high and if anybody wants to get on the Worldwide Web

they need to pay them. The flip side to that is these companies are going to be judicious about how much they raise rates because they don't want to ignite a backlash that ends up creating them and and sort of labeling them as utilities. Right, I mean, isn't this sort of the push pull that people are looking for? Right? I mean I think the um, you know, the internet providers will be very very careful about doing this sort

of thing. I'd be very surprised if in the near future if these rules get rolled back and there's gonna be probably a prolonged court battle over this, regardless uh that they did anything in terms of blocking or slowing traffic. And the other thing is, you know, this is really more about these smaller startups that need access to the Internet, and not so much some of these big companies like Netflix that are are so huge that this doesn't really

affect them as much anymore. You said that they're probably going to be lawsuits. Could that end up preventing a reverse of the net neutrality rules altogether? I think it's it's you know, you talk to experts and they would argue that this is likely going to see legal challenges in the future regardless of how today's hearing turns out. So this is something that's been tied up in the courts for several years prior to this, and I'd be

very surprised if it doesn't stay that way. Well, I'm just wondering if this could lead to specific add on charges if you want to go to specific websites. So if you'd like to go to a website that is owned by a T and T and you happen to be an a T and T wireless customer, Great, they'll let you do that along with your planets. The data that is used there is not going to be counted

against you. But if you want to go to a competitor's website, or indeed, if you actually are a content provider, which a T and T is seeking to become right through there, well they already are really with the addish network to a certain extent. But if you want content from a competing company, maybe they'll slap on a five dollar a month charge, or they'll make it more expensive

or prohibib or the website could charge directly for that access. Yeah, I mean, I think it would be less obvious to the consumer initially as far as how much you're paying. I think this is more about a streaming service like Netflix or an internet a YouTube and whether they would have to pay extra in order to make sure that their content reaches your home unimpeded, and whether they would

have to pay an internet provider to do that. Um. But you know, I think the bigger question is also just um, whether these internet providers, um, they just don't want the government looking over their shoulder. They don't want the government telling them how much they can charge internet service. Thanks very much for being with us. Jerry Smith, our media reporter for Bloomberg. He'll be following that f c C, the Federal Communications Commission decision that will be coming shortly

on net neutrality. We have talked a lot about the GOP tax overhaul plowing toward passage, and yet to GOP senators just slammed the fact that the tax overhaul included cuts for the rich. We're talking about Susan Collins of Maine and Marco Rubia of Florida. Of Florida here to talk a little bit about what this means for the passage of the bill is Terry Sullivan, partner and senior Republican strategist at Firehouse Strategies in Washington, d C. Also

the former campaign manager for Marco Rubio's presidential campaign. Terry, thank you so much for joining us. I'm wondering how should we view the descent that we're hearing out of individual members of the Senate Republican Senate. Is this a bargaining chip that you're basically seeing in real time, or is this real opposition that could end up blocking the passage of the bill. Well, I think it's still a bill in progress and that you know, and tell there's

and tell there's something final. Um, it's all negotiation and uh sometimes making sausage isn't pretty um, even if the end uh end result is going to be what we want. Um. So I think there's there's still a lot of negotiating going on, and I think that's an important part of the process. Um. That there is no done deal in this kind of flies in the face of of the Democrats argument that this was ramar added through. This is you know, there's real debate about what this uh, what's

the details of this bill look like? But you just said I'm just trying to understand this. You said that the bill has yet to be completed. We don't know many of the details of the bill. If this is such a significant piece of legislation, why would the details be released and then only have perhaps five days in order to analyze this without vigorous debate from public, uh, with public input to craft the bill in the first place.

What how does that make sense? Yeah, I mean, look, part of it is the the hyper politicization of everything. Now in that look, the senators that you know we elected umu as Americans are are there hammering out a bill on the on the Senate side and the House members on the House side. And you know that doesn't mean that every single one of us has to be

fully informed of every step of the process along the way. UM. It's concerning if they don't have the information as in some cases in the past, but clearly the the legislators are have the information and are working through this UM and so uh, it's covered like a horse race, just like a political campaign would be. But but this is this is the process of give and take and what they're trying to do is is find a tax reform

bill that benefits all Americans. Terry, I think, UM, right now one sort of drumbeat, and the backdrop is the fact that if the GOP doesn't get something done by year end, that the landscape could potentially change next year. Given the fact that Alabama new has a new senator who is a Democrat. Do you think that that could potentially either uh, throw a wrench in the works if there is no bill passed by year end, or if

this is what's accelerating the talks right now. Well, you know I think that, yes, I mean, look, there's gonna be one. Clearly, everything has come down to very party line votes, um, And the Democrats are not going to support taxi form or healthcare reform or any of these Republican proposals. So the Republicans need the votes to do it, and and that having one fewer vote is certainly going

to make it tougher. Um. So whenever, whenever Jones is sworn in it, uh, you know that's that is one fewer vote for any of these piece of legislation to get through. And just talking about Alabama Democratic Senator Doug Jones, who just won the election the special election. I'm just wondering for the GOP generally, what has the shakeout been like. I mean, we've seen reports from in fighting among members

of the GOP, people sort of soul searching. What this means about President Trump as the head of the Republican Party. What's your take on this? You know, I think it. Uh, you can't, uh, you can't underestimate the fact that there is there are some real divides within the Republican Party

right now. Um. But in part of it has to do with the fact that the Republican Party is so big and so strong compared to the Democrat Party in that control you know, the House, the Senate, the executive branch, the majority of state legislators, the majority of governor's mansions. I mean, the Republican Party really is a dominant national party. And therefore, once you get to this side, you're gonna size,

you're gonna have factions within it. Well. But because there also is this fee here that we have heard reported and perhaps this isn't true, you can you can dispel us of this, um, but there's a sort of feeling that the Republicans currently, Yes, they are very big, and they're failing to get certain things done even though they have all this power. Right, I do do not disagree with that. I'm not gonna argue that point at all, um.

And look, they've they've run for all other party has run for a lot of years on you know, repealing Obamacare and uh tax reform, and so voters are expecting him to actually get something done. And uh so I don't I don't disagree with your premise at all. Just quickly, Uh you know, Josh Holmes, who was the former chief of staff of Mitch McConnell and a political advisor. He said that the victory in Alabama of Doug Jones unmasked Steve Bannon's incompetence. Do you believe that? Uh No, I

don't believe that at all. Steve Bannon's incompetence was unmasked years ago when he ran a Biosphere two program in the Arizona Desert to seclude people from the outside world for you know, months at a time. Look, he's not, nor has he ever been a political strategist. Um, No one prior to Donald Trump has ever paid the man for his political advice. So, you know, he elevated himself, but with his White House position. He came into the Trump campaign in the final three four months. Uh. You know,

the media loves a Darth Vader. Um, he is one gruesome looking Darth Vader. We gotta Terry, We're gonna have to leave it there. We gotta run. I want to appreciate your appearance, said Terry Sullivan, partner at Firehouse Strategies and a senior Republican strategist. Thanks for listening to the Bloomberg P and L podcast. You can subscribe and listen to interviews at Apple Podcasts, SoundCloud, or whatever podcast platform you prefer. I'm pim Fox. I'm on Twitter at pim Fox.

I'm on Twitter at Lisa Abramo wits one. Before the podcast, you can always catch us worldwide it on Bloomberg Radio. H