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Really interesting headline came across the tape just a couple of minutes ago. According to a Wall Street Journal, the Department of Justice opens probe into the NFL on anti competitive concerns.
I mean, who wants to mess with the NFL? I guess the federal government.
You can. But let's break it down a little bit if we can.
Randa Williams, Bloomberg Business of Sports reporter, random, what's the story here?
So basically Senator Mike Lee, he's from Utah. He sent a letter about a month ago, maybe a little bit longer than that, and he encouraged the Federal Trade Commission, the SEC in the Department of Justice to review this Sports Broadcasting Act because of the fact that it cost over one thousand dollars to watch NFL games. Now, rising costs over broadcasting gals is pretty normal. I mean we've seen every single time a league goes to the negotiating table.
Normally the costs are passed down to the consumer, but also the games grow and so I think that it'll be interesting to see how they approach this if anything changes. But the NFL still has four years left on its broadcasting rights agreement. There have been reports that they want to opt out of that and negotiate early.
Those talks are very very early, so we'll see.
Could there be possible political motivations behind this.
I think with everything happening in the country right now, you never know who is setting your sights on the NFL. And I mean, you see what's happening with the Rooney Rule. There is a Florida Attorney General who has turned his sites towards the NFL and saying that the Rooney Rule goes against federal law. We'll see how that plays out.
And I mean, there are no reports right now that those two things are connected, but we've seen different areas of this administration set the sites on sporting leagues and other organizations out there, so it wouldn't surprise me, but it hasn't been reported yet.
So Randa, this is focusing primarily on the media rights deals for the NFL.
Now most of those.
Even going back.
Thirty years, forty years, there's.
Been some paid component to it because even if I want to watch my CBS game, I'm probably getting it through my cable package as opposed to having my rabbit ears that. So it's always been some consumers directly paying for sports. Is it different now that it's streaming?
There are more partners now.
So Amazon has a Thursday night football game you can stream on Peacock. Occasionally YouTube has streamed the game before. The NFL has been selling rights to these streamers and these broadcasting companies for many, many years, and as the game has grown, as the business has grown, the costs
have grown as well. And I think in reference to what it costs to watch all NFL games, yes, it would be expensive because you would then be paying for NFL Sunday ticket, you could be paying for red Zone, you could be paying for each individual subscription of you know, some of these games. With that in mind, of course, the costs have gone up because they've added partners, they've added games, you know, all of those things.
But again, like we're talking about.
ABC, NBCCBS, i'm ESPN, all of these things are you could walk into a bar or just subscribe to your local cable and they would be right there. Now, you wouldn't be able to choose a game. And here in New York you would probably be subject to the Jets and Giants and other places. It would be the local markets there. So it really depends on if the customer wants to pay for all of these games that the NFL broadcast.
In the letter here by Senator Mike Lee, he said to watch every NFL game during the past season, football fans spent almost one thousand dollars on cable and streaming descriptions. Yeah, I guess if you're a fan, Yeah.
It's with it.
I mean, it depends.
I would just say this that the last Super Bowl was twelve to zero and then had one hundred and twenty five million viewers, And it was twelve to zero at one point heading I believe, heading into the fourth or you know, fairly well into the game. And it was the second most watched Super Bowl of all time. And with that in mind, if you're the NFL, of course you would like to go back to the negotiating
table to try to get more money. Now, if let's just say that this investigation kicks things down the road. If your Super Bowl is twelve to zero and it's the second most watched game ever four years down the line might not be a bad thing. You just want that money right now. So evidently I do think that the NFL will get their money. It's just about when to.
Get even more money.
There's obviously very advanced talks to add an eighteenth game, and that would be that would be it.
And that would well, see, I mean that is I would say it happen.
You have to open up the whole agreement with the players.
Of course, yeah, And the Players Association has been in flux for over a year. They've had three executive directors in under a year. And when you have three executive directors, the NFL then has to go to the players Association, rip up the collective bargaining agreements, and then they have to come to terms on a deal. Those negotiations have not started at all. So an eighteenth game, a six sixteen international game package that the NFL could sell, those
negotiations haven't started at all. So I think that Roger, I've heard Jerry Jones, I've heard Robert Kraft. And those are the Patriots and the Cowboys owners all talk about adding these things, and I do think that they want to, but it's so so early, which is why, you know, going back to this investigation, in a worst case scenario for the NFL, if they had to wait four years, it might work out in their favor because of the fact that they haven't negotiated as CBA.
So you know, I think that we'll see how this plays out.
But right now, I think that if I'm the NFL watching this, it's like, Okay, we'll see.
Yeah, what could possibly be the endgame here?
I'm not exactly sure.
I think that it could be to congregate some of these costs to make sure that the CBS and the ABC that there are less streamers involved, that it is
not passed down to the customer as much. But again, like you got to think, this was one of the most watched NFL seasons of all time, So really, are the streamers hurting and I mean, excuse me, are the customer is hurting if they're continuing to tune in that That is what I think the NFL's defense to this would be is that people are watching regardless and they're paying.
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One of the news that we covered earlier today, I want to cover it from a different angles the NFL. The DJ is investigating the NFL on anti competitive terrifs and it relates to the media rights deals that they have, and the media rights deals are so important to these leagues.
It is a.
Primary driver of value for the franchises across pretty much all sports. And it's equally valuable to the broadcast networks and to the cable networks and to the streamers that put this stuff out there, because boy, advertisers love live programming. Ethan Ynek, and she's the expert here, she's a US media analyst here. So Keitha just talk to us a little bit about this dooja investigation into the NFL. What are the big media companies who are so vested into this, What are they saying?
This is actually good news, Paul, for the media companies. So remember we are right smack in the middle of what is expected to become a very very contentious media rights renegotiation process with the NFL. So the NFL is seeking something like about a sixty percent increase in its rights fees basically from companies like Fox, Paramount Skuidance from Comcasts, and be Seeing from Walt Disney. Those are the companies that are the most exposed.
And with the.
DOJ going after the NFL on anti competitive practices, it looks like what they're saying is that the NFL is trying to harm consumers by basically making it more and more difficult to access their programming. So we know that the NFL in the past has tried to sell these smaller packages to streamers, you know, whether it's Christmas Day games to Netflix or the Thursday night football package to Amazon. They try to carve out these smaller deals basically in
a move to kind of maximize you know, monetization. But obviously that's not sitting well with the DOJ. But this is good news for the broadcasters because I think, you know, we think it gives them definitely better negotiating leverage when they go back to renegotiate deals this year with the NFL.
What about let's now head to Disney, they're reading to cut a thousand jobs, largely in marketing. You've talked a lot about efficiency, So where exactly are these job cuts happening and how do you make sure that or as an analyst, how do you make sure that these don't hit the creative engines of Disney and really affect the future of the company.
Yeah, so it looks like it's about these job cuts are really happening in the marketing departments. So let's just look at you know, if you kind of take a step back and look at the whole Disney engine. I mean, they have over two hundred and thirty thousand employees, so, you know, cutting about one thousand jobs, it's less than one percent. It's really just a drop in the bucket. But you know, the layoffs are really part of this whole cost cutting and as you just said, the efficiencies.
You know, Ever since Barb Byger returned to Disney as the CEO in November of twenty twenty two, he embarked on this whole efficiency cost cutting program. He eliminated about eight thousand jobs, which resulted in about seven and a half billion dollars of cost cuts. And really this latest wave of another thousand layoffs is just part of that. So it is not in any of the creative parts of the company. This is really more in the marketing department.
So we already know that, you know, Disney has many multiple operations, so they have like a whole team supporting Disney Plus. They have a very similar team supporting Hulu, which is basically, you know, a product that is very
soon going to be integrated. So Disney Plus and Hulu are going to become one consolidated, integrated product, which means there's really no need to have two separate treat teas teams, and so this is just really a process of streamlining and removing redundancies and increasing the efficiency in the business.
KEITHA, what's the latest on the Paramount Skydiance and Warner Brothers Discovery.
When is that deal going to close?
And what's some of the feedback you're getting from investors about this deal?
The deal Paul is expected to get regulatory approval and to close by September thirtieth of this year, so we have a few more months. It looks like some of the biggest investors are recommending that Warner Brothers shareholders obviously vote in favor of the deal. That vote is set for April twenty third, So it definitely looks like they're not going to head into any big regulatory problem, something
that we were kind of anticipating with Netflix. This path seems a lot more cleaner, a lot more smoother, and in good news for Paramount, what they've done is they've kind of secured the Middle Eastern funding, so they've got about twenty four billion dollars, you know, some sovereign wealth management funds. This was kind of a little bit of an investor concern just kind of given all of the
geopolitical tensions and the regional conflicts there. But with that kind of locked and loaded, I think investors are definitely kind of heaving a sigh of relief here, and it looks like everything will go, you know, as per plan. The question, really, Paul, is whether they're going to be able to deliver after the deal closes. That's really what investors are going to be looking for, especially with the six billion dollars of synergies that they've outlined and.
A lot of debt on the boundaryt talked to us just real quickly how the market's thinking about their leverage profile because they're gonna be the most or one of the most levered media companies out.
There, absolutely right, Paul seven times leverage about eight billion dollars in debt when the deal closes. So that is really what you know, the market is worried about, as you pointed pointed out, and you know, again we have so many different parts here, but I think the biggest worry is really the exposure to the linear TV ecosystem. It's you know, at fifty five percent of revenue still is going to come from, you know, the linear TV bundle, and really it's about how well they can manage that.
So this is going to be a wait and wat story. We've not seen very good results in the past, so fingers crossed.
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You know, it seems like a lot of these big tech companies are almost tripping over themselves to get press releases out, saying how big their AI revenue is, how fast it's growing, and.
Amazon's no difference.
Amazon CEO Andy Jase, in a shareholder letter set aws's AI revenue run rate is over twenty billion dollars, as Selections was just reporting. That's up from fifteen billion just in first quarter. So that's pretty good. Stocks trading higher on rog ranaj here technology channels for Bloomberg Intelligence. He's out there in Chicago anrah Amazon twenty billion.
It seems big to me, how about you?
Yeah, no, it's a very big deal. In fact, this is the first time they are actually putting a number around it, because if you remember a couple of years ago, Microsoft was throwing its number out and everybody else was
asking Amazon, where is your number? Where are you? But you know, one of the things we talked about at that point, Amazon's writing on the chat GPT wave where Amazon's more enterprise focus, and now those enterprise workloads are coming in and that's where we see the AI revenue for Amazon.
How does this change the calculus for the outlook of the company, like the are you more bullish than you already are?
That's a very good question. In fact, we published a note yesterday saying that we anticipate aw's growth to pick up this year, in fact even in the first quarter, because one of the things we saw just now it's two days ago was Anthropics revenue went from I think nine billion to thirty billion within no time. And AWS is one of the preferred partners. And if you remember two years ago, it was all Opening II Microsoft. Now we are seeing Anthropic doing really well and that helps
Amazon Web Services. So this year we think Amazon Web Service is going to do better than what most people anticipate.
And rag updates on kind of the competitive landscape. Now where is Amazon fit in these days?
Yeah, so you go back and look at it. Prior to the AI era, Amazon Web Services was the largest. It's still the largest, but it was the largest by a massive amount compared to Microsoft and Google. Since then, after charge GPT, Microsoft really closed the gap with them and became a much bigger cloud vendor, you know, compared to Google, but not as big as Amazon. But all
three of them are doing phenomenally well. Because remember, this is a business where you need to put in a lot of CAPEX and data centers in order to gain this revenue. This is not something you and I can build in house using you know, either Claude or anything, because you need physical infrastructure, data center chips. Amazon talked
about their chip business for example. So Amazon still is in the driver's seat with the largest market share, but both the others I would say Microsoft and Google are catching up fairly faster at this point.
So speaking of this flu of deals, we also have Core. We've expanding their metadal for AIA computing the twenty one billion dollars. At a headline level, what does the deal tell you the size and duration was what is that signal and does it tell you METASAI demand is stronger than expected?
I think Beta is spending so much because they need to be relevant. Also in the large language model space, it seems to me that this particular deal is tied more so for the training of the model rather than infancing.
Because one of the things what we are seeing is when it comes to even hyperskid cloud providers, whether that's Microsoft or Google, they're doing some of the work in house with their own data centers, but as they can't expand that rapidly, they're going out to these neoclouds, whether it's Nebeis or code and renting out their capacity so that they can parse out some of that work to them as well. So this is just a continuation of that.
The bottom line is AI infrastructure demand is very strong and it actually helps out everybody, not just the hyperscal cloud providers, but also the neoclouds.
And you cover all the software providers.
They've had a tough go over it over the last several months, four or five months as investors try to sense which one of these software companies and sectors and verticals could be at risk from AI.
Where are we now? Where Where's what's the market selling these days?
So you can see them. I mean the index is down quite a bit even today. Every software company is down, and yesterday we heard that, you know, there's going to be some new model by Clouds. So every time there is a brand new model from Anthropic or anybody else, there is pressure on these names, and I don't think
that's going to change anytime soon. What these companies have to do is show that they are not going to get cannibalized by these large language models, but actually embed them in their core product and can continue with that profitabil growth that they have. But that's not an argument that gets settled in the next twelve months. It's going
to take a few years to build that out. What we want to see from companies like Salesforce is to go out and buy back a lot of the shares, which they did twenty five billion dollar buy back that they have announced. If these guys are able to embed some of these models in their own products and protect what they have, I think this is going to be a change around in sentiment. But again, that's not going to happen anytime soon. It's going to be a few years before that shows up.
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Bernie's they're out there.
Constellation Brands was last night after the close, stock straining higher here. I thought some of the guidance was a little soft, but I guess the street says, hey, it's better than we thought it was to be able. Let's break it down with the red Brown Bloomberg consumer reporter read what do we hear from Constellation about their business.
Yeah, you're right, the guidance was a little soft last night, but I think this morning on the call, the company kind of made the case that March sales were quite strong. They feel like that momentum in this early part of the year is going to kind of carry on through the summer, and with that, they're planning to kind of support the early momentum with I think the word they use was an aggressive marketing campaign. So if you think about the big events we have in the summer, makes
a lot of sense. Of the World Cup, the company expects that to be kind of a growth driver, especially for their bigger brands Modello Corona, you know, we associate those with the summer as well, so makes a lot of sense. So I think that's kind of explaining a
little bit of the share move that we're seeing. The question now, I guess, becomes whether or not that this is just a blip or they're still kind of subject to the sort of secular decline we're seeing in the other parts of the alcohol industry.
How much of this softer outlook is macro driven. We know that it's not really a good economy consumers are feeling pinch as opposed to with the products themselves.
Yeah, no, the company is making the case with the when they kind of justified their guidance and it is the lack of economic visibility. They also withdrew their twenty twenty eight guidance as well for the same reason. They say, we just can't see that far out in advance at the moment. But again, it kind of comes back to this question about whether or not it is an economic situation that they're kind of dealing with right now or it is just their subject to the kind of consistent
decline we see in the beer market. Analysts are kind of split on what the real situation is.
You mentioned some of their brands, Modello and Corona, brands that identify with the Hispanic audience in this country.
The companies in the past has.
Caught out the change in immigration policy is impacting having an impact what they have.
They updated their thoughts there.
So during the call they said they actually saw a sequential improvement and those zip codes that have.
A higher Hispanic population.
So you know, I guess it doesn't tell us a ton if it just a sequential improvement from sort of a lower start.
Right.
They didn't give any sort of specific details on just how much of an improvement it was, so I guess it's something that we still need to kind of keep an eye on.
What about I mean, the company in general has benefited from premiumization. Are we seeing customers trade down and what trends are they pointing to?
Yeah, the company said that that trend is continuing, so they're still seeing some strength within their premium brands. I think what may be going on is that people are drinking less, but when they do drink, you know, maybe
I'll reach for the nicer options. So we've seen that in other parts of the alcohol industry as well, So, like you know, Spirits tend To has been pushing premiumization as well, so that that trend might you know, maybe we don't think of beer as necessarily always like a premium option, but there are sort of ways to trade within the category.
All Right, you're of that demo, a younger demo, Thank you?
Are you guys drinking beer?
Drinking the Red White Claws and all that iced tea stuff and all that.
Yeah, No, it's I guess when you go. I mean, obviously in New York's a specific you know beer, I mean alcohol culture, bar culture. But I guess when you do go out there, you do see more people kind of holding cans. A lot of the times, it's less a white claw, that's it's more less seltzers. These days, it's more theas ready to drink. So think of like a serf side, which is like a spiked lemonade, a spiked ice tea. Those are really popular right now. And it all kind of comes back to this idea that
people are just changing the way they drink. They're being more conscientious with how they drink. You know, they still want to be social, be out talking to people, you know, like their inhibitions go, but they want to not deal with all that all of the health consequences when it comes to drinking. They don't want they want something that's a lower calorie. They want something that's lighter, easier to drink.
So I guess you know, that's it's a debate that's been going on for a long time of like our younger people actually drinking less. It's it's really kind of hard to like tease out in the data or they're just like changing, like we're saying, they're just picking difference in constellation.
Are they happy with their portfolio of brands or they think are they always buying and selling stuff?
But I think right now they should be happy.
They have some of the most popular brands like Modella obviously unseated bud Light a few years ago as the most popular beer brand in the country. Corona, I think is fifth. They also have Pacifico is one of the highest growing brands as well, So I think that they
should be pretty happy with that stable. But you know, we've seen deals happening in obviously the sort of rumors around Brown Foreman potentially merging in a couple of weeks ago, so they're, you know, in this sort of shrinking market to gain growth, there's going to be probably more of these sort of swaps, you know, in portfolios.
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