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Through Netflix shares are down about twenty five percent since they began pursuing Warner Brothers in October. So is Netflix in a race against time here?
I think so, Scarlett. I mean, you know, there has obviously been a lot of worries about that falling stock price and investors kind of questioning, Okay, so really what is the value right if that's an eighty five fifteen split for Warner Studio and streaming assets. I mean, Warner shareholders obviously worried about the falling value of you know, the Netflix stock, and so obviously Netflix, you're really trying to estivate those investors by making it an all cash offer.
But yes, they are, you know, very much running against the clock. There is the January twenty first deadline from a rival, Paramount Skidance for tendering shares at thirty dollars for all of Warner Brothers, Discovery, so there are multiple things going on here, but this definitely should spark some sort of response we think from Paramount Gita.
It feels like we're getting one escalation after the other in the bidding war. Do you think that proposing an all cash offer could actually exped expedite the closing of this deal by Netflix or do you expect that Paramount will fight back again.
We definitely think that Paramount will fight back because for them, the cost of not doing the deal is definitely greater than it is for Netflix. Paramount is in a very dire situation. They need these assets very, very badly. Not the case for Netflix, which has a really strong, you know, financial profile, has a really strong content library. This is really more of a nice to have rather than a must have. So expect expect something from Paramount Skydance. We don't expect them to go away quietly.
We don't expect them to go away quietly. But there's a real question mark here because Paramount Skidance's bid for Warner Brothers Discovery assumes that the value of the legacy cable channels is zero, and of course it's bid covers the entire company, whereas Netflix is only looking for the streaming and the studio business. Yet what does that say about Paramount Skuydiance's own legacy cable business zero? I mean, does that mean that its business is also worth something similar to zero?
I mean, that's just such a brilliant point that you raise, Scarlett absolutely. I mean, when they, you know, basically devalue the Warner Brothers assets, they risk doing the same for their own cable networks. But there is, you know, there's absolutely no way to sugar coat the fact that the
cable network business is a declining business. What Paramount is doing to its you know, kind of favoring its argument is basically using the poor stock performance of Versut, which is the cable network group from or the cable network spin off from Comcast. Its poor performance is kind of the reason their justification for why the Warner Brothers legacy
networks should not really be worth much. But I still think, you know, obviously they're still Yes, there is cord cutting, Yes advertising is under pressure, but they are still cashcows. They still do throw out a good amount of cash. And that is true both for Warner Brothers as well
as for Paramount. And obviously Paramount still sees a lot of you know, rationale and kind of combining those two portfolios Paramounts own cable networks along with warners to kind of just stem that whole melting ice cube argument that said, yeah, it's it's this, This is really turning out to be, you know, very very interesting. I think Warner Brothers still kind of sees a lot of value in its networks.
They do want, you know, that the separation. They think they can extract a lot more value with the separation of their global networks business, which is supposed to happen by the third quarter of this year. So again it's still a wait and watch, but I think at this point, Scarlett, the ball is definitely in Paramounts court.
Githa not too long ago, Bank of America said that this bidding war is reshaping the broader media industry. What are the consequences of it for the broader media industry, do you think, and what kind of precedent does it set for future media company acquisitions?
Yeah, absolutely, Alex. I think one of the things one of our key takeaways from this whole exercise is that, you know, obviously, linear networks are in a really precarious position, no doubt about that. But then the studio assets as well as the streaming platforms, the content generation part of it,
there's still quite a lot of value in those. So any of you know, the studios that you see out there, whether it's Alliance Gate or you know, maybe even an AMC Networks which has a television production studio, maybe all of that still has some value. But I think really the biggest question for us, and I think for media investors at large, is what happens with Comcast and what happens with its NBC media group that really is somewhat of, you know, this hidden jewel. I would say they have
to extract value for that. They probably have to spin off that asset. So I think everybody is really super focused on what they do next.
Okay, so in terms of what happens next, we are waiting to see if Netflix actually does revise the term of its offer to something that's all cash. And then on the paramount skidance side, you said the deadline is coming up for the tender offer.
When is that exactly?
Jan twenty first?
Jan twenty first, So next Wednesday we'll get a sense of whether shareholders are in favor of it, and what do we think is the reception right now.
Very very poor. The last we heard, only about two percent of outstanding shares had been tendered, so really a shareholder is still kind of holding out for that sweetened offer.
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Some big news out of Big Tech this week when it comes to jobs as well, Yeah, layoffs from meta platforms.
It is beginning to cut more than a thousand jobs from the company's Reality Labs division, part of its plan to redirect resources from virtual reality and metaverse products, which is really really interesting given the facts that it invested so much into this endeavor, even change its name accordingly, and we have with us Man Deep Saying, Global Tech Research head of Bloomberg Intelligence, to discuss this. Man Deep, what does this all mean for Meta's bottom line? What do these jobs job cuts?
Do?
I mean Reality lab segment is almost losing twenty billion dollars a year and cumulatively they've lost about seventy billion dollars over the past three years, so a lot of investors questioned, you know, how long they were expected to remain patient on those kind of losses. And I think the initial rumors were about a thirty percent cut in
that unit. So this is somewhat build expectations in terms of ten percent job cut, but it just goes to show that right now, the companies obviously focus more on the AI side in terms of building the infrastructure, building their own large angrid model, and it may take a while to you know, really bring it, bring that LLLM concept in that variables or the whether it's a VR
headsets or the glasses. And I mean when you compare VR headsets or the glasses that they're selling to let's say air pods, the number of units pale in comparison. We're talking, you know, ten million, maybe if they do twenty million. Apple does more than one hundred million AirPods a year, So what's the opportunity here? And I think that's where you probably will see more cuts in that business.
That is a really really important contrast to make their in terms of what Meta is trying to do, because they want to be a part of the mass market here, but it's not quite there yet. Mindy, As Meta pivots away from VR in the metaverse to AI, what does that mean for spending? I mean, they obviously had to spend a lot to build out the metaverse, to build out their VR offerings, and now they're going to shift everything to building out the AI offerings, large language models,
these AI glasses. What do you think that the pace of spending would just kind of continue, It won't really shift all that much.
Yes, On the AI side, the opportunity is huge. What everyone is chasing right now is an AI agent that can book your travel, your Uber trip, order food, you know, do shopping for you. That's the vision Google is chasing. That's what Amazon alexaplus launch was all about. So Meta has that surface area with you know, Instagram and WhatsApp, and you could argue they could in theory develop such an agent, but the hard part is integration and getting the AI to where it's you know, reliable and pretty.
And that's where I mean, it's anybody's guests who is best positioned. I think that Apple Google partnership that we saw this week is probably a negative for Meta in this sense. Like, if Apple is setting up defaults in their phone, then that makes it hard for an external kind of agent to do these kind of things. So from that perspective, distribution really matters and operating system control
really matters. So Meta is somewhat at a disadvantage when it comes to, you know, their distribution on Apple and Android devices.
Mandy. We also got news today that Airbnb hired Meta's head of General AI, which is really interesting because wasn't it not too long ago that they declined to work with open AI. What does this all mean for its artificial intelligence endeavors.
Yeah, I think Brian Chesky has been quite vocal about using open source llms as opposed to you know, proprietary llms like open AI and Gemini, and so his thing is, I've got a direct customer traffic coming to my website. If I give away you know, my bookings interface to these llms, then I'm losing that customer direct customer touch,
and he doesn't want to do that. He instead wants to build his own LM based on an open source model that's already out there, and that's where you know, Meta has open source their model in the past, so it makes sense to have somebody from Meta come in and do something along those lines. ABNP has been open to using Chinese open source models and building on top
of that. So from that perspective, it's an interesting strategy that they are going ahead with in terms of using all kinds of open source and not just you know, the US based model.
Who in the tech world is winning the talent war because it felt like for a long time open AI and traffic they were, you know, picking up a lot of talent.
Is that still the case?
I mean right now, the talent is going to where the compute is. If you don't have the compute, you just cannot attract the talent because these models need a lot of compute for training. And you may be the smartest person, but if you don't have the computer, you
can't test your idea. So from that perspective, infrastructure bill really matters, which is why in Nvidia, even though they are the chip provider, now they launch their own foundational model in autos self driving that just goes to show what compute can do, you know, and Vidia is definitely moving up the stax. It will be interesting to see how many areas where they compete in with their own foundational.
Model man Deep. We're early into the earning season, but big tech results will be here before we know it. And obviously the bar is really high when it comes to what these companies are saying about how they're monetizing their heavy AI in investments. Do you think that they'll live up to the expectations.
I think right now you have to focus on where you will see positive earnings revisions, and given the KAPEX investments are going up for this year, it's going to be hard to show, you know, positive revisions when it comes to earnings, except for someone like Alphabet that really has seen a big shift in sentiment because everyone realizes that their models have caught up, and they also are the most efficient when it comes to their stack, the
use of TPUs and low cost inferencing. So from that perspective, I think Alphabet clearly is best position to deliver positive surprises. But for someone like Meta, I mean, if you're hearing job cuts, then you know probably it's going to be hard for them to you know, show positive revisions this year.
And I feel like the counterpoint to an Alphabet a Google that's doing really well is Oracle. We've seen it really fall from grace of it, and I wonder how critical investors are going to be when they hear from the company this earning season.
Well, they will have to give foof points of the build out, the open AI backlock that they have and how that translates into revenue. Because the good thing is market is skeptical of, you know, really far out revenue streams, and so from that perspective, this is quite healthy that you know, there was a correction in Oracle even though they have given a four or five year revenue guide and they have the backlock, market doesn't believe it. The
market wants to see more proof points. So I think that's what companies will have to do when it comes to open AI monetization and ROI. They'll have to start showing more tangible proof points.
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We are talking about the big take that Bloomberg has published today, and it's called the CEO playbook to navigate Trump. This is kind of the question of the president's second, second four year term. How do you manage this president? And the answers with difficulty because the rules kind of keep changing. Matt Boyle is one of the co authors of this story, and Matt joins us now in studio.
Great story, Matt, and it was something that you had trouble reporting on insofar as a lot of people wouldn't.
Talk to you exactly. I mean, the usual sort of voices of Corporate America, the Chamber of Commerce, the Business Roundtable, We're just like, you know, we're going to take a pass on this one, and just about every CEO under the sun, you know, just they just don't want to go there. It's like the third rail. So it was challenging to report. But we had a lot of great conversations, let's say, on background, with those who are advising CEOs,
and that led to our playbook. Here the five Rules for dealing with the Trump Madness.
Matt. We've seen a growing number of business leaders recently kind of push back more than usual on some of President Trump's policy proposals. We had City CFO this morning pushing back on the credit card cap, x On Mobile CEO calling Venezuela an investable? Is this unusual in what might be the consequences for them?
Yeah, it takes a certain CEO to push back. It takes a Jamie Diamond or the CEO of ex On Mobile who have the clout and the authority and the industry backing to say no. You know, this is actually not perhaps a good idea. But most of the time, as we saw with tariffs, it was happening behind the scenes. You know, remember this is going back aways. But when Trump told the Walmart CEO, Doug McMillan to eat the tariffs,
Walmart said nothing, and that was probably pretty wise. There was no reason to get into a public spat on true social with Trump. So but now maybe it's because Trump is in a different position twelve months later, or it's the issues involved. You know, banking CEOs are very happy to go out against interest ratecaps, but we are seeing in certain cases some CEOs pushed back.
Yes, and direct engagement does seem to pay off. If you can find your way to the President and mobile phone, which apparently he pans out the number pretty willingly to certain top CEOs. You talk about in videos Jensen Huang having a direct line to the President, also Lipboon Tam of Intel being able to do that as well.
Exactly. I mean Jensen in video CEO one on Joe Rogan in December and said, you know, Trump is extraordinarily accessible. The United Airline CEO said the same thing to us. I mean, you can call this man up. He does answer his cell phone, as we've seen. Sometimes at four thirty in the morning, he will pick up his cell phone.
But not everybody has Trump on speed dials. So a point of our story was that you have to find a way in, whether that's Susie Wiles, the chief of Staff, whether it's Scott Besson Treasury or Commerce, Howard Lutnick, or one of the sort of lower level aids. Also, I mean we found that, you know, the director of the White House Office of Public Liaison is somebody you can you can go to also, So the point is to find a way in, no matter how you do it.
Matt, what are some of the differences in how President and Trump deals with business leaders in his second term from his first term.
Well, the second term he's a little bit more unshackled. Let's say in the first term, you had a few more traditional Republican voices, you know, you had Rex Tillerson in there and other folks who you know, were able to maybe play little defense. They were able to slow walk some of Trump's more outrageous policy proposals. Now it's just all true believers. So he's sort of unfettered, he's unshackled, and there's really not many checks. So what this means
for CEOs is, yeah, they really can't hide. They can't just say well, we'll let our industry association take care of this or don't worry. I mean, look at just the past week what's been going on. CEOs really need to be on watch.
Yeah, shackles is a fantastic word, a free range Trump right, there we go, There we go.
The other thing that you could do, if you're trying to get his attention or curry favor, is to give him a made up award.
Yes, he does respond to these types of trinkets and trophies, as we've seen of the Apple CEO, Tim Cook was able to give him this sort of glass you know, trophy with a twenty four carrot gold base or something, you know, with the Apple logo on it. And you know, guess what, you know, it was over tariffs and Cook and Apple we're looking for some relief on foreign microchip tariffs.
So and you know that helped. It also helped though that Cook had really put in the work though, talking to Trump for years now, going back to the first administration. So you can't just you know, sort of throw a trophy at him. But it does take some groundwork as well. But look at the Swiss business executives also giving him a you know, a gold role X and you know, so these things do tend to have an impact. As we say, everything is a transaction with this president.
Matt, you mentioned it's been difficult getting people to speak to you for this story. Did any of the business leaders you spoke to give you reasoning for why they might be afraid to talk or did they kind of just brush you off?
It's I mean, many brush us off through their gatekeepers. They just the thing is, they just don't see much upside. They don't want to be the one CEO talking to any report are on the record. But as we've seen now, maybe we might see some more come out of the woodwork now that Diamond and others are talking about you know, the interest rates. The defense companies also might have something to say about Trump pressuring them, you know, to up
their game. So we'll see. But it's that, you know, CEOs again that they might be speaking out on certain issues, but when it comes to Trump again, they just fail to see the upside. But at this point, as we say, or it was a Yale School of Management person wrote today in Bloomberg Opinion, the chaos is not just no longer in the background. The chaos is baked in. It's in the system. It's coming for them, So they might want us talk.
So yeah, it's front and center, and it feels in many ways like those who know how to navigate governments and emerging markets might be better positioned.
Yeah, so you have that experience exactly, you know, of that sort of slightly more chaotic, slightly more freewheeling environments, and many of these big multinationals, of course, do operate.
In those areas.
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