Bloomberg Audio Studios, podcasts, radio news. You're listening to the Bloomberg Intelligence podcast. Catch us live weekdays at ten am Eastern on Apple, Cocklay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts, or watch us live on YouTube.
There's a lot going on in media, or we keep hearing that there's going to be a lot going on in media, because some companies are up for sale and other companies are looking to buy, but we haven't gotten any actual bids just yet.
Keitha.
Ranganathan is our US media analyst here at Bloomberg Intelligence and Keitha.
We've been looking at.
Warner Brothers because it has announced plans to split itself up to extract more value. David Zaslov, the CEO, we know as a deal maker. Yet it just came out with results that showed revenue and the third quarter dropped six percent from a year ago. What does this mean for its plan to sell itself?
So fundamentals Scarlett really don't matter all that much at this point, especially yes, the TV networks business as we know now for many many quarters has been severely challenged. We saw a twenty percent slump in TV advertising. We saw a twenty percent decline in TV EBITDA.
This was kind of well expected, and this.
Really speaks to why they need to separate themselves, why they need to separate the low growth or rather the no growth TV assets from one part from the part of the business that's actually growing, which is studio and streaming. That part of the business actually posted really good numbers. We saw the studio Warner Brothers has actually been having a very very successful run in the box office this year.
They have about a twenty seven percent share of domestic box office and we've seen that kind of translate into really strong EBITDA numbers. And so we saw studio and streaming actually put up really really good numbers, and that again speaks to why so many different parties, including a Netflix, including a Comcast, are interested in going after those studio and streaming as. So right now, again fundamentals don't matter that much. It's really all about the m and A.
And I'm actually surprised, Githa that maybe we haven't had some more news on the MNA front, because we've seen, you know, the m ANDA environment is very very active, with the market's very receptive to M and A. Here we have a willing seller in terms of David Zaslov and the board of directors here who how do you think this is going to plug out? Is something to make a bid for the entire company or just maybe the good pieces for it.
We're having all possible permutations and combinations here, Paul. So we know that Paramounts Guidance is actually interested in all of the company, including the TV networks.
They've already made three bids.
The highest one was for twenty three and a half dollars per share for Warner Brothers Discovery all of it that was turned down, so they obviously have to come up with a much better offer.
Now.
The other bidders, and the two that are most often mentioned are Netflix and Comcast. They are the ones that are only interested in the studio and streaming assets, no interest at all in the TV linear network business. We know that Netflix has started looking into the books of Warner Brothers Discovery. This doesn't necessarily mean that they have to come out with a bid. I mean remember this. You know zaslav is, as you just mentioned, he's a very very tough negotiator.
He's a deal maker.
He is going to make sure that they really get paid well for the streaming and studio assets if they sell that, and we expect, you know, a price tag somewhere in the ballpark of about seventy five to eighty billion, So you know, whoever makes a big bid has to cough up a huge chunk of change for this asset.
So we keep talking about how it's Netflix, Comcasts and Paramount Skuidance.
Could there be another bidder that emerges from the shadows.
Absolutely, I mean you can never rule out big tech. You know, Amazon obviously has shown some interest in the past. They bought the MGM studio. We're not necessarily sure whether they've actually taken a look at the Warner brother assets.
But again, Scarlett, as you kind of think about the whole media land and you kind of think about the various assets out there, this is kind of a once in a lifetime, kind of a generational opportunity for anybody who wants to get big in media to really go after Warner I mean, they have some of the best ip out there. They have a streaming business that has performed really well. HBO Max is a name that resonates across the globe. So you know, anybody and everybody should
really be taking a look at this asset. I wouldn't be surprised if we have some kind of a dark horsepitter here.
Okay, speaking of media companies with names, brands that really resonate, Disney's ESPN dropped Penn National as its sports betting partner and has picked up Draft Kings.
Why didn't it just do that the first time around?
Yeah, that's a great question.
So if you remember actually two three years ago they were in talks with DraftKings. I think it ultimately came down to price. I think they got a much better deal with pen, which was paying them something like about two billion dollars over ten years.
The thing is that they were really a late mover.
You know, by the time ESPN bet came to the market with Ben, DraftKings and FANDUIL had already kind of really consolidated their share in the market. They have about a seventy percent share of the sports betting market. Ben had a lot of problems, you know. Yes, they kind of got the product out there, they have just about maybe a three percent share. They just haven't been able to kind of convert users. The user experience hasn't been good.
So I think, you know, ESPN did make a good decision and dropping them and going back to the DraftKings.
Mickey Mouse and sports betting. I never thought i'd see that, I know.
Right, Yeah, well, once upon a time they were like, we're not getting into any exact you're.
Exactly right, hey, Keith, I see our good friends of Comcast. Speaking of Comcasts, they have plans to split their cable networks apart from their broadband and cable TV businesses, and they're going to call this lovely company versut go figure. But I understand they're going to have an investor day December fourth, So it sounds like Comcast is moving forward on this split. Here, give us a sense of what do you think verse will look like? And when do you think that split's going to happen.
The split's going to happen before ear end falls. And they've you know, they've got all the pieces moving here. This is really all of the cable networks other than Bravo and you know, so we have the USA Network, we have Golf, Sci Fi, all of these networks that they're kind of splitting out. Again the problem with the cable network business is that it is severely challenged, more so than the broadcast business, which is why they're still
keeping NBC broadcast, the keeping the Peacock streaming platform. It's just these cable networks that have been severely challenged, you know, as we kind of model out advertising, affiliate fees and EBITDA, we're kind of looking for, you know, mid single digit IBADA decline. But it still does throw out a good amount of cash, so we're you know, as we kind of look at it, it's about two and a half two point six billion dollars in cash, so again, still a recent business.
Kita.
Why is Bravo so valuable then to Comcast.
Because they have a lot of content and nonfiction content that they put from Bravo to Peacock and it doesn't, yeah, cheap to make, and it doesn't necessarily.
Fit with the rest of the portfolio. So I want to hold on to that.
Cheap to make.
I think that's a theme here, Paul, I know, I know, But and it's also about sports as well, you know, and the sports is still working for these networks, mostly the wrong They all.
Paid up a ton yep, so it's only employment viewing.
It exactly exactly right. This is Warner Brothers Discovery still thinking about a split. Here, githa thirty seconds.
To anybody's guests called but right now, if they don't get the price that they that they want, which we think is upwards of thirty dollars a share for the entire company, I think they will go ahead with the split. And I think Zoslav is willing to wait this out and we'll see that split happens sometime in the middle of twenty twenty six.
Stay with us. More from Bloomberg Intelligence coming.
Up after this.
You're listening to the Bloomberg Intelligence podcast. Catch us live weekdays at ten am. He's done on Apple, Cocklay and Android Auto with the Work Business app. Listen on demand wherever you get your podcasts, or watch us live on YouTube.
All right, let's talk a little technology, because we've got technology earnings all over the place. Men Deep sing Joints is here, research head of Globe Bloomberg Intelligence. On tech stories, Uber Lift, they reported some numbers Door Dash repeated. Are people talk to us about that SEC segment of the economy, the ride sharing, the outsourcing, you know, the third party delivery. Are people still spending money on that stuff? They are?
And all these companies, I mean, Uber reported over twenty percent growth, door Dash reported twenty five percent top line growth. Even though the stock reaction was negative, that was primarily because they plan to spend more money next year on building their tech stack. I think what the playbook here is to expand in more geographies as well as branch
out into other areas of last mile delivery. And in the case of door Dash, they are experimenting with, you know, delivering food without a career human person involved, and also expanding into restaurant point of sale devices. I mean they're developing technology where you can pay using a door dash hardware and point of sale device. So clearly there is a lot that these companies are doing beyond you know, the original business that they have.
You know having you know, when you spend time in England and you go pay for meal, the card never leaves your presence. They just tap it on some machine and here they take it. They put it in a little folder, they take it away for.
Five minutes, and that's what you pay twenty person for.
You don't know where it's going. And that's why I'm surprised we're so behind here in Yos about that.
At point We've always been kind of behind this, you know that that's been our calling card.
The way to think about it is, there are so many legacy systems that anytime you have new technology, even everyone is talking about AI agents and whatnot, it has to sit on top of a lot of legacy technology. And like the promise of AI is it can rewrite a lot of that legacy code and migrate into the you know, the modern technology. But we have yet to come across, you know, real proof points of that.
So when you're talking man Deep, I noticed that you talked a lot about how these companies are spending, they're investing, and I'm curious about the reception that gets from investors because initially in the big AI build up, everyone was excited about these plans. But now more and more everyone's like, oh, I'm not so sure that's a great idea that you're spending so much, whether it's on AI or whether it's on new products and internal platform like it is with
door Dash. Why do you think investors are now more skeptical about this idea of companies spending.
Well, just because we've seen you know, Uber and all these companies really struggle with free cash flow. Initially, I mean in the zerp era, you know, these companies burned a lot of cash. Now they have gotten to a point where the business model does generate you know, seven to eight billion dollars in free cash flow for Uber and even for door Dash it's twenty percent ebit dumb margins.
So the fact that they're talking about spending again, it makes you think, Okay, if you're an investor, you waited all this while for these companies to get mature and you know, start delivering on cash, and now they're talking about another investment cycle. And that's where you know, in the case of Uber, it's their hand is forced by Veimo launching on in ten cities and really expanding and
potentially Tesla. I think in the case of door Dash, they feel, you know, making acquisitions will help them expand their geographic footprint and then obviously they want to expand their tech stach to more areas.
Most important. Do you arbitrage Lift versus Uber?
I don't these days, simply because I think what Uber has done well is they know my preferences, especially when it comes to business travel, and their you know, frequency and their ability to reduce wait times is far beyond anyone else in terms of giving me a ride wherever I am and shrinking that way time. I think that's very important when you compare to autonomous drive, Like I could go to San Francisco and get a Vema, but then I have to wait for five minutes, whereas I
get an Uber in less than a minute. So that's where if you really care about your time, you still go for Uber.
Yeah, I use Lyft because I have a Chase card and I get a ten dollars a month.
Quality points is another aspect.
Yeah, stay with us.
More from Bloomberg Intelligence coming up after this.
You're listening to the Bloomberg Intelligence podcast. Catch us live weekdays at ten am Eastern on Applecarplay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts, or watch us live on YouTube.
Let's talk a little bit about companies that are affected not just by tariffs, but by a consumer that perhaps is somewhat weakened, a little bit more cautious given the softness in the job market. Let's bring and put on Goyle, she is our senior US e commerce and retail analysts, to talk a little bit about under Armour, whose shares
are down about five percent in late morning trading. When it comes to under Armour, how much of the struggles that this company is experiencing is due to things like teriffs which is beyond its control, versus an overall product selection and a consumer whose taste might have shifted.
Sure, I think it's a combination of both. When you look at the top line, it's really self inflicted. Right, they're trading out of off price, They're trying to drive more full price sales. They're really revamping their whole message, trying to resonate better with consumers. So that's why we continue to say weakness there. They need to drive more product innovation. But then when it comes to margins, it's
a little bit of both. Tariffs are impacting them, in fact more than some of our other companies who have been largely able to offset these headwinds. They are not able to and that's sending gross margins down about two hundred basis points for their fiscal year.
So I think about that, you know, athletic market plunam it just feels super uber competitive to me. Is this a place where under Armour can win? Visa be the Nikes of the world the iddas.
Yeah, look, I think the market is growing and competitive, and that's you're absolutely right. It feels like every company right now in the at leisure space is on a reset mode. When you think of Nike, they're under reset, Pumas under reset, under Armors under a reset, right, So they're all going after the same customer, but in a different way. Nike clearly the giant in the room. They have the dollars to invest in brand, marketing and endorsements,
so they can continue to step harder on innovation. When it comes to under Armor. I think we've heard the story so many times now, Paul. I mean I've heard their turnaround and seen it go up and then away every couple of years. So will this be the time they get it right. It's really hard to tell because right now they've controlled their inventories, which is a good thing. They're down six percent, they're downward than the sales decline. But the innovation adds and flows, so we'll let's stick.
Will the consumer, you know, stay committed and loyal to under Armour? I don't think the consumer is weld at anything today.
That's a really good point.
They're loyal to price price first is what they're loyal to and deals phuna. Under Armour also announced a new executive, a new CFO for the company, Raisa Taligani, will be taking over or starting in February. Does this raise concerns about not leadership so much, but in terms of strategy for the company, because as you mentioned, feels like under Armour has been in turnaround mode for a long time.
It doesn't concern me about the strategy. He was a CFO in his prior role as well with another company. I think the leadership is really identified by the CEO, Kevin Blank at this example, and he has a plan to lead this turnaround. And the plan is pretty basic. It's not anything new. It's returning back to product customer innovation and going back to full price selling to maintain brand help That is retail one on one playbook for any brand, and he's just going back to the roots.
So I think the strategy is right. It's whether the customer will respond and whether they will drive enough innovation. But innovation with performance. I think that's what you need from an athletic were brand and that's where they need to put the focus.
Plut how's the holiday shopping season shaping up. What are the expectations.
The expectations are for at least for online. You know, we think online will continue to game share over the holiday season. We do see strength. I mean I cover Amazon as well, and I think Amazon's going to have a great holiday season. In terms of the broader retail I think what you'll see again is a biification and trends. The retailers that push the pedal on price and have the product the consumer's desire will take share. But then those in the middle still stand to fall behind. And
that's been the case for many years now. It hasn't changed.
This is the Bloomberg Intelligence podcast, available on Apple, Spotify, and anywhere else you get your podcasts. Listen live each weekday ten am to noon Eastern on Bloomberg dot com, the iHeartRadio app, tune In, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg terminal.