This is the Bloomberg Surveillance Podcast. I'm Lisa A.
Bromoid's along with Tom Keane and Jonathan Ferrow. Join us each day for insight from the best in economics, geopolitics, finance and investment. Subscribe to Bloomberg Surveillance on demand on Apple, Spotify and anywhere you get your podcasts, and always on Bloomberg dot Com, the Bloomberg Terminal, and the Bloomberg Business app. To talk about the specific sectors and some of the rolling recessions. One of the recessions has been in the
logistics area and the shipping area. And I do before we get to Steve Rashudo of Mizuho here, I do want to just touch base with Lee Klascow Senior, a logistics analyst at Bloomberg Intelligence.
And Lee, the reason why you're really.
The person who I want to speak to is to understand how much we could be dealing with potential supply chain disruptions again because of what we're seeing in the Red Sea.
Yeah, I don't think these are going to be a major dislocation. I think it's going to be more or less a hiccup, if you will. And that effect is that freight rates are arising. They're actually up but about nine percent sequentially. A lot of that increase is being driven by freight headed from Singapore, I'm sorry, from China to Europe. That's been up pretty significantly, up around fifteen sixteen percent over the last week, and it's up around
fifty percent since bottoming in October. But it also does need to remind people that in twenty twenty one, to ship a container used to cost fourteen thousand dollars.
That was a peak.
Today it's around fourteen hundred dollars. So rates are down significantly, but we are seeing a bounce, and you know what's going on in the Red Sea. I'm guessing that it's not going to be long term in nature, and there's going to be a resolution in the coming months.
And lee with that in mind, just quickly here if you anticipate a resolution coming in fairly short order. Does this ever touch the consumer if at all?
Absolutely, because if shippers are paying higher rates, they're going to try to push that cost onto the consumer. But remember there's a lot of T shirts that go into a container, so we're talking about half a penny more in terms of shipping costs to ship certain items. Obviously larger items the impacts greater, but you know a lot of stuff that goes on the ocean are usually lower value stuff, where high value stuff is usually shipped via air freight.
Lea Glasgow of Bloomberg Intelligence, thank you so much for being with us. Short of visit, I do want to get to the economic data that we just got, since it is fascinating to be stever Shuddo here with us chief economist at Mizuho Securities, and I.
Want to start there.
Initial jobbles claims came in below expectations. It's actually a positive downside surprise, and yet you're seeing a real rally in the two year which makes me think that the Philadelphia outlook for manufacturing is of concern.
Is that right?
Well?
I think you have this environment where you have people like you mentioned Harker talking about, you know, the grassroots kind of sentiment that they're getting in terms of inform from companies that tell them that there's a problem in the underlying economic fabric, but you're not seeing it in
the broader macro perspective. I think this gets to what was Katy was talking about in terms of rolling sector recessions but I think it also gets to the fact that expectations are really an issue because when I sit down and I talk to CFOs and I talk to CEOs of different companies in different industries, I get the same message over and over again, which is the economy is not going to do well, We're going to go into a recession, but my business is doing really well.
And I kind of like, you know, time out, guys, everybody tells me exactly the same thing. So if you're all telling me your business is doing well, but you all think the world isn't going to do well, then maybe you've got to disconnect in terms of the underlying realities. And this is why you see the continuing claims numbers doing what they're doing, they're moving lower. So you also
see this in terms of the employment numbers. Everyone says, oh, we're laying off workers, but then you go back and look at their actual job counts and you see that they've repositioned their workers into different parts of their business.
So put this together, I help us understand what that actually going on.
Is Basically, people are feeling bad because they feel like they should feel bad, and the actually things are very good, and that the risk is actually to an acceleration in the economy that people aren't expecting.
Well, I think the risk is the recession that the market is expecting doesn't happen. You look at things like the blue chip average, right, the blue chip average has first half growth at zero point five percent. Now zero point five percent is the closest you're going to get the blue chip numbers to ever saying negative GDP before you actually print negative GDP. So recession is priced into the structure. If you don't get recession, you're going to
have to have a readjustment. This is exactly what happened after the regional bank situation. Remember everyone forecasted a recession, it didn't happen. Then we had that major summer sell off.
I'm not saying we're going to get as much of a summer sell off as we got this time through, but there certainly needs to be a correction in some of these markets to reflect the fact that this economy is not rolling over and playing dead, that expectations are different than the reality, and eventually expectations have to adjust to reality because reality is what it is, it's the reality.
Well, just to meditate a little bit on the evolution of the recession calls. Remember twenty twenty three, it was definitely going to happen, and then everyone started pushing out the recession calls and then basically abandoning them all together. There's actually a story on the terminal right now, City Group, Deutsche Bank, Wolls Fargo, some of the last remaining on
the street who are still calling for a recession. But to that idea that maybe rolling recessions are what we're seeing at the sector level, is that the way we should be thinking about this economy or are we smooth sailing from here?
I think the economy is fundamentally healthy. I think we've discovered that, you know, the FED is uncomfortable with a five percent ten year note. I think the FED is somewhat equally uncomfortable with a ten year note moving below a four percent the way it is. But you have to keep in mind the fair value trading range on the ten year note, if you assume a two percent target is basically three and three quarters to four and a quarter. We're in the bottom half of that range.
And no one's going to be selling this market going into the end of the year. There's zero sellers out there and the bulls are still in favor. So what you're seeing happening on the tayl like today with the claims numbers coming lower, continuing claims coming lower. The gdpeople number probably went down. I don't have the details, wy I'm assuming because of inventory. Yeah, okay, so those are
things to tell you better growth going forward. And then we latch onto the one thing here that we can say, oh gee, it's time to be bullish again. We'll push and I think by the end of the day we'll realize it wasn't worth pushing.
So should we be just applauding the Fed right now? Because you think about what we've seen so far. We've seen inflation come down from once in a generation highs, the unemployment rate is still under four percent, and I mean everyone seems to be left and right abandoning their recession calls. Have we is it safe to say that the plane has just about landed here, that they actually have pulled it off?
Well, I mean, the plane is never going to go have a recession. We're never going to have a hard landing. The only way you could have gotten the hard landing is if the equity market corrected to earning's numbers, and then you had companies being forced to really lay off workers to drive up margins that never happened. And because the FED kept on telling you we're going to cut rates. So because the FED kept on telling you we're we're going to cut rates, you never had that adjustment take place.
So the adjustment in terms of the macroeconomic stories clearly why the FED did do that through forward guidance in terms of whether or not they're going to achieve the inflation numbers that's still open. We're looking at inflation numbers that are closer to three percent than two percent now
unto average inflation targeting. And given the concept of this FED in terms of the inflation concept not wanting to get back to the zero bound at any particular point in time in the future, they're willing to accept three percent. The problem is that three percent the ten year note is much too expensive. And if the ten year note is much too expensive, then the equity market's much too expensive.
So the reality is the FED may get us to a hotter landing, but the markets have to adjust to that, and they haven't.
That's the reason why I was just going to ask you, why are you bearish if you see the economy doing better.
Than expected and no recession.
Is this because you do think that there is this inflationary underlying pressure that people are discounting and that there is going to be a meaningful sell off in bonds as people understand that.
Well, you have to keep in mind there is a global deflationary force which is real incredible. By the same token, there is a domestic cyclical inflationary force that's real incredible, and it's been a battle between the two of them. Markets never took on board the nine percent spike in inflation. We never took that on board. So the fact that we've come down to these levels, which are in the fair value range of two to three two percent, we have to ask ourselves a question is two or three?
This is the question we haven't answered yet, and that's the critical question, and that determines whether or not where you want to be in the bond market. And to me, it also suggests that if this Federal Reserve were to do something like take an insurance rate cut, because you hear that conversation all the time. You saw that in twenty eighteen to that, you saw that during the green Span soft landing in the mid nineteen nineties, they took
these insurance rate cuts. The question was that these particular times, in those particular times, was inflation hadn't spiked and we didn't have the cyclical tightness that we have today. We do, and in twenty eighteen twenty nineteen we had a disruption in financial markets. We have no disruption in financial markets. I think if the FED were to take insurance rate
cuts right now, the dollar would collapse. If the dollar would collapse, you then get into a situation with the global deflationary story no longer helps out the inflationary numbers because we've been importing global deflation. But if the dollar collapses, we no longer import global deflation, and at that point in time, goods prices no longer go down. Goods prices no longer go down. Then service prices are fully reflected in inflation, and that becomes the rub for the FED.
That's why they're in this difficult balancing act of pushing back when things get too aggressive, and when things go too far the other way, they have to push the other way. They're trying to fine tune this thing, and so far they've been able to pull it off because the market gives them credibility. You have to ask yourself a question, how many times can you.
Get that lucky?
Steve Shuda, thank you so much.
You'll have to come back on in the new year and tell us whether it's working or not.
Steve Harshuda there of Mizuho.
Stuart Kaiser ahead of US Equity Strategy, Trading Strategy at City Group, joining us now, Stuart, I want to start there. Do you sort of worry that you're not getting bullish enough because the rest of the streets coming to you.
It's a good question. I mean, I'm definitely feeling more bullish post FED. I think that we weren't going into the FED, and as you know, we've been kind of bullish, you know, the last few months expected a rally into
your end. The FED feels like they've extended that window a little bit, just in the sense that they're being more respectful of the dual mandate and probably a little bit you know, quicker to come to the rescue, so to speak, if we do see weakness and the growth data, so you know, I think we're probably I don't know if we're more bullish, but I think the bullishness is probably has a wider window to perform in going to twenty twenty four.
Well, the reason why I ask that is because if we're at forty eight hundred, essentially you're not talking about that big of a game through year end. And this comes as you're expecting the economic data to come in strong and to still show this is inflationary trend.
So what would it take for you to boost that your end target.
Well, I'd have to call Scott and ask him to do that for us. But I think, look, from my perspective, we still do have a modest recession in the middle of the year from our US economist. So I think really the question here is does that recession call continue to get pushed out as it did through much of twenty twenty three. And if that happens, and if the FED is wanting to do quote unquote insurance cuts, then you know, then the markets are going to be much
higher by year end. And I really think that that's one of the big topics next year is a recession, do we get it or not? And be kind of what is the calculus for the FED? If you'd asked me a couple of weeks ago, I would have said the FED might be too slow to react because they want to loosen up the economy. After the December FBC, it seems like they're not going to be too slow to react, and that might just add a little bit of juice to your point as we get it too next year.
Well, on the Fed's reaction function, are you basically saying that the FED put is back or is it coming back?
I mean that that would be an initial takeaway from the December FMC. I think my view, if you had asked me in November would have been, you know, they're not going to hike unless inflation hooks higher, and they're probably not going to cut and unless we see meaningful weakness in the labor side of the economy. The December FMC suggested, you know, no, maybe there is this third option where they could actually be doing quote unquote insurance cuts.
And if they do that, I think that's extremely bullish for equities. I mean, if they're cutting in an environment let's say, well we're printing one hundred and fifty k jobs, then you know, equities, you're going higher.
Well, something that we've been tussling with is how much rate cuts are actually going to matter. You think about five hundred basis points of hikes, maybe causing a little bit of indigestion in the stock market at one point, not at all this year. We did have some turbulence over the summer. And then you think about the economy overall rate cuts. Does the why for why we're getting rate cuts actually matter when it comes to this equity rally?
I think it does one hundred percent. You know, if they're cutting because they're seeing real weakness in the labor side of the economy, you know that that's much different than if growth is sort of sideways, inflation's easing, and they decide, hey, we're too restrictive. So I think I think the why matters matter significantly, at least in my view at this point.
Though, there is a question about earnings. And I know that you say bad news is bad.
News, induce is good is have we really gotten such good news on the earnings front.
I'm going to be speaking with Emily Roland later this morning, and she basically pointed out that year on year S and P five hundred, earnings barely grew zero xo point six percent, and a lot of the gains that we've seen are pricing in next year gains that are expected to be robust.
Doesn't that concern you?
You know, it does a bit, I would say. I think year on year we're tracking down about two percent for SMP. You know, but if you had asked, if you had asked this last December, what is the risk to SMP earnings? People were throwing around two hundred numbers or sub two hundred numbers, so you know, the year on your growth isn't great, But the way the data printed relative to expectations has been you know, very very very positive. So I think I think that that's how
I view earnings this year. As we came into the year with people throwing around one hundred eighty five to two hundred dollars bear market type you know situations on EPs, we're now going to print something that looks more like two twenty scott On at City is a two forty five for next year, which is, you know, got to give you a pretty close to double digit EPs growth
in twenty twenty four, So not too worried. I think if I hadn't described twenty twenty three better than feared, and then twenty twenty four, it looks like, hopefully we're going to get some actual not only EPs growth, but a broadening out of EPs growth to a larger number of sectors, which we do think is also important.
Exactly where I was going to go.
We had Margie ptel on earlier and saying maybe that story is a little overplayed. Other people still sticking with what's worked, including big tech. You're kind of taking a little bit of a different tone.
Look, we thought big tech and growth was going to work it to your end, and then as you got into twenty twenty four, you needed to kind of do a little bit of a reevaluation of things. And next year, if you do get broader Ernie's growth after a year in which you had very narrow large cap leadership, I think there's a fair argument to say that, you know, SMP equal weight, for instance, relative to S and P
cap weight, would make a lot of sense. What we've seen this month is Russell two thousand is massively outperformed. So I think what folks are saying is, you know, growth growth may be better than we expected. The FED actually may cut you know, without a recession. And I've got a lot of stocks at the smaller size of the cap spectrum that have meaningfully lagged, so I think
that the theme has legs. I do think Russell two thousand were probably a little less comfortable with just from a risk of war perspective, but definitely SMP equal weight relative to capwaight is something that we think, we think makes a lot of sense in earlier next year.
So we're talking about some big, longer term themes here, of course, what the risks look like in twenty twenty four and the opportunities. Let's talk about two thirty pm yesterday. Of course, that sudden plunge that we saw on the S and P five hundred, A lot of people pointing to zero day options and the heavy put volume that we saw there.
What do you make of that argument?
You know, our view is that the zero date options is probably less likely to have caused that yesterday. Just talking to the clients that we talked to on a regular basis, everybody was searching. You know, some people said, oh, it must be their twenty year bond auction, or maybe it's just low volumes, you know, kind of late in the month. You know, people throw zero date options out there. I think is as a reason if they don't have
another reason. It's an easy kind of fallback reason. So it's always possible that in a low volume day, a small amount of flows can kind of get you going. And it does feel like the markets were now, once a direction is determined, we're just going to kind of go that way because there's not a lot of volume to push it back. So, you know, we're not generally the camp of blaming zero date for these type of things. It could it be one of a few things that got listed.
You know.
Some people said, oh, a delayed reaction to FedEx numbers. Some people said the twenty year bond auction, you know, other people said zero date options. It's this is just one of those I think late in the year, low volume, you know, kind of we rallied a lot, take some risk off the table.
I like the theory that it was a delayed reaction to FedEx, because that would be quite a delayed, well reaction if.
You don't have an answer, I mean people were I think people were groping yesterday. Yeah, and you just kind of you're looking for anything what has been bad news theoretically that we've received in the last couple of days that could have done it. I think the most notable thing which you mentioned earlier, is equities move but other assets didn't, and I think that's why people were a little bit confused by it. Clearly didn't come from the
bond side of the ledger. Some folks said there were just some you know, equity sell programs going through the system, and that might just be risk reduction into your end. Last year we kind of had this a little bit too, though. We kind of rallied the first two or three weeks of December and then the last two weeks of December last year were a little wonky. So maybe we're having that again.
So were you following Scott's advice just buying the tip?
Were you out there yesterday just scooping stuff up and getting really excited?
I was.
I was trying to figure out what was happening. I think the buy the dip stuff makes sense. I think if you believe all the narrative we've had here right.
So, well, this is my issue. If you always buy the dips, there will not be dips. So is that what we're expecting? All the volatility that people are talking about next year, there's a high risk of it not happening because everyone's going to buy into any kind of volatility that we see.
You know, what, it is possible there's still a lot of cash on the sidelines. You know, if you're a retail investor, you're sitting in money market and you get told rates are going lower. You just missed a twenty percent rally in the SMP and a fifty percent rally in NASDAC. And if you believe we're not going to to recession, I think there is the potential for money
to start to bleed into the market. To your point, and kind of, you know, a retail put alongside the Fed put maybe you know, kind of really improves your risk reward. But to me, it all boils down to labor market data. Labor market data holds in you just want to continue to run long equity risk. If you see weakness in that part of the economy, you need to be excuse me, you'd be really really cautious about how you manage to thinks.
Suirar Kaiser, thank you so much for being with us, joining us now, I'm so pleased to say. Is Susan Thornton, Senior Fellow at the Palsai China Center at Yal Susan, I just want to get your sense of how much of a sort of increased a threat. The NBC report on what Jijinping told President Biden really was.
Yeah, thanks very much. I think this is really a tempest in a teapot. The things that Xi Jinping said on Taiwan and the meeting with Biden are absolutely not new. The Chinese have repeated at almost every occasion that Taiwan will be reunified at some point. So I don't think anything that the Chinese would have said on this issue would be considered new by people who watch this issue. Maybe by people who don't watch this issue, they would
have been surprised. But I do think the Chinese are kind of reflecting some concern that US policy is shifting toward a support for a kind of permanent separation with Taiwan, and that would be maybe something that would be causing them a little bit of alarm and may have added some umph to this kind of statement about Taiwan will be reunified.
They added a lot of umph this morning when you talk about the potential prohibition of exports of certain rare earth metals that are really crucial to a lot of electric vehicles, And this comes as there are reports that the administration in the United States is thinking about possibly increasing the tariffs on imports of certain goods having to
do electric vehicles from China. Is this a really material increase in the tit for tat the trade war that we saw really heat up a couple of years ago with China and the US.
Well, you know, the Chinese have already announced in a couple of other occasions some selected restrictions on exports of rare earths, you know, trying to show that they have cards that they can play too in this tit for tat trade war. I think what we're seeing from the Biden administration is a desire to kind of adjust some of the tariffs that the Trump administration had imposed on China,
in which the Biden administration left on. So, you know, evs are a particular concern because of the desire to try to ramp up manufacturing here in the US. Of course, they're also a big concern in Europe, and so I think that's what we're looking at. Certainly, this is a hugely successful sector for China, so they don't want to see this tariff and position happen. I think probably they're
resigned to it at this point. And this is probably you know, just a lot more signaling than something that's unexpected.
So resigned to tariffs. But what about when it comes to sanctions. I mean to go back to what Senator Lindsay Graham said saying that he is intent on drafting pre invasion sanctions from Hell to impose on China if they take action to seize Taiwan. How would those sanctions be received and would that actually deter China in any fashion?
Yeah, I think it's really important that we sort of try to separate the Taiwan issues from the trade war issues because they are very different, and people have, you know, a tendency to try to lump all these things together, especially up on Capitol Hill. You know, the issues around trying to draft you know, pre invasion sanctions have been
talked about up on Capitol Hill for a while. You know, it didn't work with Russia, and those sanctions were probably much more dramatic than anything that could be imposed on China in terms of trying to get the rest of the countries in the world to go along with it. Of course, sanctions regime only works to the extent that you can get other countries to also join in so I think this is an effort by you know, people to try to show the Chinese that we really don't
want them to do this. But again, you know, the summit was very successful, the some in San Francisco between President Biden, President she and trying to tamp down this issue, and it seems now like there's a desire in some quarters to try to ramp it up again, and I think that's unfortunate. I mean, we really do need to see some stability on this issue going into what's going to be a pretty tumultuous year in US China relations.
I think, well, Susan to that point.
Of course, the Apex Summit, it was perceived, is going well, and I think that's why part of the reason why there was surprise to see this report from NBC yesterday when it comes to China's intentions with Taiwan. But I mean, you made the great point that this isn't necessarily new rhetoric from China when it comes to Taiwan.
Absolutely, I think the summit actually on Taiwan, my understanding is the two leaders didn't really spend a lot of time on that issue, and that there was a tacit agreement to try to work to manage this difficult issue. You know, we have the Taiwan election coming up on January thirteenth, that's going to pose tensions and some difficulties
in the relationship. There'll be an inauguration in May, and there's always a lot of bad back and forth between the US and China and how these issues will be handled. And I think what we're trying to get from the summit was that these issues will be handled carefully, and that was the message that was trying to be conveyed. And now we've sort of got back to this increased sort of hype around a possible military action, which I agree with Michael Hurston, I don't think is imminent.
Given the fact that we are dealing with a very political year heading into the election at the end of the year.
How can there be.
Any kind of diplomatic discussions between China and the US with any conviction if there is not clear who is going to be in the White House come twenty twenty five.
Well, this is an issue for diplomats working on relationships with pretty much every country in the world right now. I mean, all countries are kind of looking at our political situation and wondering what's going to happen and wondering what kind of commitments they can make with US in the coming year. So it is difficult, and you know,
probably especially difficult with China. The only thing I would say about the US China relationship is that it's it's less likely probably to turn on a dime with the you know, accession of a Republican president, be it Trump or anybody else, because I think there is this kind of bipartisan approach to China which is quite you know, hawkish at the moment and probably won't change no matter
who comes into the White House. And I think the Chinese do know that, so they are so they are looking at, you know, the coming year and then the years after it sort of how to manage what's going to be a pretty difficult time.
I think, Well, Susan, you bring up a question that I think about all the time when it comes to US China relations.
A lot of these issues go back years.
And years, they outlast any one administration, and like you mentioned, being hawkish on China is very bipartisan at the moment. And with that in mind, how much does it truly matter, how consequential is it who is actually in the Oval Office.
Yeah, well, you mentioned that being hawkish on China is bipartisan. Now, I mean, I think it actually goes a long way back, and almost every issue we have today with China has been around for decades, you know, especially on Taiwan, if you go back and look at I've been looking at historical records lately from the Harder administration, and you know, every single issue was talked about at the time of normalization between the US and China in nineteen seventy nine.
So we're forty five years on from that, and I think it you know, it's just going to be two big countries, huge economies, important players in the world, and it's just going to be so difficult to figure out how to manage all of these issues. I think the most important thing is that whoever's in the White House should be expressing confidence about the future of the United States and our ability to be resilient and maintain our competitive edge. I think that's the most important thing.
Susan Thornton of the Paul Side China Center at the Yale University, thank you so much for being with us.
The media industry is consolidating.
We late yesterday learned that Warner Brothers and Paramount held talks about a possible merger deal, putting potentially the studios together and putting HBO and CBS under one roof, according to people familiar with the matter. Robert Fishman, senior research analyst at Mofatt Nathanson, writing this morning, we hesitate to see the upside in any transaction for the Paramount company as a whole, especially at its current premium valuation. Given
the pressure on the linear TV business. It's a great place to start. And Robert, I'm so pleased to say, is joining us.
Now to discuss.
Robert, that is my key question, what is the advantage to tying up and CBS?
But good morning, thank you for having me.
I think the answer to the question right now is the desperate times in media landscape and the companies are facing significant challenges from a linear TV perspective given the increasing rates of cord cutting. Linear advertising we think is in secular declines right now. So all these companies are looking to really just cut back and back to your conversation earlier, try to figure out how to get to this other side of the streaming pivot that they're all making.
But it's a really challenging time right now.
So do you think that this is a viable deal or do you think that this is just basically CEOs throwing in the talent, saying we'll talk to whoever we can try to understand what could potentially work.
I think every company is really trying to figure it out right now, and I do think that combinations are likely to happen. Do I think that anything is going to happen in the very near term. We have our skepticism just because of the regulatory landscape that that was just reference.
And something that I've been wondering about thinking about this potential combination is how Warner Brothers would actually pay for this, because as I understand it, they have a pretty hefty debt load. You think back to that massive merger between Discovery and Murder Media from twenty twenty one. How would they actually fund this acquisition if it happens.
Yeah, we're still waiting to learn more details in terms of the actual terms and how it would be structured. I mean clearly that they would likely look for some sort of stock component, if not a significant state in the combined companies. So we still need to figure out
the exact combination. But to your point, all of these companies are in a challenged position right now because of the debt loads that they have, and that has limited the flexibility that these companies have as they're coming through the streaming pivot that they're looking to make and try to get to the other side with the pressures of the linear ecosystem going against them.
And if I were in the C suite at Netflix or say at Apple's streaming are should I be worried right now, not particularly just about this potential tie up, but potential consolidation to come.
Well from the digital company perspective in terms of streaming specifically, I mean, clearly, I would flip the question around. I'd say the media companies should continue to be worried to see how much bigger and stronger the digital companies are getting in streaming, especially with public reports that Amazon continues
to be looking to go more in sports. And I think the whole sports angle here is a really interesting angle because what Warner Brothers Discovery does not have today is a broadcast network, and what we know that they're looking to do a big deal coming up in twenty twenty four is going to be the NBA renewal, So sports I think is a critical piece to all of this potential consolidation question and how that plays out and who owns what assets will have a significant impact on
the future of the sports landscape as well.
That's exactly where I was going to go, especially with CBS.
I wonder how much that's part of this, this idea of trying to get in, especially before Amazon as they bid on this. If Amazon or one of the other streaming networks were to get a hold of some of the rights to the sports teams or football in particular, would that be the desnel for the cable channels.
Well, to some degree, it's already happening.
Amazon does have their Thursday Night package and they've succeeded so far this season. We've seen real momentum there in terms of viewership. So yes, I mean this is the trend for sports. Sports is going over the top. Clearly, ESPN remains the pivotal piece to the sports ecosystem, and there's been lots of discussion in terms of the timing of when they're going to take their flagship network over
the top as well. But all of these sports rights are a critical piece again to the future of the media landscape and to the whole sports ecosystem, and the digital players play a critical piece as part of that as well.
I have to say, as you're talking, Robert does not sound very optimistic for a lot of these streaming channels
that are not Amazon or that are not Netflix. And I'm wondering if the best game plan, according to you, is just to basically put all of the sort of repertoire, all the different shows together, give it as a streaming offer that is only one stream, it's a bundled stream, and just offering it like that, rather than trying to compete in any kind of material way with the content as well as just the pocketbook of some of these other players.
I mean, we do think that reaggregation on the streaming side is inevitable.
It will likely take some time to play out.
But this potential consolidation or whatever permutation you want to throw out there is all one step closer to that end goal.
And let's talk a little bit more about Paramount specifically, because it was interesting to see this news yesterday about Warner Brothers. When you think about what else we've heard and learned about Paramount this week. Of course, holding talks once again about a sale of the Black Entertainment Television
Network for example. We'll see if any buyers emerge. There can Paramount stand alone as a standalone company if it's not Warner Brothers, for example, do they need to be acquired by someone else at this.
Point, yeah, I mean, I think the challenges at hand
are real and growing. We hosted a conference a couple weeks ago now in terms of the future of the impact of Charter deal, that the Disney Charter deal on the rest of the ecosystem, and we believe and it's been reported that Charter deal with Paramount is coming up, but all future renewals per Paramounts given what we say, essentially back to sports, that the fact that they're leaking all of their premium sports rights, including the NFL over the top, is going to be a significant challenge going
forward for Paramount, and we think that the renewal is what will come under pressure because of.
That, and that will be another leg.
As far as what some of the risks are facing this company. Coming back to the advertising story, it's a real difficult time right now, and it's pretty clear to us that television is in secular decline in terms of advertising, and that's going to put another significant challenge ahead given how high margin these dollars are and the exposure that the TV network's TV media business is for Paramount is generating essentially all of their profit today.
And of course the talks between Warner Brothers and Paramount, they're preliminary, according to people familiar, may not lead to an agreement, but let's say that it did, that these two companies did combine. On the surface level, there's a lot of overall between these two companies. What could that potentially mean for restructuring and layoffs for example?
I mean, they would clearly be significant cost synergies involved in the combination of these companies. But in the report we published this morning, we alluded to the fact from an overlap perspective that the cable network business would be
something with high concentration. So that's clearly something from a regulatory standpoint that we would imagine is reviewed at the very least again in this potential speculative type of combination, and then you have to question what ends up with the two different studios, whether or not Warner Brothers Discovery would be forced or even opportunistically look to get rid of the Paramount Studio as well.
Robert Fishman, if Buffet Nathanson, thank you so much for being with us. Subscribe to the Bloomberg Surveillance podcast on Apple, Spotify, and where else you get your podcasts. Listen live every weekday starting at seven am Eastern on Bloomberg dot com, the iHeartRadio app tune In, and the.
Bloomberg Business app.
You can watch us live on Bloomberg Television and always on the Bloomberg Terminal. Thanks for listening. I'm Lisa Abramowitz, and this is Bloomberg