Bloomberg Audio Studios, podcasts, radio news. Bloomberg Tech is alive from coast to coast with Caroline Hyde in New York and ever low in sentrances, go.
This is Bloomberg Tech coming up. Amazon shares drop after announcing plans to spend two hundred billion dollars this year on data centers, chips and other equipment.
Mean while Bitcoin rebounds, having plummeted on Thursday when it neared the sixty thousand.
Dollars level, and we break down more tech earnings of the CEOs of Roadblocks, a firm, and the Warner Music Group.
First, we check in on what is a tentative bounce back after what has been a punishing week. Remember the Nasdaq is on track for its worst week ed in three months since the beginning of November. But now we see a little bit of a reprieve, a little bit of dip by We're up percentage point if you're looking at the big indexes, and.
I know you're going to drill into the individual movers that push and pull.
But Crypto up almost nine percent, but only about eradicating half of yesterday's losses. We're still only at sixty eight thousand what are remarkable beginning to the year for this asset class that in many ways people feel is not a store of value.
But what are you looking at?
The analyst are calling it sticker shock. Amazon pledging to spend two hundred billion dollars capital expenditures on AI infrastructure. The stock down more than eight percent right now, on track for its biggest drop since April of last year. Operating income in the current period twenty one billion dollars at the high end below consensus. So the concern is is the trade off worfit here? There is a big
backlog for AWS and AI business. By the way, it's one of the few names on the NAZAQ one hundred that's down because in reaction to that capital expenditures pledge, you see everyone from the GPU providers and videos now up more than six percent in response. Memory names, infrastructure names, energy names all higher because the capital expenditures for all
of the hyperscalers in aggregate plus meta is growing. We're going to get to that with ananilyst just a few minutes time, and the water cryptocurrencies traders are buying the dip carry outlined it. Bitcoin's rebounding after plummeting on Thursday, raising all the gains since Donald Trump's twenty twenty four election, falling close to sixty thousand US dollars, popping back up again. Blueberg Distal financial reporter Emily Nicole joins us with the latest difficult Emily, what's going on?
And your guests as good as mine. To be honest, We've been watching bitcoin over the last twenty four hours and it's really been a roller coaster. As you said, it dipped about thirteen percent yesterday. Now I think we're up about ten percent, so we're recovering some of that, but it's really just been a roller coaster week. It's been hard to kind of guess at why that's been happening.
There's been a lot of instability over the last few months with geopolitical tensions, and bitcoins really struggled to perhatch onto any narrative within that, whether or not it's a safe haven, a saw of value if it can latch onto stocks as it used to trade pretty in line with tech stocks back in the day. None of that seems to be sticking, and it's just kind of doing its own thing right now.
Fud some would call it in the market.
Fear, uncertainty, doubt just consumed the asset class as a whole, and it's consumed companies that have written so high on the back of the climb in crypto. I think of Strategy in some of these other digital asset treasury companies. That's how have you seen, particularly on the back of Michael Sailor's earnings yesterday, have you seen people still questioning how long they can ride this?
Boy?
If we look at Strategy, for example, that has also had a similarly up down two days, So yesterday it was down about seventeen percent of the close before the earnings, Investors were really bracing for some bad news coming from that, particularly with bitcoin having such a bad day, and then today we're seeing it up more than sixteen percent. Because of that kind of whipsawing effect, the earnings weren't as bad as people expected. Losses were in line with what
we thought was happening. No new debt was being created, and so people trying to stretch for you know, where can we see some some like staying power within this rally? Where is there a bottom? Where is their stability? And that might be where we're now starting to see a sort of bottom. Maybe that sixty thousand mark was it, and for strategy as well, maybe it's kind of starting to see a way out of that.
It's interesting, even with the headlines coming from China as they tighten curbs on crypto and stable coin issuance, still managing to catch some buying of the dick today.
Emily Nicole, what a busy week. Thanks for joining us.
Meanwhile, let's talk Waymo now using DeepMind's Genie three AI model to create realistic worlds for a new Waymo world models, according to the company.
In a blog post today, the self.
Driving tech developer argues this collaboration with another segment of Google's tech ecosystem is going to help the expansion of Waymos's self driving services across many more markets.
Ed, let's get back to Amazon, big mover, big stories stock lower is. The company announced it's set to spend two hundred billion dollars this year data centers, chips and equipment, supercharging its bets on AI roll. Hit Ko carne Is Managing directors see the analyst for Internet and Capital markets research at Rough Capital Partners. They call it sticker shock right. The reaction to the big capital expenditures number, But there was a time where a big capital expenditures number was
what you wanted to see. Why the negative reaction, I.
Think the negative reaction is just because outside of the caps people expected spotless earnings. I thinks Sticker Shop was expected given what Google, Meta Microsoft did last ten days. But what was not expected was slight yellow flags and operating margins, and certainly people realizing that Amazon has to spend a lot more given they are launching satellites to space, right, they are building new whole foods and so on and so forth.
You have a buy on Core, on the stock, and I believe let me just check here on my Bloomberg terminal. Yeah, two hundred and eighty five dollars price target. Right. There are lots of pieces of data in there. Some people looked at the operating income forecast for the current period and thought that's a little worrying, bearing in mind AWS is the majority of operating income. Some looked at the backlog. Some looked at the AWS growth twenty four percent, fastest
pace of growth in almost three years. Where would you look all of the above.
There are many positives in the report and in the outlook, and the various moving parts in Amazon accident aws, improving retail margins, better advertising growth as well as better efficiency in the retail. Overall, I think what is spooking the market here is there are more investments beyond AI that this company is doing, unlike many other peers that are just doubling down on simple, simply one thing. So the
wordy hear is next two to three years. How high of an investment curve are we looking at for Amazon and what level of ROI do they get beyond the core AI investments. I think that's the worry here. But all in we think this is a GENEAI winner, very underappreciated and over time time retell.
What's diggins why it's a GENAI winner? Is it trainium, graviton? Just seeing the triple digit percentage growth, the fact that they've got that vertical integration, making their own chips, using that for the compute that they offer in the efficiency theres it gains. Then is it more that their own models, Like we don't talk much about the own models that they're producing. We talk so much about Google's, for example, but not so much Amazons.
I know, I think Amazon is with all of the ambo okay, they are vertically integrating in a way that absolutely know the company on Earth is trying to replicate at the scale at which Amazon is trying to do, Vertically integrating cloud, vertically integrating retail, and having the diversity
of advertising. So I feel when all three pillars of Amazon start to crank up higher operating margins, which we will we will see over the next college six to nine months, that's when the real potential of profitability of
this company will will manifest in the numbers. And that's when That's why I believe the surface area of investments as well as surface area of ROI on those investments is so much wider at Amazon that is being underappreciated, and that's that's where we feel this is a Jenny I winner across the board.
It's interesting we have such short term memory loss sometimes this was always a company that focused more on investing in itself rather than producing profitability.
But push us forward.
As to how Annie Jasse continues to manage the cost basis, because that was the headline that stole the show previous to earning season was the amount of job cuts they're making.
Is that still what you need to be seeing from Mandy Jesse.
I think there is room probably the company needs to make after the over hiring of almost two and a half years after the COVID, I think there is still digesi period, but which probably one would argue that has been a little bit more prolonged than what would have one would have preferred to see. So I think they're finally getting there, and I think a little bit of extra cost cuts would be much more appreciated to make room for more CAPEX.
CAPEX across the Hyperscals plus Meta is now at six hundred and fifty billion dollars for the year for Microsoft. That's based on consensus. The difference with Amazon is that they might tip into negative free cash flow. We have thirty seconds. How worried are you about that?
Not worried at all. This company has gone through negative free cash flow cycles in the past and delivered ROI unlike many other become and easier for the first time going through this cycle. If you look at fifteen years, Amazon has delivered r I C probably in a besting class manner.
O Kakarni of Growth Capital Partners, thank you very much, indeed for joining us today and coming up with all more earning.
We're speaking of the Roadblocks CEO Dave Bazuki. As a company season one hundred.
And forty four million daily active users. You don't even want to hear how many hours people are spending on this platform.
We'll break it down. This is Blue meg Tech.
Chackap Chairs of Roadblocks company on fire up ten percent after they reported fourth quarter users and bookings at topped expectations.
Daily active users.
Jumped sixty nine percent to one hundred and forty four million. It beat alas forecasts and pleased to say we're now joined on the results by Dave Bazuki, CEO of Roadblocks. Your engagement levels was jumping to a similar degree. I think it was like sixty eight per What is is this the games that are driving this day?
It's really the games, the platform and the creator. You know, we are on a mission to get ten percent of all global gaming content running on Roadblocks, and we're well on our way. We had a banner year, as you mentioned in twenty twenty five, we had fifty five percent year on year bookings growth. And in addition, as we started rolling out what we call the gold standard for safety, we're age checking our users and we now have accurate you know data on the eighteen and up segment, which
is growing at over fifty percent year on year. In addition, around the world, countries like Japan are growing one hundred and sixty percent year on year. Really, people are creating new genres and types of games, whether it was dressed to Impress a year ago or grow a garden. So we're powered by both platform and an amazing creator community.
Yeah, you call Bruno Mars singing live on brain rot, I mean tolve million people all using and.
Coming to watch that at the same time. The records are interesting.
Given as you say, these safety measures have been put in place, how has that impacted? Has that created any friction or indeed, it seems as though you're leaning into the opportunity of these safety measures.
I think leaning in is a good way to mention it. I believe the last time we chatted we mentioned our vision for the gold standard for safety. In addition to filtering and monitoring all chat for critical harms and not allowing image or video sharing, we have now are full into our roleout of age estimation, which is understanding the age of everyone on our platform and using that to
allow people to communicate with people of similar age. We gave our teams an ambitious goal to have no friction for this, and when you lean into something like this, a lot of innovations pop up. On the side, our matchmaking has gotten better. We continue to refine the way we filter text and make trusted connections, so we're optimistic we're going to go through this and ultimately come out with minimal friction from this.
Dave. I fired up my new gaming PC last night, Asa Nitro V fifteen, Intel I five and Video g fours ID X forty fifty and I thought to myself, what am I going to play? And for you guys and everyone else, it's about pipeline, right. You rely on these third parties to keep the pipeline going, but you also have like the you know, the ambition on these higher fidelity games. How do you guarantee the pipeline and how are you going to manage the pipeline going forward? So I have some more things to play.
The pipeline on Roadblocks is very, very healthy. We watched the distribution, the variety, the diversity of the experiences that our creators are growing, and over the last year we've made amazing really advances, not just our technology platform, but in search and discovery, so that the pipeline is robust.
Right now, we have a unique vision with our platform, especially for eighteen and up expansion, that when a creator makes an experience on roadblocks, it works at good performance on a low end to gigabyte Android phone, for example, but also can scale up and look beautiful on your brand new gaming PC. This is a unique technology. It requires a vertical stack going from cloud to game engine,
to discovery to the apps on everyone's desktop. It's why we're optimistic that that fifty percent growth in eighteen and up can get more and more of that part of the global gaming market. I'll highlight in the US our ambitions are more than ten percent, and in the US a big majority of that fifty billion approximate gaming market is eighteen and up. So what we see really good trajectory in that direction.
Dave Advertising, we check with you regularly on it, and you're consistent that it's not yet a meaningful contributor. Right when will it be? Will it be? Or do investors now start to change how they factor in ads?
For you?
Going forward?
I want to highlight the big picture, you know, in twenty twenty five, I believe we gave guidance in the load twenties and we ended up with fifty five percent bookings growth. So I want to highlight the big picture is we continue to exceed guidance and expectation on how we grow. We're seeing great progress both on rewarded video advertising and also developer sponsor tile advertising, which is creators on roadblocks who are monetizing really well accelerating their own
growth by purchasing advertising. We do believe it'll be a big segment. It will ultimately as we roll out Roadblocks moments, which is I'm really used for discovery of video capture of roadblocks, that'll be a part of it. So we're continuously bullish, but not ready to really split it out yet.
Dave, briefly, how going to show you on the AI platform and indeed the model that you have We've got Cube foundation model that you've just unfailed, but Google's also got Project Genie. How are you seeing that changing the development of games and how do you stick to your sort of more blocky esthetic that people love.
Well.
What we believe we will see over time as we advance AI, our avatar system and our technology platform a much bigger diversity of the types of experiences you see on the platform. We've shared our notion of novel games, which is games you'd never expected to see on Roadblocks and genres like RPG or in sports, and really with AI, we see that as an acceleration technology for both creation
for the way games look. We shared some video on X this week around three D in the cloud up sampling and also how models will be used for driving creation. I'll highlight one key thing about Roadblocks. We are a connection and a communication platform. We're a multiplayer platform where you know, in sci fi terms, we're building the hollow deck where people go together. Some of the technologies out there that we're building as well, like world models, are
currently video single player technologies. We think the big long term opportunity for us is synchronizing thousands of players in the cloud, which is much different technology and stuff were you know is actively part of how we build Roadblocks.
Dave Bazuki of Roadblocks, thank you very much. Coming up on boom bag Tech, Affirm CEO Max Lefchin joins us talk about his company's results. Stick Around It's next Spinbag Tech. Shares of Affirm down about six percent. The buy Now pay later. Company reported results that beat analyst estimates, though some on the street say that the outlook part is a little bit conservative. Fortunately, we can talk through it
with a firm CEO, Max left Chin. Actually, there's been a lot this morning about the outlook the financial Strong couarter gone. I actually just want to talk about what you're doing, and I'd like to start, if I may, with the affirm card, how's that coming along? And Max with you? If if I may, what's the end game with the affirm card?
You know, there is no endgame for there's so much to do. I have a hard time saying we'll be done when this feature. Ships are from card rocketed once again.
Yeah.
For a long time, I think it looked like a gently super linear growth curve, and in our latest letter, we finally showed.
That it's that's kind of what I mean, you know, the trajectory's changed.
It's you know, we didn't do anything very specific to make it go obviously exponential, but it is accelerating. And it's just the great work of our product teams that have been putting in new features, integrating all of our zero percent deals into the card. The card grew, you know, something like four times the rest of the business, or you know, it's just a rocket ship that we built
a few years ago and it just keeps going. The endgame is to get you to put away your credit card forever and use a deviit card powered by a firm.
The other growth part of the story, because it is a growth story, and whatever you feel about the end list saying you're being conservative. Is international expansion a bit so in my home country, in Caroline's home country, the UK, it's a really interesting case study. How is that going? But then what comes next after that?
Well, we just announced some exciting brands. We're live with Shopify, our great partner in the US. Now in the UK it's a real business now. So for a couple of quarters, we said, look, we're we've crossed upon We're in London, we're hiring where we're building. It's now a business, it's making real revenue, it's generating some very significant sales lifts
for emerging partners. We have a whole slew of new partnerships to go live with soon, so feeling great about it and eyeing continental Europe next of course, and so we're definitely not going to be a North American phenomenon only, but we're still very, very committed and very focused on our North American stronghold.
So as Ted Securities is truest is Bloomberg Intelligence Analysis right, that you do guide conservatively and you just feel that that's the right thing to do in this consumer context.
I think the guide is the guide, As our CFO always reminds me to say, you know, I encourage folks that hold our stock or eyeing our stock to see how we've done in the past. Quarter after quarter. We make promises and we deliver on them. So we take our guidance very seriously. We intend to always do well relative to what we said will do and better and that's what it is. I mean, ultimately, the results speak for themselves, and we are in it for a very
long term. So at some point people will figure out exactly just how much more growth there is in this business.
Credit quality holding up clearly, and that's the litmus test in many ways to success within delinquencies.
Are they on the rise? How are you seeing a consumer right now?
Max?
You know, we have underwritten tens of millions of American households in the order of seventy million twenty six million actives just last twelve months alone, we reported we see a pretty big swath of America. Our consumer is healthy. They are paying us back their shopping. They had a great holiday season. A lot of outside observers underestimated our growth over the holidays. We proved them wrong yesterday. Once again, American consumer as we see her, is doing just fine.
Max, I think this is the first opportunity we've had to speak since the President's initiative to cap credit card interest rates. You know, we start this conversation by you saying, well, we want people's their credit card away. That you obviously have some some bias in that narrative, but just your viewpoint on it, please, and what's happened in the weeks that followed. We just have thirty seconds. Sorry.
I think the most important thing in this conversation about affordability is transparency. Like raide caps are a conversation for the legislators, but the most important thing is people understand what they're getting into. The reason affirm has been successful is because of upfront pricing. If you know what you'll pay, you'll be just fine.
Max slash Joan always great to have your transparency on the show.
See you over firm. Thank you. Coming up, we.
Dive on this week's market moves, the lay shoe of Alliance Bernstein.
That's next. This has been bad tech.
Welcome back to Bloomberg Tech. We're looking at the NASAK one hundred right. It's kind of the go to index. It has the mag seven, the kind of broadest and diversified list to tech companies. And on the week, we're headed for our biggest weekly drop since November. Carol pointed that out earlier, actually a percentage point more, and then as that one hundred beyond track for its biggest weekly
drop since April. In the moment, we're actually a little bit higher in the session, and that's the reaction of the supply chain to Amazon and Amazon's projection of spending two hundred billion dollars capital expenditures in twenty twenty six. Of course, the big beneficiary when you're spending hundreds of billions of dollars on AI infrastructure and data center is in video, and that is one of the best performers
right now in this session. If we move super fast, we might be able to change the chart and show you what that looks like. Boom and Video up seven percent, Amazon down eight percent, actually way way more widespread than that across memory chip equipment makers, Nuclear names, the whole lot, charrac.
Names, bloom its numbers extraordinary. Let's dissect this a bit more ed because you've just been talking us through the sheer scale of the Hyperscaler's plans. If you add in matter, it's six hundred and fifty billion dollars. It really underscores just how quickly the AI race is accelerating.
Let's talk more on what this wave of investment means for markets.
For disruption across industries, the actual use of the models that this compute brings. Hey, shoot is with us Ann Spensteen, CIO of Thematic Innovation Equities.
You own the whole array.
You own the hyperscalers plus the infrastructure layer.
What from this week did you think?
Do you agree that six hundred and fifty billion is what we should be seeing from these sorts of names.
I think what we're seeing, and we've been saying this is this is the third year into if you think about from the start of CHRAGYBTM where we are today, this is a third year into the build, and I would say this is the year that we should start to see adoptions, and in fact, I think that's what's causing a lot of disruption in the marketplace.
We're seeing rapid.
Model drafts and largers and new model, new versions of it, and the speed of that is accelerating, and that is something that we should be expecting to see at this point. But what's also interesting is that what it also means, and we said this, this is an interesting time the large cap themselves. They're spending a lot of money because it's as defensive as it is offensive. Right, it's for growth,
but it's also to defend your competitive mode. AI has the ability to disrupt many models, and this time it's interesting is AI has holds the potential to disrupt tech. How we think about the way that the infrastructure layer is and how we think about enterprise software, how the traditional business model with high competitive mode, how that could be changing going forward. And that's exactly what we're seeing.
So it's kind of hard for us to judge. Is six hundred and fifty the right number or is it a different number?
Yes? Can I jump in and ask where do you look for the evidence? Then? So, for example, Amazon talked up its backlog, which is very different from our pa right in the world of software because it's not invoiced. They talked about, you know, the operating income. A backlog would suggest, oh my goodness, they've got hundreds of billions of dollars of revenues waiting in the wings from their AI offering. The market doesn't seem to believe that. Do you believe that metric?
I think it's less about whether or not that is indeed just that one metric that we focus on.
But rather, if you think about all.
These this is basically a rebuild of the digital infrastructural layer. And that's why I said, what is six hundred and fifty billion? Is that precisely the right number we should be anchoring on, but just the fact that how it could unlock the future of workload and when we think about it, it's not just the hyper skelets per se, but also what does it mean for the rest of the economy. What could it unlock in terms of the potential in productivity And you're actually seeing the early evidence
of that. You can see in the traditional retail industry. What does the future hold for shopping and what does agent mean for future of shopping? Or if you think about the traditional manufacturing industry. We are in fact seeing real productivity gain from using AI, and that's only the beginning.
And time and time again, I think if we look at look back in history, when you have such disruptive technology changes, what happens in a near term the way that we do things gets disrupted, But then new business model productivity gain actually do emerge. And that is the
power of innovation. It requires little imagination. So if you look at this point in time, yes, it's a huge number that we're spending, but you probably could look back and back then when electricity was first invented, that probably was a tremendous amount of money to be spent on the grid.
What if this is the future of the grid, Well, let's talk about that for the innovation that we're seeing at the moment.
And I just want to bring to our viewers.
Of course, the latest that happened about midday yesterday Whenanthropic released a new version of its AI model, claud Opens four point six. It's designed, we know, to carry out financial research other work related functions. The company says it can scrutinize company data, regulatory filings, market information to come up with really detailed financial analysis that would normally take a person days to complete. This is after the market kind of fell out of bed following their legal plug
in to Cowork. So how are you seeing these models becoming an entry point into software? What did you think about just the gargantuan selloff across data services and software names.
You know, it's in the time of such disruption, it's very it's too early to call what's cheap?
Who is going to be the future.
Winner because this is only the beginning, And ultimately it comes back to what is the real long term competitive mode? And that's what the question really is at this point, because you know, it's if you talk to the private companies, you probably are seeing some of the private companies this is the fastest way for a company to get to one hundred million doll revenue. But my question would be, what is the real way to look at it? Who can hold on to that one hundred million dollar revenue
for a long period yees? And what we are seeing right now, what's interesting is it's not in the near
term numbers that's going down. But the question that we're asking, and I think all the mesters are asking, is well, it brings in the probability of what is the terminal revenue we should be paying, what's the terminal multiple we should be paying for the revenue because the probability of holding on to that revenue and the profit is probably changing really fast, and that's why we're seeing the terminal multiple.
Actually it is coming down pretty fast, and that's the disruption that we're seeing in the market today.
But with disruption and chaos, there's.
Always opportunities because on the other side of it is while we are really concerned about I feel like six months ago everyone is concerned about the ROI, and now we're seeing models being dropped, and then in the meantime there's a massive seale off in the market. So I would say think there's also an opportunity as well, because now we're probably a little more comfortable with the ROI.
And then the six hundred and fifty billion dollar question for everybody is we're building a road to nowhere, And I would say, well, maybe there's hope that we're building a road to somewhere. So it actually creates huge opportunities if you have long term horizon, and because there's dislocation in the market.
Lay two of Alliance Bernstein, deeply pensive on what's happening in the markets long term and short term. Thank you so much. Like coming up, we're joined by Warner Music Group CEO Robert Kinsel to break down the company's earnings that conversation. Next, don't miss it. This is Bloomberg Tech.
He the upbeat music.
After record quarterly revenue in fiscal fourth quarter, Warner Music Group rose another ten percent in its first quarter thanks to increases in digital in artist services and expanding rights and licensing revenue and leaning into AI. The shares are up five percent on the day, as you can see. Let's talk it through with the CEO, Robert Kensal.
Thank you very much.
Indeed for joining us today. Robert, and you talk about the creative wins here. So is it the fourth factors of Alex Warren, of Cardi b of ed sharing that drive these sorts of revenues or where else are you managing to pull the leavers?
First of all, thank you for having me. It's really great to be here to talk about the success that we're seeing with our strategy working. You're leading them with the right way, which is artist development. Is that the core of what we do and finding artists like the ones you mentioned is how we succeed. But it is not just that Our market share growth has been broad
based across regents, across business units. So both our catalog division as well as our frontline divisions North America, America Europe have been growing and gaining share, and that is what underpinned our consistent results over the past three quarters of driving sustained, sustained growth and toleration while we're cutting.
Costs, cutting costs.
How much you were able to cut cost with AI, because Robert, here in lies your background, the fact that you've worked always with a focus on digital, the intersection of music with technology, and the fact that you have led the charge striking deals with Suno, for example, putting out blog posts as to why this can be a win for the.
Artists you develop.
How much is that actually helping cut costs at this moment.
Yeah, So it's good to step back on AI because the way we approach it is that it has to deliver against our three core priorities. Probably number one is growing our share. We just spoke about that and their activities that we do within that using AI that help us automate our marketing across our entire catalog of over a million songs. It is humanly impossible to touch all of those songs and promote them. With AI, we can do that and we're well underway to delivering on that.
So it's a major major accomplishment for a large IP
owners such as Cells two. We have to increase we have to increase the value of music, and AI is helping us to do that by introducing new pricing tiers on existing DSPs digital service providers, but also by having new entrants such as Suno and Udio, And that is where we focused initially, and we want to make sure that now we're not only getting paid from consumption from the spotifyes and youtubes of the world, but also from creation from the SunOS and audios of the world, and
those two worlds over time will merge as well. And then third is growing our efficiency. And on the efficiency front, we're deploying AI across finance, across legal, across HR. These are the three departments that we started with obviously, in addition to market that I mentioned before, and all of that is helping us be more effective handle more copyrights and more artists at the same or lower employee base. And at the same time grow revenues and profit.
Robert, we got some early insight into what your strategy is when you joined us at Bloomberg screen Time right in October, and you know, my interpretation of your time on stage was that this was pretty early. Like Sono is a case study now that there were a few
months on. Are there any examples of work you've deployed, either internally or work you've done with Sono and the four or five other companies that you've done deals with that's new, you know, that's tangibly made an impact in the core to gone.
Yeah.
So actually when I was with you guys, you know, at your conference in October, we were actually heads down on deals with those companies, so those were not even close, so it was super early. I've published principles that we as a company uphold to doing these deals, which is the partners have to commit to licensed models. They have to probably reflect the value of music, which means the
right commercial terms that we're really happy with. And three that artists have to have the right to opt in for the use of their name and likeness in uh, you know, in derivative works. And we're in the process of transitioning these partners to licensed models. So the answer to your question is not yet, because we're extremely early
in that. But they're well underway. They're signing more partners and they're working on their new models, and as soon as they transition to license model, which is our condition number one, then we will be able to start cooperating much more deeply.
We just had the Grammys, right, let me just you know, we just had the Grammys, and that puts the focus back on the artists, the songwriters other side of the table. How have they responded to your strategy and the work you want to do with the AI companies.
It's been it's been fantastic. You know, We as a company h take our role of guiding the development of AI and music very seriously because we've learned from the past, where where the music industry waited for far too long during the file sharing era twenty five years ago. So we believe in being early, you know, taking the reins together with our partners and defining the future of music. So it's and there are a lot of artists who
want to be part of that. They also have learned, they studied the past, and they want to be part of it. So we are having conversations both with our artists, their lawyers, their managers, and there are many artists who are reaching out and they just want to be part of experimentation with us. So it's been a surprisingly positive response.
I mean, it was a positive day few with the Grammys as well as some of your R and B wins.
For example, I'm.
Interested about the joint approach briefly that you're doing with Bain because it feels as though you think the value of music is going up if you're wanting to be buying these back catalogs even more so.
Yeah, So we firmly believe that music is undervalued. It's undervalue. It's roughly fifty cents of value of a video, and it shouldn't be based on its consumption. It's just for historical reasons.
So there's a.
Tremendous opportunity for value appreciation in the future. And we believe that the industry is finally moving from just volume based subscover based growth to volume based and price based growth,
and that's really important. We started on the strategy over a year ago where we started to retool our partnerships with our distribution partners to have certainty around our wholesoli rate increases rather than hope and wait and welcome price increases, which we always do welcome, but we're really focused on
creating certainty around rate increases. So in a phase of that and with the added step change of value caused by AI and additional tiers, companies experience investors like Bain see this as something that has potential to really unlock a lot of value in the industry, under putting their money where their mouth is.
Robert Kinson, CEO of one of Music Group. Great to have you back with us on Bloomberg Tech. Really appreciate it. Thank you. Let's turn back to the earning story elsewhere. Shares have Reddit actually now softer four tens percent, basically flat. One point in the session have been up eight percent, So we kind of fizzed out a little bit. The company projected current quarters sales that did surpassable streets expectations
thanks to growing ads its advertising business. Get out to bloombs Kirt Wagner, what's going on with the Reddit story here? I just got an analyst note my inbox saying that Reddit's on a roll, but the stock would suggest otherwise.
Yeah, when it started up this morning. That made sense to me because, as you pointed out, the projections for the current quarter were good, there was a big beat in the holiday quarter. It feels like there's a lot of momentum for this advertising business. I think they have an AI story to tell too. They're obviously not building these massive data centers like we're seeing from these hyperscalers.
They're not, I mean this massive Capex, but they have this called Reddit Answers, which is basically an AI search engine built into Reddit and years and years and years of forums of people discussing things, and they are also licensing that data, as you know, to some of these AI players, So they have a bit of an AI story that isn't quite as capital intensive as a lot of these other big tech players coming down.
It's interesting, Analys said.
Many had reiterated that overweight some neutral, but pypasanla counter Fitzgerald. We're also seeing bed cut their price targets, so maybe there's a little bit of a view on how much the what's already priced incut. What was really interesting I thought was the international growth here and is that so much to do with AI and the translation capability?
Now, yeah, I think they've been working to make sure that it's accessible to people who don't just speak English. This is a lot of these consumer products, as you both know, know as they grow, they have to build their product for all of these various markets, and that does take time. I think that's part of it. One of the things that's interesting in you'll see in some of these analysts notes of this debate around logged in
versus logged out users. If you guys remember Twitter back in the this was the big debate, you know, could you show ads to someone showing up to Twitter who doesn't have an account. I think Reddit's in a better position because of the focus of these forums and being topic based, and.
Gus kat Wagner all over social media is always we thank you ed what we got.
Coming up, We've got the Boring company going full speed on a tunneling project in Nashville, but there could be some headwinds along the way. Bloomberg big take coming up. This is Bloomberg Tech.
Tesler's evaluating multiple sites across the US to.
Manufacture solar cells.
It's part of Elion Musk's one hundred giga whatsolar ambition. Its sort according to sources and the company is considering expanding production at its Buffalo, New York factory, with Arizona and Idaho also under consideration. That longer term, another scenario would involve building a second facility in New York State once source set. China currently dominates output of solar cells. And on the back of your scoop, you've seen some big share price moves.
Yeah, and his other companies are busy too. The Boring Company is about to embark on its most ambitious tunneling project yet, its first full fledge transit corridor underneath Nashville, but critics worry the company is winging it. Bloombst Kyle Porter is here with the details in this week's Bloomberg Big Take. It is the most ambitious project that Boring has undertaken, but people are worried. So balance those two things. Why is it the most ambitious and what's the concern?
Well, it's the most ambitious on several levels. They are Boring, that is, are looking to build two tenmile tunnels between the airport and downtown Nashville, and they're looking to do it through limestone, which is compared to other projects such as the Las Vegas one. They're running through sandstone predominately at that point, getting through limestone is very tricky and
you have the risk of things like sinkholes. It's also it's a very heavy wet rock, Like actually transporting it through out is going to be incredibly difficult.
That's some of the technical difficulty.
I mean, your big take was so eye catching simply because of the headline, must Sporing Tunnel in Nashville has mayor hoping? Now one dies just how realistic are they worried that that's some sort of opportunity.
Costing Well, if you read the story, the city have largely been cut out of this entire process. Having been involved at the start, they felt that it wasn't the right time. Depending on who you talk to, and people around Boring say they just weren't interested. So they went and it's the entire route now has been designed to
go on state land. So until you get to things like fire safety and like really into the construction process and looking at things like egress points where you know emergency services could get in if there's a problem in the tunnel, the city don't have much say. So you know, the mayor, depending on your point of view, is either being alarmist or is just expressing concern on behalf of this constituents.
You've been reporting on Boring Deeply for a little while now, and the timing of the big takes are interesting because also the company is looking to the golf right. What can you tell us about Dubai and their international expansion.
Dubai is the first successful contract signed for an international expansion. They're looking at putting multiple exit points in to that network. Our understanding is that they may have already sent a test vehicle out there that we've not been able to confirm that yet. Again, it's a very aggressive timeline for getting these things done. If you look at the Las Vegas project, I believe they started tunneling their pre COVID that was supposed to be you know, sixty eight miles
worth of tunnel's doug by. Now I think they've got five miles operational. So either they've dramatically improved the machine and their processors, or it's not going to go as quickly as they're saying.
In mex Car Porter Deeply research story, we urge people to go and read it.
Meanwhile, that does it for this edition of Bloomberg Tech.
What Week ed Yeah, you know, it's like the mic drop week for capital expenditures undred and eighty five billion Alphabet, two hundred billion Amazon, the repercussions next week recap on the pod. You know where to find it. It's there on the screen. And this is Bloomberg Tech