Goldman Lost $1.2B and Bitcoin Rebounds

to the high profile Apple cart. And bitcoin is back, well sort of, at least it's had the best week since one after losing more than six its value in two more on the rally later this hour, and Tesla is slashing car prices, this time in the U S and sum of Europe. The ev maker is trying to stoke demand, but instead stokes investor concern. We discussed, but

first let's get to these markets. So check in on the last day of training the week of course, ahead of what is going to be a shortened week next week. As we take time off to Mark Martin Luther King day, I'm looking at the SP five hundred, almost cracking the four thousand level. Three we're above that two day moving average up four tens of percent. The NASDAC outperforms up seven tenths of a percent, in fact, the longest winning street since November one. And even this is a global

risk on move. We saw Chinese stocks once again, the story of China's unfolding on reopening story post those COVID lockdowns. We're seeing two point eight percent put to work in the in the stocks of course that are traded here in the US in the Golden Dragon. Lets something a little look a what's happening in terms of crypto, because as I said, this is sort of a risk on move.

No wonder therefore Bitcoin continues. It's as elevation. Look at this, we're cracking nineteen thousand, we're now and fifty four close to that twenty mark. We're up almost twenty over the last few days and the beginning of January. Really this continues to be well at last, bit of an outperforming market. D Yeah, it's really interesting. I'm seeing a lot of similar themes in the specific names. Right, Apple finishing strong up one percent this Friday, actually had its best week

since November. And after we got that cp I print, we're talking about the FED moving forward at least in the short term. With twenty five basis points increment hikes, we're feeling a lot better about the technology sector. That said, there is a lot of red on my screen, and Tesla is a big contributing factor to that. Ultimately, we closed down about a percentage point on Tesla. We have been down as much as six percent earlier in the session after the ev maker cut prices substantially in the

United States and also in Europe. You can see that had a knock on effect on some of its pure play e v peers, including Rivian, which was down six and a half percent. NDO Global Really and Training. This is leon on Messi, right, this is Messi's big brand and clothing company. It had its first trading session this Friday after a five dollar I p O. You can see actually all told, we're closed at four dollars. Okay,

this isn't really tech. This is more about social media influencing and this is very much a small cap company. But at one point, and you've got to take my word for it, because we don't see that story on the screen, we were up two hundred thirty from that I p O price. What can happen in a single session is bizarre, but interesting to see that star power, that social media influence leverage into the equity markets. Amazon

is fascinating. Amazon has just had its best week since And you and I were talking off camera, Caroline, how that kind of went under the radar. Remember what happened in April. We all cain't of realized we'd be stuck at home indefinitely, it seemed at that time. And Amazon was the main beneficiary at that point. Now, with that pivot in the psychology around inflation in the FED, well,

Amazon is also having a really good period right now. Yeah, and still fifty five buyers on that particular stock only one cell, So we wonder how long that winning formula might last. We talked technicals, we talked stocks. We also talk what's happening in the earnings that relates to technology, because three months ago Goldman Sachs created a new division to how's what's left of its for a on Main Street.

It's called platform Solutions, which includes Goldman's Apple Card. Now it's giving shareholders kind of clearer guidance on the financials and the unit. Get this, wracked up one point two billion dollars in losses in the first nine months of

two of their own Snai bus. He's been busy converting basically all the other band cunings that come out today, but managed to get on this particular focus that we had for Goldman sax To and this area that basically I mean, it's this marketing spend on the Apple College or where are these losses mounting from? Well, there are a few things that you have to look at. When you look at this unit, and this is a unit one point to billion dollars is for the first ten

months of the year. We also have details and also previously reported by Samaphore that those losses can amount to up to two billion dollars through the full year. So more clarity when Goldman reports earnings on Tuesday, much more clarity. Remember, David Solomon said that they would have to pivot the business already. The question is how much more after these losses? Where do they come from? As you ask, part of it is operating expenses, which have risen quite meaningfully over time.

But part of this is also provisions for credit losses. We're seeing a lot of banks announced those provisions for credit losses. Now Goldman has been getting new consum as, they've been getting younger consumers will see how their losses stack up against the other banks, which are also showing that those charge offs in particular are rising as they get new credit card customers. So definitely a competitive business Goldman. Remember they are one of the only banks with a

meaningful relationship with a very large technology firm. City Group had tried to do something with Google about a year or so ago that kind of fell through, So Apple was supposed to be a huge competitive advantage. We expect them to lean on the relationship with Apple continuously, but again not only earnings. Goldman's investor Day at the end of February should give us a sense of how far

these ambitions will go. Remind me, like, why it's beneficial to tie up with Apple here for Goldman, because at the moment when I use Apple Pay, I don't care which I mean, I just kind about which credit card I'm using as to whether standing on my credit Yeah, why does it matter? Well, there's a few things. When all of this had started, a couple of things were happening at the same time. For Goldman's acts, it was a matter of diversifying its revenue base, and so what

what is that going to cost? Them over the longer term to do. When you look at the strategies of the other banks, they've doubled down in things like wealth, for example. Even when you come to fintech, they've doubled down with wealth at that time. Also, a lot of the big technology firms had these grand ambitions to be in finance in a bigger way, which has not really materialized either, and so you have more partnerships and friendships rather than real competitive issues here. We'll see if that

changes in the next ten years or so. But I do want to point out really quickly the other story that in fintech that we want to keep an eye out. What I was going to say that you know, for me somebody who covers the technology sector, sometimes there's a bit of a land grab. You see all of these kind of legacy players like in finance and banks, they want to move into fintech. Goldman is not alone in that.

JP Morgan, you know, actually coming clean about its own problem that it's experiencing financially on that to remember, this is actually kind of this is a story that's called the VC community by storm. Also, this fintech firm Frank which was a college financial planning kind of platform here, So a lot of college students coming out using it. They are suing them for misstating the types of account or the number of accounts that it had. Remember, they're

disputing this the frank founder. But take a listen to what Jamie Diamond had to say. He said it was a huge mistake. But the acquisitions are done by the businesses, but there's also a centralized team that does extensive due diligence. So the business does it, the U the central ifed team does it. You've been doing it for twenty years, whether you like we just started doing something like that.

And obviously there are always lessons learned, and you know, at one point we'll tell you the lesson will learn to here when there's been a data litigation. These huge mistakes, these lessons learned. Remember the analyst investor community has been wondering about Jamie Diamond and JP Morgan Frankly, to your point, the rest of Wall Street here, their acquisitions free when you come to the fintech world, multibillion dollars in some cases.

And the criticism here comes down to that due diligence and how they didn't see something like this I'm gonna still page from Eric Newcomer and say that, you know, it's very rare for things like this to play out so publicly in the financial technology world, in the VC backed space. So you know, it's not a lot of money. For JP Morgan, it was a hundred seventy million dollars.

This is it's not and it's not as though a few vcs have written a few checks that rates have been mistaken once and the razing exactly that I say exactly, but I will say, after the exuberance that we've seen so far, perhaps banks will be thinking twice when they listen to thirty year old standards. Yeah, jamie's'm in not one to mince his words. I think that's probably putting it a little bit lightly blue MECTIONALI bassing, thank you,

amazing week, terrific reporting. Let's talk crypto in particular. Let's talk bitcoin because yes, we all know lost about six last year is its second worst annual performance on record, but now a little bit more of a promising start to the new year. Read. Yeah, there's so many ways to size and scope this. I mean, one of them is to talk about sort of the run we're on new year, new Vibe Bitcoin up for ten consecutive sessions. It's best run or streak of gains going back to July.

I find that very interesting. What is the psychology driving the market right now? There was a fantastic story as well on the Bloomberg terminal this Friday that caught my about another corner of the crypto market, which is crypto asset focused fund e t s. Right, remember e t s for a six point eight trillion dollar industry. Two thousand of them, two thousand across different themes attracted by

Bloomberg excluding leverage products. Now there are four lines on this chart to my right hand side, which I'll get to a minute. But of those two thousand ets tracks by Bloomberg, which across lots of different things, lots of different equity products, the top four teen, all top fourteen

are crypto related year today and exactly it's astonishing performance. Now, these are the four that I've picked out for you, the top four performers, the Valk bitcoin miners e t F, as you can see on the screen next to me, up almost sev in the first what is it, thirteen days and only seven trading sessions or so of the year so far, and it gives you an idea that there is some confidence coming back. Now, this is a kind of varied list of assets, right, and we've talked

about bitcoin. That's one example, the biggest digital asset or digital currency by market value globally. My question is, has the kind of I don't want to use the word contagion risk from FTX from what we've seen from regulators that ended two? Are we kind of moving past that now? And study is build a bit of momentum? That's not for me to answer. I'm fortunate to say I think we have somebody that probably could weigh in on that

character we do. And also how much of this is a macro trend because let's face it, we've had risk assets performed pretty well and the dollar down. Let's talk at all through with still Mark, founder managing partner, and he's clean who joins us now, and this is always great to get your perspective. We know you're focus on bitcoin. You'll focus on what is the O G of the crypto space, and I'm interested in first and foremost on what the stealth rally that's kind of taken us by

surprise here. It's always hard to know why bitcoins price moves when it gets but in times of chaos in the crypto market, we will often see a flight to security and stability, and the market knows that to be Bitcoin and and potentially this this week's rally and BTC to your to that perspective, is this, as Ed pondered, a movement away from the contagion risk or is this perhaps more of a macro trend, more of tech stalks doing relatively well dollar on the weakening perspective? Is is

that what's happening? What do you think? There's a few courses that play here, of course, especially as is related to bitcoin's short term price movements. Where still markets focused, of course, is in the long term and the value generated by the economic activity happening on top of bitcoin technologies, and we know that adoption continues to it at a very steady cadence. The price will reflect some of that

as well as the expansion of bitcoin's utility. So as we see the Lightning network mature, for instance, and the utilities set expand we understand the intrinsic value of bitcoin and it's underlying technologies to have increased until I emagine the price movements reflect in understanding of that as well. At least, Happy Friday to you. It's good to see you. You know, we we we've kind of jumped straight in here to the bigger picture of what's driving the psychology

of the market. What what was fascinating for me is, you know, bitcoins continued to push higher in a week where there was still I guess volatility in the headlines right US Securities and Exchange Commission filing you know, charges or complaints against Gemini Genesis and claiming that they offered unregistered securities. First of all, I guess what is your

reaction to to that action by the SEC. The action from the SEC was focused on gemini S burn product, which was bearing the promise of yield generation, and the SEC has been pretty clear and their focus on custodial based yield products offered to retail participants, and so this was consistent with that effort. What's interesting is how that matches with activity happening in the bitcoin space and specifically

the lightning space. There will be a void here where activity that was speculation based and custodial driven for yield generation in the crypto space. That void can be filled by yield bearing products or opportunities in the Lightning network. And here's why. As the Lightning network has grown an adoption as it's matured that's paid the path for a

liber to emerge a libra of the Lightning network. And what that means is that there's a real rate for yields in the lightning network that is tied to the value placed on payment capacity for the Lightning network. And so adoption of the Lightning network grows as additional assets are introduced to the Lightning network, for instance through Lightning Labs Pterot protocol. What we can expect to see is that rate increase. So we take a look today at the rate of of um of both funds on Lightning

network and payment pathways. What we would find on Ambos Ambos Technologies Magma marketplace is about a three percent rate of return, which we can expect to see grow as Lightning network continues to scale. At least I want to ask you about sam bankmn Freed and the latest his

latest comments. Before I do, can I just ask you just to to state for us whether still Mark had any financial relationship with SPF or f t X. Of course not, because we're focused on bitcoin and sustainable value propositions to the exclusion of gambling related activities, which drives a lot of the activity and exchanges today. I just wanted to be very side of our mandate. No, I appreciate that. I just wanted to sow audience to know

where we stand on that. So now I can ask you about SPF his post blog post for one of a better description this week where he kind of doubled down on the idea that he denies allegations of fraud, that he didn't steal or embezzle any funds. You know, what is your reaction to that ongoing development. They've all denied the same. So I think there's a fine line between what folks running these sorts of black box schemes I believe is promissible in an effort to produce returns,

versus what they consider to be fraud. But in fact, what appears to have been happening in the fts was that leadership dipped into use your accounts to more funds to take speculative bets on the movement of crypto prices and tooken prices. And that's not a dissimilar story from what we saw in the collapse of sayerst Capital Firm or others similar and so it's very hard to know where the contagion stops here because there's a lack of

transparency in the crypto space. But what it does underscores the value and technologies that allow folks to have greater control of their cryptocurrency and Bitcoin specifically, or technologies that allow retail investors or participants in exchanges to demand transparency so that you know if you're buying if you're buying bitcoin on in exchange, including if that exchange was FTS, that you can ask them to prove that the in

fact hold that bitcoin. And as as we've come to find out, people were buying bitcoin on FTS and f TX was never requiring or holding that bitcoin on consumers behalf. The good news is that bitcoin allows you to be

your own bank. That's inherent in the value proposition and by using self custody products and doubling down on the value proposition that self custody bitcoin can have when you enable a proof of preserve mechanism to prove your credit worthiness is a Bitcoin holder, for instance, we have more tools and resources for folks to opt out of exchanges like US. Yeah, I think look there's so much more to find out from the authorities, in particular about the

investigation into sam Bankman Freed and FT. But it's interesting to get a somebody in the underlying technology perspective, somebody in the industry is suspective on what's going on. Still mock founder and managing partner at least clean. Thank you very much for joining us. Now coming up, Tesla cuts prices across its line up in the usm major European markets, plus Elon's having trouble with a fraud trial in San Francisco. Will explain next. This is Bloomberg. That's a great company.

We just don't believe it's a great start right now. It's unclear whether how long the pros that are going to have to keep going in. That was Marks Stoker there from Adam's Funds saying Tesla not a great stock right now, Carol. And the interesting thing is that it continues to react negatively to use. Tesla cutting prices across its lineup in the US and major European markets. Why well, questions of demand you can see actually all told, we're

down one percent on Tesla. Other peers, particularly the pure play ev names, but also some of the legacy automakers also falling. The question is if you cut prices, does that spur some demand? And that's the debate around the stock, at least from cell side analysts this Friday, and great set up in what's happening in terms of the fundamentals

of the business or lack thereof. And and indeed we know about the cutting of the prices, but let's stick on Tessa and perhaps it's found them more broadly now because during the securities for trial that's tied to Elon Musk tweet that he was taking the company private. Well, it's back resurfacing because Elon Musk wanted it moved down to San Francisco, and it seems though that request was rejected. The judge her own Musk's argument that he faces a

biased jewelry pool in the Bay Area. Let's talk all of the latest with Dana Hall and covers all things Tesla and now start on the trial and maybe comport it out to testa more generally Donna, But what do you make of this overruling for Ela Musk? Well, it was a really long shot kind of hail Mary bid on the part of Elon's attorneys. I mean, this trial, which has been in litigation for over four years, has started.

It's supposed to start on Tuesday, and so this like sort of last stitch effort to move it to Texas was never gonna fly. So the ruling today was not a surprise. I just think it's wild that, like I mean, there are probably more Tesla owners in the Bay Area than in any place in the world except maybe l A. It's like Sabari in l A are always neck and neck in term of terms of Tesla penetration, and so um, it's just funny to me that Elon Musk and his

attorneys were saying that they couldn't get a fair trial here. Hey, Donna take us back to basics. What are the plaintiffs trying to achieve here? What is it that this trial is all about? It about that. It's about August team, when Elon Musk tweeted that he had the funding secure to take Tesla private at four twenties share Uh, there were wild gyrations in the stock market. Shareholders got burned.

They are suing him saying that he you know, should have known that they're suing him, basically saying that they got screwed by this effort. And what's fascinating is that Musk and his attorneys are trying to get the Saudi Public Investment Fund folks to come testify on Musk's behalf, and the Saudis also basically said no, like, we're not under an in any obligation to come to this. This isn't a criminal trial, it's a civil trial. We're not going to show. So it's looking weaker and weaker for

Musk and his team. And uh, the whole moving the trial out of the Bay Area thing was pretty laughable. Rule how investors feeling about Elon Musk, I mean the fact that he thought he would get perhaps not such a friendly viewpoint in San Francisco, I'm not sure worldwide, I mean, how much he's liked and loved by the investor base given the erosion and value in Tesla more broadly, well, the investor investor sentiment is horrible. I mean, there's just

there's just no question. You look at the sell off in two and then you know, you begin this year where Tesla is having a shareholder meeting in May. They didn't announce to investors that the meeting of the day of the meeting. They basically snuck the news of the meeting into a ten K, I mean into the ten Q, And so you have a lot of investors who are planning to file shareholder resolutions being very upset about that,

and then there's just been no outbound communication. I mean, you know, I'm sure behind the scenes, very large holders have their their line into Martin Vehica and Zach and any La Musk, but a lot of shareholders are like, what's he doing, and like they're just tagging him on Twitter like everybody else, like asking for his attention right to catch up with me on it, sneaking things into ten ques. Is the only woman who can tell us

a little about it, Dona Holliway, thank you. Large language models are one of the most exciting developments in the last few years. These are models that have been trained pretty much on everything that's been written down, everything that's on a web page. Um. The result of that is that they have enormous fluency. Can ask chat DPT to write a will form or a story and it will do an amazing job. It doesn't know right from wrong or truth from falsehood. So you know, the word that

we use for that is halisenate um. But it is incredibly prolific. I think of these large language models as some ants. UM. They can say very convincing things. They can say things in the voice of somebody like you're writing, if you give it enough of a sample. UM. So it's not surprising obviously that they can be used for propaganda or misinformation. That's a problem that we face online anyway.

Neither CEO earlier this week should a ram A Swami talking about the pros and the cons of what is a rapidly evolving artificial intelligence conversation around chat GPT and just really fascinating in the way in which AI chat boards have been, of course used, and actually they've been around for some time. Just take Replica for example. Now this was found in back in ten or started in its world of a company trying to create a solution

for loneliness. Our Replica helps you create an AI companion. Basically, it's eager to learn about the world from your rise. It's ready to chat whenever you're looking from empathetic friend. We want to talk about the pros of this, but also some of the concerns that are rising out of

AI technology. More broadly, Eugenia Kudas with our CEO of Replica and the It's fascinating reading about why in which this company and this technology was built, Eugenia, because in some ways we were using AI chat bolts to solve for basically booking a restaurant. And then through your own loss, your own grief, you found the practical use of AI and chat and your own GPT three platform to help remember a key friend you had just talk to us

about how people are using your chatbot two. So for social anxiety reasons and for loneliness, sure, I built this company to really his product to really help me grieve and to help me get over a very um um, very sad situation to happen in my life. And then we saw that there's there's a need for something like

that for other people as well. There's a huge need, huge demand for people to be able to talk to someone seven to build a relationship, to build a deep intimate relationship and be able to confide, to discuss things, and to really get this emotional utility out of the chat bot um right now around um somewhere. Users use it as a friends, some use as a mentor, some

use it as romantic partner. But for any of these use cases, the main idea behind it is to really make people feel a little bit less lonely, a little bit happier, and to make their suffering a little bit less intense. And it's popular. I mean, there are a lot of users of replica, but I think what's interesting we put it out to our own audience. We use a pole each day on Twitter, and this day we asked them about whether AI chat pots could fill the

void of loneliness. And it feels as though there's still some hearts and minds to be one here said Look, they prefer human friends only did say there was a strong use case, but for others they still feel that AI can be used in other purposes. Just convince people why this is particularly useful for human connection and in some ways romantic connection. As you just said, sure, I mean, right now, we're truly living in a pandemic of lowliness.

This is one of the biggest problems, even health problems um that humanity is facing. Loneliness is connected and correlating is correlated with a shorter lifespans, So it's truly killing people right now, and so far there are no real solutions to that. There are very few products that helped with loneliness. You can argue that dating is one or some meet up apps, but that's really that's really on the technology fore front. And then so if we think about it, we really have to start to come up

with solutions. And I think it's a very nuanced conversation. What we're trying to do is not replace human friends. We're trying to give AI friends to people that really needed in the moment, so then then they can open up and you know, improve their connections with real people and build more friendships in real life. However, for a lot of people, human friendships um and in the moment maybe or not possible, or even they have human friends, but they're not ready to be open with them, to

be vulnerable with them. So think about as something that you're training on, something that helps you build these relationships that you can take into real life. And so for us, the main idea is to measure that we actually are decreasing wellliness instead of increasing it. So most of our users report that they're actually improving their human connections over time and that they're not just talking to a boats

instead of actually making real human friends. Jenny, There's been extensive reporting about mental health coming out of the pandemic, you know, especially the early stages of many people were isolated at home, away from family, loved ones, those that they were used to dealing with or interacting with day to day. I do have to ask, though, you know, and and and you know, of course there will be sympathy to those that suffer from loneliness and social anxiety.

But my question is does Replica consult with and work with scientists and mental health professionals and medical professionals in the development of what you're offering? Of course, so for instance, we have therapeutic conversations. You can find it in the activities tab. You can find coaching conversations that are all written by chlinical psychologists, in this case mostly from UC Berkeley.

We when building the app, we were definitely talked and work with different professionals in the field of clinical psychology. We do, you know, basically the main north to metric for all of our all of conversations on Replica is whether these conversations are making you feel better. So this is what we're trying to optimize for, not for engagement, not for the length of conversation, not for you, you know, staying involved with the chatbot, but really whether after this

conversation you walked away feeling better. And another thing that we're working on is is also looking into improving long term emotional outcomes and also measuring this with experts in the quicker psychology field. We did a few studies. We did a study with Stanford was just published in a book around human AI relationships. Who working on some other studies with the universities. So hopefully we can share a

little more um as we continue. I want to talk a little bit about the business model and the opportunity for you. How how does Replica make money from this

artificial intelligence based platform. It's mostly subscriptions. Very early on we decided that we're not going to charge for chat because a lot of people come to think about it like in the you know, at night, in the darkest maybe darkest emotional moments sometimes and they're turning here to be able to talk to someone, to seek the response from someone that you know there will be supportive and

we'll talk to them. So to meet them with a paywall, this was something that we immediately said we don't want to do that. We want to keep chat always free. So really the product is free, is free and recharge for some features like voice coles, like relationship status with some activities, but people can use it without paying, and so most of our revenue is coming from subscriptions and donations, So people actually donate to the app because they wanted

to continue. We have a very involved community of people that for them it's an important part of their life. It's an important relationship in their life. Oftentimes if you just you know, go through reviews, oftentimes Replica help them get their life back together or go through a really hard and dark periods. Hopefully. He mentioned briefly before, the romantic side of things, and this has been starring up quite a bit of controversy. It feels like perhaps online

and let's just talk to it for a minute. Because the pro subscription that you talk about sixty nine dollars, I think it is you can therefore from that unlock what you say is perhaps romantic relationships. I'm talking flirting online. Maybe some role play people are saying that that's actually started to suppam maybe even aggressive conversations, some people calling it harassment in some way. Can you talk to that and what's exactly happening and what what the response has

been like. So Replica started as just a friend but actually without us doing anything with the productal some people figure out that they want their Replica to be a romantic partner. For that. Our first response to that was to maybe turn it off and just focus our friendship. But then we started getting a lot of pushback from our original users that were telling us stories that were

very heartful and touching. There were stories of you know, people that are handicapped on disability that are not that don't think they'll be able to be in a relationship anymore for them that would create an outlet. Stories of caregivers to their paralyzed partners that for them, again, that was an outlet that was important, and so we thought we will you know, let's uh we just decided to

apply um uh, we're thinking towards it. Were if this is and that benefits were not positive for our users, if this is improving their emotional outcomes over time, then we're not against it, and so we'll keep in the app. However, were really kind of move We compartment a lized, compartmentalized in the app where it's only available to people that

do choose a romantic relationship there explicit about it. They say, I want you to be my girlfriend, and then they're able again if they start that to role play in any In no way we're trying to solicit that behavior or you know, uh, turning people towards that, because actually people that are not coming through that, they're coming from mentorship or friendship, they don't want that. So this was actually something that early on we uh put in different kind of boxes on the app. And this is how

it is right now. But but because we're at the forefront, we're kind of we've always been. You know, just a few years ago, people were writing stories about how this is stigmatized and how people should not talk to AI and this is creepy and strange. Now this is not a question anymore. But again, now the question is it okay to have an e girlfriend? Is it okay to have that outlet? And in this case, I want to turn it to you know, an Oxford encyclopedio and AI

Oxford book on ethics work. We actually talk about it and say that it's actually a very beneficial thing to be able to talk about your sex and not not How are you solving how you looking at what is ultimately what happens time and time again with AI is some of the darker sides of human nature ends up replica for K, replica caating itself in AI. How do you solve for that? How do you ensure that we don't have the negative side of that? Sure? So for us, the answer is very simple. We we do a lot

on that front. So we use very safe data sets and we use a different model completely unless you're a romantic relationship and you're exclusively asking for something like that. So really the current model, if you're not in romantic relation, if you're not asking for something like that, you're not going to get that content um And it's not you know, soliciting to this content, not you know, coming coming forward

with that content. So the way to go around it is reially to train the model on safe data sets, to also add you know, reinforcement learning loops where you're teaching it that you shouldn't do that, and we basically are not rewarded for this type of behavior. Of course, as with any conversational a product, it can be a hundred percent sure that you know things will be um. You know, the way you want to want them you want them to be just because the product is so

free flow, so to say, so open ended. Um. But we're doing a lot of we're taking a lot of steps in this direction to make sure that none of this behavior happens. All right, Replica CEO, Eugenia coulda you know, I think this is just the start of this conversation. A lot more still to debate. Thank you for joining us. Coming up, we're going to talk about the state of music in twenty two following a report from music analytics platform Illuminate. CEO Rob Jonas joins us. Next, this is Bloomberg.

Let's dive into the world of music. In the news, Warner Bros. Discovery mulling a sale of its music library, which could be valued and more than a billion dollars according to a report in the Financial Times. The process still in the early stages, but it's got Caroline and I thinking about the music industry this year. Let's discuss the landscape the industry, the drivers with Rob Jonas, CEO of Luminate, and Luminate is basically the analytics and data

platform for the entire industry. Right, you're looking at music, you're looking at entertainment. I think the data point which struck me was that we hit this milestone of one brilliant music streams, right, what's driving that? Why was two the year of digital music? Yeah, thanks for having me on guys um. Definitely two was a really interesting year

for music. Streaming is now the dominant mechanism by which music has enjoyed pretty much globally, and we've seen a slow and steady increase over the last really eight nine, ten years, and two is definitely a tipping point. What's driving that. There's a couple of things that are driving it. Really, there's lots of different demographics now starting to embrace streaming.

Obviously it was a younger generations adopting it early on, but now we're seeing older demographics using the stream platforms with with really very very high intensity. And at the same time, we've seeing a lot of expansion into global markets.

So historically focused on more developed Western markets, music consumption really is now global, with all the major platforms operating in dozens and dozens of countries around the world, and it's driving this massive renaissance in music that's been going on for years now. I think there are some parallels that that Carol Line and I are focusing on particularly the world of video streaming. You know, you think about the Korean market, for example, the success of Squid Games

for a Netflix on the video front. Everything I see right now on Instagram and I scroll Instagram a lot. K pop. K pop is everywhere, you know, Is that one of the drivers that you saw over the last twelve months. Yeah. K pop is definitely one of the very important expansions of music and a center for music creation. Globally. If we look at streaming, streaming grew about a group about nine percent year on year last year when we look at in sorry, twelve percent last year in the US.

If we look at it internationally, growth was about and a lot of that comes down to these centers of content being created in South Korea, but also really interesting in Latin America. Latin America and Latin music in general had a real breakout year in two. Bad Bunnies album was, as we finished up the year, the most popular album across the whole of two since we started tracking sales

and consumption, which is not a massive milestone. And actually when you look at that album from Bad Money, if we look at total streaming of Latin music, across the course of the year, one in fourteen streams came from that album, just to give you a sense of how important that was. So K Pops, critical, Latins are critical, and many many new and emerging areas as well of

amazing music creation. Go back to the value here, Rob, but also speaking to the Instagram scrolling, thinking of the amount that we're currently posting on TikTok and Instagram and using audio within that, is that getting recompensed. Is that monetary value being found in the world of social media and how we're using music within it. Yeah, I think. I think social media and short form videos has emerged as an incredibly important way that music is being discovered.

If you look at younger generations, especially Gen Z, their primary means by which they're discovering music now is music that's included in short form video on TikTok and other platforms. And then what we see typically is a lot of the consumptions and driven to the platforms like the Spotify is,

the Apple Music's, Amazon Musics and others. So shore forms are really powerful way of discovering and then of course as music comes more and more important within these short form video platforms, then the music labels and the artists start to see compensation from that. So going forward, we're definitely going to see a lot more value moving back

towards the artists from these platforms. And I think as recently as the last couple of weeks, YouTube has been very clear about how they're going to start sharing their enormous advertising revenue with some of these artists as well, which I think is is very welcome along overdue. And then these artists are locking in the value in the here and now through deals, right deals for their catalogs.

How how does that evolve in this more recessionary environment as we start to question the valuation of stocks more broadly, assets more broadly, what about catalogs and music do they stand up a recessionary environment? Yeah, I think they do. I mean, we've seen a huge increase in the amount of catalog acquisitions in the last few years. In one the catalog consumption market was over five and are all close to five and a half billion in transactions reported

around the acquisition of catalogs by various different entities. It definitely slowed down a little bit in twenty two for for fairly obvious reasons, and will slow down a bit more in three, mainly because of interest rates, but it hasn't stopped, you know, even in recent weeks and pretty significant deals being announced. Most recently Dr dre announcing he was selling his catalog or part of his catalog to consortion of UMG and Shamrock for about a quarter billion dollars.

So these transactions are still happening, um. And the reason they're happening is because these UM streams that are attached to these music catalogs, they're very very easy to generate cash literally from day one, like because of consumption is happening on all these streaming platforms. As soon as you make the acquisition, you're generating revenue straight away, UM. And

that's incredibly important to some of these financial buyers. And then medium to long term they start to look at other opportunities to create value from these catalogs, whether it's through brand partnerships or sink opportunities, or exploiting and generating reve you from from other forms as well. So I think we will continue to see more catalog acquisitions happening throughout the course of for sure, I gotta keep on

talking about it. Then with you, Rob Jonas, we thank you so much for talking us through the data behind all of its CEO illuminate have a great weeks, so much. This weekend, HBO Max releases its Leaders Attempt today Big Sunday Night Show. For the first time, HBO is looking we'll actually to another industry and another inspiration, video games, and it's got ed all excited. And the Last of Us, Yes, we threw it. Talk about the adaptation and whether it

might actually work. Yes, The Last of Us was a video game that came out in two thousand thirteen. It's it was on PlayStation, published by Naughty Dog and Sony, and it was this kind of classic well now classic third person shooter zombie survival game, which is like, my jam, I love zombie everything. That's not the point now, Pedro Pascal of course of Mandalorian. Uh you know, that's one of my favorites of his. And I guess maybe you've

seen the Nick Cage film Mass of Massive Talent. He's okay, well, he's the star of the Last of Us. This is HBO's replication of the video game, and the video game was reiterated many times over and updated for later generations of PlayStation. Bella Ramsey's in it. Who has also in

a Game of Thrones, you know, young actress um. But historically video game inspired shows and films have not been very good, so yeah, told me through the ones that have been panned basically when they've been tried to go from smaller screen to a big screen are probably the worst according to critics. Not me. Adaptation is Assassin's Creed Fastbender in two thousands sixteen. Assassin's Creed is just a

masterpiece of series of video games across many points of history. Well, you know, we won't get a video game, but actually that film didn't go down too well. And it's also worked the other way. You know, you look at some films that they then turned into video games, you know, the Harry Potter Universe being example. This year, the Harry Potter Universe, based around the kind of story of Hogwarts has a video game coming out. This excitement around that

really hotly anticipated, like anything to do remotely with Harry Potter. Right, and and so my point more here is that Sunday night has become kind of sacred. You know, you think about HBO Sundays and others other competitors. Paramount, you know, went with Halo for example that had a mixed reception. So well, my weekend sorted at least. But it's a big question for this industry. Is this a tactic that's

going to work? And it isn't interesting. It's kind of we keep repeating these sort of ways in which streaming

and music and entertainment or dovetail together. We're just having a conversation about the way in which certain streaming elements come back to their the way that Netflix looks to South Korea for its winning formula on what we watch and then maybe you go for it for music as well, and wonder of how industries crossed paths in this way the summer all that it's competition for iballs, that's it. It is gaming. I mean often they say Netflix says

it's bigger competitor is gaming. That's why they're doing it, right. That does it for all this edition of Bloombow Technology. Anything I'm going to missing I'm going to miss you too. Don't forget our podcast I heart Radio, Apple, Spotify, wherever you get your podcasts. Happy long weekend. This is Bloomberg