May 9, 2025 • 44 mins
Watch Carol and Tim LIVE every day on YouTube: http://bit.ly/3vTiACF.
Airlines and US aviation officials plan to meet on further flight cutbacks at Newark airport following multiple breakdowns in radar systems, according to people familiar with the matter.
The plan currently under consideration would encourage carriers to voluntarily decrease the number of flights for a limited period at the transportation hub outside New York City, said the people, who asked not to be identified discussing private deliberations. The Department of Transportation is expected to schedule discussions with airline leaders in the coming weeks, one of the people said.
The urgency for such a meeting was underscored Friday by a second incident in which air traffic controllers guiding planes in and out of Newark Liberty International Airport briefly lost communications and radar displays. It follows a similar breakdown on April 28. Neither resulted in injuries or accidents.
Today's show features:
- George Ferguson, Bloomberg Intelligence senior aerospace, defense & airlines analyst
- Erik Wasson, Bloomberg News congressional reporter on Trump Cautions GOP on Tax Hike for Rich, But He’s ‘OK’ With It and SALT Republicans Have to Accept ‘Unhappy’ Deal, GOP Chair Warns
- Nina Trentmann, Bloomberg News senior editor & Procore CFO Howard Fu on his company's outlook and his perspective on how tariffs could impact construction
- Chris Palmeri, Bloomberg News entertainment reporter & Andrew Silverman, Bloomberg Intelligence Government analyst on Trump Plans 100% Levy on Foreign Films, Deepening Trade War and how film tariffs would actually function
Hosts: Matt Miller and Norah Mulinda
Producer: Justin Milliner
See omnystudio.com/listener for privacy information.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio News. This is Bloomberg Business
Week Daily reporting from the magazine that helps global leaders
stay ahead with insight on the people, companies, and trends
shaping today's complex economy. Plus global business finance and tech
(00:23):
news as it happens. The Bloomberg Business Week Daily Podcast
with Carol Masser and Tim Steneveek on Bloomberg Radio.
Speaker 2 (00:32):
George Ferguson our next guest has definitely been my guy.
Speaker 3 (00:35):
I love to read his research.
Speaker 2 (00:36):
He is, of course Bloomberg Intelligence senior Aerospace, Defense and
Airlines analysts, and he's joining us here today just to
chat about what's going on right now in the aerospace
and defense industry. I mean, of course we've really been
talking about the defense budget and how all those things
are really impacting US defense primes.
Speaker 4 (00:53):
Here, George, we booked him to talk about the Boeing
sales fair, Hi, ge, But now getting there, Yeah, now
we got the headlines on Newark.
Speaker 2 (01:03):
No very true, So many things going on right now.
But I mean, of course, as Matt just pointed out,
we have the ITEG it's ordering seventy one large jets
from Boeing and Airbus to grow its network. George, what
is the initial reaction to this and how are you
all thinking about this in terms of peers and what
it really just generally means for Boeing.
Speaker 5 (01:23):
First, thanks for having me on. Yeah, so you know,
we've we really thought that Boeing would probably be in
the middle of the Trump administration's balance of payments equalization process,
let's call it, right, And I think the defense primes
will be there as well. And so it wasn't surprising
to us when we saw the first deal made with
(01:45):
the UK include Boeing jets, right, and so I think
they talked about ten billion dollars orth the Boeing jets.
We saw a bunch of seventy seven orders today. I
might quibble about whether it's really ten billion dollars worth.
I think they're using list prices, so maybe we could
have we could have goosed that up a little bit
if we used actual pay prices. But I'd expect this
(02:06):
is going to be a trend you're going to see
around the world as the Trump administration engages countries with
again balance of payment with the US that's out of whack,
and they're gonna they're going to probably offer them components
for aircraft from Boeing and defense products in order to
balance it. So I think you could see a pretty
(02:27):
good year for the Boeing order book. And it's it's
been a little bit like recently because they haven't been
executing Airbus has been and Airbus has been taking the
majority of orders last couple of years. So it would
be a nice talent for Boeing to have a good
year of orders underneath.
Speaker 6 (02:43):
Well, I'm glad of that.
Speaker 4 (02:45):
I love the wide body planes. I hate the seven
thirty sevens and the A three to twenty.
Speaker 3 (02:50):
So why body more space?
Speaker 4 (02:52):
I need more space, you know, And I guess they'll
i AG is going to use these for BA.
Speaker 6 (02:57):
I use Iberia a lot, which i G also owns.
Speaker 4 (03:00):
I'm looking forward just to having more, you know, look
at me. I'm a big guy guy.
Speaker 7 (03:05):
I like it.
Speaker 4 (03:06):
But I am not going to be flying out of Newark.
Typically when I go to Berlin, I'm on a United
flight straight out of Newark. But over the last two weeks, George,
we've had two events where the radar screens go blank,
and to me, although I heard from I think the
(03:28):
CEO of United said it's still safe, that does not
sound safe to me. How safe is it when the
radar screen turns off?
Speaker 6 (03:35):
George?
Speaker 5 (03:38):
I think you're right. I would argue that probably isn't
that safe. But I would expect the FAA and the
CEO of United to say it is safe, because that's
what they always say. But I'd find it very concerning.
Speaker 4 (03:51):
So I mean, what happens then? I mean, first of all,
what happens. Does the FAA have to stop people flying
out of Newark? Because if we think that all airline
travel is dangerous, that is horrendous for the US economy.
So isn't it the right move for officials to say, no,
it's just this one airport and stop people from flying
(04:11):
in and out of that one.
Speaker 5 (04:13):
I mean, I think one, there's just no way we're
gonna be able to stop people coming in and out
of Newark. And just to make sure we understand what,
you know, what the outage is. The outage is for
aircraft sort of arriving into the Newark area, not so
much the air traffic control going you know, directly landing
at Newark. And so is that a little bit better?
(04:34):
I think it is. I think give more time to react. Clearly,
the FAA has to get better systems in place. You know,
part of the backstory here is they moved the control
of this approach and departure from Newark from a control
center in New York, out of Long Island to Philadelphia,
because New York is pretty overworked. They've got LaGuardia, They've
(04:55):
got Kennedy. They tried to put in systems that would
essentially remote into the New York center to get the
controllers all the information they needed, and they thought they
had redundant systems in place, and clearly they didn't, so
they have to redouble their efforts and making sure they've
absolutely got a fail safe line that gets in the
(05:15):
data they need from that New York center. And then
I think, you know, part of that is that some
of the employees were, you know, very stressed out about
the experience, and they've gone on leave and that's put
them at a shortage. So I think it's temporary. At
New York is a challenging airport. As you know, in
the summer when we start to get thunderstorms, we can
(05:36):
always have backups at Newark even under normal circumstances. But
if the FA wants to push through and control this
out of Philadelphia, which seems to be the right move
given the amount of workload in New York. They've got
have to redouble their efforts on this backup, this backup
you know system to make sure there's always information and
(05:57):
they're going to have to get you know, the controllers
work there in Philadelphia.
Speaker 2 (06:01):
Again, Hey, George, there was a time where people were
really concerned about hopping on a Boeing plane. I would
argue that people are still a little bit uncomfortable with
getting on some Boeing planes. But as we've kind of
navigated through earning season, has the focus really been about
tariffs and Boeing in other A and D companies exposure.
Speaker 3 (06:18):
To tariffs or are people at all still.
Speaker 2 (06:20):
Talking a little bit about the safety aspect for passengers
on flights you.
Speaker 5 (06:25):
Know here and there. I do still hear people tell
me they won't fly a Bowing airplane to they're concerned
about it. I presume not. I'd fly in any time. So,
but I do think that the narrative is starting to
turn to effective tariffs as well. As you know Boeing's
manufacturing process, is it stable? Is quality coming through it?
(06:47):
Which I guess sort of bleeds into that question, would
you fly a Boeing airplane? And you know what we've
seen in one queue. We've saw good deliveries. We saw
them get ready rid of some of the inventory of
airplanes they've already been built. They've been sitting on TARA
costs a lot of money to keep those maintained. They're
getting rid of them. That'll help the the cost at Boeing,
and it helps them focus on the manufacturing line, which
(07:10):
is you know, which is where the cash generation's got
to come from. That's going to lead the turnaround. And
I would say one que looked pretty good, and so
I think the narrative, you know, we've got to watch
tariffs closely. I do. I don't think tariffs will hurt
Boeing that much. Again, I think they'll be involved in
negotiations over balance of payments. I think there's other parts
(07:30):
of the backlog where they could deliver airplanes away from
tariff issues. And so it looks to us like the
setup could still be pretty good for a recovery for Boeing,
for a lot of deliveries this year and some good
cash generation.
Speaker 4 (07:45):
George in general, I think people though are worried about safety,
not necessarily about the seven thirty seven. I know you'll
still fly at Paul Sweeney loves that plane. But you know,
we've had we've had more air crashes, we have these
problems now at Newark. Is it just bad timing that
(08:06):
this happens at the same time that you know, Elon
Mosk is taking a chainsaw to government jobs? Or is
this because of that kind of cost cutting? And I
also wonder air traffic control are they paid enough to
work in the New York metro area or do we
need to pay them more?
Speaker 8 (08:29):
So?
Speaker 5 (08:29):
I think a bunch of questions in there, maybe.
Speaker 6 (08:32):
Two separate questions, right is it is it Doge or not?
Speaker 4 (08:35):
And so should we pay these should we pay these
guys moving ten a little bit more? So?
Speaker 5 (08:41):
I think that first it's not Doge in my view? Right, So,
air traffic control system is something that is built over decades,
and that's part of the challenge, challenge of managing it
and upgrading it, is that you've got old systems working
with new The air traffic control system never seems to
get enough money from Congress to make it as maybe
(09:03):
as whiz bang as we should have here in the
United States. It's important to us, it's important to our economy.
We have a very disparare country. Right, We've got population
centers pretty far apart, no trains that link them. So
to me, it's super critical to the US infrastructure. It
never seems to get the money it deserves. And so
this is a build up over decades of you know,
(09:24):
putting this together with bailing wire and tape. Right. So
hopefully the Trump administration does come through with a nice
upgrade program for the system, because I think it would
also fix some of the controller issue. I think you
could bring a lot better technology to the business and
not have to worry about recruiting controllers. I think we're
having a challenge recruiting controllers. Are they paid enough? Probably not, right,
(09:46):
I hear ranges from seventy to two hundred and twenty
thousand dollars. You probably know, even with two hundred and
twenty thousand dollars a year, it's probably a little bit
hard to live on Long Island if you're starting out
at seventy I don't know how you live in Long Island.
I will tell you some of them get you know,
over time and other things that bolster their pay and
(10:06):
you know, so maybe they don't want, they don't want
one hundred percent backfill of all the employees. But probably
just a bad situation for us to be in, and
so we need to do better at recruiting and we
probably need to raise some day in that area.
Speaker 6 (10:19):
All right, George, thanks very much, George Ferguson.
Speaker 1 (10:21):
There, you're listening to the Bloomberg Business Week Daily Podcast.
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Speaker 3 (10:38):
Well, you know, a lot has been going on right now, Matt.
I've been watching, I.
Speaker 2 (10:42):
Mean, what we're doing, the news, but there's so many
headlines that have been coming through. And one of the
things that I've been keeping an eye on is Trump
saying that he is interested, he's open to right. He
said he's okay if they do hiking on hiking taxes
on the wealthy. Those are people who are earning two
and a half million dollars or more. And it seems
(11:04):
as though he's cautioning the GOP on it, but he
says that he's okay with it.
Speaker 3 (11:07):
It's a lot to uncover here.
Speaker 4 (11:08):
A lot as He mastered the flip flop, the wishy
washy statement in a way that nobody else could because
he said in a truth social posting that this is
what cost George Bush Senior the election, although this isn't
what cost George Bush Sheenery the election. He thinks Congress
could do it, although he doesn't think Congress maybe should
do it. He's contradicted himself in so many ways. But
(11:31):
it's interesting. Nonetheless, Yes, and so we're going to talk
about it right now with Eric Wasson, congressional reporter out
of Washington, d C.
Speaker 6 (11:40):
For US at Bloomberg News. Eric, it seems as.
Speaker 4 (11:43):
If President Trump wants to do this to pay for
a lot of the other tax cuts that he's promised
while he was on the campaign trail.
Speaker 6 (11:53):
Is that fair to say?
Speaker 9 (11:55):
Yeah?
Speaker 10 (11:55):
You know, his truth social post differs very much from
what he's saying in private. He called up Speaker of
Mike Johnson on Wednesday and ask for this tax rate
increase on the wealthy. He also asked in that same
conversation to close what's known as the carried interest loophole,
to to call tax carried interest as ordinary income, something
that's opposed by private equity venture capital in the real
(12:16):
estate industry. But you know he's waffling in public. One
GPA high level texted me, you know, this guy's a
fortress force of nature. They're really trying to put together
this very complicated bill, and his public statements and private
interventions are making it even harder to get you get
together on this. The big question is, you know, how
how many years can they you know, suspend taxation on
(12:39):
tips overtime and raise a standard deduction for seniors to
compensate for paying tax and Social Security benefits. You know,
the if they do these other pay fors as they're called,
like raising decks on the ritch, you could maybe do
that for ten years. If not, maybe it's just two
or three or four years of that tax new tax
benefit and then basically they can go to the voters say,
(13:00):
you know, re elect Republicans in twenty twenty eight, will
extend it.
Speaker 2 (13:04):
Eric I mean, of course, when we think about the
idea of hiking taxes, especially on the wealthy, this could
be said to be counter to what the Republican agenda
is in Washington. If there is merit to these tweets
and there is a push for this, what exactly does
that look like in terms of the hurdles that it
takes to make that happen, and does Trump actually have
(13:25):
the jurisdiction to make that call.
Speaker 10 (13:27):
Well, well, just put it simply, I don't see this
tax rate increase happening. It's opposed by congressional leadership in
both the House and Senate. You know, this is opposed
by the core, you know, the traditional Republicans. Now there
are these New America First populists like JD. Vance or
in cast others who are in favor of it, and
you know what, the politics, they're probably right. Democrats are
(13:51):
going to attack this bill as a tax cut for
billionaires paid for by cuts to medicaid in food stamps,
and it is a very good chance that Democrats take
the House in twenty twenty six elections running against this bill.
So I think Trump's political instincts are correct. But the
party really doesn't want to be the party of raising taxes.
It's one thing that really unites Republicans in the past,
(14:12):
and it's going to be almost impossible. They can only
lose like three votes in the House, you know, the
same number in the Senate, and then you're just not
going to get those votes for this, So I don't
think it's really going to happen. That carried interests is
a different story. Maybe that gets snuck in. Certainly lobbyists
or fighting tooth and nail on that issue as we speak,
but I just don't think it's going to happen. And
(14:33):
Trump has remade the party. If his truth social posts
today came out strongly in favor of this, perhaps he
could move mountains. But he's so tepid in his support
that I just I don't see him really being able
to get this through now.
Speaker 4 (14:47):
The interesting thing is that he raised taxes on so
many millions of middle class families in twenty seventeen with
the TCJA when he capped the State and Local tax deduction,
a deduction that has been in place for over a century.
That really, that really, I think reflects the heart of
(15:09):
American tax policy, that you shouldn't be taxing people twice
on the same income. And that cap he promised to
lift when he was campaigning here in New York on
Long Island before the before the election.
Speaker 6 (15:23):
Do you think we're gonna see the salt cap lifted?
Speaker 10 (15:27):
It's going to be lifted, but the amount that's on
the table now is a thirty thousand dollars cap as
if the ten thousand that's there now not doubled for
for for married couples. You know, that was rejected immediately
by a group of Republicans from high tax states like
New York and California, including Elise Stefonik, who may be
running for governor, who jumped into this fray kind of
(15:48):
at the eleventh dour. You know, I think they maybe
they're gonna get the marriage penalty eliminated, maybe goes up
to forties. Can't be much more. It's extremely expensive. Uh,
you know, we're talking trillions if you get high I
hire into the size of the cap that some people
are talking aboute hundred thousand dollars, and they just don't
have the running room. And then the House, the real
(16:08):
issue is that the Conservatives want spending cuts, and if
you go above four trillion dollars, they want more spending
cuts that the moderates will not do to medicate. The
Senate's a different story. You know, in the end of
the day, the Senate has given itself a mandate of
only cutting four billion dollars in spending. They're pretty much
primed to put a lot of this on the nation's
credit card and then increase the deficit through a budget
(16:31):
gimmick that I won't go into now, but basically it
assumes that the cost of extending the existing tax cuts
is zero. You know, the Senate will probably win the
end of the day, but for now, they're just trying
to get this out of the House. The House has
to start all tax legislation under the Constitution, and you know,
they got to satisfy the conservative fiscal hawks a little
bit by not just going hogwild on things like an
(16:52):
unlimited salt cap.
Speaker 4 (16:55):
All right, I just you know, it feels like they
didn't get tax revenue before. So if you double tax
people to get more tax revenue temporarily, and then all
of a sudden it turns into I guess all temporary
taxes eric turn into permanent taxes, don't they.
Speaker 6 (17:11):
Well, I was a pay.
Speaker 10 (17:12):
Four in twenty seventeen. I mean, it was one of
the pay fours, So they're trying to use it again
to some degree. But yeah, I mean there's certainly an argument. Interestingly,
business really cares about something you know, to sea salt,
which is the corporate salt deduction. There's been a real
effort here to limit that. That's the ability of companies
to deduct state income, property and other fees from their
(17:33):
federal taxes. And I was thought of as a pay
for for this salt cap increase. We are hearing that
business is probably going to be successful in beating that back.
It's a top priority of places like the US Chamber
of Commerce to not have this in the bill, and
we can get into it. There's a host of other
similar tax provisions on executive compensation, stock buybacks that lobbyists
are fighting over even as we speak.
Speaker 4 (17:54):
It's so funny because they don't pay taxes anyway, these corporations, right,
if you look at Eric, correct me if I'm wrong,
But individual taxpayers contribute I think two point two trillion
dollars to annual revenue, and corporations contribute less than half
a trillion, something like four hundred and fifty billion.
Speaker 9 (18:11):
Is that right.
Speaker 10 (18:12):
I don't have those stats right in front of me,
so I can't confirm or deny them, but I will.
I will say that you know, corporations will argue that
this will impinge on economic growth and their ability to
hire and grow their businesses. So you know, there's probably
some merit to that, especially if new corporate taxes go
much higher. You know, the corporate solid tax proposal is
talking about that's on the table is a one percent
(18:34):
effective corporate tax increase from the current twenty one to
twenty two percent.
Speaker 2 (18:39):
I mean, of course, when we think about the idea
of taxing the rich, this is something that Democrats do
want to hear. But I mean when we think about
their Republican party, is there anybody that would be in
support of this?
Speaker 3 (18:51):
Who else would be potentially on board with Trump?
Speaker 10 (18:54):
Oh? Well, you know, it's very interesting. Andy Harris is
the head of the House Freedom Caucus. He's very much
on board. I think I first broke that story when
I talked to him in the hallway. He's out on
media again today saying yes, let's do it. He would
even go for millionaires, not just two point five millionaires,
and to pay for some of these other agenda items.
So it's interesting. There are interesting allies even among the
(19:16):
most conservative. Josh Hawley, who's a populist of the new
style close to JD. Vans in the Senate, is also
in favor. So there are allies, and these are part
of the people who think the Republican Party needs to
cement itself as a working class party. Culturally, it's very
working class, it braces very similar values, anti woke, etc.
(19:36):
These guys say it needs to be followed up with
economic benefits. But on the other hand, you know, certainly
economists woul say these tariffs, some of which would go
into place permanently, that Trump is talking about, are a
direct you know, basically a sales tax that really hits
lower and blue collar workers.
Speaker 6 (19:53):
Eric, great talking to you.
Speaker 4 (19:55):
I'll continue to send you the occasional email here and
there when if you're right assault story. He's sick of me,
probably shooting him a Bloomberg message. By the way, where
are you It looks like you're set up in a
debate hall or something.
Speaker 3 (20:07):
I'm so curious.
Speaker 10 (20:08):
I'm in the press conference studio of the House Representatives,
right next next to the place where I work.
Speaker 4 (20:15):
Oh, that makes sense for our congressional reporter, Eric Watson
definitely follow his reporting on the Bloomberg terminal or Bloomberg
dot com.
Speaker 1 (20:24):
This is the Bloomberg Business Week Daily Podcast. Listen live
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Just say Alexa play Bloomberg eleven thirty.
Speaker 6 (20:43):
Nina Trentman from the Bloomberg News Side of the Building.
Speaker 4 (20:47):
And Nina, you brought the CFO of a construction company,
which I find particularly interesting in this environment.
Speaker 11 (20:53):
Yeah, like it's actually a software company. That's a lot
of construction company software. But yeah, it's an interesting space
to be.
Speaker 4 (21:02):
Howard Food joins us right now from Carpenteria, California. Did
I say that right, Howard Carpenteria.
Speaker 8 (21:10):
Yes, the pro Core is actually based in Carpentrya, California.
I'm joining you today from Washington, DC.
Speaker 5 (21:15):
Actually, well, I've getting.
Speaker 4 (21:16):
All sorts of things wrong, but I'm excited about pro Core.
I actually think the software side is such a cool
piece of this business. I have a family full of architects,
so they all use this stuff. But as you may
have heard in the teas, when it comes to construction,
I'm wondering about not only the labor issue with mass deportations,
(21:41):
but also the high price of lumber, the high price
of steel. Like, isn't all of this converging to make
it a difficult business for growth.
Speaker 5 (21:49):
Yeah.
Speaker 8 (21:50):
Well, first of all, thank you all for having me today.
The short answer is yes. But remember construction we've always
talked about as being a very resilient industry. And when
you think about labor, when you think about costs, and
you think about terrorists, when you think about all those
different things, all of these challenges are not unique in
terms of what the industry has faced, and the industry
(22:13):
has always come back. And we're in an industry that
is continuing to build and continuing to rebuild, and this
is just another line of things that the industry has
been used to dealing with, and I'm confident that the
industry will come out of this.
Speaker 2 (22:26):
So tell us a bit more about what your company does,
specifically from the software perspective, and of course you will
work with construction industries, but what role do you really play.
Speaker 8 (22:36):
Yeah, construction is one of the least digitized industries in
the world, and what pro Core does is to help
facilitate through our customers the industry to help digitize what's
traditionally been a very manual work process to how we
build things in the world. So think about digitizing project
(22:56):
management think about digitizing the financial aspect of managing a
construction project. Think about digitizing how we manage the labor
and the equipment and estimating all the different parts of
the ecosystem and the flow for what needs to happen
and the information that needs to happen and need to
be verified. That's what pro coord does. And our vision
(23:20):
and mission is to connect everyone in construction on a
global platform, and our vision is to improve the lives
of everyone in construction.
Speaker 11 (23:31):
How about jumping in here, Nina, Thanks for joining us.
I'm just wondering what are you hearing from from clients
at this point in time. We heard from Mark sort
of a lot of uncertainty in the economy. We're expecting
changes to the construction industry, and how far is that
affecting your sales cycles? Are you already seeing some form
of impact?
Speaker 8 (23:51):
Yeah, you know, in Q one we actually had really
strong results and through April, which is the first month
of our second quarter, we actually have not seen a
material deviations from our pipeline in our demand or anything
of that nature. Obviously, our customers are keeping a close
tabs on what's going on in the broader economic environment,
(24:13):
but you have to remember also, remember I said that
the industry is really resilient, resilient, and they've been through
things like this before. And when the industry and our
customers make decisions, they're making decisions based on commitments that
are going to have impacts over the next two three years,
and so the industry actually doesn't shift too quickly in
terms of what the flavor of the day is in
(24:35):
terms of the news that's going on. So what we're
hearing from customers is they're keeping close tabs on things.
They're making sure they have the pulse on what the
subcontractors are doing, what owners are doing, making sure they
have a good understanding, and making sure they have an
understanding of the exposure that they have across different things
in there in there, in their in their supply chains
and so forth. That's actually what's going on right now.
(24:58):
And pro Core is actually seen as a part or
in this because because we do digitize the industry and
we do help our customers digitize, we actually help them
manage and give visibility into a lot of what they
need to make sure that they keep a pulse on
what's going on today.
Speaker 11 (25:12):
So when should we then expect any changes of course,
you said, sort of your clients are not showing you
any any signs yet, sort of, when is a realistic
point in time for us to expect changes?
Speaker 8 (25:26):
You know, I wish I had an answer to that.
You know, we're in the same boat as our customers,
and again, we are actually doubling down on our partnerships
to make sure that we have an open dialogue to
make sure that not only do our customers engage with us,
and we engage our customers, but our customers engage each
other to make sure that when things do continue to evolve,
(25:50):
that they are able to react.
Speaker 5 (25:52):
In a timely matter.
Speaker 8 (25:53):
But it's very difficult to predict when things are going
to happen, and so we're the same boat with our customers.
Speaker 11 (26:01):
House is from a CFO perspective, we've seen a lot
of companies this earning cycle adjust their guidance, pulling guidance,
adjusting guidance ranges. How are you thinking about guiding the
street at this point, given that, of course, is this
uncertainty potentially facing your business?
Speaker 8 (26:20):
Yeah, well, the first thing is we had we had
a strong key one and our approach to guidance has
been to take quite a conservative approach, both in terms
of our full year guidance for the top line on
revenue as well as our profitability, and also definitely for
Q two as well. I think in this environment it's
prudent to take that approach. We have run multiple scenarios
(26:45):
internally about what would need to happen in terms of
bookings for us to even come close to our guidance,
and our guidance allows us to actually weather scenarios where
there's a significant downturn to our demand, which actually we
haven't seen yet through Q one and through April. We
think it's a highly conservative We have great confidence that
(27:08):
we're going to beat our guidance for both Q two
and for the full year, but I think it's prudent
to take a conservative approach given the uncertainties that are
out there right now.
Speaker 7 (27:17):
Yeah, I'm looking.
Speaker 6 (27:18):
Sorry, I'm looking at your website.
Speaker 4 (27:20):
You have these giant customers Brookfield Ball for Gilbain, et cetera.
And you just mentioned your Q one was strong, but
your stock is pretty much flat over the last five years.
Speaker 6 (27:35):
It's just done nothing. Why do you think that is
and what can you do to change it?
Speaker 8 (27:42):
Yeah, you have to remember over the last two years,
we've kind of been in this challenging demand environment, and
I think that has a lot to do. That has
a big influence on the sentiment of our customers and
how much they're willing to commit to in terms of
the construction volume that they want to run on pro
Cores platform. The key thing to note is customers still
stay with pro Course, So our gross retention rate is
(28:05):
still in the mid nineties and customers stay with us,
and so when we've been in this environment for this
period of time and then you start to layer in
some of the additional aspects of what's going in the
broader economic environment, I think this is what I was
speaking to earlier, where customers are staying partner in partnership
with us to make sure that we collectively manage through
(28:26):
this environment. But ultimately, the industry is going to be
resilient and we're going to be there along with our
customers as we get through this. The other reason why
customers stay with us and why we continue to get
investor interest is because there is a tremendous opportunity in
the industry and we're at the forefront of that. We
are at the forefront with our customers in terms of
(28:48):
digitizing a very underdigitized industry, and we're unfortunately just in
this limbo right now where there's a tremendous amount of
uncertainty right now in the broader environment.
Speaker 2 (29:00):
Been hearing from a lot of these major tech companies,
a lot of software firms, and really the conversation has
also been a focus on cap X as we think
about AI and a lot of the transitions that are happening.
Of course, that requires a lot of money. How are
you all thinking about spending right now and what are
you thinking in terms of AI developments at the company?
Speaker 8 (29:19):
Yeah, AI, I think is exciting for the industry, for
pro Core, for general software. For us, we are thinking
about AI and agents and large language models both from
an extra works it's off into our product as well
as internally in the ways that it could optimize the
way we work as a company here at pro Core.
(29:42):
We continue to make investments in AI. We have made
investments historically in AI with some of our prior acquisitions,
well before the recent push and the recent recent news
and push on from a broader standpoint, it's something that
we are continuing to work into our product with things
like Copilot, our agents and our agents, studio, and then internally,
(30:05):
we have been on a journey of operational excellence, of
which AI is going to be a part of that.
As we continue to scale our business past where we
are today at the billion dollar mark, over next several
billion dollars as we continue to grow, so critical to
how we think about the way we operate internally as
(30:25):
well as critical to the value that we add in
our product offerings to our customers.
Speaker 11 (30:31):
How are you said earlier that your your guidance is
conservative going into the second quarter. I'm wondering how are
you're thinking about other spending, not just on AI, but
also on for example, hiring. What are your plans there
and then how far will you be also cautious there?
Speaker 8 (30:49):
But you know what we've talked about is last year
and going into the first half of this year, we
made a commitment to go on a number of changes
in our go to market organization to set ourselves up
for much better engagement, much more intimacy with our customers.
We're basically moving to a general manager model, adding more
technical resources that allows us to do that. Most of
(31:11):
that hiring was already completed at the back part of
Q four and N Q one. The reason that's important
relative to this question is essentially, most of our expense
structure is going to be around people, and most of
our hiring incrementally has already been done, and so our
expense profile is going to be very consistent throughout each
(31:31):
quarter of this year, and as we continue to grow revenue,
that scale will then flow through to our profitability profile
as we work throughout each quarter of this year. In
terms of the commitments, those are the major commitments that
we got done in the beginning, and as I think
about commitments going forward, making sure that we are very
careful about making commitments that our too long term leave
(31:53):
ourselves flexibility depending on what happens in the demand environment.
And that's the way that I'm thinking about how to
invest in the business. The other thing that we're doing
is we still have two hundred million dollars left in
our or astock buyback that we will continue to look
for opportunities to deploy.
Speaker 4 (32:11):
Howard, thanks so much for joining us. Really appreciate your
time today. Howard fo there, he's the chief financial officer
over at pro Core and our thanks of course.
Speaker 6 (32:18):
Anina Trentman as well from.
Speaker 4 (32:20):
Bloomberg News Check out her newsletter CFO Briefing Bloomberg CFO Briefing.
Speaker 1 (32:27):
You're listening to the Bloomberg Business Week Daily Podcast. Catch
us live weekday afternoons from two to five Eastering. Listen
on Applecarplay and Android Auto with the Bloomberg Business app,
or watch us live on YouTube.
Speaker 4 (32:41):
We want to talk a little bit about Hollywood because
President Trump has promised to tax films made in foreign countries,
and there's so many questions around this. How would it
happen and also would it be helpful to Hollywood, where
I think it's safe to say revenue from this business
(33:01):
has been on the decline. Chris Paul Mary joins us
out of the Los Angeles Bureau, where he is Bloomberg
News Entertainment Reporter extraordinaire to give us his take. And
Andrew Silverman is here with us in New York City
at seven thirty one Lex. He's a Bloomberg Intelligence government analyst.
He's a tax guy, a tax lawyer, here in the
studio to talk about this. Let's kick it off with you, though,
(33:24):
Chris and I want to ask if people in Hollywood,
if people in Los Angeles traditionally not Donald Trump's demographic
or in favor probably of all of these tariffs. Were like, Ah,
this one is good, this one makes sense, this one helps.
Speaker 6 (33:39):
Me in my own pocketbook.
Speaker 9 (33:43):
Kind of.
Speaker 12 (33:44):
So this all began with Trump's ambassador to Hollywood, one
of them, John Voight, meeting last weekend with Trump and
mar A Lago. They came up with a proposal his
group of really based on tax incentives. These are the
tax credits that studios get for making movies in various
states and countries. And there was a small component of
(34:05):
that that was about tariffs. The President grabbed the tariff
concept and then you know, put that out on social media.
I think the studios would love to see more of
a tax incentive thing than a tariff related thing, because
it's the tariff would impact their ability to still operate
overseas and would cost them money.
Speaker 4 (34:28):
All right, So they'd rather see I guess subsidies than
tariffs or tax incentives. As you say, it's interesting, I
don't understand really exactly how this would work. And Andrew Silverman,
maybe you have given it a little bit of thought
from your vantage point, because there are a lot of
(34:48):
films that are you know, there's scenes done in Eastern
Europe or scenes filmed in China, for example, because of
what a big market it's been, and then they still
make the film, edit it, color it, put it together
in in Hollywood. How does how does this work in
a in a t tariff situation?
Speaker 7 (35:08):
Yeah, you're absolutely right. I mean, there are a lot
of things that we don't know about about this terraff.
We don't know if it only applies to US film
studios making movies outside the United States. We don't know
if it applies to foreign film studios making movies out
of the United States. We don't know if if a
foreign film companies coming into the US making movies here
would have the TERRORF applying to them. But but the
(35:30):
tariff is is is really interesting. It's actually quite like
a tax. Uh well, you know, I'm a tax layer,
so you know, to to to a hammer. Everything looks
like an exactly right, But but it's it's a lot
like either an excise tax or or a border adjustment tax.
Right with regard to an XI tax. An excise tax
(35:51):
in this in this case would be sort of a
syntax right, attacks on alcohol, attacks on cigarettes. It's a
it's a federal sales tax. So in that sense, this
is quite like that is trying to get American studios,
American film studios, and American theater goers to not see
movies made outside of the United States to change their behavior.
(36:14):
And a border adjustment tax is a tax that only
applies to imports, not to exports. Same situation here, right,
If you're bringing movies, presumably, if you're bringing movie making
into the United States, tariff doesn't apply. If you're exporting
your movie making outside the United States, teriff applies.
Speaker 2 (36:33):
And it seems as though there's been some positive reception
at least from Hollywood. What I'm hearing anecdotally about this
the idea of bringing more dollars and more things being
made here in the US as it pertains to films.
Speaker 3 (36:45):
But I mean, of course, to your earlier.
Speaker 4 (36:46):
Point blow in La as well that said they're pretty
happy about.
Speaker 3 (36:49):
That, right, So, Chris, what are you hearing?
Speaker 9 (36:51):
Well?
Speaker 12 (36:52):
I think you have to differentiate the people that want
the sort of carrot portion of this whole package, the
tax inteatives, as opposed to the stick portion, which is getting.
Speaker 9 (37:00):
Hit with the tariff.
Speaker 12 (37:02):
If you may be own studio space and are in
the business of actually making movies. If you're an actor
or screenwriter and you just want to see more work
brought back to the US, then maybe you could make
an argument for this whole movement, But I wouldn't say
there's a broad embrace of the idea of tariffs. In fact,
a couple of days after this first came out, you
(37:23):
saw California Governor now Gavin Newsom suggests sort of his
own plan, which was seven and a half billion dollars
of federal tax credits, which was actually more in line
with what the John Boyd group was proposing tax instead
of federal tax credits to make movies in the US.
Speaker 3 (37:39):
Well, I mean Chris as a fall up to that.
Speaker 2 (37:41):
So I cover real estate stocks in one of the
stocks that I cover is Hudson Pacific Properties, and they
are actually an owner of a lot of these Hollywood studios.
And why Bush analysts are actually saying that tariffs, this
whole situation could potentially be a possible positive for the company.
When we think about these Hollywood studios, can it be
a perk at all for them and terms of bringing
in more dollars to them, specifically at all.
Speaker 6 (38:05):
The tariff portion.
Speaker 12 (38:07):
It's a little tricky for the studios. They're going overseas
because they can it's cheaper for them to do so.
Speaker 9 (38:13):
Okay, so if.
Speaker 12 (38:14):
They're forced by tariffs to come back here, it's not
necessarily a win for them, it's a win for US jobs,
which is definitely something President Trump wants to do, and
so you could see why some workers.
Speaker 9 (38:27):
Would be happy about that.
Speaker 12 (38:28):
Calculating a tariff on a foreign foreign film, I mean,
if you depends on how you define it. I mean,
basically all the Star Wars films were shot in the
UK or Tunisia. They were all foreign films. It's a
very complicated process. The Void Group did suggest some way
of doing so, only putting a tariff on the parts
(38:50):
that are shot overseas, and then really only slapping the
tariff on in the case of what they called a
bad actor who could have made the movie domestically but
deliberately one of It's a complicated thing.
Speaker 4 (39:02):
I mean, I know people in la as well who
have space that studios rent, you know, who have warehouses,
and they have made for years revenue on companies shooting
movies in their in their in their places, and they
have less revenue now because films, Uh, because studios are
going overseas more. Also, I will note Australia's US envoys said,
(39:25):
this is a tax on Bluey, which is a fantastic
product completely filmed overseas or colored overseas. Andrew, I wonder
about the legality of all of these taxes, and I
guess it's a much bigger question, right. AIPA, which is
the International Emergency Economic Powers Act, has been challenged in
(39:46):
the past. President Trump tried to use it to uh
TO to expel TikTok in his first term, and then
a couple of courts told him no, can do Now.
He's a huge fan of TikTok. Of course, that Chinese
social media I used to spy on us. What do
you think about challenges to his tariff powers? Will they
Will they be successful in the courts?
Speaker 6 (40:08):
Any of them?
Speaker 4 (40:08):
Is Congress ever going to take this power back from
the executive?
Speaker 7 (40:12):
So let me just start up by saying, I'm also
a huge fan of blue Yeah.
Speaker 3 (40:16):
I have to see this.
Speaker 6 (40:17):
It's a great product, Absolutely love it.
Speaker 7 (40:20):
I must be late, so so so so. The reason
that President Trump referenced national security when he was talking
about this tariff on form produced films was because that's
a key aspect of AEPA. Right, if it's it's related
to national security, then the president can do it. And
Congress has given that power away even though it's in
(40:42):
the constitution. Congress said, Look, if it's national security, it's
the president's business to do what he wants to do.
And it has been challenged in the past. But but
normally the president wins those lawsuits because courts don't question
national national security.
Speaker 6 (40:58):
And and Hollywood feel are a matter of national security? Right?
Speaker 4 (41:02):
Isn't that Isn't that what we all think? Isn't that
the case?
Speaker 7 (41:07):
Of course?
Speaker 4 (41:07):
Yeah, Chris, I mean the President has said that, Chris,
I just want to ask for a second, because I
can't let any mention of John Voight go without bringing
up his christ Little baron that George Costanza bought.
Speaker 6 (41:23):
Does everyone know the reference that I'm making or does
nobody watch? Seinfeld?
Speaker 3 (41:29):
I think you're alone?
Speaker 6 (41:30):
Am I alone?
Speaker 9 (41:30):
There?
Speaker 6 (41:31):
Chris Palmery? Do you not see that episode?
Speaker 12 (41:34):
You know, there's so many great John Voyd moments. I
don't know where to start, but you know, look, you
know the President Trump appointed him, Mel Gibson Sylvester Stallone
as his ambassadors.
Speaker 9 (41:45):
I gotta give Void credit.
Speaker 12 (41:47):
He's the only guy who actually came up with some
plan and he's getting everybody talking about it in Hollywood
and maybe even won't get something accomplished.
Speaker 9 (41:54):
So it's a great episode, Cowboy.
Speaker 4 (41:57):
He leaves his pencil in the in the glove and
then George has John Voyd's pencil. And anyway, I wonder
if you think he also screened Alcatraz with the President
while he was at mar A Lago, because together with
the film Tariffs came the idea to reopen that prison
off the coast of San Francisco. And what's the reaction
(42:18):
been like on the West coast to that little piece
of information?
Speaker 9 (42:23):
Similarly shock and awe.
Speaker 12 (42:25):
You know, you may have seen the reports that you
know that was closed fifty years ago because it costs
three times more than any other federal prison to operate.
Speaker 9 (42:33):
So I can't tell you if they screened it.
Speaker 12 (42:34):
I know they all watched the Kentucky Derby together and
I'm almost positive that Trump did not bet on journalism.
Speaker 2 (42:41):
But and Chris, I know, Hollywood has really been through
a lot, especially as we reflect on the fires.
Speaker 3 (42:48):
What's it like?
Speaker 2 (42:48):
I mean, of course you live there personally, what's it
like and what's the recovery been like for the industry
more broadly, Well, you have.
Speaker 12 (42:55):
To understand what's going on here. You have to step
back a few years. We had this era people were
calling peak TV and there were six hundred scripted TV
programs were being made because everybody wanted to create the Netflix,
and it didn't matter how much you were spending. You
were trying to get as many subscribers. That started to
change around twenty twenty two. The strikes happened, and then
(43:19):
the studio said, look, they were already cutting back, and
then they said we can get back by with a
lot less. And at the same time, streamers were trying
to reach a global audience. So we're now watching TV
shows that were made in South Korea or France or Israel,
and so this is what happened. We reported last year
(43:39):
production in the US between twenty twenty one and twenty
twenty four declined about twenty nine percent.
Speaker 9 (43:44):
So it's a number of factors.
Speaker 12 (43:46):
The cost cutting, the globalization of the entertainment industry, and
the tax credits that you can get by making a
film in the UK or Australia or whatever.
Speaker 9 (43:55):
A lot of things converging.
Speaker 6 (43:57):
All right, Chris, great to have you on the program.
Thanks for joining us.
Speaker 4 (44:00):
Paul, Mary, they're out of our Los Angeles bureau covers
Hollywood for US and entertainment. Andrew Silverman here from Bloomberg Intelligence,
our resident tax lawyer.
Speaker 1 (44:10):
This is the Bloomberg Business Weekdaily podcast, available on Apple, Spotify,
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(44:31):
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(00:23):
news as it happens. The Bloomberg Business Week Daily Podcast
with Carol Masser and Tim Steneveek on Bloomberg Radio.
Speaker 2 (00:32):
George Ferguson our next guest has definitely been my guy.
Speaker 3 (00:35):
I love to read his research.
Speaker 2 (00:36):
He is, of course Bloomberg Intelligence senior Aerospace, Defense and
Airlines analysts, and he's joining us here today just to
chat about what's going on right now in the aerospace
and defense industry. I mean, of course we've really been
talking about the defense budget and how all those things
are really impacting US defense primes.
Speaker 4 (00:53):
Here, George, we booked him to talk about the Boeing
sales fair, Hi, ge, But now getting there, Yeah, now
we got the headlines on Newark.
Speaker 2 (01:03):
No very true, So many things going on right now.
But I mean, of course, as Matt just pointed out,
we have the ITEG it's ordering seventy one large jets
from Boeing and Airbus to grow its network. George, what
is the initial reaction to this and how are you
all thinking about this in terms of peers and what
it really just generally means for Boeing.
Speaker 5 (01:23):
First, thanks for having me on. Yeah, so you know,
we've we really thought that Boeing would probably be in
the middle of the Trump administration's balance of payments equalization process,
let's call it, right, And I think the defense primes
will be there as well. And so it wasn't surprising
to us when we saw the first deal made with
(01:45):
the UK include Boeing jets, right, and so I think
they talked about ten billion dollars orth the Boeing jets.
We saw a bunch of seventy seven orders today. I
might quibble about whether it's really ten billion dollars worth.
I think they're using list prices, so maybe we could
have we could have goosed that up a little bit
if we used actual pay prices. But I'd expect this
(02:06):
is going to be a trend you're going to see
around the world as the Trump administration engages countries with
again balance of payment with the US that's out of whack,
and they're gonna they're going to probably offer them components
for aircraft from Boeing and defense products in order to
balance it. So I think you could see a pretty
(02:27):
good year for the Boeing order book. And it's it's
been a little bit like recently because they haven't been
executing Airbus has been and Airbus has been taking the
majority of orders last couple of years. So it would
be a nice talent for Boeing to have a good
year of orders underneath.
Speaker 6 (02:43):
Well, I'm glad of that.
Speaker 4 (02:45):
I love the wide body planes. I hate the seven
thirty sevens and the A three to twenty.
Speaker 3 (02:50):
So why body more space?
Speaker 4 (02:52):
I need more space, you know, And I guess they'll
i AG is going to use these for BA.
Speaker 6 (02:57):
I use Iberia a lot, which i G also owns.
Speaker 4 (03:00):
I'm looking forward just to having more, you know, look
at me. I'm a big guy guy.
Speaker 7 (03:05):
I like it.
Speaker 4 (03:06):
But I am not going to be flying out of Newark.
Typically when I go to Berlin, I'm on a United
flight straight out of Newark. But over the last two weeks, George,
we've had two events where the radar screens go blank,
and to me, although I heard from I think the
(03:28):
CEO of United said it's still safe, that does not
sound safe to me. How safe is it when the
radar screen turns off?
Speaker 6 (03:35):
George?
Speaker 5 (03:38):
I think you're right. I would argue that probably isn't
that safe. But I would expect the FAA and the
CEO of United to say it is safe, because that's
what they always say. But I'd find it very concerning.
Speaker 4 (03:51):
So I mean, what happens then? I mean, first of all,
what happens. Does the FAA have to stop people flying
out of Newark? Because if we think that all airline
travel is dangerous, that is horrendous for the US economy.
So isn't it the right move for officials to say, no,
it's just this one airport and stop people from flying
(04:11):
in and out of that one.
Speaker 5 (04:13):
I mean, I think one, there's just no way we're
gonna be able to stop people coming in and out
of Newark. And just to make sure we understand what,
you know, what the outage is. The outage is for
aircraft sort of arriving into the Newark area, not so
much the air traffic control going you know, directly landing
at Newark. And so is that a little bit better?
(04:34):
I think it is. I think give more time to react. Clearly,
the FAA has to get better systems in place. You know,
part of the backstory here is they moved the control
of this approach and departure from Newark from a control
center in New York, out of Long Island to Philadelphia,
because New York is pretty overworked. They've got LaGuardia, They've
(04:55):
got Kennedy. They tried to put in systems that would
essentially remote into the New York center to get the
controllers all the information they needed, and they thought they
had redundant systems in place, and clearly they didn't, so
they have to redouble their efforts and making sure they've
absolutely got a fail safe line that gets in the
(05:15):
data they need from that New York center. And then
I think, you know, part of that is that some
of the employees were, you know, very stressed out about
the experience, and they've gone on leave and that's put
them at a shortage. So I think it's temporary. At
New York is a challenging airport. As you know, in
the summer when we start to get thunderstorms, we can
(05:36):
always have backups at Newark even under normal circumstances. But
if the FA wants to push through and control this
out of Philadelphia, which seems to be the right move
given the amount of workload in New York. They've got
have to redouble their efforts on this backup, this backup
you know system to make sure there's always information and
(05:57):
they're going to have to get you know, the controllers
work there in Philadelphia.
Speaker 2 (06:01):
Again, Hey, George, there was a time where people were
really concerned about hopping on a Boeing plane. I would
argue that people are still a little bit uncomfortable with
getting on some Boeing planes. But as we've kind of
navigated through earning season, has the focus really been about
tariffs and Boeing in other A and D companies exposure.
Speaker 3 (06:18):
To tariffs or are people at all still.
Speaker 2 (06:20):
Talking a little bit about the safety aspect for passengers
on flights you.
Speaker 5 (06:25):
Know here and there. I do still hear people tell
me they won't fly a Bowing airplane to they're concerned
about it. I presume not. I'd fly in any time. So,
but I do think that the narrative is starting to
turn to effective tariffs as well. As you know Boeing's
manufacturing process, is it stable? Is quality coming through it?
(06:47):
Which I guess sort of bleeds into that question, would
you fly a Boeing airplane? And you know what we've
seen in one queue. We've saw good deliveries. We saw
them get ready rid of some of the inventory of
airplanes they've already been built. They've been sitting on TARA
costs a lot of money to keep those maintained. They're
getting rid of them. That'll help the the cost at Boeing,
and it helps them focus on the manufacturing line, which
(07:10):
is you know, which is where the cash generation's got
to come from. That's going to lead the turnaround. And
I would say one que looked pretty good, and so
I think the narrative, you know, we've got to watch
tariffs closely. I do. I don't think tariffs will hurt
Boeing that much. Again, I think they'll be involved in
negotiations over balance of payments. I think there's other parts
(07:30):
of the backlog where they could deliver airplanes away from
tariff issues. And so it looks to us like the
setup could still be pretty good for a recovery for Boeing,
for a lot of deliveries this year and some good
cash generation.
Speaker 4 (07:45):
George in general, I think people though are worried about safety,
not necessarily about the seven thirty seven. I know you'll
still fly at Paul Sweeney loves that plane. But you know,
we've had we've had more air crashes, we have these
problems now at Newark. Is it just bad timing that
(08:06):
this happens at the same time that you know, Elon
Mosk is taking a chainsaw to government jobs? Or is
this because of that kind of cost cutting? And I
also wonder air traffic control are they paid enough to
work in the New York metro area or do we
need to pay them more?
Speaker 8 (08:29):
So?
Speaker 5 (08:29):
I think a bunch of questions in there, maybe.
Speaker 6 (08:32):
Two separate questions, right is it is it Doge or not?
Speaker 4 (08:35):
And so should we pay these should we pay these
guys moving ten a little bit more? So?
Speaker 5 (08:41):
I think that first it's not Doge in my view? Right, So,
air traffic control system is something that is built over decades,
and that's part of the challenge, challenge of managing it
and upgrading it, is that you've got old systems working
with new The air traffic control system never seems to
get enough money from Congress to make it as maybe
(09:03):
as whiz bang as we should have here in the
United States. It's important to us, it's important to our economy.
We have a very disparare country. Right, We've got population
centers pretty far apart, no trains that link them. So
to me, it's super critical to the US infrastructure. It
never seems to get the money it deserves. And so
this is a build up over decades of you know,
(09:24):
putting this together with bailing wire and tape. Right. So
hopefully the Trump administration does come through with a nice
upgrade program for the system, because I think it would
also fix some of the controller issue. I think you
could bring a lot better technology to the business and
not have to worry about recruiting controllers. I think we're
having a challenge recruiting controllers. Are they paid enough? Probably not, right,
(09:46):
I hear ranges from seventy to two hundred and twenty
thousand dollars. You probably know, even with two hundred and
twenty thousand dollars a year, it's probably a little bit
hard to live on Long Island if you're starting out
at seventy I don't know how you live in Long Island.
I will tell you some of them get you know,
over time and other things that bolster their pay and
(10:06):
you know, so maybe they don't want, they don't want
one hundred percent backfill of all the employees. But probably
just a bad situation for us to be in, and
so we need to do better at recruiting and we
probably need to raise some day in that area.
Speaker 6 (10:19):
All right, George, thanks very much, George Ferguson.
Speaker 1 (10:21):
There, you're listening to the Bloomberg Business Week Daily Podcast.
Catch us live weekday afternoons from two to five eas
during Listen on Applecarplay and Android Otto with the Bloomberg
Business app, or watch us live on YouTube.
Speaker 3 (10:38):
Well, you know, a lot has been going on right now, Matt.
I've been watching, I.
Speaker 2 (10:42):
Mean, what we're doing, the news, but there's so many
headlines that have been coming through. And one of the
things that I've been keeping an eye on is Trump
saying that he is interested, he's open to right. He
said he's okay if they do hiking on hiking taxes
on the wealthy. Those are people who are earning two
and a half million dollars or more. And it seems
(11:04):
as though he's cautioning the GOP on it, but he
says that he's okay with it.
Speaker 3 (11:07):
It's a lot to uncover here.
Speaker 4 (11:08):
A lot as He mastered the flip flop, the wishy
washy statement in a way that nobody else could because
he said in a truth social posting that this is
what cost George Bush Senior the election, although this isn't
what cost George Bush Sheenery the election. He thinks Congress
could do it, although he doesn't think Congress maybe should
do it. He's contradicted himself in so many ways. But
(11:31):
it's interesting. Nonetheless, Yes, and so we're going to talk
about it right now with Eric Wasson, congressional reporter out
of Washington, d C.
Speaker 6 (11:40):
For US at Bloomberg News. Eric, it seems as.
Speaker 4 (11:43):
If President Trump wants to do this to pay for
a lot of the other tax cuts that he's promised
while he was on the campaign trail.
Speaker 6 (11:53):
Is that fair to say?
Speaker 9 (11:55):
Yeah?
Speaker 10 (11:55):
You know, his truth social post differs very much from
what he's saying in private. He called up Speaker of
Mike Johnson on Wednesday and ask for this tax rate
increase on the wealthy. He also asked in that same
conversation to close what's known as the carried interest loophole,
to to call tax carried interest as ordinary income, something
that's opposed by private equity venture capital in the real
(12:16):
estate industry. But you know he's waffling in public. One
GPA high level texted me, you know, this guy's a
fortress force of nature. They're really trying to put together
this very complicated bill, and his public statements and private
interventions are making it even harder to get you get
together on this. The big question is, you know, how
how many years can they you know, suspend taxation on
(12:39):
tips overtime and raise a standard deduction for seniors to
compensate for paying tax and Social Security benefits. You know,
the if they do these other pay fors as they're called,
like raising decks on the ritch, you could maybe do
that for ten years. If not, maybe it's just two
or three or four years of that tax new tax
benefit and then basically they can go to the voters say,
(13:00):
you know, re elect Republicans in twenty twenty eight, will
extend it.
Speaker 2 (13:04):
Eric I mean, of course, when we think about the
idea of hiking taxes, especially on the wealthy, this could
be said to be counter to what the Republican agenda
is in Washington. If there is merit to these tweets
and there is a push for this, what exactly does
that look like in terms of the hurdles that it
takes to make that happen, and does Trump actually have
(13:25):
the jurisdiction to make that call.
Speaker 10 (13:27):
Well, well, just put it simply, I don't see this
tax rate increase happening. It's opposed by congressional leadership in
both the House and Senate. You know, this is opposed
by the core, you know, the traditional Republicans. Now there
are these New America First populists like JD. Vance or
in cast others who are in favor of it, and
you know what, the politics, they're probably right. Democrats are
(13:51):
going to attack this bill as a tax cut for
billionaires paid for by cuts to medicaid in food stamps,
and it is a very good chance that Democrats take
the House in twenty twenty six elections running against this bill.
So I think Trump's political instincts are correct. But the
party really doesn't want to be the party of raising taxes.
It's one thing that really unites Republicans in the past,
(14:12):
and it's going to be almost impossible. They can only
lose like three votes in the House, you know, the
same number in the Senate, and then you're just not
going to get those votes for this, So I don't
think it's really going to happen. That carried interests is
a different story. Maybe that gets snuck in. Certainly lobbyists
or fighting tooth and nail on that issue as we speak,
but I just don't think it's going to happen. And
(14:33):
Trump has remade the party. If his truth social posts
today came out strongly in favor of this, perhaps he
could move mountains. But he's so tepid in his support
that I just I don't see him really being able
to get this through now.
Speaker 4 (14:47):
The interesting thing is that he raised taxes on so
many millions of middle class families in twenty seventeen with
the TCJA when he capped the State and Local tax deduction,
a deduction that has been in place for over a century.
That really, that really, I think reflects the heart of
(15:09):
American tax policy, that you shouldn't be taxing people twice
on the same income. And that cap he promised to
lift when he was campaigning here in New York on
Long Island before the before the election.
Speaker 6 (15:23):
Do you think we're gonna see the salt cap lifted?
Speaker 10 (15:27):
It's going to be lifted, but the amount that's on
the table now is a thirty thousand dollars cap as
if the ten thousand that's there now not doubled for
for for married couples. You know, that was rejected immediately
by a group of Republicans from high tax states like
New York and California, including Elise Stefonik, who may be
running for governor, who jumped into this fray kind of
(15:48):
at the eleventh dour. You know, I think they maybe
they're gonna get the marriage penalty eliminated, maybe goes up
to forties. Can't be much more. It's extremely expensive. Uh,
you know, we're talking trillions if you get high I
hire into the size of the cap that some people
are talking aboute hundred thousand dollars, and they just don't
have the running room. And then the House, the real
(16:08):
issue is that the Conservatives want spending cuts, and if
you go above four trillion dollars, they want more spending
cuts that the moderates will not do to medicate. The
Senate's a different story. You know, in the end of
the day, the Senate has given itself a mandate of
only cutting four billion dollars in spending. They're pretty much
primed to put a lot of this on the nation's
credit card and then increase the deficit through a budget
(16:31):
gimmick that I won't go into now, but basically it
assumes that the cost of extending the existing tax cuts
is zero. You know, the Senate will probably win the
end of the day, but for now, they're just trying
to get this out of the House. The House has
to start all tax legislation under the Constitution, and you know,
they got to satisfy the conservative fiscal hawks a little
bit by not just going hogwild on things like an
(16:52):
unlimited salt cap.
Speaker 4 (16:55):
All right, I just you know, it feels like they
didn't get tax revenue before. So if you double tax
people to get more tax revenue temporarily, and then all
of a sudden it turns into I guess all temporary
taxes eric turn into permanent taxes, don't they.
Speaker 6 (17:11):
Well, I was a pay.
Speaker 10 (17:12):
Four in twenty seventeen. I mean, it was one of
the pay fours, So they're trying to use it again
to some degree. But yeah, I mean there's certainly an argument. Interestingly,
business really cares about something you know, to sea salt,
which is the corporate salt deduction. There's been a real
effort here to limit that. That's the ability of companies
to deduct state income, property and other fees from their
(17:33):
federal taxes. And I was thought of as a pay
for for this salt cap increase. We are hearing that
business is probably going to be successful in beating that back.
It's a top priority of places like the US Chamber
of Commerce to not have this in the bill, and
we can get into it. There's a host of other
similar tax provisions on executive compensation, stock buybacks that lobbyists
are fighting over even as we speak.
Speaker 4 (17:54):
It's so funny because they don't pay taxes anyway, these corporations, right,
if you look at Eric, correct me if I'm wrong,
But individual taxpayers contribute I think two point two trillion
dollars to annual revenue, and corporations contribute less than half
a trillion, something like four hundred and fifty billion.
Speaker 9 (18:11):
Is that right.
Speaker 10 (18:12):
I don't have those stats right in front of me,
so I can't confirm or deny them, but I will.
I will say that you know, corporations will argue that
this will impinge on economic growth and their ability to
hire and grow their businesses. So you know, there's probably
some merit to that, especially if new corporate taxes go
much higher. You know, the corporate solid tax proposal is
talking about that's on the table is a one percent
(18:34):
effective corporate tax increase from the current twenty one to
twenty two percent.
Speaker 2 (18:39):
I mean, of course, when we think about the idea
of taxing the rich, this is something that Democrats do
want to hear. But I mean when we think about
their Republican party, is there anybody that would be in
support of this?
Speaker 3 (18:51):
Who else would be potentially on board with Trump?
Speaker 10 (18:54):
Oh? Well, you know, it's very interesting. Andy Harris is
the head of the House Freedom Caucus. He's very much
on board. I think I first broke that story when
I talked to him in the hallway. He's out on
media again today saying yes, let's do it. He would
even go for millionaires, not just two point five millionaires,
and to pay for some of these other agenda items.
So it's interesting. There are interesting allies even among the
(19:16):
most conservative. Josh Hawley, who's a populist of the new
style close to JD. Vans in the Senate, is also
in favor. So there are allies, and these are part
of the people who think the Republican Party needs to
cement itself as a working class party. Culturally, it's very
working class, it braces very similar values, anti woke, etc.
(19:36):
These guys say it needs to be followed up with
economic benefits. But on the other hand, you know, certainly
economists woul say these tariffs, some of which would go
into place permanently, that Trump is talking about, are a
direct you know, basically a sales tax that really hits
lower and blue collar workers.
Speaker 6 (19:53):
Eric, great talking to you.
Speaker 4 (19:55):
I'll continue to send you the occasional email here and
there when if you're right assault story. He's sick of me,
probably shooting him a Bloomberg message. By the way, where
are you It looks like you're set up in a
debate hall or something.
Speaker 3 (20:07):
I'm so curious.
Speaker 10 (20:08):
I'm in the press conference studio of the House Representatives,
right next next to the place where I work.
Speaker 4 (20:15):
Oh, that makes sense for our congressional reporter, Eric Watson
definitely follow his reporting on the Bloomberg terminal or Bloomberg
dot com.
Speaker 1 (20:24):
This is the Bloomberg Business Week Daily Podcast. Listen live
each weekday starting at two pm Eastern on Applecarplay and
Android Auto with the Bloomberg Business App. You can also
listen live on Amazon Alexa from our flagship New York station,
Just say Alexa play Bloomberg eleven thirty.
Speaker 6 (20:43):
Nina Trentman from the Bloomberg News Side of the Building.
Speaker 4 (20:47):
And Nina, you brought the CFO of a construction company,
which I find particularly interesting in this environment.
Speaker 11 (20:53):
Yeah, like it's actually a software company. That's a lot
of construction company software. But yeah, it's an interesting space
to be.
Speaker 4 (21:02):
Howard Food joins us right now from Carpenteria, California. Did
I say that right, Howard Carpenteria.
Speaker 8 (21:10):
Yes, the pro Core is actually based in Carpentrya, California.
I'm joining you today from Washington, DC.
Speaker 5 (21:15):
Actually, well, I've getting.
Speaker 4 (21:16):
All sorts of things wrong, but I'm excited about pro Core.
I actually think the software side is such a cool
piece of this business. I have a family full of architects,
so they all use this stuff. But as you may
have heard in the teas, when it comes to construction,
I'm wondering about not only the labor issue with mass deportations,
(21:41):
but also the high price of lumber, the high price
of steel. Like, isn't all of this converging to make
it a difficult business for growth.
Speaker 5 (21:49):
Yeah.
Speaker 8 (21:50):
Well, first of all, thank you all for having me today.
The short answer is yes. But remember construction we've always
talked about as being a very resilient industry. And when
you think about labor, when you think about costs, and
you think about terrorists, when you think about all those
different things, all of these challenges are not unique in
terms of what the industry has faced, and the industry
(22:13):
has always come back. And we're in an industry that
is continuing to build and continuing to rebuild, and this
is just another line of things that the industry has
been used to dealing with, and I'm confident that the
industry will come out of this.
Speaker 2 (22:26):
So tell us a bit more about what your company does,
specifically from the software perspective, and of course you will
work with construction industries, but what role do you really play.
Speaker 8 (22:36):
Yeah, construction is one of the least digitized industries in
the world, and what pro Core does is to help
facilitate through our customers the industry to help digitize what's
traditionally been a very manual work process to how we
build things in the world. So think about digitizing project
(22:56):
management think about digitizing the financial aspect of managing a
construction project. Think about digitizing how we manage the labor
and the equipment and estimating all the different parts of
the ecosystem and the flow for what needs to happen
and the information that needs to happen and need to
be verified. That's what pro coord does. And our vision
(23:20):
and mission is to connect everyone in construction on a
global platform, and our vision is to improve the lives
of everyone in construction.
Speaker 11 (23:31):
How about jumping in here, Nina, Thanks for joining us.
I'm just wondering what are you hearing from from clients
at this point in time. We heard from Mark sort
of a lot of uncertainty in the economy. We're expecting
changes to the construction industry, and how far is that
affecting your sales cycles? Are you already seeing some form
of impact?
Speaker 8 (23:51):
Yeah, you know, in Q one we actually had really
strong results and through April, which is the first month
of our second quarter, we actually have not seen a
material deviations from our pipeline in our demand or anything
of that nature. Obviously, our customers are keeping a close
tabs on what's going on in the broader economic environment,
(24:13):
but you have to remember also, remember I said that
the industry is really resilient, resilient, and they've been through
things like this before. And when the industry and our
customers make decisions, they're making decisions based on commitments that
are going to have impacts over the next two three years,
and so the industry actually doesn't shift too quickly in
terms of what the flavor of the day is in
(24:35):
terms of the news that's going on. So what we're
hearing from customers is they're keeping close tabs on things.
They're making sure they have the pulse on what the
subcontractors are doing, what owners are doing, making sure they
have a good understanding, and making sure they have an
understanding of the exposure that they have across different things
in there in there, in their in their supply chains
and so forth. That's actually what's going on right now.
(24:58):
And pro Core is actually seen as a part or
in this because because we do digitize the industry and
we do help our customers digitize, we actually help them
manage and give visibility into a lot of what they
need to make sure that they keep a pulse on
what's going on today.
Speaker 11 (25:12):
So when should we then expect any changes of course,
you said, sort of your clients are not showing you
any any signs yet, sort of, when is a realistic
point in time for us to expect changes?
Speaker 8 (25:26):
You know, I wish I had an answer to that.
You know, we're in the same boat as our customers,
and again, we are actually doubling down on our partnerships
to make sure that we have an open dialogue to
make sure that not only do our customers engage with us,
and we engage our customers, but our customers engage each
other to make sure that when things do continue to evolve,
(25:50):
that they are able to react.
Speaker 5 (25:52):
In a timely matter.
Speaker 8 (25:53):
But it's very difficult to predict when things are going
to happen, and so we're the same boat with our customers.
Speaker 11 (26:01):
House is from a CFO perspective, we've seen a lot
of companies this earning cycle adjust their guidance, pulling guidance,
adjusting guidance ranges. How are you thinking about guiding the
street at this point, given that, of course, is this
uncertainty potentially facing your business?
Speaker 8 (26:20):
Yeah, well, the first thing is we had we had
a strong key one and our approach to guidance has
been to take quite a conservative approach, both in terms
of our full year guidance for the top line on
revenue as well as our profitability, and also definitely for
Q two as well. I think in this environment it's
prudent to take that approach. We have run multiple scenarios
(26:45):
internally about what would need to happen in terms of
bookings for us to even come close to our guidance,
and our guidance allows us to actually weather scenarios where
there's a significant downturn to our demand, which actually we
haven't seen yet through Q one and through April. We
think it's a highly conservative We have great confidence that
(27:08):
we're going to beat our guidance for both Q two
and for the full year, but I think it's prudent
to take a conservative approach given the uncertainties that are
out there right now.
Speaker 7 (27:17):
Yeah, I'm looking.
Speaker 6 (27:18):
Sorry, I'm looking at your website.
Speaker 4 (27:20):
You have these giant customers Brookfield Ball for Gilbain, et cetera.
And you just mentioned your Q one was strong, but
your stock is pretty much flat over the last five years.
Speaker 6 (27:35):
It's just done nothing. Why do you think that is
and what can you do to change it?
Speaker 8 (27:42):
Yeah, you have to remember over the last two years,
we've kind of been in this challenging demand environment, and
I think that has a lot to do. That has
a big influence on the sentiment of our customers and
how much they're willing to commit to in terms of
the construction volume that they want to run on pro
Cores platform. The key thing to note is customers still
stay with pro Course, So our gross retention rate is
(28:05):
still in the mid nineties and customers stay with us,
and so when we've been in this environment for this
period of time and then you start to layer in
some of the additional aspects of what's going in the
broader economic environment, I think this is what I was
speaking to earlier, where customers are staying partner in partnership
with us to make sure that we collectively manage through
(28:26):
this environment. But ultimately, the industry is going to be
resilient and we're going to be there along with our
customers as we get through this. The other reason why
customers stay with us and why we continue to get
investor interest is because there is a tremendous opportunity in
the industry and we're at the forefront of that. We
are at the forefront with our customers in terms of
(28:48):
digitizing a very underdigitized industry, and we're unfortunately just in
this limbo right now where there's a tremendous amount of
uncertainty right now in the broader environment.
Speaker 2 (29:00):
Been hearing from a lot of these major tech companies,
a lot of software firms, and really the conversation has
also been a focus on cap X as we think
about AI and a lot of the transitions that are happening.
Of course, that requires a lot of money. How are
you all thinking about spending right now and what are
you thinking in terms of AI developments at the company?
Speaker 8 (29:19):
Yeah, AI, I think is exciting for the industry, for
pro Core, for general software. For us, we are thinking
about AI and agents and large language models both from
an extra works it's off into our product as well
as internally in the ways that it could optimize the
way we work as a company here at pro Core.
(29:42):
We continue to make investments in AI. We have made
investments historically in AI with some of our prior acquisitions,
well before the recent push and the recent recent news
and push on from a broader standpoint, it's something that
we are continuing to work into our product with things
like Copilot, our agents and our agents, studio, and then internally,
(30:05):
we have been on a journey of operational excellence, of
which AI is going to be a part of that.
As we continue to scale our business past where we
are today at the billion dollar mark, over next several
billion dollars as we continue to grow, so critical to
how we think about the way we operate internally as
(30:25):
well as critical to the value that we add in
our product offerings to our customers.
Speaker 11 (30:31):
How are you said earlier that your your guidance is
conservative going into the second quarter. I'm wondering how are
you're thinking about other spending, not just on AI, but
also on for example, hiring. What are your plans there
and then how far will you be also cautious there?
Speaker 8 (30:49):
But you know what we've talked about is last year
and going into the first half of this year, we
made a commitment to go on a number of changes
in our go to market organization to set ourselves up
for much better engagement, much more intimacy with our customers.
We're basically moving to a general manager model, adding more
technical resources that allows us to do that. Most of
(31:11):
that hiring was already completed at the back part of
Q four and N Q one. The reason that's important
relative to this question is essentially, most of our expense
structure is going to be around people, and most of
our hiring incrementally has already been done, and so our
expense profile is going to be very consistent throughout each
(31:31):
quarter of this year, and as we continue to grow revenue,
that scale will then flow through to our profitability profile
as we work throughout each quarter of this year. In
terms of the commitments, those are the major commitments that
we got done in the beginning, and as I think
about commitments going forward, making sure that we are very
careful about making commitments that our too long term leave
(31:53):
ourselves flexibility depending on what happens in the demand environment.
And that's the way that I'm thinking about how to
invest in the business. The other thing that we're doing
is we still have two hundred million dollars left in
our or astock buyback that we will continue to look
for opportunities to deploy.
Speaker 4 (32:11):
Howard, thanks so much for joining us. Really appreciate your
time today. Howard fo there, he's the chief financial officer
over at pro Core and our thanks of course.
Speaker 6 (32:18):
Anina Trentman as well from.
Speaker 4 (32:20):
Bloomberg News Check out her newsletter CFO Briefing Bloomberg CFO Briefing.
Speaker 1 (32:27):
You're listening to the Bloomberg Business Week Daily Podcast. Catch
us live weekday afternoons from two to five Eastering. Listen
on Applecarplay and Android Auto with the Bloomberg Business app,
or watch us live on YouTube.
Speaker 4 (32:41):
We want to talk a little bit about Hollywood because
President Trump has promised to tax films made in foreign countries,
and there's so many questions around this. How would it
happen and also would it be helpful to Hollywood, where
I think it's safe to say revenue from this business
(33:01):
has been on the decline. Chris Paul Mary joins us
out of the Los Angeles Bureau, where he is Bloomberg
News Entertainment Reporter extraordinaire to give us his take. And
Andrew Silverman is here with us in New York City
at seven thirty one Lex. He's a Bloomberg Intelligence government analyst.
He's a tax guy, a tax lawyer, here in the
studio to talk about this. Let's kick it off with you, though,
(33:24):
Chris and I want to ask if people in Hollywood,
if people in Los Angeles traditionally not Donald Trump's demographic
or in favor probably of all of these tariffs. Were like, Ah,
this one is good, this one makes sense, this one helps.
Speaker 6 (33:39):
Me in my own pocketbook.
Speaker 9 (33:43):
Kind of.
Speaker 12 (33:44):
So this all began with Trump's ambassador to Hollywood, one
of them, John Voight, meeting last weekend with Trump and
mar A Lago. They came up with a proposal his
group of really based on tax incentives. These are the
tax credits that studios get for making movies in various
states and countries. And there was a small component of
(34:05):
that that was about tariffs. The President grabbed the tariff
concept and then you know, put that out on social media.
I think the studios would love to see more of
a tax incentive thing than a tariff related thing, because
it's the tariff would impact their ability to still operate
overseas and would cost them money.
Speaker 4 (34:28):
All right, So they'd rather see I guess subsidies than
tariffs or tax incentives. As you say, it's interesting, I
don't understand really exactly how this would work. And Andrew Silverman,
maybe you have given it a little bit of thought
from your vantage point, because there are a lot of
(34:48):
films that are you know, there's scenes done in Eastern
Europe or scenes filmed in China, for example, because of
what a big market it's been, and then they still
make the film, edit it, color it, put it together
in in Hollywood. How does how does this work in
a in a t tariff situation?
Speaker 7 (35:08):
Yeah, you're absolutely right. I mean, there are a lot
of things that we don't know about about this terraff.
We don't know if it only applies to US film
studios making movies outside the United States. We don't know
if it applies to foreign film studios making movies out
of the United States. We don't know if if a
foreign film companies coming into the US making movies here
would have the TERRORF applying to them. But but the
(35:30):
tariff is is is really interesting. It's actually quite like
a tax. Uh well, you know, I'm a tax layer,
so you know, to to to a hammer. Everything looks
like an exactly right, But but it's it's a lot
like either an excise tax or or a border adjustment tax.
Right with regard to an XI tax. An excise tax
(35:51):
in this in this case would be sort of a
syntax right, attacks on alcohol, attacks on cigarettes. It's a
it's a federal sales tax. So in that sense, this
is quite like that is trying to get American studios,
American film studios, and American theater goers to not see
movies made outside of the United States to change their behavior.
(36:14):
And a border adjustment tax is a tax that only
applies to imports, not to exports. Same situation here, right,
If you're bringing movies, presumably, if you're bringing movie making
into the United States, tariff doesn't apply. If you're exporting
your movie making outside the United States, teriff applies.
Speaker 2 (36:33):
And it seems as though there's been some positive reception
at least from Hollywood. What I'm hearing anecdotally about this
the idea of bringing more dollars and more things being
made here in the US as it pertains to films.
Speaker 3 (36:45):
But I mean, of course, to your earlier.
Speaker 4 (36:46):
Point blow in La as well that said they're pretty
happy about.
Speaker 3 (36:49):
That, right, So, Chris, what are you hearing?
Speaker 9 (36:51):
Well?
Speaker 12 (36:52):
I think you have to differentiate the people that want
the sort of carrot portion of this whole package, the
tax inteatives, as opposed to the stick portion, which is getting.
Speaker 9 (37:00):
Hit with the tariff.
Speaker 12 (37:02):
If you may be own studio space and are in
the business of actually making movies. If you're an actor
or screenwriter and you just want to see more work
brought back to the US, then maybe you could make
an argument for this whole movement, But I wouldn't say
there's a broad embrace of the idea of tariffs. In fact,
a couple of days after this first came out, you
(37:23):
saw California Governor now Gavin Newsom suggests sort of his
own plan, which was seven and a half billion dollars
of federal tax credits, which was actually more in line
with what the John Boyd group was proposing tax instead
of federal tax credits to make movies in the US.
Speaker 3 (37:39):
Well, I mean Chris as a fall up to that.
Speaker 2 (37:41):
So I cover real estate stocks in one of the
stocks that I cover is Hudson Pacific Properties, and they
are actually an owner of a lot of these Hollywood studios.
And why Bush analysts are actually saying that tariffs, this
whole situation could potentially be a possible positive for the company.
When we think about these Hollywood studios, can it be
a perk at all for them and terms of bringing
in more dollars to them, specifically at all.
Speaker 6 (38:05):
The tariff portion.
Speaker 12 (38:07):
It's a little tricky for the studios. They're going overseas
because they can it's cheaper for them to do so.
Speaker 9 (38:13):
Okay, so if.
Speaker 12 (38:14):
They're forced by tariffs to come back here, it's not
necessarily a win for them, it's a win for US jobs,
which is definitely something President Trump wants to do, and
so you could see why some workers.
Speaker 9 (38:27):
Would be happy about that.
Speaker 12 (38:28):
Calculating a tariff on a foreign foreign film, I mean,
if you depends on how you define it. I mean,
basically all the Star Wars films were shot in the
UK or Tunisia. They were all foreign films. It's a
very complicated process. The Void Group did suggest some way
of doing so, only putting a tariff on the parts
(38:50):
that are shot overseas, and then really only slapping the
tariff on in the case of what they called a
bad actor who could have made the movie domestically but
deliberately one of It's a complicated thing.
Speaker 4 (39:02):
I mean, I know people in la as well who
have space that studios rent, you know, who have warehouses,
and they have made for years revenue on companies shooting
movies in their in their in their places, and they
have less revenue now because films, Uh, because studios are
going overseas more. Also, I will note Australia's US envoys said,
(39:25):
this is a tax on Bluey, which is a fantastic
product completely filmed overseas or colored overseas. Andrew, I wonder
about the legality of all of these taxes, and I
guess it's a much bigger question, right. AIPA, which is
the International Emergency Economic Powers Act, has been challenged in
(39:46):
the past. President Trump tried to use it to uh
TO to expel TikTok in his first term, and then
a couple of courts told him no, can do Now.
He's a huge fan of TikTok. Of course, that Chinese
social media I used to spy on us. What do
you think about challenges to his tariff powers? Will they
Will they be successful in the courts?
Speaker 6 (40:08):
Any of them?
Speaker 4 (40:08):
Is Congress ever going to take this power back from
the executive?
Speaker 7 (40:12):
So let me just start up by saying, I'm also
a huge fan of blue Yeah.
Speaker 3 (40:16):
I have to see this.
Speaker 6 (40:17):
It's a great product, Absolutely love it.
Speaker 7 (40:20):
I must be late, so so so so. The reason
that President Trump referenced national security when he was talking
about this tariff on form produced films was because that's
a key aspect of AEPA. Right, if it's it's related
to national security, then the president can do it. And
Congress has given that power away even though it's in
(40:42):
the constitution. Congress said, Look, if it's national security, it's
the president's business to do what he wants to do.
And it has been challenged in the past. But but
normally the president wins those lawsuits because courts don't question
national national security.
Speaker 6 (40:58):
And and Hollywood feel are a matter of national security? Right?
Speaker 4 (41:02):
Isn't that Isn't that what we all think? Isn't that
the case?
Speaker 7 (41:07):
Of course?
Speaker 4 (41:07):
Yeah, Chris, I mean the President has said that, Chris,
I just want to ask for a second, because I
can't let any mention of John Voight go without bringing
up his christ Little baron that George Costanza bought.
Speaker 6 (41:23):
Does everyone know the reference that I'm making or does
nobody watch? Seinfeld?
Speaker 3 (41:29):
I think you're alone?
Speaker 6 (41:30):
Am I alone?
Speaker 9 (41:30):
There?
Speaker 6 (41:31):
Chris Palmery? Do you not see that episode?
Speaker 12 (41:34):
You know, there's so many great John Voyd moments. I
don't know where to start, but you know, look, you
know the President Trump appointed him, Mel Gibson Sylvester Stallone
as his ambassadors.
Speaker 9 (41:45):
I gotta give Void credit.
Speaker 12 (41:47):
He's the only guy who actually came up with some
plan and he's getting everybody talking about it in Hollywood
and maybe even won't get something accomplished.
Speaker 9 (41:54):
So it's a great episode, Cowboy.
Speaker 4 (41:57):
He leaves his pencil in the in the glove and
then George has John Voyd's pencil. And anyway, I wonder
if you think he also screened Alcatraz with the President
while he was at mar A Lago, because together with
the film Tariffs came the idea to reopen that prison
off the coast of San Francisco. And what's the reaction
(42:18):
been like on the West coast to that little piece
of information?
Speaker 9 (42:23):
Similarly shock and awe.
Speaker 12 (42:25):
You know, you may have seen the reports that you
know that was closed fifty years ago because it costs
three times more than any other federal prison to operate.
Speaker 9 (42:33):
So I can't tell you if they screened it.
Speaker 12 (42:34):
I know they all watched the Kentucky Derby together and
I'm almost positive that Trump did not bet on journalism.
Speaker 2 (42:41):
But and Chris, I know, Hollywood has really been through
a lot, especially as we reflect on the fires.
Speaker 3 (42:48):
What's it like?
Speaker 2 (42:48):
I mean, of course you live there personally, what's it
like and what's the recovery been like for the industry
more broadly, Well, you have.
Speaker 12 (42:55):
To understand what's going on here. You have to step
back a few years. We had this era people were
calling peak TV and there were six hundred scripted TV
programs were being made because everybody wanted to create the Netflix,
and it didn't matter how much you were spending. You
were trying to get as many subscribers. That started to
change around twenty twenty two. The strikes happened, and then
(43:19):
the studio said, look, they were already cutting back, and
then they said we can get back by with a
lot less. And at the same time, streamers were trying
to reach a global audience. So we're now watching TV
shows that were made in South Korea or France or Israel,
and so this is what happened. We reported last year
(43:39):
production in the US between twenty twenty one and twenty
twenty four declined about twenty nine percent.
Speaker 9 (43:44):
So it's a number of factors.
Speaker 12 (43:46):
The cost cutting, the globalization of the entertainment industry, and
the tax credits that you can get by making a
film in the UK or Australia or whatever.
Speaker 9 (43:55):
A lot of things converging.
Speaker 6 (43:57):
All right, Chris, great to have you on the program.
Thanks for joining us.
Speaker 4 (44:00):
Paul, Mary, they're out of our Los Angeles bureau covers
Hollywood for US and entertainment. Andrew Silverman here from Bloomberg Intelligence,
our resident tax lawyer.
Speaker 1 (44:10):
This is the Bloomberg Business Weekdaily podcast, available on Apple, Spotify,
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afternoons from two to five pm Eastern on Bloomberg dot Com,
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(44:31):
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