June 2, 2025 • 40 mins
Watch Carol and Tim LIVE every day on YouTube: http://bit.ly/3vTiACF.
Ukraine’s drone strike deep inside Russian territory left Kremlin officials angry and alarmed over the sudden vulnerability of a nuclear-capable air fleet far from the battlefield, according to people close to senior officials in Moscow.
Sunday’s dramatic attack on Russian long-range bombers in air fields in Siberia helped to disrupt an arsenal that Moscow deploys to hit Ukraine with some of its most powerful missiles. It also demonstrated Ukraine’s ability to hit key assets thousands of miles from the front lines, which the Russian military had thought were safe.
While nobody is predicting that Sunday’s dramatic attack will change the course of Vladimir Putin’s war, Ukrainian President Volodymyr Zelenskiy celebrated the “brilliant” covert operation.
Planned over a year and a half and involving unmanned aerial vehicles popping out of trucks that had been driven across Russia’s vast expanse, it was the longest-range mission undertaken in the three-year war, he said.
The damage inflicted on the warplanes is likely to rattle decision makers around Putin rather than shake up Moscow’s military aims. Only a few such bombers are needed for attacks on Ukraine, meaning that the pace of missile and bombing strikes won’t slow, according to people close to the Kremlin who spoke on condition of anonymity.
But the deep-penetration raid was a direct hit on air assets, including targets on Tu-160, Tu-95 and Tu-22 M3 bombers that have long been considered less vulnerable to attack than land and naval forces, which have suffered bigger losses. Russia’s Defense Ministry confirmed attacks at five military airbases across the country on Sunday. Russia acknowledged that several aircraft were damaged, compared with Kyiv’s claim that more than 40 planes were hit. A person close to the Kremlin put the tally at closer to 10. Pro-Moscow military blogger Rybar, which has about 1.3 million Telegram subscribers, estimated that 13 aircraft were affected, most of them long-range bombers.
Western officials continued to assess the aftermath of the raid. The destruction was “substantial,” with at least seven Tu-95s and four Tu-22s damaged or destroyed, according to one senior official. The strike, broadcast widely on Russian social media, was successful in lifting moral in Ukraine, a European diplomat said.
President Donald Trump’s administration was not notified ahead of the attack, a US official said.
Today's show features:
- Angela Stent, Senior Fellow at the Brookings Institution, on Ukraine’s drone strikes inside Russia and Monday’s talks between the warring nations
- Bloomberg Economic Chief Geoeconomics Analyst Jennifer Welch on new developments in the US-China trade war
- Alan Zafran, Co-Founder and Managing Partner IEQ Capital on markets and investing strategies
- Jeffrey Hirsch, President and Chief Executive Officer of Starz on his company’s recent earnings and separation from Lionsgate
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
Weekdaily 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 news
(00:23):
as it happens. The Bloomberg Business Week Daily Podcast with
Carol Masser and Tim Steneveek on Bloomberg Radio.
Speaker 2 (00:32):
Our focus shifts now to the latest development when it
comes to Russia's invasion of Ukraine. The two countries wrapped
up a second round of talks, these happening in Istanbul,
but they failed to bring the two sides closer to
ending the war. They laid the groundwork for a new
exchange of prisoners. However, the Russian delegation handed over peace
proposals that include Kiev surrendering control of territory it still
holds in four partially occupied regions. This according to a
(00:55):
Ukrainian official. We did also hear from the Ukrainian Defense
Minister who said that Key demanded an unconditional truce for more.
We bring in doctor angelas Stent. She's senior fellow at
the Brookings Institution. She's also former National Intelligence Officer for
Russia and Your Asia at the National Intelligence Council. She
also served in the Office of Policy and Planning at
the US Department of State, and she's author of the
(01:16):
book that came out in twenty nineteen. It's called Putin's World,
Russia against the West and with the Rush. She joins
us from Washington, DC, Doctor Stent, good to see you.
It's been about a month since we last connected. I
do want to start with peace negotiations, but before that
kind of get to the context of what happened over
the weekend, the drone attack, so called Operations Spiderweb. Russia
(01:37):
and Ukraine are each saying different things about what exactly happened,
the damage, what was destroyed. Zelenski did say that about
a third of the strategic cruise missile carriers at airfields
were hit. How does this complicate negotiations, Well.
Speaker 3 (01:51):
I think you may remember that President Trump told the
President Zelensky at that unfortunate meeting in the Oval Office
that Ukraine quote unquote had no cards. I think this
was really an amazing operation. It had been planned for
one and a half years, we heard from the President Zelenski,
and it shows that Ukraine does have some cards. It
(02:12):
was capable of destroying these Russian strategic bombers that were
being used to hail bombs on civilian and targets and
infrastructure in Ukraine. And these, by the way, are old
Soviet era planes and they can't be replaced, so it'll
take Russia some time to rebuild to acquire some more
(02:33):
of these strategic bombers. It doesn't necessarily change the course
of the whole war, but it certainly shows that Ukraine
can fight back, that it's very good at this kind
of advanced warfare, using the drones and trucks if you're
like the Trojan trucks as they've been called, and really
apparently taking the Russians and everyone else by surprise. But
(02:56):
as you said, you know today's talks, they exchange agreed
to exchange more prisoners, which is very important. But there's
been absolutely no more progress made on approaching a ceasefire,
any kind of an end to the fighting than that was,
you know, when President Trump first took office.
Speaker 4 (03:16):
I want to get to that ceasefire, but just briefly,
were there are there. I'm wondering if there's geopolitical implications
of this attack beyond just how it affects Russia's war
with Ukraine, but how this could potentially affect Russia's relationships
with other countries.
Speaker 3 (03:34):
Well, it has major implications for warfare in general. Some
people are now saying that what Ukrainian really did was
to help NATO, because it makes it less likely at
least that in the immediate future, Russia would be able
to attack a DATO member. But it has implications even
for the United States. I mean, if you can now
destroy planes and other military hardware through the use of
(03:58):
drones like that, people are going to have to rethink
where they position things and how they conduct warfare. So
it potentially has major implications really for the way that
countries fight wars in the twenty first century.
Speaker 2 (04:12):
But this was a difficult thing for Ukraine to pull off.
I mean, some of the reporting around it indicates that
this was over a year in planning processes. They were
able to get drones into the country and then have
them take off simultaneously to attack different strategic assets of
the country. This is not an easy thing to do,
doctor sten.
Speaker 3 (04:32):
No, no, no, I mean it took a lot of
meticulous planning. Obviously, the Ukrainians had people inside Russia who
helped with this. President Zelenski last night and his address
said that some of these people were located very close
to a major headquarters for the Russian domestic intelligence services.
But it just shows you that this is a war
(04:52):
that partly resembles World War One and trench warfare, but
it is also a very high tech, twenty first century,
cutting edge type of warfare, of which we will see
more in the future.
Speaker 4 (05:04):
So where does this leave us now? Because the two
nations spoke today, but it doesn't seem like they're any
closer to making progress towards a ceasefire.
Speaker 3 (05:14):
No they are not. I mean Vadimia Putin is not
interested in a ceasefire at the moment. Russia has been
taking incrementally more territory in the past few months. It's
also sustained very high numbers of casualties as it takes
this territory. But he is, I think determined to continue
with this war. Most people believe it's going to go
(05:35):
on at least for this year, if not into next year.
But the negotiations will continue because Putin has understood that
if Russia doesn't take part in negotiations, than the prospects
for improving US Russian relations, which President Trumpet promised him
go down significantly. So I think we'll see. I know
(05:55):
they've already said they're going to have another negotiation, not
in a not too distant future. They may continue to
talk about these humanitarian issues again, very important issues, the
exchange of prisoners, particularly disabled ones. But that doesn't mean
that the fighting is going to stop anytime soon.
Speaker 2 (06:13):
Doctor Stam, We're getting a question from some folks who
are watching listening right now, want your view on over
three years in on your four of this war, when
many thought it would last a couple of weeks, what
you view as the original cause of this war.
Speaker 3 (06:31):
The original cause of this war is that Vladimir Putin
has never accepted the collapse of the Soviet Union. He
has never accepted that Ukrainians are a separate people, that
they should have a separate country. He believes that they
should be part of Russia. He wrote that explicitly in
a July twenty twenty one five thousand word essay that
(06:53):
he penned about Ukraine. So the root cause of the
war is that the Russia believes and the Putin believes,
that it should control Ukraine and that Ukraine shouldn't have
any choice in moving westward, in joining Western institutions. So
that's the original cause of the war. A lot of
the discussion we hear about NATO enlargement causing it, that's
(07:15):
not the cause of the war. I mean, the reason
that Putin didn't like NATO, didn't want NATO to enlarge
is because if Ukraine had been a member of NATO
and Russia had attacked Ukraine, then it would have been
involved potentially in a large scale, possibly nuclear war with NATO.
So that's not NATO is not the root cause of
the war. It's Putin's desire and the desire of many
(07:37):
people around him to reconquer Ukraine.
Speaker 2 (07:40):
Doctor Sten, you know, we started the interview by you
saying that this drone strike over the weekend was proof
that Ukraine does indeed have the cards. Do they have
the cards to force Russia to negotiate in a way
that does not include actually giving up part of its
Ukraine's owned territory.
Speaker 3 (08:01):
So I would say they do not have those cards.
I think what they had the cards is to make
Russia understand that it's going to be more difficult as
the fight goes on. But I think the only way
to get the Russians to negotiate more seriously would be
two things. One, there is a fairly robust sanctions bill
(08:22):
that eighty one senators bipartisan in the Senate support, and
that Senators Graham and Bloomothal who were just in Kiev,
said that they would possibly pass this week. Hasn't happened yet,
we'll see, but they would be Those would be very
punishing sanctions on Russia. And it would be for the
Trump administration to resume supplying Ukraine with the weapons and
(08:45):
the financial assistance it needs to continue fighting Russia in
such a way that Putin might have to understand that
his maximum demands cannot be met and that he would
be willing to make some compromises in the demands that
the Russians are making.
Speaker 4 (09:00):
Just thirty seconds, but what's your current thinking on how
the war ends.
Speaker 3 (09:07):
Eventually, it will end in a negotiation, and there will
be a negotiation clearly where both sides will have to
compromise and both sides will have to move back from
their maximum demands. But I think neither side is at
the situation yet where they're willing to make those compromises.
Speaker 2 (09:26):
Doctor stan always appreciate you taking the time in joining
us here on a Bloomberg Business Weekdaily. Doctor Angela Stent,
Senior Fellow at the Brookings Institution, also the author of
the twenty nineteen book Putin's World, Russia.
Speaker 5 (09:38):
Against the West and with the Rest.
Speaker 6 (09:42):
You're listening to the Bloomberg Business Weekdaily Podcast. Catch us
live weekday afternoons from two to five pm Eastern. Listen
on Applecarplay and Android Auto with the Bloomberg Business app,
or watch us live on YouTube.
Speaker 2 (09:57):
President Donald Trump and Chinese President Shiji Ping are likely
to speak this week, the White House said, as the
world's two largest economies remain locked in trade at turmoil.
From where we bring in Jennifer Welch, Bloomberg Economics Chief
geoeconomics analyst.
Speaker 5 (10:10):
She joins us from Washington.
Speaker 2 (10:11):
Jennifer, I just want to start with the lay of
the land right now, because we're a little over a
month away from the end of this ninety day pause
that the President had laid out for every country that
it's negotiating with around the world. What is the average
tariff rate that we should keep in mind for goods
(10:32):
that are coming from China into the US right now.
Speaker 7 (10:36):
Well, the moment, the US effective terif rate on China
is closer to forty percent with the ninety day pause
on the higher reciprocal tariffs that came into play after
April second, after the tip for tap between Washington and Beijing.
But as the calls lead up has indicated, those wheels
are starting to fall off of that truth and we
(10:56):
might see tensions come to a boil well before that
ninety day period is to end. And I think the
threatening there is whether or not terror rates are going
to go back up again once that ninety day truth ends,
will there be an extension of it to allow for
a larger deal on trade. At the moment, the lines
are pointing pretty negative.
Speaker 2 (11:15):
You know, I was sitting in the studio with Tom
Kane doing Bloomberg surveillance a couple of weeks ago, and
in one single day we spoke to two analysts and
this was before this was before the ninety day truce.
We spoke to two analysts who told us that within
weeks we were going to see empty shelves here in
the US. It doesn't seem like that has materialized. Yes,
there's been a pause at this point. Are you based
(11:39):
on the research that you see the folks that you
talk to, are you seeing that still a concern given
that so much of what we buy in the US
comes from China.
Speaker 7 (11:48):
I think the ninety day pause allowed for companies that
had already been surging orders in advance of Liberation Day,
anticipating that terrorists were going to go up, allows them
to continue to make orders and through at least this
ninety day period. So it has bought some space, and
it has bought some time. They are facing higher prices,
(12:09):
but they are not facing the kinds of exorbitant prices
at one hundred and forty five percent teriffreight that we
were in mad to late April that would have made
many of those orders cost prohibitive. So I think it
has bought some space, and that's why we haven't seen
empty shells. We may still see price pikes though, because
that's thirty eight percent effective terriff. That's a high rate,
(12:31):
higher certainly than where we were before a second. But
I think it has avoided some of the shortages that
we're concerned about before this truce was reached in Geneva.
Speaker 4 (12:42):
I'm wondering if in your observations these you know maybe
some cracks in the trade truce beginning to show how
much of that is just a normal part of a
negotiation between two of the world's largest economies.
Speaker 7 (13:01):
I think given the experience of the first years China
trade war at this point in time, I would say
history suggest that this isn't surprising. In that trade war,
we saw multiple what I would call potential off MPs
where both parties had the opportunity to take a step
down from trade tension, that were either bypassed or only
lasted a temporary period of time. And we also saw
(13:22):
multiple rounds of escalation and tit for tat even when
it seemed likely that the two parties are maybe reaching
an agreement of stories. Ultimately, it took two years from
the initiation of tariffs to the conclusion of the deal
in the form of the Phase one deal and that
trade war for terrorists to come down, and even then
the Phase one deal didn't last very long before attension
(13:44):
starts to psych again. I think that helps explain the
backdround for today's trade talks, where there's deep levels of
distrust on both sides. Both sides, as you're applying, are
still looking to gain leverage even though they've agreed to
this truce, and that's probably part of the reason Beijing
has been slow to peel back these expert controls on
(14:04):
rare earth and other critical minerals of the US has
complained about. That's leverage that Beijing wants to continue to
retain in addition to the administrative challenges appealing back expert controls,
and on the US side, there are a number of
stats in the United States wants to take as part
of its competition with China outside the trade domain. And
from Washington's perspective, a trade truth doesn't mean that a
(14:26):
degree to pause all of that. But from Beijing's perspective,
I'm not going to agree to something in the trade
arena when you're hitting me on expert controls or on
student pieces. At the same time.
Speaker 4 (14:39):
House White House Press Secretary Caroline Lovett told reporters today
that I'm just going to quote it. I can confirm
that the two leaders will likely talk this week. Of course,
referring to Trump and Chinese President Jiji and paying this
would be the first time since they spoke, correct since
Trump took office. What would this mean.
Speaker 7 (15:03):
It would be the first time that we know of
they've spoken since he took office. President Trump has indicated
that they spoke at some other point in time, but
he hasn't provided specifics of it, and there was never
a readout from it, so we don't really know if
that call ever happened. I think it's highly unlikely that Beijing,
in this atmosphere would agree to a leader level call.
From Beijing's perspective, that's just incredibly risky. They don't want
(15:25):
to put President Being in a position where he could
be embarrassed or surprised in the way that some other
foreign leaders in meeting or talking with Trump happened. Their
preferred mo is for the leaders to meet and to
talk once they have something to announce, which usually requires
more progress thant working levels. Obviously, that flies in the
face of President Trump's preferred approach, where he likes to
(15:46):
work things out with his counterparts, and that often is
a faster path to resolving differences. And so if a
phone call happens this week, I think that is a
good thing for trade negotiations. That probably will help restart
momentum or at least clear the error in a way
in which these tensions are kind of boiling on the
back burner, But I think a call is unlikely, and
(16:07):
what that means is that tensions could continue to boil
because they're only being addressed really at lower levels, and
it would take a higher level engagement to put them
to rest or at least to put them into the
background to the point where they're not interfering with talks further.
So my anticipation is, despite what the White House Press
Secretary saide, I'd be very surprised if a phone called,
(16:28):
did it happen, And I'd be, as a result, very
surprised if we had a quick resolution to this current
period of tividual first of decision kind of containing the
left things boil and works them out.
Speaker 8 (16:40):
At the lower levels.
Speaker 2 (16:42):
Hey, Jennifer, we're going to try to fix your mic
a little bit. But Emily, one thing that I wanted
to talk about with Jennifer we've got a couple minutes left,
hoping we can fix the connection is who has leverage
in this negotiation. I mean, China has the rare earth
capacity for refining these rare earth elements. We've talked about
that with Jodo quite a bit, and Gracelyn Baskren over
at the Centerer for Strategic and international studies. They also
(17:05):
have the stuff that we want to buy as consumers,
but we have the consumers, Jennifer, I want to go
back to you and bring you back in here. Who
has the leverage when it comes to this negotiation.
Speaker 7 (17:16):
So in a sense, both sides have leverage. Obviously from
the US perspective, they are China's single largest market in
the world, and there are very limited options for Beijing
to shift those goods to other locations. At the same time,
manufacturing is increasingly a very important part of the Chinese economy.
It has been for decades, but especially in light of
(17:37):
their property bubble and some of the other challenges that
they have had with consumer sentiment. At this moment in time,
with their other economic weaknesses, manufacturing becomes an even more
important part of China's growth hopes. On the other hand,
for the US, the weakness is really in terms of
consumer dependence on Chinese goods that there aren't a lot
of alternative options or it is certainly not within US
(17:58):
consumers price preferences, and so both sides are going to
face incredible pain here if terrists resume. Higher levels for
China will be in the form of dropped exports, as
a result, the impact it's likely to have on factories,
and in course of that and impact on jobs. On
the US side, it's going to be in terms of
much higher prices for US consumers, to the point where
some goods might not be available and there aren't ready
(18:20):
alternatives for those goods. So both sides certainly have an
incentive to avoid a return to higher attentions here. But
at the same time, the depth and deep persistence of
these trade tensions against the backdrop of distress makes avoiding
that outcome a real challenge.
Speaker 2 (18:37):
Jennifer Welch, Bloomberg Economics Chief geoeconomics analyst, joining us this
afternoon from Washington.
Speaker 8 (18:45):
I'll bet you let me drive. Oh no, no, no, no,
this is not a toy, honey, please hovels. I want
to try it.
Speaker 1 (18:57):
It's a good question, good tribes, this is the drive
to the clothes.
Speaker 8 (19:04):
Punk's amusing well, Trier run to dawn.
Speaker 5 (19:07):
On Bloomberg Radio, and look at that.
Speaker 2 (19:10):
We're just about nineteen minutes from the close of equity trading,
as we just heard from Jordan Fitzgerald, about three tens
of one percent. But a strong day for tech right now.
The NASDAC Hire by six tens of one percent.
Speaker 5 (19:21):
The Dow is flat.
Speaker 2 (19:23):
Let's bring in Allan Zaffern. He's co founder and managing
partner at i EQ Capital about thirty six point eight
billion dollars in assets under management. He joins us once
again from Foster City, California. Good to have you back
on the program. We haven't spoken since Wow, just after
the tariff pause, so mid April twenty or no, yeah,
(19:45):
just after the tariff pause, I should say, Allen, it's
been quite a while since we've last spoken with you.
Good to have you with us this afternoon. That's exactly
where I want to start, because we're gonna get to
the FED in a minute. We're going to get to
sort of acid allocation. Now, maybe it's different than a
few months ago, but with regard to US trade negotiations,
(20:07):
in your view, how do you thinks stand right now?
Speaker 8 (20:11):
Well, first of all, Tim and anially, thanks for having
me on the show. Look, it's unclear. Right on the
one hand, our administration is talking to China and arguing
that they're going to delay the imposition of some of
these terrorists. But then the next thing you hear is
there's again conversations about maybe it's not going to be
so easy. So the last we heard is President Trump
(20:32):
will talk with the head of China later this week,
and the intention is to get the conversations back on track.
If you have the two largest economies in the globe
not acting well with one another, clearly that's a negative globally.
And so I think on a short term basis, where
this market is headed. Stock market is measuring the ability
(20:54):
of our administration to get its way to some degree
with some imposition to terifts while not being too problematic
or hurtful to other countries administrations, so that we can
work out face saving agreements on both sides of the
oceans or both sides of the country. So that's that's
the game. Are we going to find some middle ground
(21:16):
that enables the US to argue it's one in the
imposition of some tariffs for the benefit of protecting our
domestic industries, but to the same token in a way
such that other countries administrations can have face saving agreements
on behalf of their own cities. That's the game to
play right now in terms of tariffs.
Speaker 4 (21:34):
I saw a note this morning. I'm blanking on who
who wrote it, but the analyst was mentioning how it
seems like markets aren't reacting as strongly on Monday mornings
when we get news over the weekend about US China relations,
which we did get this weekend. It's not like we
(21:56):
saw a massive drop coming in Monday morning. What do
you make of that? Are are investors getting tired of
all of the headlines about tariffs and the trade war?
Are or are there actually real developments here that kind
of signal meaningful progress that could be good for the
(22:16):
equity market.
Speaker 8 (22:18):
I think it's a little of both. First of all,
I actually think there's a tremendous amount of cash still
on the sidelines, which just goes all the way back
to the stimulus that was created as an effort to
fight COVID.
Speaker 5 (22:30):
You you still think there's still cash on the sideway sidelines?
Speaker 9 (22:33):
Yeah?
Speaker 3 (22:33):
I do, I do.
Speaker 5 (22:36):
Who's got it?
Speaker 4 (22:36):
There's like a record in money market Yes, right, I.
Speaker 5 (22:39):
Know there's it did money market funds.
Speaker 2 (22:40):
But I'm thinking it more of like like who has
who still has you know, thousand dollars or whatever we
got from PPP or from those emergency COVID funds.
Speaker 8 (22:50):
Well, that's a whole nother conversation. We could get into.
But I think the most affluent portions of the US
citizenry have significant well which has only grown since COVID,
and they have ample amounts of cash to put to
work on dips. That's why I think he keeps seeing
the buy the dip mentality on top of that, As
to your question, Emily, on top of that, I think
(23:11):
what you're seeing is people are coming to a conclusion
that the current US administration is it only has a
tolerance for so much pain in the markets before it's
going to revert back to a more amenimal set of
tariffs that the global economies can tolerate. In a world
in which we have ten percent on average tariffs imposed
(23:33):
by the US not ideal, but it's a global economy
that can still grow, if even at a slightly lower
rate than it would have otherwise. That's dramatically different than
a world with thirty percent tariffs, which puts probably US
into a global recession.
Speaker 7 (23:47):
So I think.
Speaker 8 (23:47):
Investors have concluded the administration is teasing out the middle
ground and therefore is not reacting to the day to
day headlines as to fifty percent tariffs on steel or
whatever product or service of the week that they're going
to talk about. I think the investors are more discerning
and realizing it's probably not going to be as bad
as it was feared when we had our dramatic drop
(24:07):
in early April.
Speaker 2 (24:08):
Allan, when do we start to see those those actual
tariffs make their way into actual prices that we're paying
for stuff.
Speaker 8 (24:17):
You're actually starting to see it a bit because producers
are in service providers already anticipating some of that, but
we haven't seen the bulk of that yet.
Speaker 2 (24:26):
And in fact, is that just because we're making our
way through inventory, Like you know, we heard from the
retailers earlier this week or earlier that last month, I
should say in this most recent earnings round that they're
still working through inventory that they had pre tariffs.
Speaker 5 (24:40):
Is that why?
Speaker 8 (24:41):
That's a large part of it?
Speaker 5 (24:42):
Okay.
Speaker 8 (24:43):
The other issue concerned though, is imagine a world in
which everyone's holding off on offering the products out of
a concern if and when and how the terriffs show up.
So there's also a bit of front running right where
products are going out the door as quickly as possible
in avoidance of the tariff being imposed on that. So
when you may see some dramatic step step shifts up
(25:04):
in prices if in fact TIFFs become legislated into law.
So there it depends on the product and service from
the country.
Speaker 5 (25:13):
What do you think is most at risk?
Speaker 8 (25:17):
Well, I think most at risk are really where we're
trying to protect, are a creator of a fair playing field.
So it's anything from importation of energy services too oddly
enough things at risk like the notion that maybe foreigners
(25:38):
are going to get taxed on investments in the US.
That's an easy one to impose on foreigners. It doesn't
hurt us, so you're going to see the reverse, and
then we don't know how to predict if other countries
will impose those costs back on US investors to non
US investments. That might be the next step we haven't
seen yet.
Speaker 2 (25:53):
Hey, I want to shift cares a little bit before
we go. Just get your word on what you're seeing
with alternatives right now. Private credit and private equity. Venture
capital certainly is a relatively large portion of the way
you invest the money that you manage. What's the opportunity
there right now and how has it changed in the
recent months.
Speaker 8 (26:15):
As really it's to private credit, we have not seen
a lot so. Interestingly enough, despite concerns about economic slowdowns,
let alone recession fears, we're seeing little if any evidence
that there's any degradation or decline, and the ability of
private companies to pay their debts, meaning private credit, in
our mind, still is a highly attractive asset class, yielding
much higher annual income streams than what you can buy
(26:38):
from the public bond markets. In the privates arena secondary investments,
when you're the buyer of someone else's illiquid investment, we
think you're going to see more and more of it
for two reasons. Most recently, there's news that a lot
of the universities are finding themselves having too much ill liquidity,
finding a need to raise cash for potential will increase
(27:00):
in tax rates on their returns on their investments, and
so they're coming to the markets with portfolios of investments
that secondary en buyers, the second investors can buy at
a discount.
Speaker 5 (27:12):
Okay, that's we're seeing a lot more of that.
Speaker 8 (27:15):
We're probably going to see it.
Speaker 2 (27:16):
Alan zaffrin Ieq Capital, thanks for joining us.
Speaker 1 (27:20):
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 2 (27:35):
Shares of Stars sored twenty seven percent on a Friday,
this after the company set it out at five hundred
and thirty thousand streaming subscribers in the US during the
fiscal fourth quarter. The company is now a standalone entity.
It separated from Lionsgate Studios and began trading independently last month.
It's got a market cap now just north of three
hundred million dollars. Today, it gives back some of those
(27:57):
gains from Friday chars following as much as fourteen percent,
down nine point four percent as we speak. We're joined
here in the Bloomberg Business Week studio by Jeffrey Here.
She's president and CEO of Stars. Jeffrey, good to see you,
Welcome investors, welcomed the streaming additions in the fourth quarter.
You increase total subscribers in the US by close to
two percent. You attributed that to the premiere of the
(28:17):
fourth season of Raising Canaan. What's in the product pipeline
right now, the content pipeline that will continue with the growth.
Speaker 9 (28:24):
Well, thanks for having me. It's good to be here
this afternoon. We have a great slate in twenty five.
You know, we're coming off a strike effected year where
we only had three big tempole shows and so that
created a little kind of gaps in our content. And
so what you see as we roll into twenty five
is we've got five big shows coming. We have BMF
which premieeres this weekend, which is a fifty cent show,
(28:45):
one of our biggest shows. So we're excited about that
premiere this weekend. We rolled that into Outlander prequel called
Bood of My Blood, which I think the fans will
really like.
Speaker 2 (28:52):
This is why Carol is going to be so mad
she's not here today. She's like, the biggest Outlander fan
are out Yeah, that's okay, this tell her.
Speaker 10 (28:58):
We'll tell her the prequels.
Speaker 9 (29:00):
You know, twenty years prior to the first season of Outlander.
It's back in Scotland. It's Clan Lauren. It's two romance stories,
so it's how each of the leads of Outlander's parents
met and fell in love. So one of the stories
of Romeo and Juliette story rival Clans Forbidden Love. The
other is a World War one you know, with a
gentleman on the front and a woman reading the letters,
and it's a phenomenal tale.
Speaker 10 (29:21):
There aren't any.
Speaker 9 (29:22):
Books, and so the fan base it's all new to them,
and so I think it's gonna be a really great show.
We come back with a fan favorite from twelve years
of called and Spartacus, which is going to be you know,
I was talking to a producer on the way down here.
He's because it's coming back. I'm like this fall and
so that's gonna be and the Stephen D. Knight's doing that,
it's gonna be as good as, if not better than
the original. We come back with Force, which is one
(29:42):
of our power spin offs, and then back into Canaan,
so real strong ear of content. We wrap that with
you know, big movies from Lionsgate like Ballerina, and then
Universal has a couple of movies coming off Penheimer. So
it's really great portfolio of content coming this.
Speaker 10 (29:56):
You were pretty excited.
Speaker 4 (29:57):
Talk about your target demographic because it's it's not every
single person that wants to watch TV, right.
Speaker 9 (30:04):
Yeah, Look, we're really trying to be complementary to all
the broad Bay streamers. We've in twenty sixteen when we
launched our app. What we saw from the data, and
it was the first time we really got data Honor subscribers,
it was that women was driving our business and so
we leaned in significantly into that. And so our content
is really only focused on women and underrepresented audiences, and
not only on screen, but in the director's chair, in
(30:24):
the writer's room, all the way through the office. Seventy
percent of my direct reports of women in eighty percent
of women of color. And so it's really a network
for buying about women and underrepresented audience is run by
women and underrepresented audiences.
Speaker 2 (30:35):
So you see yourself trying to broaden out the content
to bring in more people, or I make it a
bigger tent, or is this the niche you want to
focus on.
Speaker 5 (30:43):
Look, it's not.
Speaker 2 (30:44):
I'm not saying it's a niche. It's a huge target market.
But like Emily said, the other streamers want to have everything.
Speaker 9 (30:50):
Yeah, Look, they want to be all things that everybody
and they're competing with themselves, and we really are focused on,
like I said, women are underrepresented audience. We think that
TAM and the US is about eighty million households. We're
sitting at twenty million households today, So we think there's
a lot of room to go. And if women in
is a niche, which are forty nine point six percent
of the planet small, then I'm happy to have everybody
else focus everywhere else and let us do what we're doing.
So we'll continue to be complementary. We'll continue to really
(31:13):
be the destination of content, our rated adult scripted content
for women, and so we feel good about that.
Speaker 4 (31:20):
So you don't have ads right now on the streaming
correct platform, how do you grow revenue then if you
don't have ads, So.
Speaker 9 (31:28):
I think there's really three ways we can go revenue,
and we'll think we'll grow revenue one to three percent
over in you know, in the next short term period.
Want to subscriber growth. Like I said, we've got a
lot of tam still out there today. You saw that
in the first quarter we were the base one point
eight percent in the US, and so we think there's
a lot of opportunity and as these broadbay streamers continue
to compete, it'll look a lot like the old world
(31:48):
where you have stars sold as an add on or
buy this service and get stars included. So we think
there's a real opportunity for us to kind of replicate
that unique position we had in the traditional world on
in the new digital world we are today.
Speaker 5 (32:00):
So you're saying, look out for bundles.
Speaker 10 (32:02):
Lookout for bunchs.
Speaker 8 (32:02):
Do you have any Now?
Speaker 9 (32:03):
We are the most bundled service in the space today.
We have five bundles. We are about to launch another
one this week. In the first quarter, we had a
be Et Stars bundle on Amazon. We had an HBO
Max Stars Bundle on Amazon. We've actually bundled BritBox into
The Stars app was the first one we've bundled into ourselves.
So where we are, we are set up to bundle
with almost everyone.
Speaker 5 (32:23):
What's a bundle you're working on? I can't tell you
that today, but in your but describe it.
Speaker 2 (32:28):
For us, Like in an ideal world, these are these
you know, we went through a few years, about a
decade ago, where the major telecom companies were bundling this stuff.
If you subscribe to AT and tier Verizon, you get
you know, X or Y for free. That was that
was unique in the context of Okay, you're paying for
a cell phone plan, you're getting content for free.
Speaker 5 (32:45):
What world do you want to see?
Speaker 9 (32:47):
I think the nice thing about bundles I think everybody
looks at it and says, well, for the consumer, they
get a discount and the companies get stickier. What really
makes the bundle unique and special for the companies is
you're lining at your content slates together. So for example,
last quarter with HBO Max, the White Lotus launched in February.
They didn't have a big show launch in March, but
we had raising Canaan launch in March.
Speaker 10 (33:06):
So when you put those.
Speaker 9 (33:06):
Together, you have two big premiers working with each other
to continue to drive subscribeer acquisition. So when we look
at the landscape that's out there today, we look at
content that's either complementary or you know, folks that are
servicing the other side of the household that we're not.
And if you can put our service with their service
and complete the loop for the household, it's a really
compelling bundle for consumers.
Speaker 4 (33:27):
Tim mentioned this is your relatively new as a public company.
It's been not even a month right from separating from
Lionsgate Studios. Talk a little bit more about just how
that split is going to help Stars now.
Speaker 9 (33:42):
You know, I think the board three years ago looked
at the combined company and said investors like a simplicity
and story, and the fact that you had a studio
and a network together wasn't then simple, and it was
hard to figure out where to put your investment dollars.
I think investors like to invest in content or distribution
and not kind.
Speaker 10 (33:57):
Of a hybrid.
Speaker 9 (33:57):
And if they are going to put it in a hybrid,
such a small cap company, the point you put money
into Comcast or NBC Universal as a higher Disney as
a hybrid there and so rightly so made the decision
to put the two companies to put value back on
each of the companies. I think you've seen that in
the stock performance on both Line and Stars over the last.
Speaker 10 (34:16):
Couple of weeks.
Speaker 9 (34:17):
But ultimately allows us to focus on what we do best,
which is really put great content on the air, own
our own content, and drive our subscriber base to ultimately
drive profit and return money. We've got a fifteen percent
margin today. When we get into a steady state in
twenty six, we'll convert seventy percent of that to un
lever free cash flow. So profitable business generating a lot
of cash for investors, and we think it's a very
(34:38):
investable business.
Speaker 5 (34:40):
Go ahead.
Speaker 4 (34:41):
I'm curious when you say own your own content, what
does it actually mean in practice that it's only on
your platform and you would never sell it to others?
Do you own the production supply chain as well?
Speaker 7 (34:53):
How does that work?
Speaker 9 (34:54):
So today everything that we have on Stars is exclusive
to Stars for a period of time. It's a window
that when you like Lin's Outlander from Sony, you get
an exclusive window where they can't sell it to somebody
else domestically against you because we're only us in Canada,
but your license, you're renting that content for a period
of time. When you have ownership economics, not only can
you control costs better because you're actually in their daily
(35:17):
making it controlling the cost.
Speaker 10 (35:18):
But you create other revenue streams.
Speaker 9 (35:19):
So for today, I don't if Outlander gets to be
sold internationally, that money gets to Sony. If I own
then the show, I can actually put revenue streams on
international sales and second window domestically, or I can net
the cost down so it allows us as we turn
the slate over and get to half the slate in
twenty seven, being Stars owned, we can start to drive
margin for the business, which ultimately should be multiple expansion.
Speaker 2 (35:42):
You're coming to this business or you're at the helm
of this as an independent business at a time when
cord cutting is just absolutely rampant right now. I mean
when just a few years ago this was for you,
it was a one hundred percent PayTV supported business, That's
what Stars was was. Now seventy percent of the revenue
comes from You're still exposed to cord cutting headwinds for
about thirty percent of the company.
Speaker 5 (36:04):
How do you combat that?
Speaker 2 (36:05):
Like, how do you make up for the cord cutting
revenue that you will inevitably lose with streaming?
Speaker 10 (36:09):
So two things.
Speaker 9 (36:10):
One, I still think there's a lot of opportunity for
us on the linear side because remember we're not a
fully distributed ad supported network, and so there's still opportunity
for us trying to grow the business. And as you
see with DirecTV, with skinning your bundles and Charter now
leaning back into video, I still think there's an opportunity
for us to play in the bundle world on the
linear side to drive growth for the business. There eighty
(36:31):
percent of all of our customers, whether they're on digital,
linear or a la carte or revshare, which means two things. One,
we're making money for our partners, but two people chose
Stars because they wanted the content, and so the content
has to work. And so at the end of the day,
as long as the content continues to outperform and be
some of the biggest shows on television, will grow the
business on both sides.
Speaker 2 (36:50):
Emily mentioned that you don't have advertising. There were years
when I was covering Netflix when they were saying, we're
never going to do advertising. We're never going to do advertising.
And look what they're doing now, they're doing advertise. Are
you ever going to do advertising?
Speaker 9 (37:02):
I don't think we're going to ever do advertising with
the Stars content. It's you know, we don't have a
lot of content. We have about ten originals so called
one hundred hours of content. It's called six hundred minutes
of advertising. It's very our rated, it's very adult. So
it cuts a lot of the advertisers that won't advertise
on our service. But I do think, you know, we
build our own app, we have our own data stacked,
is very scalable, and that gives us the opportunity to
(37:24):
actually help other linear networks that are marooned on the
linear side, that don't have a digital future, and actually
use some commercial deals where we could actually take the
linear feed, turn it into digital, launch it next to
the Stars app, and have an advertising supported business next
to our subscription business and take some of the economics
on behalf of our partners.
Speaker 2 (37:42):
So essentially, what you're saying is you could have maybe
a less expensive consumer version that is ad supported in
certain areas.
Speaker 5 (37:49):
When when would that be?
Speaker 10 (37:50):
You know, right now we're like we said, we're three
or four weeks. It's about separation.
Speaker 9 (37:54):
Right now, we're really focused on set of making sure
we're setting up the business, talking to investors, making sure
everybody understands the growth story.
Speaker 10 (38:00):
And I think eventually the two to dot zero will
come pretty soon.
Speaker 7 (38:03):
Cool.
Speaker 4 (38:04):
Do you feel in this environment that you have pricing
power because this is a space where consumers there's so
many options for what you get for your streaming.
Speaker 3 (38:13):
I know some people it's like.
Speaker 4 (38:14):
I already have Max, I already have Netflix, and I
have Hulu. There's just a lot of choice and a
lot of times people judge on price.
Speaker 9 (38:21):
Yeah, so you know, as a complimentary service, we've always
wanted to be prices significantly below the broad bay streamer.
So you know, Netflix without ads is twenty four dollars.
I think Hulus around eighteen or nineteen, we're at eleven.
So as long as they keep continuing to raise that price,
it gives us the ability to raise underneath it. Because
in the consumer's mind, anything that is you know that much,
it has that much gap. People see that as a
(38:43):
complementary decision versus the competitive decision. So we always want
to be significantly below the broad based streamer. So I
do think we'll have some pricing power. We've done two
rat increases over the last two years. I think that's
something will take a pause on for a while and
get back to just pure subscriber growth for a way
to grow, but we reserve the right to do some increases.
Speaker 10 (39:00):
In the future.
Speaker 2 (39:02):
Emily raises the question about pricing power when it comes
to consumers. What about the pricing power that you have
to compete with the huge companies such as Amazon, Netflix,
Max and the likes. When you're out there bidding up content,
how do you compete?
Speaker 10 (39:17):
So it's interesting.
Speaker 9 (39:18):
I think we have a specific mission, you know, we
really focus on women and underrepresented audiences, and we were
just out in a very competitive bid for a book
called All Fours, which has really taken America by storm,
and the forty something women in America.
Speaker 10 (39:30):
And when we went out and met with Mirandos.
Speaker 9 (39:32):
July, who's the author, because we are so are rated,
we are adult, we allow the author and the writers
to go where they naturally, authentically would go, versus pulling
stuff back for her the only destination to really put
her book to bring it to life on TV as
authentically as she wanted to do with Stars. And so
we are able to win that competitive bid because of
the mission that we have and I think you see
(39:53):
that not only in content, but when we hire folks.
People come to Stars because they understand that we have
a point of view and we have a mission, and
they want to be a part of that. And so
it's been very helpful having a specific lane and really
kind of leaning into that in a way that is
very deep and authentic.
Speaker 5 (40:07):
Jeffrey Hirsh, thanks for joining us, for having me.
Speaker 2 (40:09):
Yeah, goodness to you, everybody, President and CEO of Stars
joining us here in the Bloomberg BusinessWeek Studio.
Speaker 6 (40:14):
This is the Bloomberg Business Week Daily podcast, available on Apple, Spotify,
and anywhere else you get your podcasts. Listen live weekday
afternoons from two to five pm Eastern on bloomberg dot com,
the iHeartRadio app tune In, and the Bloomberg Business app.
You can also watch us live every weekday on YouTube
(40:35):
and always on the Bloomberg terminal
Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg Business
Weekdaily 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 news
(00:23):
as it happens. The Bloomberg Business Week Daily Podcast with
Carol Masser and Tim Steneveek on Bloomberg Radio.
Speaker 2 (00:32):
Our focus shifts now to the latest development when it
comes to Russia's invasion of Ukraine. The two countries wrapped
up a second round of talks, these happening in Istanbul,
but they failed to bring the two sides closer to
ending the war. They laid the groundwork for a new
exchange of prisoners. However, the Russian delegation handed over peace
proposals that include Kiev surrendering control of territory it still
holds in four partially occupied regions. This according to a
(00:55):
Ukrainian official. We did also hear from the Ukrainian Defense
Minister who said that Key demanded an unconditional truce for more.
We bring in doctor angelas Stent. She's senior fellow at
the Brookings Institution. She's also former National Intelligence Officer for
Russia and Your Asia at the National Intelligence Council. She
also served in the Office of Policy and Planning at
the US Department of State, and she's author of the
(01:16):
book that came out in twenty nineteen. It's called Putin's World,
Russia against the West and with the Rush. She joins
us from Washington, DC, Doctor Stent, good to see you.
It's been about a month since we last connected. I
do want to start with peace negotiations, but before that
kind of get to the context of what happened over
the weekend, the drone attack, so called Operations Spiderweb. Russia
(01:37):
and Ukraine are each saying different things about what exactly happened,
the damage, what was destroyed. Zelenski did say that about
a third of the strategic cruise missile carriers at airfields
were hit. How does this complicate negotiations, Well.
Speaker 3 (01:51):
I think you may remember that President Trump told the
President Zelensky at that unfortunate meeting in the Oval Office
that Ukraine quote unquote had no cards. I think this
was really an amazing operation. It had been planned for
one and a half years, we heard from the President Zelenski,
and it shows that Ukraine does have some cards. It
(02:12):
was capable of destroying these Russian strategic bombers that were
being used to hail bombs on civilian and targets and
infrastructure in Ukraine. And these, by the way, are old
Soviet era planes and they can't be replaced, so it'll
take Russia some time to rebuild to acquire some more
(02:33):
of these strategic bombers. It doesn't necessarily change the course
of the whole war, but it certainly shows that Ukraine
can fight back, that it's very good at this kind
of advanced warfare, using the drones and trucks if you're
like the Trojan trucks as they've been called, and really
apparently taking the Russians and everyone else by surprise. But
(02:56):
as you said, you know today's talks, they exchange agreed
to exchange more prisoners, which is very important. But there's
been absolutely no more progress made on approaching a ceasefire,
any kind of an end to the fighting than that was,
you know, when President Trump first took office.
Speaker 4 (03:16):
I want to get to that ceasefire, but just briefly,
were there are there. I'm wondering if there's geopolitical implications
of this attack beyond just how it affects Russia's war
with Ukraine, but how this could potentially affect Russia's relationships
with other countries.
Speaker 3 (03:34):
Well, it has major implications for warfare in general. Some
people are now saying that what Ukrainian really did was
to help NATO, because it makes it less likely at
least that in the immediate future, Russia would be able
to attack a DATO member. But it has implications even
for the United States. I mean, if you can now
destroy planes and other military hardware through the use of
(03:58):
drones like that, people are going to have to rethink
where they position things and how they conduct warfare. So
it potentially has major implications really for the way that
countries fight wars in the twenty first century.
Speaker 2 (04:12):
But this was a difficult thing for Ukraine to pull off.
I mean, some of the reporting around it indicates that
this was over a year in planning processes. They were
able to get drones into the country and then have
them take off simultaneously to attack different strategic assets of
the country. This is not an easy thing to do,
doctor sten.
Speaker 3 (04:32):
No, no, no, I mean it took a lot of
meticulous planning. Obviously, the Ukrainians had people inside Russia who
helped with this. President Zelenski last night and his address
said that some of these people were located very close
to a major headquarters for the Russian domestic intelligence services.
But it just shows you that this is a war
(04:52):
that partly resembles World War One and trench warfare, but
it is also a very high tech, twenty first century,
cutting edge type of warfare, of which we will see
more in the future.
Speaker 4 (05:04):
So where does this leave us now? Because the two
nations spoke today, but it doesn't seem like they're any
closer to making progress towards a ceasefire.
Speaker 3 (05:14):
No they are not. I mean Vadimia Putin is not
interested in a ceasefire at the moment. Russia has been
taking incrementally more territory in the past few months. It's
also sustained very high numbers of casualties as it takes
this territory. But he is, I think determined to continue
with this war. Most people believe it's going to go
(05:35):
on at least for this year, if not into next year.
But the negotiations will continue because Putin has understood that
if Russia doesn't take part in negotiations, than the prospects
for improving US Russian relations, which President Trumpet promised him
go down significantly. So I think we'll see. I know
(05:55):
they've already said they're going to have another negotiation, not
in a not too distant future. They may continue to
talk about these humanitarian issues again, very important issues, the
exchange of prisoners, particularly disabled ones. But that doesn't mean
that the fighting is going to stop anytime soon.
Speaker 2 (06:13):
Doctor Stam, We're getting a question from some folks who
are watching listening right now, want your view on over
three years in on your four of this war, when
many thought it would last a couple of weeks, what
you view as the original cause of this war.
Speaker 3 (06:31):
The original cause of this war is that Vladimir Putin
has never accepted the collapse of the Soviet Union. He
has never accepted that Ukrainians are a separate people, that
they should have a separate country. He believes that they
should be part of Russia. He wrote that explicitly in
a July twenty twenty one five thousand word essay that
(06:53):
he penned about Ukraine. So the root cause of the
war is that the Russia believes and the Putin believes,
that it should control Ukraine and that Ukraine shouldn't have
any choice in moving westward, in joining Western institutions. So
that's the original cause of the war. A lot of
the discussion we hear about NATO enlargement causing it, that's
(07:15):
not the cause of the war. I mean, the reason
that Putin didn't like NATO, didn't want NATO to enlarge
is because if Ukraine had been a member of NATO
and Russia had attacked Ukraine, then it would have been
involved potentially in a large scale, possibly nuclear war with NATO.
So that's not NATO is not the root cause of
the war. It's Putin's desire and the desire of many
(07:37):
people around him to reconquer Ukraine.
Speaker 2 (07:40):
Doctor Sten, you know, we started the interview by you
saying that this drone strike over the weekend was proof
that Ukraine does indeed have the cards. Do they have
the cards to force Russia to negotiate in a way
that does not include actually giving up part of its
Ukraine's owned territory.
Speaker 3 (08:01):
So I would say they do not have those cards.
I think what they had the cards is to make
Russia understand that it's going to be more difficult as
the fight goes on. But I think the only way
to get the Russians to negotiate more seriously would be
two things. One, there is a fairly robust sanctions bill
(08:22):
that eighty one senators bipartisan in the Senate support, and
that Senators Graham and Bloomothal who were just in Kiev,
said that they would possibly pass this week. Hasn't happened yet,
we'll see, but they would be Those would be very
punishing sanctions on Russia. And it would be for the
Trump administration to resume supplying Ukraine with the weapons and
(08:45):
the financial assistance it needs to continue fighting Russia in
such a way that Putin might have to understand that
his maximum demands cannot be met and that he would
be willing to make some compromises in the demands that
the Russians are making.
Speaker 4 (09:00):
Just thirty seconds, but what's your current thinking on how
the war ends.
Speaker 3 (09:07):
Eventually, it will end in a negotiation, and there will
be a negotiation clearly where both sides will have to
compromise and both sides will have to move back from
their maximum demands. But I think neither side is at
the situation yet where they're willing to make those compromises.
Speaker 2 (09:26):
Doctor stan always appreciate you taking the time in joining
us here on a Bloomberg Business Weekdaily. Doctor Angela Stent,
Senior Fellow at the Brookings Institution, also the author of
the twenty nineteen book Putin's World, Russia.
Speaker 5 (09:38):
Against the West and with the Rest.
Speaker 6 (09:42):
You're listening to the Bloomberg Business Weekdaily Podcast. Catch us
live weekday afternoons from two to five pm Eastern. Listen
on Applecarplay and Android Auto with the Bloomberg Business app,
or watch us live on YouTube.
Speaker 2 (09:57):
President Donald Trump and Chinese President Shiji Ping are likely
to speak this week, the White House said, as the
world's two largest economies remain locked in trade at turmoil.
From where we bring in Jennifer Welch, Bloomberg Economics Chief
geoeconomics analyst.
Speaker 5 (10:10):
She joins us from Washington.
Speaker 2 (10:11):
Jennifer, I just want to start with the lay of
the land right now, because we're a little over a
month away from the end of this ninety day pause
that the President had laid out for every country that
it's negotiating with around the world. What is the average
tariff rate that we should keep in mind for goods
(10:32):
that are coming from China into the US right now.
Speaker 7 (10:36):
Well, the moment, the US effective terif rate on China
is closer to forty percent with the ninety day pause
on the higher reciprocal tariffs that came into play after
April second, after the tip for tap between Washington and Beijing.
But as the calls lead up has indicated, those wheels
are starting to fall off of that truth and we
(10:56):
might see tensions come to a boil well before that
ninety day period is to end. And I think the
threatening there is whether or not terror rates are going
to go back up again once that ninety day truth ends,
will there be an extension of it to allow for
a larger deal on trade. At the moment, the lines
are pointing pretty negative.
Speaker 2 (11:15):
You know, I was sitting in the studio with Tom
Kane doing Bloomberg surveillance a couple of weeks ago, and
in one single day we spoke to two analysts and
this was before this was before the ninety day truce.
We spoke to two analysts who told us that within
weeks we were going to see empty shelves here in
the US. It doesn't seem like that has materialized. Yes,
there's been a pause at this point. Are you based
(11:39):
on the research that you see the folks that you
talk to, are you seeing that still a concern given
that so much of what we buy in the US
comes from China.
Speaker 7 (11:48):
I think the ninety day pause allowed for companies that
had already been surging orders in advance of Liberation Day,
anticipating that terrorists were going to go up, allows them
to continue to make orders and through at least this
ninety day period. So it has bought some space, and
it has bought some time. They are facing higher prices,
(12:09):
but they are not facing the kinds of exorbitant prices
at one hundred and forty five percent teriffreight that we
were in mad to late April that would have made
many of those orders cost prohibitive. So I think it
has bought some space, and that's why we haven't seen
empty shells. We may still see price pikes though, because
that's thirty eight percent effective terriff. That's a high rate,
(12:31):
higher certainly than where we were before a second. But
I think it has avoided some of the shortages that
we're concerned about before this truce was reached in Geneva.
Speaker 4 (12:42):
I'm wondering if in your observations these you know maybe
some cracks in the trade truce beginning to show how
much of that is just a normal part of a
negotiation between two of the world's largest economies.
Speaker 7 (13:01):
I think given the experience of the first years China
trade war at this point in time, I would say
history suggest that this isn't surprising. In that trade war,
we saw multiple what I would call potential off MPs
where both parties had the opportunity to take a step
down from trade tension, that were either bypassed or only
lasted a temporary period of time. And we also saw
(13:22):
multiple rounds of escalation and tit for tat even when
it seemed likely that the two parties are maybe reaching
an agreement of stories. Ultimately, it took two years from
the initiation of tariffs to the conclusion of the deal
in the form of the Phase one deal and that
trade war for terrorists to come down, and even then
the Phase one deal didn't last very long before attension
(13:44):
starts to psych again. I think that helps explain the
backdround for today's trade talks, where there's deep levels of
distrust on both sides. Both sides, as you're applying, are
still looking to gain leverage even though they've agreed to
this truce, and that's probably part of the reason Beijing
has been slow to peel back these expert controls on
(14:04):
rare earth and other critical minerals of the US has
complained about. That's leverage that Beijing wants to continue to
retain in addition to the administrative challenges appealing back expert controls,
and on the US side, there are a number of
stats in the United States wants to take as part
of its competition with China outside the trade domain. And
from Washington's perspective, a trade truth doesn't mean that a
(14:26):
degree to pause all of that. But from Beijing's perspective,
I'm not going to agree to something in the trade
arena when you're hitting me on expert controls or on
student pieces. At the same time.
Speaker 4 (14:39):
House White House Press Secretary Caroline Lovett told reporters today
that I'm just going to quote it. I can confirm
that the two leaders will likely talk this week. Of course,
referring to Trump and Chinese President Jiji and paying this
would be the first time since they spoke, correct since
Trump took office. What would this mean.
Speaker 7 (15:03):
It would be the first time that we know of
they've spoken since he took office. President Trump has indicated
that they spoke at some other point in time, but
he hasn't provided specifics of it, and there was never
a readout from it, so we don't really know if
that call ever happened. I think it's highly unlikely that Beijing,
in this atmosphere would agree to a leader level call.
From Beijing's perspective, that's just incredibly risky. They don't want
(15:25):
to put President Being in a position where he could
be embarrassed or surprised in the way that some other
foreign leaders in meeting or talking with Trump happened. Their
preferred mo is for the leaders to meet and to
talk once they have something to announce, which usually requires
more progress thant working levels. Obviously, that flies in the
face of President Trump's preferred approach, where he likes to
(15:46):
work things out with his counterparts, and that often is
a faster path to resolving differences. And so if a
phone call happens this week, I think that is a
good thing for trade negotiations. That probably will help restart
momentum or at least clear the error in a way
in which these tensions are kind of boiling on the
back burner, But I think a call is unlikely, and
(16:07):
what that means is that tensions could continue to boil
because they're only being addressed really at lower levels, and
it would take a higher level engagement to put them
to rest or at least to put them into the
background to the point where they're not interfering with talks further.
So my anticipation is, despite what the White House Press
Secretary saide, I'd be very surprised if a phone called,
(16:28):
did it happen, And I'd be, as a result, very
surprised if we had a quick resolution to this current
period of tividual first of decision kind of containing the
left things boil and works them out.
Speaker 8 (16:40):
At the lower levels.
Speaker 2 (16:42):
Hey, Jennifer, we're going to try to fix your mic
a little bit. But Emily, one thing that I wanted
to talk about with Jennifer we've got a couple minutes left,
hoping we can fix the connection is who has leverage
in this negotiation. I mean, China has the rare earth
capacity for refining these rare earth elements. We've talked about
that with Jodo quite a bit, and Gracelyn Baskren over
at the Centerer for Strategic and international studies. They also
(17:05):
have the stuff that we want to buy as consumers,
but we have the consumers, Jennifer, I want to go
back to you and bring you back in here. Who
has the leverage when it comes to this negotiation.
Speaker 7 (17:16):
So in a sense, both sides have leverage. Obviously from
the US perspective, they are China's single largest market in
the world, and there are very limited options for Beijing
to shift those goods to other locations. At the same time,
manufacturing is increasingly a very important part of the Chinese economy.
It has been for decades, but especially in light of
(17:37):
their property bubble and some of the other challenges that
they have had with consumer sentiment. At this moment in time,
with their other economic weaknesses, manufacturing becomes an even more
important part of China's growth hopes. On the other hand,
for the US, the weakness is really in terms of
consumer dependence on Chinese goods that there aren't a lot
of alternative options or it is certainly not within US
(17:58):
consumers price preferences, and so both sides are going to
face incredible pain here if terrists resume. Higher levels for
China will be in the form of dropped exports, as
a result, the impact it's likely to have on factories,
and in course of that and impact on jobs. On
the US side, it's going to be in terms of
much higher prices for US consumers, to the point where
some goods might not be available and there aren't ready
(18:20):
alternatives for those goods. So both sides certainly have an
incentive to avoid a return to higher attentions here. But
at the same time, the depth and deep persistence of
these trade tensions against the backdrop of distress makes avoiding
that outcome a real challenge.
Speaker 2 (18:37):
Jennifer Welch, Bloomberg Economics Chief geoeconomics analyst, joining us this
afternoon from Washington.
Speaker 8 (18:45):
I'll bet you let me drive. Oh no, no, no, no,
this is not a toy, honey, please hovels. I want
to try it.
Speaker 1 (18:57):
It's a good question, good tribes, this is the drive
to the clothes.
Speaker 8 (19:04):
Punk's amusing well, Trier run to dawn.
Speaker 5 (19:07):
On Bloomberg Radio, and look at that.
Speaker 2 (19:10):
We're just about nineteen minutes from the close of equity trading,
as we just heard from Jordan Fitzgerald, about three tens
of one percent. But a strong day for tech right now.
The NASDAC Hire by six tens of one percent.
Speaker 5 (19:21):
The Dow is flat.
Speaker 2 (19:23):
Let's bring in Allan Zaffern. He's co founder and managing
partner at i EQ Capital about thirty six point eight
billion dollars in assets under management. He joins us once
again from Foster City, California. Good to have you back
on the program. We haven't spoken since Wow, just after
the tariff pause, so mid April twenty or no, yeah,
(19:45):
just after the tariff pause, I should say, Allen, it's
been quite a while since we've last spoken with you.
Good to have you with us this afternoon. That's exactly
where I want to start, because we're gonna get to
the FED in a minute. We're going to get to
sort of acid allocation. Now, maybe it's different than a
few months ago, but with regard to US trade negotiations,
(20:07):
in your view, how do you thinks stand right now?
Speaker 8 (20:11):
Well, first of all, Tim and anially, thanks for having
me on the show. Look, it's unclear. Right on the
one hand, our administration is talking to China and arguing
that they're going to delay the imposition of some of
these terrorists. But then the next thing you hear is
there's again conversations about maybe it's not going to be
so easy. So the last we heard is President Trump
(20:32):
will talk with the head of China later this week,
and the intention is to get the conversations back on track.
If you have the two largest economies in the globe
not acting well with one another, clearly that's a negative globally.
And so I think on a short term basis, where
this market is headed. Stock market is measuring the ability
(20:54):
of our administration to get its way to some degree
with some imposition to terifts while not being too problematic
or hurtful to other countries administrations, so that we can
work out face saving agreements on both sides of the
oceans or both sides of the country. So that's that's
the game. Are we going to find some middle ground
(21:16):
that enables the US to argue it's one in the
imposition of some tariffs for the benefit of protecting our
domestic industries, but to the same token in a way
such that other countries administrations can have face saving agreements
on behalf of their own cities. That's the game to
play right now in terms of tariffs.
Speaker 4 (21:34):
I saw a note this morning. I'm blanking on who
who wrote it, but the analyst was mentioning how it
seems like markets aren't reacting as strongly on Monday mornings
when we get news over the weekend about US China relations,
which we did get this weekend. It's not like we
(21:56):
saw a massive drop coming in Monday morning. What do
you make of that? Are are investors getting tired of
all of the headlines about tariffs and the trade war?
Are or are there actually real developments here that kind
of signal meaningful progress that could be good for the
(22:16):
equity market.
Speaker 8 (22:18):
I think it's a little of both. First of all,
I actually think there's a tremendous amount of cash still
on the sidelines, which just goes all the way back
to the stimulus that was created as an effort to
fight COVID.
Speaker 5 (22:30):
You you still think there's still cash on the sideway sidelines?
Speaker 9 (22:33):
Yeah?
Speaker 3 (22:33):
I do, I do.
Speaker 5 (22:36):
Who's got it?
Speaker 4 (22:36):
There's like a record in money market Yes, right, I.
Speaker 5 (22:39):
Know there's it did money market funds.
Speaker 2 (22:40):
But I'm thinking it more of like like who has
who still has you know, thousand dollars or whatever we
got from PPP or from those emergency COVID funds.
Speaker 8 (22:50):
Well, that's a whole nother conversation. We could get into.
But I think the most affluent portions of the US
citizenry have significant well which has only grown since COVID,
and they have ample amounts of cash to put to
work on dips. That's why I think he keeps seeing
the buy the dip mentality on top of that, As
to your question, Emily, on top of that, I think
(23:11):
what you're seeing is people are coming to a conclusion
that the current US administration is it only has a
tolerance for so much pain in the markets before it's
going to revert back to a more amenimal set of
tariffs that the global economies can tolerate. In a world
in which we have ten percent on average tariffs imposed
(23:33):
by the US not ideal, but it's a global economy
that can still grow, if even at a slightly lower
rate than it would have otherwise. That's dramatically different than
a world with thirty percent tariffs, which puts probably US
into a global recession.
Speaker 7 (23:47):
So I think.
Speaker 8 (23:47):
Investors have concluded the administration is teasing out the middle
ground and therefore is not reacting to the day to
day headlines as to fifty percent tariffs on steel or
whatever product or service of the week that they're going
to talk about. I think the investors are more discerning
and realizing it's probably not going to be as bad
as it was feared when we had our dramatic drop
(24:07):
in early April.
Speaker 2 (24:08):
Allan, when do we start to see those those actual
tariffs make their way into actual prices that we're paying
for stuff.
Speaker 8 (24:17):
You're actually starting to see it a bit because producers
are in service providers already anticipating some of that, but
we haven't seen the bulk of that yet.
Speaker 2 (24:26):
And in fact, is that just because we're making our
way through inventory, Like you know, we heard from the
retailers earlier this week or earlier that last month, I
should say in this most recent earnings round that they're
still working through inventory that they had pre tariffs.
Speaker 5 (24:40):
Is that why?
Speaker 8 (24:41):
That's a large part of it?
Speaker 5 (24:42):
Okay.
Speaker 8 (24:43):
The other issue concerned though, is imagine a world in
which everyone's holding off on offering the products out of
a concern if and when and how the terriffs show up.
So there's also a bit of front running right where
products are going out the door as quickly as possible
in avoidance of the tariff being imposed on that. So
when you may see some dramatic step step shifts up
(25:04):
in prices if in fact TIFFs become legislated into law.
So there it depends on the product and service from
the country.
Speaker 5 (25:13):
What do you think is most at risk?
Speaker 8 (25:17):
Well, I think most at risk are really where we're
trying to protect, are a creator of a fair playing field.
So it's anything from importation of energy services too oddly
enough things at risk like the notion that maybe foreigners
(25:38):
are going to get taxed on investments in the US.
That's an easy one to impose on foreigners. It doesn't
hurt us, so you're going to see the reverse, and
then we don't know how to predict if other countries
will impose those costs back on US investors to non
US investments. That might be the next step we haven't
seen yet.
Speaker 2 (25:53):
Hey, I want to shift cares a little bit before
we go. Just get your word on what you're seeing
with alternatives right now. Private credit and private equity. Venture
capital certainly is a relatively large portion of the way
you invest the money that you manage. What's the opportunity
there right now and how has it changed in the
recent months.
Speaker 8 (26:15):
As really it's to private credit, we have not seen
a lot so. Interestingly enough, despite concerns about economic slowdowns,
let alone recession fears, we're seeing little if any evidence
that there's any degradation or decline, and the ability of
private companies to pay their debts, meaning private credit, in
our mind, still is a highly attractive asset class, yielding
much higher annual income streams than what you can buy
(26:38):
from the public bond markets. In the privates arena secondary investments,
when you're the buyer of someone else's illiquid investment, we
think you're going to see more and more of it
for two reasons. Most recently, there's news that a lot
of the universities are finding themselves having too much ill liquidity,
finding a need to raise cash for potential will increase
(27:00):
in tax rates on their returns on their investments, and
so they're coming to the markets with portfolios of investments
that secondary en buyers, the second investors can buy at
a discount.
Speaker 5 (27:12):
Okay, that's we're seeing a lot more of that.
Speaker 8 (27:15):
We're probably going to see it.
Speaker 2 (27:16):
Alan zaffrin Ieq Capital, thanks for joining us.
Speaker 1 (27:20):
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 2 (27:35):
Shares of Stars sored twenty seven percent on a Friday,
this after the company set it out at five hundred
and thirty thousand streaming subscribers in the US during the
fiscal fourth quarter. The company is now a standalone entity.
It separated from Lionsgate Studios and began trading independently last month.
It's got a market cap now just north of three
hundred million dollars. Today, it gives back some of those
(27:57):
gains from Friday chars following as much as fourteen percent,
down nine point four percent as we speak. We're joined
here in the Bloomberg Business Week studio by Jeffrey Here.
She's president and CEO of Stars. Jeffrey, good to see you,
Welcome investors, welcomed the streaming additions in the fourth quarter.
You increase total subscribers in the US by close to
two percent. You attributed that to the premiere of the
(28:17):
fourth season of Raising Canaan. What's in the product pipeline
right now, the content pipeline that will continue with the growth.
Speaker 9 (28:24):
Well, thanks for having me. It's good to be here
this afternoon. We have a great slate in twenty five.
You know, we're coming off a strike effected year where
we only had three big tempole shows and so that
created a little kind of gaps in our content. And
so what you see as we roll into twenty five
is we've got five big shows coming. We have BMF
which premieeres this weekend, which is a fifty cent show,
(28:45):
one of our biggest shows. So we're excited about that
premiere this weekend. We rolled that into Outlander prequel called
Bood of My Blood, which I think the fans will
really like.
Speaker 2 (28:52):
This is why Carol is going to be so mad
she's not here today. She's like, the biggest Outlander fan
are out Yeah, that's okay, this tell her.
Speaker 10 (28:58):
We'll tell her the prequels.
Speaker 9 (29:00):
You know, twenty years prior to the first season of Outlander.
It's back in Scotland. It's Clan Lauren. It's two romance stories,
so it's how each of the leads of Outlander's parents
met and fell in love. So one of the stories
of Romeo and Juliette story rival Clans Forbidden Love. The
other is a World War one you know, with a
gentleman on the front and a woman reading the letters,
and it's a phenomenal tale.
Speaker 10 (29:21):
There aren't any.
Speaker 9 (29:22):
Books, and so the fan base it's all new to them,
and so I think it's gonna be a really great show.
We come back with a fan favorite from twelve years
of called and Spartacus, which is going to be you know,
I was talking to a producer on the way down here.
He's because it's coming back. I'm like this fall and
so that's gonna be and the Stephen D. Knight's doing that,
it's gonna be as good as, if not better than
the original. We come back with Force, which is one
(29:42):
of our power spin offs, and then back into Canaan,
so real strong ear of content. We wrap that with
you know, big movies from Lionsgate like Ballerina, and then
Universal has a couple of movies coming off Penheimer. So
it's really great portfolio of content coming this.
Speaker 10 (29:56):
You were pretty excited.
Speaker 4 (29:57):
Talk about your target demographic because it's it's not every
single person that wants to watch TV, right.
Speaker 9 (30:04):
Yeah, Look, we're really trying to be complementary to all
the broad Bay streamers. We've in twenty sixteen when we
launched our app. What we saw from the data, and
it was the first time we really got data Honor subscribers,
it was that women was driving our business and so
we leaned in significantly into that. And so our content
is really only focused on women and underrepresented audiences, and
not only on screen, but in the director's chair, in
(30:24):
the writer's room, all the way through the office. Seventy
percent of my direct reports of women in eighty percent
of women of color. And so it's really a network
for buying about women and underrepresented audience is run by
women and underrepresented audiences.
Speaker 2 (30:35):
So you see yourself trying to broaden out the content
to bring in more people, or I make it a
bigger tent, or is this the niche you want to
focus on.
Speaker 5 (30:43):
Look, it's not.
Speaker 2 (30:44):
I'm not saying it's a niche. It's a huge target market.
But like Emily said, the other streamers want to have everything.
Speaker 9 (30:50):
Yeah, Look, they want to be all things that everybody
and they're competing with themselves, and we really are focused on,
like I said, women are underrepresented audience. We think that
TAM and the US is about eighty million households. We're
sitting at twenty million households today, So we think there's
a lot of room to go. And if women in
is a niche, which are forty nine point six percent
of the planet small, then I'm happy to have everybody
else focus everywhere else and let us do what we're doing.
So we'll continue to be complementary. We'll continue to really
(31:13):
be the destination of content, our rated adult scripted content
for women, and so we feel good about that.
Speaker 4 (31:20):
So you don't have ads right now on the streaming
correct platform, how do you grow revenue then if you
don't have ads, So.
Speaker 9 (31:28):
I think there's really three ways we can go revenue,
and we'll think we'll grow revenue one to three percent
over in you know, in the next short term period.
Want to subscriber growth. Like I said, we've got a
lot of tam still out there today. You saw that
in the first quarter we were the base one point
eight percent in the US, and so we think there's
a lot of opportunity and as these broadbay streamers continue
to compete, it'll look a lot like the old world
(31:48):
where you have stars sold as an add on or
buy this service and get stars included. So we think
there's a real opportunity for us to kind of replicate
that unique position we had in the traditional world on
in the new digital world we are today.
Speaker 5 (32:00):
So you're saying, look out for bundles.
Speaker 10 (32:02):
Lookout for bunchs.
Speaker 8 (32:02):
Do you have any Now?
Speaker 9 (32:03):
We are the most bundled service in the space today.
We have five bundles. We are about to launch another
one this week. In the first quarter, we had a
be Et Stars bundle on Amazon. We had an HBO
Max Stars Bundle on Amazon. We've actually bundled BritBox into
The Stars app was the first one we've bundled into ourselves.
So where we are, we are set up to bundle
with almost everyone.
Speaker 5 (32:23):
What's a bundle you're working on? I can't tell you
that today, but in your but describe it.
Speaker 2 (32:28):
For us, Like in an ideal world, these are these
you know, we went through a few years, about a
decade ago, where the major telecom companies were bundling this stuff.
If you subscribe to AT and tier Verizon, you get
you know, X or Y for free. That was that
was unique in the context of Okay, you're paying for
a cell phone plan, you're getting content for free.
Speaker 5 (32:45):
What world do you want to see?
Speaker 9 (32:47):
I think the nice thing about bundles I think everybody
looks at it and says, well, for the consumer, they
get a discount and the companies get stickier. What really
makes the bundle unique and special for the companies is
you're lining at your content slates together. So for example,
last quarter with HBO Max, the White Lotus launched in February.
They didn't have a big show launch in March, but
we had raising Canaan launch in March.
Speaker 10 (33:06):
So when you put those.
Speaker 9 (33:06):
Together, you have two big premiers working with each other
to continue to drive subscribeer acquisition. So when we look
at the landscape that's out there today, we look at
content that's either complementary or you know, folks that are
servicing the other side of the household that we're not.
And if you can put our service with their service
and complete the loop for the household, it's a really
compelling bundle for consumers.
Speaker 4 (33:27):
Tim mentioned this is your relatively new as a public company.
It's been not even a month right from separating from
Lionsgate Studios. Talk a little bit more about just how
that split is going to help Stars now.
Speaker 9 (33:42):
You know, I think the board three years ago looked
at the combined company and said investors like a simplicity
and story, and the fact that you had a studio
and a network together wasn't then simple, and it was
hard to figure out where to put your investment dollars.
I think investors like to invest in content or distribution
and not kind.
Speaker 10 (33:57):
Of a hybrid.
Speaker 9 (33:57):
And if they are going to put it in a hybrid,
such a small cap company, the point you put money
into Comcast or NBC Universal as a higher Disney as
a hybrid there and so rightly so made the decision
to put the two companies to put value back on
each of the companies. I think you've seen that in
the stock performance on both Line and Stars over the last.
Speaker 10 (34:16):
Couple of weeks.
Speaker 9 (34:17):
But ultimately allows us to focus on what we do best,
which is really put great content on the air, own
our own content, and drive our subscriber base to ultimately
drive profit and return money. We've got a fifteen percent
margin today. When we get into a steady state in
twenty six, we'll convert seventy percent of that to un
lever free cash flow. So profitable business generating a lot
of cash for investors, and we think it's a very
(34:38):
investable business.
Speaker 5 (34:40):
Go ahead.
Speaker 4 (34:41):
I'm curious when you say own your own content, what
does it actually mean in practice that it's only on
your platform and you would never sell it to others?
Do you own the production supply chain as well?
Speaker 7 (34:53):
How does that work?
Speaker 9 (34:54):
So today everything that we have on Stars is exclusive
to Stars for a period of time. It's a window
that when you like Lin's Outlander from Sony, you get
an exclusive window where they can't sell it to somebody
else domestically against you because we're only us in Canada,
but your license, you're renting that content for a period
of time. When you have ownership economics, not only can
you control costs better because you're actually in their daily
(35:17):
making it controlling the cost.
Speaker 10 (35:18):
But you create other revenue streams.
Speaker 9 (35:19):
So for today, I don't if Outlander gets to be
sold internationally, that money gets to Sony. If I own
then the show, I can actually put revenue streams on
international sales and second window domestically, or I can net
the cost down so it allows us as we turn
the slate over and get to half the slate in
twenty seven, being Stars owned, we can start to drive
margin for the business, which ultimately should be multiple expansion.
Speaker 2 (35:42):
You're coming to this business or you're at the helm
of this as an independent business at a time when
cord cutting is just absolutely rampant right now. I mean
when just a few years ago this was for you,
it was a one hundred percent PayTV supported business, That's
what Stars was was. Now seventy percent of the revenue
comes from You're still exposed to cord cutting headwinds for
about thirty percent of the company.
Speaker 5 (36:04):
How do you combat that?
Speaker 2 (36:05):
Like, how do you make up for the cord cutting
revenue that you will inevitably lose with streaming?
Speaker 10 (36:09):
So two things.
Speaker 9 (36:10):
One, I still think there's a lot of opportunity for
us on the linear side because remember we're not a
fully distributed ad supported network, and so there's still opportunity
for us trying to grow the business. And as you
see with DirecTV, with skinning your bundles and Charter now
leaning back into video, I still think there's an opportunity
for us to play in the bundle world on the
linear side to drive growth for the business. There eighty
(36:31):
percent of all of our customers, whether they're on digital,
linear or a la carte or revshare, which means two things. One,
we're making money for our partners, but two people chose
Stars because they wanted the content, and so the content
has to work. And so at the end of the day,
as long as the content continues to outperform and be
some of the biggest shows on television, will grow the
business on both sides.
Speaker 2 (36:50):
Emily mentioned that you don't have advertising. There were years
when I was covering Netflix when they were saying, we're
never going to do advertising. We're never going to do advertising.
And look what they're doing now, they're doing advertise. Are
you ever going to do advertising?
Speaker 9 (37:02):
I don't think we're going to ever do advertising with
the Stars content. It's you know, we don't have a
lot of content. We have about ten originals so called
one hundred hours of content. It's called six hundred minutes
of advertising. It's very our rated, it's very adult. So
it cuts a lot of the advertisers that won't advertise
on our service. But I do think, you know, we
build our own app, we have our own data stacked,
is very scalable, and that gives us the opportunity to
(37:24):
actually help other linear networks that are marooned on the
linear side, that don't have a digital future, and actually
use some commercial deals where we could actually take the
linear feed, turn it into digital, launch it next to
the Stars app, and have an advertising supported business next
to our subscription business and take some of the economics
on behalf of our partners.
Speaker 2 (37:42):
So essentially, what you're saying is you could have maybe
a less expensive consumer version that is ad supported in
certain areas.
Speaker 5 (37:49):
When when would that be?
Speaker 10 (37:50):
You know, right now we're like we said, we're three
or four weeks. It's about separation.
Speaker 9 (37:54):
Right now, we're really focused on set of making sure
we're setting up the business, talking to investors, making sure
everybody understands the growth story.
Speaker 10 (38:00):
And I think eventually the two to dot zero will
come pretty soon.
Speaker 7 (38:03):
Cool.
Speaker 4 (38:04):
Do you feel in this environment that you have pricing
power because this is a space where consumers there's so
many options for what you get for your streaming.
Speaker 3 (38:13):
I know some people it's like.
Speaker 4 (38:14):
I already have Max, I already have Netflix, and I
have Hulu. There's just a lot of choice and a
lot of times people judge on price.
Speaker 9 (38:21):
Yeah, so you know, as a complimentary service, we've always
wanted to be prices significantly below the broad bay streamer.
So you know, Netflix without ads is twenty four dollars.
I think Hulus around eighteen or nineteen, we're at eleven.
So as long as they keep continuing to raise that price,
it gives us the ability to raise underneath it. Because
in the consumer's mind, anything that is you know that much,
it has that much gap. People see that as a
(38:43):
complementary decision versus the competitive decision. So we always want
to be significantly below the broad based streamer. So I
do think we'll have some pricing power. We've done two
rat increases over the last two years. I think that's
something will take a pause on for a while and
get back to just pure subscriber growth for a way
to grow, but we reserve the right to do some increases.
Speaker 10 (39:00):
In the future.
Speaker 2 (39:02):
Emily raises the question about pricing power when it comes
to consumers. What about the pricing power that you have
to compete with the huge companies such as Amazon, Netflix,
Max and the likes. When you're out there bidding up content,
how do you compete?
Speaker 10 (39:17):
So it's interesting.
Speaker 9 (39:18):
I think we have a specific mission, you know, we
really focus on women and underrepresented audiences, and we were
just out in a very competitive bid for a book
called All Fours, which has really taken America by storm,
and the forty something women in America.
Speaker 10 (39:30):
And when we went out and met with Mirandos.
Speaker 9 (39:32):
July, who's the author, because we are so are rated,
we are adult, we allow the author and the writers
to go where they naturally, authentically would go, versus pulling
stuff back for her the only destination to really put
her book to bring it to life on TV as
authentically as she wanted to do with Stars. And so
we are able to win that competitive bid because of
the mission that we have and I think you see
(39:53):
that not only in content, but when we hire folks.
People come to Stars because they understand that we have
a point of view and we have a mission, and
they want to be a part of that. And so
it's been very helpful having a specific lane and really
kind of leaning into that in a way that is
very deep and authentic.
Speaker 5 (40:07):
Jeffrey Hirsh, thanks for joining us, for having me.
Speaker 2 (40:09):
Yeah, goodness to you, everybody, President and CEO of Stars
joining us here in the Bloomberg BusinessWeek Studio.
Speaker 6 (40:14):
This is the Bloomberg Business Week Daily podcast, available on Apple, Spotify,
and anywhere else you get your podcasts. Listen live weekday
afternoons from two to five pm Eastern on bloomberg dot com,
the iHeartRadio app tune In, and the Bloomberg Business app.
You can also watch us live every weekday on YouTube
(40:35):
and always on the Bloomberg terminal
Hosts And Creators
Tim Stenovec
Carol Massar
Popular Podcasts
True Crime Tonight
If you eat, sleep, and breathe true crime, TRUE CRIME TONIGHT is serving up your nightly fix. Five nights a week, KT STUDIOS & iHEART RADIO invite listeners to pull up a seat for an unfiltered look at the biggest cases making headlines, celebrity scandals, and the trials everyone is watching. With a mix of expert analysis, hot takes, and listener call-ins, TRUE CRIME TONIGHT goes beyond the headlines to uncover the twists, turns, and unanswered questions that keep us all obsessed—because, at TRUE CRIME TONIGHT, there’s a seat for everyone. Whether breaking down crime scene forensics, scrutinizing serial killers, or debating the most binge-worthy true crime docs, True Crime Tonight is the fresh, fast-paced, and slightly addictive home for true crime lovers.
Dateline NBC
Current and classic episodes, featuring compelling true-crime mysteries, powerful documentaries and in-depth investigations. Follow now to get the latest episodes of Dateline NBC completely free, or subscribe to Dateline Premium for ad-free listening and exclusive bonus content: DatelinePremium.com
24/7 News: The Latest
The latest news in 4 minutes updated every hour, every day.