March 1, 2024 • 39 mins
Watch Alix and Paul LIVE every day on YouTube: http://bit.ly/3vTiACF.
On this week’s podcast, Mary Ross Gilbert, Senior Equity Analyst, who covers Retail for Bloomberg Intelligence, discusses Macy’s earnings. David Welch, Bloomberg Detroit Bureau Chief, discusses the state of the electric vehicle industry. Jennifer Rie, Bloomberg Intelligence Senior Litigation Analyst, talks about why it’s likely Capital One’s bid for Discover will face a rigorous antitrust review by the DOJ. Poonam Goyal, Senior U.S. E-Commerce and Retail Analyst at Bloomberg Intelligence, discusses how Amazon is still working on ongoing initiatives to boost market share and profits. Mark Hoplamazian, President and Chief Executive Officer of Hyatt Hotels, talks about the state of the hotel industry. Geetha Ranganathan, Bloomberg Intelligence Analyst on US Media, discusses Paramount earnings.
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Speaker 1 (00:00):
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These are two.
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On Today's Bloomberg Intelligence Show, we dig inside the big
business stories impacting Wall Street and the global markets.
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Each and every week we're going to provide you in
that research and data on some of the two thousand
companies and one hundred and thirty industries our analysts cover worldwide.
Speaker 3 (00:55):
Today will look at why Capital Ones bid for Discover
will likely face a rigorous anti trust review by the
US Justice Department.
Speaker 4 (01:01):
Plus we'll discuss how shrinking advertising on traditional TV channels
is impacting sales at Paramount Global.
Speaker 3 (01:06):
But first we dive into the retail space. This week,
Macy's said it plans to close almost a third of
its US locations. And this comes despite Macy's reporting fourth
quarter revenue and earnings that exceeded low analyst expectations.
Speaker 4 (01:18):
All right, for more, we're joined now by Mary ross Gilbert,
senior equity analyst who covers retail for Bloomberg Intelligence. And
we first asked Mary about her take on Macy's most
recent quarter.
Speaker 7 (01:27):
The focus really wasn't on how they did in the
fourth quarter. It's really their new plan that was the
big focus. The new plan and their guidance for the year.
So their guidance came in softer than consensus, and I
guess it's just no surprise just thinking about how department
stores are under pressure, and we've seen it across the
board with you know, again, Dillard's showed some weakness. We're
(01:51):
seeing it with Macy's in their outlook. But Macy's has
a plan to address the department store model in shuddering
one hundred and fifty underperforming stores, and then they're going
to invest in the three hundred and fifty remaining and
those are going to be primarily an A and A
plus plus plus malls and what they're going to do
(02:11):
is increase the service levels. Beauty has been something they've
been investing in almost every year and expanding the floor
space dedicated to beauty. You'll see that they have expanded
the space and who knows, they could expand it again
this year. We've been seeing it for the last five
years that that space has been expanded. So there's a
lot of details in what Macy's is doing. It's something
(02:33):
they need to do. They really need to up their game,
and that's exactly how they started their presentation, and that
includes really making the assortments a lot better than they
are because if you look at the inline store performance
at malls, the ones that are executing, such as the Abercrombies,
the Urban Outfitters, they're outperforming.
Speaker 3 (02:53):
So Mary I was kind of surprised to see this
number of stores one p fifty because I kind of
thought that this decade plus long shrinkage of department store
footprints across the country by a lot of different companies,
that was more or less kind of we're done that,
or we're at near the finish line. So to see
another big round of closings that kind of surprised me.
(03:14):
Did it surprise the market at all, or is this
something that analyst and investors have been asking for.
Speaker 7 (03:18):
What Macie's had said is, we don't need to close
stores except for the usual stores that you close every year,
which is maybe less than ten per year. But the
reason that they've decided to close them is because these
stores were underperforming, but they were still profitable on a
four wall basis, so historically that their thought was, well,
if it's still profitable and we're still generating cash, we'll
(03:41):
keep it open.
Speaker 2 (03:42):
And this time what they.
Speaker 7 (03:43):
Did is they took a more holistic approach and said, Okay,
even though it's four wall profitable, we could do a
lot better with the funds that we could generate closing
these stores, selling the real estate and redeploying it back
into the existing store base. And for all the initiatives
that they have going forward, it makes a lot of
sense because we really need to rethink the department store model.
(04:06):
It has to evolve.
Speaker 6 (04:08):
Mary.
Speaker 4 (04:08):
Does this do enough to get activist investors off Macy's back?
Speaker 7 (04:14):
That is a good question.
Speaker 1 (04:16):
I think it may.
Speaker 7 (04:17):
I think board has made it very clear that they
are supporting this plan. Could they enhance the board with
additional directors. That could be a possibility, so learn more
about that in the coming months. But I think that
this plan is it's been decided that this is the
move forward. And when you think about what's happening with
(04:37):
the activists, it usually involves the real estate, and what
we have seen in past transactions is the real estate
is usually milked and it can be to the detriment
of the retail operations.
Speaker 3 (04:50):
Talk to us about that, like a relative performance between
like a Macy's store and a comparable Bloomingdale store. Is
the Bloomingdale store maturely more profitable?
Speaker 7 (04:58):
I guess yes, they don't disclose the profitability on Bloomingdale's
versus Macy's, but Bloomingdale's outperforms, as does bloom Mercury. This year,
their comp sales were down one point six percent because
the aspirational luxury consumer is spending less and we've been,
you know, hearing about the overall luxury business being impacted,
especially after we came off the post pandemic spending from
(05:24):
stimulus checks that really had that aspirational customer going after luxury.
So now that that's kind of falling back, we're seeing
more of a normalization. This is something Nordstrom Asco slided,
so their sales were just down one point six percent,
but they think that could probably stabilize and go higher
next year. And of course, you know what the beauty
(05:45):
side on luxury, you know that's posting positive comp sales.
Speaker 4 (05:48):
Yeah, Mary, I was going to ask about then the inventory.
Macy's notoriously last year struggled with inventory. The last quarter
we saw they really got it together. What did we
learn this quarter about their inventory?
Speaker 7 (05:58):
Yeah, so even though inventory it was up two percent
year every year, it's still down over twenty percent versus
twenty nineteen. So they've really done a great job reducing
their inventory, and that means that they're having less clearance activity.
This is something that's going to affect their first quarter
because last year they had more clearance and this year less.
(06:20):
So they're doing a great job overall. They've just been
improving their execution with data technology, logistics, and they're going
to be even employing some generative AI. They've already been
employing machine learning, so we'll see more. And they're going
to be streamlining operations. We didn't talk about that, but
they're going to be consolidating some of their facilities, so
(06:42):
they've really and they've reduced layers within the management structure,
so overall simplifying the operations. So all of these things
could restore positive growth in twenty twenty five.
Speaker 3 (06:56):
Our thanks to Mary Ross Gilbert, senior equity analysts who
covers retail for Bloomberg and Eligence.
Speaker 5 (07:00):
We moved now to the auto industry.
Speaker 4 (07:02):
You know, we were told earlier in the week that
Apple is canceling a decade long effort to build an.
Speaker 3 (07:06):
EV For more on this in the current state of
the electric vehicle industry, we were joined by David Welch,
Bloomberg Detroit Bureau chief. We first asked for his take
on this week's news.
Speaker 8 (07:15):
Look, really, take the airplane up about twenty thousand feet
on Apple's decision. Their margins are what thirty or forty percent,
and gross margins for Tesla and General motors about the
same in these days at about sixteen percent, and you
have to spend billions of dollars to make this vehicle.
Why would they do that? So I think that's really
what this is about. They were looking at an electric
(07:35):
vehicle that was going to be about one hundred thousand dollars,
So this was going to be a luxury Apple EV
and we're you know, we see Rivian, we see Lucid. Yeah,
you know that's rare.
Speaker 1 (07:44):
Frid Air.
Speaker 8 (07:45):
That's a tough sell. There's just they're just don't that
many people who can afford one hundred thousand dollars vehicle.
And then one other thing I'd like to bring up
with Apple is they talked about Apple TV for a
long time and everyone thought we were going to have
this Apple TV hanging on the wall. But eaking television just
allows you high capital the bow marching business kind of
like automobiles. And then they gave us a box with content.
(08:08):
So you know, Apple supplies car plator automakers. You know,
they may still have an auto play with some kind
of content sort of thing in their vehicles. But I
think they looked at the capital side of this and said,
you know, that's not what they do. They create cool
stuff and contract someone else to make it. The business
just never made a lot of sense.
Speaker 3 (08:27):
Hey, David, what's the feeling in Detroit these days as
to kind of how this EV thing is going to
evolve going forward? I mean, it seems to have hit
kind of a lull here in terms of the enthusiasm,
and I guess a lot of folks are trying to
get a sense of Is it because the costs is
just too high? Is it because people just don't like evs?
Is it because there's not enough choice, there's not enough
(08:49):
charging stations. What's the feeling in Detroit is how this
thing will evolve?
Speaker 8 (08:54):
It's all of that, but I would say especially choice
and price. I mean, look, there's one EV on the
US market that sells for less than forty thousand dollars.
Now it's a Nissan a Lead. It's a compact hatchback,
which Americans hate, that gets about two hundred miles of range,
and so everything else is much more expensive than that,
and for most Americans that doesn't cut it, particularly when
(09:17):
the charging network is bad. It's all these things are
sort of related. But I think the carmakers are now
really cautiously watching this and in the vehicle to watch
in the next year is General Motors is going to
sell an electric Chevy Equinox. So the Equinox is a
small crossover reshuerv. It's that's kind of the new family
(09:38):
car because no one buys Sedanze and they're going to
sell that EV for thirty five thousand dollars and it'll
go three hundred and twenty miles on a charge, which
is pretty good. And that will kind of tell us
if the mass market is ready to go electric, because
right now, a lot of the people who buy evs,
they're not just early adopters and rich people. They are
early adopters and rich people with three or four other
cars in the garage. So if they need to drive
(09:59):
on a long run trip, they pull the land rover around,
gass it up, and go. And so can the industry
sell evs to people who have one car in their gage?
And we'll see. So that's going to tell us a
lot about what's going to happen with this market and
how flat the middle of this S curve is in
order to get to the next.
Speaker 4 (10:18):
Way, David, I'm also wondering just the mood, I mean,
to Paul's point, the mood in.
Speaker 5 (10:23):
Detroit, Like, how do the workers feel about all of this? Right?
Speaker 4 (10:27):
I mean, we know the shift to evs eventually, when
you're just making EV's, you need less workers, et cetera.
Speaker 5 (10:32):
And I'm just wondering, kind.
Speaker 4 (10:34):
Of, yeah, like how do they feel right now?
Speaker 8 (10:38):
So I'm not totally convinced by the way that it's
going to need fewer workers. I think over a long
period of time maybe, but that's a different issue that
the union worker does think that, and they also think
that the engine and transmission jobs will be gone and
batteries will come in from someplace else.
Speaker 9 (10:54):
And they won't be the ones making them.
Speaker 8 (10:56):
So there is a lot of fear, and I think
they're breathing some kind of a side of relief that
maybe a lot of these workers are a bit older,
they'll be retired before this is a real issue. And
so I think if you're the union, you're looking at
this transition as being longer and slower than everybody thought
probably two years ago, and so to be more manageable,
(11:17):
you know that the you know, the attrition can be
just done by retirements and people want to lose their
jobs and be left with nothing.
Speaker 3 (11:24):
It'll just But it is the commitment from the car
companies still there, David, because I could make an argument
I think half of this country will never go electric
for reasons other than economics, other than powertrain.
Speaker 5 (11:37):
Was it like, look or what politics?
Speaker 3 (11:40):
I'm not going green?
Speaker 8 (11:42):
That's interesting. I've sort of thought for a long time
that Elon Musk has gone conservative for two reasons. One,
he's been fighting with the government, so he hates regulators.
Democrats get pinned with regulation, so he went conservative. I
think the other is that guy's a brilliant marketer. It's
the most underrated thing about Elon Musk. He knows that
EV's have been politicized, he knows conservatives don't like them,
(12:04):
and so I think he went conservative because maybe they'll
buy evs from their guy. Right, He's the guy on
Twitter letting them say whatever they want. And I've always
sort of thought, with no evidence, that maybe that's what
he's doing. But eventually everyone's going to go EV because
that'll just be the powertrain available. Question is how long
does it take to get there?
Speaker 3 (12:21):
Our thanks to David Welch, Bloomberg Detroit Bureau Chief.
Speaker 4 (12:24):
All right, coming up, we're going to break down why
a Capital One discovered deal will likely fase a rigorous
antitrust review by the DOJ.
Speaker 3 (12:30):
You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in
depth research and data on two thousand companies and one
hundred and thirty industries.
Speaker 4 (12:37):
I'll Paul Sweeney and Am alex deal, and this is Bloomberg.
Speaker 2 (12:51):
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Speaker 5 (13:06):
Next, we take a look at the anti trust base.
Speaker 4 (13:08):
So it's likely the Capital Ones bid for Discover will
face a rigorous anti trust review by the DOJ. And
this comes as the proposed thirty five point three billion
dollar mega merger would create the largest credit card lender
in the US.
Speaker 3 (13:20):
To discuss this and other deals that are facing scrutiny,
we were joined by Jennifer Ree, Bloomberg Intelligence Senior litigation analyst.
We first asked Jennifer for her Capital One Discover prediction.
Speaker 1 (13:30):
This one is such a tough one, you know. I
think that the Department of Justice is kind of in
a conundrum with this one, right because they're under a
directive to get tougher on deals, and in particular get
tougher on bank deals. I mean, this is come from
back in twenty twenty one when President Biden issued an
executive order saying, look, you know, we can't just rubber
stamp these bank deals. We've got these huge banks. We've
(13:50):
had problems with banking, and we need to get more aggressive.
And the Department of Justice is on board with that,
you know, we've heard their statement saying that they're on
board with that. But we also have a market that
simply hasn't been competitive for many, many, many years, and
that's in credit card processing.
Speaker 6 (14:06):
Right.
Speaker 1 (14:06):
We really have just two biggies, Visa and MasterCard, and
this deal provides an opportunity to really bolster competition in
an area that's been problematic ever since. I can remember
when I started anti trust, the very first lawsuit I
worked on was the Department of Justice versus Visa and MasterCard,
alleging that they were engaging in conduct that was blocking
out Discover and American Express. And ever since then, we've
(14:30):
had allegations of or private litigation public litigation against those
two companies for anti trust violations, and we've had regulation.
So this deal does have these strong pro competitive benefits,
but you've also seen massive political reaction against it. So
you really have two very strong opposing sides, and I
think it's just going to come down to the investigation
(14:51):
and how the Department of Justice views the credit card
issuing market and the overlaps in the credit card issuing
market between these two companies, and how out any potential
for harm it might find against this this pro competitive aspect.
Speaker 3 (15:05):
So, but it seems like a reasonable argument that putting
Capital One and Discovered together does in fact create a
viable competitor to Visa master Card. Otherwise there will never
be a viable competitor.
Speaker 1 (15:17):
Actly Yeah, No, that's exactly right. And that's why this
is an unusual deal, because you know, all companies with
deals come in and say, oh, there are all sorts
of pro competitive benefits that are going to benefit consumers
and innovation, et cetera. And usually sometimes they're kind of
lawyer created. Sometimes they're really you know, it's unclear whether
they're going to come to fruition. And most of the
time the Department of Justice or Federal Trade Commission are
(15:39):
going to be very skeptical about those claims. They say
they don't really ever bear fruit. But in this case,
it's a much stronger claim, and it is kind of
obvious to see how there really truly could be a
very significant pro competitive benefit here, and so it could
be one of these unique deals where that aspect is
given more weight than usual by the Department of Justice
(16:00):
and possibly be considered important enough to allow the deal
to go through even if there might be some other issues.
Speaker 4 (16:07):
Jen couldn't I have made the same argument with say
Spirit and Jet Blue, and that definitely didn't work out.
Speaker 1 (16:12):
You know, it's so interesting you bring that up, because
I see so many parallels between that case and this case,
even though completely different industries. Because there was a very
strong argument that those two combined could have bolstered competition
against the legacy airlines Delta, United, etc. But the problem
there was that there was a small set of consumers
that really depended on the unbundled low fares that were
(16:32):
offered by Spirit and we're going to lose out where
jet Blue took over those routes and retrofitted the planes
and created more space but raised fares and a weird way,
you kind of have the same dynamic here. You can
create a lot more competition as against the incumbents, the
big legacies Visa and MasterCard, but you might have some
sort of a negative effect on underserved consumers. Because Capital
(16:54):
wanted to discover when they issue credit they tend to
focus more on underserved populations then do some of the
other big issuers of credit, so people who are new
to credit, people who carry a revolving balance, subprime borrowers.
And it may be that there's a view that this
impacts a smaller group of subprime borrowers, and in Jet
Blue and Spirit at the end of the day, that
(17:16):
one out the DOJ one because of that harmful impact
on a small set of particular consumers. You have the
same thing here, but what you might have here is
a stronger argument on the pro competitive side than you
had in that case.
Speaker 4 (17:29):
Is there an argument you made for some of these
potential deals that are getting a hard time from the
DJ or FTC to kind of bide time till the
number six of this.
Speaker 1 (17:38):
Year absolutely went off the.
Speaker 5 (17:41):
Clock, Like is this part of a strategy?
Speaker 1 (17:43):
I mean absolutely, And look at Capital one and discover
they very well are probably going to bleed into the
next administration, whether it's Democrat or Republican, there is no doubt, Alex.
I mean, historically Republican administrations have the reputation in the
merger world of being more business friendly and also being
far less skeptical of claims of efficiencies, giving them a
lot more weight, and that's going to be important. As
(18:05):
I mentioned, in this deal. Right now, it's a little
bit of a wildcard. It used to be ten years
ago that whoever came in to run the FTC, if
we had a Republican president, whoever got appointed as chair,
the Republican majority there, and whoever came in on the
DOJ side, we're likely to be more business friendly or
likely to look at efficiencies in a more friendly manner.
(18:27):
Right now, though, we have kind of two different kinds
of Republicans. You have sort of a Josh Holly type
and that you guys may have seen in the news
that he's already come out and complained about this deal,
said the Department of Justice should block it. And then
you kind of have the Joe Simon's type, who was
the chair of the FTC in the previous Trump administration,
a little bit more traditional in the way we think
of Republicans in the antitrust world. And so I think
(18:49):
to some extent it might depend on who you get
at the DOJ, but I would still say that it
ticks higher. The chances of getting cleared probably tick higher
if we have a change of administrations next year.
Speaker 3 (19:00):
Our thanks to Jennifer Ree, Bloomberg Intelligence senior litigation analysts.
Speaker 4 (19:03):
All right, let's go to big tech, Paul, because Amazon
dot Com finally joined the famous Dow Jones Industrial Average.
So this week the e commerce giant replaced Walgreens Boots
Alliance in the thirty stockage.
Speaker 3 (19:14):
Yes, Amazon's inclusion in the Dow is another milestone and
the retailer's rapid expansion. The company already sells goods of
all kinds and runs the world's largest cloud computing business.
But Amazon is still working on ongoing initiatives to boost
market share and profits.
Speaker 4 (19:27):
So discuss all things Amazon and the ladies in the
retail space were joined now by Punham Goyle, senior US
e Commerce and retail analysts at Bloomberg Intelligence. We first
asked her why people are getting so excited about Amazon.
Speaker 6 (19:39):
I think it's all about profits. For a long time,
Amazon was all about marketshare, and today the story is
really a profit story. It's the profitability that's about to
unfold at Amazon that's really getting people excited and interested.
We wrote about this a few months ago, where you know,
if you look at their most lucrative businesses and everyone
knows of the cloud, which generates thirty percent bit margins,
(20:01):
which we think can go to forty percent. That could
be a two hundred billion dollar business. So you're looking
at sixty to eighty billion dollars in profits in the
coming years. But then if you add advertising to then, Paul,
you know the space, well, they have fifty percent ebit
margins and we can see advertising growing to one hundred
billion dollars in just a few years. So you're talking
(20:21):
about fifty billion in advertising, plus if you add another
sixty seventy of cloud, you're talking a big profit number here,
and I think that's what's getting people excited. Aside from that,
retail is growing, and part of the reason that advertising
is doing so well is because people go into Amazon
as if it was a search engine. Right, You go
(20:42):
in and you search for something. But the difference with
Amazon versus a search engine is you go with the
purchase intent. People go into Amazon looking for something and
to Colleck that buy button. They already know they want it,
They just want to find it and get it there
in two days or less.
Speaker 4 (20:55):
That is such a good point, and this is a
great example of this story of Amazon replacing one So
I was talking to an anchor who's been struggling with
feeling sick and feels like that winter, like you're just
sick all the time. And I was telling about Airborne,
which you take if you feel a coming on of
a cold.
Speaker 5 (21:09):
She's like, oh, where do I buy it?
Speaker 4 (21:10):
Amazon? And I'm like, no, go to your local drug store.
It's two blocks away. But that idea, right, like walking
those two blocks isn't going to happen. And I have
to go to Amazon to buy the thing because it'll
come in two days.
Speaker 5 (21:20):
And I'm not even worried about it. Where is the downside?
Speaker 2 (21:23):
Though?
Speaker 5 (21:23):
Who know?
Speaker 4 (21:23):
I mean, you laid out a pretty convincing case, So
how do I I don't know what do I worry about?
Speaker 6 (21:28):
So I think you know the downside? If we enter
a consumer recession, clearly Amazon will be impacted, right, so
we'll the rest of retail. But I think that's near term,
and as we've seen in past cycles, what goes down
comes up eventually. Amazon is one of those places where
we think if you view it for the longer term,
there's just a lot of opportunity across all its businesses.
(21:49):
We can't control the macro, but with the logistics platform
in place, and even this example that you gave. You know,
you need cold medicine, or you need anything, and you
have to go to CBS or somewhere else because you
need it. Now you can't wait six hours, twelve hours,
twenty four hours for it. But I'll tell you that
Amazon's delivery has gotten much faster. I mean I'm seeing
(22:10):
stuff at my door that I ordered in less than
twenty four hours, sometimes eight to twelve hours. And that's
pretty incredible. And that's really a part due to their
realignment of their distribution centers, which they're able to infuse
an even faster delivery.
Speaker 3 (22:25):
See it now, I have a general idea where Punham
and our family live. It's literally amongst or very close to,
like I think all these distribution centers in Central Jersey.
It's unbelievable. I think we've got to be like the
Central we have to be like the distribution hub of
the East Coast.
Speaker 5 (22:40):
It seems like I feel like a Jersey primo.
Speaker 3 (22:42):
Oh yeah, wh yeah, I am. So when I see
the Gove, I tell them, you know, so put them
let's backway from Amazon talk to us about just retail
in general. Here how's the consumer doing out there? What
are you hearing from your companies?
Speaker 6 (22:55):
I think the consumer is very focused on value today.
If you're seeing the retailers that are actually being able
to drive the share gains, you'll see that they offer
some sort of value in their proposition, whether it was
from Walmart, you know, that's doing well. But then we
hear from the other retailers, the more discretionary ones, and
they're struggling. Even the at leisure companies. We heard, you know,
(23:16):
from Puma and Adidas. We heard from some of the
other companies where they may have done well in four
Q because holiday was really strong last year, but when
they look out for their guidance, it's been conservative for
the most part from most of the retailers that I've
heard from, And I think that just goes to show
you that you have to have what the consumer wants,
and you have to have it at the price that
(23:37):
the consumer wants for you to actually succeed in today's environment.
Speaker 3 (23:40):
You know, we talk about inflation. Punum prices buy and
large in the supermarket don't come down after they shot up. However,
many per percent here, that's just the inflation rate of
growth is slowing. How about for like Adidas, do they
ever cut the price of a shoe because inflation's declining?
Speaker 6 (24:00):
That No, they had discounts, right, So if you want
to bring prices down, retailers use discounts as a medium
to do that. But once prices go up, they don't
come down.
Speaker 3 (24:10):
See that's a problem with inflation. That's why inflation is insidious.
Speaker 5 (24:14):
Yeah.
Speaker 4 (24:15):
But so to kind of Paul's question, but really to
my question, are we going to see a lot of
discounting from retailers?
Speaker 6 (24:21):
So?
Speaker 5 (24:21):
I don't know if you guys know this.
Speaker 4 (24:22):
Have we talked about alex as a counter indicator?
Speaker 3 (24:24):
No?
Speaker 4 (24:25):
I only shop on sale, Okay, so where I'm shopping,
you should be shorting the stocks. So this is a
joke that winds up happening because I'm shopping there because
their inventory is bloated and because the sales are so good.
So am I going to be going to Bluemy's in
the next couple of weeks or they finally have their
pricing power and inventory in check?
Speaker 6 (24:43):
I think inventory is getting more in check as we
move into the spring. So I was in stored. The
discounts were pretty reasonable. They weren't too aggressive. There were
some clearance wracks across them all, but I can tell
you the stores were quiet. So it's it's interesting because
there's new inventory that's flown in for the spring, and
as stores put this new inventory out, they're going to
(25:04):
be a little careful with their discounting and we could
see more discounts come in in April on the spring
inventory before now they're being steady and careful with them.
Speaker 3 (25:12):
Our thanks to put them. Goyle, Senior US e Commerce
and retail analyst at Bloomberg Intelligence.
Speaker 4 (25:17):
Coming up on the program a conversation with Mark Hoplomasian
President and CEO of Hyatt Hotels in the state of
the hotel industry.
Speaker 3 (25:24):
You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in
depth research and data on two thousand companies and one
hundred and thirty industries. You can access Bloomberg Intelligence via
Bigo on the terminal.
Speaker 4 (25:33):
I'm Paul Sweeney and I'm Alex Deeal and this is Bloomberg.
Speaker 2 (25:45):
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on Amazon Alexa from our flagship New York station, Just
Say Alexa played Bloomberg eleven.
Speaker 4 (26:03):
We moved out of the hotel industry, so Highed Hotels
recently reported net income for the fourth quarter and full
year twenty twenty three that surpassed analyst expectations.
Speaker 3 (26:11):
For more on this and the state of the hotel industry,
we were joined by Mark Hopplomasian President and chief executive
officer of Hia Hotels. When we first asked them about
Hyatt's most recent quarterly results and the messaging the company
is trying to get across.
Speaker 9 (26:23):
The clear message was really centered around the fact that
the transformation of the company to asset lighter platform has
now shown up in the numbers in a very material way.
We had the highest pre cash flow that in the
company's history. We also had the mix of our asset
light earnings to our total earnings went up to seventy
(26:44):
six percent five years ago. That was in the mid forties.
Speaker 3 (26:47):
Hey Mark described first, what your asset light strategy is
is I'm relying more on franchisees.
Speaker 9 (26:52):
Yeah, so it's not really I wouldn't call it an
asset light strategy. I would call it an asset light
program where we were selling down we had we had
two major drivers of our earnings. One was from real
estate that we own hotels, and the other ones from
management franchising hotels across the world. We're primarily a management business,
not a franchise business, but those are the two businesses.
So as we sell down real estate, the proportion that's
(27:14):
coming from real estate sourced earnings has been dropping. We've
concurrently reinvested in buying new platforms and new brands over
the last five years, and that has driven up our
management and franchising fees at the same time, so the
mix has shifted to much more in the management and
franchise fee driven business, which is very low capital intensivity
(27:37):
and high margin and high free cash floaks inversion. So
that was probably the key message. The other thing that
we did is we simplified our financial presentation because we
have a business that's a subscription model membership business called
Unlimited Ucation Club, and we sold the majority interest in
that business to a third party, which helped us simplify
how we report our earnings, and that was very well
(27:59):
received by investors.
Speaker 4 (28:01):
So Mark, that's you and the c suite managing all
of that. What about the demand side of the business,
What kind of pricing power do you have per room,
and what's the demand situation like.
Speaker 9 (28:11):
We think about three different demand drivers. One is leisure,
which has been the leader of the recovery through post
COVID period. We think about group business, which is big
meetings and conventions and things like that, and we also
have business travel individual business travel. All three are showing
signs of great momentum and positive outlooks. So starting with leisure,
(28:35):
in the first quarter of this year, our pace meeting
our bookings are up eleven percent for our all inclusive
resorts in the Pervian and also up for our resorts
in the Americas. But leisure travel has been really, really
solid in China. We had a record year for Lunar
New Year. The spending amongst Chinese, both inside of China
(28:57):
and other destinations in Asia was at them all time high.
So that's leisure in group Our pace into this year,
that is forward bookings are up eight percent and so
we're looking at another solid year of growth in meetings.
And I think corporations are increasingly resolved to make sure
that they prioritize those meetings, and then on business transient
(29:17):
the US is lagging, but the overall business transient category
demand around the world is about seven percent the low
where it was pre pandemic, so we're getting closer and
closer to being a parody. Europe is fully recovered, and
then some China is fully recovered, and then some the
United States is still lagging, and we're seeing positive signs
of business transient travel increasing. So I would say across
(29:39):
all three major categories, we're seeing positive trends into twenty.
Speaker 3 (29:43):
Four Mark, did you talked to us about M and
A and kind of growth via acquisition? How does that
figure into your growth plans? What are you guys messaging
to the street about your willingness to engage in em Anda,
because I know you had to buy out recently of
the Apple Leisure Group. I want to see kind of
your appetite is going forward.
Speaker 9 (30:00):
In the past five years, we've invested about three point
eight billion dollars in acquisitions, the biggest one being Apple
Leisure Group at two point seven billion, and it's been
tremendously beneficial to us because we've been able to expand
our customer base and highest growth and most relevant to
US categories, which is leisure, lifestyle, and luxury, and so
we've really done this in a very deliberate way to
(30:22):
move the company in that direction. In the fourth quarter,
I think we had fifty seven percent of our total
rooms revenue around the world was leisure focused, which is
up twenty points from the mid thirties to the mid
fifties pre pandemics on now, so the mix in the
company has tremendously shifted, but they're also been very profitable
and high value acquisitions. The fees per room that we
(30:46):
are earning are materially higher than they were five years
ago before we made these acquisitions and evolved the company.
Even as we have grown our select service brands, so
we are expanding in lower price points, but our overall
feed growth per room has been growing, which is really
I think part of the equation of actually driving share
holder value on an accelerated basis. I think there will
(31:08):
be more opportunities for MNA in the future, but probably
smaller scale.
Speaker 4 (31:12):
Talk to me about how expensive it is to run
your business, like where costs coming down, where costs going up?
Speaker 9 (31:18):
First of all, let's start with the biggest cost category,
which is people.
Speaker 5 (31:21):
Yeah, at our hotels in.
Speaker 9 (31:22):
Twenty twenty one non union markets, which is primarily in
the South, the sun Belt, the smile of the United States.
Our wage rates went up by twenty percent over the
course of that year, and that started to mitigate or
ameliorate in twenty twenty two and twenty twenty three. But
we experienced a massively ac situation in terms of supply
(31:43):
of labor.
Speaker 8 (31:44):
That's evened out.
Speaker 9 (31:45):
We were in the mid teams.
Speaker 4 (31:47):
That's evened out in that because we also talked about
didn't we pall about cleaning services like not staffing housekeeping
because it just can't find the workers. So do you
feel like you're at the right spot?
Speaker 9 (31:57):
I would say that there are pockets where we still
have shortages, and I think part of that has to
do with the nature of the workforce at this point.
So we've got a lot of the byproduct of not
having a really advanced immigration policy in the United States
and HTB VISA program, is that for at times, especially
(32:19):
over the summer, where you have peat demand, we don't
have the right type of labor that's willing to take
those jobs and be happy to start their careers in
those jobs. So I think they go together a lot
of the HTB people that come in on an HDB visa,
which is a temporary work visa. They come and they leave.
For the incidence of immigration that allows us to hire
(32:41):
people who are coming into the workforce in the United
States for the first time has been under some pressure now.
Having said that, overall, our vacancy rates have gone from
mid teens to mid single digits, so down ten points,
which is extraordinary, and that's over the last eighteen months.
So we are having a better time finding labor, but
they're definitely pockets of constraints, all right.
Speaker 4 (33:02):
Thanks to Mark Copplomaisian president and CEO of Hyatt Hotels.
Speaker 3 (33:06):
We now turn to the media and entertainment space. This week,
Paramount Global, the paramount of CBS, MTV and other networks,
reported fourth quarter sales below analyst expectations. This is largely
the result of shrinking advertising on traditional TV channels.
Speaker 4 (33:19):
I heard that before. Still Paramount said it sees profit
for Paramount Plus domestically in twenty twenty five. So for more,
we're joined by guitamranghanad than Bloomberg intelligence analyst on US media,
and we ask Gita about her takeaway on Paramount's earnings results.
Speaker 10 (33:31):
Streaming was definitely a key positive, and subscriber numbers those
came in slightly ahead of estimates. The bigger positive was
the RPOO trends. So remember Wall Street has now kind
of shifted its focus away from subscriber growth to revenue
growth as well as profitability, and they kind of scored
pretty well on the revenue growth metrics as well. So
(33:51):
arpoo increased about thirty percent through the year, and that's
on the back of a price increase, and then the
next thing, of course you look at was profitability and
their narrowed, so they're obviously taking a step in the
right direction. I think what investors are kind of really
cheering though, is that they did articulate some kind of
strategy to kind of get to profitability, and they outlined
a timeframe as well, so twenty twenty five is when
(34:13):
they're expecting paramount plus profitability, which is definitely I think
good news. The question is, I'm not sure whether it's enough.
Speaker 3 (34:20):
What does the ownership here want to do with the company,
And it appears by all accounts that they're just not
big enough to compete against some of these big technology companies.
Some of these big media companies like a Netflix, like
a Disney, and boy, there's a lot of speculation around Paramount.
Did they address that at all?
Speaker 10 (34:35):
They didn't. I mean the one thing though, that you know,
I think Bob Bkish got out of the way was
they are going to do something that is good for
all shareholders. He kind of underlined that because there has
been this constant, you know, question about whether you know,
Sherry Redstone is kind of just going to cash out
and leave everybody else hanging, and so he wanted to,
you know, kind of get that out of the way.
(34:55):
But again, you know, I think the focus is going
to come, you know, the M and A options. Paul
and we've discussed this seem to be shrinking at this point.
You know, Warner Brothers, Discovery obviously said they're no longer interested.
Other firms have kind of come taken a look. Apollo
being one of them, said not interested. The only interested
party right now is sky Dance, controlled by David Ellison.
But again, there's really no natural buyer for all of
(35:17):
the assets. He's not interested in controlling some TV networks.
He's only really looking at the studio. So again, I'm
not sure that Paramount Management necessarily wants to do kind
of parts sale here, so I think they're going to
kind of go back and focus on fundamentals. I think
some of the realistic m ANDA expectations are kind of
going to subside a little bit. We're going to go
back to fundamentals, I think for the time being.
Speaker 4 (35:38):
Well to that point, then did they buy themselves some time?
Because I could make an argument that, Okay, well the
slowing and AD sales and maybe that's then industry wide thing. Okay,
other players are getting hit. They did as a streaming subscribers,
so they have some time now.
Speaker 5 (35:50):
Is that a real statement or no?
Speaker 10 (35:51):
I think so. I definitely think so, because with streaming,
what we're going to see is we're going to see
some sustained momentum in those ARPO increases, so they're doing more,
you know, international price increases. They've kind of integrated showtime
into Paramount and with that they've been able to take
some price increases. So we're going to kind of see
that play out so pretty much most of twenty twenty four.
(36:12):
The question is what happens after twenty twenty four, But
they definitely have bought themselves sometime.
Speaker 3 (36:16):
What is the outlook for the studio here at Gita Studio.
Speaker 10 (36:19):
Unfortunately, for twenty twenty four looks really really bleak. So
the big movie, of course that everybody was kind of
looking at, was Mission Impossible. That's been pushed out to
twenty twenty five. We do have a few movies here
and there. I mean, you have Quiet Plays that's coming
out in June. There's obviously some anticipation building there. But again,
in general, Paul, the box office outlook for twenty twenty
four is just pretty weak, and that's just because of
(36:42):
all of those Hollywood strikes. Has pushed out a lot
of movies into twenty twenty five. It's kind of going
to shave off I think at least two billion dollars
off the box office.
Speaker 4 (36:50):
So presumably we're going to look through that, right, I mean,
presumably they're going to recoup that and they'll be pent
up in twenty twenty five.
Speaker 10 (36:56):
That is the big question, right. Yes, we've seen kind
of box office demand and you know, in general kind
of come back, but it's still about twenty percent below
pre pandemic level. So the big question is, Okay, when
all of those big titles kind of hit the screens
in twenty twenty five, are we kind of going to
see a bigger resurgence.
Speaker 6 (37:13):
The jury is still out.
Speaker 10 (37:14):
I think yes, it's definitely going to be better than twenty
twenty four. Is it going to be as good as
it was? You know, and it's heyday, I'm not so sure.
Speaker 5 (37:21):
Githa.
Speaker 3 (37:21):
How about the CBS television network and the Viacom cable networks,
you know, one point that was such a big part
of this company. Here, talk to us about the advertising
the television advertising market. What's kind of the forecast for
the next several years. Is it a growing business? Is
it a declining business?
Speaker 10 (37:36):
It's a melting ice cube ul just like you know,
just like the whole PayTV ecosystem. So you know, this
is this used to be back in the day about
a sixty billion market. It's shrunk. It's going to probably
hit about forty five billion by the end of next year.
And really, you know, this is just kind of a
progression of where all the eyeballs are moving. So they're
moving away from the linear TV networks to streaming, and
(37:57):
so we're seeing kind of those ad dollars follow those
eyeballs and going from you know, the TV medium to
what is now called connected TV, which is really all
the streaming platforms and you know, you're using all your
connected TV devices, the rokus and the Google Sticks and
all of that to kind of watch television, and that's
where all of the advertising is moving as well. Unfortunately,
(38:18):
Paramount doesn't have too much of a presence there. Yes,
they do have, you know, Pluto TV, which is their solution,
but it's not going to be able to kind of
offset the leakage that we're seeing in the television ecosystem
and that is really a problem for all of these
media companies, for Paramount a little bit more so.
Speaker 4 (38:35):
All right, Thanks to geta Maganathan, Bloomberg Intelligence analyst on
US media.
Speaker 2 (38:39):
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Bloomberg Intelligence with Alex Steinhall and Paul'sweenye on Bloomberg Radio.
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On Today's Bloomberg Intelligence Show, we dig inside the big
business stories impacting Wall Street and the global markets.
Speaker 4 (00:48):
Each and every week we're going to provide you in
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Today will look at why Capital Ones bid for Discover
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US Justice Department.
Speaker 4 (01:01):
Plus we'll discuss how shrinking advertising on traditional TV channels
is impacting sales at Paramount Global.
Speaker 3 (01:06):
But first we dive into the retail space. This week,
Macy's said it plans to close almost a third of
its US locations. And this comes despite Macy's reporting fourth
quarter revenue and earnings that exceeded low analyst expectations.
Speaker 4 (01:18):
All right, for more, we're joined now by Mary ross Gilbert,
senior equity analyst who covers retail for Bloomberg Intelligence. And
we first asked Mary about her take on Macy's most
recent quarter.
Speaker 7 (01:27):
The focus really wasn't on how they did in the
fourth quarter. It's really their new plan that was the
big focus. The new plan and their guidance for the year.
So their guidance came in softer than consensus, and I
guess it's just no surprise just thinking about how department
stores are under pressure, and we've seen it across the
board with you know, again, Dillard's showed some weakness. We're
(01:51):
seeing it with Macy's in their outlook. But Macy's has
a plan to address the department store model in shuddering
one hundred and fifty underperforming stores, and then they're going
to invest in the three hundred and fifty remaining and
those are going to be primarily an A and A
plus plus plus malls and what they're going to do
(02:11):
is increase the service levels. Beauty has been something they've
been investing in almost every year and expanding the floor
space dedicated to beauty. You'll see that they have expanded
the space and who knows, they could expand it again
this year. We've been seeing it for the last five
years that that space has been expanded. So there's a
lot of details in what Macy's is doing. It's something
(02:33):
they need to do. They really need to up their game,
and that's exactly how they started their presentation, and that
includes really making the assortments a lot better than they
are because if you look at the inline store performance
at malls, the ones that are executing, such as the Abercrombies,
the Urban Outfitters, they're outperforming.
Speaker 3 (02:53):
So Mary I was kind of surprised to see this
number of stores one p fifty because I kind of
thought that this decade plus long shrinkage of department store
footprints across the country by a lot of different companies,
that was more or less kind of we're done that,
or we're at near the finish line. So to see
another big round of closings that kind of surprised me.
(03:14):
Did it surprise the market at all, or is this
something that analyst and investors have been asking for.
Speaker 7 (03:18):
What Macie's had said is, we don't need to close
stores except for the usual stores that you close every year,
which is maybe less than ten per year. But the
reason that they've decided to close them is because these
stores were underperforming, but they were still profitable on a
four wall basis, so historically that their thought was, well,
if it's still profitable and we're still generating cash, we'll
(03:41):
keep it open.
Speaker 2 (03:42):
And this time what they.
Speaker 7 (03:43):
Did is they took a more holistic approach and said, Okay,
even though it's four wall profitable, we could do a
lot better with the funds that we could generate closing
these stores, selling the real estate and redeploying it back
into the existing store base. And for all the initiatives
that they have going forward, it makes a lot of
sense because we really need to rethink the department store model.
(04:06):
It has to evolve.
Speaker 6 (04:08):
Mary.
Speaker 4 (04:08):
Does this do enough to get activist investors off Macy's back?
Speaker 7 (04:14):
That is a good question.
Speaker 1 (04:16):
I think it may.
Speaker 7 (04:17):
I think board has made it very clear that they
are supporting this plan. Could they enhance the board with
additional directors. That could be a possibility, so learn more
about that in the coming months. But I think that
this plan is it's been decided that this is the
move forward. And when you think about what's happening with
(04:37):
the activists, it usually involves the real estate, and what
we have seen in past transactions is the real estate
is usually milked and it can be to the detriment
of the retail operations.
Speaker 3 (04:50):
Talk to us about that, like a relative performance between
like a Macy's store and a comparable Bloomingdale store. Is
the Bloomingdale store maturely more profitable?
Speaker 7 (04:58):
I guess yes, they don't disclose the profitability on Bloomingdale's
versus Macy's, but Bloomingdale's outperforms, as does bloom Mercury. This year,
their comp sales were down one point six percent because
the aspirational luxury consumer is spending less and we've been,
you know, hearing about the overall luxury business being impacted,
especially after we came off the post pandemic spending from
(05:24):
stimulus checks that really had that aspirational customer going after luxury.
So now that that's kind of falling back, we're seeing
more of a normalization. This is something Nordstrom Asco slided,
so their sales were just down one point six percent,
but they think that could probably stabilize and go higher
next year. And of course, you know what the beauty
(05:45):
side on luxury, you know that's posting positive comp sales.
Speaker 4 (05:48):
Yeah, Mary, I was going to ask about then the inventory.
Macy's notoriously last year struggled with inventory. The last quarter
we saw they really got it together. What did we
learn this quarter about their inventory?
Speaker 7 (05:58):
Yeah, so even though inventory it was up two percent
year every year, it's still down over twenty percent versus
twenty nineteen. So they've really done a great job reducing
their inventory, and that means that they're having less clearance activity.
This is something that's going to affect their first quarter
because last year they had more clearance and this year less.
(06:20):
So they're doing a great job overall. They've just been
improving their execution with data technology, logistics, and they're going
to be even employing some generative AI. They've already been
employing machine learning, so we'll see more. And they're going
to be streamlining operations. We didn't talk about that, but
they're going to be consolidating some of their facilities, so
(06:42):
they've really and they've reduced layers within the management structure,
so overall simplifying the operations. So all of these things
could restore positive growth in twenty twenty five.
Speaker 3 (06:56):
Our thanks to Mary Ross Gilbert, senior equity analysts who
covers retail for Bloomberg and Eligence.
Speaker 5 (07:00):
We moved now to the auto industry.
Speaker 4 (07:02):
You know, we were told earlier in the week that
Apple is canceling a decade long effort to build an.
Speaker 3 (07:06):
EV For more on this in the current state of
the electric vehicle industry, we were joined by David Welch,
Bloomberg Detroit Bureau chief. We first asked for his take
on this week's news.
Speaker 8 (07:15):
Look, really, take the airplane up about twenty thousand feet
on Apple's decision. Their margins are what thirty or forty percent,
and gross margins for Tesla and General motors about the
same in these days at about sixteen percent, and you
have to spend billions of dollars to make this vehicle.
Why would they do that? So I think that's really
what this is about. They were looking at an electric
(07:35):
vehicle that was going to be about one hundred thousand dollars,
So this was going to be a luxury Apple EV
and we're you know, we see Rivian, we see Lucid. Yeah,
you know that's rare.
Speaker 1 (07:44):
Frid Air.
Speaker 8 (07:45):
That's a tough sell. There's just they're just don't that
many people who can afford one hundred thousand dollars vehicle.
And then one other thing I'd like to bring up
with Apple is they talked about Apple TV for a
long time and everyone thought we were going to have
this Apple TV hanging on the wall. But eaking television just
allows you high capital the bow marching business kind of
like automobiles. And then they gave us a box with content.
(08:08):
So you know, Apple supplies car plator automakers. You know,
they may still have an auto play with some kind
of content sort of thing in their vehicles. But I
think they looked at the capital side of this and said,
you know, that's not what they do. They create cool
stuff and contract someone else to make it. The business
just never made a lot of sense.
Speaker 3 (08:27):
Hey, David, what's the feeling in Detroit these days as
to kind of how this EV thing is going to
evolve going forward? I mean, it seems to have hit
kind of a lull here in terms of the enthusiasm,
and I guess a lot of folks are trying to
get a sense of Is it because the costs is
just too high? Is it because people just don't like evs?
Is it because there's not enough choice, there's not enough
(08:49):
charging stations. What's the feeling in Detroit is how this
thing will evolve?
Speaker 8 (08:54):
It's all of that, but I would say especially choice
and price. I mean, look, there's one EV on the
US market that sells for less than forty thousand dollars.
Now it's a Nissan a Lead. It's a compact hatchback,
which Americans hate, that gets about two hundred miles of range,
and so everything else is much more expensive than that,
and for most Americans that doesn't cut it, particularly when
(09:17):
the charging network is bad. It's all these things are
sort of related. But I think the carmakers are now
really cautiously watching this and in the vehicle to watch
in the next year is General Motors is going to
sell an electric Chevy Equinox. So the Equinox is a
small crossover reshuerv. It's that's kind of the new family
(09:38):
car because no one buys Sedanze and they're going to
sell that EV for thirty five thousand dollars and it'll
go three hundred and twenty miles on a charge, which
is pretty good. And that will kind of tell us
if the mass market is ready to go electric, because
right now, a lot of the people who buy evs,
they're not just early adopters and rich people. They are
early adopters and rich people with three or four other
cars in the garage. So if they need to drive
(09:59):
on a long run trip, they pull the land rover around,
gass it up, and go. And so can the industry
sell evs to people who have one car in their gage?
And we'll see. So that's going to tell us a
lot about what's going to happen with this market and
how flat the middle of this S curve is in
order to get to the next.
Speaker 4 (10:18):
Way, David, I'm also wondering just the mood, I mean,
to Paul's point, the mood in.
Speaker 5 (10:23):
Detroit, Like, how do the workers feel about all of this? Right?
Speaker 4 (10:27):
I mean, we know the shift to evs eventually, when
you're just making EV's, you need less workers, et cetera.
Speaker 5 (10:32):
And I'm just wondering, kind.
Speaker 4 (10:34):
Of, yeah, like how do they feel right now?
Speaker 8 (10:38):
So I'm not totally convinced by the way that it's
going to need fewer workers. I think over a long
period of time maybe, but that's a different issue that
the union worker does think that, and they also think
that the engine and transmission jobs will be gone and
batteries will come in from someplace else.
Speaker 9 (10:54):
And they won't be the ones making them.
Speaker 8 (10:56):
So there is a lot of fear, and I think
they're breathing some kind of a side of relief that
maybe a lot of these workers are a bit older,
they'll be retired before this is a real issue. And
so I think if you're the union, you're looking at
this transition as being longer and slower than everybody thought
probably two years ago, and so to be more manageable,
(11:17):
you know that the you know, the attrition can be
just done by retirements and people want to lose their
jobs and be left with nothing.
Speaker 3 (11:24):
It'll just But it is the commitment from the car
companies still there, David, because I could make an argument
I think half of this country will never go electric
for reasons other than economics, other than powertrain.
Speaker 5 (11:37):
Was it like, look or what politics?
Speaker 3 (11:40):
I'm not going green?
Speaker 8 (11:42):
That's interesting. I've sort of thought for a long time
that Elon Musk has gone conservative for two reasons. One,
he's been fighting with the government, so he hates regulators.
Democrats get pinned with regulation, so he went conservative. I
think the other is that guy's a brilliant marketer. It's
the most underrated thing about Elon Musk. He knows that
EV's have been politicized, he knows conservatives don't like them,
(12:04):
and so I think he went conservative because maybe they'll
buy evs from their guy. Right, He's the guy on
Twitter letting them say whatever they want. And I've always
sort of thought, with no evidence, that maybe that's what
he's doing. But eventually everyone's going to go EV because
that'll just be the powertrain available. Question is how long
does it take to get there?
Speaker 3 (12:21):
Our thanks to David Welch, Bloomberg Detroit Bureau Chief.
Speaker 4 (12:24):
All right, coming up, we're going to break down why
a Capital One discovered deal will likely fase a rigorous
antitrust review by the DOJ.
Speaker 3 (12:30):
You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in
depth research and data on two thousand companies and one
hundred and thirty industries.
Speaker 4 (12:37):
I'll Paul Sweeney and Am alex deal, and this is Bloomberg.
Speaker 2 (12:51):
You're listening to the Bloomberg Intelligence Podcast. Catch us live
weekdays at ten am Eastern on Effo card playing Enroud
Otto with the Bloomberg Business App. Listen on demand wherever
you get your podcasts, or watch us live on YouTube.
Speaker 5 (13:06):
Next, we take a look at the anti trust base.
Speaker 4 (13:08):
So it's likely the Capital Ones bid for Discover will
face a rigorous anti trust review by the DOJ. And
this comes as the proposed thirty five point three billion
dollar mega merger would create the largest credit card lender
in the US.
Speaker 3 (13:20):
To discuss this and other deals that are facing scrutiny,
we were joined by Jennifer Ree, Bloomberg Intelligence Senior litigation analyst.
We first asked Jennifer for her Capital One Discover prediction.
Speaker 1 (13:30):
This one is such a tough one, you know. I
think that the Department of Justice is kind of in
a conundrum with this one, right because they're under a
directive to get tougher on deals, and in particular get
tougher on bank deals. I mean, this is come from
back in twenty twenty one when President Biden issued an
executive order saying, look, you know, we can't just rubber
stamp these bank deals. We've got these huge banks. We've
(13:50):
had problems with banking, and we need to get more aggressive.
And the Department of Justice is on board with that,
you know, we've heard their statement saying that they're on
board with that. But we also have a market that
simply hasn't been competitive for many, many, many years, and
that's in credit card processing.
Speaker 6 (14:06):
Right.
Speaker 1 (14:06):
We really have just two biggies, Visa and MasterCard, and
this deal provides an opportunity to really bolster competition in
an area that's been problematic ever since. I can remember
when I started anti trust, the very first lawsuit I
worked on was the Department of Justice versus Visa and MasterCard,
alleging that they were engaging in conduct that was blocking
out Discover and American Express. And ever since then, we've
(14:30):
had allegations of or private litigation public litigation against those
two companies for anti trust violations, and we've had regulation.
So this deal does have these strong pro competitive benefits,
but you've also seen massive political reaction against it. So
you really have two very strong opposing sides, and I
think it's just going to come down to the investigation
(14:51):
and how the Department of Justice views the credit card
issuing market and the overlaps in the credit card issuing
market between these two companies, and how out any potential
for harm it might find against this this pro competitive aspect.
Speaker 3 (15:05):
So, but it seems like a reasonable argument that putting
Capital One and Discovered together does in fact create a
viable competitor to Visa master Card. Otherwise there will never
be a viable competitor.
Speaker 1 (15:17):
Actly Yeah, No, that's exactly right. And that's why this
is an unusual deal, because you know, all companies with
deals come in and say, oh, there are all sorts
of pro competitive benefits that are going to benefit consumers
and innovation, et cetera. And usually sometimes they're kind of
lawyer created. Sometimes they're really you know, it's unclear whether
they're going to come to fruition. And most of the
time the Department of Justice or Federal Trade Commission are
(15:39):
going to be very skeptical about those claims. They say
they don't really ever bear fruit. But in this case,
it's a much stronger claim, and it is kind of
obvious to see how there really truly could be a
very significant pro competitive benefit here, and so it could
be one of these unique deals where that aspect is
given more weight than usual by the Department of Justice
(16:00):
and possibly be considered important enough to allow the deal
to go through even if there might be some other issues.
Speaker 4 (16:07):
Jen couldn't I have made the same argument with say
Spirit and Jet Blue, and that definitely didn't work out.
Speaker 1 (16:12):
You know, it's so interesting you bring that up, because
I see so many parallels between that case and this case,
even though completely different industries. Because there was a very
strong argument that those two combined could have bolstered competition
against the legacy airlines Delta, United, etc. But the problem
there was that there was a small set of consumers
that really depended on the unbundled low fares that were
(16:32):
offered by Spirit and we're going to lose out where
jet Blue took over those routes and retrofitted the planes
and created more space but raised fares and a weird way,
you kind of have the same dynamic here. You can
create a lot more competition as against the incumbents, the
big legacies Visa and MasterCard, but you might have some
sort of a negative effect on underserved consumers. Because Capital
(16:54):
wanted to discover when they issue credit they tend to
focus more on underserved populations then do some of the
other big issuers of credit, so people who are new
to credit, people who carry a revolving balance, subprime borrowers.
And it may be that there's a view that this
impacts a smaller group of subprime borrowers, and in Jet
Blue and Spirit at the end of the day, that
(17:16):
one out the DOJ one because of that harmful impact
on a small set of particular consumers. You have the
same thing here, but what you might have here is
a stronger argument on the pro competitive side than you
had in that case.
Speaker 4 (17:29):
Is there an argument you made for some of these
potential deals that are getting a hard time from the
DJ or FTC to kind of bide time till the
number six of this.
Speaker 1 (17:38):
Year absolutely went off the.
Speaker 5 (17:41):
Clock, Like is this part of a strategy?
Speaker 1 (17:43):
I mean absolutely, And look at Capital one and discover
they very well are probably going to bleed into the
next administration, whether it's Democrat or Republican, there is no doubt, Alex.
I mean, historically Republican administrations have the reputation in the
merger world of being more business friendly and also being
far less skeptical of claims of efficiencies, giving them a
lot more weight, and that's going to be important. As
(18:05):
I mentioned, in this deal. Right now, it's a little
bit of a wildcard. It used to be ten years
ago that whoever came in to run the FTC, if
we had a Republican president, whoever got appointed as chair,
the Republican majority there, and whoever came in on the
DOJ side, we're likely to be more business friendly or
likely to look at efficiencies in a more friendly manner.
(18:27):
Right now, though, we have kind of two different kinds
of Republicans. You have sort of a Josh Holly type
and that you guys may have seen in the news
that he's already come out and complained about this deal,
said the Department of Justice should block it. And then
you kind of have the Joe Simon's type, who was
the chair of the FTC in the previous Trump administration,
a little bit more traditional in the way we think
of Republicans in the antitrust world. And so I think
(18:49):
to some extent it might depend on who you get
at the DOJ, but I would still say that it
ticks higher. The chances of getting cleared probably tick higher
if we have a change of administrations next year.
Speaker 3 (19:00):
Our thanks to Jennifer Ree, Bloomberg Intelligence senior litigation analysts.
Speaker 4 (19:03):
All right, let's go to big tech, Paul, because Amazon
dot Com finally joined the famous Dow Jones Industrial Average.
So this week the e commerce giant replaced Walgreens Boots
Alliance in the thirty stockage.
Speaker 3 (19:14):
Yes, Amazon's inclusion in the Dow is another milestone and
the retailer's rapid expansion. The company already sells goods of
all kinds and runs the world's largest cloud computing business.
But Amazon is still working on ongoing initiatives to boost
market share and profits.
Speaker 4 (19:27):
So discuss all things Amazon and the ladies in the
retail space were joined now by Punham Goyle, senior US
e Commerce and retail analysts at Bloomberg Intelligence. We first
asked her why people are getting so excited about Amazon.
Speaker 6 (19:39):
I think it's all about profits. For a long time,
Amazon was all about marketshare, and today the story is
really a profit story. It's the profitability that's about to
unfold at Amazon that's really getting people excited and interested.
We wrote about this a few months ago, where you know,
if you look at their most lucrative businesses and everyone
knows of the cloud, which generates thirty percent bit margins,
(20:01):
which we think can go to forty percent. That could
be a two hundred billion dollar business. So you're looking
at sixty to eighty billion dollars in profits in the
coming years. But then if you add advertising to then, Paul,
you know the space, well, they have fifty percent ebit
margins and we can see advertising growing to one hundred
billion dollars in just a few years. So you're talking
(20:21):
about fifty billion in advertising, plus if you add another
sixty seventy of cloud, you're talking a big profit number here,
and I think that's what's getting people excited. Aside from that,
retail is growing, and part of the reason that advertising
is doing so well is because people go into Amazon
as if it was a search engine. Right, You go
(20:42):
in and you search for something. But the difference with
Amazon versus a search engine is you go with the
purchase intent. People go into Amazon looking for something and
to Colleck that buy button. They already know they want it,
They just want to find it and get it there
in two days or less.
Speaker 4 (20:55):
That is such a good point, and this is a
great example of this story of Amazon replacing one So
I was talking to an anchor who's been struggling with
feeling sick and feels like that winter, like you're just
sick all the time. And I was telling about Airborne,
which you take if you feel a coming on of
a cold.
Speaker 5 (21:09):
She's like, oh, where do I buy it?
Speaker 4 (21:10):
Amazon? And I'm like, no, go to your local drug store.
It's two blocks away. But that idea, right, like walking
those two blocks isn't going to happen. And I have
to go to Amazon to buy the thing because it'll
come in two days.
Speaker 5 (21:20):
And I'm not even worried about it. Where is the downside?
Speaker 2 (21:23):
Though?
Speaker 5 (21:23):
Who know?
Speaker 4 (21:23):
I mean, you laid out a pretty convincing case, So
how do I I don't know what do I worry about?
Speaker 6 (21:28):
So I think you know the downside? If we enter
a consumer recession, clearly Amazon will be impacted, right, so
we'll the rest of retail. But I think that's near term,
and as we've seen in past cycles, what goes down
comes up eventually. Amazon is one of those places where
we think if you view it for the longer term,
there's just a lot of opportunity across all its businesses.
(21:49):
We can't control the macro, but with the logistics platform
in place, and even this example that you gave. You know,
you need cold medicine, or you need anything, and you
have to go to CBS or somewhere else because you
need it. Now you can't wait six hours, twelve hours,
twenty four hours for it. But I'll tell you that
Amazon's delivery has gotten much faster. I mean I'm seeing
(22:10):
stuff at my door that I ordered in less than
twenty four hours, sometimes eight to twelve hours. And that's
pretty incredible. And that's really a part due to their
realignment of their distribution centers, which they're able to infuse
an even faster delivery.
Speaker 3 (22:25):
See it now, I have a general idea where Punham
and our family live. It's literally amongst or very close to,
like I think all these distribution centers in Central Jersey.
It's unbelievable. I think we've got to be like the
Central we have to be like the distribution hub of
the East Coast.
Speaker 5 (22:40):
It seems like I feel like a Jersey primo.
Speaker 3 (22:42):
Oh yeah, wh yeah, I am. So when I see
the Gove, I tell them, you know, so put them
let's backway from Amazon talk to us about just retail
in general. Here how's the consumer doing out there? What
are you hearing from your companies?
Speaker 6 (22:55):
I think the consumer is very focused on value today.
If you're seeing the retailers that are actually being able
to drive the share gains, you'll see that they offer
some sort of value in their proposition, whether it was
from Walmart, you know, that's doing well. But then we
hear from the other retailers, the more discretionary ones, and
they're struggling. Even the at leisure companies. We heard, you know,
(23:16):
from Puma and Adidas. We heard from some of the
other companies where they may have done well in four
Q because holiday was really strong last year, but when
they look out for their guidance, it's been conservative for
the most part from most of the retailers that I've
heard from, And I think that just goes to show
you that you have to have what the consumer wants,
and you have to have it at the price that
(23:37):
the consumer wants for you to actually succeed in today's environment.
Speaker 3 (23:40):
You know, we talk about inflation. Punum prices buy and
large in the supermarket don't come down after they shot up. However,
many per percent here, that's just the inflation rate of
growth is slowing. How about for like Adidas, do they
ever cut the price of a shoe because inflation's declining?
Speaker 6 (24:00):
That No, they had discounts, right, So if you want
to bring prices down, retailers use discounts as a medium
to do that. But once prices go up, they don't
come down.
Speaker 3 (24:10):
See that's a problem with inflation. That's why inflation is insidious.
Speaker 5 (24:14):
Yeah.
Speaker 4 (24:15):
But so to kind of Paul's question, but really to
my question, are we going to see a lot of
discounting from retailers?
Speaker 6 (24:21):
So?
Speaker 5 (24:21):
I don't know if you guys know this.
Speaker 4 (24:22):
Have we talked about alex as a counter indicator?
Speaker 3 (24:24):
No?
Speaker 4 (24:25):
I only shop on sale, Okay, so where I'm shopping,
you should be shorting the stocks. So this is a
joke that winds up happening because I'm shopping there because
their inventory is bloated and because the sales are so good.
So am I going to be going to Bluemy's in
the next couple of weeks or they finally have their
pricing power and inventory in check?
Speaker 6 (24:43):
I think inventory is getting more in check as we
move into the spring. So I was in stored. The
discounts were pretty reasonable. They weren't too aggressive. There were
some clearance wracks across them all, but I can tell
you the stores were quiet. So it's it's interesting because
there's new inventory that's flown in for the spring, and
as stores put this new inventory out, they're going to
(25:04):
be a little careful with their discounting and we could
see more discounts come in in April on the spring
inventory before now they're being steady and careful with them.
Speaker 3 (25:12):
Our thanks to put them. Goyle, Senior US e Commerce
and retail analyst at Bloomberg Intelligence.
Speaker 4 (25:17):
Coming up on the program a conversation with Mark Hoplomasian
President and CEO of Hyatt Hotels in the state of
the hotel industry.
Speaker 3 (25:24):
You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in
depth research and data on two thousand companies and one
hundred and thirty industries. You can access Bloomberg Intelligence via
Bigo on the terminal.
Speaker 4 (25:33):
I'm Paul Sweeney and I'm Alex Deeal and this is Bloomberg.
Speaker 2 (25:45):
You're listening to the Bloomberg Intelligence podcast. Catch us live
weekdays at ten am Eastern on applecar Play and Android
Auto with the Bloomberg Business. You can also listen live
on Amazon Alexa from our flagship New York station, Just
Say Alexa played Bloomberg eleven.
Speaker 4 (26:03):
We moved out of the hotel industry, so Highed Hotels
recently reported net income for the fourth quarter and full
year twenty twenty three that surpassed analyst expectations.
Speaker 3 (26:11):
For more on this and the state of the hotel industry,
we were joined by Mark Hopplomasian President and chief executive
officer of Hia Hotels. When we first asked them about
Hyatt's most recent quarterly results and the messaging the company
is trying to get across.
Speaker 9 (26:23):
The clear message was really centered around the fact that
the transformation of the company to asset lighter platform has
now shown up in the numbers in a very material way.
We had the highest pre cash flow that in the
company's history. We also had the mix of our asset
light earnings to our total earnings went up to seventy
(26:44):
six percent five years ago. That was in the mid forties.
Speaker 3 (26:47):
Hey Mark described first, what your asset light strategy is
is I'm relying more on franchisees.
Speaker 9 (26:52):
Yeah, so it's not really I wouldn't call it an
asset light strategy. I would call it an asset light
program where we were selling down we had we had
two major drivers of our earnings. One was from real
estate that we own hotels, and the other ones from
management franchising hotels across the world. We're primarily a management business,
not a franchise business, but those are the two businesses.
So as we sell down real estate, the proportion that's
(27:14):
coming from real estate sourced earnings has been dropping. We've
concurrently reinvested in buying new platforms and new brands over
the last five years, and that has driven up our
management and franchising fees at the same time, so the
mix has shifted to much more in the management and
franchise fee driven business, which is very low capital intensivity
(27:37):
and high margin and high free cash floaks inversion. So
that was probably the key message. The other thing that
we did is we simplified our financial presentation because we
have a business that's a subscription model membership business called
Unlimited Ucation Club, and we sold the majority interest in
that business to a third party, which helped us simplify
how we report our earnings, and that was very well
(27:59):
received by investors.
Speaker 4 (28:01):
So Mark, that's you and the c suite managing all
of that. What about the demand side of the business,
What kind of pricing power do you have per room,
and what's the demand situation like.
Speaker 9 (28:11):
We think about three different demand drivers. One is leisure,
which has been the leader of the recovery through post
COVID period. We think about group business, which is big
meetings and conventions and things like that, and we also
have business travel individual business travel. All three are showing
signs of great momentum and positive outlooks. So starting with leisure,
(28:35):
in the first quarter of this year, our pace meeting
our bookings are up eleven percent for our all inclusive
resorts in the Pervian and also up for our resorts
in the Americas. But leisure travel has been really, really
solid in China. We had a record year for Lunar
New Year. The spending amongst Chinese, both inside of China
(28:57):
and other destinations in Asia was at them all time high.
So that's leisure in group Our pace into this year,
that is forward bookings are up eight percent and so
we're looking at another solid year of growth in meetings.
And I think corporations are increasingly resolved to make sure
that they prioritize those meetings, and then on business transient
(29:17):
the US is lagging, but the overall business transient category
demand around the world is about seven percent the low
where it was pre pandemic, so we're getting closer and
closer to being a parody. Europe is fully recovered, and
then some China is fully recovered, and then some the
United States is still lagging, and we're seeing positive signs
of business transient travel increasing. So I would say across
(29:39):
all three major categories, we're seeing positive trends into twenty.
Speaker 3 (29:43):
Four Mark, did you talked to us about M and
A and kind of growth via acquisition? How does that
figure into your growth plans? What are you guys messaging
to the street about your willingness to engage in em Anda,
because I know you had to buy out recently of
the Apple Leisure Group. I want to see kind of
your appetite is going forward.
Speaker 9 (30:00):
In the past five years, we've invested about three point
eight billion dollars in acquisitions, the biggest one being Apple
Leisure Group at two point seven billion, and it's been
tremendously beneficial to us because we've been able to expand
our customer base and highest growth and most relevant to
US categories, which is leisure, lifestyle, and luxury, and so
we've really done this in a very deliberate way to
(30:22):
move the company in that direction. In the fourth quarter,
I think we had fifty seven percent of our total
rooms revenue around the world was leisure focused, which is
up twenty points from the mid thirties to the mid
fifties pre pandemics on now, so the mix in the
company has tremendously shifted, but they're also been very profitable
and high value acquisitions. The fees per room that we
(30:46):
are earning are materially higher than they were five years
ago before we made these acquisitions and evolved the company.
Even as we have grown our select service brands, so
we are expanding in lower price points, but our overall
feed growth per room has been growing, which is really
I think part of the equation of actually driving share
holder value on an accelerated basis. I think there will
(31:08):
be more opportunities for MNA in the future, but probably
smaller scale.
Speaker 4 (31:12):
Talk to me about how expensive it is to run
your business, like where costs coming down, where costs going up?
Speaker 9 (31:18):
First of all, let's start with the biggest cost category,
which is people.
Speaker 5 (31:21):
Yeah, at our hotels in.
Speaker 9 (31:22):
Twenty twenty one non union markets, which is primarily in
the South, the sun Belt, the smile of the United States.
Our wage rates went up by twenty percent over the
course of that year, and that started to mitigate or
ameliorate in twenty twenty two and twenty twenty three. But
we experienced a massively ac situation in terms of supply
(31:43):
of labor.
Speaker 8 (31:44):
That's evened out.
Speaker 9 (31:45):
We were in the mid teams.
Speaker 4 (31:47):
That's evened out in that because we also talked about
didn't we pall about cleaning services like not staffing housekeeping
because it just can't find the workers. So do you
feel like you're at the right spot?
Speaker 9 (31:57):
I would say that there are pockets where we still
have shortages, and I think part of that has to
do with the nature of the workforce at this point.
So we've got a lot of the byproduct of not
having a really advanced immigration policy in the United States
and HTB VISA program, is that for at times, especially
(32:19):
over the summer, where you have peat demand, we don't
have the right type of labor that's willing to take
those jobs and be happy to start their careers in
those jobs. So I think they go together a lot
of the HTB people that come in on an HDB visa,
which is a temporary work visa. They come and they leave.
For the incidence of immigration that allows us to hire
(32:41):
people who are coming into the workforce in the United
States for the first time has been under some pressure now.
Having said that, overall, our vacancy rates have gone from
mid teens to mid single digits, so down ten points,
which is extraordinary, and that's over the last eighteen months.
So we are having a better time finding labor, but
they're definitely pockets of constraints, all right.
Speaker 4 (33:02):
Thanks to Mark Copplomaisian president and CEO of Hyatt Hotels.
Speaker 3 (33:06):
We now turn to the media and entertainment space. This week,
Paramount Global, the paramount of CBS, MTV and other networks,
reported fourth quarter sales below analyst expectations. This is largely
the result of shrinking advertising on traditional TV channels.
Speaker 4 (33:19):
I heard that before. Still Paramount said it sees profit
for Paramount Plus domestically in twenty twenty five. So for more,
we're joined by guitamranghanad than Bloomberg intelligence analyst on US media,
and we ask Gita about her takeaway on Paramount's earnings results.
Speaker 10 (33:31):
Streaming was definitely a key positive, and subscriber numbers those
came in slightly ahead of estimates. The bigger positive was
the RPOO trends. So remember Wall Street has now kind
of shifted its focus away from subscriber growth to revenue
growth as well as profitability, and they kind of scored
pretty well on the revenue growth metrics as well. So
(33:51):
arpoo increased about thirty percent through the year, and that's
on the back of a price increase, and then the
next thing, of course you look at was profitability and
their narrowed, so they're obviously taking a step in the
right direction. I think what investors are kind of really
cheering though, is that they did articulate some kind of
strategy to kind of get to profitability, and they outlined
a timeframe as well, so twenty twenty five is when
(34:13):
they're expecting paramount plus profitability, which is definitely I think
good news. The question is, I'm not sure whether it's enough.
Speaker 3 (34:20):
What does the ownership here want to do with the company,
And it appears by all accounts that they're just not
big enough to compete against some of these big technology companies.
Some of these big media companies like a Netflix, like
a Disney, and boy, there's a lot of speculation around Paramount.
Did they address that at all?
Speaker 10 (34:35):
They didn't. I mean the one thing though, that you know,
I think Bob Bkish got out of the way was
they are going to do something that is good for
all shareholders. He kind of underlined that because there has
been this constant, you know, question about whether you know,
Sherry Redstone is kind of just going to cash out
and leave everybody else hanging, and so he wanted to,
you know, kind of get that out of the way.
(34:55):
But again, you know, I think the focus is going
to come, you know, the M and A options. Paul
and we've discussed this seem to be shrinking at this point.
You know, Warner Brothers, Discovery obviously said they're no longer interested.
Other firms have kind of come taken a look. Apollo
being one of them, said not interested. The only interested
party right now is sky Dance, controlled by David Ellison.
But again, there's really no natural buyer for all of
(35:17):
the assets. He's not interested in controlling some TV networks.
He's only really looking at the studio. So again, I'm
not sure that Paramount Management necessarily wants to do kind
of parts sale here, so I think they're going to
kind of go back and focus on fundamentals. I think
some of the realistic m ANDA expectations are kind of
going to subside a little bit. We're going to go
back to fundamentals, I think for the time being.
Speaker 4 (35:38):
Well to that point, then did they buy themselves some time?
Because I could make an argument that, Okay, well the
slowing and AD sales and maybe that's then industry wide thing. Okay,
other players are getting hit. They did as a streaming subscribers,
so they have some time now.
Speaker 5 (35:50):
Is that a real statement or no?
Speaker 10 (35:51):
I think so. I definitely think so, because with streaming,
what we're going to see is we're going to see
some sustained momentum in those ARPO increases, so they're doing more,
you know, international price increases. They've kind of integrated showtime
into Paramount and with that they've been able to take
some price increases. So we're going to kind of see
that play out so pretty much most of twenty twenty four.
(36:12):
The question is what happens after twenty twenty four, But
they definitely have bought themselves sometime.
Speaker 3 (36:16):
What is the outlook for the studio here at Gita Studio.
Speaker 10 (36:19):
Unfortunately, for twenty twenty four looks really really bleak. So
the big movie, of course that everybody was kind of
looking at, was Mission Impossible. That's been pushed out to
twenty twenty five. We do have a few movies here
and there. I mean, you have Quiet Plays that's coming
out in June. There's obviously some anticipation building there. But again,
in general, Paul, the box office outlook for twenty twenty
four is just pretty weak, and that's just because of
(36:42):
all of those Hollywood strikes. Has pushed out a lot
of movies into twenty twenty five. It's kind of going
to shave off I think at least two billion dollars
off the box office.
Speaker 4 (36:50):
So presumably we're going to look through that, right, I mean,
presumably they're going to recoup that and they'll be pent
up in twenty twenty five.
Speaker 10 (36:56):
That is the big question, right. Yes, we've seen kind
of box office demand and you know, in general kind
of come back, but it's still about twenty percent below
pre pandemic level. So the big question is, Okay, when
all of those big titles kind of hit the screens
in twenty twenty five, are we kind of going to
see a bigger resurgence.
Speaker 6 (37:13):
The jury is still out.
Speaker 10 (37:14):
I think yes, it's definitely going to be better than twenty
twenty four. Is it going to be as good as
it was? You know, and it's heyday, I'm not so sure.
Speaker 5 (37:21):
Githa.
Speaker 3 (37:21):
How about the CBS television network and the Viacom cable networks,
you know, one point that was such a big part
of this company. Here, talk to us about the advertising
the television advertising market. What's kind of the forecast for
the next several years. Is it a growing business? Is
it a declining business?
Speaker 10 (37:36):
It's a melting ice cube ul just like you know,
just like the whole PayTV ecosystem. So you know, this
is this used to be back in the day about
a sixty billion market. It's shrunk. It's going to probably
hit about forty five billion by the end of next year.
And really, you know, this is just kind of a
progression of where all the eyeballs are moving. So they're
moving away from the linear TV networks to streaming, and
(37:57):
so we're seeing kind of those ad dollars follow those
eyeballs and going from you know, the TV medium to
what is now called connected TV, which is really all
the streaming platforms and you know, you're using all your
connected TV devices, the rokus and the Google Sticks and
all of that to kind of watch television, and that's
where all of the advertising is moving as well. Unfortunately,
(38:18):
Paramount doesn't have too much of a presence there. Yes,
they do have, you know, Pluto TV, which is their solution,
but it's not going to be able to kind of
offset the leakage that we're seeing in the television ecosystem
and that is really a problem for all of these
media companies, for Paramount a little bit more so.
Speaker 4 (38:35):
All right, Thanks to geta Maganathan, Bloomberg Intelligence analyst on
US media.
Speaker 2 (38:39):
This is the Bloomberg Intelligence Podcast, available on Apples, Spotter, Pye,
and anywhere else you get your podcasts. Listen live each
weekday ten am to noon 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
and always on the Bloomberg Journal.
Speaker 5 (39:00):
Contint cont
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