Bloomberg Markets Full Show (02/16/2022)

Bloomberg Markets Full Show (02/16/2022)

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From the financial centers of the world. This is Bloomberg Markets with Alix Steel and Guy Johnson. It's 30 minutes into the US trading day on Wednesday February 16th. Here are the top market stories we're following for you at this hour. Roaring retail sales. The U.S. consumer shows up and knocks retail sales estimates out of the water with the biggest jump in 10 months. It signals demand resilience in the face of inflation. De-escalation disputed the U.S. and NATO saying

there's still no proof of Russia's troop pullback. The Kremlin denies that and says it had nothing to do with the cyber attack on Ukraine. It all adds to geopolitical uncertainty and the view from the C suite. We'll break down the results from Barrick Gold and Paramount with CEO Mark Bristow and Bob Brackett. Their insight on inflationary pressures and streaming dynamics this hour from New York. I'm Kailey Leinz with Guy Johnson in London.

Welcome to Bloomberg Markets. Guy it's hump day inflation and geopolitics once again at the forefront. Yeah. Retail sales number that you referenced in the headlines is really interesting. Basically a we're in a situation where December was weak because of the pull forward effect October November but then we get a strong number coming in for January. I'm trying to put it all together and try and get a smooth picture of what's really happening with the consumer. I go back to the Michigan data which certainly pointed to the idea that the consumer is feeling the pinch right now. And as a result of which you would

expect them to be spending less. But that doesn't seem to be the case here though this number is and of course inflation adjusted. And Kelly I think this really goes straight to the heart of our question of the day from a concern from a corporate point of view are you in a position where you effectively have to defend your top line or your bottom line if you basically pass on prices are ultimately consumers get to stop pushing back and as a result of which the top line gets hit. But your bottom line is preserved. It's a really difficult one I think for a lot of CEOs to manage right now. I think the Haidi Lun CEO was interesting earlier on when he talks about the idea that maybe we could see people pulling back on beer purchases which is really serious stuff as you and I both know that's what we're ultimately coming here and the consumer's going to have to price. I said that. So the question the date that was a long way to get to it. Have we reached. Have we reached the limits of

pricing power. Well let's ask Kathryn Rooney Vera Baltic Capital Markets chief investment strategist and our very own Mike McKee. Bloomberg's international economics and policy corresponded. Mike let me come to you. First of all I just want to I want to figure out what is happening with the consumer right now. Because I think that's the starting points in terms of trying to answer this question. I thought you match data pointed to a consumer that was feeling concerned. I look at the retail sales

data and I see I could see whether it is still spending but it's the retail sales data real. The retail sales data is real. But there may be some reasons why it wasn't quite as good as it appeared guy. Because seasonal adjustment factors would have anticipated a drop off and maybe boosted the numbers a little bit more than they otherwise would because the numbers had fallen so much in December. As you say because of the pull forward effect. Also inflation is playing a

big role here. The retail sales numbers are calculated in dollars. So Mark higher prices mean more sales at least as far as the retail numbers are concerned. The one thing that I would mention however is that the consumer surveys don't really tell us a whole lot. Alan Greenspan famously said we watch what they do not what they say because while the overall numbers the overall sentiment has been that the U.S. economy is kind of lousy. Other surveys show that people think their own situation

is pretty good. So they can keep spending as long as they have that money in the bank. The question is what happens when that gets spent down. All right. So that's on the consumer side of the equation Catherine to bring you in here for the corporate side. Does the data we're seeing make you confident in their ability to continue to shore up their margins to exercise that pricing power. Right. And Mike's right for especially for demand inelastic goods like consumer staples. You really shouldn't expect to see too much of a drop off in terms of purchasing those items especially when we consider you know the lack of substitutes or as our team has has discussed internally a change in consumer behavior. So in the absence of either of those two things we should expect for example beer beer costs to continue to grow a

beer a demand to continue a remarkably robust as it historically has been but even more importantly is of course wages. So you know as wages go up more dollars in your pocket offsets the weaker dollar story. So. So I'm pretty confident in the ability both of the consumer to continue for the foreseeable future. I mean this can certainly change. And corporations both from consumer staples to discretionary to continue to be able to pass along those costs as wages continue to offset that weaker dollar. So basically people are going to get wage rises. They're going to spend those rate wage rises Catherine. My question to you is and you're kind of alluding to this. What are they going to

prioritize. It sounds like you think they're going to continue to privatize Bear which is I would have thought fairly important. But nevertheless what else do they prioritize. Well consumer staples ISE are by definition of course you know basic goods that people are going to continue to consume. Bigger beer being one of the most important and well well known of those you know kind of inelastic goods. So discretionary I think is where we need to historically look. But a red hot labor market I think is going to continue to give a boost to consumer demand. What I'm really looking at though guy is is is confidence. Confidence

has been on the decline. And that's of course because of inflation expectations which the Fed is particularly keen on as those continue to rise and start to dig into purchasing power. Then you should expect corporates to be unable to further pass along those costs. We are still seeing opportunities however and in Staples especially those higher priced items you can continue to pass along those costs. And I'm still pretty positive especially in this first half of the year with economic growth

being as robust as it is the wealth effect. We haven't even discussed that. Equity markets still remain exceedingly high. We have asset prices across the board. You know you're here. You can you can finance yourself. Your house is worth a ton of money. Wages are increasing. Retail sales just came out this morning spectacularly strong. So things are still looking good

from the perspective of corporates to be able to pass along and consumers to continue to foot the bill although completely complaining about it all the time which one can understand. But they're still be buying beer. And I would love to talk more about that right guy and ISE fundamental disagreement on whether Stella Artois is or is not a good beer. But Catherine did mention the Fed there Mike. So I have to go to you on that because of course we are going to get the minutes later on this afternoon. Strong retail say sales data consumer looking good inflation running hot. Is there any reason not to move 50 basis points next month. Well there's reason to read 50 basis points. If you think that the Fed is behind the curve the numbers are sort of justifying your viewpoint at this point. However we've only heard really from Jim Bullard. So we'll need to hear from

others to see if they agree that that's likely to happen. But we could get another tantrum today in the markets as we did the last time the minutes were released. Because if there's a lot of concern expressed or if they talk about 50 basis points in the minutes then people will read into that. I think Deborah what they might do in March. And they'll be entered to see whether the market ultimately extrapolates to get 50. You extrapolate to another 50. Catherine

what's your take on this. I think if Russia does invade Ukraine 50 Pepsi's completely off the table. Anything can derail this thread. This is a Fed that I think has been behind the curve should have started tapering you know months and months ago and should probably go 50 IBEX. But as I say the Russia issue could take that off the table. Well and speaking of some of the other risks that are out there other than central banks and in geopolitics Catherine where do you feel comfortable putting your money. They have three main overweight leads especially in rate

sensitive and inflation sensitive sectors. That's been my view in bull steak for the past year. We've been talking about inflation being the primary risk for more than a year and I think that's what we need to continue to look for value especially in alternatives assets that have low correlation to the public markets. You want to be invested in alternatives. Even cryptos even even commodities want to be in sectors such as industrials materials staples banks. I even added to our overweight list health care because I think valuations are attractive there. I think you want to stay away from the emerging markets at this juncture. It all depends on what the Fed does. You know if the big banks are

right it's kind of a race to be the most aggressive in terms of who can say how many times the Fed is going to hike. I personally think the Fed is going to do it is going to surprise on the downside then to the upside of what the currently Fed funds future rates are pricing in. Anything can derail this feds intention to tighten. I think it's a Fed that's unlikely to go too aggressively because that could completely put a brake or reverse this economic expansion. Covid. There's a lot of ifs and buts in that though and we're trying to figure out what the insert uncertainty is ultimately going to bring us and how it is going to crystallize. What where do you sit on cash right now.

I'm wondering how you get some optionality around some of this uncertainty. There is a lot more downside than upside from current levels. Inflation is going to peak in March by our forecasts. So we're going to see above 7 percent inflation. But they're on from April through the end of the year. We're going to see inflation mean revert. And that's because of statistical base effects. Last year inflation was very very high from April through the year.

So you're going to see inflation come down. That's going to give the Fed a breather in terms of having to increase rates at least from an inflation fighting credibility perspective. So I do think that there's still equity upside. I think that there's a lot of volatility inherent in the Fed's intention to remain data dependent which in my view they no longer should be. There should be a plan of attack to reverse the inordinate monetary expansion and stimuli that we've seen thus far. But that data dependency inherently brings volatility. So yes be ready to weather that volatility. I would be buying on big drops in equity markets. As I say. I think it does come down to the Fed. It's a big if but that's the

primary risk. I think the Fed as I said is already behind the curve but they're loath to increase rates too aggressively and precipitate that change in the economic cycle which historically has been at the hands of a too aggressive fed. All right. Well we are exactly one month and four weeks away from that Fed decision. Thank you so much to Kathryn Rooney Vera of Baltic

Capital Markets and as well to Bloomberg's Michael McKee. Now coming up production is up. Costs are down for the world's second biggest supplier of gold. We'll talk with the CEO and president of Brickell Mark Bristow. This is Bloomberg. A big quarter for Barrick. The world's second largest gold producer beat earnings estimates raised dividends and unveiled a

billion dollar share buyback and trifecta. Joining us now is Barrick Gold CEO Mark Bristow. Mark congratulations on the big quarter. Let's talk about challenges on the inflation front that you your peers companies across the board are dealing with higher labor costs higher freight costs. How are you finding yourselves able to navigate that. And what's your view as we move forward through 2020 to. So Alex it's all part of business. You know managing costs. We've got a big margin. I think the challenge is to keep a focus on that margin. The way we do that is allocate capital at a longer term. Twelve hundred dollar gold price. And then you know it's all about management. And as you know we set out to to

build a different company in the new Barrick with a very big focus on best assets and best people. And I think the best people part is critical. Our mining industry needs to get on the front foot bull something that's more acceptable for future generations. And and take a different position when it comes to how we manage our business.

Given that Mark and I've known you for a long time and you're a pretty convincing guy why is the market treating you in the way that it is right now. What have you got to do to convince the market that this is a higher value business. What am I missing here. So I think Alex you know as you know I mean you you're not known each other for a while. I've I manage on very clear milestones. I think we we set out to do three big things in combination with both the Barrick Red Gold merger and also the J.V. and Nevada and and taking Acacia private. And we started out with a four billion dollar debt. We said one affects the balance sheet today. We've got no debt. We want to build a business that pays real returns based on the strength of the PML. So fix the business next which I believe we have. And this this 2021

despite the challenges of last year show what high quality assets can do. And and then then return to shareholders. And you know we've we started out four billion dollars of debt. Net debt. We've got net cash. Now we've paid out 2.5 billion dollars of cash to our shareholders. We've got a strong platform of top quality assets best in the industry. And now we deliver. And you know this is a long game. And as you know gold prices go up and down. Costs go up and down. Right. And you know it's it's it's a long haul. And I think we're really at that point now to stand up and say we deserve a better rating in the market. We support

that rating with our high quality business. All right Mark. Well stock prices go up and down just as as you say gold prices go up and down. So let's talk about the gold price. What is your outlook in an environment where central banks are moving towards tighter policy. Yeah Alex. Look. You know if they carry on at this snail's place

we're going to have a major problem because we don't get anywhere near dealing with this negative interest rate. That's good for gold. I think added to that is all this free money. This massive quantitative easing the huge governmental debt in the in the developed world are all worrying factors. And and you know I've just heard the previous speaker. You know this concept that it's all going to be different. We've been there before. Guy you know this. And I know this world is in a very precarious place both economically and politically geopolitically. We've never seen so much conflict for two decades now. And and you know gold's always works well. And those times and of course very closely

has copper and copper is is a is a new modern metal more strategic than most I believe. And and so I think Barrick is really well positioned to build it to build a proper business. And not only just relying on this sort of sentiment side of things but a high quality big margin business because we have world class assets. Mark you are no stranger to large scale consolidation in other mining exacts are sounding very cautious at the moment. What is your attitude. Do you think we're still in a world where large scale consolidation is possible that investors will be backing

that. Do you see any opportunities that could push you in that direction. So you know there was a unique moment where investors and companies like Barrick and Randgold and even the Acacia deal and and and and the joint venture deal between Barrick and Newmont really delivered values because we all work together and consolidation needs that needs shareholder support and it needs shareholders to think longer term. I've said this for a while and. And right now what we've seen is a another round of smaller consolidation at the top of the market. The margins that have

been paid are very similar to those that hurt the industry in the last cycle. And so you know I do believe that the industry does need consolidation. It needs careful rearrangement of the assets in inappropriate baskets. Well what does that mean for Barrick. Mark are you looking at any assets in particular that you would be interested in potential meet making some potential acquisitions. You know Alex I've always looked at opportunities and done very few. And what's driven I think the success of my

career and the companies that I've been involved in is the things we didn't do. And so you know it's easy to do deals at these sort of prices because high gold prices and commodity prices floats all boats. And you can see the potential risks. And and we're very careful about sticking to our investment criteria. Of course we're not shy of doing big deals as we've proven in the past. But right now Barack's got some very solid organic opportunities to continue to grow on the base that we've built. And they've focused on value. And and and we've got a very strong balance sheet strongest in the industry.

And we've got a policy of making sure that we reward our shareholders as owners rather than just investors. And and so I think we know we will look at opportunities when and if they are off. Mark great stuff. Thank you very much indeed. We look forward to the next earnings season. Maybe we'll see you in London or New York. Mark Bristow Barrett president and CEO thank you very much indeed sir. Coming up Morgan Stanley shares dropping. There's a Bloomberg scoop that is now on the terminal. More on the bank's involvement on the ark. Goss blow up and big block trades that

were part of the unwind and how the regulators are now looking at that from Kelly. And from me from Alex. And from me this is Bloomberg. It turns out that Morgan Stanley's role in the unraveling of Bill Wang's family office breathed new life into a federal investigation. The bank shares are dropping on this Bloomberg scoop. The probe was examining irregularities in Wall Street's lucrative market for BLOCK Trade Street. Our Natarajan got the story and he joins

us now. So Sherry congratulations on the scoop. What do we need to know about this investigation and how it has evolved since our CAC. It is definitely something that a lot of traders on Wall Street are paying close attention to the market for block trades. When banks have to privately negotiate and sell large blocks of stock

with their prominent hedge fund clients is pretty big. There are about 70 billion a block trades lost in Morgan Stanley is a dominant player in that field. Over the last few days. We've of course become aware that the DOJ and the S.E.C. are looking into the kind of conversations that take place in this area. Specifically they're trying to figure out if the banks have been illicitly leaking some information and if some of their favorite hedge fund clients have been acting on that information before they actually trades hit the market. That is very troubling. We don't know what this is. And the DOJ

may be able to find. This is something that started years ago going as far back as 2018. But what happened with our egos and the investigations that followed after that has breathed new life into this probe to block trades and Wall Street. Shriek Can you just walk us through how this relates directly to what is happening with the Unwind debacle. GOSS Clearly this was

something that needed to happen and needed to happen quickly to avoid market disruption. Can you just put these two things together for me and give me an understanding of why this specifically is becoming a problem. What we know right now Guy is specifically that in the months after our egos we knew that it already spawned a bunch of inquiries from ranging from whether there was collusion in banks market manipulation and a few other props as investigators swept through the wreckage of our egos. They were tracking some of the trades that happened in those last days of March when tens of billions of dollars of

belongs our cargoes died. Holdings were hitting the market. Morgan Stanley had built up one of the biggest exposures out there and was one of the first to cut its losses and try and unwind and get out of it without getting hit with a big loss. They did have a nine hundred and eleven million dollar loss but they were one of the first ones on. Forget what the regulators are probably trying to figure out is what kind of conversations that they have. And our understanding is from there. This probe has expanded into some of the other trades that they have brought into market and what draws some of their top executives might have played in that great great story. Tre nice scoop. Thank you very much indeed. Shery Ahn Rajan on what is happening

with the investigations around. Okay got some blocked rates. Talking of bank regulation President Biden's five nominees for the Federal Reserve. They're in limbo now. We're going to talk about this next. This is Bloomberg. It's been an hour since the start of us cash trading. Let's get more with Bloomberg's Credo Gupta who has been following the moves. And Christie it's different from yesterday and that stocks broadly are lower but energy energy's higher which is a reverse of what we saw on the Tuesday session. Right. And at the end of the day it is tech that's dragging the benchmarks lower

because it does have the heavyweights. I mean energy does not have. Take a look at this though. You have the Nasdaq 100 down about one point two percent reflective of that pain you are seeing in the technology sector. But also put this into some context because yesterday the Nasdaq rallied two and a half percent. A pretty huge rally. You can see that translate to even the Asian session where the cause DAX is the Korean tech index. And even the Hang Seng index actually had some really strong gains. KORSAK Its best day since June of 2022. So some of that's just going to be pairing those gains that we saw from last week

or actually from yesterday from the last session. But also the idea that some of the geopolitical uncertainty is starting to weigh on stocks as well. I really want to show out the point of tech pain though because it's not just the geopolitical uncertainty. You're also seeing headlines here come from Alphabet from Google and say that well they're actually going to kind of curtail some of that ad tracking a move that's similar to what was Apple kind of implied on the social media name. So you can see any companies like I have that relationship or that revenue relationship to this kind of practice of advertising attracting data and selling data. Well those stocks are really getting hit even harder. Relative to the broader indexes and relative to that big tech move in general. But like me say let's circle back a full circle to that geopolitical uncertainty

because it's not just tech that shows pain. You're actually seeing a premium that geopolitical risk premium get baked back into the oil market. Now Brent crude crossing at ninety five dollars a barrel once again inching closer and closer to a hundred dollars a barrel guy. Great stuff Chris. You very much indeed for the update. Let's get back to one of the other main stories that we've been tracking over the last few days the standoff in the US Senate Banking Committee. The Republican the ranking Republicans basically vowing to keep blocking the vote on the nominee. Sarah

Bloom Raskin until he gets some answers. Let's go to Washington and Bloomberg's Amari Holder Amiri. I'm trying to understand what the timeline now looks like whether all five get continually held up whether it just comes down to Bloom Raskin whether it's cook as well. He just give me a kind of sense of what progress is going to look like and how slow or fast it's going to be. Well guy you and me both when it comes to the prospect for the timeline we just don't know. It's quite elusive at the moment. And potentially all five of these nominees from the president for the Federal Reserve could be held up in limbo because of this. What you have is the Republicans not moving forward in the

committee to move on all the nominees because of Mrs. Sarah Bloom Raskin. Now you have the other senator the chair Democrat Sherrod Brown coming out and saying he's going to keep them linked together which basically pull puts in hostage all five of them including Fed Chair Jerome Powell. Now to make things a little bit more complicated the Senate next week is on recess so this could potentially bleed into March. All right. So it could be a while is I guess the point of the story. Thank you so much to Bloomberg's and reheard and down in D.C. And let's get more on this now. Terry Haynes Pam policy

founder is joining us. Terry where do you put the odds that Sarah Bloom Raskin will indeed ultimately somewhere down the line get confirmed. Good morning Kelly I've got Bloom Raskin at about 40 percent and same with Cook I'm on the record as saying that I think that Chair Powell and the new vice chair Brainerd are about 70 percent likely. I also see Mr. Jefferson as as likely. But what you got here is a situation where I think largely of the White House and Senate Democrats doing where you know as you point out they've linked all five together. And if you're going to do that

then you're hostage. The weakest link. And right now Bloom Raskin is in pole position for Weakest Link. But I think Cook is not looking particularly well either. So this isn't and this is not small stuff. I'll say the senior Republican on the Banking Committee Senator Toomey says that there are 36 questions for the record in which Ms. Bloom Raskin claims she either did not recall or was unaware of things and also criticized pretty much every interaction she's had with the Republicans on the committee. This is not a small thing that's going to get papered over easily. So I think markets need to understand that this standoff will happen. Move will continue for quite a while.

Terry let's just dig in a little bit more in terms of what the problem is here. I struggle to believe that this is about a fintech company. It's off to levels guy. I don't struggle to believe it it's that it's about a fintech company. When you've got the circumstances around that that there are. Firstly and secondly when Muslim Raskin says she doesn't recall the interaction with the Federal Reserve you know that strains some credulity in the eyes of a lot of people including The Wall Street Journal editorial page which has been hammering this for a while. But you know there are larger problems here ranging from ranging from looking like you're the proxy for a lot of green New Deal work to concerns about ESG. You know all kinds of concerns that the Fed might be going beyond its mandate by approving some of these people. That's not a small thing in the

Senate because remember the Fed exercises congressional power and the Fed excuse me the Senate said to the Congress sets the Fed's mandate. In this case the dual mandate which exists by law. So the idea that they'd be appointing above potentially appointing a bunch people that are prepared to go beyond that and and stretch that is a deeper concern than I think most people understand. Well talking of the Fed and the monetary policy reaction function to higher inflation the Biden administration has continually said we trust the Fed to fix it. The Fed is going to do its job. Obviously the composition of the

Fed now in question. But when we think about the political issue of inflation how much is that dogging not just the Biden administration but congressional Democrats as they face the midterms coming up in the not so distant future. Terry I mean is this issue number one when it comes to voters heading to the polls. But this issue is number one for the voters wanted to do the polls you're quite right Kelly and you know it's an interesting push off by by the Biden folks. On the one hand they want to say that inflation is really being handled by the Fed and they'd

like to put people in the Fed to handle it. But by all appearances you know that the Fed would not handle it with those new people. In a particularly strong sort of way. So it's one kind of disconnect. The second disconnect as you identify is that congressional folks need something to talk about and need to be seen and need to be actually doing things. Excuse me. So what what needs to happen here ultimately is they need to be showing some action. You know with a few months left before the midterms they're really not going to be able to do it. So now you've got people flailing around on issues like

moratoria on the gas tax. You know something that something that's supposed to fund the infrastructure spend to show you how much help fund it. Which shows you just how desperate a lot of people are getting to show real action or real sympathy with the normal folks on the ground. Terry the president tried to link high gas prices higher energy prices with the situation in Ukraine. A. Is that credible. Is that something that works with the American people from a policy point of view. And does this give him potentially an exit route from the challenge i.e. people going to see high gas prices but he's going to say hey this is on Russia.

Yeah I just I don't find it particularly credible there is a long litany now of and I think the more that an average citizen delves into and I think the less credible they would find it the you know it doesn't pass the smell test in part because the average person thinks of all that is very far away. The more knowledgeable person would understand that the United States is a net exporter now. So the idea of of of higher prices resulting from a commodity that we've that we've got at home insufficient sufficient levels is something that's not going to be understood. And also I'm not

going to resonate. You know the White House I've I've long thought the White House continually looks like it's behind the curve reactive which is never good. And a lot of the policy response tends to be that you know that old childhood rhyme about you know it's here. They're the man behind the tree you know who else but me. And yeah I don't think that's going to fly. In fact I think it's probably going to make their political problems more entrenched and more intractable. Well let's talk about the foreign policy response. We understand the headline Just Crossing the President Biden will be speaking with German Chancellor Olof Schultz later today to 30 p.m. Eastern Time. How

would you grade this U.S. president and his handling of the Ukraine crisis so far. Has he succeeded in bringing America back to front and center leading the west in terms of geo policy. I think the president has a very difficult hand. And it's one that he was not dealt but in fact has long preceded him certainly going back to the administration of which he was the vice president. You know you've got a bunch of recalcitrant and and scattered European allies. You know you can do your best to try to herd this particular cats but they're not going to be herded. And Germany has whatever we all think of Germany's energy decisions. But you know Germany has long felt I mean for a century or more

as long felt itself in the middle between Western Europe and Russia to to a great extent and acts and reacts accordingly to that. And yes he's got a very difficult president. Our president has a very difficult job trying to keep European allies together united and effective. When what you've got here on the other side is largely a Russian president who's interested in rope a doping and and maximizing those those strains as much as possible number one. And number two really seeks a an expansion of a sphere of influence that that the West seemed it would have and would not be in. Is not it not really wanting to give up. Terry it's always great to get your insight. It's incredibly useful. Thanks for sharing it with us. Terry Haynes of Pangaea Policy. Thank you very much indeed. Coming up we need to talk

about a company that used to be called Viacom. CBS was always a bit of a mouthful. It's now going to be paramount. We're going to talk about streaming. We're going to talk about the legacy business. We're going to talk about consolidation. Bob Blackish the CEO of Paramount coming up next. This is Bloomberg. This is Bloomberg Markets average. GUPTA You're looking at a live shot of the principal room. Tune in to Bloomberg's monthly series Cheap Beat Drops. This episode featuring Macy's CFO Adrian Mitchell. This is Glenn Beck. There's news from Viacom CBS on several fronts. The company announced it's changing its name to Paramount Global.

And for the first time it broke out the subscriber numbers for its Paramount Plus streaming service. It ended last year with almost 33 million subscribers. But the stock tanking after the results down about 21 percent in the U.S. session. Joining us now is president and CEO Bob Backlash. So Bob streaming clearly doing very well but something analysts are flagging as an issue is the cost and the pressure it is going to put on profits as you make these investments into streaming. How long will it be until you see that actually pay off. And it no longer is a cash negative operation. Yeah sure. Well look

we're tremendously excited about what's going on at the company we now call Paramount. Last year when we staged an investor event we talked about our streaming strategy. We talked about the launch of Paramount Plus and we talked about the need to invest in it. And since then we've been doing exactly what we said we would do. The only difference is we're having much more material results

more quickly than even we thought at the time. You just look to our fourth quarter you reference some of the statistics but we added nine point four million subs globally in pay. Eighty percent of those paramount plus by the way we added 10 million M.A. use to our market leading free ad supported streaming television product Pluto TV. So we had an amazing quarter in

streaming. And by the way an amazing quarter in our traditional business to have the top four shows on linear television. And CBS is FBI Equalizer and NCI s and Paramount Networks Yellowstone. We lead in multiple categories whether it's the number one comedy the number one kid show the number one premium show index your new blood. And we just had two number ones at the box office in Scream and Jackass. So we're tremendously excited about what's going on at Paramount. Pope to follow up on Katy's question though. How long are you going to have to keep investing in the streaming business to get

the kind of scale you think you're going to need. And at what point do you get to the same kind of margins that you'll seeing in Libya right now. Sure. So a couple of things. In our presentation yesterday we provided new segments including TV media. That would be what you refer to as linear as well as DTC. So think streaming as well as studio which is the film business. In terms of your question on investment and margins what we said

yesterday is that we would have peak streaming losses in terms of investment in 2023 and then they would improve from there which would return the company to total earnings growth in 24 and beyond. We see the streaming business as an incredible opportunity for the company. We have a differentiated playbook. We're playing both in free and in pay. That access is dual revenue streams advertising and subscription. That's additive to our streaming economics. We of

course benefit from our broad content portfolio as well as our global reach as well as the fact that we have strip platforms beyond streaming. You put that all together and we see a streaming business that builds over time to margins approaching our TV media business. Well Bob of course you aren't the only player in the streaming game and you have set some pretty ambitious targets in terms of subscribers. Are you confident it's going to be enough for you to really compete with the likes of Netflix that already has over 200 million. Look that's where I would say there's a lot of talk about we're not big enough to succeed et cetera. But I would just say look at the facts. The facts are in the fourth quarter we had the

fastest growing streaming service in Paramount. Plus the facts are in 2021. We had the fastest growing brand in the United States in Paramount Plus. And by the way that wasn't in streaming. That was of any brand in the United States. The facts are that we have the number one fast free ad supported streaming television service include TV in the United States. And by the numbers I've seen we not only led in the fourth quarter we increased our lead in the fourth quarter. And then we have all

this strength on the divisional TV media side and on the film side. So you know that to me is proof of the power of our portfolio the power of our content engine. And again early days. But you see us direct that the streaming and we're having incredible results. So we're very excited about where we're going to go. And part of that was reflected in our increase in guidance of pay streaming subscribers to 100 million in 24 from the 65 to 75. We talked about million last year. Nevertheless Pope we find ourselves in a position where the consumer is likely to be stretched. Inflation is going up.

People are going to have to make some tough decisions. You've got a situation where you and your peers are having to invest very aggressively to try and get the numbers in terms of subs that you're looking for. Is this a market that you see continuing to consolidate. Is there an opportunity out there to put more businesses together to maybe take some costs out to

generate bigger numbers bigger overlaps. I'm wondering how you see the landscape developing over the next few years. Well a couple of things in response to that. First of all we see a very large and high growth total addressable market in streaming particularly globally. Second piece is we are in early in our growth curve particularly at Paramount Plus. So we see a

lot of upside there. The third thing is we are going at this in a differentiated way. We're going out in a broader way than our competition and certainly a broader way than a pure play stream. And I would point to two some aspects of that with respect to your question. The first point there is our broader streaming business model. We have the market leading free service for

consumers that want free. We have two versions of our pay service Paramount plus we have essentials which is our lower price service which includes advertising and we have a premium which is an ad free version at different price points so we can meet consumers where there are. And we're confident our value proposition particularly as you look at the breadth of our lineup we are the broadest streaming service out there both in free and in pay. That combination of sports including the NFL news and entertainment entertainment spanning scripted unscripted market leading kids portfolio movies of all shapes and forms. It is a very compelling proposition. And again in the fourth quarter you really saw the power of that. And it's not just about your streaming service. You also license out original content to other services as the

way you think about that and your desire to do so. Evolving Bob. Absolutely. When we put Viacom and CBS together we then had critical mass to go launch a scale pay service. That service became paramount. Plus we launched it late early last year and 21 in March. At that point we made the strategic decision to point our content engines and our franchise IP at our in-house streaming platforms. And you saw you see the early results of that to date. And again in the fourth quarter things like the Yellowstone spinoff 1883 which has been a huge success. Things like moving SEAL team from CBS to Paramount plus exclusively things like movies coming to Paramount. Plus from Paramount including by the way those two number one movies in the first

quarter Scream and Jackass will be on Paramount Plus in March of this year as part of our fast follow i.e. 40 to five day from theatrical debut to streaming strategy. So there's a lot going on there and we're tremendously excited about our ability to be a very significant player in streaming by pointing our content engine the powerful paramount content engine in-house. Bob it's great to catch up. Thank you as ever for so much of your time. Bob Barker is the president and CEO of Paramount loving the new name of that Hollywood halo effects right. Keeping you up to date with news from around the world. Here's the first word. Here's where it could come to. Thanks guy. Retail sales in the US rebounded by more than forecast last

month. Americans kept spending through the pandemic and rising inflation to help drive the recovery. The value of overall purchases rose three point eight percent. That's the biggest gain since March. Russia has announced that more troops are returning to their bases after maneuvers ended in Crimea. But Western officials remain cautious. NATO's secretary general sent Stoltenberg said there's no proof of de-escalation on Russia's part. And the Kremlin hasn't announced pullbacks of large numbers of troops along the Ukrainian border. This is Glenn Beck.

2022-02-21 14:04

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