Daybreak Holiday: Apple's New CEO, Oracle Earnings, Paramount Deal

0:00Here are 5 Reasons to Subscribe to Bloomberg News Now. 5. You Get the Latest News From Around the World Instantly 4. It saves you time. Your day's busy. Catching up takes just a few minutes. 3. It's available 24 hours a day whenever you need it. 2. It's Convenient. Listen on your smartphone or smart speaker. 1. It's Easy to Find. Subscribe on Apple Podcasts, Spotify or anywhere you listen. 5. Reasons. Stay on top of the news. Bloomberg News Now. Hello everybody. Thank you so much for joining us for this special edition of Bloomberg Daybreak. US markets are closed for the Labor Day holiday. I'm Nathan Hager. Coming up this hour will update you on where a mega media merger stands on the legal front. Bloomberg Intelligence Senior Litigation Analyst Jennifer Re will join us on Paramount Skydances 110 billion dollar takeover of Warner Brothers Discovery. Plus, big tech in focus this week. Bloomberg's Brody Ford will join us from San Francisco to get

1:01us set for oracles earnings on Wednesday. Also Wednesday, Apple holds its biggest product launch of the year helping to kick off the 10 year of Apple's first new CEO in 15 years. John Turnis and for more on this we are pleased to welcome Bloomberg's top reporter on the Apple and consumer tech beat. Mark German is with us from Los Angeles. Thanks so much for being here. I hear so much about a foldable phone coming, a foldable phone coming in Cupertino this week. Is that all we're expecting? Hello. It's not all we're expecting, but that is going to be the center piece of Apple's launch on Wednesday. Samsung, some of the Chinese companies have been offering foldable phones for many years at this point, but now Apple's getting in the game, which is going to make it a lot more mainstream. And their differentiator there is that their version is a bit shorter and wider, which means it has an aspect ratio that is more interesting and is a better viewing experience for video

2:01and for book reading and for gaming. And so this should be a little bit of an interesting concept. When closed, it's about the size of a passport and when opened, it's about the size of a small iPad. So that's going to be pretty interesting, but it's also going to be fairly expensive coming in at over $2,000. Wow. So how much are we expecting this to resonate with consumers at a price point like that? I don't think the first generation of this product is going to be a mainstream device by any means. I think this is going to be a product bought by early adopters. It's going to be a product bought by people coming over from the Android ecosystem. And it's going to be a product bought by the people at the very high end of the Apple ecosystem, right? The people who are going to always buy the top end version of the Apple products, the most expensive Apple products. Now don't get me wrong. Apple has tried this early adopter product strategy before. Remember the Apple Vision Pro launch two years ago? That was $3,500. That was very expensive, but also very heavy and very cumbersome.

3:04That product really didn't resonate. But I think this foldable will do much better than that. How so? Why could this one do better than, as you say, the Vision Pro that kind of went by the wayside, I think? Well, believe it or not, foldable phones are more mainstream than headsets, right? Like price aside, a headset is something you got to put on your head. A headset is something that you got to boot up. Limited content offerings, limited applications, limited use cases, two hours of battery life. And of course, also very heavy, but a phone is a phone. And there's going to be some interesting capabilities there. And also that's a big price difference, two, $1,500 in between. You know, this is also coming after Apple raised prices on some of its existing lineup, including Macs and iPads, to come out with a new product at an even higher price point like that. What does that do for consumer sentiment potentially? Apple rolled out a recent program called Apple Upgrade, where now you could lease your phone, lease your iPad, lease your Mac, lease your watch.

4:04And so you're paying a monthly fee that's less than an installment and sort of like leasing a car. And at the end of your lease term, you could sign up for a new phone or you can pay off the balance and keep the current phone. But the reality is, is that most people don't pay full prices for their phones, right? A lot of people are using trade-in programs, financing, installments. And so yeah, there'll be the sticker shock of $2,000 plus. But when reality comes down to it, you're not paying that. You're paying something month to month on your phone bill most likely. Is that expected to be a significant revenue driver for Apple going forward, the upgrade strategy? I think so. I think over time, a lot of people, particularly in the US, will move from paying full price, sticker for Apple products at the Apple online store and Apple retail stores and do that leasing program. It's pretty compelling and it's pretty easy to use. You know, it's really interesting as well to see a major product launch like this coming after years

5:05where the iPhone hasn't really upgraded significantly over its last several cycles and to have John Ternis come in just over a week after taking over CEO to come out and be the face of a product launch like this. How much is writing on John Ternis when it comes to getting this product launch right? Well, it's no coincidence. Typically, when Apple does these types of big transitions, they're doing it at the very end of the year or at the very beginning of the year. Now, they're doing this one on September 1st, completely intentionally timed for Ternis to be the one to introduce this product. They want to give him these air pockets to have these major products at the beginning of his tenure. Now, don't get me wrong. All these devices were led by Ternis in the development process, but it was still Tim Cook's Apple and this was being developed and Tim Cook was a big proponent of doing a foldable iPhone, doing more smart home devices, doing more in the TV space. Ternis led the development and he's going to be the one to introduce it.

6:07But it's going to be a while till we see what are the new types of products developed entirely under Ternis's watch. Are we expecting then that Ternis is going to be spearheading a lot more new product for Apple given his background as the hardware chief in Cupertino for so long? Let's be honest, Ternis has been there the last 25 years and he was the hardware chief for the last five, six years. And so he has been there and I'm not sure there's been anything under his watch that he was unable to do with Cook as CEO, right? So I don't think anything is going to change in terms of being wholly new immediately. It's going to be a while till we really see the impact of Ternis as CEO. Speaking with Mark German who covers Apple for Bloomberg News, getting us ready for the next product launch, probably one of the biggest events for Apple coming up later this week with the release of the expected foldable iPhone. And of course the first big event for John Ternis as CEO.

7:10How much of a change are we expecting when it comes to the direction of Apple with Ternis at the helm? And Tim Cook still in the company as an executive chairman. I don't think anything is going to change for the next two or three years. I really don't. Anything of large significance. I think there's going to be a lot of continuity there. I mean, if you look at the pay packages, Ternis and Cook are basically getting paid the same. It almost feels like a co-CEO situation, right? So I honestly don't think there's going to be a ton of changes imminently. I really don't. And when it comes to the type of focus that Ternis is going to have as CEO, give it his hardware background, not necessarily having the same kinds of focus that Cook had in the past when it comes to services and dealing with government officials in particular, how do you see Ternis sort of navigating that? Well, during Tim Cook's tenure, he didn't get involved in product development pretty much anything close to anything other than a demo.

8:11Here's what I expect from Ternis. Ternis is not going to touch much on the procurement side, on the operational side, potentially on the government of fair side. He's going to be focused on product development. So it's essentially the opposites. But the through line here is that they both are focusing on the things that they know best and where they can make the biggest contributions to the company. And so Ternis is placed to make the most contributions is on product development. It's on engineering. Tim Cook's biggest place to make an impact was on operations, was on government relations, was on supply chain, was on procurement. And so they both have picked their spots and Apple did super well with Cook picking the right spots. And I anticipate Apple to continue to do super well with Ternis picking his spots correctly. How do you see Ternis picking his spots when it comes to artificial intelligence? We haven't even touched on that aspect of the business here. Are we expecting much further clarity on how Apple is integrating AI into its products at this event this week? So the AI push for Apple this fall will be in the smart home.

9:13They're going to launch a new smart home device, almost like an Amazon Alexa. They're Echo show. So a speaker with a display. And this is going to have deep AI integration, deep Siri integration, being able to control your home, being able to give you access to your personal content using AI based facial recognition. So when you a person walks up to it, it recognizes who they are and it could tailor the content specific to them. All the new Apple devices are going to have Siri AI. And so that is going to be the through line there for Apple's product rollouts for this year next and and beyond. But in terms of major blockbuster new chat GPT competition, something to really go ahead to head with Claude. None of that is coming anytime soon. How do you see Siri AI performing does it stack up to other chat bots effectively now after all this time where we've talked about Apple trying to or needing to play catch up. You know, Siri from the last 15 years or so, it didn't even play in the same universe as chat GPT or quad or Gemini, right?

10:16Siri AI enters that universe. It has chat bot like functionality. You have LLMs. You have similar underpinnings to Google Gemini and they're offerings there. But it's nowhere near as effective. It's nowhere near as fast. It's nowhere near as capable. And I guess one good comparison, a very simplified comparison. It's like you've got iMovie, right? The basic movie editing suite on Apple products and then you've got Final Cut Pro and chat GPT Claude or like Final Cut Pro and Siri AI is like iMovie. And before Siri AI, Apple didn't even have an iMovie in the AI space. When it comes to Apple's stock performance, there's been a lot of comparison to the company to others in the Mag 7 and whether Apple's focus is different from some of those when it comes to AI. Is AI integration going to be important for investors going forward when it comes to this stock continuing to rally the way it had in the Tim Cook era?

11:16I think we'll have to see, right? There was a point where any AI related news over the last two years would move the stock prices of any of these companies in the Mag 7 to a very significant degree. When andthropic and open AI IPO, right, we will see if that will have the same impact, right? Like if there's AI news related to some of these other companies, will it really move the needle as much? And so I think only time will tell it's possible we're in a bubble. We'll know soon, right? The IPO's of open AI and inthropic are going to tell us a lot. Well, how much pressure do you think John Ternis is under coming in a CEO after the spectacular run we saw from Tim Cook over the last 15 years, almost 2300% gain for Apple stock in his tenure? I don't think he's under much pressure. I'll be honest with you. I mean, Tim Cook is still there. He's still intimately involved. The pressure is going to really be on turnis when Tim Cook actually takes a step back, but that has not happened.

12:16And so let's have this conversation in three, four years, see where we're at and if the pressure is on, but he has been handed an amazing product roadmap. The next three, four years of product rollouts are going to be chalk full, more new products in the next three years and we've seen over the last 15 years. And so it's an amazing time for him to be walking into the space. It's a ready made situation for him. Do you see the return of one more thing when Ternis makes the stage this week? That's a good question. I'm not so sure about that. He's got a remake Apple in his own image. All right. Very good. We'll be looking forward to Ternis taking that stage in Cupertino, California for the first time as CEO of Apple. Thanks for this. Mark, really great to have you on with us. That's Mark German of Bloomberg News and stay with us for complete coverage of that iPhone launch and Ternis's debut on stage coming up this Wednesday. Up next has been a good year for Oracle shareholders. Well, this week's earnings turned things around for that tech company. That's straight ahead on this special Labor Day edition of Bloomberg Daybreak.

13:25It's 20 minutes past the hour. I'm Nathan Hager. This is Bloomberg. Hi, I'm Barry Rittultz inviting you to join me for the Masters in Business Podcast. Every week we bring you conversations with the people who shake markets, investing and business. I speak with CEOs, Nobel laureates, market innovators and legendary investors. Whether you own stockspons, real estate commodities, even crypto, these are discussions you absolutely need to hear. Subscribe to the Masters in Business Podcast on Apple Spotify or anywhere you listen. Welcome back to the special edition of Bloomberg Daybreak. I'm Nathan Hager. US markets are closed on this Labor Day holiday. It has certainly been a bumpy ride for Oracle investors after the stock hit an all time high just over a year ago. It's lost more than half its value since then. So this week's going to be one to watch as Oracle reports earnings Wednesday.

14:25For more on what to expect, we're pleased to welcome Bloomberg News reporter Brody Ford getting ready for those results from San Francisco Brody. What can we expect? Hello. Hey, thank you for having me. Oracle is one of the most interesting stories in tech right now because they levered a super profitable traditional software business to go all in on AI data centers. And because of that, their stock is trading as a bit of a barometer for how the market's feeling about the whole AI data center, you know, Neo Cloud Bet. And as you said, they shot up incredibly late last year because of this huge open AI contract. Then in the following months, the market got quite nervous because they said, wait a second, how long is this really going to take to come to fruition? How much money is it going to cost? And so Oracle results are really washed as a kind of metric of that progress.

15:26How quick are the data centers coming online? What's the demand look like? How much are you spending a lot on Wall Street seem to think that the negativity toward Oracle may have hit its peak. We've seen a couple of pretty favorable analyst reports come out over the last week or so saying that there is probably more potential than downside, but it's been a very volatile company over the last couple of months. And it's always going to be an interesting one to watch earnings of. Well, what's the potential? What is the heft behind some of the bullish sentiment around the stock heading into this print? The bowl case is that there's a lot of bad news already priced in here. We've seen a lot of reports of delays at data centers of the financing taking more money than expected of banks being uncertain about lending to the data centers about open AI losing competitive ground.

16:26So pretty much all of the kind of negative headlines that could come out that could dent this stock kind of already have. And so if they come out and say the sites are progressing as we hope to, we're starting to see some revenue ramp. We're turning on these servers and handing them over to open AI and our sales are going up as a result. Or maybe that we aren't going to need to pull out more money. Our debt picture is looking good. These are the kind of things we could hear on the call that might help flip the sentiment around on Oracle. On the other side of the coin, I mean, we've seen in the past a lot of stocks get hammered if they raise their capital expenditure guidance more than Wall Street analysts might like. What's the possibility of that happening? Yeah, it's all about that capEx and it seems like for every hyper scale or every data center developer, it's been kind of up until the right.

17:27Every time you think that you've gotten a grasp around how much these data centers are going to cost. It just seems to escalate further. And so Oracle has tried to do some kind of interesting strategies to avoid that cash crunch. For example, they're having some of their customers trying to pay them up front for some of the components so that the capEx isn't quite so severe. But we have to remember that Oracle is the first of the hyper scalers to go free cash flow negative. This happened a couple of quarters ago. It was really this kind of landmark moment where one of the world's greatest profit machines went free cash flow negative and said that we're going to really invest heavily in this technology. And at that time, everybody thought Larry Ellison was crazy. There was a lot of negativity out there. But what's happened since then? We've seen Google do that. We've seen Amazon do that. And so this investment cycle in hopes of a future AI payoff, it looks a little less crazy today than it maybe did six months ago.

18:31That said, even in the last reporting cycle, we saw Oracle guide for about 70 billion in CapEx in the next fiscal year, guiding for billions in debt potentially to finance all that spending as well. If we see those numbers move up even further, I mean, how can investors react to that? It's a good point and it really depends what the trajectory is on the revenue realization because these data centers, they take a while to come online, right? From the time you ink a contract with a customer, it might take you two years to get that data center built and get the servers put in there. And so probably even more than the financing, it comes down to how quickly do they come online? How quickly do you start getting revenue from that? We have to remember that one of the biggest AI contracts out there, maybe the largest cloud contract in history is between Oracle and OpenAI.

19:31OpenAI committed about 300 billion to Oracle over about five big data centers. One of them is starting to come online. That's in West Texas and Abeling. There's four other big sites that are closely watched as kind of barometers of this hyperscale development all over the US. So any updates on those, how quickly they come online will be very closely watched. One in New Mexico in particular has been in the news a lot because it's received a lot of local backlash. As we know data centers have become this very politically toxic thing. And the question is, does that actually delay development for any of these centers? Speaking with Brody Ford, a reporter for Bloomberg News getting a set for Oracle earnings do out on Wednesday. Looking ahead to these results, as you know, Brody, there's so much competition now in the cloud space.

20:32You've got players like Oracle and Neo Clouds as well. When you talk about Oracle being a harbinger of AI sentiment, how does Oracle stack up to so many of the other players in this space? Something interesting about Oracle is that they got a lot of their big data center projects moving a little sooner than some of the other Neo clouds. And so I'd say they have an advantage there. But it's right now we're in this moment where demand looks insatiable. All you can hear from every Neo cloud, whether it's, you know, end scale or core weave. I mean, there's a whole bunch of alphabet soup companies that's possible to keep track of. All you hear from them is that demand is insatiable. That customers are willing to sign super expensive short duration contracts because the AI labs are just so in need of computing power. As long as that continues, things look very good for the Neo clouds.

21:32Still, when you talk to people in the industry, most agree that this can't continue forever. There's going to be a moment where the AI labs say, all right, maybe we still need more compute, but we're not so underwater demand isn't so insatiable. Most don't think that's coming tomorrow or the next day. But at some point it will come and some are going to end up getting caught and looking kind of in at risk. So it's all about the demand picture right now. It looks good. All of the reads we've gotten from Oracle competitors, other Neo clouds have been pretty positive. But it's very closely watched. Certainly we've been hearing from a lot of these companies talking about massive backlogs in AI orders. How do we expect Oracle to answer some of the questions that are certain to come up in the call when it comes to managing the backlog? One thing that's interesting on Oracle that often gets forgotten is their massive traditional software business.

22:35The tool that built the house is the Oracle database and they also have a suite of applications, whether it's human resource management or sales management. And a lot of those tools have gotten caught up in this whole staff spot code scenario. Right, a lot of the stock weakness through this year is probably due to that because a lot where people are worried that AI makes it easier to replace traditional software. And if Oracle is able to show that hey, that isn't happening. We're holding on to our applications business. It's helping us print free cash flow. Maybe we're even upselling a bit with our AI in the apps. It's a bit of a forgotten piece of the Oracle story. But it's one that could give a lot of comfort to investors and help the stock out if they show they're not getting eaten by AI. And generally the sentiment on application software has improved quite a bit in the last month or two. I mean, I think a lot of us remember early this year if Anthropic, they would announce a plug-in for a tech company, a plug-in for a software function.

23:38And the company that makes the leading provider there would lose, you know, 10-20% of their stock in a single day. Things have improved quite a bit since then for software companies. Now you mentioned as well some of the consumer backlash that we're starting to see from artificial intelligence, NIMBYism around data centers, that sort of thing. Could that be a weight on Oracle stock at a time when, as we've been saying, you know, Oracle is trying to recover from losing half its value since the start. This is a super interesting question because I have personally been shocked at how much the data center backlash continues to grow and becomes a very mainstream political topic. The general consensus view is that the big data centers by established companies like Oracle will go on, but they could get delayed by this. And we're talking even at the margins, right? Let's say that protests for permits get pushed out a month or two.

24:39That seems like not a big deal, but when you're talking about the very difficult tightrope Oracle is walking on finance where their free cash flow is going negative and they're betting that the revenue recognition will come back in a year or two, even pushing that out a couple of months can be pretty material for the stock. And so I imagine on the earnings call we're going to get a lot of questions about how they're dealing with NIMBYism. Oracle is a company that traditionally doesn't care about PR. I'm sure they would dispute that characterization, but you know, they're not one that you see coming out there doing fluffy marketing. And it's really interesting to see how that's changed in the data center moment. I see them sponsoring rodeos. I see them sponsoring kids archaeological parks and small towns where they're building data centers because they're trying to convince the locals that look we're a part of the community. We're not going to boil all your water. And I think the Oracle four years ago will have never spent their time doing these kinds of things.

25:39Well, whether you think of Oracle caring about PR or not, they certainly care about how investors feel. Is there patients among Oracle investors for the stock to get back to the levels that they used to enjoy in the past? I'm seeing a lot of cell side analysts sounding pretty positive on Oracle this cycle. I think there's this sentiment that Oracle was kind of lambasted as this image of the AI bubble of overspending, but it increasingly looks like the strategies they're using are happening across the industry and maybe the underlying demand trends are there to support them. So it feels like there's a bit of a sense, at least among the cell side, that things could improve from here. So it's going to be interesting to see what these results carry, but it's been a really volatile and interesting company to watch. And there's always a kind of unsurprise waiting for us on their earnings calls.

26:42Yeah, well, we'll certainly wait and see whether Oracle lives up to its name when it comes to the future of the AI trade. Thanks so much for this, Brody. Really great having you on with us. That's Bloomberg News reporter Brody Ford ahead of Oracle's earnings coming up on Wednesday. Up next here on this special edition of Bloomberg Daybreak, we'll take a look at where Paramounts acquisition of Warner Brothers Discovery stands with Bloomberg Intelligence, Senior Litigation Analyst, Jennifer Ray. It's 37 minutes past the hour. I'm Nathan Hager. This is Bloomberg. Thanks for joining us on this special edition of Bloomberg Daybreak, US Markets Are Close for the Labor Day holiday. I'm Nathan Hager.

27:52The Justice Department and other major global jurisdictions have already approved Paramount's Skydances takeover of Warner Brothers Discovery. But Paramount is still trying to resolve antitrust concerns from California and 11 other states for more on this and the overall antitrust landscape right now. We're joined by Bloomberg Intelligence, Senior Litigation Analyst, Jennifer Ray. Jen, thanks for being here. What is the standing for the states given that the Justice Department has approved this 110 billion dollar deal? That's a question that's come up a lot, Nathan, and thanks for having me. I think people don't realize that the states have always had the authority to enforce federal antitrust laws just as the Federal Trade Commission or the Department of Justice do. And while they have not always exercised that enforcement authority independently, they have increasingly been doing so in the last couple of years. And they signaled this because I think there was some concern by mostly blue states that when President Donald Trump was reelected, that antitrust enforcement would become too lax.

29:01And I think there is a viewpoint by some states that it has become too lax. And if that happens, that they would step in. And in fact, that's what we're seeing happen here as well as in some other cases. So these states have this right to sue and they have brought the case out in California. Yeah, certainly a pretty aggressive case that's been brought by California Attorney General Rob Bonta leading this off with almost a dozen other states as well as the writer's guild of America here. So give us an update on where this stands. Where do things stand now in this case? It's a really interesting proceedings here. So at least right now in the big picture, a trial on whether or not this deal should be permanently enjoined as set for March 2nd. So that that's where we stand now unless there's a settlement before that. And the interesting thing is that this litigation was all teed up to go forward with what is called a preliminary injunction trial. That would have been a shorter hearing just to determine whether or not the judge should stop the companies from closing their deal and integrating until she makes a decision on a permanent basis, which would be after that March trial.

30:09But I think in a big surprise to many, the companies themselves stipulated, meaning they voluntarily agreed that they would hold off on closing their deal until either June 1st or five days after a decision by this judge. So this is a stipulation they agreed to stay separate. That was before the judge set a trial for March 2nd. They may have a little bit of regret now that they did that because Nathan starting in October, they're going to have some fees that kick in that they agreed to in their purchase agreement with Warner that they would pay a ticking fee to the shareholders starting October 1st for each quarter that it hasn't closed yet. So this is going to start to get more expensive for the companies. And I think they did expect a trial earlier than March 2nd. Okay. So given that these ticking fees are going to start piling up here potentially for paramount, could this end up being an even more expensive proposition to acquire Warner Brothers than the 110 billion dollar price tag we've been talking about for so long?

31:16Absolutely. If this doesn't settle and it goes forward to trial, this could cost something like another 1.5 billion depending on how long it takes. There's some financing fees as well as well as the ticking fee. And also if it falls apart completely due to antitrust concerns that let's say the states win a trial, there's a 7 billion breakup fee that paramount would have to pay to Warner Brothers as well. So what are the chances then that we do see a settlement before all this happens? I mean time certainly is of the essence here. You got to think that there could be a pretty significant amount of pressure for paramount to try to come to some kind of deal. You know, I think there is and I think on both sides, my feeling has been for some time that this is like more likely than not to settle. And the reason is because there really are issues, problematic issues for both sides. You know, as we just talked about on the company side on paramount side, there's one always the risk they'll lose at trial and second, how much more expensive this is going to start to become if things continue to drag out.

32:20On the state side, while the case they filed is stronger, I think, than many suspected and it does look like they pulled a pretty sympathetic judge to their side, the case is still weak and fragile, I think. And could fall apart if we went to trial and the states could lose completely and obviously they'd be more likely to want to get some concessions out of the companies and allow the broader deal to go forward, then they would to lose and get no concessions at all. So because I think you've got these negatives on both sides, I believe there are incentives. And as we get closer to the end of September, I think we're more and more likely to start hearing in the news that there's settlement talks or that they're getting close to a settlement because obviously that October 1st day, is important to the companies. Well, what could a settlement potentially look like? What kind of a hit could it leave for a paramount if they do decide to cut a deal? So I think probably the major piece would be divestiture of some capable channels. One of the theories of harm that the states have utilized here is that they'd own the combined company would own so many basic capable channels that when they license those channels to these multi video distributors, you know,

33:32the cable distributors, the five the Fios distributors and satellite that they're going to have they're going to have this leverage to exert higher fees. And when they exert those higher fees on the distributors, that trickles down to the consumer that's paying for that subscription. But believe it or not, there's still some consumers out there that haven't cut the cord and continue to pay for those subscriptions and and a bundle of live TV. That's one theory of harm and obviously one of the fixes would be to sell a set of those basic cable channels and I believe many think that CNN would probably be amongst those cables that this cable channels the states are pushing on the studio side. That's a little trickier because I believe paramount really wants to do this to get the content to get the studios to have this library that they can use for their streaming services and to get HBO. So I think on that side, if the states push for divestiture of studios, it's less likely they'd reach a settlement, but it may be that if paramount will agree to sell off some of those basic cable channels and then agree to some behavioral concessions such as maintaining facilities and maintaining a certain size of workforce.

34:43Employees are still have jobs there in Southern California and elsewhere or maybe even promising to maintain the two studios and to maintain them separately and independently. That could be good enough and those terms might be good enough for a deal. Speaking with Jennifer Ree, senior litigation analyst for Bloomberg Intelligence, getting the latest on the paramount Warner Brothers saga. What are the chances do you think, Jen, that paramount goes aggressive on this? I mean, we've heard the studio talk about potentially pulling up stakes and moving completely out of California in response to this litigation. Do you think that is a serious possibility? You know, I think that that would be a lot. I know that this has been a real threat and I think they have bored approval to do that. It would be a pretty significant move that I think might hurt them as much as it would hurt Southern California. So I'm not so sure how serious they are, but I'll say that they actually didn't surprise me that they're being so aggressive publicly about what they might do because they really needed leverage here.

35:46You know, when they got the direct when the state lawsuit was filed and the judge was assigned, the first thing the states did was to try to get a temporary restraining order. That's a very short order to try to keep the companies from closing the deal and they got one with a pretty good opinion for them. You know, the judge didn't just issue that restraining order. She went on to say in her decision that she thought the states would have a likelihood of success here. And I think it might have thrown the companies for a loop just a little bit. I think they thought the state of the state's cases very weak. And so they, then the trial date got set for March 2 and they really had no leverage at all. And it's difficult to go into tough settlement negotiations when you don't have leverage and when the states have all the momentum. So I think some of what they've been doing and saying, including moving out of the state, have been to build up their leverage so they have a better position and stronger negotiating position for settlement. Doesn't mean they wouldn't do it, Nathan. But I think it has more to do with the leverage than it has to do with really contemplating doing something like that.

36:48So then who do you see having the greater leverage at this juncture, the states or the studios? I think still the states because again, they have the momentum at least and they have a judge that so far has been sympathetic. But you know, as I said, Nathan, their case is a little bit weak. You know, what they've done is defined what we call three relevant markets where the deal could cause harm. One, two are for theatrical releases. One of really big blockbuster films and the other of what they call tent pole films, which is a subset of the first one. You know, these giant films, you know, think of the Odyssey where they're big budgets and big stars and a lot of marketing for the film. And then the other one obviously I mentioned is in the licensing of basic cable channels. But if you look at those two theatrical distribution markets, what they've done is said combined share by taking market share for the last four years ending at the end of 2025 puts them close to 30%. And it gives concentration numbers. There's this these mathematics that they do that provide a number that tell you whether the markets would be too concentrated that show based on the Department of Justice's guidelines of presumption of harm.

37:59And so it's really great for plaintiffs to be able to walk into court with those numbers that show that presumption. But if you start to pick apart what they've done, if you start to look at these narrow markets that they've defined and you can argue that those narratives markets should be a little broader, not just these big huge films you're talking about but many more films and not just the studios you included in your market shares, but maybe some of the smaller independent studios. Oh, and maybe you shouldn't have looked at just those four years if you expanded that to 10 years those market shares are quite different because market shares can really be different year to year depending on whether a studio has a really big film that does well. And if you start to pick this apart, it looks a little fragile. And those market shares can drop down below the numbers that bring a presumption of harm. When you walk into court with those kinds of numbers, that's really your case. You don't have a case after that. So if this did go to trial, it would be all about those market definitions. It would be all about whether the market shares, the state set out and they're complaint are correct or not.

39:03And if the judge were to agree with Paramount, the state's case really falls apart. So when I think of the case, I think of it as fragile. What they've done is fine. You know, the way they've sort of been an artful way set forth the complaint and set forth their allegations. So they had this presumption. You know, there was nothing wrong with that. It's their legitimate and viable arguments. But as I said, I feel they can be easily refuted. So while today I see them as having the momentum, they have an incentive to settle as well because it's just not a slam dunk for them if they go to trial. So do you see this settling before the taking fees start accruing or is this going to hang over investors for a while longer, do you think? I think it depends on how aggressive the companies are being and whether the states are getting what they want. I feel that the states probably won't agree to something that they're unhappy with. They're going to want CNN divested. They're going to want other basic cable like TNT and other channels divested.

40:05And they're going to want some really strong concessions related to the studios and employment. If they're not getting what they want from the companies, the more they move into October, the more the companies might sweat, start to panic a little bit, and maybe concede to some of the demands that they hadn't yet been willing to concede on. So it wouldn't surprise me if we pushed into October, but I do think the companies are going to try hard to get this done by the end of September. Really appreciate this. We'll be watching. Thanks so much. That's Jennifer Reeve. Thanks. That's Jennifer Reeve, Senior Litigation Analyst for Bloomberg Intelligence. Thanks as well to Bloomberg's Mark Gurman and Brody Ford for the look ahead to the major tech news this week. And of course, thanks to you as well for taking the time out of your Labor Day to join us here on this special edition of Bloomberg Daybreak. I'm Nathan Hager. Stay with us, top stories, and global business headlines are coming up right now.