Chapter 1: What is the main topic discussed in this episode?
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This is Bloomberg Tech. Coming up, Spotify added a record number of users last quarter thanks to its end-of-year Wrapped campaign. Shares surge.
Plus, Paramount enhances its bid for Warner Brothers Discovery, offering billions to cover termination, debt refinancing and ticking fees. Details this hour.
And Runway CEO Cristobal Valenzuela joins us to talk about the new funding round that values the company at $5.3 billion.
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Chapter 2: What factors contributed to Spotify's record user growth?
Let me tell you something, though. I think there's more bonds to come. We still have Microsoft. We still have Meta. We still probably have Amazon.
But would they do 100 a year?
You know what? They might.
Chapter 3: How did Paramount enhance its bid for Warner Bros. Discovery?
And they also might do a lot of other incremental currencies like we talked about yesterday. I'm actually surprised they stayed out of the Euro market. I think there's a bid deep demand. There is every portfolio manager that we are talking to is talking about having excess cash on hand. And everyone is looking at the same compressed yields. There is a bid for yield.
It is not going away anytime soon. So if we hit the top of the market, I don't think it's today. Maybe it's next week.
Chapter 4: What insights does Runway CEO share about the company's funding round?
Maybe it's going to be in three weeks, but I don't think it's yet. Listen, I've never been as bullish on tech as I am today. I don't think these companies have ever been better positioned. I don't think their balance sheets have ever been better positioned.
And I actually think the confidence levels that we see across the bond market far supersede what I think even Bloomberg News is talking about.
Robert Schiffman from Bloomberg Intelligence. Bonds are fun. Thank you very much. The software sector may have a chance to rebound. We're so closely tracking what's happening in software right now. According to JP Morgan strategists, fears of AI disruption may be overblown. And the current bearish sentiment is a, quote, overshoot at this time.
That view is echoed by Lauren Webster, Managing Director of Investment Banking for Technology at Piper Sandler. She writes... While there is merit that AI will be a death sentence to certain sectors of software, the notion of software's broad obsolescence is overstated. Delighted to say that she joins us now. I mean, this is a day-by-day thing.
Looking at some of the trading in action in the moment, I see a lot of green in the software space. But I say it every day, one market session a market does not make. Just go a bit deeper on your thesis and why you're a bit more calm here.
Absolutely. So I think where we are is in sort of this phase of forming, storming, norming in the market and the give and take between AI innovation and software stocks. And so you're seeing a lot of volatility happening. Disruption each time there is a new product released from an AI innovator. Yet this broader realization that enterprise software is here for good.
You can't rip it out tomorrow. And this is a longer term trend as we figure out how to embed AI into enterprise solutions. What is actually going to be disrupted?
We are canvassing a wide and diverse range of views on what's happening in software. Earlier today, we spoke to the Goldman Sachs CEO, David Solomon. Here's what he thinks.
We have software exposure, but I'd say it's insignificant in the scale of our overall platform, but it's certainly something that we're monitoring. I think the narrative over the last week has been a little bit too broad. There'll be winners and losers, and plenty of companies pivot and do just fine.
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Chapter 5: How is the bond market reacting to current economic conditions?
For those, although I don't imagine there's many that don't know what that is, Ashley, just explain it. But why was that such a big factor?
So Wrapped is their annual interactive viral marketing campaign where people share their music and podcasts that they listen to the most this year. And every year, it is just a moment on the internet. People tend to activate their service to participate in Wrapped, so they always expect to see a boost. But I believe on the call today, they said this was their biggest Wrapped ever.
So we can really see the results of that marketing campaign.
But aren't people advertising more with Spotify? Are they able to drive revenues not just by having more of us tune in and unearth our Spotify account every end of year?
So this is the one part of the earnings today that was a little bit gloomy. The ad-supported revenue actually dropped year over year. And this has been a part of the business that people are really wondering, When are we going to see you start making more money from advertising? Which is also an important question because when we're talking about them adding users, these are ad-supported users.
Subscribers grew as well. But if you're going to keep adding ad-supported users, you also want to see the revenue in that department go up as well.
Bloomberg's Ashley Carman on Spotify. Thank you very much. Paramount is trying to sweeten its Warner Brothers bid. The media giant saying it will cover a $2.8 billion termination fee that Warner Bros would pay Netflix if it terminates an already agreed upon deal. Bloomberg's Lucas Shaw, who leads the Screen Time team, is with us. This was interesting, right?
So the headlines here, and it's a sweetener, an improvement on their deal. But actually, the specifics are very interesting. They're not... They're not boosting the offer price. Go into detail. Explain how we unpick this. Yeah, so they are addressing, and they being Paramount, two of the concerns that Warner Brothers has had about their deal. One is this question of the breakup fee, right?
So Warner Brothers had been debating between two main offers, between Netflix and Paramount. they picked Netflix, but if they walk away from Netflix to re-engage with Paramount, they have to pay Netflix a bunch of money.
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Chapter 6: What impact does AI have on the software sector?
And so another way of thinking about it is we have some of the best tools to create media and videos for humans to watch. We now started to create videos and media for robots to watch and for those robots to learn from that data, which is fascinating.
It is fascinating. It also has different impacts on different people. And when you say it helps an industry, it's kind of in the eye of the beholder. Christabel, talk to us about how you think about, as a leader of your business, the implications this has for the labor market, for what it means more broadly, for humans watching content that wasn't made by people and the reality of them.
Yeah, look, that's a question that we've tried to grapple for a long time in terms of how do we make sure that companies and industries react accordingly to what's coming and what's happening. And I think my take after seeing the industry for quite some time is I think the industry is adapting pretty well, to be honest.
If you look at advertising agencies, if you look at Hollywood, it's pretty obvious these days that every studio has an AI department, an AI can function, an AI chief, and the organization has started to rethink themselves in an AI native world. And that has allowed themselves to really find new jobs, new types of things that they weren't able to do before.
So in a way, that's taking some of the tasks and things we've seen in the past and that will go away. And that's natural. I think that we've slowly realized that that's the case. At the same time, we've seen more jobs being put out there with new descriptions on things that even a year ago would have been unthinkable of.
And I think that reaction is now becoming obvious, notably for media, for Hollywood, but for gaming companies and for many other industries, even for software engineers. I think it's kind of pretty obvious these days where you start to see that you can automate and simplify a lot of the entry-level tasks and jobs.
And so that's where I think we will continue to see growth industry-wise in media and entertainment. Christopher, we find that there's a lot of interest in runway, right? As a company, how the models are being deployed and used, commercialization. This was a big round. The valuation is interesting. A lot of the questions we get for you are about your future and whether you plan to go public.
So I'd ask you to kind of be candid about that, the benefits and negatives of being a public company and why you might consider doing that. It's not something we would not consider at some point. I think right now, given the breadth and research innovation that we conduct at the company, I think we're in a much better position thinking about being private for a bit more time.
I think there's trade-offs as being a public company in terms of how you report, how you think about your growth, the kind of things that you need to focus on. Right now, for me, this is an area of interest. unique frontier research. And being a private company allows you to do that frontier research with much more freedom.
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