Spotify's Strategic Layoffs
Explore the reasoning behind Spotify's decision to cut its workforce and what it means for the company's future direction. We discuss the broader context of tech industry layoffs and how Spotify's actions reflect its strategic goals.
Zuckerberg's Meta Stock Moves
Dive into the implications of Mark Zuckerberg's sale of Meta shares. What does this insider trading signal about the future of Meta and the tech stock market as a whole? We break down the complexities of these market manoeuvres.
Netflix Enters the Gaming Arena
Netflix has taken a significant leap into gaming by offering Grand Theft Auto for free to subscribers. Join us as we discuss what this development means for Netflix's business model and the gaming industry.
Mike : 0:00
The big news story of the week is on Spotify. So they started the week cutting about 17% of his workforce. I think it was about 1500 people. So not a pleasant Christmas for that core Netflix. From next week you can play Grand Theft Auto 3, Grand Theft Auto by City and Grand Theft Auto San Andreas on your Netflix app. No extra costs for subscribers.
As of December 2023, now, zuckerberg's net worth is estimated to be about $115 billion by Forbes. $190 million off the table carries significance. They're wrong.
Mike : 0:42
Hi there, I'm Mike in the Stock Brook podcast brought to you by my Wall Street. I'm Mike and Jeremy. Today's show is my Wall Street's chief investor, Emmett Savage. Today's podcast brought to you by Vote Phone Business. And now, if you're like us here in my Wall Street, you know that running a business is hard. There are countless things to think about and many often simply get ignored or completely forgotten about. That's where Vote Phone Business can help. They've crafted a suite of tools and supports to boost your business operations, and the best part is it's free for everyone. From cybersecurity to harnessing the power of AI, building a website and improving how your teams work remotely, vote Phone Business will help you to address the often overlooked but crucial elements for your business's success. To get started today, check out their one-to-one V Hub digital support and advice service. You'll find everything you need right there. Find the links and our show notes, or simply Google Vote Phone V Hub for more details. Now let's dive into today's episode. Emmett, how are you? How are you doing? Hi Mike, how's it going? It's all good. Now this episode is going to be published on the day of our Christmas party. I just want to ask you what are you most nervous about?
Oh, you know what I'm most nervous about? John Terrell wants us all to jump into the Atlantic Ocean. So we're having a Christmas party in Galloway which is where your home is, Mike and we all have to go for a swim, which I think is absolutely ridiculous, and, as you can see, I get a bit exercised over that whole thing, but this is a good one.
Mike : 2:04
This is a good one for the listeners. Now I said to Emmett that I'd respect him more and it would show more bravery if he didn't swim and didn't cave to the peer pressure of the moment.
Yeah, well, you know, I grew up in a Dublin town called Malahide and my folks' house was by the sea and I swam every day 365. And then one morning I just slept in and I never looked back. I thought, wow, this is nice, that's very nice. Waking up, naturally, getting up, having a shower, putting on your clothes as opposed to doing that other thing, and I swore I'd never do it again. Then, a few years ago, we did one for charity and we all jumped into the sea in Dublin and it was Baltic, and I swear I am not one bit looking forward to doing it in Galway, which is like Dublin but minus two degrees.
Mike : 2:50
Yeah, well, actually I was in on Monday and it was nice, but nice is very relative. Do you know that kind of way?
It is. Yeah, I was going to ask you to double click on that word. Nice, like, what is it?
Mike : 3:03
Well, I was expecting to freeze over and I was like well, this is actually kind of pleasant. But I'm looking out now and it's kind of blustery and rainy, so I don't know if it'll be too nice tomorrow. We'll see.
So, as our listeners can hear, we really know how to have a good time at my place, yeah.
Mike : 3:19
Well, I'm just glad you didn't say the bill at the end, because you're going to be the one paying it, yeah.
Well, that comes in second place, but honestly, I doubled the bill if I could stay any longer.
Mike : 3:29
Maybe I should just do the brave thing and go. I'm not getting in. I could explore the baby All right.
Mike : 3:38
Ok, let's get into the show, and I think the big news story of the week is on Spotify. So they started the week cutting about 17% of his workforce. I think it was about 1,500 people. So not a pleasant Christmas for that cohort. Anyways, is there anything noteworthy about the layoff?
Well, for starters, I suspect there's about 1,500 fewer people with a free Spotify subscription. But yeah, Daniel Eck, the founding CEO, wrote in a memo posted online and sent to his employees on Monday, and he said I realise that for many a reduction of this size will feel surprisingly large, given the recent positive earnings report and our performance. So really there was, I suppose, the self-awareness that this isn't a good look.
Mike : 4:26
And it's the third time I read the document as well. Very blunt, will we say. The cutthroat seems harsh, but just very likeable. This is what we need to do for the business.
Yeah, I agree, I read it too and I don't want to be unfair to an entire race, but to say I had a kind of Scandinavian bluntness if you like. Directness. Yeah, but it's actually the third time that Spotify has cut jobs this year, and it reduced its workforce by 6% in January and then are falling 2% there in summer, in June, and as a result of the announcement he made this week, as you can imagine, there was quite a few cynical tweets because they had Spotify did their what's called a wrap-up business.
Mike : 5:14
Raph, yeah, yeah, yeah, yeah, wrapped in it and somebody kind of repurposed that infographic to show that you cut 25% of your workforce this year, the employees most affected like 2,300. And the department hit the hardest with marketing, and it did it just like the Spotify Raph, which I thought was almost inevitable, but it was unfortunately well done. But if we look at the bigger picture, like the world, the number of tech layoffs was really front loaded in 2023. More in January, I suspect, than the entire second half of this year. It seems Like in January and I have a chart here in front of me there were 108,000, and nearly 109,000 tech layoffs and that came from Amazon, google, microsoft, salesforce, ibm, all the big names, all the companies.
Mike : 6:08
It impacted that sometimes.
Oh, thank you, doing quite well as well. Oh, entirely. You would not encounter a name that you would say, yeah, that's frail. That business really is fighting to breathe. So, yeah. So January, february, march, between those three months had about a quarter of a million layoffs. Now, when you look at the last few months now December has only started, so around 1900, november 1600, october 31,000, september 14,000, like you basically see that it was Q1, where most of the damage for the year was done. But bringing it back to Spotify, the business, like all those other tech companies that grew in size during the pandemic and its head count doubled over the last three years to 8,000 workers. That's a big workforce. When you look at Spotify, I think you could be forgiven for thinking what they've done is elegant, and with elegance comes a degree of simplicity and with simplicity comes well, not 8,000 people. And I think the main thing that matters at the moment out there in the tech world is profitability ahead of growth. We see that all the time. We see it in my Wall Street. I mean my Wall Street. For the first few years our story was grow, grow, grow, earn trust, get the biggest audience possible. But that's all fine as long as somebody is handing you a check, but what really matters now for every business is profitability ahead of growth. So, despite its efforts to reduce costs, ex-ed in that note that we both read that Spotify is still spending too much money and that interest rate increases have made it more expensive to borrow. And here's another quote from that miso recently. He says the Spotify of tomorrow must be defined by being relentlessly resourceful in the ways we operate, innovate and tackle problems. Being lean is not an option but a necessity. And actually, as it happens, the shares popped 8% after the announcement. Did you see that? I think that's.
Mike : 8:14
I think it's indicative of wider investor sentiment, especially with the company like Spotify, and we get into why the operating expenses are so important. There is that I think basically all of Wall Street knows that tech got very bloated and they need to see it cutting back and they need to see focus on the bottom line. Spotify is a huge business and it's just turning over 30 million operating profit in this quarter. Do you know? It was using 200 million a year last year? So it's really shifting the priorities from what you said, from growth to the bottom line, and I think it's very important that most tech investors realise that the shift has happened and, while some high quality business might get away with it, the focus isn't as much on growing all costs or even growth at all. Really. So yeah, for sure.
I heard a rumour, I would say, about two years ago, founded on one piece of data or one anecdote and, as I said before, an anecdote doesn't make data but that the big tech companies Microsoft and the likes, were recruiting talent to stop the other guys from getting it. I mean, it was like vanity recruitment, and I heard it from a pretty solid source from someone who said they were recruited to stop being recruited by someone else. So you know, when you're in that realm you realise something has malfunctioned. But look, spotify shares are up about 150% this year. They're still down from their high. So that's the layoffs. But you've been looking into it. What are your thoughts of it as an investment?
Mike : 9:55
Yeah. So I thought this was worth diving into when we were talking about Spotify, because I think a lot of people are going to be listening to Spotify for this podcast. You know what I mean and you mentioned it there. Stock's up close to 150% year to date and it fell. It fell as much as 80% between February 2021 to the end of 2022. So it still hasn't fully recovered. I think it's about 40% from all time highs set there at the start of 2021. So this whipsaw in the share price isn't surprising. And then to see the company or the stock perform so well while it's going through three different sets of layoffs you know, if you were in the company as an employee and you're seeing the stock go one way and the staff can't go the other, you kind of question things. But I think that the perennial issue investors have with Spotify is its cost structure. It's what Daniel Ek mentioned in the document that went out to everyone about the layoffs. So I thought it'd be interesting to go through the company and see what's changed but, more importantly, see what's the same. And the number one criticism of Spotify has always been that it can't control its cost. So its main expense is artist royalties and these, of course, scale along with how many streams an artist gets. Typically with the software business, you'd have relatively fixed costs and then scaling is where you make that high margin income because you spent all your money on whatever else cloud server, cloud servers and all the tech involved and all the staff and everything else but if you add one more customer, there's no real additional costs to that, just setting them up small, totally. That's not the case with. That's not the case with Spotify. It doesn't really act like a normal and normal software business. So Spotify's gross margin is in the mid 20s and has been for a very long time, and even on top of this. So it's spending so much money on artist royalties. But on the other side of that, artists hate Spotify because they pay peanuts as well. So not only is it getting squeezed, but it's also doing some squeezing itself. So, yeah, it's not even like it can really cut into what it's already paying because it's already so low. So I remember we were talking about this recently and the porter's five forces, and one of the issues was the buying power of your customers. So Spotify is in an awful spot here. So it's a distributor, essentially buying content off record labels and distributing it to its users. So those record labels are incredibly powerful, which is why Spotify's margin performance has been so poor, especially for a software company like you know I don't know it's a software company, but it kind of isn't either especially its cost structure. So between the big three record labels Universal Music Group, Sony and Warner they control about 80% of the market. So for talking about buying power, that's not the three customers you want to have at all.
No way, no, I mean never until now did I look at Spotify as a two sided marketplace. It just didn't occur to me. But you could almost argue that it's no different to Etsy there's people knitting nice jumpers on one side and buyers on the other, but instead of jumpers, we're talking about, you know, obviously, podcasts and music, but it really is a double sided marketplace but crushing powers on both sides, and that is a, I suppose, a perspective that I'd never latched on to. I have a question for you: Are you a paying Spotify member or are you Apple Music? Which one do you use?
Mike : 13:27
I'm paying Spotify and I don't think I would change for a significant amount of money. I love it.
That's very interesting.
Mike : 13:36
One of my most used apps.
Yeah, now, the reason that's interesting to me is I always looked at Apple Music as a perfect substitute to coming back to Porter. You know the fact that we have a I thought right over, there is the exact same thing: the same tracks, the same podcasts, the same playlists and so on. But it's very funny. Last night my older son said to me I'm on Apple Music and he's on Spotify, which is highly inefficient, by the way, for a household, but he said he would never swap. I was like what are you talking about? It's the same thing. So it's not a perfect duopoly there. Actually, it seems that Spotify is really differentiated in the minds of its customers, such as yourself and such as my son. So what is it that has it so sticky in your mind?
Mike : 14:25
Yeah, well, it's an interesting conversation because we probably don't give Spotify enough credit. Like Apple, completely dominated the music market, itunes and all the rest and this little Swedish startup came in and completely took share and like it's two biggest competitors it's two biggest competitors now are Apple and Amazon, and if you throw YouTube in as well, so Apple, amazon and Google like three biggest companies in the world, and Spotify is the one leading the market. So in that sense, I think it probably doesn't get enough credit as a business story in Spotify, probably because the situation is in now where it hasn't really kicked on from that. It's still stuck with kind of the same problems and maybe that's why Apple didn't defend itself as much as it could have, because it saw that it wasn't the most lucrative market. I'm not sure. But yeah, in terms of actually using Spotify, I think there's so much. They do create curated playlists. They kind of tell you what to listen to next, which is the beautiful thing, so like yeah. I remember I used to have Discover Weekly every Monday and then out of the 30 songs, 15 will get added to my already new playlist or whatever rest there is so much. And then you can see as well that Spotify have been trying to remedy the gross margin issue around royalties for a long time, so they got into podcasts heavily. Now. Their execution on that strategy wasn't great, given Prince Harry and Meghan Markle 20 million quid to make one podcast or something like that. But they saw a ruse of saying, all right, well, we have music, but why not get all of the audio? And they've pushed into audio books as well. I think they're trying to add audio books as part of just your generous subscription, which is great, but I don't see Spotify not being dominated by music at the same time. I think those are ancillaries, they're not going to be the main product. But even Daniel Like was really pushing into this AI generated music, not not unlike Elvis singing Tom Jones songs, but like lo-fi study music beats that Spotify could produce itself. And so that would be streams without royalties, which would be huge for the business, but in the end it is going to be dominated by these huge record labels and big names and so, yeah, it's always gonna be that negative on the stock and I don't think it's gonna be able to come out of it. But I had a quick kind of look through the numbers and basically said why is the stock up 150% year today? Because it's doing something right Now. There is definitely the whipsaw effect. It fell so much from the start of 2021 to the end of 2022 that it had to bounce back and I think, in general, my consensus is that the market is always overreacting in one direction.
You know what I mean.
Mike : 17:36
So the negative wasn't that negative in 2022 and the positive probably isn't that positive this year, but momentum always feeds into it. But there are a lot of regrets. There's a lot of positives to highlights, because the stock doesn't just go up 150% in 11 months either. So you're getting huge growth in active users, still 26% year over year in the last quarter. Some operating profits of 32 million this quarter compared to a loss of 230 million last year. Free cash flow went from 35 million in 2022 of Q3 to 216 million. It's the most recent quarter. It's not sitting on about four billion in cash and about one billion in total cash. So, balance sheets, very healthy. Ghost margin is at 26%, which is actually a positive, would you believe. It's a couple of percentage points over the last year and this is probably actually the highest it's been over the last five years. They're there about Daniels. It's always been that low and probably most importantly, when we're tying this back to the layoffs, is that operating expenses were down 13% year over year. So I think this is where Daniel Ek is going to find those efficiencies. He's going to run the business. He's not going to turn into Ryan Aarant, but to really cut down and probably just accept that. Okay, we're a low margin business. We have to act like it. Do you know Airlines?
But you know, on that point, sorry to cut across you, but it's like Spotify on being a low margin business, it is a utility. What I mean by that is not that the price doesn't matter, but that it is one of the last things you would cancel in your life. So when you look across the gamut of monthly outgoings in your life, I would say most people who have a Spotify or indeed Netflix subscription will put it in the top 10%, are the ones least likely to cut, because we all aggregate these recurring bills monthly, yearly, whatever it is. But the utility of that is so high, it's so like it's the last thing you'd cut, like I always believe. Like one's attachment to your music is analogous to, perhaps, your religion. It's a deep seated emotional connection with something. So your Spotify, when that business is getting more and more efficient in the ways you described with AI and it's landing the perfect tune at the perfect moment or the perfect vibe at the perfect moment if you're studying, it actually becomes a deeper part of your day to day, week to week, year to year life.
Mike : 20:20
And there's huge costs as well. If you go, I'd say I have 50 playlists made. Yes, exactly, they just go up and down. You'd have to ban them, yeah.
That's a very good point as well. But if you look at Starbucks high volume, low margins, like I mean it's just thrown your cup Well, actually probably decent margins in Starbucks case. But the theory of coffee is that you're thrown out as many cups as you can make in a day and they all have a small margin. But you're doing enough of them. And that's the Spotify effect. It is the coffee house of music, so to speak.
Mike : 20:54
Yeah, and I think that's where it's going for, and definitely, reading what Daniel Ek wrote about it, it's maybe just deciding that, yeah, ok, we are a low margin business and because of that we're going to have to run such a tight ship and operate. In some sense it's like supermarkets or airlines or wherever else, where they have to pinch pennies to make the machine work basically. So that's the bull and bear case, and I don't know if I'm even more confused after putting it out, because I think there are perennial issues, but there's also so many positives, like we said as well, especially around just how users talk about it, how I talk about it.
Yes, and when you take everything into account, I don't think anyone would doubt that it will be around in 20 years. The only reason Spotify won't endure is if it's bought out. That would be my view. So if one of those tech giants go, hey, look, let's just leapfrog. If Amazon said, look, our efforts haven't been all that great, let's do a pair of my studios on this deck, name your price. That's the only reason why I believe Spotify won't be around in 10 or 20 years, because it has such a deep-seated purpose now and a deep-seated customer base that it will endure. So when we look at ex-latest letter or the last quarterly results, we're applying a very tight filter to a giant picture, and I think the giant picture is we're looking at a brand that we all saw, like Airbnb. We also. The brand arrives into our lives and it will be there long after we've let out our terminal breath.
Mike : 22:45
Yeah, yeah, no, no, it's true, but I also think I don't know if it makes a great acquisition target. If you're buying it at its market cap, it's just shy of $40 billion. So if you're going to add, let's say, $50 billion for how acquisitions go on, the premium on it you're talking about what? 50 times free cash flow.
Yeah, it's a big price tag. And you're also again, these giant texts often don't price, usually don't price things like that. They just say, right, this now is just getting deeper into the home or to the pocket or to the phone or whatever it is, and so that's how they probably go about that. But that's not to say that I think it will be acquired. I don't, I think, and I think Spotify will keep Spotify independent. He's certainly got a clarity of vision.
Mike : 23:40
The only acquisition that would make real sense is if one of the studios bought it. Oh yeah, totally yeah, Universal Music Group or Sony or Warner Music Group went and bought it. I'd say there would be antitrust issues at the one oh yeah, but there would be where you would actually see some synergies and you could see some genuine improvements in the margins.
Yeah, that's true. But then you see back to Portis Five Forces. The other studios would suddenly have a very strong leverage because they're like well, you've got your catalogues and we've got ours and, by the way, you don't have Grateful Dead anymore.
Mike : 24:16
Yeah. Yeah, it's a fascinating one to watch and I know we've probably beaten it to that, but I don't think there's a stock investor who hasn't considered Spotify and looked at it and can assess those multiples and its position. I've looked at it a thousand times and I continue to do so.
Mike : 24:37
Yeah, it's just such a day to day brand in people's lives, but again there's so many question marks. It's a really interesting business to talk about in this sense, but I don't think the picture is any clearer, for me anyway.
Yeah, I mean, for me, a long term buy would be a yes, but I acknowledge the fact that it has a pricey multiple and it obviously has really always has that. But I like it. I think it's a great business and I don't need to like the leader. I don't dislike him, but certainly he's not a man of the week, considering just Christmas is on the horizon.
Mike : 25:13
Yeah, okay, all right, moving on, we're just going to give a quick reminder for my friends at Vodafone Business. They're sponsors of Stock Club, so check out their free one-to-one digital support and advice service today to discuss a range of topics from social media tips, cybersecurity and building a website for your business. Search Vodafone V Hub or go to the link in our show notes for today's episode.
Just go in and talk to them and walk into a shop and talk to them. That's there you go. Ask Vodafone V Hub. There you go, All right.
Mike : 25:39
Emily Easy. It's been a while, but we had a few different things you want to recover. So we're bringing back a big deal or no big deal, and we're going to get a few of them out very quickly. So you're kicking off with Zuckerberg. He sold shares in Facebook for the first time in two years, off-loaning just shy of 200 millions worth. Big deal or no big deal.
Yeah well, insider stock purchases and sales are often considered a valuable signal for investors, as these individuals are presumed to have access to non-public information that could affect the company's future stock price. However, the relationship between insider trading and then the subsequent stock price performance is actually very complex and it's not always so straightforward. There's been so many academic studies investigating the relationship between an insider like Zuckerberg buying or selling a share and then the subsequent performance, and we could spend an entire episode discussing those findings. But stick to the question. For once, I'm going to say this is no big deal. As of December 2023, now Zuckerberg's net worth is estimated to be about $115 billion by Forbes, making him the seventh richest person in the world. So if anyone thinks him taking 190 million off the table carries significance, they're wrong. Like he and his wife, priscilla, have vowed to donate 99% of all of their meta shares to good causes during their lifetime, which you have to admire, and also I love hearing that because they need to do it in public, so others follow their lead, but that's another discussion. So I think 190 million is as newsworthy as me donating $10 to a charity. It's no big deal whatsoever and it's a good question, but it's also worth just realising how insignificant this is against the man's wealth.
Mike : 27:39
I think the big deal was him actually not selling for two years. Have you looked at the stock chart between November 21 and November 23? And it's almost a perfect curve. He clearly decided in his head well, all these CEOs have some sort of selling plan because there weren't so many. There's more than 100 billion worth of Facebook shares. So he clearly decided, well, no, I'm not selling at that value because I feel like that's under value. And it didn't come back until it was basically at the same price. I think it was 340 in November of 21, and it's 320 yesterday, November 23. So I thought that was really impressive and it looks just like oh, I'll only sell my shares when I think they're of fair value.
No fair point. And when you look at these business leaders, the founding CEOs, who are household names generally, they'll say and do things that the voting public will go against, like, obviously, elon Musk being the extreme example, but like Zuckerberg renaming the business to meta and pegging a I presume 20 or 30 year vision down to say, look, we're moving towards the metaverse and I'm going to get ahead of the curve. And the stock took that hammering that you described and he stood steadfast, I suppose, in his resolve. And now we've all accepted the business, called meta. I think most people have accepted the metaverse. We'll creep in, might not arrive this year, definitely won't arrive this year in force. And he again, which, through his inaction, by not selling any shares, there was a signal, but it's almost an invisible signal. How can you, you know, take something from something that didn't happen? But there is something in that mic. Okay, look, before I get too off the reservation, I'm going to hit you with, I suppose, the hottest news at the moment, which is Grand Theft Auto 6, but, rolling back a bit, Netflix has launched its Grand Theft Auto trilogy for free, along with 80 other games. Is that a deal or no big deal?
Mike : 29:44
Yeah, I love this, just the timing, both for Netflix and take two. So, basically, Netflix from next week, 7 or 14th, you can play Grand Theft Auto 3, Grand Theft Auto by City and Grand Theft Auto San Andreas on your Netflix app, no extra costs for subscribers. As you said, there's already been 80 plus games within Netflix that you can play, but I think this really kicks it off. They're obviously going to be the highest profile names, but it's also adding to the excitement of the launch of Grand Theft Auto 6. And it's unbelievable marketing play from take two I think. But it's also kicking off Netflix gaming ventures into I wouldn't say overdrive, because I don't think they have been really driving yet. It's kind of crawling so far and now it's really been like this is our intention and this is what we can do. So I'm going to say a big deal. There's a quote from the co CEO, greg Peters. He said on the Q3 earnings call, talking about gaming and just the quest to keep people and their users engaged, basically. So it says our job is to incrementally scale to the place where games have a material impact on the business. We've got ambitious plans here. We really want to grow our engagement by many multiples of where it is today over the next half full of years. So they're seeing where the puck is going, in a sense, and they realise that they have the distribution, they have the scale. But also people aren't just watching TV on their phones. So how can we, how can we use the fact that we're in basically everyone's pockets and this, this is a very natural segue into it. And when they first mentioned it it didn't really have much momentum because there was nothing like this on it. But now I think we're going to see a lot more people pick up their phones, start playing that San Andreas, you know on the subway or on their kids. I think it's. I think it's a great move.
Yeah, I agree with you. I mean, these are some of the biggest titles in gaming history. The grand theft out of vice city was a game changer. I remember at the time you could buy the soundtrack when CDs were a thing and were a six CD set. They kind of secured the distribution rights for a whole bunch of 80 bangers and also 70 bangers and I love that word bangers. But they also had, like they had like their actors, like Ray Liotta, a voice, one of the characters and like no one, no one Hollywood players in the game and it was a. It was a real seminal moment in gaming where they'd absolutely maxed out the chipsets, the acting, the, the sounds, the whole lot. And now it's down to the phone. Can you play? Can you play it on the TV app by wonder, or does it have to be the mobile phone app?
Mike : 32:27
I'm not sure what the controls would be on your TV app, but I'm sure you can figure out a way, yeah.
We had a fun thought exercise on our live show.
Mike : 32:37
Oh, just before we move on, we have to give credit to Bill Mann at our, at our live show. So when we were, yeah, yeah, similar to the question we're just about to ask when we were at our live show, Bill Mann said I would mind seeing Netflix by taking two interactive videos. And I'd say what? Two weeks later we see take twos, take twos game at Grand Theft Auto, all over Netflix.
I've been meaning to text him, to ask him how did you like it?
Mike : 33:04
come on, that's like, honestly like he sat on stage inside a training maybe hold on like you're right.
He said Netflix will probably buy two interactive ones. Read a good chat about it, and that was that. Knocked my socks off. When I saw the announcement from Netflix only two weeks later, I just wondered where's this guy's crystal ball hidden, right?
Mike : 33:26
around that subject. Hopefully his ears are burning and he is listening to this show now. Right.
On that then. So, Mike, just a one way question. You're not allowed to ask me what you can. If you want, let's just go name an acquisition that you think might happen in 2024. You had a good night. I suppose you can regurgitate that.
Mike : 33:48
Yeah, I think Disney is going to. It might not be its first intention, but I think we might see ESPN getting offloaded. It was, I said, in Q3, it just started reporting ESPN revenue separately, so that could be it putting it in the shop window. Do you know what I mean? It has to free up 8 billion quid to fulfil its acquisition of Hulu from Comcast fully. So at the minute I think Disney owns two thirds of Hulu and Comcast owns the last third, and there was a long-term contract which basically saw Disney agree to buy the rest of it from Comcast eventually. I think that's happening next year. We've already seen Iger offload some assets. I think he is looking to sell ABC News. He's looking to sell Disney's operations in India. But I think in terms of if you were and someone going to buy in companies, you would look at ESPN as the one you want and I think Netflix would love to buy it. But I don't think it has the firepower. I don't think there are many companies that actually do have the firepower when it comes to the cost of sports rights these days: the NFL, the NBA, we've seen Google, we've seen Amazon get involved and it goes into the billions very quickly. And if that's ESPN's whole business, it gets very expensive. So there are only a certain number of companies that can actually take it forward to buy ESPN but to run it in that sense. So I think Apple, Google or Amazon could all be in the mix. They've all splashed out in live sports recently and it's that one area of entertainment we'll say that tech hasn't really got involved in. It's dipped in the toe. In recent years. We've seen Google and Amazon with the NFL, Apple with the MLS, but maybe that's just the litmus test to see, all right, can we actually do this? So, yeah, I think ESPN might be on the chopping block and I think it'll be a very interesting asset, especially for those companies. And it goes into what you said where maybe it might not be purely for profit, when we mentioned about buying Spotify, but it's about reach and it's about kind of how involved these companies can be in everyone's day to day lives. And I think it was the stats from last year or the year before where 49 of the top 50 watched like watched bits of TV were NFL games. So just yeah, yeah, yeah, that brings about amazing.
When you lived in America, did you have a subscription to ESPN? Was it a subscription? It is a subscription service is it?
Mike : 36:39
There's ESPN plus, but no, to watch ESPN, it would be part of the cable channels.
Mike : 36:45
I see Okay, if Apple owns that, then it's on Apple TV. Do you know what I mean? It's a big opportunity there. So, yeah, I think that could be a realistic acquisition to have next year, and I think Disney might need some cash and they're looking at a lot of different routes. Maybe that's where they get their best offer.
I mean, I saw recently that Netflix had the Netflix Open. Was it the Las Vegas Golf Game?
Mike : 37:10
Oh, the golf. Thing, yeah, yeah, yeah.
That's, and they've all tested the whole sport on their platform thing and it so far hasn't just looked or felt right. I know it's hard to describe, but that golf coverage just didn't look the same as you'd see on regular tv, as you'd say at home, yeah.
Mike : 37:28
Yeah, that's kind of Netflix, because Netflix has the F1 show and the golf show, so I think they're just trying to combine it together. But I think Amazon Prime has Terzeneye football now, and I think U2, bosch and I fell Sunday ticket Both paid billions for it. So I think it could be in there with us. There'd be a lot of convincing on both sides. But if. Disney wants some cash. That's why I'd be much more interested in ESPN than ABC News. Do you know what I mean? Yeah, for sure.
Right, Mike. I think that concludes our conversation for today.
Mike : 38:04
And just going to give a quick shout out again to our friends at Vodafone Business. If you're a business owner in need of a leg up when it comes to your digital transformation, just get yourself over to Vodafone Beehub and book your appointment today. So find the link in the show notes for more details. Just going to talk to them, just going to talk to them. Just going to talk to them.
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Mike : 38:31
All right and thanks for joining me and thanks everyone for listening. Remember, if you have any elevator pitches you'd like us to tackle, get in touch on Twitter at mywallstreet.com, on TikTok at my wall street, or simply just email us at pod at mywallstreet.com. If you're enjoying the show, leave us a review and share this with your friends. We will talk to you next week.
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