'Bloomberg Technology' Full Show (08/17/2022)

'Bloomberg Technology' Full Show (08/17/2022)

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From the heart of where innovation money and power collide. In Silicon Valley and beyond. This is Bloomberg Technology with Emily Chang. Emily Chang in San Francisco and this is Bloomberg Technology coming up in the next hour. It is a date Apple's next big

product unveiling is set for September 7th. According to Bloomberg sources details on the new Mac iPod and of course iPhones. We will see. Plus mega rolls out its old playbook for a new round of midterm elections. We'll talk about whether it's enough to fight the latest trends in mis and dis information and aren't just posted record revenue and shipments but its ship industry peers are seeing a slowdown ahead. I'll ask CEO Rene Huss if he shares that sentiment. We will get to all of that in a moment. But first I want to get a look at the markets. U.S. stocks falling for the first time in four days. Bloomberg's Christine Aquino here to paint the picture. Christine. Well Emily is fed minutes day today. And we got another reminder that more rate hikes are coming. You know what that means. Higher yields and bad news for tech

Lisa. Let's take a look at a broad tech sector today. Both the Nasdaq 100 and the same index is falling for a second straight day. Also falling more than 1 percent. It's been about a week since we saw declines of that magnitude. And we're definitely see a bit of acid rotation here. We're here from investors that they're preparing to load up on treasuries as they're getting to

these cheaper levels. And that usually happens at the expense of these high valuation tech stocks. Of course all of that also weighing on chips today. Take a look at the Philadelphia Semiconductor Index extending its two day decline to about three and a half percent. And you know before the Fed minutes we also got some bad news out of

China earlier this week. Now it's definitely taking a double whammy toll on this index now down about 25 percent year to date. Let's take a look at some interesting corporate stories today. We have quite a few that Bath and Beyond. Of course continuing its retail fuelled surge. And that's really that trade is really back with a vengeance here. But I actually want to turn our attention to another stock on this board. It is the Manchester United stock here which is rallying quite a bit

today. And Emily if you're wondering what does that have to do with tech. It is by way of Elon Musk who earlier tweeted about potentially buying this English football club. But then hours later clarified that it was just a joke. Still a nice blip higher for the stock though it finished the day higher by nearly 7 percent. Emily just a joke indeed. Another one. OK. Christine

thank you for that. Meantime a number of high profile venture capitalists and entrepreneurs are meeting in Los Angeles for L.A. Tech Week. It includes names like Marc Andreessen Ari Emanuel for a better sense of the sentiment there. I want to bring in Zillow co-founder and 75 and sunny general partner Spencer Rascoff who's also a speaker at L.A. Tech Week this

week. Spencer if we were to take the temperature of the markets it is anything but 75 and sunny. What's the temperature in L.A.. The market temps hot. Yeah it's hot. We're going to we're not going to let a week couple of days or a couple of months in the stock market dampen the enthusiasm for tech here in Los Angeles. It's a really exciting time. This conference this week you know it was kind of an unconference because we just sort of announced it to the community just a couple of months ago. And now we have

over 300 events and 16000 people many of whom have come from other areas including the area exploring L.A. Tech filled with enthusiasm and excitement. And it's a boom time here. You know tech hubs have been changing. Obviously we've been talking about the movement away from Silicon Valley but now with more distributed work more remote work. What is the power of the L.A. tech hub in particular. L.A. is the intersection of media entertainment pop culture commerce. It's where tastemakers live. So you know the 10000 20000 people that decide what's cool for the rest of the country the rest of the world they live in L.A. This is where culture happens. And now you have this convergence of media through streaming and studios which really are tech companies increasingly. So the

media entertainment and pop culture is very strong in tech community here. But it should be remembered that L.A. also has a 50 year manufacturing history in aerospace in heavy equipment factory and technology incredible universities. And it is it has now cemented itself as the number two high tech hub behind the Bay

Area. Our goal my goal the L.A. Tech Committee is goal Emily is to get you someday to move your show from the Bay Area to here in L.A. and have the intro of your show. Talk about how L.A. is the tech center of the country and hopefully the world. It's a wonderful idea Spencer. And I can't say we haven't thought about it. So you will be my first phone call when that happens. But you know look it's it's it's dreary. There's a lot of red on the screen when you look at the markets almost every day. How is this impacting your strategy. So look we're in the midst of a venture winter. There's no doubt so venture firms have pulled back late stage growth investors the hedge funds the crossover investors that were leading all of these high priced series D series E series F rounds. They've moved out of privates. They're either hiding under their

desk or they're focused on the public markets right now. So that chill has moved upstream to the earlier stage. Companies and companies are adjusting. Companies are doing inside rounds. They're doing flat rounds. They're cutting back on marketing expense. They're cutting headcount and they're adjusting for this new winter. And you know I'm I'm old enough now to have been through several cycles 2008 2001.

Great companies can get created during these down cycles. They just have to make sure that they survive. And customer behavior changes corporation behavior changes during these period of change and during recession. So a lot of great companies a lot of great things come out of them. But you're absolutely seeing companies adjust and venture capital investors adjust. Now I know Andrews and Horowitz has a big presence down there and they are the target of a lot of

chatter in Silicon Valley right now. Marc Andreessen writing the firm's biggest check ever to Adam Newman the founder of Early Work. Some people pretty unhappy about this. And we spoke to a young founder Alison Byers yesterday. And I want you to take a listen to what she had to say.

You have to feel that rage when you are part of that community. That is just historically blocked from accessing this funding. Spencer I'm just going to leave it open ended. What's your take. Well there's a lot of commentary and discussion this week at L.A. Tech Week about about this exact topic. My take is I was very surprised by the size of the check. I mean

350 million dollars for for a seed round. That's that's ginormous. By any standards I don't know Adam Newman. I suspect that the team at Injuries and Horowitz had a hard look in the eye with him and said have you been humbled. Are you now coachable. Did you learn from the mistakes that you made. And they looked past those mistakes and said here is somebody who has revolutionized a huge category commercial real estate and who has created a very large successful publicly traded company which was a roller coaster. It went up. It went down. But you know it's still a five to 10 billion dollar public company today. And I suspect that he convinced entries and Horowitz that he learned from his excesses and from his mistakes. Now the commentary from a firm that that founder is absolutely right. It speaks to the fact that there is

still a lack of diversity equity included. I mean Emily you literally wrote the book on this. Right. And this is still a serious issue in tech. And and so she's right to to express outrage from her perspective about it. But I think that's what Andreessen Horowitz is thinking when they decided to back Adam Newman again which is that. Hill Hill will have learned from his mistakes and and be a

different type of founder and a different type of leader the second time. You know it does speak to a pattern as you say that we have seen in Silicon Valley time and again I'm just so curious when you think of his idea as someone who also founded a company in real estate is his idea flow this idea to revolutionize residential real estate apartments. Does it. I think it's a pretty good idea. Yeah I think it's interesting. I mean for for viewers that don't know he's trying to create a branded multifamily product. So think like what W Hotels is to hospitality. This company flow

could be two apartments and it is a good insight that most apartment buildings are unbranded. They're just named the address. And it is kind of a you know an uninteresting experience. You just take the elevator up to your little box and that's that. So he's trying to create you know we work for apartment living. I think that's a good idea. What I don't know is if the margins of managing a multifamily building can support the the the you know the accoutrements that he needs to build to create that community. I was talking to an investor last night who's much more experienced in in multifamily roles to investing than I am. And this person was very bearish on the idea said it'll never work. There's not enough margin in managing

multifamily part buildings to to create what he's trying to build both the brand and also also other advantages to the tenants. And so so this investor was was very negative on it. I haven't you know I'm not close enough to know to have a personal opinion about it. But as a user as a you know as a as a tenant as a homeowner I would agree that there is there does seem to be there there. I think it is solving a problem that that renters have.

Well you and I could go on and on about this for hours but what we can do that online. Spencer I. I do want to get your take on on the market dynamics the housing market dynamics. Do you think that the downturn that we're going through will delay innovation in the housing industry. You know you know the hope which is what you were trying to do is Zillow. Zillow is make transactions easier for homebuyers and will all of this tunnel. Put that off potentially because what's happening is the downturn in housing is scaring venture capital investors from putting money to work in the category. So you know 75 and Sunny my venture firm has

about 100 investments. About a quarter of which are in prop tech. And so I'm a very active proxy prop tech investor. And I can tell you that these CEOs are really put off and scared because the public comps have come down so much. I mean Zillow is at a 7 8 9 year low and all the other public comps have come down so much. And that weighs on investor mentor investor mindset and sentiment. So. So yes it could dampen innovation because there will be fewer startups and prop tech getting funded. Now the good news is if you are a prop tech like Picasso one of my other companies that is funded that has raised a lot of venture capital that already has a product in the market. This is a great time to gobble up market share because

competitors probably won't be able to get funded. So you know again like I've seen in other cycles in 2008 for example where Zillow actually benefited from the 2008 recession because they were already funded and on the racetrack and others couldn't get funding great companies can be built during this down cycle. Last quick question about sparks. You were part of a US backed gold rush to Polly had a TIA as well. Yours back off her pad. You know I don't think it's worth pointing out where you want it to be. We've seen a number of spat cancellations. Was this whole spat thing just too good to be true or does it reemerge in a

better market. So I did choose DAX one merged with Getty Computing and one merge with Offer Pad. And you're right. Neither of them are trading where I would like them to trade ones at five and one's it too. So there's a long way to go for those companies to live up to their full potential. You know this back craze is over. I think that investor sentiment has soured on the product and I still think there's a place for that product. And in particular if a private company wants to get public right now a spec merger is really only the only way to do it because the regular IPO process is totally shut right now. So there is still a role for set backs but it's a much smaller role than it was a couple years ago when the advantages of this back path were more clear relative to a traditional IPO.

All right Spencer Rascoff I'll let you get back to your very hot 75 and sunny weather over there. Thank you as always for stopping by. Okay. Coming up Apple's brand new iPhone coming up this September. That and much more. All the details what we know about September 7th. This is Bloomberg. Apple is kicking off a busy fall product season September 7th with new iPhones new Macs low and high end iPads and three models of the Apple Watch. The event will only be streamed online. Let's get more on this with Bloomberg's Mark Gurman who covers all things apple for us. So what do we know. So I know that the event is currently being planned for Wednesday September 7th a little rare for Apple. They usually

like to hold their events on a Tuesday. But as you know Labor Day is on that Monday. So they're you know blocking off that Tuesday as a travel day. Now what does that mean to me. That means that not only is he going to be streamed online but they'll have an in-person portion probably for press and others for a little bit of hands on. We're probably about two weeks away from this event being announced. In all likelihood at the center of the event will be the iPhone 14 line along with the Apple Watch series 8 line. So looking forward to both of those products and seeing what's in store. When will these products be

available. So you'll see Apple do an initial launch wave on September 16th. That's a Friday. Nine days after the announcement. And that is probably going to be for the iPhone 14 line. You'll see four models. Right. You'll see entry level versions of the 14 as well as iPhone 14 pro models. Now the big thing this year is that the mini is going away. So there won't be an iPhone 14 mini. Instead there'll be an iPhone 14 max. That means there's going to be a six point seven inch version of the non pro phone for the first time to be a little bit pricier than normal for the non pro phones. But I think it will be especially popular because of that enhanced screen size. Now obviously we've been talking a lot about inflation. Consumers under pressure you know difficult market dynamics. Is now the right time for Apple to be updating

its flagship product. Yeah absolutely right. Apple updates its iPhone every September October fall. They've done that since shifting their release schedule back in 2011. There is no way Apple is not going to update their devices. The people who are able to buy them are going to buy them. As usual you'll see a lot of new trade in deals. I think I mentioned this on the show last last year so I had the iPhone Twelve from 2020. I was actually able to get the

iPhone 13 not only for free but I think I got about seventy five dollars in cash in my pocket extra for trading in. Right. So if they have aggressive trading deals like they did last year I think they're going to shake out pretty pretty fine. You also had a story out today on Netflix some more details about their ad supported plan. What will be included. What won't be included. What do we know. Yeah so investors and consumers of Netflix have been pretty interested in this ad supported tier.

For those unfamiliar right now Netflix can cost upwards of 20 dollars a month for their top Tier 4 K plan with multiple screens right. They want a cheaper option and the way to go cheaper is to add ads. Right. And so it's going to cost less and they're going to offset that with advertisements. And what we learned today based on code findings inside of the Netflix iPhone app is not only are they underway on revamping their app to support this ad supported tier but we know that they're not going to support downloads profligate viewing super popular feature. I've used it before. If you're hopping on a plane you want to download some Netflix movies and shows to watch on your cross-country flight. You want that feature. This won't have it. OK. Good to know. Thanks Mark for your great reporting as always to Burks Mark Gurman. OK. Coming up mid-term elections are just a few weeks away. Is social media ready. Have companies learned from their mistakes. We'll discuss. This is.

Well with midterm elections approaching Metta is rolling out its plan to tackle misinformation after years of revising and updating its election strategy. The social media giant is sticking with some familiar tactics the same tactics we saw in the 2020 general election which was marred by conspiracies and culminated in the January 6th insurrection at the U.S. Capitol. Bloomberg's Alex Branco covers social media for us. So Alex talk to us about what Metta is planning to do here and what if anything is different from 2020. Yeah so they're very much focused like you said on on misinformation. So they will remove posts and ads that have to do with things like wrong logistics on voting things that incite violence based on the outcome of an election. And also you know making sure that in the week prior to the close of the polls they will not actually add any new

political advertisements or allow any changes to political advertising. It's the reason that we'll give it is sufficient time for folks to kind of process and potentially fact check if there's any misinformation on the platform. So for them bottom line is misinformation. Logistics is the focus. The question is is it going to work. Are they are they any more prepared than they were in 2020 for tactics that will surely have evolved. So we have the opportunity to chat to their top policy boss Nick Clegg and he says look we have spent the last six years kind of evolving the taxes we have. We feel good about

what we had in 2020. We've made some iterations. But you know he insists that the company will not be complacent. He also said that they're sure they'll see some new things that they need to come back this year. So will it work. Well if the goal is to remove misinformation from the platform and kind of stay ahead of things I expect it will still kind of be this game of whack a mole where you see bad actors putting on information. It needs to be taken down. They might change the language. It needs to be taken down which would be you know as the tune is for this year pretty consistent with what we saw in 2020. And how does what Facebook is planning to do. Metta I should say compared to for example tick tock. So Metta is kind of unique compared to tick talk and say Twitter and that they do actually allow political advertisements tick talk and Twitter. Both don't allow political ads on the platform. So Metta also has this unique stance that they won't

fact check ads. That's been a bit of a controversial stance for them. So that is kind of the main difference there. When you look at something like tick tock tick tock we'll also vet organic posts since they don't allow those ads and basically suppress things that are unverified from the platform. So fact checkers will allow good information that they information they deem good to go through on tick. Talk to the for you page. That information will be taken down. Anything that's not verified will be suppressed from that. All important for you feed that main kind of feed where people discover things. So you know that

is probably the biggest difference here is that lever of suppression. Let's say that tick tock has to make sure that information that's not fully verified or they can't say one way or another doesn't necessarily garner as big of an audience as as a piece of content normally could. Well and it's hard enough in English. How are they thinking about handling these issues in other languages say Russian. Yeah. So Metta didn't talk a lot about Russian language this go round. What they did talk about was adding additional Spanish language fact checkers. They have about 10 fact checkers that

working with half of those are Spanish because what they saw in the 2020 general election was a lot of news and commentary was in Spanish. And so they felt they needed to added add some external partners who kind of focus on that language as well. So no mention of Russian Emily for that for the US audience. But they are at least adding that additional language there for this election. OK. Alex Branca as always appreciate you stopping by. Thank you. All right. Coming up a conversation with ALM CEO Rene Hawkes about chips and IPO woes. He joins me next. This is Bloomberg. Due to the macroeconomic uncertainties as well as due to high levels of inventories that customers have built across various end market segments for us those inventories are being adjusted down and that is what is resulting in reduced demand for us.

That was Micron CEO Sanjay Mehrotra earlier this month. The slowdown in semiconductor demand was tough to find though in arms. Latest earnings report. The chip maker reported record first quarter revenue and shipments as its diversification into cars and infrastructure starts to pay off. Here to discuss ALM CEO Rene Hawes. So we've been hearing from a lot of chip makers that demand is going to slow down. Their numbers haven't been good. How. How is it that arm bucked the trend. Well Q1 was good for us. We were very fortunate. We had record revenue for us in Q1. We had

record royalties for us over 400 million dollars in royalties. We had never done anything close to that before. So it's quite good I think for us. Emily largely it's been the result of the diversification of our business. As you mentioned ALM was largely known for smartphones a number of years ago. But now we're in the cloud in networking equipment or in industrial IO TI automotive. All those markets have been strong. So the result is a really good quarter for us. Are you seeing any signs of a slowdown. We're seeing some but largely speaking areas like automotive areas like the cloud areas like networking still really really strong. We've seen some slowdown in smartphones some in pieces.

We personally have not been impacted by it that much because we're seeing more and more armed compute in each of these devices. So as a result our results have been really really strong. So what does this show investors about the company. As you know you're getting ready to go public. Not much I can say about their process but the results I think speak for itself in terms of how well we're doing. So there have been a number of announcements about ARM getting into the data center. ADP U.S. is obviously leading the way. What kind of progress are you making there and what kind of market share do you think ARM

could potentially get to. We're growing. I wouldn't want to speculate to how large your market share can get. But you know some of the fundamentals that we bring are really important and that's really around efficiency. You know when you build a new data center you only have so much power. You can put the data center and you have only so much square footage. So compute performance matters but compute efficiency really matters. It's an area that's really arms DNA. It's an area that really really good at. And we're seeing that really in terms of benefits of what NWS is doing and

other partners. You know we had announcements from Microsoft Google all the major hyperscale has now made announcements on ARM. You've also I know been working hard to hard to grow P.C. market share. Obviously Apple has helped there. What about Windows. When are we gonna see a big windows breakthrough. I think you're seeing more and more of it. The laptops today are based in our home are terrific in terms of battery life. They're terrific in terms of performance. They don't need fans. I think you'll see the Windows ecosystem moving to arm in a big way pretty soon. So chip stocks the market has not been kind to them this year. What's your sort of outlook. You know what will in your view

differentiate arm from the pack. Yeah I can't predict what the stock markets can do. Obviously if I was I probably on your earlier shows for the different with a different job. We have two pieces to our business. We have a royalty business which is an indicator of units that ship. But we also have a licensing business which is really about design wins. The canary in the coal mine relative to new design starts. That's really strong. And in fact it's strong as it's ever been. We're seeing a lot of investment in R and D in automotive in the cloud in IO T in laptops and smartphones. So I think going forward the secular trends have driven a lot of growth. We're very very bullish on that. And we're seeing again our licensing

activity which is an indicator really of investment. R and D has never been better. Now I know you can't talk specifically about the IPO but what has the volatility meant for your strategy and your plans. I mean you have to be watching the market dynamics and wondering if now is really the right time. I mean many people are saying the window at the IPO window is closed right now. Yeah. I can't speak about the IPO process. But what I what I can tell you is that there's been a lot of semiconductor downturns in history. Obviously we all know that what's different about this one is we're not seeing people tap the

brakes relative to new investment and we're not seeing people tap the brakes on our. For us the license that we do today. They end up in products three or four years down the road. The royalties that we're seeing today as a result of design wins that we did three or four years ago we see continued strong demand for our technology and products. Let's talk about China continuing tensions in U.S. China relations more restrictions from the US side about doing business in China. We've seen with the arm example just how difficult it is to run a joint venture there. How are you

navigating that given the unique arms in a very unique geographic and sort of geopolitical. Position How do you navigate that without upsetting Washington and Beijing. We're in a unique space. So when the US for example puts down restrictions around entities or companies that can't be shipped to that require licenses like any other company we have to apply for a license will adhere to the compliance rules. We're a little different than traditional U.S. companies because

ultimately those rules come down to the nature of the US content i.e. the percentage of U.S. engineers working on the products. The majority of arms engineers are not the United States. The majority of them are in Europe mostly in the UK. So we are generally not as impacted as other companies around these areas. But of course and we need to comply. We will and we have to apply for license. We'll do it. Other companies do. What's your view on the supply chain right now and how the Covid restrictions in China will continue to impact supply. I think it's a very hard thing to predict to be honest with you because

the shutdowns are sudden. They don't come with much warning. It doesn't take a whole lot for a section of the country to shut down. And the next thing you know you can't get a port open you can't ship product. So I think the supply chain perturbations are with us for for a while the world was very accustomed to the old normal world was flat. We had no pandemic. There were no

skirmishes or conflicts across borders. We live in a different time now unfortunately. And I think you're seeing that manifest itself in terms of all kinds of shortages. I think it'll exist for a while. So what have you changed about the way you do business the way you run the business to navigate that to get around that. Or can you. Hard for us. We don't build products as you know we license IP. So we ship blueprints to companies who build ships. But what about your customers. We watch that very closely. Right. We want to make sure that we can supply the products they

need at the time. They need to have them to ship. But ultimately we're kind of beholden to what the supply chain looks like. Again what we continue to see though is people doing more and more designs doing more more design starts not slowing them down. We're not seeing anyone say look I can push a product out by six months because I'm sitting on inventory.

Our partners don't think that way. It's really about innovating as fast as possible because the demand cycle is so so strong. Well there is concern though that that demand cycle doesn't keep up. But you know demand side is supply. Are we still going to continue to see supply issues and how long do those supply issues. I think we will see it for a while until the world gets

to a new normal of understanding what the buying patterns are what the forecasting patterns are. Let's take a system on CHIP for example. You may be able to get it up die from TSMC but if you can't get the substrate that you're going to put the system on package you're going to have a problem. So I I personally think it's with us for a while. So whereas arm and let's say a

year from now hopefully I mean with you talking about record revenues record royalties record design wins. I'm hoping that the momentum continues. I'm confident that it will. And will you be public to try and get RTS every day. Good to have you back. Thank you for stopping by. OK. Coming up Coyne funds a brand new Web three venture fund. We're going to talk about where they're

placing their bonds with managing partner David CAC next. This is Bloomberg. Time now for our crypto report and even on the market might not be as bullish as it was last year. Coin Fund is announcing the launch of a 300 million dollar early stage Web three venture fund called Coin Fund Ventures and it's backed by institutional investors family offices and crypto native founders. I want to bring in David Pacman managing partner and head of venture investing at Coin Fund now for more. So David we've been talking about how there's a lot of dry powder out there with the market

downturn. You know a lot of investors right now having to sit on the sidelines. Why launch this now. Well this is not our first bear market in crypto. It's our third one. Coin funds a firm that's been investing in crypto for since 2015. And we launched our second seed fund in the depths of the twenty eighteen bear market that funds done really well. So we have three seed funds and now we're launching this venture fund focused on early stage like series a stage venture projects and companies. But in our view this is probably the largest economic value

creation opportunity we've ever seen in tech. Bigger than Web one bigger than web two. You're rearranging the entire value stack of software. We're going to build software on top of decentralized block chains. Crypto is going to eat the global financial system. And then if teams are going to completely rebuild the way we monetize intellectual property that's a huge opportunity set. And so independent of where we are in market cycles we think crypto is the best place to be making tech investments. So what's your unique approach. Where and how do you plan to place your bets differently from all of that other dry powder out there. Well I think first we have seen a retraction in the amount of crypto investors out there. There

certainly are a group of crypto native investors like us who only invest in crypto and block chains and all the technology around Web three. But many of the traditional venture firms and hedge funds that started digging into crypto have pulled back leaving ample opportunity for us to make investments. We invest along the entire waterfront of crypto everything from layer ones in the Balkans themselves to the infrastructure stack built above them. We invest it in FTSE and gaming layer over investors and dapper labs the creators of the NFTE standard. And one of the most successful in game crypto collectible companies. We invest in stable coins and payments and asset management and wallets and exchanges and really define all the different places where crypto is starting to see evidence of mainstream adoption. I

think the differentiating factor between us and other investors is first of all we're crypto natively only focused on crypto. And secondly a super deep technical depth. We audit the smart contracts of our portfolio companies. We help them architect the token nomics. We're value added and helpful in helping people build companies. You're on the board of Reparable the largest NFTE marketplace. You also co-founded Apple Music Group back in nineteen ninety five. And I'm curious what potential you see at the intersection of an F TS and music. There's so much kind of resentment in the music industry about you know sort of others

having the power rather than the artists themselves. Could this somehow resolve that tension for all of the intellectual property NFTE create a way to sell scarce assets collectibles that can become more interesting or more rare or develop more attributes over time. That'll be true for music. It's been heavily true for pictures and videos where we've sold more than 30 billion dollars of NF 50s in the two years since they'd been created making I think. And if TI's the most successful consumer product release since the invention of the smartphone this is an overwhelmingly successful new product category. But for music it's been small. We've not seen significant traction around music and FTSE. But we will you know going back to before the internet music was scarce. You could have only a certain number a limited number of pressings of vinyl or or rare merch items that people collected. But once music went digital

there's no scarcity anymore. A stream of music is ephemeral and there's really nothing to collect. And if he's put the collector ability back into intellectual property and music will not be left in the cold here I think artists as you point out are looking for ways to monetize their fan base and increase engagement. And I think they'll do that through enough TS. But it's early. I think there's only limited evidence of kind of music success anywhere near the scale of what we've seen elsewhere in FTSE. Right. Still a lot of people listen to music don't know what crypto is don't understand and FTSE. But I

wonder in the future could musicians could crypto be the new platform or potentially a more valuable platform than Tic TAC or YouTube as a way to build and amplify a following. The Web to business model is to sell attention right to pump videos in feeds and kind of keep people glued and monetize them through selling their data effectively to advertisers or targeting them with data driven advertising. That's not a great model for content creators. Just don't make a lot of money from it. The Web 3 model is to create scarce. Limited edition digital collectibles that can be purchased and owned provably by your fans in any medium and you can get much higher revenue per user. One of the most exciting things about it if TES are that the average and if teen buyer spends between three hundred and nine hundred dollars per year on NAFTA that compares super favorably to people spend like 180 bucks a year on Netflix or less than 60 dollars a year on Spotify. So if people are willing to spend more for DirecTV teens for digital collectibles then more of that can go to artists and creators. And I think that's a

business model that most people who are creators will will embrace. So what's your how do you see the music industry. Let's say 10 years out. What will be different about it and what will you have potentially invested in to maybe benefit from it. So I think that first of all to build digital collectibles or any type of digital intellectual property there's a lot of software this could be built first. We call that in Web 3. Those software we call protocols. And so we're investing in a lot of the marketplaces and protocols on which entities are created and sold and tracked. Think of it as NFTE infrastructure. There are

examples of NF T products that have come to market. They've been very successful that we've also invested in like NBA Topshop which is a basketball collector's game created by Dapper Labs. And so I think our intention is to invest up and down the T stack but it doesn't mean that we're buying and tease ourselves. We actually have a portfolio company called Metaverse all that does that. But I think one of the big questions for music is will the artists release their own creative works digitally through entities themselves. Or will they continue to give their rights or sell their rights to record labels and have those labels do it for them. If they choose the latter half they will really maintain the status quo of the music industry value

chain. But if they take back their works and they monetize it themselves by selling them through very low cost marketplaces to their fans they can have more control over their careers and also creators can have more money. Absolutely fascinating. Thank you for laying out a different view of the future. David Pacman quite fund managing partner.

Appreciate it. Thanks for having me on. All right. Coming up 10 cent is saying a report about its stake in May 1 is incorrect but hasn't completely denied it. That story next. This is Bloomberg. Ten cents says a report that the company intends to sell all or much of its 24 billion dollar stake in a food delivery company May 1 is incorrect. Bloomberg Chrystal Zee joins us now to explain. And Crystal as I understand it 10 10 10 didn't actually

deny the report does make sense of this. So I mean there are many reasons company deny a story and others. Chief strategy officer came out and said the story that word has put out yesterday is inaccurate. But if you think about the kind of strategy that Tencent has been working on since last year that they already disclose that plans to divest or stake in JD. And overall in China you're seeing that anti-trust is becoming a bigger issue. So the Chinese government had flat out say that they don't want any one company one technology company to have too much influence in society. So it actually would dramatically

make a lot of sense for Tencent to divest or stake in May 1. But we saw made one stock got really just tanked after the report came out. And you know now that they're in current statement or denial have gone out it's actually come back up. So it's hard to speculate what's going on with Phil and the story out of Asia out of the U.S. But there could be more to the story behind if there is some truth here if something like this happens. What would be the significance of that. Yes. So Chinese companies as

of two years ago have not really had any anti-trust concern. Basically if you're Chinese tech company your strategy has been just to build just to grow. And a lot of 10 cents investment has panned across all sectors in someone's life. You have your delivery you have grocery you have all of these instant messaging apps or in terms of information in terms of reach.

Tencent has been really really strong and tapping into all these sectors. But now you're seeing that is taking a more Western approach. The government is saying that no one company can beat that big and it could really kick off a flurry of deals. And Tencent Ali Baba. Those could be the first targets. So it's Ali Baba. We have already seen you know there run into kind of scrutiny with the government. And it wouldn't be surprising if Tencent goes into the same direction. How does the Chinese

government's recent crackdown on tag. I mean it's been happening over the last several years play into this. So it's we are seeing this play out in actually many ways. If you remember the DDA IPO is probably a really good example. The government told them you know for listing it's not the best option for you. It really manifests in many forms. It could be telling big tech

company to drive faster stake in other companies or just retaining these control in China on shore instead of letting them raise capital elsewhere. So we're seeing we have been seeing a lot less foreign listing there hasn't been released any Chinese listing in the US after D.D. And we've seen how a lot of actually multiple Chinese company that have us listed vehicle have announced de-listing plants. So in many ways the Chinese kind of capital markets become more closed off. And as a country

they are really protecting their technology a lot more. We've been obviously there's been a lot of volatility in U.S. markets is that it. Are we seeing the same thing in China markets when it comes to Chinese IPO Chinese listings. Is the window closed. Yeah. If you look at Tencent and May Taiwan those two stocks actually are down between 25 to 35 percent year to date. It sounds bad but if you compare that to NASDAQ S&P or those tech companies in that same category in the US those are probably down double or triple that. So the U.S. capital markets is actually more closed off than right now. At least more active is more NOCs than the Hong Kong or the Shanghai capital markets. But that could change any. We see a follow on market in the US come back. So if more of these follow on blog trades come back in the US we

could see IPO coming back as well. All right. Crystal Zee thanks for that update. Appreciate it. And that does it for this edition of Bloomberg Technology. Coming up Thursday we're gonna hear from the co-founder of Lulu Ventures Miriam Rivera talking about her investment strategy and how it's changing in a recession.

And don't forget to check out our podcast wherever you get your podcast. I'm Emily Chang in San Francisco. This is Bloomberg.

2022-08-19 17:09

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