# BofA Shares Tumble After Fines, Weak Trading Drag Down Results

An episode of [Bloomberg Intelligence](https://invisiblenetwork.ai/podcast/326301337), 14 Oct 2026, 24 min.

Audio: https://podtrac.com/pts/redirect.mp3/tracking.swap.fm/track/UVBrz8bN8aM2Xe47PEPu/traffic.omny.fm/d/clips/e73c998e-6e60-432f-8610-ae210140c5b1/7f534b8c-9e91-429a-b102-ae3c00090c6d/2a809669-6d75-4739-a5a3-b4e301154f8f/audio.mp3?utm_source=Podcast&in_playlist=0ad812bf-fd15-4012-a18c-ae3c00090c76

Watch Paul and Scarlet LIVE every day on YouTube: http://bit.ly/3vTiACF. Bloomberg Intelligence hosted by Scarlet Fu and Stacey Vanek Smith -Herman Chan, Senior Analyst, US Banks for Bloomberg Intelligence, recaps U.S bank earnings. Bank of America Corp.'s stock and fixed-income traders missed estimates, with bond-trading revenue falling 17% to $2.55 billion and equity trading up 10% to $2.51 billion. The company announced a $1.2 billion non-tax-deductible charge for fines related to money laundering and sanctions violations, which cut into net income by 17 cents a share. -Matthew Palazola, Bloomberg Intelligence, Senior Analyst, P&C Insurance, discusses shares of Bending Spoons surging as much as 55% after Berkshire Hathaway Inc. agreed to invest an additional $330 million in the Italian technology conglomerate. The investment brings Berkshire’s stake in Bending Spoons to 4% and gives Bending Spoons more capital to pursue acquisitions. Bending Spoons will issue 10 million ordinary shares to Berkshire at $33 apiece through a private placement, according to a statement Wednesday. -Geetha Ranganathan, Bloomberg Intelligence Analyst, discusses Netflix job cuts. Netflix Inc. is cutting 6% of its global staff, or about 1,000 positions, due to slowing growth. The cuts will be in the product, tech, legal and human-resources teams, according to an email from co Chief Executive Officers Greg Peters and Ted Sarandos. Netflix's business is "strong and growing, and we remain on track to deliver our full-year forecast," the executives wrote, despite concerns about growth and weakening subscriber engagement. -Tamlin Bason, Bloomberg Tech Litigation Analyst, discusses Apple and OpenAI heading to court for a hearing in Apple's lawsuit accusing OpenAI of scheming to steal proprietary information about upcoming products. Two critical issues are on the agenda: Apple's request for a court order to stop OpenAI from using allegedly stolen trade secrets and OpenAI's demand to dismiss Apple's lawsuit entirely. OpenAI has denied the allegations, arguing that Apple's lawsuit is an effort to restrain employees from leaving for a competitor and that the company seeks to cast "ordinary job interviews as acts of trade secret misappropriation." See omnystudio.com/listener for privacy information.

## Transcript

[0:02] Speaker 1: Bloomberg Audio Studios.
[0:04] Speaker 2: Podcasts.
[0:05] Speaker 3: Radio.
[0:06] Speaker 4: News.
[0:09] Speaker 5: You're listening to the Bloomberg Intelligence Podcast. Catch us live
[0:13] Speaker 5: weekdays at 10 a.m. Eastern on Apple CarPlay and Android
[0:16] Speaker 5: Auto with the Bloomberg Business App. Listen on demand wherever
[0:19] Speaker 5: you get your podcasts or watch us live on YouTube.
[0:24] Speaker 6: Herman Chan is our senior analyst covering U.S. banks for
[0:27] Speaker 6: Bloomberg Intelligence, and he is here with us now. And
[0:29] Speaker 6: the price action for Bank of America, that $ 1. 2 billion
[0:33] Speaker 6: penalty that came in, that just crossed last night, one
[0:37] Speaker 6: day before the earnings report. Talk about bad timing.
[0:39] Speaker 7: Yeah, yeah.
[0:40] Speaker 2: I guess they were trying to get it into the
[0:42] Speaker 2: third quarter numbers. So it was a 17 cent hit
[0:46] Speaker 2: to earnings, $ 1. 2 billion related to regulatory fine, lax asset
[0:52] Speaker 2: money laundering activity for Bank of America. So hopefully the
[0:59] Speaker 2: bank can get this behind them, but there will be
[1:02] Speaker 2: some repercussions in terms of remediation, hiring new personnel, making
[1:07] Speaker 2: sure those compliance costs are in line to address the issues.
[1:10] Speaker 8: Why are bank stocks down?
[1:12] Speaker 9: It seems like they should be up with all these
[1:14] Speaker 9: huge deals happening. Is it interest rates or what's going on?
[1:18] Speaker 2: I think a lot of it has to do with
[1:20] Speaker 2: the higher for a longer rate environment that we're in,
[1:22] Speaker 2: expecting potentially more rate hikes over the next six to
[1:27] Speaker 2: nine months. That could slow down the economic growth of
[1:31] Speaker 2: the country and really drive potentially higher loan losses for
[1:34] Speaker 2: the group. So credit quality concerns. Nothing is imminent, but
[1:40] Speaker 2: bank investors are always looking around the corner for the
[1:42] Speaker 2: next shoe to drop. So I think that's one of them.
[1:45] Speaker 2: The other thing is that there's some questions on agentic
[1:49] Speaker 2: risk and AI risk, given the fact that Muse really
[1:51] Speaker 2: just took off from nowhere and really surprised a lot
[1:54] Speaker 2: of folks. And there's some questions on if More customers
[1:58] Speaker 2: adopt MUSE and similar agents. Does that mean that customers
[2:02] Speaker 2: will use this for their personal finances and move their
[2:06] Speaker 2: deposits much more quickly and increase the funding cost for
[2:11] Speaker 2: the banks?
[2:12] Speaker 6: So basically, they'll shop around to look for the best
[2:14] Speaker 6: rate and then move their money out of, say, Bank
[2:16] Speaker 6: of America to go somewhere else.
[2:17] Speaker 2: So let's say your checking account is earning zero interest rate.
[2:21] Speaker 2: You can move excess cash into a high-yield savings account,
[2:24] Speaker 2: and that would be detrimental for a bank that's holding
[2:27] Speaker 2: these checking accounts.
[2:28] Speaker 6: Do we know if any of these big banks are
[2:30] Speaker 6: partnering up with MUSE in any way to make sure
[2:34] Speaker 6: that MUSE can work with them as opposed to work
[2:37] Speaker 6: against them?
[2:37] Speaker 1: Yeah, it's still early days.
[2:39] Speaker 2: The banks are saying that there's always been rate-seeking behavior.
[2:44] Speaker 2: And we're in sort of year two or three of
[2:47] Speaker 2: this higher rate backdrop. You saw this last year where
[2:51] Speaker 2: your wealthier asset management clients were already moving money out
[2:56] Speaker 2: of their consumer checking accounts and into higher-yielding products. So
[3:02] Speaker 2: that's nothing new over the horizon. And your typical checking
[3:08] Speaker 2: account's only.
[3:09] Speaker 8: Like $ 3, 000.
[3:09] Speaker 2: To $ 5, 000 in size. So for your typical U.S. customer,
[3:15] Speaker 2: probably won't move the needle that much.
[3:18] Speaker 8: What might turn this around for banks?
[3:20] Speaker 9: I mean, there are these big IPOs happening, lots of mergers,
[3:23] Speaker 9: anything that is a silver lining?
[3:25] Speaker 10: Yeah.
[3:26] Speaker 2: Um, the other thing that slowed in the third quarter
[3:29] Speaker 2: was fixed income trading. So that was a bit of
[3:32] Speaker 2: a surprise for across the group, given the fact that
[3:35] Speaker 2: we had the really steep run up in interest rates
[3:38] Speaker 2: in the third quarter and less activity in, in September.
[3:41] Speaker 2: So if we can get better trading results, um, in
[3:45] Speaker 2: the fourth quarter, which is typically seasonally soft, given the
[3:47] Speaker 2: holiday months, um, that, that could turn things around. Um,
[3:52] Speaker 2: re-engagement in IPOs that some of them have been delayed.
[3:57] Speaker 2: And if we have a more open capital markets backdrop,
[4:01] Speaker 2: that could increase some confidence that the backlog can be
[4:04] Speaker 2: realized for banks like Morgan Stanley, Goldman, and JP Morgan.
[4:09] Speaker 1: Stay with us. More from Bloomberg Intelligence coming up after this.
[4:16] Speaker 5: You're listening to the Bloomberg Intelligence Podcast. Catch us live
[4:20] Speaker 5: weekdays at 10 a.m. Eastern on Apple CarPlay and Android
[4:23] Speaker 5: Auto with the Bloomberg Business App. Listen on demand wherever
[4:26] Speaker 5: you get your podcasts or watch us live on YouTube.
[4:31] Speaker 6: Let's talk some Matrix or some Johnny Carson if you're
[4:34] Speaker 6: old school like John Tucker.
[4:36] Speaker 7: Oh, bending spoon. Yeah, I have to go back to
[4:38] Speaker 7: Johnny Carson. Remember that guy? What was his name? What
[4:41] Speaker 7: was his name again? He used to go on Carson.
[4:44] Speaker 7: and bends spoons with his mind power. And Carson set
[4:47] Speaker 7: him up one day to show that he was a
[4:53] Speaker 7: complete fraud. But then there was the movie.
[4:56] Speaker 1: Well, the idea of bending spoons stuck.
[4:58] Speaker 8: He wasn't really bending spoons with his mind.
[5:00] Speaker 6: We just thought we saw it.
[5:01] Speaker 4: Yeah.
[5:02] Speaker 6: Well, I don't know if we thought we saw this
[5:04] Speaker 6: taking place either. Berkshire Hathaway, investing... an additional $ 330 million
[5:10] Speaker 6: in the company bending spoons. So we want to bring
[5:13] Speaker 6: in Matthew Palazzola. He is our senior analyst on PNC Insurance,
[5:17] Speaker 6: which means he covers Berkshire Hathaway in his area of
[5:20] Speaker 6: coverage to talk a little bit more. So whenever a
[5:22] Speaker 6: company gets the endorsement of Warren Buffett, the shares surge.
[5:26] Speaker 6: And this is kind of what happened here with Bending Spoons,
[5:28] Speaker 6: the stock rising as much as 55%.
[5:30] Speaker 10: Yeah, so we definitely do not know if Warren Buffett's
[5:33] Speaker 10: behind it. He probably isn't, to be honest. It's Warren
[5:37] Speaker 10: Buffett's Berkshire Hathaway, so in a way he is. But
[5:41] Speaker 10: I was walking back from a meeting and I start
[5:42] Speaker 10: getting instant messages about Matrix references. I said, what is
[5:46] Speaker 10: going on? And yeah, it finds out that they invested
[5:50] Speaker 10: in the IPO of this company in July, which I'm
[5:53] Speaker 10: almost positive was not public news. I did not know
[5:56] Speaker 10: about that. So they did, I think it was like
[5:58] Speaker 10: $ 300 million in the IPO. They do 13Fs, but those
[6:01] Speaker 10: are only U.S.
[6:02] Speaker 7: Companies.
[6:03] Speaker 10: And this is an Italian company. So it didn't show
[6:05] Speaker 10: up on any of those filings. And $ 300 million for
[6:08] Speaker 10: them is a small number. So they invested in the
[6:11] Speaker 10: IPO and they just did another $ 600, which brings them
[6:14] Speaker 10: to about 4% of the company.
[6:16] Speaker 9: So this is, so this is like, as you said,
[6:18] Speaker 9: an Italian company, what do they do and why, why
[6:22] Speaker 9: do you think Berkshire is.
[6:23] Speaker 8: So interested in them?
[6:24] Speaker 10: So, uh, as Scarlett said, I'm the, I'm the insurance guy.
[6:28] Speaker 10: So I'm not an expert on, in spoons or technology, but, um, it's,
[6:33] Speaker 10: it doesn't scream to me like, you know, you hear
[6:35] Speaker 10: Berkshire buying in like tech IDO. Like it's not, I
[6:38] Speaker 10: don't think it's exactly that they buy other companies and
[6:41] Speaker 10: and I guess rehabilitate them and work on the brand.
[6:44] Speaker 10: So those companies are tech companies. Has good bones.
[6:49] Speaker 4: Yeah.
[6:49] Speaker 10: So I think it's not exactly like they're a startup.
[6:53] Speaker 10: They're buying other companies.
[6:54] Speaker 6: So Bending Spoons is kind of like a Berkshire, but
[6:56] Speaker 6: focused on tech companies in a way.
[6:59] Speaker 10: Probably a little bit of a stretch. I mean, maybe
[7:01] Speaker 10: they're like a repair. No one's a Berkshire, right? So
[7:03] Speaker 10: I wouldn't want to go that far.
[7:04] Speaker 1: Okay, that's true. That's true.
[7:05] Speaker 2: Okay.
[7:06] Speaker 8: I do like the idea of Berkshire buying Berkshire.
[7:08] Speaker 1: But it's buying a company that holds a bunch of
[7:10] Speaker 1: other companies.
[7:11] Speaker 2: Right.
[7:11] Speaker 10: It's not like a tech startup. It's buying a company that,
[7:13] Speaker 10: I guess, but they buy them to specifically improve them
[7:17] Speaker 10: or work on them. Where Berkshire kind of will buy
[7:19] Speaker 10: a company because it's a great company and they want
[7:21] Speaker 10: to own it.
[7:21] Speaker 1: So it's a little bit private equity-ish.
[7:23] Speaker 4: Yeah, it is.
[7:24] Speaker 6: OK, so is this kind of consistent with Berkshire's approach
[7:28] Speaker 6: to investments overall or does this mark a change?
[7:31] Speaker 10: It seems a little new to me. I mean, you know,
[7:33] Speaker 10: we have Greg Abel as a CEO. We don't know
[7:36] Speaker 10: if he did it. It could have been Ted Welcher,
[7:38] Speaker 10: who's an investment deputy. It could have even been Warren Buffett.
[7:41] Speaker 10: He's still he is officially retired, but he is chairman now. Emeritus,
[7:47] Speaker 10: and he's still talking to Abel. So he could have
[7:49] Speaker 10: been involved. They did buy into the Snowflake IPO in 2020.
[7:54] Speaker 10: They subsequently sold all those shares in 2024. And I
[7:57] Speaker 10: think their investment in Snowflake was around $ 700 million. So
[8:00] Speaker 10: this isn't completely unprecedented, but definitely a departure from their
[8:05] Speaker 10: normal playbook.
[8:07] Speaker 1: So.
[8:08] Speaker 8: Buffett stepped down. I just looked this up earlier this year.
[8:11] Speaker 8: But as you said, he's still sort of in the zeitgeist.
[8:15] Speaker 1: Yes, he looms.
[8:16] Speaker 8: He's not totally gone.
[8:19] Speaker 9: Does this mark a departure for Berkshire, or is this
[8:22] Speaker 9: like a different kind of company? Is this sort of
[8:23] Speaker 9: marking a new era for them, or is this very
[8:26] Speaker 9: much along the lines of... Does this make sense to
[8:28] Speaker 9: you when you look at.
[8:29] Speaker 10: The other things? Yeah, I think... Like I was saying
[8:31] Speaker 10: on the first read, I was like, oh, kind of
[8:33] Speaker 10: didn't really make sense. But to read more a little
[8:38] Speaker 10: bit about Bending Spoons and... the company that they are
[8:41] Speaker 10: probably follows, falls more into their playbook, but definitely a
[8:45] Speaker 10: departure from, from the type of companies they've been invested in. Uh,
[8:49] Speaker 10: they've been looking at, uh, they've traded in and out
[8:53] Speaker 10: of companies and more, although I don't think you'd want
[8:55] Speaker 10: to buy this at the IPO and like kind of
[8:57] Speaker 10: trade out of it, but they've done a little bit
[8:58] Speaker 10: more of that over maybe call it the past five
[9:00] Speaker 10: years in small positions.
[9:03] Speaker 5: Okay.
[9:03] Speaker 6: So, um, Berkshire, obviously not just making an investment in
[9:06] Speaker 6: bending spoons, it's also done other things. It's, um, increased
[9:10] Speaker 6: its stake in Lennar, which is a traditional home builder.
[9:13] Speaker 6: I mean, it feels like they're, they're straying away a
[9:16] Speaker 6: little bit from their focus on industrial companies.
[9:18] Speaker 1: Is that a fair assessment?
[9:20] Speaker 10: A little bit. I mean, I think Greg Abel's really
[9:22] Speaker 10: putting capital to work. I think some, when I talk
[9:24] Speaker 10: to clients, people say, well, what are they doing? Are
[9:26] Speaker 10: they not, you know, they can't really move the needle.
[9:29] Speaker 3: Indeed.
[9:29] Speaker 10: They can't move the needle dramatically given how big the
[9:32] Speaker 10: company is, but he's, he's making moves. He's buying back stock, uh, linear.
[9:37] Speaker 10: They own, uh, Clayton Homes, which is a home builder.
[9:44] Speaker 10: They build the home and they bring it to you.
[9:46] Speaker 10: So it's an off-site home builder.
[9:47] Speaker 5: Oh, the prefabs, right?
[9:48] Speaker 10: Yeah, a prefab. And then they bought Tyler Morrison, which
[9:52] Speaker 10: was an on-site builder. And now they're increasing their stake
[9:56] Speaker 10: in Lanier, which is another home builder. So it's not.
[10:00] Speaker 10: Departure from some of their core businesses, but they have
[10:03] Speaker 10: experience in the home building business. Greg Abel is long-term bullish.
[10:08] Speaker 10: He acknowledges their cyclicality in the home builders, especially in
[10:12] Speaker 10: those stocks, which is probably why they're buying them now.
[10:15] Speaker 10: But long-term housing supply... shortage is a thesis for Berkshire.
[10:21] Speaker 9: I feel like there's something like a Berkshire bump that
[10:24] Speaker 9: Bending Spoons is experiencing. Is a Berkshire investment still what
[10:29] Speaker 9: it used to be in terms of the Oracle of
[10:34] Speaker 9: Omaha investing in your company and things.
[10:37] Speaker 8: Like that, or is it different?
[10:37] Speaker 10: I think so. I think so. Buffett's still there. It's
[10:41] Speaker 10: the company of Buffett. Able is really carrying on the ethos.
[10:45] Speaker 10: They've got more money, I don't know, than anybody, right?
[10:48] Speaker 10: They've got $ 300 plus billion in cash, $ 300 billion in equities.
[10:52] Speaker 10: So the capital behind it, having that kind of partner
[10:57] Speaker 10: behind you, I think still carries a lot of weight.
[11:00] Speaker 7: Okay.
[11:00] Speaker 6: Well, for now, the market's certainly treating it that way,
[11:02] Speaker 6: given how much bending spoons shares are surging in U.S.
[11:06] Speaker 1: Trade.
[11:06] Speaker 6: And of course, that's why everyone's always on the lookout
[11:09] Speaker 6: for any kind of announcement that Berkshire Hathaway has deployed
[11:13] Speaker 6: a new position or increased its position or maybe sold
[11:16] Speaker 6: its position. And that also triggers a bunch of copycat
[11:18] Speaker 6: moves as well. All right, Matthew, thank you so much.
[11:21] Speaker 6: Matthew Palazzola of Bloomberg Intelligence. He's a senior analyst covering
[11:25] Speaker 6: PNC insurance. You're about to get really busy over the
[11:27] Speaker 6: next week, right?
[11:29] Speaker 4: Indeed.
[11:29] Speaker 10: We had earnings. We had the hurricane. We also had
[11:31] Speaker 10: progressive report earnings today. That's knocked down a lot.
[11:34] Speaker 6: Yeah.
[11:35] Speaker 10: I think market's probably underappreciating the fact that they are
[11:38] Speaker 10: gaining a ton of market share at attractive margins.
[11:41] Speaker 1: Stay with us. More from Bloomberg Intelligence coming up after this.
[11:48] Speaker 5: You're listening to the Bloomberg Intelligence Podcast. Catch us live
[11:52] Speaker 5: weekdays at 10 a.m. Eastern on Apple CarPlay and Android
[11:55] Speaker 5: Auto with the Bloomberg Business App. Listen on demand wherever
[11:58] Speaker 5: you get your podcasts or watch us live on YouTube.
[12:03] Speaker 6: One of the headlines that we're paying attention to this
[12:05] Speaker 6: morning is Netflix. The company has not yet reported earnings.
[12:08] Speaker 6: I think that's in about a week or so, but
[12:10] Speaker 6: it is cutting staff. Six percent of its global staff,
[12:13] Speaker 6: that's about a thousand positions. So we want to get
[12:16] Speaker 6: the instant reaction and analysis from Geetha Ranganathan. She's our U.S.
[12:21] Speaker 6: media analyst who covers Netflix. And Geetha, this all kind
[12:25] Speaker 6: of gets at the idea that Netflix is a maturing
[12:29] Speaker 6: business now. It isn't seeing the kind of growth that
[12:31] Speaker 6: it once did.
[12:33] Speaker 4: Yeah, it didn't. And that's exactly, I mean, this job
[12:36] Speaker 4: cut exactly confirms those fears. So the last big job cut, Scarlett,
[12:40] Speaker 4: that we saw with this company was back in 2022.
[12:44] Speaker 4: And remember, that was the first time in their history
[12:46] Speaker 4: that they actually reported. subscriber loss. So people very much
[12:51] Speaker 4: kind of equate the job cuts with really the slowing
[12:55] Speaker 4: growth algorithm. We've definitely seen a deceleration across at least
[12:59] Speaker 4: the U.S. markets in terms of engagement. That has been
[13:02] Speaker 4: stoking a lot of kind of muted sentiment for the stock. But,
[13:07] Speaker 4: you know, there is obviously some positives, but you're absolutely
[13:10] Speaker 4: right in the sense that this is definitely a maturing
[13:13] Speaker 4: growth story and focus is shifting now away from subscribers
[13:16] Speaker 4: to really profitability. And this just goes to prove that.
[13:20] Speaker 9: Well, I would like to say for the record that
[13:21] Speaker 9: I have been doing my part to engage with Netflix.
[13:26] Speaker 9: One question I had, is this just that the space
[13:28] Speaker 9: is getting so much more competitive because there are so
[13:31] Speaker 9: many new services coming online and so much more competition
[13:34] Speaker 9: in streaming or is Is something else going on? Is
[13:38] Speaker 9: it just like the eyeballs are getting split?
[13:42] Speaker 4: Yeah, no, that's exactly what it is, Stacey. So it's not,
[13:44] Speaker 4: you know, it used to be, we used to call
[13:46] Speaker 4: it the streaming wars, right? So it used to be
[13:49] Speaker 4: Netflix against... you know, a Disney against an HBO Max,
[13:52] Speaker 4: but that's just no longer the case. Today, I mean,
[13:55] Speaker 4: if you just look at the, you know, zoom out
[13:57] Speaker 4: and kind of look at the whole ecosystem, Netflix is
[13:59] Speaker 4: not just competing with Disney and Amazon. It's competing with YouTube.
[14:03] Speaker 4: That's its biggest competitor. It's competing with other social media
[14:06] Speaker 4: platforms like an Instagram, you know, YouTube Shorts, and, you know,
[14:13] Speaker 4: gaming platforms. So really, I mean, the competition now is
[14:16] Speaker 4: definitely for eyeballs and it's... The universe, I would say,
[14:21] Speaker 4: has kind of really broadened for Netflix, and they're feeling
[14:24] Speaker 4: the pinch pretty, pretty strongly.
[14:26] Speaker 6: Yeah, I remember for earnings reports, Netflix would usually kind
[14:30] Speaker 6: of identify who they see as their biggest competition. At
[14:32] Speaker 6: one point, Reed Hastings had said sleep was a competition
[14:36] Speaker 6: to Netflix, and then YouTube was identified.
[14:39] Speaker 8: As the competition.
[14:41] Speaker 1: What is the market ticker for that? Exactly, ZZZZZ.
[14:45] Speaker 6: Does Netflix still do that, kind of identify who it
[14:48] Speaker 6: sees as its biggest foe, its biggest competitor?
[14:52] Speaker 4: Oh, absolutely. I mean, you're right. They used to identify
[14:55] Speaker 4: their peers. So pretty much, you know, the Amazons and
[14:57] Speaker 4: the Disneys of the world. But if you look at
[14:59] Speaker 4: all of their newsletters that come out with every earnings
[15:02] Speaker 4: report over the past so many quarters, every quarter in
[15:07] Speaker 4: and quarter out, they talk about YouTube, right? They talk
[15:10] Speaker 4: about them only having about 7% or 8% of total
[15:15] Speaker 4: US TV viewing time. And they kind of position it
[15:17] Speaker 4: as an opportunity. But the reality is that it hasn't
[15:21] Speaker 4: really budged now. They've stayed stagnant at that 8% to 9%.
[15:24] Speaker 4: In fact, their share of total US TV viewing time
[15:27] Speaker 4: has been falling. And so that's what's really disconcerting, Scarlett,
[15:30] Speaker 4: for investors.
[15:31] Speaker 2: Yeah.
[15:32] Speaker 8: Are there any of the streaming services that are really
[15:34] Speaker 8: doing great?
[15:35] Speaker 9: Is it YouTube? Is anyone really dominating this business right now?
[15:40] Speaker 4: I mean, Netflix still dominates, Stacey, when it comes to,
[15:44] Speaker 4: you know, obviously subscribers. They have close to almost maybe
[15:46] Speaker 4: about 340 million subscribers, although they have stopped reporting subscribers
[15:52] Speaker 4: on a quarterly basis. But they do kind of give
[15:54] Speaker 4: us milestones. So they're absolutely the giant when it comes to,
[15:58] Speaker 4: you know, streaming subscriptions. The market's focus, of course, has
[16:02] Speaker 4: shifted to profitability. And again, here, Netflix kind of leads, definitely.
[16:06] Speaker 4: They do have, you know, strong profits, strong operating margin.
[16:10] Speaker 4: But everybody is kind of trying to catch up to
[16:12] Speaker 4: them and everybody's clothes on Netflix's heels. You know, the
[16:15] Speaker 4: biggest competitor that we are now looking at is this
[16:19] Speaker 4: newly formed Skydance, which is a combination of Paramount and
[16:24] Speaker 4: Warner Brothers Discovery. And it has roughly about... 220 million subscribers.
[16:29] Speaker 4: So obviously it is definitely going to be a formidable competitor.
[16:33] Speaker 4: We know David Ellison is not going to, you know,
[16:38] Speaker 4: spare it, you know, content costs. So yeah, definitely something
[16:42] Speaker 4: to watch out for.
[16:44] Speaker 1: Stay with us. More from Bloomberg Intelligence coming up after this.
[16:51] Speaker 5: You're listening to the Bloomberg Intelligence Podcast. Catch us live
[16:55] Speaker 5: weekdays at 10 a.m. Eastern on Apple CarPlay and Android
[16:58] Speaker 5: Auto with the Bloomberg Business App. Listen on demand wherever
[17:01] Speaker 5: you get your podcasts or watch us live on YouTube.
[17:05] Speaker 6: Apple and OpenAI are heading to court in high stakes
[17:09] Speaker 6: AI trade secret fight. They are in dispute over trade secrets,
[17:16] Speaker 6: and we want to get a better understanding of what's
[17:17] Speaker 6: at stake here. Tamlin Basin is Bloomberg Tech litigation analyst
[17:22] Speaker 6: joining us from London. Tamlin, can you just set the
[17:25] Speaker 6: scene for us here? What are they disputing over?
[17:29] Speaker 1: Yeah, sure.
[17:30] Speaker 3: So what they're really disputing over is trade secrets. But
[17:33] Speaker 3: these are specifically trade secrets tied to OpenAI's push into
[17:38] Speaker 3: creating hardware devices, hardware devices that will have AI incorporated
[17:43] Speaker 3: into them. And what Apple alleges is this goes back
[17:46] Speaker 3: to an acquisition OpenAI made about a year and a
[17:50] Speaker 3: half ago of a company called IO, which had been
[17:54] Speaker 3: started by former Apple executives. Apple argues that after this acquisition,
[18:01] Speaker 3: some OpenAI employers that came from I.O. then started poaching
[18:06] Speaker 3: Apple talent, Apple engineers. And in this process, they were
[18:10] Speaker 3: asking potential employees to bring Apple devices that had proprietary
[18:15] Speaker 3: data in them to interviews. So this is really what
[18:19] Speaker 3: this is about. Apple says this goes beyond talent mobility
[18:22] Speaker 3: and this goes directly towards trying to gain proprietary information
[18:28] Speaker 3: against the Federal Trade Secrets Act. So that's really the
[18:31] Speaker 3: broader stage for this dispute.
[18:34] Speaker 8: I mean, Apple has so much dominance in the world
[18:37] Speaker 8: of devices.
[18:39] Speaker 9: Are they facing potentially a threat? I mean, obviously this
[18:42] Speaker 9: is a legal situation, but I mean, do they see
[18:46] Speaker 9: companies like OpenAI as a threat in the device space?
[18:50] Speaker 3: Yeah, so I think it's important that Apple very rarely
[18:53] Speaker 3: exerts IP in cases like this. Sort of one of
[18:56] Speaker 3: the instances that stands out, which is really sort of
[18:59] Speaker 3: the exception that proves the rule, is when it went
[19:02] Speaker 3: after Samsung for patent infringement related to the design of
[19:06] Speaker 3: the Samsung phone. So I think when Apple does feel
[19:09] Speaker 3: that its proprietary data or designs have been infringed, then
[19:13] Speaker 3: it will aggressively go after the other company. And here,
[19:16] Speaker 3: AI and devices isn't necessarily a burgeoning market now. So
[19:22] Speaker 3: this is really about sort of first mover advantage. Apple
[19:25] Speaker 3: says that OpenAI essentially tried to get a shortcut to
[19:28] Speaker 3: get there, to get on the market by stealing its
[19:32] Speaker 3: proprietary information. So I think that's a way to look
[19:34] Speaker 3: at this, is this is about Apple trying to protect
[19:36] Speaker 3: its moat and trying to make sure that if OpenAI
[19:39] Speaker 3: comes out with any hardware products, that those don't incorporate
[19:44] Speaker 3: Apple's what it says are proprietary trade secrets in those.
[19:48] Speaker 3: So I think it's more about sort of moat protection
[19:50] Speaker 3: at this stage.
[19:51] Speaker 6: Is it also about bad blood? Because you mentioned IO,
[19:53] Speaker 6: that hardware startup. It was actually founded by Sir Johnny Ive,
[19:57] Speaker 6: who's the famous design chief for Apple, who worked hand
[20:01] Speaker 6: in hand with Steve Jobs to design the Apple, definitely
[20:05] Speaker 6: the Apple iPhone, and I want to say the Macintosh
[20:07] Speaker 6: even before then. I mean, he's kind of the brains
[20:10] Speaker 6: behind how things look and how it feels in your hand.
[20:14] Speaker 6: And of course, he stayed on at Apple after Steve
[20:16] Speaker 6: Jobs passed, but at some point he left the firm and,
[20:20] Speaker 6: you know, went over to start his own company and
[20:23] Speaker 6: then teamed up with OpenAI.
[20:25] Speaker 1: Is there, you know, just bad blood between Apple and
[20:29] Speaker 1: Johnny Ive?
[20:30] Speaker 3: Yeah, so it's interesting because the Apple complaint actually doesn't
[20:33] Speaker 3: really reference Johnny Ive at all. Despite this history he
[20:37] Speaker 3: has there, it really focuses on the other founders of I.O.
[20:42] Speaker 3: who say were more involved in sort of this acquisition
[20:46] Speaker 3: strategy to bring over Apple talent. and sort of try
[20:51] Speaker 3: to get them to take with them sort of proprietary data.
[20:54] Speaker 3: So Apple really goes to great lengths, I think, to
[20:56] Speaker 3: not talk up the Johnny Ive situation. And also when
[20:59] Speaker 3: they followed the suit, they said this doesn't actually impact
[21:02] Speaker 3: our existing relationship with OpenAI, of course, you can have
[21:06] Speaker 3: OpenAI on Apple devices, there is this ongoing relationship. And
[21:11] Speaker 3: they were clear to note that this lawsuit isn't going
[21:14] Speaker 3: to affect that. Of course, depending on how this goes,
[21:17] Speaker 3: there could be bad blood developing between the companies. But
[21:21] Speaker 3: I think at the outset, Apple was pretty cautious to
[21:25] Speaker 3: frame this as this is an isolated incident where we
[21:28] Speaker 3: think OpenAI has gone beyond the realm of legality in
[21:31] Speaker 3: terms of acquiring talent, and we want to draw a
[21:35] Speaker 3: line in the sand and make sure that a court
[21:37] Speaker 3: recognizes this as improper conduct.
[21:41] Speaker 8: Is this maybe a sign of things to come?
[21:43] Speaker 9: Are we expecting to see some of the big AI
[21:48] Speaker 9: companies getting into the device space and competing with Apple?
[21:51] Speaker 9: Because Apple seems to have stayed out of AI for
[21:55] Speaker 9: the most part.
[21:56] Speaker 1: Great question.
[21:57] Speaker 3: Yeah, yeah, and I think that's probably a good way
[21:59] Speaker 3: to look at that. I mean, on one hand, we've
[22:02] Speaker 3: already seen quite a bit of litigation just on the
[22:05] Speaker 3: sort of talent acquisition side. There's only a limited number
[22:09] Speaker 3: of really skilled engineers in this space, and there's quite
[22:13] Speaker 3: a bit of poaching going on in Silicon Valley, and
[22:16] Speaker 3: we've already seen some lawsuits accusing firms of sort of
[22:20] Speaker 3: bringing proprietary data over. I do think a next stage
[22:23] Speaker 3: could be on the hardware space, especially as we get
[22:27] Speaker 3: beyond trade secrets, probably into those hardware devices are going
[22:30] Speaker 3: to be more patented than we do see in the
[22:33] Speaker 3: sort of what we've seen today, where it's mostly a
[22:36] Speaker 3: copyright issue. I think once you get into proprietary patents,
[22:41] Speaker 3: we could see a wave of litigation taking place, you know,
[22:44] Speaker 3: over the next few years between these companies. That's sort
[22:48] Speaker 3: of been the way that these technology cycles have gone
[22:51] Speaker 3: in the past, and I wouldn't be surprised to see
[22:53] Speaker 3: it develop that way in the future.
[22:54] Speaker 1: Tamlyn, very quickly here.
[22:56] Speaker 6: So, the two will face off in court today. How
[23:01] Speaker 6: long do we think this will take, this hearing, this
[23:03] Speaker 6: whole trial? Is it going to go to trial, or
[23:05] Speaker 6: are they motivated to settle?
[23:07] Speaker 3: Well, so the hearing today is actually about Apple's request
[23:10] Speaker 3: for a preliminary injunction. Basically, it's asking the judge to
[23:15] Speaker 3: rule now before we test the merits of the case.
[23:17] Speaker 3: And it's really asking the judge to say, put a
[23:19] Speaker 3: stop to all this and to grant limited relief. I
[23:23] Speaker 3: think that's going to have a hearing in a few weeks.
[23:26] Speaker 3: If this goes to trial, it probably won't be until
[23:28] Speaker 3: late next year. I think a settlement could be highly
[23:30] Speaker 3: likely after this hearing.
[23:31] Speaker 5: This is the Bloomberg Intelligence Podcast, available on Apple, Spotify,
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