Power Lunch - Big Tech, Opportunities in China's Economy & Comcast Explores Spinoff 10/31/24

Episode Date: October 31, 2024

CNBC’s Tyler Mathisen and Kelly Evans take you through the heart of the business day bringing you the latest developments and instant analysis on the stocks and stories driving the day’s agenda. “Power Lunch” delves into the economy, markets, politics, real estate, media, technology and more. The show sits at the intersection of power and money. “Power Lunch” gives viewers a full plate of CNBC’s award-winning business news coverage, plus a healthy dose of personality from the show’s anchors and the network’s top-notch roster of reporters and digital journalists. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Power Lunch, everybody. Alongside Contessa Brewer, welcome, Contessa. Good to have you here. I'm Tyler Matheson. And with those few hours left in the trading month on this spooky Halloween, it's likely to be the first losing month for the Dow and the S&P 500 since April. And the NASDA just went into negative territory for the month as well. It doesn't, Contessa, seem to me, like it's been that bad a month.

No, but, you know, the earnings and sort of the swath of big name earnings that we've had, for disappointment. I mean, you know, it just, you can see how that would drive the sentiment. And it is the big factor driving the markets this week. Microsoft is a huge drag on all the averages following its results. We have Amazon and Apple coming out after the bell. And recent headlines with Apple, it's about the new AI phones. And with Amazon, the Jeff Bezos and Washington Post headlines seem to be driving a lot of the narrative there. Yeah. It looks like maybe the Apple revenue numbers, it might be a little bit. better than expected. But this quarter, which is their fourth fiscal quarter, is usually kind of the least significant quarter in their year because everybody gets ready for this

December quarter where the new product and the new iPhone comes online. But we'll see. Obviously, it's a big market moving event. Anyway, it goes. Huge story in the media world. Comcast, which is the parent of CNBC, is considering a spinoff of its many cable networks. It's part of ongoing changes in television and streaming, those things that are going through. This obviously comes and hits close to home, but the cable business we've known for a long time is undergoing deep and profound changes in the world of streaming and the content that you can get that way. And also what we're hearing from media insiders and former executives about our parent company is, hey, does it make sense and how do you do it? It's not that it does not make sense at all

and what are you talking about? It's how do you do it most efficiently? And they say if they did it, it would be well capitalized. So that's the good news. We'll talk more about this. I went through this, or I was certainly familiar with it at Time Incorporated. And Time was part of Time Warner, and Time Warner wanted to get out of the magazine business. This is what they did.

They spun it off. Anyhow, this morning's PCE reading coming in just above the Fed's target rate for inflation of 2%. This means that things on the economic front are finally starting to stabilize, or maybe it's probably been stabilizing for some time now, but it's not the same when it comes to the market right now. Another tough week of earnings have got the S&P and the NASDAQ on track for their second straight day of declines, and the Dow was down more than 400 points at its low today,

now down about 300 points. So what comes next for the markets? Let's ask Keith Fitzgerald, principal at the Fitzgerald group. Keith, you know, I said to Contessa a moment ago, we're down now for the month for the first time since the spring on all of the major market barometers, but it doesn't seem like it's been that bad of a month until kind of today, yesterday.

Well, I think that's a very insightful point. And, you know, your words, deep and profound changes. That's the key here. The markets are testing the feds resolved. So you're seeing a lot of that. Second, many of the big names that are selling off today are, in fact, widely owned around the world. So it's logical that all the indexes,

all the pension funds, endowments, are going to have to rewire their holdings as a result of this sell-off. So now it's the computers duking it out. I think it's overdone. I think if you look at the broader scheme of things, the bigger numbers, the names we talk about frequently, they're going to be there tomorrow when the sun comes up. And that's what you want to focus on in days like today. You know, when we're talking about tech, we're already seeing a mixed bag here where you've got

Microsoft versus Alphabet Apple this afternoon. Give me a sense of where the expectations are, where it may be the, the performance is not bad, but failing to meet expectations and whether it's expectations, especially around AI, that need to be managed. Well, that's a good question. And I think what you've got to do is focus on expectations and you talk about whose expectations. Are you talking about company executives who know their products intimately? Or are you talking about analysts who may never have worked in the industry, but that somehow are responsible for pronouncing judgment on it? I would submit that you want to focus on the executive. So I think Apple is going to

produce probably pretty strong start. I have rented lips today. Pretty darn strong numbers. Mata is more wait and see. But then you got Microsoft, which is already talking about AI being a $10 billion run rate this year. So there's a big difference. Not all text the same. And that's the mistake that people are making today. They're painting it with a broad brush. So let's play a game of would you rather with four stocks. The two M's meta versus Microsoft and Amazon versus Apple. would you rather META or Microsoft, and then Apple versus Amazon? Which would you rather? Well, I'll tell you what I am doing.

I do not own META. I do own Microsoft because I think it's a viable business. It's already got a lot of money on the plate. And it's really out there working. It's the maestro of earnings. In terms of Apple versus Amazon, I'd rather be and am Apple any day, and I do not own Amazon. Why is that? Well, I think that a couple things.

Again, the ecosphere with Apple is key. Amazon has got tremendous regulatory challenge. The shopping that everybody knows isn't what drives the business. We personally and our company use AWS. That's going to be the key here. But there's tremendous regulatory pressure. Customers are not happy with it. There's a lot of competition emerging.

And within Amazon itself, Jassy is no Bezos. So I think the dynamic and culture has changed. I also note that you own AMD and Nvidia right now. Where do you come down on chips and the semis and Intel? Oh, boy, you know, Contessa, that's a tough one because this just, I hate saying this, but I think Intel is going to be lucky to survive this mess. I think that AMD and Nvidia dominant market players, GPUs, CPUs, clearly the head of the game. Intel missed mobile, missed AI, missed a number of other things.

And now they're trying to play catch-up. I'm not sure they're going to be able to. And the intel we know yesterday or new yesterday won't be the one we see in five years. Keith, we've spent so much of this year really focused on the Magnificent Seven. Is it time to truly broaden out past this and start to consider other stocks and other, I'll give you, for instance, if you're looking at insurance, which is seen as a defensive play, but a lot of the insurance companies have just reported earnings and have plans for growth. Well, and that's a very valid point, right?

But if we look back towards the late 50s, early 60s, even early 70s, it was not unusual to have even more concentration in the markets than we are today with companies like IBM and AT and So this notion of broadened out just for the sake of broadening out, I've never bought into. But if we're looking at where tech is going and which companies are going to benefit from it, clearly insurance, clearly medical, clearly pharma, because every business on the planet is going to adapt, adopt, or die when it comes to AI and to big tech in particular. So to me, it's the next logical spillover is going to be the areas where I'm looking, defense, medical technology, pharma. Those are the companies that I'm going to, quote, broaden out into. Keith, it's great of you to join us today. Thank you so much for your time and your insight.

Thank you. Big tech stock weighing on the markets today over concerns about spending on AI. It comes ahead of Apple, which is lower ahead of its earnings report after the bell. The result will include two weeks of iPhone 16 sales with investors looking for clues, whether it's AI efforts, fuel the much-hyped-up iPhone super cycle. Joining us now for more, Tony Sakhanagi, senior research analyst of U.S. IT hardware. at Bernstein. You know, I've got a little sister who I think spends money on crazy stuff. She's already gone out and bought the brand new iPhone because of the AI software and says she loves it.

But you said that this is, I was reading through some of your notes, you don't really think much that it's going to drive this cycle or drive earnings right now. Why? Good afternoon, Contessa. So that is really the big question is, will, Apple intelligence functionality and the phones drive a strong cycle. And, you know, to date, the Apple intelligence is very modest, and it will be rolled out over the remainder this year and well into next year. So some of the highlight features of Apple intelligence, like an enhanced and more conversational Siri or integration with Chad Cheap-B-T, those aren't available. They won't be available until the end of November. The functionality,

won't be available in languages beyond U.S. English till next year. Integration with third-party apps may not happen until the middle of next year. And so, you know, I think many consumers are still waiting for when, you know, really impactful Apple intelligence functionality is going to be delivered. Did the hype machine get ahead of Apple's ability to deliver? And I don't lay that on Apple's door. necessarily. I think we in the media may be guilty of it. I think people in the investment community may be guilty of it of creating this hype machine around this new product that Apple

was going to come out with. So the simple question is, did the hype get ahead of the ability to deliver the product? Well, it's a great question, Tyler. And I, you know, Apple was uncharacteristic in talking about a lot of things that we're going to come in the future. This is a company that typically is very secretive, loves the element of surprise. and typically doesn't talk about anything until it's available. Occasionally, they'll debut features that will be available over the next month or so in software. But it was different this year. They had at their Worldwide Developers Conference, they talked about Apple Intelligence

functionality that wouldn't be ready until the middle of next year. And so to some degree, I think Apple's at fault because it talked about what is to come. And, you know, consumers and people who watch this space, you know, probably looked on the bright side and said, wow, all this great stuff is coming. But the reality is it's going to evolve over time. And so that may impact the pace at which we have iPhone sales. And I think one of the big questions for tonight is, you know, is there any evidence that this might be, you know, a more back-end loaded year? Does Apple anticipate or has it seen anything? The first release just was a couple days ago, so they may not be able to tell.

But does Apple anticipate that as they roll out more features, they think there'll be, you know, a meaningful uptake? I'm curious about China here because I'm looking at this chart from IDC that shows Apple's market share in smartphones falling. Vivo has claimed now the number one slot. It's year-over-year growth up 21.5 percent. Huawei up 42% and nipping at Apple's heels. And there you have Apple, just barely holding on to number two. How important is the China market now for them in the overall scheme of things? And how much of this is macro issues that Apple doesn't really control?

So China's about 20% of Apple's revenues and about 20% of iPhone shipments go to China. So it's an important market for Apple. Our belief has been this past iPhone cycle, the iPhone 15, was a weak cycle. Wasn't that different from the prior year phone. And generally, iPhone's going to be flat for the year. It has been worse in China. And our belief is that's partly due to a softer economy, but it's also due to the fact that historically we've seen that the Chinese consumer is very feature sensitive. And so when there is

something new, they upgrade very strongly and growth rates in China are higher than the rest of Apple. And when there's not something new like this past cycle, they upgrade more slowly and growth rates are lower than the rest of Apple. And that's what we saw last year. So again, depending on how quickly Apple can whether it can and how quickly it can get AI features out, you know, that could proved to be a catalyst for China going forward. But I do think it is because, you know, Apple's feature set over the last two years, quite frankly, hasn't been particularly compelling. So people in China are keeping their iPhones longer awaiting something that's worthy of their upgrading. And they're much more feature sensitive. Historically, they have been than the rest of the

world. So what you just said is fascinating because it points to something, and that is that While we are being critical of this latest iPhone launch, you think that the sequential revenue gains are going to be greater in percentage terms, though not as high as the historical average, greater in percentage terms in terms of growth than in the past two years, because? Yeah, so I think that's the big question is, you know, right now, if we look at what consensus numbers are, they expect. you know, iPhone revenues to be up high single digits this year. That's much better than the last two years. So tonight we'll be looking to see if the growth that Apple's calling for in Q1 is supportive of that. And, you know, Apple doesn't guide specifically to iPhone. They'll just talk a little bit. They'll give some direction on how much they think their revenue is going to grow. These consensus estimates are around 7% growth. If the cycle is better than people are anticipating, that number will be higher. I think most byside investors

are a little lower than that number, probably four or five. But that will be the number everyone will be looking for is what do they think growth will be next quarter? And if it's, you know, if it's something positive, that's good, but expectations are at seven. And that will really shape sentiment around, is this cycle better than we thought or worse than we thought? Right now, expectations are, this cycle would be better than the last two. Very interesting. This is why we love to have you on, Tony. Really appreciate all the insight. Tony Sakanagi. Thanks. Thank you, Tyler. You got it, man. Apple results may be the big focus, but we got lots, lots of other earnings get through. Yes, we do, Contessa. We're going to get the trades on Microsoft,

Uber, Roblox, three-stock lunch. It's going to be big, big, big, power lunch would be right back. Today's three-stock lunch, and we're taking a look at some huge moves off of earnings. First up, Microsoft on pace for its worst day in more than two years. Despite an earnings beat on its cloud strength, shares are sliding after the company's guidance for revenue growth fell short of expectations, and there were some real concerns about its spending. Here with our trades is Adele Zaman, partner at the Wall Street Alliance Group. Adil, what do you think of Microsoft? Great to be with you.

So I think that generally we feel that the bar is set so high for these big tech companies given the monster rally that they've had, that anything short of a wow earnings report is going to be met with a sell-off, and this is what we saw with Microsoft. I think one of the concerns has been that they're spending too much on AI. We actually view this as a positive because the AI business is on pace to clear about 10 billion annual run rate by next quarter, which will make the company's fastest division to reach that mark. So they're doing a great job in monetizing AI. We like the company here. For us, this would be a buy.

All right. Let's talk a little bit about Uber, shall we? Also under pressure today, down 11 percent after the company's third quarter gross bookings fell below estimates. Adil, your thoughts on Uber, not as a product, but as a stock. We actually think that this is a great company. We think that it's basically getting spooked out by the broad tech sector falling, but generally we do agree with Uber's CEO that this is a very sticky business,

especially given the fact that they're having their membership program through the network. They're getting a lot of customers. And what we really like Uber about Uber is their diversified mix of business. You know, they're doing really well on the delivery business, especially with acquisitions like Postmates. So for us, this would be another stock that we would say buy. All right. And lastly, we have Roblox shares surging today after strong earnings report lifting its annual

bookings forecast as in-game spending booms. Now, the stock's on pace for its best day since February, 2023. but Adelaide, you're pointing out that it's still down from its pandemic highs. Yes, absolutely. I mean, this, for us, we would stay away from it. We don't really like this company that much. So for us, this would be a sell. This stock used to be a pandemic era, darling, but it's still down about 60%, more than 60% from its all-time high.

Part of the reason is that their costs tend to be higher than other competitors, because they are catering to their target audience is 13 years and younger. So they have to spend a lot more on things like cybersecurity. So we think this is a tough business. The company is still losing money. So we would stay away from this. You know, it's interesting that you say that, though. I've just pulled it up because my kids keep asking me for Roblox,

and I keep saying no, because it says right on the app store, it's for ages 12 plus. The fact that they are, and I've been petitioned by second graders to let my kids have Roblox, I think it's so interesting that the developer itself says it's not for those kids, and yet that's who they're catering to. Yeah, I mean, that's interesting, right? And that's part of the challenge for their business model as well. And, you know, they have to spend a lot of money on building out their digital infrastructure. Their costs go high as well.

So I think they're just better places in the market to be right now because there's so many other opportunities. Adelaal Zaman, thank you so much for joining us, like a little discussion about parenting there while we're at it. Thank you for joining us for three-stock lunch tomorrow on Power Lunch. We'll be joined by the CEO of Roblox. I won't be here, so it won't matter. We'll follow up right there. We're going to play that little bite. But he's going to be here, and then we can press him on all this and the business model.

Yeah, we will definitely do that, even in your absence. But thank you. All right, still to come. Is the China turnaround starting to slow? Stocks there still down. But manufacturing showing signs of picking up, we will discuss. next when we sail across the Pacific in our market navigators vote. All right. Speaking of high concept, Dom Choo is here.

Welcome back to Paralyance. Quick check on the market. Stocks are lower for the session. The NASDAQ off more than 2.5%. S&P off 1 and 2 thirds percent. And the Dow, the champ there, but it was off more than 400 at one point. Dom Choo, what is in today's market navigator? So a lot of people are navigating the Apple and Amazon earnings coming up after the bell today. But there are a lot of folks out there who are looking internationally as well. And China's manufacturing data expanded for the first time, believe it or not, in six months. But the Chinese stock markets actually slipped ending lower for the fifth month out of the past six.

Still, our next guest says this could be the start of an actual real turnaround to the upside. Join me now is Jason Sue, founder and CIO at Reliant Global Advisors. Jason, thank you very much for joining us here. This has been a head fake for a lot of folks who've tried to catch this falling knife that has been the Chinese markets. It has been called Uninvestable, and then David Tepper recently said everything. I'm all in trying to buy everything in sight for China. There is some kind of middle ground. So where are the Carolina Panthers?

Yes. As a commander's fan, I know he's a little bit kind of curious about this. But as a markets guy, I'm curious, what exactly you see is the opposite? opportunity in China right now? Well, first and foremost, you do want to be aware of the head face. So I don't think you want to get ahead of yourself too much. Do believe in Beijing, you know, don't fight Beijing. So Beijing is going to do exactly what it says it's going to do, which is it's going to

spend money. And a lot of that's going to be infrastructure spending. It is going to bail out real estate and make sure that it sets a floor for real estate. And it is going to be nice to the stock market. Again, the government or the national team is doing a lot of. lot of buying. Now, whether that turns around the economy or not, I think that remains to be seen. But in the meantime, I think you can comfortably bet on the construction sector, and comfortably bet on the banks and insurance companies who hell a lot of real estate and we're trading at

distress prices. But now that distress is out of the way, I think they're safe bets. But again, whether China is out of the woods and the real economy is going to turn around, I think you probably want to wait for another quarter or two to really say. So, Jason, with that in mind, there are a plethora, and Tyler and I'd look at these all the time, of ETFs that track many different things, especially in the Chinese market. But you're talking about two very specific parts of the market. How exactly do investors then go about taking that view if they want to be constructive on construction and banking and insurance within China?

Or do they just buy the large cap ETFs? You know, I think for now, buying the large cap ETF is the safe way to go. Now, first of all, there aren't that many Chinese ETF options out there. Certainly, you aren't going to find, like, the Chinese banking sector, ETF. And so if you look at just the large cap, the mega-cap China ETFs, you're probably going to get, I would say, roughly 50, 60% of that will be some combination of the financial stocks and the state-owned. construction companies. So you're going to do well buying the mega cap companies. They will target enough of the two sectors I talked about just now. And what about before we let you go, Jason, you mentioned maybe another quarter or so

before you can really see signs of a market turnaround. What exactly will you be looking for? What will navigate you through what that next quarter looks like? What kind of data will you be scrutinizing? A lot of people are probably reading tea leaves a little too much. Everyone is sort of, you know, trying to figure out, is Beijing's monetary policy big enough? Is this stimulus package specific enough? Now, I would say the only thing you really want to pay attention to is does Beijing continue to focus on trying different things, doing things to turn the economy around, doing things to stabilize the financial market? Because up to this point, Beijing has been somewhat nonpluss about, you know, both activities, right?

The real economy and the financial markets. The fact that right before national holiday, it's made this commitment to really focus and shift its narrative away from national security, from data security, from geopolitics, back toward economic growth, back toward leaning on the free markets. I think it's observing the continual commitment to free markets to economic growth. That's going to be a difference maker. Everything else is just a policy experimentation. If they are aiming in the right direction, I think things are going to work out. All right. Jason Seward-Raleigh, and thank you very much for the trade on China.

We'll talk to you soon. All right. Interesting that he chose sort of the more simple way to go about it. Sure, the large-cap ETFs. The large-cap ETFs. I mean, a market can go down and stay down a long time. All we have to do is look at Japan and the number of years it was trading below its all-time highs. But if you believe in the China thesis, a large-cap BTF might be the most direct way for the most people to play.

Sure. But, you know, people talk about the two main ones, which is FXI, which is the Hong Kong listed Chinese big cap stocks, which might be that one they look at it. Or versus the K-Web, which is the Internet tech names. Yeah. All right. Dom, thanks. Appreciate it. Back to you, contest.

All right, guys. As we head to break, CNBC is live all night, overnight, into the morning on election night. We have the results as they come in, reactions from the biggest names in business. It begins at 7 p.m. Eastern from the New York Stock Exchange. We'll have live coverage in the over-our-night hours. I'll be here with Brian Sullivan. Holding down the 4-plus, we'll have Asian, European markets, then Squawk Box starts at 5 a.m. Stay with CNBC on election night all night.

And remember, you can always hear us on our podcast. Be sure to follow and listen to Power Lunch wherever you go. We will be right back. Welcome back to Power Lunch. We have lots of other key earnings to highlight. It's time for today's power check. Peloton raising its full year guidance, but says it's expecting a softer holiday quarter than expected.

The stock is having a comeback this year at 38%. Also announcing a new CEO, and it's up 25% on the day. Robin Hood dropping its missing expectations. The company saying that, there we go, there's Robin Hood, missing expectations. The company says it was hurt. by marketing promotions to attract new customers. It's down by 16%. All right, international paper climbing after an earnings beat hitting its highest level since October 21, also leading the S&P online payroll

and human resources software company Paycom having its best day. That's like me. I have my best day ever announcing better than expected revenue citing strong service demand. However, they did lower revenue expectations for the next quarter. Finally, a company that I cover. closely. Allstate beating on earnings. It did have some losses, of course, from recent hurricanes and other third quarter catastrophes. But overall, you've got revenue and income really improving over the last year. On the auto insurance front, the company has made headlines. It's combined ratio, which shows how much it's making on premiums versus how much it's paying out and expenses and claims improved. But it says it saw significant declines in retaining customers because the

auto insurance rates are up 40% since 2022. That stock is down about half a percent, but it's had an amazing run this year so far. All right. Let's get now to Kate Rogers for a CNBC news update. Kate? Hi, Contessa. The Biden administration said today some 8,000 North Korean troops are now in Russia's cursed region near the Ukraine border. That's where Ukraine launched an incursion earlier this year. Secretary of State Anthony Blinken says that the troops are expected to deploy against Ukraine in the coming days. And Spanish emergency services now say at least 155 people have died in devastating flash flooding in the country, the majority in the Valencia region. A year's worth of rain fell in eight hours, wiping out roads and bridges and inundating houses. Rescue teams are

still searching for others who are missing in what could become Europe's worst storm-related disaster in more than 50 years. And Los Angeles County is suing Pepsi and Coca-Cola over plastic pollution. The lawsuit claims the two soft drink companies deceived customers into thinking their single-use plastic bottles were actually recyclable. It also calls the plastic pollution traced to the company's products a public nuisance. Coke and Pepsi did not respond to request for comment. Back over to you, Tyler. All right, thanks very much, Kate. Interesting. All right, NBC parent Comcast, considering a spinoff of its cable network companies, a move that could drastically change the media space. We will discuss that when Power Lunch returns.

right here on CNBC owned by Com. Welcome back to Power Lent shares of our parent company Comcast, trading higher by 3% after President Mike Kavanaugh said it's exploring a separation of the cable networks. Now, that separation would reportedly not include the broadcast network NBC or the streaming platform, Peacock. The comments came during the company's third quarter earnings call this morning. For more, let's get to our all-star media panel. Tom Rogers is the executive chairman of Orroup.

which focuses on distribution of AI-generated content and media. He's also the founder of CNBC and MSNBC and is currently a CNBC contributor. Joe Flint, media reporter for the Wall Street Journal, and Julia Borsden is our senior media and technology reporter. Julia, let me begin with you. What have you learned? Put this in context about why it would happen and what are the hiccups to getting it done? Well, look, this is all very preliminary.

The reason why Comcast announced that they were invests. investigating this is because they knew that as they have these conversations, something was going to leak out and they wanted to clarify what they were looking at. Over the past couple of years, we've talked about the potential for Comcasts to spin off NBC Universal as a whole. They're saying this would not be that. This would be simply the cable portfolio. We don't know how many or which of the cable channels would be included. For instance, CNBC, one of those cable channels along with MSNBC. They have said they want to keep NBC part of the original NBC Universal and NBC, along with Peacock, would not be part of the spin-off. Why is that? That's because NBC has sports

and sports is essential to Peacock, and Peacock is very much part of the growth potential of the NBC Universal Company, including, of course, all the potential synergies with the broadband and wireless that Comcast is so very much invested in right now. So there are a lot of questions about how this could happen, but the reason why we're talking about this now is because, of course, the weakness in the cable space. We've seen a decline in the total number of pay TV subscribers. And then also a lot of ad revenue really shift over into streaming. All right, Tom, let me get to you.

I mean, you have a strong track record of spotting the trend before it happens and taking advantage and creating a vehicle to drive in new directions with new media and new delivery services. What do you make of the idea and how would you get it done? Well, it clearly underscores the fact that we're beyond the point of no return with cord cutting. And these linear cable channels burden the other parts of Comcast, all of which have good growth stories against them. I personally believe CNBC in particular has a role in the streaming world under a very different model because it's about the only cable channel out there that financial future doesn't have to rest on the consumer pocketbook.

How many streaming services is a household going to take, four, five, six. There are ways to support a streaming future for CNBC involving investor and corporate fees that I think would give it a very strong future. But there's certainly a rationale to say, look, court cutting is not going to get better. It's going to get worse. Let's spin these off. I think the entertainment channels by themselves are weak assets for the future. It's very hard for any kind of standalone entertainment channel without being integrated into some kind of major streaming service to have a future. but if you package them with CNBC and MSNBC, both of which have enormous influence still in terms of who they reach,

I think that you could find some very interested bidders for that vehicle should it be spun off as an independent entity. So, Joe, why don't you react to what Tom just said, number one. And number two, I used to work for Time Incorporated, which is a big magazine publisher, as you may well recall. And fundamentally, they did what is being discussed here. They spun off the magazine business. And in the end, it basically was the death knell for that business. Would you see a spinoff of this sort,

even though there might be some healthy properties in there, as the death knell for the likes of oxygen or Bravo or USA Network? In other words, in five or ten years, if you do this spinoff, will those even exist? Certainly, I would think some of those networks would go away. We actually wrote a story a few years back when this idea was kicking around inside NBC. And one of the thoughts was which networks might have enough diminishing returns to call for just pulling the plug on them. And oxygen was certainly one of those and E.

And just to sort of weigh in more broadly, we've seen, Warner Discovery take a, you know, almost $10 billion right down on its cable networks. Paramount took a $6 million billion right down on its networks. So this is part of a broader trend of what's happening. It's somewhat ironic that all these networks are still very profitable. They are driving the investments for these streaming services, which are still bleeding red ink. But they are seen as albatrosses and slow melding ice cubes. But you need content for the streaming service.

I mean, you know, like you need shows for people to watch and not everybody wants to watch the same thing. Julia, couldn't they just shove all of the things they're talking about spinning off into Peacock if that's the delivery service of the future? Well, look, I think there are various pieces here because you have to remember that all of the media companies licensed content to other media companies and they're all effectively frenemies and both competitors and partners on various things. So there's a studio at NBC Universal that sells content to other streamers as well as putting content directly on Peacock. So this is a very nuanced ecosystem here of all of these companies creating content for different places. I do think you're right that there's this question of whether or not there is an inherent value in having content aligned with the distribution. And I think what we're seeing is the reason they want Peacock part of the NBC Universal Studio is because, you know, You can have the TV studio create content that's designed custom for Peacock.

And you could also have sports, you know, like the NFL. You could strike a deal where there is additional distribution on Peacock, on streaming, in addition to broadcasts, which is what we saw in the most recent NFL deal. So I think the question of whether there's value in having Bravo and oxygen be part of that as well, that's a separate conversation. I think that's what they're really going to be evaluating here. and figuring out which of these cable networks add real value to Peacock and to that NBC Universal company, and which ones might be better off as maybe the source of another company and also then a potential roll-up. Once you have a separate company with cable networks, then they might be able to roll up other cable networks as well. I think the most interesting part of the Peacock discussion was Mike Kavanaugh statement that they're open to partnering with other streaming services,

to grow Peacock. It's pretty clear to have a financial model going forward for a major streaming service. It needs to be global. Peacock is a domestic only service. You have Max out there that Warner has some global growth against. You have Paramount Plus that has been the new potential owners have been going around having discussions about future prospects for partnering there. So you've got three parties there that some combination of two or possibly three of them to create a major entertainment and sports streaming service that would really have the kind of scale to give Netflix a run for its money, I think is what you also heard today. Tom, Julia, Joe. Let me be the naysayer on that real quick because these partnerships are very complex. If we've seen Hulu and litigation, Comcast and Disney in litigation, who's going to run them, who's going to invest?

someone always feels they're getting the shorthand. Comcast and Warner Discovery are suing. Yeah, they're in a lawsuit right now overseas. They're entangling a lot of other opportunities and fights. It's just a lot harder. It looks easy on paper, but a lot harder to make work. Joe, thank you, Julia. Thank you, Tom.

Appreciate it. All right, the latest read on inflation coming in right where the markets. And perhaps the Fed had hoped, and we've got a big jobs report. It comes out tomorrow. November 1, I can't believe it. We're going to break down the economic day. when we return. Yes, we are. Before we say goodbye, it's really never going to be goodbye. It's just going to be so long. See you later. It's going to be see you later. I'm not going to say goodbye.

Let's get a check on the markets here. All three major market averages are lowered today. And for a change set to end the month of October in the red. It'll be the first time for that since I believe the spring for a couple of those barometers at fairly least. Thanks for watching, Power Lunch, everybody. Closing bell starts right now.