Yet Another Value Podcast - Andrew Freedman walks through the TMT space

Episode Date: December 6, 2021

Andrew Freedman, managing director at Hedgeye, walks through the TMT landscape post earnings. Key topics include how he looks at legacy media company, why he's bearish PINS and SNAP but long TWTR, and his wories that the economics of streaming simply don't work.Andrew's Twitter account: https://twitter.com/HedgeyeCommChapters0:00 Intro1:15 Andrew's Process5:15 Discussing long TWTR vs short SNAP / PINS9:35 Does the strategic interest around PINS worry you?15:20 What's going on with TWTR right now?32:30 Discussing legacy media (starting with VIAC)37:10 Comping VIAC's valuation versus NXST41:10 Why does Andrew have a buy rating on NFLX?45:35 What should Disney do with ESPN?47:30 Does the MGM / Amazon deal suggest all of legacy media is undervalued?51:00 How Andrew looks at the Discovery / Warner merger1:00:40 Valuing VIAC's Pluto asset1:04:15 Closing thoughts and Andrew's favorite pick

All right. Hello and welcome to the yet another value podcast. I'm your host, Andrew Walker. And with me today, I'm excited to have Andrew Friedman. Andrew is a managing director at Hedgeye. Andrew, how's it going? Going well. Thanks for having me on. Great. Hey, let me start this podcast the way to do every podcast. First, a quick disclaimer. Andrew and I are going to talk about a lot of stocks today. So everyone should just remember, nothing on this podcast is investing advice. Everyone should do their own work, do their own diligence. And then second, with a pitch for you, my guess, you know, I love to talk about the media space, the telecom space, all this. And whenever I do and I get something wrong, you know, there's just trolls everywhere saying, you got this wrong. You're so dumb. I knew it all along. But there's, there are very few people who can point to, hey, I was writing in real time.

about this. And Andrew's one of them. When I came out and said, I was long, Altis, a couple months later, people will come back. And Andrew said, look, here was my thesis on Altis, why it was a bad idea, which it really was a bad idea at the time. But look, I love the way you're looking at the world. I've reviewed your coverage list. And I know the way you're looking at the world is, it's really working today. So I'm excited to go through all of TMT and have this conversation. So that all the way, TMT is a broad space. Let's talk about, we can talk about what you're seeing right now or just how you're kind of view the world in general. Yeah, sure. I mean, look, I think just to kind of kick things off, it's probably helpful to just tell folks how I think about the world, our process, because it's a little bit different. So first, you know, hedge I, we're an independent research firm. So we don't do any asset management. So when we say we're long, short, this, it's a research recommendation. And we have various levels of conviction on our ideas at any given time. But in terms of the process and how I come up with ideas, it's very dynamic. So we think across multiple durations, you know,

know, we get criticized as being too short term, which I understand. But it's also important, I think, to really understand your catalysts and how fundamentals are trending in the very short term. And that's really key to the process, which is also very data driven. So we use a lot of data inputs to kind of understand how the company's fundamentals are trending. You never get real time, right? But if I can kind of get a sense of how the business is doing intracorder using some third-party data set or some primary research efforts, that's super helpful. In China, understand, you know, when we should, you know, crank up or crank down our levels of conviction on a specific name. And, you know, we'll get stuff wrong just like everybody else. But then in the

long term, you know, we have, you know, at least for me, a very, you know, thematic process, right? So the communication services space, which I've deemed everything, internet media, cable telecom, is very rich with very long-term secular trends that are investable. And if you can get those right and you can also kind of navigate the cyclicality and the absent flows within those long-term secular trends. I think, you know, you can come out with a process on the long, short side that can create a lot of value. And I guess the other thing to just mention here is that, you know, the way I think about the world is through a long-short framework. So I think a lot about relative value, what's going to work relative to this. And so, you know, it's not necessarily an absolute

value, right? So when I look at my ideas on the long and short side, it's like, okay, we're a long- Twitter. It's been absolutely a disaster and very painful of late. And we can get into that if you want. Oh, I want to talk Twitter for sure. But on the other side of that, right, we've had a very negative view of digital advertising, just given the comp dynamics, IDFA deprecation, data privacy issues, the list goes on and on, which, you know, gave us a lot of conviction and helped us time really well, our shorts on Pinterest and Snapchat, which are two of our top shorts at the moment that we got right into earnings against our Twitter long, right? So, you know, we're not actively managing money. And, you know, obviously being able to

manage position sizing and managing those kind of gross to net exposures is very challenging. And so, but in that sense, you know, that's how we at least communicate our ideas. It's very rate of change focus. But at the same time, we also build models. And I pay attention a lot to like the key drivers of the businesses and how I think the fundamentals are. are trending both in the short and long term. So that being said, if I kind of talk out of both sides of my mouth or, you know, I talk to cross durations, that's probably, you know, that hopefully that helps kind of frame things up. That makes total sense. Hey, let me start with something that you mentioned there. And one of the things I like is, you know, most of the time when you have

a cell site analyst, their list is, you know, if they cover 20 companies, it's 17 buys, two neutrals and maybe one cell. But I mean, you, your cells and longs are actually pretty pretty, pretty, balanced. I'm looking at right now it's like 15 longs and probably 12 shorts. Although I will stop your short, Andrew. The fact that you're calling me a cell site analyst hurts me a little bit. I know that's technically what it is. I know, but like in terms of how I feel and think, I just, you know, usually we're poking holes at the cell site because we are independent, right? And so I don't get paid off of management conferences. I don't get paid off the same great quarter guys. You know, I don't, we don't have any banking or trading, right? So in the truest sense, I'm just trying to, you know,

do buy-side quality research and be right at the end of the day. But so everybody wants to be unique, right? But let me start. You mentioned long Twitter, short, Snap, and Pinterest. And I just thought that was an interesting combo because, you know, most people I know who are bullish Twitter, Spotify, Facebook, which I know, Roku, which I know you are, I think to be bullish, especially Snap and Pinterest. And now I don't follow Snap and Pinterest super closely, but I'm just in general.

tend to be bullish on this. So what about Snap and Pinterest in particular, it kind of drives you to look at those as shorts? Yeah. So, I mean, the timing was interesting, right? And a lot of it's looking at what the drivers of the business were and why they worked so well for so long. And really, it came down to a couple things, right? They benefited disproportionately coming out of the pandemic last year. So while the world was going through a very difficult time, with there was civil unrest, we all know, so we don't have to recap 2020, but it was really a bad environment for brand advertising and really resulted in a lot of large brands and agencies to shift their, shift their ad spend to other platforms. So, and given how large the digital

advertising market is, right, if you just pick up 50 basis points of market share, it's incredibly increased to your growth rates. And so that resulted in, you know, a massive positive revision cycle, a huge acceleration in growth for Pinterest and Snapchat coming out of the pandemic, which lasted about through, you know, the second quarter of this year. And as we're kind of going into the back half, you know, valuations were incredibly stretched. We were just coming off this massive positive revision cycle. At the same time, growth is going to slow. And we thought that a lot of these, you know, tailwinds of these businesses were going to revert and that people were mistaking, you know, basically extrapolating all this positive growth.

into perpetuity. In the case of Snapchat, you're sitting there looking at, you know, consistent 100 basis point market share gains a year, 60%, you know, three-year kegaring gross profit, where we thought that, you know, this was maybe more of a temporary boost. And the company just earlier in the year came out and said, look, we think we can grow 50% a year forever. And they did that right at the top, right? Right. As their business was absolutely the best it was going to be. And so we saw effectively mean reversion, right? But, but, you know, there's a good opportunity to, you know, to peg the short. And I think we timed it pretty well, ultimately.

And the same thing with Pinterest. Obviously, they've been seeing very weak engagement trends. So they're a little bit more nuanced, right? Because it's not really a social platform. It's more of a search platform. It's more of a content platform. And so they benefited a lot, you know, in COVID from the stay-at-home trends and things of that nature. And when we were coming into the year,

you know, we were concerned that, again, we would see a lot of those positive trends reverse. It's a leading indicator, right? So search is intent for Pinterest. It is very top of the funnel in terms of user behavior. You know, you're talking about weddings and things of that nature that are planned events. And during COVID, a lot of those things got put on hold. And as a result, you saw people's engagement, the time spent with the platform go from like 12 months up to 18 months. And that has, in a normalized environment, has since reversed. And then you also just have the general, you know, reopening trade that's been occurring, which has resulted in them losing a lot of the users that they've had, which isn't good for engagement trends, it's not good

for monetization. Time spent in the app has gone down. And we've been tracking a lot of the data there fairly closely to monitor those trends and help us, you know, build conviction. And, you know, looking in Q4, they just guided to the slowest growth rate out of the group. I know, and I'll stop after this comment, but I know long term, a lot of people look at Pinterest and Snapchat and they say, look, these are great platforms at scale, direct response advertising is the fastest growing part of the market. And while that is the case, you know, there are a lot of challenges that these businesses are going to be facing specifically, currently, and at least through the next six months, which is why we're seeing the multiples come back in. And, you know, and we're seeing

this across all pandemic, quote, pandemic winners, right? It's just, it's all going back to where it was before. Just on Pinterest in particular, you know, it strikes me because I kind of threw it on my list to look at and haven't gotten fully around to it. But, you know, there was the rumor Microsoft offers buying for 80 over the summer. There was the rumor. I don't even think this was a rumor. PayPal put out a press release. That's it.

PayPal offered 70 and PayPal's shareholders kind of revolted in PayPal stepped away. But, you know, this stock, I think it's like 40 as we speak. Is that right? I don't have it. I think it's down more. I think it's 35, down 6%. We just go and go on the street town. When I look at a stock at 35 where less than two months ago, there was a strategic who was talking about paying 70 for it.

I look at that. And, you know, Microsoft and PayPal are two of the world's biggest companies. And both of them looked at Pinterest and saw something strategic where they were rumored within the past year to pay a huge premium to the current price. I look at that and say, oh, that seems kind of scary as a short. Are you not concerned about kind of the Pinterest, strategic interest, M&A target? You go back to like October. Well, first of all, when that first, when that Microsoft news came, it actually made me more bearish, right? Because at the time, it wasn't necessarily a premium to the stock.

And so then when you have that floated out as a price, you're like, all right, my upside's capped. You know, if I think the business. That's a great point. Yeah. That's a great point. The second thing is, yeah, it's super scary because, I mean, you know, we, so we have, we communicate ideas and you probably see this, Andrew, on our position monitor. We have our active longs and then our bench name. And the active longs are ones that, you know, we have more conviction at the moment.

We think, you know, that they're basically in play, right? And the bench is more of longer term thematic. We may have not gone all the way through the investment process. So when we had, so we had Pinterest on the short bench, you know, going into earnings and we had the PayPal news. And yeah, it was terrifying. Like, it was awful, right? It's a squeeze. The stock went from 50 to like 63.

And then, you know, that kind of, it turned out to be nothing burger. And then we added it back on as an active store because we saw the business deteriorating. Look, I think what it comes down to is when that deal, when the Microsoft bid came out, what was the business doing? They were just coming off of a breakneck year. The fundamentals still looked really good. Fast forward to the potential PayPal rumor. It was lower than the Microsoft bid rumor, right? The business fundamentals were getting worse.

And so the business, the fundamentals continue to slow, right? And so does it make me concerned? Yes. But if you're a potential strategic here, is there a sense of urgency to buy Pinterest? If you think you could potentially get a better price for it, you know, I'm not privy to those conversations, right? I don't think most are. But, you know, if the business is at 35 today, you know, maybe you can get it at $50, right? It would still be a big premium. And the strategic value, is there in the sense that, you know, having, you know, commerce conversions on platform in a world where you have, you know, limited visibility with IDFA deprecation to integrate payments to better track, you know, conversions for shopping. It makes a ton of sense. I just don't know if Pinterest is the right platform, right? Because they don't have, well, they have over, well, they have a lot of MAUs, the actual engagement levels of those MAUs is pretty low. And it hasn't really shown an ability to scale outside its core demo of females, which is a good demo. It's a attracted demo. Don't get me wrong. There are a lot of females out there. Yeah. Yeah. And they monetize really well,

right, for shopping. But still, like, I don't really know if Pinterest is really the right horse in that sense if you're PayPal or some of these other platforms. So that's kind of in my sense. And yeah, I mean, Eminet is scary, but, you know, it's always a risk, right? Like, I remember when we first went short, Altis in December of 19, and the feedback always was, like, you know, Charter's going to buy it, right? Like, or Draw, he's just going to come in and take this thing private. I mean, Dexter at a cocktail party with our director of research after we went short, called her report Q and said that he'll just go and buy back all the stock, right? Which he personally did to try to do. But the point is, it's like, you know, my problem.

process, like I try not to really be too concerned with MNA, but yeah, I'm probably going to get blown up on it at some point. Well, we don't have to talk about Altis, but I just, I find it's funny. I mean, look, you put this all in your short report, but, you know, Altis in 2018, 2019, they definitely had an arrogance to them, right? Like you said he called his report short. Every conference they went to, they'd say, hey, our free cash flow yield to equity is 10% and our debt costs us, you know, 3% after tax. We're going to take advantage of that. all day long, we're going to buyback shares. They called charter and Comcast stupid for how they were launching their mobile business. And the Altisway, we're going to have the best mobile

business can be cheaper, more profitable, all this. And they cut costs like crazy. And this year stock way down. It's my biggest loser by far. And they're out here, everything's gone, right? No more share bybacks. They're reinvesting in the business and paying down debt. Despite the stock being 50% lower than where they were hammering the share count, Altisway is dead. They're reinvesting into the business. The mobile plan's scrap. They're redoing all. Like, it just shows an arrogance to them. But anyway, let's go back to telecom or you can talk to Altis. No, yeah, no. I didn't want I only brought Altis up because you asked the M&A question, right? And I thought it's a good example of like how I think about M&A from the short side. So we yeah, we don't have to get about that.

But yeah, I agree. I mean, if you notice we're not short Altis at all, like it's nowhere on the list right now, right? Because for the reasons that you mentioned. So, well, let's talk just one more in the tech space, Twitter. You know, I've been a long time. Twitter bill. Fortunately, don't have a position currently, but Elliot Turner came on right at, Elliot Turner came on the podcast right after they kicked Trump off and we talked about it. And, you know, me, like many bulls, I look at Twitter and I see this platform where I create tons of value. You and I connected on Twitter, right? Like all this value is creating. It drives every new story. They literally, you know, not to rehash the story, but they kicked Donald Trump off and

Donald Trump's microphone is literally taken away. Without Twitter, you don't have a microphone, you know? So I look at this and I see what I think is maybe the most powerful platform in the world and it's trading for $40 billion on the open market. I haven't looked at the EV since the huge stock price drop in the past couple years. But they can't figure out monetization. Every time it seems like they're getting something going, they kick themselves into the foot. And the Bulls have always said they just redid their tech stack.

Things are accelerating. It just doesn't feel like it. So what's going on with Twitter? Why can't they figure out this monetization? Why does the stock suck so much? much. I mean, I think the stock sucks so much. Well, there's a couple of reasons. First of all, everyone wants to be long performance, direct response advertising, right? Twitter is 85% brand advertising. It's not really a growth market. It's highly cyclical. The return on ad spend isn't

necessarily extremely high, right? But that's because, but it speaks to the fact that Twitter is an amazing awareness tool, right? It's a great, it's a, it's broadcast. It's phenomenal in that respect. And because of that, you just don't inherently get a large multiple for brand advertising businesses because it's, it's slower. Now that's why they're moving from eight trying to get to from 85 brands and 50-50 direct response. If they can successfully grow that business, then, you know, you can start to see the multiple re-rate and their growth rate to be more durable over time. So there's that aspect of it, which I think is an overhanging. The other thing, too, is look, there's just so much scar tissue here. I think it's just been such a chronic disappointment.

The Twitter long thesis isn't necessarily new. It's been talked about in many different ways. And it just hasn't worked. So investors just become tired at that point, right? The opportunity cost of being a Twitter bull or being long Twitter is just way too high. And so let me just be long Facebook, which has been a better idea, right? It's on the long side. But again, you look at Twitter and you just can't help but see the optionality in the business, all these levers that they could potentially pull to create shareholder value. And on the one hand, if you look at what they've been doing,

I think this is not the same Twitter that it was three years ago. They have been executing against their plan. They've been, you know, product development velocity has more than doubled. If you look at their market share of digital advertising dollars compared to peers, it's stabilized and it's starting to turn. Brand advertising has snapback. They've gotten their maps, Map 2.0 back online for mobile app advertisers. That's growing quickly. And so if you just look at what they're doing, they're executing, right?

And actually, the fundamentals of the business in terms of revenue and users have come in a little bit better than even I was anticipating. coming into the year, which is the exact opposite of, like, looking at like a Pinterest or a Snapchat, like in the most recent quarters, where they've, where they've disappointed. But nonetheless, right, we're seeing a slowdown across digital advertising, tough comps, and the whole group is re-rating lower, right? And so you're going to have that issue where Twitter's relative valuation is going to be tracking peers. And so if, you know, Snap's going to go from 20-time sales to 10-time sales and Pinterest is going to

go from 15 times sales to seven times sales, right? You're not going to see Twitter's multiple or valuation stay constant relative to that. So I think that's a big part of the issue that we're seeing recently. And frankly, you know, it's also no, I mean, obviously no one believes their MDOW guidance. I think they're, you know, it's mathematically, if you just look at the numbers, it's very difficult to just look at the past and say, can they get it going forward? That being said, I think, you know, there are levers that they have at their disposal to get to their hit that number, ultimately, whether it's converting some products that currently don't have exposure to advertising to ones that do. And then you also have to think about all this product, all the investment that they're making in use cases like spaces, communities, super follows that maybe are not necessarily big monetization drivers directly. but what they do is they have the effect of driving higher engagement and increasing MD out conversion,

which is incredibly important. And the last thing I'll just say there is I think people are way too, like they look at the very short term and they don't realize that, I mean, coming off of last year's political cycle and the engagement trends that we saw, the fact that they're actually growing users, you know, still in 2021 is actually pretty impressive. So we'll see. We'll see how it ultimately plays out. But yeah, it's definitely been the painter.

been disappointing. Obviously, this week, Jeff steps down, resigns, fired, whatever you want to call it. They're placing with an internal candidate. Just quickly, what were your thoughts on the CEO switch? I think that, you know, like most, I thought maybe doing an external CEO search and bringing somebody fresh in would probably be better. But at the same time, if you think about that if you were to bring in a brand name CEO, they're going to want to put their stamp on the organization, right? And they've already pivoted this organization in a strategic direction, you know, 18 months ago. And so all of a sudden take it in a completely different direction, right? It would be very disruptive in and of itself. And then you also have to think

about, yeah, I mean, and then you just have to think about just how long it would actually take an outsider CEO to acclimate to the culture and really understand what's going on in add value, if at all. And so I think that in that framework, you know, elevating Parag to the role that he's in now makes sense. And frankly, the other thing, too, that we have to keep in mind here is, like, what the strategic options are, you know, and if this company is going to be taken private, either private equity or strategic, you know, are you going to bring in a brand name CEO who's going to make, who's going to want to be here for five to seven years if really the name the game here is just, you know, who care, they may not even hit, it may not even matter

what their 20, 23 targets are, right? They could just be like, you know, whatever. They may believe them. They may not. I don't know. But if they have plans on taking the company private, it's not going to matter. The taking the company private is an interesting thought because, you know, they loosely fit into just about everyone as a strategic player. Now, Google, Facebook, you know, regularly, there's no chance to acquire them. But Iger's book, he says, we had a deal to by Twitter, and I called it off, like, a couple hours before, if I'm remembering, a couple hours before we were about to sign it, if I remember that correctly, because he didn't like what a toxic pool it was, but, you know, every media company, Twitter would make sense for

Twitter and Spotify could make sense. Twitter and Netflix, if you really stretch, could kind of make sense. Like, you could basically see Twitter as a, it's strategic to just about everyone. It's interesting. I haven't heard a lot of buzz around that. And then on the private equity side, you know, this is a famous thing, but Twitter spends a billion dollars on R&D. what the fudge are they spending a billion dollars in R&D on? You know, like the site hasn't improved in years. Interesting what you said about bringing a new CEO in because that was kind of my only concern. I thought Jack did fine, but I thought they needed a full-time CEO for a company this important. And my only concern with Jack leaving right now was, you know, we're supposed to

be on the accelerating ramp, right? Like they paid off all their technical debt. They've got all their ad targeting stuff where they supposedly wanted to be month active users are supposed to ramping revenue is supposed to ramping we're supposed to be ramping up and you switch CEOs right as the ramp up happens that's always a little concerning yeah i mean i guess my only thought on that is look jack is an incredible barrier to attracting investor capital yep and love him or hate him you know he needs to i think in any way to get the stock higher is that he need to go. And I think that this transition plan has probably been in the works for a very for a long time here. And also again, if you have plans on selling the company

in some way, shape, or form, right? If that's ultimately the path we're on, you know, Jack doesn't need to really to be there anymore. If anything, it makes it worse. And he's also giving up his board seat next year. So yeah, I thought that was, I thought that was interesting. having Jack, the founder, give up a board seat so quickly. I thought that was pretty interesting. Yeah, so anyway, but that's just, you know, my two cents on it. I mean, I think it's, I hear, I, I think what your perspective makes a lot of sense, too. I just, you know, I just don't know if Jack is really going to be the one who wants to see this through,

who's going to carry the torch for this next way of growth. Obviously, it's not the case, right? Because that's what he said, and that's why he resigned. But, you know, I think that it's probably for the best interest of shareholders. And whether or not the next stage of value creation for Twitter is going to accrue to public equity holders today or maybe in the hands of private equity, I don't really know. But I can see multiple paths going forward. But, yeah, Twitter's been, you know, very tough.

And the narrative shifts have been really difficult to manage because people got way too excited about some of their subscription initiatives around superfollows. There's a lot of hype and excitement because all their power users see how much, who are also investors, see the value in the platform. But ultimately, I think what it comes down to is just like, how do you get revenue to grow faster? You've got to get into direct response advertising. It's really that simple. So what they're doing in shopping is interesting currently, business profiles. They need to get more SMBs on platform.

And also, too, and this is the last thing I'll mention on Twitter. is like, let's just be real, right? Like, imagine managing this organization. Like, put yourself in the operator's seat. It doesn't, change doesn't happen overnight. Yeah. It takes a long time to, you know, turn a ship the size of Twitter, right? And I know investors just want to get paid tomorrow and they want to see change immediately,

but that's the reality is that doesn't always happen, especially for turnarounds. So we'll see how this ultimately works in their favor or against them. Yeah, I just, when I look at the platform, I was messaging Elliott about this the other day. I don't think he respond, but this is a little happy. You know, when I engage with companies, I tweeted this a couple months ago. I was calling Delta. I had a COVID exposure, had to quarantine, had to cancel flight because, you know, you had to COVID exposure. Calling Delta trying to cancel my flight day of, wait time on the phone is four hours.

I tweeted about it. I was like, hey, I don't know. Like, it's three hours to JFK until my. flight. I don't know if I'm going to be able to cancel this before they actually pick up the phone. Tweeted out Delta representative DMs me 10 seconds later, everything's taken care of over Twitter DMs. And that's pretty much how I engage with most brands now, right? I slide into their Twitter support. I just message them on Twitter and say, hey, can you help me? And I don't believe Twitter makes a dime off of all the support functions. And I've always wondered, like,

it just seems like that alone. Hey, it shows the strategic value of Twitter, how much capture. and it just feels like there's a lot of value out there that they could take in different ways that they're really not getting paid for. So I have my own story, which I'll share in a second. I think the fact is that Twitter is such a powerful organic marketing tool, right? And organic marketing is the best kind of marketing.

It's the most effective as the cheapest. And because it's so good, it makes it less effective to actually want it to pay and monetize if the organic is so strong, right? If you have a great following, those are the people that are likely going to, if you're looking to monetize your audience, those are the ones that are a high probability. And so you can do lookalike audiences. You can do a lot of things on the promoted advertising side to try to grow your audience for sure. But the fact is that is such a great organic marketing tool that it actually almost works against them in some ways.

And then my own story was like this was like two months ago or a month ago, I switched to T-Mobile. And I had a software upgrade and it didn't work. And I went to the store to try to fix it. There was some issue with the computer. I waited like 36 hours. I went back. It was a Friday. They said they couldn't help me.

I was supposed to go on a business trip that Monday. I needed my phone. And then they were like too bad. You know, it's not going to work. I could try to support. I literally got on Twitter and I just tweeted at John Freer, who's their head of the consumer organization and he's in my DM like 15 minutes later

I got like the chief operations office the COO for the Northeast Division calling my cell phone and I have a new device in my hand within 45 minutes it's like the power of the platform is phenomenal now someone has told me they're like look you know you guys have more than

$10,000 which doesn't make us gods among Twitter users but it puts us well above average right and they're saying hey I think the companies on Twitter do know, if it's somebody who tweets at you on Twitter, they're much more likely to, you know, engage really heavily on Twitter. So if you don't treat them right, they're going to be spreading bitchol. And, you know, even if it's a guy with 10 followers, it can go viral very quickly. And if it's a guy with 10,000 followers, they can go viral very quickly. Oh, yeah, the cost, right?

The cost of having somebody with any followers are like, you know, you know, classic like net promoters for, right? Like, your detractors, like negativity and, you know, detractors are amplified, right? It's just like in real life, right? When something bad happens to you, it feels a lot worse, a lot of the times and when something good happens, right? Lost aversion in investing. And the same thing can be applied when it comes to marketing in that, you know, you want to neutralize, right? Because you have that complaint, right? But then if you can actually take that complaint and turn it into a positive outcome by fixing it and then they promote that outcome, that's actually worth like 3x, right, than any other type of organic promotion or any type of other positive experience that

you would get because it shows that you're committed to fixing problems that you care about your customer. So in that sense, you know, you're spot on. Yeah. I know, a hundred percent agree. I just thought it was interesting because my worry with Twitter and my worry with a lot of media companies is if you love them, right, you're going to see all the bull cases. You're going to see the optionality, it can be hard. And when someone said, hey, you know, I worry with Twitter, I've got to bias use it because I get so much value out and I enjoy it so much. I'm sure you're the same, but somebody was saying you might have a little bit of a

bias view of the product and the optionality just because of how you interact and engage with it. Yeah, I mean, like the reality is that there's a long tail, like any type of media platform, right? Like you can look at Netflix consumption. You can look at Spotify streams, right? There's always going to be, you know, that long tail of, you know, users and consumption across the board and the value is not going to translate equally, you know,

to everybody, right? There's a lot of people that are attached to Twitter, kind of on the margin, right, that don't engage with it daily. And so there aren't as many, like the value, like they monetize me really well, right, but they're not going to monetize the long tail as effectively, which is the whole point of the strategy, give people more reason to engage, get that MDOW conversion, higher and then hopefully, you know, that translates into faster growth over time. But yeah, no, the bias, I think the bias is real. I mean, at the same time, you know, from my C, I try to neutralize it within the process, right? So like, you know, what are my key thesis points, one of my fundamental expectations,

what are my catalysts, what is my perception of value, right? And so as long as I kind of have my true north and I don't really feel like I'm deviating from that in too many ways, then I feel like my bias is a little, you know, neutralized, But, yeah, I mean, look, people, like, we all grow up in this business and investing, right? And what's the first thing that you're taught? Like, buy stocks and the companies that you know, right, that you enjoy, that you're a consumer. And in that sense, you know, maybe everyone has biases, right? But I think that's why it's important to have a thesis and really be able to be objective.

Let me, let's leave the, I guess, social network space, tech space right now. And let's go to one of my favorite spaces, the media side, right? I know you cover, I'd say you've got the classic, we're bullish on the future of media, you know, the Netflix, the Roku, and even Disney in there, and we're really bearish on the legacy media company. So I'm thinking about Viacom and AMC networks right now. So I guess my first question would be like, how cheap, when is Viacom a buy? You know, because I've looked at this company so many times over the years. It is so damn cheap, you know, it's as we're talking to trades for about $30 per share, which

that's about $35 billion enterprise value from just eyeballing it correctly, which is, you know, it's eight times EBITDA maybe. And they've got a lot of, you know, if they really wanted to juice, this is one thing I've thought about like, if they really wanted to juice their EBIT, they could just shut down Paramount Plus, license everything, you know, like there are real assets in there, right? They've got good brands, Nickelodeon, SpongeBob, Star Trek. Like, there are real assets in there. It's very cheap.

Viacom, I actually really like the Bob, the Viacom CEO, but like when is it too cheap? Yeah. So, I mean, valuation is, for me, it's kind of like the last thing that I do, right? So it's, I don't start with valuation. I start with, you know, what is the top down secular trends of the business? and then from there, like, where are the fundamentals of the business trending, and then, you know, what do I think the future, uh, EBITDA, cash flow, whatever the key metric is that I think the stock's going to anchor off of. Like, where do I think that's trending three years from now? And then, then I kind of think about, you know, okay, what's the right multiple? And then what is the multiple track? And, um, you know, just from a thematic standpoint, maybe just to kind of step, step back for a second. I mean, uh, you know, we've, we've been on both sides, um, of these names. Um, of these names. And historically. I've been long discovery. We're not currently involved in discovery. But, you know, look, I think you have to realize that there's a massive shift that's been ongoing and

it's continuing, right, in media. And that's a transition to streaming, which has implications for the economics of these media companies, right? So, you know, it weighs on affiliate fees. It ways on advertising trends. And so if you look at, you know, in the case of Viacom, you know, in the time that the merger closed with CBS in their pitch book, you know, they said 500 million annual cost energies, pro forma adjusted OIBada of $6.3 billion, right? And this year, they're going to probably do $4.6 billion in OEBada, and it's going lower. You know, free cash flow in 2019 was $1.24 billion. This year, it's going to be $1.1 billion, and it's going lower. And so in that sense, you know, I think you have your classic value trap, right? Where cheap gets cheaper because the

fundamentals continue to be challenged. Now, yes, they're growing streaming very rapidly. And, you know, they have grown their subscriber base for Paramount Plus and Pluto much faster than I initially anticipated. Granted, they've done a lot of other things in terms of striking distribution partnerships that help, you know, keep that number growing at a faster rate since then. But the point here is, is that, you know, streaming is just a much less profitable business compared to linear. So you're driving inferior economics through the model. And 90% of your cash flow is still coming from these legacy linear advertising and affiliate streams. And in that sense, you know, like, what's it worth, right? So, you know, let's say they're going to do

$3.5 billion in EBITDA in 24. The street's currently at like four and a half five. Maybe you pay seven times on that and you get, you know, an EV of $25 billion, less net debt of 14, 10 and a half equity, and you get a $16 stock. You know, at eight times EBITDAs, it's 22. And so I think the bulls want to be able to look at this and say, look, it's some of the parts. It's streaming. It's going quickly. Let's give it a, you know, a per subvaluation on on part Disney or Netflix. And I just don't think that's the right valuation approach. Let me push back on a couple different points here. And I don't, I don't have a position in Viacom right now. I'm just fascinating, but there's two, I guess my first pushbacks you

would be, okay, I hear you on that, but I look at something like Nextstar, which Nextstar is the affiliates, right? So if you're, if you're living, you watch CBS on a, for people who watch you know, on linear networks, CBS is actually owned by an affiliate. So Viacom owns the CBS overall network, but the affiliate runs the local news, all the programming and stuff. Nexar is an affiliate of CBS. Being an affiliate's a worst business because you have to pay CBS network a big revenue share, basically, right? Nexar trades at seven or eight times EBDA. Biacom trades at seven or eight times EBDA, right? So I've always looked at it and said, well, an affiliate is a worse business than the network. Obviously, Viacom isn't all CBS. You know, they've got a lot of other

channels in there, and Nexar's management is second to none. But I've always looked at it and said, relative value-wise, like affiliates going for eight times, and you see credible players, you know, Tegna's getting bids from Apollo right now. Tegna's another affiliate. They're getting bids from private equity players to take them out at like seven or eight times EBDA right now. Gray just bought television stations for Meredith. Like seven or eight times EBIT is how much affiliates are worth. If they're worth seven or eight times, isn't Biacom worth more than that would be my first pushback? Yeah, I mean, within that framework, I mean, I think that is reasonable, right?

I mean, if you look at historically like what broadcast, even though multiples or, you know, high single digits, maybe 10 times at the high end, like eight to time, eight to 10 times, you know, cable is what, you know, four to six is usually, you know, the valuations that you see. For cable stocks or cable networks? Yes, no, not cable company. The cable network. I was about saying, you take that back. Only all T-Straids for six.

Charter's an even 10 or 12. Blasphemy. Yeah, no. Yeah, no, sorry. Yeah, no, not that. But, yeah, just cable networks. And look, what's Viacom work? The cable nets, you know, post-the-merger closing, right?

Like, the stock went down to granted that was COVID, but you saw, like, biacom value just disappear. You know, we were short into that. And we covered it, like, at the, like, 12, because it was just, like, just, valuation was just kind of absurd. But yeah, I mean, look, you can look at like relative valuation comps, things like that. I mean, for me, what it really comes down to is, you know, if, if I think that EBITDA is going from

four and a half billion a year to three and a half to two and a half to maybe two, right, then this business isn't trading at seven to eight times, right? It's trading at already trading at, you know, 10 times. And so then you have to think about that re-rating that's going to continue to happen as estimates continue to go lower. And then it really just becomes a question of like, do you think that they can get to scale in streaming? And by scale, I mean like actual like profitability, right? Not just like sheer number of subscribers. Like can they actually leverage their content costs to drive, you know, better unit economics to get to, you know, a larger EBITDA base?

that higher level of incrementals and flow through in the model years out. And, you know, I just, I have a really hard time getting there. And it's not just Viacom, right? I just think that streaming is just structurally a pretty terrible business, at least, you know, at these current prices. Maybe down the road, you know, when the bundle ever goes to zero, we're all paying like, you know, $35 for Netflix and $20 for Paramount Plus. I don't know, right? Unbundle to re-bundle. Well, I've got some more Viacom questions, but let me split it. So I agree with you. People are learning quickly that streaming is harder. You have to get a lot of scale to justify the big content spend, right? Well, you've got Disney and Netflix on your buy list. And, you know, they're different. Netflix is the number one winner. Disney has a brand and they've got other stuff. You know, the parks and everything are incredible businesses. But when I look at that and you say you've got to buy there, I mean, Netflix is way more expensive than buy acom. Now Netflix is growing and they've got to, dominant position. But, you know, if you're starting to question how profitable streaming can be,

you look at Netflix and you say, oh, well, there is a lot of competition and the competition is getting funded by hugely deep pockets in Amazon Prime or Apple TV or stuff. Or it's getting funded by, you know, legacy cash flows that are going down, but that are there that are real, that can fund a lot. And they do spend a lot on content in a Viacom, a CVS, all this. So why are Netflix and Disney buys with all these questions while Viacom's a cell? Yeah. Well, it comes down on a couple things. First of all, we've been fairish and mostly wrong on Netflix for a really long time.

Actually, when you sent me your list, I was like, I'm pretty sure Andrew has been a Netflix fair. I didn't realize. Yeah, no, definitely for a really long time. And I still, you know, believe a lot of my initial viewpoints, right? And just in terms of valuation and market dynamics, you know, what's baked into the valuation. I don't see how, I don't believe that they're going to be able to get to like 350, 400, 500 million subscribers. I mean, still, right? And, but, you know, in the spirit of like, you know, either, you know, wanting to be intellectually right or actually help people make money, right? I'm very much so

focused on helping people make money. And so in the shorter term, we pivoted to kind of the long side. And it's not a high conviction long. But, you know, we're coming up against easier comparisons on subscriber trends, their number one driver's subscriber acquisition being content was ramping back up and the data we were tracking was getting a lot better. At the same time, everything else looked like absolute crap in our space, you know, advertisers is going to fall out of bed. We're coming up against, you know, more difficult comparisons with the reopening trade. And so it just made sense that I thought that Netflix could start outperforming. And so that's why we pivoted. And we'll see how long we stay there, right? Because we can go both ways. But,

But the point is, like, it doesn't mean that I think that Netflix is a great business or that I think that, you know, there's a sustainable path here to significant free cash flow generation while maintaining their current rate of subscriber growth because I think the end market is ultimately not going to show up. That being said, you know, it's still pure play in streaming. And if you just look at, you know, at least the reported metrics, right, EBITDA is still growing. earnings are still growing you know we can get into you can talk about counting nuances and how they account for their content cost and all that stuff it's probably not worth it to get into here but um you know the question is like in that scenario right like i want to be long netflix against short biacom because biacom is coming up against the product launches the linear business is coming under pressure uh as they comp these affiliate renewals at the same time

advertising you know we're comping against uh the big increase in or the resurgence linear advertising trends right that happened post-COVID and so that business is going to slow very quickly at the same time on rising content expenses while netflix business at least on subs is going to stabilize and potentially positively inflect and in that scenario i think that that that that works and then for disney um you know we were big disney bowls going into the disney bus launch right like our view going into this from day one was that they were going to surprise the upside. And this was before on subs. And this was before anyone was like, everyone thought that, you know, no one could do it but Netflix and no one was going to subscribe to all these services, which ended up being,

you know, not true. And we did a lot of like survey work to kind of build our conviction and turn out to be right. But, you know, if there's one company out there in legacy media that has the brands, the franchises, the ability to, you know, transition the base. over to direct-to-consumer, it's Disney. But still, like, it doesn't change the reality that, you know, ESPN is still, you know, a large percentage of their free cash flow, right? And so the question is, you know, do you believe they can get to scale and streaming? And they have this incredible free cash flow that they can just leverage to reinvest into

streaming, which is great. And I think that, but I still think the jury is out whether or not it's, going to actually be profitable for them and to what you know scale so it's what do you think disney should do with the espm uh i think that they need to i think yeah it's a good question i'm not sure i have a good crystal ball on this but um i'm not sure anybody does uh frankly they need to they need to keep it i don't think they can sell it um because so key to their direct direct-to-consumer strategy, right? And I know people have thought about that.

But the sports is a huge driver of subscriber acquisition for these streaming services. And I do think that if you're smart about it and they can get the rights that, you know, it could really help drive much higher levels of ARPU and better retention for their bundle of streaming services, which is Hulu, ESPN Disney Plus, in the long term. But it's, there's no, there's no easy answer to what to do with. with ESPN. I mean, I don't know if you have any thought. No, I agree with you.

It's tough because it is just a clunky product in its current form. But, you know, everybody's, you hear all the time, oh, well, they should just spin it off or sell it. Well, ESPN has crazy synergies with Disney's legacy, with Disney's legacy TV channels, right? The Disney. Yeah. I mean, it's the largest part of the bundle, right? I mean, like, yeah. And if you sold, if you spun off or sold ESPN, well, you're.

killing yourself, right? Because Disney's got the most synergies with it. So if you spun off ESPN, all of your legacy affiliate fees goes down and who's ever buying ESPN is going to have to price in. Well, I lose a lot of affiliate fees and stuff. It just makes no sense from that standpoint and in the future. Though, you know, I do wonder if they regret having ESPN Plus and Disney Plus separate. I get that there's cost arguments and everything, but having ESPN plus, Disney Plus, and then Hulu on the side, it's just a strange thing. But we, that's probably too long conversation for now. I just want to circle back quickly to the Viacom piece, right? Because there's one other thing in the relative value, I already mentioned Next Star, but I think there's one other

thing that a lot of legacy media investors hang their hats on. You know, when you look at Lionsgate, which probably sells for about $5 billion on the open market now, Viacom, Amazon, and that's Amazon buying MGM, right? Amazon's buying MGM for about $9 billion. I think the headline price is. Will the DOJ and FTC allow it? I don't know. But, you know, that is a market. price. And you'll hear Lionsgate say, hey, if MGM's worth $9 billion, Linesgate owns Stars, MGM owns Eps, Stars is way better than epics. MGM's library has some real classics in it, but Lionsgate Library way better than MGM's library when you look kind of all in for new stuff. Linesgate TV production better than MGM. So Linesgate would say, well, our comp is

$9 billion. We're worth more. Viacom would probably come at that and say, you guys think you're worth $9 billion. Like, we're 15 times better than you guys and our EV is $35 billion. Why aren't we 50, $70, $90 billion on the strategic value MGM says? So what would you say to people who kind of point at the MGM strategic value relative value comp? Yeah, I mean, look at like, you know, what Kevin Mayer and Tom Stag is buying, you know, too, and like the valuations that they're paying for some of these independent productions. When he, when they bought the Reese Weatherspoon business for like a billion dollars, I can't tell you how many people sent that. And they were like, don't they own four shows in a relationship with Reese,

weather spoon. We have actual billions of cash flow. Like, what? Yeah, no, no, absolutely. Look, library value is real, right? Getting access to this IP is of strategic value to a lot of these larger companies, but that, that is the value, right? If you're in Amazon, if you're an Apple, if you're anybody, like, you're not looking at Biacom and you're not saying, you're, you're not looking at Biacom CBS and saying like, oh my gosh, I want all these subscribers, right? You don't want to buy a streaming subscription business because you already have scale in your existing business, right? So in the case of Amazon, all you really need is IP, right? And maybe have it be exclusive to help drive, you know, better retention and help fuel prime video and meet all those

strategic needs. And I think what the market is telling us is that they should be, you know, an arms dealer, right? They should be, do the Sony model. They should license their content out and generate, you know, very high levels of return and free cash flow off that IP and that there isn't really a path to tremendous value creation in streaming. And maybe the stock will get cheap enough, right, where somebody will come in and, you know, put in a bit, right, for that. So I can't really say that, you know, I can't disagree with your thesis, right? I mean, I think I think it makes sense. I just, you know, the question also just becomes like, you know, all the other relationships within the business, right? Like, then you all of a sudden have to buy a broadcaster, right? With CBS,

you know, would Amazon be able, would Amazon be able to buy CBS, right? Would that pass, you know, antitrust? Like, I don't think Amazon and MGM is going to, so I think Amazon and CBS. I mean, I think it should be allowed to, but I just. Yeah, but that's, but that's the point, right? Like, The thing with Viacom, CBS, is that it's not easy, right? If you want to buy it, there's a lot of issues, right? Which is why, you know, we're seeing WarnerMedia merge with, you know, discovery, right? Like, it's not a not Viacom, right? Because there is the broadcaster element here.

So let me ask, you brought up WarnerMedia discovery. Very interesting one to me. I do have a position in discovery, which like Altis has not been a great call. But, you know, I think that merge is really interesting. I don't believe you have Discovery rated right now, but what do you think of Discovery Warner? Because I think the two arguments are the bear side is these are two legacy companies merging together. You put two turds together and you get a turd, not a raisin, right? Yeah, the Bull case, which I kind of subscribe to is you look at the asset strength and the IP value at Warner

plus the kind of, yes, it's legacy bundle, but it's really nice background noise that gets lots of engagement is really good for retention with Discovery. You merge those together. There's going to be synergies on the revenue side. You merge those together. I think you've got a great product that's a real third-scale player that's kind of in the same league. Not quite as Netflix or Disney, but it's really brushing up against them. And you look at the valuation, the combo, it seems very cheap to me. How are you looking at it? Yeah. And, you know, we've been, I've actually always historically kind of had a long bias on Discovery. And part of it's because I think they have really unique brands. I think, you know, the unscripted space has better, you know,

economics and return on, you know, your content spend than scripted. It's just a little less competitive and they have, you know, their dominant player there. And I think people generally underappreciate like the strength of like HDTV and all these, you know, with it. And it might be the old thing where most, most analysts, most people on this podcast are male, unfortunately. And, you know, H-G-TV, even discovery channel deals. I mean, like all these things. Like there's good, you know, it's, you know, it's and yeah, it's like the pushback is like, oh yeah, why would I want to own honey boo-boo, right?

But like, I mean, but the point is. Dr. Pimple-popper. Yeah, but here's the point. The point is that it still resonates and it has a large demographic, right? And so I think the worst thing that you can do as a media investor, right, is just assume that your taste and preferences are the same as everybody else, right? right in the world because it's just not true right and so you really have to take a little bit more of a balanced approach to you know how contract forms and even to add on it not just your taste and

preferences but what everyone else says their tasting preferences is because you remember that old thing where like they used to rely on what people told them to report a tv show viewership and everyone said they watched the news and PBS and no one admitted jerry springer and then they got a little bit of digitalization and it was like the news and pbs were way lower than people were reporting but jerry Springer was way higher. Nobody admits it, but everybody kind of watches. Everybody has guilty pleasures, right? Everybody has their guilty pleasures that, you know, if you're at a bar talking with your buddies or whatever, you're not going to admit to watching, you know, whatever show or, you know, it's just, it's just where, what it is. I mean, I love like, you know,

science base, you know, all the alien shows. I can't get enough of it. You know what I mean? And so I love Discovery Plus. Like, I think it's, I think it's great. My wife, you know, she loves all the food network, all these things. So I think it's, I think it has very interesting brands that are a little bit more durable than people think. And because it's not scripted, you're not subject to the same type of like inflationary pressures on the production side. And so I do think they can, you know, leverage their content costs a little bit better. But that being said, and it's still cable, right? And so it's cable generally viewed as, you know, secondary to broadcast because, you know, broadcast commands premiums from that advertising side.

it also has, you know, a larger reach and a larger percentage of time spent, you know, it's increasingly being carried by, you know, it's also being characterized increasingly more so by higher content costs, right, especially with sports. But, but yeah, no, okay, so going back to your original question, you know, I think that it's still, like, if we just look at it objectively, right, if I just showed you this business model, right, and the trends in this business, and I didn't tell you what the business was, right? would look at it and say, all right, you know, advertising revenue in this last quarter was actually I had it right here. So advertising revenue this last quarter was 991 million in the U.S. It's only up 5% year over year. It's down 3% from the third quarter of 19. Right. So that is a large percentage of the economics and the cash of the business, which is in decline. Right. And then you look at it from the affiliate side and you say, okay, well, that's still growing. Right. But then you think about it in terms of like what is the biggest problem with the with the bundle, right? It's the rising price, viewerships down, increasingly becoming worse value to the consumer, which is over time, in theory, driving, accelerating churn on cord cutting, for cord cutting, accelerating core cutting trends. And so then you put this thing together with Warner and you know what they're going to do. They're going to do the playbook that they always do, right? They're going to use their larger scale to go back to charter, go back to Comcast. go back to all the distributors and they're going to say we're this larger organization now

and they're going to use that to their advantage to try to get better rates right and that's part of the revenue synergy then what is comcast charter going to do they're going to go back and they're going to pass that through onto the consumer because they don't want to have they're not going to lose money on video they're barely making any money on video but they're not going to lose money on video right and then you do that and then all of a sudden you're like I don't want to pay this anymore right and then you cut the court and so the issue that I see with the merger is that yes it you have all these short-term benefits financially. It's very financially engineering, but driven, which I understand.

But it actually, over the long-term, potentially exacerbates the problem, right? Which is the value proposition of the bundle. I agree with much of what you just said, but I think they would push back and say, yes, that's the short term. But what it really positions as for is the long-term, right? Because you marry the HBO, Buzzy IP, right? There's nothing to draw people in like the Game of Thrones spin-off that's coming out or the movies. HPO's got great stuff there.

What they don't really have is that background stuff that stops retention. You know, David Zassel obviously exaggerating, but he said, I've heard from people, yeah, I've heard from people if we could marry the Discovery Library with our stuff, our turn would go to zero because we could super serve. So I think what they're thinking is, hey, for the future, we get the HBO stuff, we get the Warner movies, and we marry that with this massive discovery library, and boom, our turn drops to zero and we're a truly skilled player. Do you buy into that or do you think they're kind of dream? I mean, I think that, I mean, the push or that argument on churn is actually very fascinating, right? Because I think it's true, right?

I mean, the whole, how do you get churned down? You got to increase engagement in time spent with the service. I mean, it's not rocket science. So if you can get all this kind of white noise filler, B rated, like type content in with this other service, and you can increase time spent that. great. I think the question becomes whether or not you actually merge the two services together, right, and all the benefit comes from churn, or do you actually try to do like a bundling strategy, right? Because at the same time, you mentioned HBO, right? Killer brands, killer

content, continue to invest in that, right? You also have the Warner Library that they continue to pump in there too. And, you know, the discovery content's a little bit different than that, right? And so I do wonder what their strategy is going to be ultimately because I feel like, at least in the U.S. market, Discovery Plus needs Warner a little bit more than Warner needs Discovery Plus, right? And international, it's kind of flipped. So the turn benefit could be there. You can have a scale player in streaming, sure. But again, then we're coming back to the same question, Andrew, that we were at before, right is is a scaled streaming player right even if it gets to the size of Disney or sorry Netflix is it going to be as profitable right as the businesses today and linear and I think

as far as I see it the answer is no because it's been the bundle's been over earning right legacy media has been over earning for way too long it's the culmination of decades of just contract renewals, consolidation, launching new networks and trying to stop everything down the next of the cable industry, which they're starting to finally push back on. And I think that it's just going to be less profitable, which I'm not sure that translates into shareholder value ultimately. It's going to be really interesting to see how it plays out.

If you read the S4, I don't have the numbers by me right now, But I believe Discovery was projecting for the next 10 years, basically flat EBITA and cash flow and everything. And, you know, you think about this year is supposed to be, hey, our EBITDA is trow because we're investing $500 million into launching Discovery Plus and the streaming service. Like you would have thought just kind of annulizing that and hitting scale on Discovery Plus, EBITDA should recover. And it was, I think a lot of people were a little surprised that even these industry insiders are saying, hey, the legacy bundle is so challenged, even when we're.

when we're kind of annulizing this massive investment into tech and platform and everything and Discovery Plus, we're not going to be growing anymore. I think a lot of people were surprised there. Let me ask, I have one more question on Viacom, and then I want to let you just wrap everything up because I know we're running wrong because I've been having a blast at this. No, I mean, I got time if you need it, but otherwise we can wrap it up, but everyone is. Just last question on Viacom, you know, I think a lot of Bulls, and this is a place I haven't been able to do lots of work on because they don't have great numbers, but Pluto TV, which Viacom bought, It's this ad-supported streaming service where you can watch a lot of things on it.

Bycom bought it for $340 million in early 2019, had 12 million monthly active users. Today, as of August, I don't have updated numbers. I'm looking at a tweet. I put out a while ago. I'll put it in the show notes maybe once it. As of August, 52 monthly active users, 52 million monthly active users, revenue doubling year over year, a little bit of pandemic benefit, but mainly because it's growing so quickly, over a billion in revenue.

When I look at Pluto, you know, revenues 15x and 3,000. three years. They say it's a total home run acquisition. They paid $340 million. What's Pluto worth as a standalone business? How have you thought about that? Yeah, so a couple things. So with Pluto, first of all, for any type of fast service, Avod service, like MAUs is just the worthless metric, right? It's totally, it's totally garbage. I mean, it really comes down to like time spent and engagement. And all the third party data that I've seen suggest that, you know, Maybe they have a lot of MAUs, but the engagement is pretty low, all things considered. And then the other thing you have to ask yourself is, like, when you start to think about

Viacom as some of the parts play, right? So what is Pluto worth? What is Paramount Plus worth? You have to think about it. Like, what is Pluto worth without all like the Viacom content? Yes, exactly. If you don't have MTV, if you don't have the sales force, right? And the way that Biacom has been selling advertising, especially as well as up front, is all

through bundling, right? So the revenue growth rates look great. The revenue looks great, but they're really just channeling a lot of the linear ad sales into Pluto because that's what they think they need to do to drive the multiple for the stock. And so, yes, it's growing much faster. A lot of it's not, you know, a lot of it's kind of manufactured in that way. And so that's why I think if you look at Pluto as a standalone business, it wouldn't be anywhere close, you know, to what it is right now. And yeah, so, you know, I don't know.

I think it's a, it's an interesting asset. I don't know if the future is really going to be, you know, fast, you know, in this, in the current streaming form that it is. Maybe if they start putting more sports there doing it that way, but then you have to think about, well, are they, They're not going to give up, you know, they're not going to start broadcasting NFL games through Pluto TV because that needs to go to Paramount Plus, right? So it's just you follow the bouncing ball and you just don't get to a really exciting place at the end where Pluto is this, you know, diamond in the rough, incredibly undervalued asset because it's doing the job of, you know, recapturing a lot of those lost linear economics. But ultimately, like, at least in the data that I've seen, too, like the U.S. growth has slow. down engagement levels aren't that great. So, you know, maybe I'm just too cynical. No, that makes total sense. That's me, that makes so, you know, just, again, I haven't dug

dug into Pluto, but I know a lot of Iacom bulls who look at Pluto and say, look at those metrics, what would this be worth? Especially when SPACs were really hot. They were saying, what would this be worth of a SPAC? Yeah, I know. Yeah. Last question for you. And then I'll let you, what's your favorite long in the sector? You know, you cover TMT, you cover. You cover. you cover everything what's your favorite right now yeah right now um it's so hard to find longs um i mean i think if we're talking like in the next we're talking like in the next two to three months i would say google probably continues to work if we're talking you know three years um i think that um you know some of these issues with roku resolve right and um you know we're not incredibly

like we've flagged a lot of the issues with roku and youtube and we've taken it down you know on the position monitor as a result. But I think that right now at 200, you're getting it for a price where you're not paying that much for the future growth option in the company. And I still think that there's a long tail and a long-term thesis is there for those that, you know, our patient can take advantage of this opportunity. But it's not, it's definitely one that's a challenge, but the stock reflects it. Roku is another one that has a lot of interesting strategic angles to it as well.

probably the conversation for another lot. We've run long because I've had so much fun with this. I had telecom stuff to ask you about, but we'll have to save it for the next time. Let me just give you the last word here. Is there anything, we mainly focused on social and legacy media, anything you wish we had covered harder, anything we didn't get to that you think we should have talked about?

I mean, we didn't talk about Fubo, but I mean, I've talked about, I'm on the tape, a lot about Fubo. I mean, it's, yeah, it's... Fubo, just real quickly. So for those who don't know, Fubo is basically, hey, we're your legacy cable bundle except you stream us. And we've got a lot of sports too.

It seems the most upside down business model I can possibly imagine. I'm shocked that there are some people who've said, oh, no, this is revolutionary. I'm just shocked that sophisticated investors say it. My issue is, and I'll tell you what my issue is, it's the same issue I have with people who are sell side who say short AMC theaters or shirt, shirt Fubu. It's like, yes, I am 100% positive. They are overvalued. You go try and find borrow.

and you go try and short a stock that can be up 200% overnight because Elon Musk tweeted about apes or something, you know? Yeah, no, I hear it. Yeah. I mean, shorting meme stocks has not been a profitable endeavor to say the least. But eventually, you know, I like to think that it all comes full circle in the day, which you're definitely seeing. But yeah, no, no, Andrew, this has been excellent. You know, hopefully I added some value and I appreciate the great questions and the ongoing debate. hey this was absolutely great i ran long because i was having so much fun enjoying it andrew friedman i'm going to have the link to his twitter profile on the show notes so people can follow him on there hit him up he's got a passionate following on there too so uh be sure to me but andrew this was great we'll have to have you on maybe after next earnings to do

another media recap or something sounds good and you thanks thanks man