Podcast #83: Andrew Freedman walks through the TMT space

Andrew Freedman, managing director at Hedgeye, walks through everything happening in the TMT space.

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Transcript begins below

Andrew Walker: All right. Hello and welcome to Yet Another Value Podcast. I'm your host Andrew Walker. And with me today, I'm excited to have, Andrew Freedman. Andrew is a Managing Director at Hedgeye. Andrew, how's it going?

Andrew Freedman: It's going well. Thanks for having me on.

Andrew W: Great. Hey, let me start this podcast the way to 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 the pitch for you, my guest. I love to talk about the media space, the telecom space, all this. And whenever I do, when I get something wrong, there are just trolls everywhere saying, "You got this wrong. You're so dumb. I knew it all along." [laugh]

But there are very few people who can point to, hey, I was writing in real time about this and Andrew is one of them. When I came out and said I was long Altice, a couple of months later, people come back. And Andrew said, "Look, here was my thesis on Altice why it was a bad idea, " which it really must be a bad idea at the time. [laugh] But look, I love the way you're looking at the world. I reviewed your coverage list, and I know the way you're looking at the world as 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, maybe we can talk about what you're seeing right now or just how your view the world in general.

Andrew F: 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. First, Hedgeye was an independent research firm, so we don't do any asset management. 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. 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 understand how the company's fundamentals are trending.

You never get real-time, right? But if I can gets a sense of how the business is doing in your corner using some third-party data set or some primary research efforts. That's super helpful in trying to understand when we should crank up or crank down our levels of conviction on a specific name. We'll get stuff wrong, just like everybody else. But then, in the long term, we have, at least for me, a very thematic process. So the communication services space, which I have 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 navigate the cyclicality and the ebbs and flows within those long-term secular trends, I think you can come out with a process and the long-short side that can create a lot of value.

I guess the other thing to just mention here is that in 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, 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 long Twitter. It's been absolutely a disaster and very painful of laid and we can get into that if you want but-

Andrew W: Oh, I want to talk to her on Twitter.

Andrew F: But on the other side of that, right, we've had a very negative view of digital advertising, just giving the comp Dynamics, IDF, a deprecation data, privacy issues list goes on and on which gave us a lot of conviction and help us time really well, are 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, 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, they know that's how we, at least communicate our ideas. It's very ready to change Focus. But at the same time, we also build models. I pay attention a lot to like the key drivers of the businesses and how I think the fundamentals 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, I talk across durations that's probably, that hopefully it helps kind of frame things up.

Andrew W: That makes so sense. Let me start with something that you mentioned there. Yeah, and one of the things I like is, you know, most the time when you have sell-side analysts their list is, you know, if they cover 20 companies, it's 17 buys, 2 neutral, and maybe 1 sell. But, I mean, your sell and longs are actually pretty, pretty balanced. I'm looking at it right now. It's like 15 longs and probably 12 shorts. [crosstalk]

Andrew F: Although, I will establish short [inaudible]. In fact, that you're calling me a sell-side 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, usually were poking holes at the sell-side 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, I don't. You don't have any banking or trading, right?
So in the truest sense, I'm just trying to, doing buy-side quality research and being right at the end of the day, but so said it makes that. [laugh]


Andrew W: So everybody wants to be unique, right? But let me start, you mentioned long Twitter, short snap, and Pinterest. I just thought that was an interesting combo because, most people I know who are bullish, Twitter, Spotify, Facebook, which I Roku which I know you are. I think 10 TV is bullish, especially Snap and Pinterest. And now I don't follow Snap and Pinterest super closely, but I'm just in general. They tend to be bullish on this. So what about Snap and Pinterest in particular kind of drives you do look at those is a shorts?

Andrew F: Yeah. So I mean the timing was interesting, right? And a lot of it's looking at what the drivers of the business were why they work so well for so long. And really came down to a couple of 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 is civil unrest, we don't know, so we don't have to recap 2020 but it was really a bad environment for brand advertising. Usually result in a lot of large brands and agencies to shift their ads spent other platforms. Given, how large the digital advertising Market is, if you just pick up 50 bases, points of market share. It's incredibly creative to your growth rates.

And so that resulted in a massive positive revision cycle, a huge acceleration and growth for Pinterest and Snapchat coming out of the pandemic. Which lasted about through, you know, this the second quarter this year, and as we were kind of going into the back half, 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, Tailwinds of these businesses were going to revert. And that people were mistaken, you know, it basically extrapolating all this positive growth into perpetuity. In the case of Snapchat, you're sitting there looking at, consistent 100 bases, point market share gains a year, 60%, three-year kegger, and gross profit where we thought that you know, this is maybe more of a temporary boost. And the company just earlier in the year heard came out and said, look, we think we can grow 50% a year forever. They did that right at the top, right as their business was absolutely the best it was going to be.

So we saw effectively mean reversion, right? But, there's a good opportunity to Peg the short, it took me time to pretty well, ultimately. 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, in covid from the stay-at-home trends and things of that nature.

When we were coming into the year, we were concerned that again, we would see a lot of those positive Trends reverse. It's a leading indicator, right? So the search is intent for Pinterest. It is very top of the funnel in terms of user behavior. 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. That is in a normalize 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 had, which isn't good for engagement, trans is not good for monetization. Time spent in the app has gone down and we've been tracking a lot of the data. They're fairly close to monitoring those trends and help us build conviction. Looking in Q forward. 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, 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. We're seeing this across all pandemic, quote, pandemic winners, right? It's just it's all going back to where it was before.

Andrew W: Just on Pinterest in particular, it strikes me because I kind of threw It on my List. Look at and haven't gotten fully round to it. But there was the rumor, Microsoft offered to buy him for 80 over the summer. There was the rumor, I don't even think there's a rumor. PayPal put out a press release, that says, PayPal, offered 70 and PayPal's shareholders, kind of revolted and PayPal's that the way. But this stock I think it's like 40 as we speak. Is that right?

Andrew F: I think downward, it's 35 down 6%- [crosstalk]

Andrew W: Oh, just going and going street [inaudible] [crosstalk].

Andrew F: It's going down, man.

Andrew W: When I look at the stock at 35, we're 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, two 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 shit scary as a short." Are you not concerned about the Pinterest strategic interests MNA target, all kinds of circular?

Andrew F: You go back to like, October. Well, first of all, when that first one, that Microsoft news came, it actually made me more bearish right. Because at the time it wasn't necessarily premium to the stock. And so then when you have that, floated out as a price, you're like, all right, my upsides capped, if I think the business- [crosstalk]

Andrew W: That's a great point, yeah.


Andrew F: That's one thing. The second thing is yeah, super scary because I mean, we communicate ideas and you probably see this Andrew, on our position monitor, we have our active Long's and then our bench names. The active longs are ones that you know, we have more conviction and moment.
We think, that they're basically in play right. And the bench is more long-term somatic. We may have not gone all the way through the investment process. So, we had Pinterest on the short bench, 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 52 like 63, and then, you know, that kind of turned out to be a nothing burger.

And then we add it back on as an active storks. We saw the business of tearing look. I think what it comes down to is when that deal when the Microsoft big came out. What was the business doing right? There, were just coming off of a Breakneck year. The fundamental still looked really good. Fast forward to the potential PayPal rumor. It was lower than the Microsoft bit rumor, right? The business fundamentals were getting worse. And so the business... the fundamentals continue to slow. 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. I'm not privy to those conversations. I don't think most are but, if the business is at $35 today, you know, maybe you can get it at $50, still be a big premium.

The Strategic value is there, in the sense that, having commerce conversions on a platform in the world where you have, limited visibility with the idea of deprecation to integrate payments, to better track conversions for shopping. It makes a ton of sense. I just don't know, Pinterest is the right platform, right? Because they don't have... well, they have over, but I have a lot of use, the actual engagement levels of those MMA uses 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 attracted a, don't get me wrong.


Andrew W: There are a lot of females out there.

Andrew F: Yeah, and they monetize really well right for shopping. But still like I don't really know if Pinterest is really the right course in that sense. If your PayPal or some of these other platforms, so that's kind of been my sense. And yeah, I mean MMA is scary. But you know, it's always a risk, right? Like I remember when we first went short old piece and just like December of 19th, and the feedback always was like, charters going to buy it. 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 colder report, Q and said that he'll just go and buy back all the stock. Which he personally to try to do. But the point is, my process, like, I try not to really be too concerned with MMA. But yeah, I'm probably going to get blown up on it at some point. [laugh] It was fun.

Andrew W: Well, we don't have talked about Altice, but I find it's funny. I mean, look, you put this all in your short report, but, Altice in 2018, 2019. They definitely had arrogance to him. Right? Like, you said, he called his report short. Yeah, every conference they went to, they'd say, "Hey, our free cash flow yields Equity is 10% and our debt and costs us 3% after-tax." We're gonna take advantage of that all day long were going to buy back shares.

They called Charter and Comcast stupid for how they were launching their mobile business. Altice way, we're going to have the best mobile business can be cheaper, more profitable, all this. They cut costs like crazy and this year stock is way down. It's my biggest loser by far and they're out here. Everything's gone, right. No more share, buy backs, they're reinvesting in the business and paying down debt. And despite the shocking 50% lower than where they were hammering the share count, Altice way is dead. They're reinvesting into the business. The mobile plan scrap, they're redoing all like, it just shows arrogance then. But let's go back to Telecom or you can talk to Altice if you want to.


Andrew F: No, you know what? I only brought Altice because you ask MMA questions, right. It's a good example of how I think about MMA, from the short side. So we don't forget about that. But yeah, I agree, I mean, if you notice, we're not short Altice. I don't like it's nowhere on the list right now. Because for the reasons that you mentioned.

Andrew W: Just one more in the tech Space Twitter, you know, I've been a longtime Twitter Bill. Fortunately don't have this position currently. [laugh] But Elliot Turner came on the podcast right after, they kicked Trump off and we talked about it. Me, like many bulls I look at Twitter, I see this platform where I create tons of value, and I connected on Twitter, right? Like all these values creating, it drives every news story. They literally, you know, not to rehash, story, but they kick Donald Trump off. And Donald Trump's microphones literally taken away without Twitter. You don't have a microphone, so I look at this and I see what I think is maybe the most powerful platform in the world and is trading for 40 billion dollars on the open market. I haven't looked at the TV since the huge stock price drop in the past couple of years.

They can't figure out monetization, every time it seems like they're getting something going, they kick themselves in the foot and you know, 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? [laugh]

Andrew F: I mean, I think the stock sucks so much. Well, there's a couple great, there's a lot of reasons. First of all, everyone wants to be long performance, direct response. Advertised 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. But that's because it speaks to the fact that Twitter is an amazing awareness tool. It's great, it's broadcast, it's phenomenal and respect. And because of that, you're just don't inherently get a large multiple for brand advertising businesses because it's slower.

Now that's why they're moving from a trying to get some 85 grants and 50/50 direct response, if they can successfully grow that business, then, you could 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 overhang. The other thing too. Is that look, there's so much scar tissue here. I think it's just been such a chronic disappointment that 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 poll or being long Twitter. It's just way too high. And so let me just be long Facebook which has been a better idea. 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 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, is stabilized and starting to turn. Brand advertising has snapped back. They've gotten their mope maps map, 2.0 back online for mobile app, Advertisers, that's growing quickly.

So if you just look at what you're doing, it's they're executing. And actually, the fundamentals of the business in terms of Revenue and users have come in a little bit coming a little bit better. They even, I was anticipating coming into the year, which is the exact opposite of looking at like a Pinterest or a Snapchat. Like the most recent quarters where they've, where they disappointed but nonetheless. We're seeing a slowdown across digital advertising, tough comps and the whole group is re-rating lower. And so going to have that issue or Twitter's relative valuation is going to be tracking peers. And so if snaps can go from 20 times sales to 10 times sales and Pinterest is me to go from 15 times sales to 27 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, it's also no, I mean, obviously, no one Believes their [inaudible] guidance.
I think 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 some 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 use cases, like, cases. Communities super follow that maybe are not necessarily big, monetization drivers directly. But what they do is they have the effect of driving higher engagement and increasing and 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 your…you know, still in 2021 is actually pretty impressive. So we'll see how it all plays out. But yeah, it's definitely it's been the Pinterest, it's been disappointing.

Andrew W: Obviously, this week, Jack steps down, resigns, fired, whatever you want to call it. There placing with an internal candidate, just you quickly. What were your thoughts on this year switch?

Andrew F: I think that, like most of you, I thought maybe doing an external CEO search and bringing somebody fresh and would probably be better. But at the same time, if you think about that, if you were to bring in a brand named CEO, they're going to want to put their stamp on the organization. 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, would be very disruptive in and of it. 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 and add value if at all.

And so I think that in that framework, elevating Prague 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 what the strategic options are. And if this company going to be taken private either private equity or strategic. Are you going to bring in a brand name, CEO? Who's going to want to be here for 5 to 7 years, if really the game here is just, you know, who cares? They may not even hit... it may not even matter what their 2023 targets are, right? They could just be, I mean, they 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.

Andrew W: Taking the company private is an interesting thought because they loosely fit into just about everyone as a strategic player. Now, Google, Facebook, you know, regularly, there's no chance, they acquire them. But IG's book, he says, we had a deal to buy Twitter and I called it off like a couple of hours before if I'm remembering correctly. A couple of hours before we were about to sign it, If I remember that correctly because he didn't like what a toxic bull it was. But you know, every Media Company on 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 can basically see Twitter as 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, this is a famous thing, but Twitter spends a billion dollars on R&D, and what the fudge are they spending a billion dollars in R&D on? You know like that.[laugh] Beside has an improved in years. Interesting, what you said about bringing a new CEO and 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. My only concern with
Jack leaving right now was... 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 a month. Active users, especially ramping revenue specific ramping a supposed to be ramping up and you switch CEO's, right as the ramp-up at happens. That's always a little concerning.


Andrew F: Yeah. I mean, I guess my only thought on that is look, Jack is an incredible barrier to attracting investor Capital. Love them or hate them, you know, he needs to I think in any way to get the stock higher he needs to go. And I think that this transition plan is probably been in the works for a very long time here. And also, again, if you have plans on selling the company in some way, shape, or form. If that's the ultimate, the path we're on, Jack doesn't need to really be there anymore. If anything it makes it worse and he's also giving up his board seat next year.

Andrew W: I so I thought that was interesting, having Jack, the founder, give up a board seat so quickly. I thought that was pretty interesting.

Andrew F: Yeah. So anyway, but that's just, you know, my two cents on it. I mean, I think it's right here. I think what your perspective makes a lot of sense too. I just don't know, Jack is really going to be the one who wants to see this [inaudible] going to carry the torch for this next wave of growth. Obviously. It's not the case, right? Because that's what he said, 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's going to crew to public Equity holders today or maybe in the hands of private Equity. I don't really know. But I can see that multiple path going forward. But yeah, Twitter has been, 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 super follows and there's a lot of hype and excitement because of all their power users. See how much we're also investors. See the value in the platform.

But ultimately, I think what it comes down to is just how do you get Revenue to go faster? You 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 snp's on platform. The last thing I'll mention on Twitter is... let's just be real, right? Imagine managing this organization, put yourself in the operator seat. Change doesn't happen overnight. It takes a long time to turn a ship the size of Twitter. And I know investors just want to get paid tomorrow and they want to see a change immediately, but that's the reality is that doesn't always happen, especially for turnarounds. So we'll see how this openly works. In their favor against them.

Andrew W: Yeah, when I look at the platform, I always message Elliot about this the other day. I don't think he responds but this is a little hectic. But you know, when I engage with companies, I treated this a couple of months ago. I was calling Delta. I had a covid exposure had to quarantine had to cancel fight because you know, you had a covid exposure. Calling Delta trying to cancel my flight day of wait time, on the phone is four hours. I tweet about I was like, hey, I don't know like, it's three hours to JFK. So my flight, I don't know if I'm going to be able to cancel this before, they actually pick up the phone. Tweet it out, Delta representative DM's me. 10 seconds later.

Everything's taken care of over Twitter. DM, and that's pretty much how I engage with most brands. Now, right? I slide into their Twitter support, fine. I just messaged them on Twitter and say, hey, can you help me? And I don't believe Twitter makes a dime off of all of 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 not getting paid for.

Andrew F: So I have my own story which I'll share as I think the fact is that Twitter is such a powerful, organic marketing tool. And organic marketing is the best kind of marketing. It's the most effective is cheapest and because it's so good. It makes it less effective to actually want to pay and monetize if the organic is so strong, right? So 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 high probability. And so you can do look alike audiences. You can do a lot of things on the promoted. 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 two months ago or a month ago. I switched the 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 was a Friday, they said they couldn't help me. I was supposed to go on a business trip that Monday. I need my phone and then they were like too bad, you know, it's not going to work. [laugh] I tried to support. I literally got on Twitter and I just tweeted that John Freier. He's they're headed, the consumer organization. And he's in my DM, 15 minutes later. I got the chief operations officer the CEO of the Northeast division, calling my cell phone, and I have a new device in my hands and 45 minutes.
The power of the platform is phenomenal.

Andrew W: Now, someone has told me. They were 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 you know if it's somebody who tweets that you on Twitter there, much more likely to you know engage really heavily on Twitter." So if you don't treat them, right, they're going to be spending a bitch all and you know, even if it's a guy with ten followers, it can go viral very slow[?]. And if it's a guy with 10,000 followers, it can go viral very quickly.

Andrew F: Oh, yeah. The cost of having somebody with any followers are like the net classic like the net promoter score. Like your detractors like negativity and detractors are amplified. It's just like in real life, when something bad happens to you it feels a lot worse. A lot of the times when something good happens, right? That's the version in investing, and the same thing can be applied when it comes to marketing and that. You want to neutralize because you have that complaint, 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. 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're spot on...

Andrew W: Yes, and no, 100% 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 how the optional and can be hard and when someone said "hey you, you know, I worry Twitter. I've got a biased use it because I get so much value out of it, I enjoyed it so much, I'm sure you're the same." But somebody saying, "You might have a little bit of a biased view of product the optionality just because of how you interact and engage with it."

Andrew F: 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. There's always going to be, you know, that long tail of, users and consumption across the board. And the value is not going to translate equally to everybody. There's a lot of people that are attached to Twitter kind of on the margin. That don't engage with them daily.

And so there aren't as many like the value. 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 them down conversion, you know higher. And then hopefully, that translates into faster growth over time.

Yeah. I know the bias. I think the bias is real, I mean, at the same time, from what I see I try to neutralize it within the process. What is my key? What is my key thesis point? What is my fundamental expectation? What is my catalyst? What is my perception of value? And so as long as I kind of have my true worth and I don't really feel like I'm deviating from that and in too many ways. Then I feel like my bias is a little, neutralized.

But yeah, I mean, look, people like, we all grew 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. That you enjoy that your consumer, and in that sense, maybe everyone has biases. But I think that's why it's important to have a thesis and really be able to be objective.

Andrew W: Let's leave the social network space, their tech space right now. And let's go to one of my favorite species, the media side, right? Yeah. 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 Viacom is a buy because I've looked at this company so many times over the years. It is so damn cheap, you know, if it's as we're talking to trade 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 even on maybe.

Andrew F: And a half years[?].

Andrew W: Yeah, and they've got a lot of... if they really wanted to juice. This is one thing I thought about likes me too. If they really wanted to juice their Ebitda. They could just shut down Paramount plus license everything, you know, like they're real Assets in there. They've got good brands, Nickelodeon SpongeBob, Star Trek, they're real Assets in there. It is very cheap, Viacom, I actually really like the Viacom Co but, when is it too cheap?

Andrew F: Yeah, so, I mean, valuation is for me, it's kind of like, the last thing that I do, right? So, I don't start with valuation. I started with what is the top-down secular trends of business? And then from there, like where the fundamentals of the business trending and then, you know, what do I think the future Ebitda cash flow? Whatever the key metric is that I think the stocks going to Anchor off? Where do I think that's trending three years from now? And then I kind of think about, okay, what's the right multiple and what is multiple tracks. And you know just from a thematic standpoint, maybe just to kind of step back for a second. I mean, we've been on both sides of these names historically. I've been long Discovery, we're not currently involved in Discovery. But, look, I think you have to realize that there's a massive shift that's been ongoing and it's continuing in a year.

And that's the transition to screaming which has implications for the unit economics of these media companies. So, you know, it weighs on affiliate fees, it weighs on Advertising Trends. And so if you look at the case of Viacom, in the time that the merger closed with CBs in their pitch book, you know, they said 500 million in annual cost, synergies pro forma just it away but does 6.3 billion, right? And this year they're going to probably do 4.6 billion in Ebitda and its going lower.

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, I think years, have your classic value trap right. Where cheap gets cheaper because the fundamental will 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, keeps that number growing at a faster rate since then.

But the point here is that streaming is just a much less profitable business compared to linear. So you're driving it. [inaudible] 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, what's it worth? So, let's say they're going to do 3.5 billion in Ebitda, on 24, the streets currently, like four and a half, five. Maybe you pay seven times on that and you get, EV of 25 billion less net debt of 14, ten a half equity and you get a $16 stock. At eight times Ebitda, it's 22. And so, I think the bowl is wanted 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 purse of valuation on part is near Netflix. I just don't think that's the right valuation approach.

Andrew W: Let me push back on a couple of different points are and I don't have a position in Viacom right now.

Andrew F: Yeah, I know, fine, please.

Andrew W: I'm just fascinated by... but there's two... I guess, my first push back to you would be okay. I hear you on that, but I look at something like Next star, which Next star is the Affiliates, right? So if you're living... you watch CBS on for people who watch on linear networks. CBS is actually owned by an affiliate. So Viacom owns the CVS overall network, but the affiliate runs the local news, all the programming, and stuff. Next star is an affiliate of CBS. Being an affiliate to worst business because you have to pay CBS network a big revenue share basically. Next star trades at seven or eight times at Ebitda, Viacom trades at seven or eight times Ebitda.

So I've always looked at and said, well, an affiliate is the worst business than the network. Obviously, Viacom isn't all CBS, you know, they've got a lot of other channels in there and Next star, manage and it's second to none. But I've always listened and said relative value-wise like Affiliates going for eight times and you see credible players, you know, Techno's getting bids from Apollo right now. Techno’s another affiliate. They're getting bids for private Equity players to take them out at like seven or eight times Ebitda right now.

Gray just bought television stations for married. It's like seven or eight times Ebitda is how much Affiliates are worth? If there were seven or eight times, isn't Viacom worth more than that? Would be my first push back.

Andrew F: Yeah, I mean, within that framework. I mean, I think that is reasonable. I mean if you look at historically what broadcast, even that multiples or you know, high single digits, maybe 10 times at the high-end like, 8 to 10 times, no cable is what, you know, 4 to 6 is usually the valuations that you see-

Andrew W: To save some socks?

Andrew F: Yes.


Andrew W: Or cable companies.

Andrew F: No, not the cable company. The cable, now- [crosstalk]

Andrew W: I was about to say, you take that back, only on T straight for sex. [crosstalk] Charters are even 10 or 12.

Andrew F: Blasphemy. Yeah. No. Sorry again, I'm not that, but yeah, just cable networks. And look, what's Viacom worth the cable Nets, you know? Post the merger closing, right. The stock went down and granted. Covid they saw like Viacom value just disappear. Were short into that, we covered it. Like it's 12 because there's just, valuation was, is kind of absurd. But yeah, I mean, look, you can look at like a relative, valuation, comps things like that. I mean, it for me, what it comes really comes down to is, 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. Already trading at ten 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 really just becomes a question of do you think that they can get to scale in streaming and by my death fight scale? I mean actual profitability. Not just like sheer number of subscribers, can they actually leverage their content costs to drive better unit economics to get to a larger Ebitda piece [?].

I just I have a really hard time getting there and it's not just Viacom. I just think that streaming is just structurally pretty terrible business. At least, you know, at these current prices, maybe down the road, you know, when it's the bundle ever goes to zero, we're all paying like $35 for Netflix and $20 a month plus. I don't know, but-

Andrew W: Only one tool to rebounded [?]. Well, I've got some more... if I have questions, but let me split then. So I root you, people are learning quickly. That streaming is harder. You have to get a lot of scale to justify the big content being 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 Viacom. Now, Netflix is growing and they've got a 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 and 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 Viacoms, CBS all this. So why Netflix and Disney are buys with all these questions while buy comes and stuff?

Andrew F: Yeah. Well, it comes down to a couple of things. First of all, we've been bearish and mostly wrong on Netflix for a really long time. I mean-

Andrew W: Actually, when you sent me your list, I was like, I'm pretty sure, Andrew has been a Netflix fair. I didn't realize... [crosstalk]

Andrew F: No. Well, no definitely for really long time. And I still believe a lot of my initial view points, 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, but in the spirit of either wanting to be intellectual, right? Or actually help people make money, 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 son a high conviction long. But you know, we're coming up against easier comparisons on subscriber Trends. Their number one driver subscriber. I can position being content with wrapping back up and the data we're attracting was getting a lot better. At the same time nothing else look like absolute crap in our space, you know, advertising is going to fall out of bed. We're coming up against 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 the point is that it doesn't mean that I think that Netflix is a great business or that I think that 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 a pure-play and streaming. And if you just look at least the reported metrics. Ebitda is still growing, earnings are still growing, we can get into, you can talk about counting nuances and how they account for their content costs and all that stuff. It's probably not worth it to get into here. But the question is like in that scenario, I want to be long Netflix against short Viacom, because of is coming up against the product launches. The linear business is coming under pressure, as they copies affiliate, renewals at the same time advertising, you know, we're competing against the big increase in Resurgence, linear advertising Trends. That happened, post covid. And so that business is going to slow very quickly at the same time on rising content expenses.

All Netflix business always on Subs is going to stabilize and potentially positively inflect. And in that scenario, I think that works. And then for Disney, we were big Disney bowls going into the Disney Bus launch, right? Like our view going into this from day one was that they're going to surprise the upside. And this was before unsub's and this was before anyone was like everyone thought that you know, no one could do it, but Netflix and no one is going to subscribe to all these services which ended up being not true.

And we did a lot of like survey work to kind of build our conviction turn out to be right. But you know, there's one company out there and Legacy Media that has the Brands, the franchise has the ability to 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 large percentage of their free cash flow. And so the question is, 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. But I still think the jury is out whether or not it's going to actually be profitable for them and to what scale.

Andrew W: What do you think Disney should do with the SPM?

Andrew F: I think that they need to... it's a good question. I'm not sure. I have a good crystal ball on this but I'm not sure anybody does. Frankly, they need to keep it. I don't think they can sell it because Sookie[?] their a direct-to-consumer strategy, right? And I know people thought about that, but sports is a huge driver of a subscriber, acquisition for the streaming services. And I do think that if 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 bungled of streaming services, which is Hulu ESPN [inaudible] Disney Plus in the long term. But it's there's no easy answer to what to do with ESPN. I mean, yeah, I don't know if you have any- [crosstalk]

Andrew W: No, I wreath you. It's tough because it is just a clunky product and its current form. But 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 TV channels. The Disney-

Andrew F: Yeah. I mean, it's the largest part of the bundle, right.

Andrew W: 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 feels 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 and Disney Plus, and then Hulu on the side, it's just a strange kind of thing. But, that's probably too long a conversation for now. I just want to circle back quickly to the Viacom CBS[?]. Because there's one other thing and the relative value already mentioned Next star, but I think there's one other thing that a lot of Legacy Media investors hang their hats on.

When you look at Lions Gate 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 prices. Well, 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, Lionsgate's and Stars MGM owns, FX, stars is a way better than FX.
MGM's library has some real classics in it. But Lionsgate Library is way better than MGM's Library. When you look at it all in for new stuff Lionsgate TV production is better than MGM. So Lionsgate 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 REB is $35 billion. Why aren't we $50 billion, $70 billion, $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?

Andrew F: Yeah, I mean, a quick look at what, Kevin Mary and Tom Staggs buying, you know, to and like the valuations that they're paying for some of these independent, [inaudible]. [crosstalk]

Andrew W: Oh, when they bought the Reese Witherspoon business for like a billion dollars. I can't tell you how many people sent that in there. Like, don't they own four shows in a relationship with Reese Witherspoon. We have actual billions of casual, like what?

Andrew F: Yeah. I know. No, absolutely. Look at library value is real. Getting access to these IP is of strategic value to one of these larger companies. But that is the value. If you're an Amazon, if you're an apple fear, anybody like you're not looking at Viacom and you're not saying... you're not looking at ViacomCBS and saying like, "Oh my gosh, I want to lose subscribers." You don't want to buy a streaming subscription business, because you already have scale in your existing business. So from the case of Amazon, all you really need is IP. And maybe have it be exclusive to help drive, better retention, and helpful Prime video and meet all those strategic needs.

And I think what the market is telling us, is that they should be an arms dealers. They should be through 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, where somebody will come in and, put in a bit for that.

So I can't really say that... I can't disagree with you right. I mean, I think it makes sense. The question also just becomes like, all the other relationships within the business. Then you all of a sudden have five broadcasters with CBS. Would Amazon be able with it with Amazon be able to buy CBS? With that pass, and I trust like-


Andrew W: I don't think Amazon MGM is going to, so I think Amazon CBS. I mean, I think it should be allowed to but I just- [inaudible] [crosstalk]


Andrew F: Yeah. But that's the point right? Like the thing with Viacom CBS is that it's not easy. If you want to buy it there's a lot of issues. Which is why, we're seeing one or media merge with, Discovery. It's not... and that Viacom, because there is the broadcaster element here.

Andrew: So let me ask... you brought up Werner Media Discovery, a very interesting one to me. I do have positioning discovery which like all thesis top integrate calls. But you know, I can get merges 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 third[?] together and you get a third, not a reason. [crosstalk]


Andrew F: [inaudible] greater damage. Yeah.

Andrew W: The bull case, which I kind of subscribe to is you look at the acid strength and the IP value at Warner plus the... yes it's a 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 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?

Andrew F: Yeah, and we've been... I've actually always historically kind of had a long bias on Discovery. And part of it because I think they have really unique Brands. I think unscripted space has better economics and returns on your contents have been conscripted still less competitive. They have...they're dominant player there and I think people generally underappreciate the strength of like HGTV and all these.

Andrew W: Yeah. It might be the old thing, where most analysts most people on this podcast are male unfortunately and HGTV discuss, even Discovery-


Andrew F: Discovery Channel Tales, I mean, always things like there's 50. Yeah, it's like the pushback is like, "Oh, yeah. Why would I want on Honey? Boo. Boo great." But like, I mean the point is-

Andrew W: Dr. Pimple popper.

Andrew F: Yeah, but here's the point. The point is that it still resonates and has a large demographic. And so, I think the worst thing that you can do as a media investor, it's just assume that your tastes and preferences are the same as everybody else in the world. Because it's just not true. So you really have to take a little bit more of a balanced approach to how confidence forms.

Andrew W: Even said on it, not just your tastes and preferences, but what everyone else says, their tastes and preferences is because you remember that old thing. We're like they used to rely on what people told them to report TV show viewership and everyone said they watch the news and PBS and no one admitted to Jerry Springer. And then they got a little bit of digitalization and it was like, the news and PBS were way lower than people reporting. But Jerry Springer was way higher. Nobody admits it but everybody watch [inaudible] [crosstalk]

Andrew F: Everybody has guilty pleasures, right? Everybody has their guilty pleasures that you know, if you're at the bar talking with your buddies or whatever, you're not going to admit to watching, whatever show. Or you know, it's just, what it is, I mean, I love science apace, you know, all the alien shows. I can't get enough of it. Do you know what I mean? So I love discovering plus. I think it's great, my wife, she loves all the Food Network all these things. So I think it has very interesting brands or a little bit more durable than people think. And because it's not scripted, you're not subject to the same type of, inflationary pressures on the production side. So I think they can leverage their constant cost a little bit better.

But that being said and it's still cable, right? And so it's cables, generally viewed as a secondary to broadcast because, broadcast commands premium CPM some for that, from that advertising side. It also has a larger Regional larger percentage of time spent. It's increasingly being carried by... it's also being characterized increasingly more. So by higher content costs especially with sports. So going back to your original question, I think that it's still like if we just look at it objectively if I just showed you this business model. And the trends in this business and I didn't tell you what the business was, you would look at it and say, "All right, you know, advertising revenue in this last quarter was actually a header right here." So, advertising revenue, this last quarter was $991 million in the US. 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 casual business, which is in decline.

And then you look at it from the affiliate side and you say, okay. Well, that's still growing but then you think about it in terms of what is the biggest problem with the bundle. It's the rising price, dealerships down, increasingly becoming worse value to the consumer, which is overtime. In theory, driving accelerating, turn on a cord-cutting exciting work, 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 did right there going to use your larger scale to go back to Charter. Go back to Comcast, go back to all the Distributors, and they're going to say where this larger organization now. And they're going to use that to their advantage, to try to get better rates.

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 on to the consumer because they don't want to have... they're not going to lose money on video. They're barely making any money that has to go, but they're not going to lose money on video. And then you do that and then all of a sudden you're like, I don't want to pay this anymore. And then you cut the cord and so the issue that I see with the merger is that yes, you have all these short-term benefits financially. It's very financially engineering-driven, which I understand. But it actually over the long term potentially exacerbates the problem. Which is the value proposition of the bundle.

Andrew W: 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 far as the long-term. Because you marry the HBO Buzzy IP. There's nothing to draw people in like the Game of Thrones spin-off that's coming out or the movies. HP has got great stuff there. What they don't really have is that background stuff that stops retention, you know, the data is as obvious exaggerating, but he said I've heard a noise. [crosstalk] Yeah, I've heard from people, if we could marry the discovery library with our staff, our churn will go to zero because we can Super Service. 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 churn drops to zero and we're a truly skilled player. Do you buy into that or do you think there are any kind of?

Andrew F: I think that the push-fit... over that argument on churn is actually that is very fascinating. Because I think it's true, right? I mean, how do you get turned down? You got to increase engagement time, spent with the service. I mean, it's not rocket science. So if you can get all this kind of white noise, filler berated, like type content in with this other service and you can increase time spent. That's great. I think the question becomes whether or not you actually merge the two Services together.

And all the benefit comes from churn. Or do you actually try to do a bundling strategy? [crosstalk] Because it's like-

Andrew W: Like Disney Dollars with ESPN, Applause dealers [inaudible] [crosstalk]

Andrew F: You mentioned, HBO killer Brands, killer content continue to invest in that. You also have the Warner library that they're continuing to pump in there too. And the discovery contents are 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 US market Discovery plus needs Warner a little bit more than Discovery plus. And international is kind of flip. So the term benefit could be there. You have a scale player and streaming sure. But again, then we're coming back to the same question Andrew that we were at before, is a scaled streaming player, right? Even if it gets to the size of Disney oh, sorry Netflix. Is it going to be as profitable? As the businesses today and linear. And I think as far as I see it, the answer is no. Because the bundles been over earning, legacy meat 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 but industry. Which they're starting to finally, push back on.
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.

Andrew W: If you read this for, I don't have the numbers behind by me right now, but I believe Discovery was projecting for the next 10 years. Basically flat Ebitda and cash flow and everything. And you know, you think about this year is supposed to be hey our Ebitda is trowel because we're investing $500 million into launching Discovery Plus in the streaming service. You would have thought just kind of analyzing that and hitting scale and 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 we're kind of analyzing this massive investment into Tech and platform and everything in 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 where running wrong. I've been having a blast at this.

Andrew F: No way, we get them, I've got time to [inaudible]. Otherwise will wrap up everyone-

Andrew W: This last question Viacom you know, I think a lot of bulls, and this is a place I haven't been able to lot to 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. Back, on 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 Twitter, I put out a while ago. I'll put it in the show notes, maybe once it. As of August 52 million monthly active users, revenue doubling year-over-year. 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, in three years. They say it's a total home run acquisition. They paid $3 million to $4 million. What's Pluto worth as a standalone business? How have you thought about that?

Andrew F: Yeah, so a couple of things. So it Pluto, first of all for, you know, any type of fast service, MA service like used is just a worthless metric. It's totally garbage. I mean, it really comes down to time spent and engagement and all the third-party data that I've seen suggest that you know, maybe they have a lot of MA use but the engagement is pretty low all things considered.

And then the other thing you have to ask yourself is when you start to think about Viacom as a sum of the parts play. So what is Pluto worth? What is Paramount plus worth? You have to think about it. like what is Pluto worth without all like, Viacom content? [crosstalk] Like if you don't pass exactly young potential, if you don't have MTV, if you don't have the Salesforce. And the way that Viacom's been selling advertising, especially its ass upfront is all through bundling. 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 where they see... that's what they think they need to, do drive a moldable for the stock.


And so yes, it's growing much faster. A lot of it's not 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, to what it is right now. And yeah, so, I don't know I think it's an interesting asset. I don't know if the future is really going to be fast, and in the current streaming form that it is. Maybe if they start putting more Sports, they're 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. So it's just you follow the bouncing ball and you just don't get to really exciting place at the end where Pluto is this, you know, a diamond in the rough, incredibly undervalued asset. Because it's doing the job of recapturing a lot of those lost linear economics.

But ultimately like at least the data that I've seen to like the US growth has slowed down engagement levels, aren't that great. So, maybe I'm just too cynical. [laugh]


Andrew W: No. That makes total sense to me. That makes... just again I haven't dug into Pluto, but I know a lot of Viacom Bulls who look at Pluto and say "Look at those metrics, what would this be worth?" Especially when stocks were really hot. There are saying "What would this be worth of as fact?"

Andrew F: Yeah, I know.

Andrew W: 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 everything. What's your favorite right now?

Andrew F: Yeah, right now, it's so hard to find Long's. I mean, I think if we talking like in the next...we're talking like in the next two or three months. I would say Google probably continues to work if we're talking, you know, three years. I think that you know, some of these issues with Roku resolved, right? And, you know, we're not incredibly, we flagged a lot of the issues with Roku and YouTube and we taking it down, 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 the long-term thesis is there. For those that our patient can take advantage of this opportunity. But it's not, it's definitely one that is challenged in the... but the stock reflects-

Andrew W: Roku is another one that has a lot of interesting strategic angles to it as well. It covers it for another. We've run long because I've had so much fun with this. I had Telecom stuff to ask you about the, we'll have to save it for the next story. Let me just give you the last word here. Is there anything... we mainly focused on social and Legacy Media. Anything wish we had covered harder. Anything. We didn't get to that you think we should have talked about?

Andrew F: 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...

Andrew: 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 am shocked that there are some people who said, "Oh no, this revolution here." 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 short AMC, who are sell-side who say short AMC theaters or short fubo. 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 to 1% overnight. Because Elon Musk tweeted about apes or something, you know?

Andrew F: Yeah. No, I hear, yeah. I mean, shorting meme stocks is not been a profitable endeavor, to say the least. But eventually, I like to think that it all comes full circle, which are definitely seeing. But yeah, no, Andrew this has been excellent, hopefully added some value and I appreciate that. Great questions and the ongoing debate.

Andrew W: Hey, this was absolutely great that I ran long because I was having so much fun enjoying it. Andrew Freedman. I'm going to have hit the link to his Twitter profile in the show notes. So people can follow them on their hit him up. He's got a passionate following on there too. So be sure to meet him. But Andrews, this was great. We'll have to have you on maybe after the next earnings to do another media recap or something.

Andrew F: That's getting you. Thanks.

Andrew W: Thanks, man.

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