TRANSCRIPT 🔗
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Speaker 1: Bloomberg Audio Studios.
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Speaker 2: Podcasts.
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Speaker 1: Radio.
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Speaker 3: News.
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Speaker 4: You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube.
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Speaker 5: Of course, we also are waiting for more details on Anthropic. We have gotten some because the company, the AI Frontier Lab, is holding its investor roadshow right now. And Bailey Lipschultz is our go-to guy for all things on IPOs. He's in our Bloomberg Interactive Broker Studio in New York City. And Bailey, there was some snafu with paperwork that added some last-minute drama.
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Speaker 6: Yeah.
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Speaker 2: Well, it was a little confusing, Scarlett.
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Speaker 7: So basically, the TLDR, if you were asleep or watching Monday Night Football yesterday, was there was a report from Reuters about a filing that was sent around. Our understanding and some of our competitors reporting that there was an incorrect S1 filing sent around from an external firm working on the deal. That was a little bit weird because it caused a lot of headlines.
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Speaker 2: But really, if you.
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Speaker 7: kind of subtract the fact that it was reporting on, not too weird. It wasn't like there was something submitted to the SEC that was wrong. It was just reporting and kind of the spread across social media and other outlets yesterday evening, late last night, really, throughout this morning. And then that was all kind of put to rest when the company began marketing this deal this morning at about 6.30 a.m.
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Speaker 2: New York time.
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Speaker 6: Got it.
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Speaker 2: So talk to us about valuation, Bailey.
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Speaker 8: What do we know in terms of what they're looking to raise here?
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Speaker 2: What valuation?
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Speaker 7: So they're looking to sell in the IPO primary and secondary share sales up to $ 64 billion. On top of that, though, is a $ 26 billion private placement participating in that. AMD, Broadcom, Google, Micron, Microsoft, NVIDIA, Taiwan Semi, pretty much a who's who of circular financing concerns participating in that private placement. At the top of that range, when you include things like equity stock options for employees, restricted shares, stock reserve for the company's donation program, fully diluted valuation targeting at the top, and $ 1. 4 trillion, which is below the $ 2 trillion number that had been circulating about a month ago, but above where we were hearing folks on the buy side were trying to push the company to last week when they were targeting maybe as low as $ 1. 1.
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Speaker 2: $ 1. 2 trillion.
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Speaker 7: So a lot unfolding, again, in a market backdrop where over the last 12 months, NVIDIA's down 25%, Alphabet's down 17%.
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Speaker 2: And Meta's down 10%.
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Speaker 5: And Bailey, just remind us of all the things that we need to watch out for in order for this IPO to go.
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Speaker 1: Off without a hitch. What kind of timeline are we looking at here?
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Speaker 5: If all goes according to plan, when is the likely pricing date and when's the likely listing date?
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Speaker 7: As far as we know, they will be on the road starting this morning, Tuesday through Wednesday of next week. Post-market, the deal should be priced by its bankers in the company. Wednesday evening here in New York, and the first trading day will be next Thursday. Again, similar to SpaceX, you can kind of expect this to be a deal that there's a pricing announced Wednesday night, but the stock doesn't open until late morning, early afternoon on Thursday, and that'll be the first trading day for Anthropic.
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Speaker 2: So do we know how much of this is going to retail investors? Because I would think there'd be a lot of demand there.
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Speaker 7: We reported that 15% to 20% was expected. When you think back to SpaceX, similarly, 20% was the top range. I think it ended up shaking out about 15% to 16%. So still quite a large sum being sold or marketed to retail. But Paul, the one thing you got to remember is It's interesting or going to be interesting how they kind of quantify retail. You can still lump in high net worth individuals as retail clients. So think about the people who have accounts at JP Morgan that are individuals who manage their own investments. They do fit into the retail crowd alongside the folks buying Ant on Robin Hood. So a lot of money to go around. One thing that we did see back when Anthropic went public was was a global push for retail investors and obviously a lot of excitement on day one when SpaceX went public and day two. So it'll be interesting to see not only how they dole those shares out, but what really happens with the retail trading community across social media and kind of just in their trading accounts next Thursday and Friday.
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Speaker 5: And just before we let you go, Bailey, the company is going to hold a live stream event as well to kind of be able to speak directly to the public.
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Speaker 7: Yeah, they did this with SpaceX. It was Jamie Dimon interviewing Elon Musk. And it does seem like JP Morgan, according to Bloomberg reporting, they will have another live stream event. This Friday with Jamie Dimon interviewing none other than Dario Amodi. So similar mood, similar kind of flavors, if you will, to what we saw with SpaceX trying again to discuss the company's vision and trying to really, at least from the JPM perspective, according to our reporting and our understanding, trying to make this an offering that can cater to their retail clients and retail clients writ large. Again, when you think about historically IPOs marketed to a who's who of investors, a lot of closed door meetings. Well, the pitch at least from the
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bank running this, doing it on Friday like that.
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Speaker 2: Stay with us.
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Speaker 9: More from Bloomberg Intelligence coming up after this.
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Speaker 4: You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube.
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Speaker 5: Paul and I are downtown in the financial district at BAM Mutual.
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Speaker 1: That's right, Friday, as the kids say.
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Speaker 5: We're going to check in with Sean McCarthy, the CEO and co-founder of BAM Mutual, in just a moment.
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Speaker 1: But we need to get an update on the latest with NVIDIA.
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Speaker 5: The stock down another 3.8%, trading at about a seven-month low right now. Michael Shepard is our Bloomberg News Senior Technology Editor. He joins us right now from Washington, D.C. And Michael, what we've heard from President Trump is that the FBI is now looking into Chen Sen-hwan's relationship with this alleged Chinese spy, in addition to NVIDIA opening up a probe into this yesterday. So just give us an update on what we know so far.
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Speaker 6: Well, you know, the Trump news conference yesterday did shed some light on the administration's view toward Jensen Wang. Right now, the president offered his. unvarnished support, calling Jensen Wang an honorable man despite the allegations that came out and the admission by Jensen Wang of an extramarital affair. But the president did say also that the FBI was looking into the matter. He didn't elaborate on the nature of the probe, exactly which direction it was going, and if it was focused on the relationship itself. We contacted the FBI. They have not returned our request for comment. So we are still reporting out exactly what the government is doing in terms of an inquiry. There have been investigations underway, though, Scarlett, as we already know, into the company where Jensen Wang's power more work. This is Megaspeed International. It had been the focus of Commerce Department inquiries yesterday. into whether it had violated export controls and diverted some of the NVIDIA chips it had purchased to China in violation of U.S. rules. So that is something we're going to be tracking and trying to figure out whether that probe is expanding or accelerating, and including whether the U.S. is also going to take further steps when it comes to export controls, too.
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Speaker 8: Michael, what have we heard, if anything, from the company itself, specifically the board of directors?
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Speaker 6: Well, the board did put out that statement on Sunday saying that it stood by Jensen, but that it would be conducting its own independent investigation with the outside directors who were on there, along with a firm that it would hire to look into the allegations more closely. They said in their statement, though, that For now, they do not believe that any company secrets or any national security information was shared by Jensen during his interactions with Alice Wong, the executive from Megaspeed, with whom he had that relationship. We don't know, Paul, yet how long this investigation will take. The board hasn't commented since Sunday on it. But they will be under pressure to act or at least provide an update because just next week, a week from today, NVIDIA is scheduled to issue quarterly results. And typically on those calls, it's not just the chief financial officer, Colette Kress, who provides an update on the business. It's also Jensen Wong, too.
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Speaker 2: Yeah.
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Speaker 8: Yeah.
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Speaker 2: Exactly.
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Speaker 1: So everyone's going to be tuning into that.
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Speaker 5: And I feel like the actual results will be secondary to what he says about everything else. Very quickly, Michael, NVIDIA hasn't sold much, if any, high-end chips to China in a while because Beijing has banned its companies from being able to buy NVIDIA chips. But there are now questions of whether some of NVIDIA's Asian customers are somehow tied to the Chinese government. And I mean, are people talking about perhaps orders needing to be canceled because of that possible relationship?
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Speaker 6: We haven't seen any actual orders being canceled, but that is something that is under review by Congress and is whether the loophole that allows Chinese firms to use data centers with NVIDIA chips offshore, outside China, to access that computing power and develop their own models, whether that path to using NVIDIA chips needs to be cut off. Right now, NVIDIA can't sell its chips directly to China, but it can sell to neoclouds like Megaspeed that are based elsewhere, like Singapore, Malaysia, Japan, that offer computing power on a rental basis to companies like Alibaba and others that have used that computing power to develop their AI models. the ones that are challenging right now, OpenAI and Anthropic.
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Speaker 2: Stay with us.
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Speaker 9: More from Bloomberg Intelligence coming up after this.
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Speaker 4: You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube.
00:10:26
Speaker 8: We've still got some earnings coming out. We recently heard in the media space from Skydance. Remember, this is the Paramount and Warner Brothers Discovery and Skydance.
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Speaker 2: It's now called Skydance Corp. The ticker is S-K-Y-D.
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Speaker 1: That took me a while to get to.
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Speaker 10: Me too.
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Speaker 1: Because I kept putting in P-Sky and nothing was showing up.
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Speaker 2: Me too. Then I did find it. No bueno.
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Speaker 8: Stocks down 9% today. Down 40% year to date. They reported some numbers last night. And the
street's a little bit concerned about that for sure. Let's go to Geetha Ranganathan. She's the expert.
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Speaker 2: She is the Bloomberg Intelligence media analyst here. Skydance.
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Speaker 8: Geetha, what did we learn from, I think this is kind of the first earnings call. One of the first since these merged companies got together.
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Speaker 3: Yes, it is, Paul. So they closed their deal for Warner Brothers Discovery on October 6th. So this was their first quarter with the combined company. However, remember that the results were still for standalone Paramount. You know, if you actually looked at the results, they were pretty decent. So one of the things that Paramount or, you know, Skydance now, obviously David Ellison and his team have been trying to do is to show that, you know, whatever they had promised in terms of the standalone paramount numbers that they're able to deliver on. And they've actually done a pretty decent job with it. I think where the market is still extremely skeptical is that they have to be able to extend this, you know, model to a much broader enterprise with the Warner Brothers discovery assets. And that's going to be tough to do, especially when you have an $ 80 billion debt load.
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Speaker 1: Yeah, that, that, Every time we bring up Skydance, that's the first thing people ask about, you know, $ 80.
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Speaker 5: Billion debt load. What are they going to do to address that? One thing we know, they're going to try to bring in more revenue through the streaming business because Skydance says it would release a streaming bundle that includes both Paramount Plus and HBO Max services early next year. Do we presume that means higher prices, Geeta?
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Speaker 1: Great question, Scarlett.
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Speaker 3: So one thing that we've seen with the bundle, and I think Skydance is really taking a page out of the Disney playbook here, is that they do raise prices on the standalone products. If you want to buy Paramount Plus standalone, yes, you'll have to pay a higher price. If you want to buy HBO Max, again, you'll have to pay a pretty high price. But the bundle itself will be discounted. So if we just look at Disney as an example, the bundle costs roughly anywhere from about 35% to 45% less than versus if you were to take all those products separately. And not only is it more economical and obviously a better value proposition for the consumer, from the company standpoint, it actually helps in increasing engagement and it helps in reducing churn. And it really, I mean, at the end of the day, it really kind of speaks to the depth and the breadth of their assets. So you look at HBO, you have some great franchises, prestige television, as we would call it. And then you look at Paramount, they have some great entertainment and sports. They have NFL, they have a lot of the The marquee sports properties that, you know, Americans watch. And so that's good. And then add on, they have an ad supported service in Pluto, which also helps them. So, you know, they have access to a lot of those older TV shows and movies as well. So I think, yeah, this has the potential to be a really, really powerful product, Scarlett.
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Speaker 5: And Paul, you have to subscribe to the bundle because I know you are a big landman.
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Speaker 2: Yeah, absolutely.
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Speaker 8: Paramount Plus has got me. Yep, absolutely. A lot of that property programming I like. Hey, Keith, if I'm buying into the stock right here, a big part of it is this company delivering and maybe out delivering on cost synergies.
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Speaker 2: What's the story right now? How's the street thinking about that?
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Speaker 3: Yeah, cost synergy is obviously a big number. As you just pointed out, it's $ 6 billion, and they're saying that they're going to be able to achieve that over the next two to three years' time. I don't think achieving the cost synergies itself is the problem, Paul. As we've seen time and again, even with Warner Brothers Discovery itself, We saw David Zaslav promise a certain number and go well above and beyond that number. That wasn't the problem. The problem was that the underlying model, the business model, we saw deterioration much faster than anticipated. And I think that's what investors are really worried about with Paramount or with Skydance as well. Because ultimately, when you kind of look at the company, yes, streaming is big and has the potential to be big. But as we look at the model today, 70 percent of EBITDA is still coming from the structurally challenged linear TV business. And, you know, the question is, can streaming kind of offset those losses? And, well, the burden of proof is pretty high in this case.
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Speaker 9: Stay with us. More from Bloomberg Intelligence coming up after this.
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Speaker 4: You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube.
00:15:25
Speaker 1: There's a big, big release coming up on November 19th. It's GTA 6.
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Speaker 2: I don't know what that is.
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Speaker 5: I had to look it up. We've talked about this before. GTA 6 Global Grand Theft Auto.
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Speaker 2: Excuse me, not global. Grand Theft Auto.
00:15:39
Speaker 1: But it is a global franchise.
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Speaker 8: All right.
00:15:41
Speaker 6: Yeah.
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Speaker 5: On its own, this franchise is worth the same as the Star Wars movie franchise.
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Speaker 2: That's what they tell me.
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Speaker 6: Okay.
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Speaker 1: It's a big deal.
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Speaker 8: All right.
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Speaker 5: Nathan Naidoo is our Bloomberg Intelligence Analyst who covers the video game sector. And he joins us right now with more. He's our Tech Research Analyst joining us from London. Nathan, we've been talking about GTA 6 for
so long. The release is so widely anticipated. What does this mean in terms of the earnings impact for Take-Two, the company behind it?
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Speaker 10: So big, big release is an understatement, what you just said, because this is really more than a decade in the wait, right, 13 years. And like previously, players didn't have to wait 13 years for that, for a new installment in a franchise, to your question. What this means for Take-Two, so they just released results yesterday and today. We think the guidance held constant for the second time. The guidance was issued in May, and that's looking increasingly conservative to us because of the strong pre-order trends for GTA 6. In the CEO's own words, far exceed their initial expectations, unprecedented levels. And so that means it leaves room for upsides, depending on whether consensus estimates would catch up to what we think it would be the right range for GTA 6 sales. You know, management obviously retained guidance, but I think that might have baked inside.
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Speaker 2: Level of risk.
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Speaker 10: We can talk about that later, but the guidance is very conservative, and we think there's room for upside when GTA 6 actually launched. I think management just doesn't, and they actually explicitly say this, they don't want to claim success before it actually happened, which, you know, I guess makes sense.
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Speaker 8: So, I always, Nathan, being a former media analyst, I kind of liken the gaming business to kind of the movie business. It's a hit or miss kind of business, and But in the movies, it can be a huge hit and it could be a complete flop. Like, you just don't know. Is it different in the gaming business? Do you guys have a sense that Grand Theft Auto 6 is going.
00:17:51
Speaker 2: To be a winner?
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Speaker 10: Making hit games is definitely increasingly more difficult these days because there is so much more content, even before AI came to the scene. Now, with AI, making games become easier. Basically, any game, you can make a game. Whether or not you would like to play that, that's another question. But there's a lot of content, so attention becomes increasingly scarier. that makes hit games increasingly difficult even big ones to retain players and i think that's a key part of the questions to your questions whether this could be a flop but i think not because there's a lot of things that this game can piggyback on to throw you a stat the whole franchise has sold almost half a billion copies while you were talking just the fifth installment alone that's 235 million players or people who have bought a game, a GTA 5 game. So there's a lot of players that can be drawn back to this specific franchise. And also, there's a lot of content, right? GTA 6, if you think about it, is multiple games in one. There's a shooting element. There's a racing element. There's an action RPG element. It's multiple games in one. And there's like 80 hours of content there. just the main stories to go through. So there's a lot to do, and we think it's a very bullish view so far on how the game will perform. We are estimating 40 to 60 million unit sales just in the first year. And I think there are way crazier estimates out there, like 85 million units in the first 60 days, which, you know, it's not out there. It can be achieved, to be honest. If any game can achieve that, it's GTA 6.
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Speaker 4: This is the Bloomberg Intelligence Podcast, available on Apple, Spotify, and anywhere else you get your podcasts. Listen live each weekday, 10 a.m. to noon Eastern, on Bloomberg.com, the iHeartRadio app. app, TuneIn, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg Terminal.