This podcast is originally published by BBC as part of their Business Matters show. Find the original publication here: https://www.bbc.co.uk/programmes/w172yzrhkr95sgp
In a recent BBC podcast episode called “UK gatekeeps gaming merger,” host Devina Gupta discussed cloud gaming and the potential merger between Microsoft and Activision Blizzard with guests Tony Nash and Yoko Ishikura.
Nash, the Chief Economist at Complete Intelligence, believes that the concerns raised by regulators about the merger are unfounded. He believes that Microsoft’s decision to open access to its games on other platforms shows that there is no need to worry about the company’s potential dominance in the gaming market.
Nash also noted that there is no reason to believe that the merger would stifle innovation or harm the UK startup environment.
The podcast also discussed the confidence crisis in the US banking sector, with First Republic Bank facing investor concerns and depositor exits.
The show also touched on Disney suing Ron DeSantis and ageism in China.
Transcript
BBC
Hello and namaste. I’m Devina Gupta and you’re with Business Matters on the BBC World Service. I’m joining you from a brightly lit studio here in Saltford in the UK. And it’s 0106 GMT. And with me in the gallery are Hannah, Matt, Alex and Glenn. And thank you for your company at this hour. Wherever you’re joining us from, it’s a show where we connect with two guests from different sides of the world to talk about business stories that are shaping your world. So here’s what’s coming up on Business Matters. We have our guests from the US and Japan. And on the program today.
BBC
No one’s comfortable right now. They can’t really guarantee formally all the banks, but at the same time they know the reality is they don’t want to take the economy.
BBC
We take a look at how another US bank, First Republic, is now in a hot spot. It finds itself between a rock and a hard place, with many investors and depositors exiting and buyers not committing to take over. Will the US regulators finally step in? More on that in a bit, but let me get our guests in for this edition of Business Matters. We have Tony Nash, who’s the chief economist at Complete Intelligence in the US, joining us. Hi, Tony. How are you?
Tony
Hi. Good evening.
BBC
Good evening, Tony. So to get started, do you think age is just a number?
Tony
Oh, age? No, I think it’s very real. All right. Unfortunately it’s very real.
BBC
Yeah, it is very real. It’s about a deal that is not to be for now at least, because let me tell you, quote unquote. This is the big merger that the gaming industry has been waiting for. That is Microsoft to take over the game developer Activision Blizzard. Now, for those of you who are really online gamers, you would know about Call of Duty, World of Warcraft, Candy Crush, and these are the games that are developed by Activision Blizzard. And this deal is pegged at about $70 billion. But once again it stuck. Competition regulators around the world are looking at this deal and on Wednesday, the UK regulators have said it cannot go ahead.
BBC
Peter, be with me because I want to get our guests Tony and Yoko in as well, because what we’re talking about Tony’s, cloud gaming, which is sort of like the Netflix of gaming, the future that you could just order a game sitting at your home through that cloud gaming platform. But in the sense to the first part of what we’ve been talking with Peter about, what Brad Smith and also what Activision Blizzard’s chief communication officer has said, talking about reassessing our growth plans for the UK is what Activision Blizzard has said from the US. How are you looking at these developments? Because let’s not forget, even the US. Regulators are trying to assess this particular takeover bid.
Tony
Yeah, I think to be honest, I think it’s some probably well meaning government employees who don’t really understand the market. And I don’t know the quality of the CMA in the UK, but I suspect it’s that. The main item that I see is Microsoft has opened these games to other platforms and opened access to other platforms. So, honestly, I don’t understand why this is an issue. And I feel pretty confident that when Microsoft appeals, this will be passed. I mean, I’m not a Microsoft advocate or a shareholder or anything like that, but the more I read about this, the less I understand about why it’s been held up. This deal has even been passed in Japan, where some of the key competitors for Microsoft are. So I don’t understand why it would be held up in the UK.
Tony
I also don’t understand why this would say that innovation would be held up, because we have some pretty big tech companies in say, well, really all over, and there are still tech startups that start every day, every single day, and there are tech startups that succeed and fail every single day. So I just don’t understand how a deal like this would hold up innovation. Because if we look at the top video games in 2014, they were Nintendo games, and so if we look at ten years from now, if Microsoft has a hold on this for ten years, it’s possible that they don’t have top video games in ten years. I have no idea. So I don’t understand from many facets of the deal, I’m just not sure why it’s been held up.
BBC
But Tony, if I could come to you on this, how do you see this moving ahead from now for UK? Because I remember Rishi Sunang, the UK’s Prime Minister, has just recently said that it should be Unicorn Kingdom and he has had delegates going to Silicon Valley and talking up the benefits of moving to the United Kingdom to attract more startups.
Tony
Well, to be honest, I don’t necessarily see how this decision would affect the startup environment in the UK. These are two foreign companies getting approval to do a deal in the UK to access the UK market. So I hear people say that, or I’ve heard people say today that this would affect innovation in the UK. I just don’t think that that is even relevant. This is about big business and market share and the ability to transact in the UK. I don’t think it really has anything to do with innovation. I run a small artificial intelligence company and so this type of deal, it’s way too big for me as a startup to really even care about. Would I love to be bought by Microsoft? Absolutely. But do I think this deal affects my ability as a tech startup to operate? No, I don’t.
BBC
All right, Peter Moore, we’ll say thank you to you at this stage. But before you go, would you be playing Call of Duty? All right. I believe Peter’s left us. But are you a fan, Tony? Call of Duty or any of the video games?
Tony
I am not, but my kids are. Obviously, I was a different generation of games.
BBC
We’re all different generation of gamers. But it’s a big deal, big space to watch out for. And if you talk about generation, we’d carry on this discussion on the other side of Business Matters. Stay with us.
BBC
Welcome back. You’re with Business Matters. And I’m Devina Gupta, and in this half we have loads line up for you. We are talking about business stories shaping your world with our two guests from opposite sides of the world. We have Tony Nash, who’s Chief Economist at Complete Intelligence in the US. And we have Yoko Ishikura, who’s joining us from Japan. She is Professor Emiratus at the Japanese University Hithot Sparshi University, specializing in business strategy from Japan. So thank you, both of you, for being with us.
BBC
Let me get the story that we’ve been tracking through the day. First in, because we’ve been talking about the confidence crisis in the US banking sector. Another regional bank, First Republic, is now in a tough spot. It’s literally between a rock and a hard place because on one side, its investors have continued to dump its shares. They fear that this bank could be the next one to collapse after Silicon Valley Bank, which is another regional bank, collapsed earlier in March.
BBC
So bank shares fell over by 20% on Wednesday, slashing the market value of this bank below $1 billion for the first time. And on the other side, its depositors are exiting as well because there have been exit of about 100 billion dollar worth of deposits, which the bank claimed earlier this week. Now. The US. Regulators are refusing to step in for now. And Tony, I wanted to get you in first for this because how is this being seen, especially when it comes to the confidence of the banking sector in the US?
Tony
It’s crazy, right? When we saw Silicon Valley Bank collapse, I think there was a week where people were really nervous about these smaller regional banks. What we’ve seen since then is we’ve had regional banks in say, California or South Carolina or other places report their quarterly earnings and they’re okay. So I think the overall regional banking story is one where many of the union banks are fine. It’s not as bad as many people had worried. I think First Republic is a special case. They were particularly bad in their communication, so very poor communications to their depositors, to their shareholders and to regulators. And they would convey one message to depositors and then on the same day convey a contradictory message to investors. And of course, all that information is accessible and so that will get out very quickly. So First Republic, I think, had they communicated better, had they taken a few different steps, of course, there are loads of technical and financial issues with this. But had they communicated better, I think they would be in a better place today. But because they communicated so poorly, their depositors continued to leave. And you see what happened today when they at one point today, their shares were down 50%. They recovered a bit before the end of the day, but it’s really not going to end well for them.
BBC
Well, even as a lot of depositors leave the bank. I actually spoke with Tim McCarthy, who’s an investor and is still loyal to First Republic. He’s got money still in the bank.
Tim
They do a great job of really appealing to those that have money, to.
BBC
Be honest, for even First Republic Bank. Now, there are eleven large US banks that have come together to save it. They’ve injected about $30 billion. But the question is, will the US regulators now step in? Tony, what’s your assessment? What’s next now?
Tony
Yeah, I’m quite sure the US regulator will step in. It was funny when your guest said that there hadn’t been a bank run. 100 billion dollar drawdown on deposits of First Republic Bank. That is a bank run. So First Republic has already had a bank run. And so given their share price volatility, given the basic insolvency of the company, I have a high degree of confidence that they will be taken over by somebody else. First Republic cannot continue, or it doesn’t seem that they can continue under the management as it stands, because they couldn’t manage the risk that they had. It wasn’t a secret that the Fed was raising interest rates. And so these banks have very smart people, typically who work for them, who manage their risk, their portfolio risk, their holdings risk, their loans risk, and so on. So this was no secret. This was the best telegraph rate rise in history. And so, of course, the banks have to hold some duration, meaning some stuff at low interest rates, while they lend out at a different duration. But there are a number of activities that could have been taken for them to be in a better position and they just didn’t do it.
BBC
Absolutely. And as they say, lessons are to be learnt. But let’s move on to the other story that we are following, which is about Disney. And this one begins with happy endings, because whenever you think about Disney, there’s always this and they lived happily ever after, isn’t it? But what Disney is now looking at is a grim corporate reality, where Disney is fighting for its happily ever after for its own home turf in Florida. Because after a tumultuous year when its top management changed, its profits have been dented. It’s now locked in a legal fight for its Walt Disney Complex, a theme park and its headquarter in Florida. And today it has sued the elected Governor of the State Ron DeSantis, why? Matt Line, that’s BBC’s Mat lines explaining us what exactly has happened through Wednesday. But Tony, have you been to Disneyland?
Tony
A long time ago, when I was a kid, yes, actually. I was in Hong Kong Disney, a couple of times last decade.
BBC
Yeah, but Tony, here’s also the point that Disney has a special tax district. It enjoys special autonomy and privileges, as Matt was talking about, its own policing, its own waste management, and much more. It’s the highest tax paying company in the state. It employs over 75,000 people. But the crux of the argument also is, should private companies have such autonomy?
Tony
It’s a great question. And obviously at one time, the state of Florida thought it was a great idea because they wanted to attract the investment and the jobs. And I think what we had in the situation, regardless of the political issue, Disney got involved because their employees wanted them to get involved in this issue. But Disney as a functioning entity, should really get involved if the shareholders want them to get involved. And so Disney got involved in a political issue when probably they should have told their employees that as residents, Florida, they’re welcome to vote on those issues. Right? And so imagine if Disney came out in 2016 and said they’re pro Brexit. How would people in the UK feel about that? I mean, that’s a company acting as a political actor. So in Florida, Disney acted as a political actor in a way that wasn’t necessarily in its business interest. And this is where Ron DeSantis, who’s the governor, who the social aspect and the education in Florida, is part of his purview. And his voters obviously wanted that. He had just won a very one sided election in Florida, and he had a mandate to represent his constituents. And so he was representing his constituents in a certain way. Disney didn’t like that.
BBC
But how is it not playing out for Florida Governor Ron DeSantis, who’s also planning to be Republican presidential contender? Because a lot of people have been tweeting and they have been talking about social media, about what Disney has said, that this kind of move is anti business, anti Florida. That’s getting some traction.
Tony
Maybe it is, maybe it isn’t. I think things on social media oftentimes are really amplified. And so Twitter isn’t really life. I mean, the demographic of people on Twitter doesn’t represent society in general, so maybe it’s true. But again, imagine if Disney had been pro Brexit in 2016. Would people object to that? Maybe because it didn’t reflect at least a lot of people in, say, central London of what they wanted. And so the people in Florida support Ron DeSantis. Honestly, I don’t live in Florida, so I don’t really care about this issue. But I look at.
BBC
When you have other cities and other places like New Jersey now saying that, okay, come and set up the business here, set up your shop here, and shift your theme park here. It’s the major tourist attraction. It was also benefiting local businesses, then it’s something to think about, isn’t it?
Tony
Yeah. How many billions of dollars would Disney have to spend to move that theme park? And again, their shareholders would be very upset if they said, we’re going to shut down Disney World in Florida and we’re going to move to another state. Right. It’s a producing asset. It produces a lot of revenue every year. They’ve already put the investment in there. So shareholders would be pretty upset if they decided just to abandon because some of their employees didn’t like something that the governor was doing.
BBC
Well, let’s not forget that the US presidential race is around the corner. And I was actually speaking to legal attorney earlier from Florida, Richard, and he says that it may be a time tactic, a delaying tactic to get a resolution.
BBC
But let’s get on to the story that I’ve been really waiting for in Business Matters, and that’s basically about ageism, and this story is about China. And when you look at glossy advertising campaigns in the fashion world, you often see young faces in the spotlight, but not, it seems, in China, because a small online marketplace in China has been using women over the age of 60 in its latest campaign. And this is part of the brand’s social commerce initiative to recruit more senior citizens into their online advertising. Tony, how much of this debate is making way, especially as Joe Biden, who’s clearly the oldest American president, has now announced that he would be running for the second term? He’s 80 years old. And how much of this ageism debate is now making into the frontline of politics as well in the US.
Tony
I’m not sure. We have old people on TV all the time here, so I don’t know that it’s necessarily controversial. I lived in Asia for 15 years, and I did see a huge amount of young people in advertising in Asia because it reflected the demography of the economies. I think Japan, the US, other places, and Europe especially, have had older populations for a long time with the baby boomer brackets. So we’ve had older people kind of in prime positions in movies and ads for probably 15-20 years. So I’m not sure that it’s necessary, really, as big of an issue here as maybe it would be, say, in China.
BBC
All right, thank you so much, Tony, Deshonda and Yoko, for joining us on this edition of Business Matters. And if you’ve been listening, thank you for being with me at this hour. You can listen to business matters. Just search Business Matters wherever you get your podcast from and see you next time soon again. Namaste.