Speaker 1:
From the library of the New York stock exchange at the corner of Wall and Broad Streets in New York City, you're inside the ICE House, our podcast from Intercontinental Exchange on markets, leadership and vision and global business. The dream drivers that have made the NYSE an indispensable institution of global growth for over or 225 years. Each week, we feature stories of those who hatch plans, create jobs and harness the engine of capitalism right here, right now at the NYSE and at ICE exchanges and clearing houses around the world. And now welcome inside the ICE House. Here's your host, Josh King of Intercontinental Exchange.
Josh King:
In addition to making this show here at the New York Stock Exchange, I listen to a lot of podcasts. Every nightly network news show has a 19 minute podcast, which is all you need if you don't mind missing the edited packages with a well made up anchor, sitting behind the desk. I've heard John Skipper talk about DeZone on Peter Kafka's show. And I believe that live sports are probably the last thing that keeps me tethered to the full cable bundle. No matter how much of a discount Spectrum throws at me for four family phone lines. I'm throwing good money after bad. Case in point, my new England Patriots, I live in New York City and upstate New York, and I want to watch, there's 16 regular season games. So shoot me. The only way I can reasonably be assured that is NFL's Sunday ticket from Direct TV, a brand of AT&T that sets me back $293.94 a year. In addition to everything else I buy, which is a lot.
Josh King:
The thing is, beside national Sunday early and late games on CBS and Fox, the Sunday Night Game on NBC, the Monday Night Game on ESPN and the Thursday Night Game on the NFL network, most of the paths 16 games are available to me elsewhere and blacked out on my premium product. So what's a guy to do? The attention market is strained. There's a growing seemingly endless supply of digital audio and video content vying for the public's static demand for entertainment. A sign of this proliferation, besides all the ways I can watch the Patriots can be seen in the 523 scripted series in production, broadcast, cable and streaming networks in 2019, a twofold increase in less than a decade. Each of these shows needs to carve out or retain an audience from not just each other, but also from the sports offerings from DeZone, the raft of new SVOD subscription video on demand, the games that keeps my kids eyes glued to their iPhones.
Josh King:
And my favorite product, the Autumn app, which has professional readers voice all of the best long firm journalism at the same time, the articles are posted on the web instant gratification for a price. The backdrop to this escalating arms race stems partly from the acquisition of 20th, First Century Fox by Disney. And the on again combination of Viacom and CBS leaving 90% of the media in the United States concentrated in four companies. The big four representing the survivors of the country's legacy entertainment brands are now poised to compete with the disrupters that have come of age over the last two decades, such as Facebook, Amazon, Apple and Netflix, and entrance like DeZone. So we're witnessing a clash of the Titans to borrow a phrase from Aryeh Bourkoff, our guest today, and a leading banker in what he calls the digital economy and creative industries.
Josh King:
And maybe there's a little David and Goliath in there too. Aryeh believes that similar clashes will be seen across sectors and years of mergers and acquisitions have left only a few companies truly able to compete, he would know. Between 2012, the year he founded LionTree and the end of 2018, the firm advised on 39 media and entertainment companies M and A deals. You can do that math. Our conversation with Aryeh Bourkoff on the future of the media landscape, competing with the big banks and his career coming up right after this.
Speaker 3:
And now a word on ICE ETF Hub.
Speaker 4:
Across global markets, ETFs are flourishing and ETF assets now top $5.5 trillion yet a variety of protocols and lack of standardization mean the time is right to help fuel further growth. Now, new advancements can help simplify the process. We're working with the industry to create a centralized hub that connects participants and brings efficiencies to the primary market. ICE ETF Hubs, unified standards and protocols supports order entry across equity and fixed income ETFs for fixed income. The speed of custom basket facilitation's will increase with both parties using APIs, UI, and chat to assemble a mutually beneficial basket. Market efficiency will be enhanced by improved transparency, helping to boost the number of creation and redemption baskets assembled and underlying bonds traded. ICE ETF Hub brings new efficiencies to the primary trading process, fueling ongoing growth participation and market modernization.
Josh King:
Our guest today Aryeh Bourkoff is founder and CEO of LionTree LLC, an independent investment bank operating predominantly in the TMT space. TMT is such an old investment banker's term, he might call it the digital economy and creative services space and Aryeh should know. He was vice chairman and head of America's investment banking at UBS, where he oversaw investment banking across all sectors throughout the Americas and held a seat on UBS's global investment banking executive committee. He's a frequent media guest sharing his expertise and insight on the business of entertainment, media, and communications. His voice can be heard as the host of Kindred Cast, a leading podcast produced by Kindred Media and brought to whatever podcast network you're listening to this episode on by LionTree. Welcome Aryeh inside the ICE House and the New York Stock Exchange.
Aryeh Bourkoff:
Thank you so much for bringing me here. It is a true honor to be in downtown Manhattan in the Library of the New York Stock Exchange.
Josh King:
You just recorded an episode of Kindred Cast with the New York Stock Exchange's president Stacy Cunningham. I watched you guys interact. Stacy's doing most of the work, you're coming in with a little story, a little anecdote from your past, easier to be the host than the guest.
Aryeh Bourkoff:
Well, I enjoyed all, I mean, Stacy was inspiring because of the role that she's playing, but also such a great commentator in the state of the public markets and what companies are private, who we work with a lot can expect when they go public and how you go public. And so I think that's relevant for everybody. And it all goes back to how you allocate capital, how you think about the markets, where we're going as a country and the companies that represent her universe. I was fascinated by it.
Josh King:
You were finishing your conversation with her talking about some of the things that she likes to listen to, the content she's consumed over 2019, the books, the podcast. I touched on this avalanche of video content now available to the public in the intro, but there's also these 700,000 podcasts operating in the world today. Two podcast hosts are in the room right now, talking about the format on a podcast. It might be preaching to the choir, but what do you think the draw is for this format?
Aryeh Bourkoff:
It's really this conversation. I think people are longing for human connectivity. We've gone through a period of a lot of technology. And some of that leaves us feeling a little bit lonely. And this is an intimate conversation, even though we just met each other, because I think we're in each other's ears, we're having a conversation, you're a companion, you're a friend. Also, it's a bit of a departure from the video streaming platforms and reading a book you can literally have in your ear, a book in audio while you're doing other things. I find it to be part of a conversation. And I think that's what we're looking for in the world right now, being part of a broader conversation.
Aryeh Bourkoff:
There's this feeling of togetherness, this PRI decor of fighting for things that you believe in and talking about them. And I think podcasting has hit a chord at that exact time. All media is interesting. Everything right now has to have a message as I call the reification of the world. If you have a story and you have a message and you've something you want to say, and it doesn't travel, it doesn't exist. So we're trying to find different ways to reach people. And it gets crowded, which puts a lot more pressure on quality and conversation and impact. And I think that's what people are really trying to get to right now.
Josh King:
I mean, talking about feeling a little bit lonely and that yearn for companionship that so many people have, if you think about being conscious and awake 18 hours a day, so much of our days are now more productive because if the kids and the wife decide to go to bed at 10:30 at night, but you still have two hours of putzing around, I can do it with Aryeh Bourkoff.
Aryeh Bourkoff:
Well of those 18 waking hours, which in my case may be slightly more than that. But in those 18 waking hours, the average U.S. adult spends 11 of those hours with media. So 11 hours a day, and that's not growing that much, actually. That's a big number and it's relatively static. Everyone's competing for those 11 hours. And so you see now video streaming platforms, those audio podcasts and gaming and all other forms of leisure experiences, concerts, music, all competing for those 11 hours. And so you're getting a lot of choice as a consumer, which is amazing. It's a renaissance. You mentioned over 520 scripted shows now, right? That number was a hundred, probably five years ago. So it is a real renaissance and you're getting choice, but it also puts a lot more emphasis on what you're going to say.
Aryeh Bourkoff:
And I think the other part about podcasts are interesting is that you get to listen in on someone else's conversation. So a lot of podcasts are fun because you're hearing a conversation that two people are having that you're not really part of. And you get to like pop in on different people's conversations. Imagine going through or a house and just like listening to other people's conversations in different rooms. Not because you're eavesdropping, but because they're interesting, you're learning and you're curious. That I think is a lot of what media is, but people will pop in and pop out. It's not necessarily long form as much as it used to be anymore.
Josh King:
Yeah, I was mentioning AT&T's DIRECTV product in your year end letter, talked about John Stankey's line in one of those podcasts, in which he says, "We're just a little company looking for our one hour of those 11 hours." I mean, these guys are really competing for this very large pie, but with so many slices.
Aryeh Bourkoff:
And the tongue in cheek phrase that John Stankey's using there is that we're just a small company. I mean, AT&T is one of the hallmarks of American industry and has huge amount of cash flow. And they're just trying to make a dent in a very crowded marketplace.
Josh King:
The appendix of your year end letter included a list of podcasts you're listening to. I saw you included the Bill Simmons podcast from The Ringer. The Ringer is currently airing the Book of Basketball 2.0, are you listening to that as well?
Aryeh Bourkoff:
I am. I am.
Josh King:
So, in addition to the tie in with media 2.0, the endeavors, the sequel to his first and only paper book, Aryeh, seven years ago, you were the executive producer of the documentary narrated by Merl Streep about the end of the book called Out of Print. Is that what we're seeing now with his and other authors, such as Michael Lewis, Malcolm Gladwell, seeming to leave the paper behind in favor of more immersive multimedia experiences?
Aryeh Bourkoff:
I would say Steve Jiles, backing up for a minute, defined media as the creation of content distributed over a technology. And in the documentary out of Print, Jeff Bezos actually starts it off by saying that the book was a technology. The book is a technology.
Josh King:
Gutenberg.
Aryeh Bourkoff:
Yeah, exactly. Right. And he's featured in the documentary. Newspapers were technology. So I think the medium has evolved, right? It's direct to consumer, it was broadcast, its cable channels, that keeps changing but the creation of content. Having to rise the service and reaching an audience is the hallmark. So I think Out of Print talks about the collapse of the library system and the emergence of a direct to consumer model where consumers have the choice. And that is absolutely the case. Now consumers have the power, it's their world, it's, it's not the creator's world. Although, the brands today will have a lot more resonance with the consumer and reaching them directly than ever before. If you want to get on Spotify, you want to get on Facebook, you want to get on Amazon, Apple, this podcast, you will reach people directly, very quickly point to multi-point. So the message better be good and better be relevant.
Josh King:
The director of Out of Print was Vivienne Roumani, who in addition to her subject expertise running digitization projects for the Library of Congress in UC Berkeley, it's also your mom. This is actually your second documentary together with your first having a more personal topic. I want hear just a little clip of it.
Speaker 6:
[foreign language 00:13:12]. You know, anytime you have a community that is erased, it's a tragedy, not only for the community, but for humanity. You know, it's a loss for everybody. We were born in Libya. This was where our home was. This was where our parents were born, where their parents were born. And Jews have been in Libya for centuries, if not millennials.
Aryeh Bourkoff:
Wow.
Josh King:
How did the idea of preserving your family's personal history evolve into this professionally narrated and produced documentary?
Aryeh Bourkoff:
Well, first I have to say, I feel like I'm in the movie, Jerry McGuire right now and Cuba Gooding Jr. was interviewed and they just revealed his contract on air and he got all...
Josh King:
Show me the money.
Aryeh Bourkoff:
He started kvelling. So that was a real surprise, I really am blown away that you play that. My mother's family is from Benghazi Libya, one of the last Jews of Libya, none exist today. I was born in California, first generation American. And you bring at my mother who's obviously a special person in my life, today is actually her 70th birthday.
Josh King:
Wow. Happy birthday.
Aryeh Bourkoff:
Thank you. So we're celebrating for her and you really brought it home. So I really appreciate that. Look, that project started and these are passion projects for me. I'm not a film maker. I'm not an expert and I have no plans to make any other documentaries. These were passion projects, one more personal than the other. It really is about connecting generations, I'm a big believer in understanding where you came from to better position where we're going. And I'm just a vessel in the middle of that experiment and that arc.
Aryeh Bourkoff:
So when my mother grew up saying that this is where we came from, this place called Libya, that was not familiar to me whatsoever. And then she said, "There are no Jews left in Libya." I just wanted to understand why, while she was in the place where she could interview our family and people that she grew up with to tell the story and to have it documented properly. And then the story became interesting. And we found a professional narrator in Isabella Rossellini for that one. And I went to Tribeca, which I was very grateful to Jane Rosenthal and obviously the group at Tribeca. And people now have enjoyed it and I'm just touched by it.
Josh King:
It wasn't just your mom's family. Your father's family were also refugees. Right?
Aryeh Bourkoff:
My father was born in Tel Aviv, but grew up in Poland and Austria, respectively for his father and mother and then moved to Washington Heights, New York.
Josh King:
How did this whole clan find its way out to California?
Aryeh Bourkoff:
Well, my father went to Brooklyn Tech for high school and then to MIT. And my mother went... Most of her family actually went to Italy because Libya was an Italian colony. But her family led by her older brother, Maurice were students and scholars and came to Boston to study. My mother ended up at Simmons College, met my father, they married. And then my father went to Berkeley to get his PhD. And that's where I was born. And when they were very young, it was great. We eventually made our way back to the east coast because they were all in academia. And I was the first person in my family that actually went into business. They thought I was crazy.
Josh King:
Yeah. So how did this collection of Pols and Libyans influence this kid to get into finance?
Aryeh Bourkoff:
Well, I remember there was a mug. I mean, you got me this great mug for being a guest here on the inside of the ICE House mug. So I appreciate this gift. But there was a mug that I had growing up that said coming from an immigrant family full of academics saying, I have a BA, I have a BS, I have an MBA, I have a JD, now, all I need is a J-O-B. And I took that to heart. Just let's get the job and start working and put all this stuff in practice.
Josh King:
I think one of your first jobs was at Smith Barney back in the mid 1990s, it was around 1996. I'm working at the White House, working for president Clinton. We decided to do something inventive with this bill signing. We're not going to do it in the Oval Office or the East Room or the Rose Garden. We're going to bring it to Library of Congress and we're going to sign it with vice president Gore, looking over president Clinton's shoulder. And we're not going to use a pen and quill and ink, we're going to use a computer stylist on a pad. It's the Telecommunications Act of 1996, the first major overhaul of the space since FDR created the FCC in 1934. When that was past, you were just a year into working for Allen Ginsburg, a guy you were talking about with Stacy earlier at Smith Barney covering the space. How did you find your way into covering the sector that would define your career beside Ginsburg's interest in food and restaurants?
Aryeh Bourkoff:
Well, Allen Ginsburg not to be confused with the poet, really is and was a Sivan. He wrote for Rolling Stone Magazine, was a trained lawyer, grew up working at Drexel Burnham in Beverly Hills, running research with Mitch Julis, for Michael Milken. And then after Drexel folded in 91, they all dispersed around Wall Street and Allen went to Smith Barney. I came to New York, looking for a job, didn't know anything, was looking for someone to train me and pay me at the same time, which was, I thought a great deal. And I stumbled upon Allen Ginsburg who ran the research department and was building it up at Smith Barney. He himself was working for a guy named Jim Zelter who ran the Smith Barney High Yield Group overall and a good friend to this day. And Allen and I are still in touch.
Aryeh Bourkoff:
And Allen basically said that I'm going to be the first junior person in the group and I'm going to help him. And he focused on these industries, which were core to the high yield business. The media industries, as Stacy was talking about, not only had dual classes of stock, but had a lot of debt, the telecom companies had a lot of debt and also a lot of innovation. I remember at that time you had these wireless cable companies that we used to talk about being a paradoxical. You have wireless and cable, but effectively you have all kinds of competition, upstarts, regulation, debt and a lot of uncertainty. A company called Dish, which is run by Charlie Ergen had negative cash flow. So you got to analyze companies and Stacy mentioned something really interesting that part of the reason she loves her job is because she gets to enable companies to realize their hopes and dreams by getting to the capital markets of something being public.
Aryeh Bourkoff:
That's how I justify my job to my mother. When I first got the job and saying, I come from an immigrant family, I want to do well by them. And I'm getting into industry not academics, what am I doing for the world? And I said, well, the high yield bond business allows companies through this financing that didn't otherwise exist, to get capital that they wouldn't otherwise you have before. And therefore it allows new companies to emerge that would never be there. And CEOs and founders dreams realized. And that is exactly how I presented, the same way Stacy said it about her role. And I found that so interesting and gratifying. And Allen helped me think about that.
Aryeh Bourkoff:
And I remember one day there was a major event that happened where a fire burned down the Opera House in Florence. And I was so focused on my job every single morning, just trying to do right, wearing a suit tie. I walked in the morning and Allen said, "Did you read the Wall Street Journal?" And I said, "Yeah, I think so, what deal did I miss? What happened? Did I miss a number?" He goes, "No, no, no, no. Forget the numbers." He goes, "the Opera House burned down in Florence. You didn't read that?" And I said, "I didn't even think to read that." And he said, "you're going to have to be a little bit more open mind about this." And I remember my first boss who actually ran the Smith Barney group above Jim Zelter was Jamie Diamond. And he had a new hire lunch, every month for all the new hires, he was a great boss and still is to this day.
Aryeh Bourkoff:
And he had all this new recruits from across Smith Barney. And he sit around the table and go and he's asked everyone, "If you could have dinner with one person who's living tonight, who would it be?" And I was last and everyone kept saying, Alan Greenspan, they had Ronald Reagan and all these great people. And they got to me and they said, What do you think Aryeh?" And I said, "Paul Simon." He said, "Paul Simon?" I said, yeah. I said, "I just think his lyrics are amazing. I love to sit and have dinner with him and learn about it." And I learned that from Allen and I was just curious, and it was okay to be yourself, even though it doesn't fit the mold of a Wall Street guy.
Josh King:
Well, it's so fascinating you say that because you're talking about the opera house burning down and Allen saying, did you read that article Aryeh? And I read your year-end letter. And it starts out with this meditation on this beautiful ancient tile mosaic, plus ultra. And later on in the letter, you're talking about this sculpture, Umberto Boccioni's unique forms of continuity and space. Not only are you this banker, but you are this art historian. You're finding this meshing of the two.
Aryeh Bourkoff:
I appreciate that. I mean, blues ultra means something beyond. So it's a great way to start a letter talking about the year ahead, the decade ahead in my mind and trying to point people to something beyond that, you can't really pinpoint. Because we all try to be precise with our predictions, but we're going to be generally a little right but precisely wrong. And so I just find it life. I mean, at the end of the day, I take my job very seriously. I love finance. I love capital structures, things that you would normally think of as being boring, I find there to be a lot of romance and those deals and those structures and those companies and the way they run. But they're all run by an individual at that helm of the company, no matter how many numbers there are that exist in the capital structure and the projections, they're all run by an individual.
Aryeh Bourkoff:
And those individuals have normal dreams and anxieties and psychology and objectives. And that's where I enjoy the juxtaposition of both those things. To do that, you have to be learning all the time, otherwise, how could you be an advisor if you're not curious? To be curious, you have to be aware and awareness and consciousness is something that I take very seriously because we only live one life and it's not going to last a long time, unfortunately. And so while you're here, we lean in, I want to lean into it and I want to have different experiences and learn new things. And frankly it could inspire, thought and business building and Goodwill. I mean, being part of the world's conversation and trying to change things. And my definition of happiness for me is by my presence, hopefully with all humility, having the pie grow, I don't like zero sum game where you and I lose or vice versa. I want the pie to grow. I'd like for LionTree's, presence in particular in this world to lead to something different and something bigger than existed before we got here.
Josh King:
You mentioned Jamie diamond. And we all sort of wait in wrapped anticipation for his annual letter in his annual report. And we've come to think of him and his team as a very strong communicator. But as I read your letter and see how you weave those in with your podcasts too Aryeh, how long does this thing take for you and how much heart and soul do you put into it?
Aryeh Bourkoff:
Well, I'm glad you asked that because I started writing it at the end of the summer, end of August. And it goes with various levels of intensity all the way until we published at the end of December. And at the beginning, I just wanted to freestyle what my thoughts are and put them down. And they're seemingly contradictory thoughts that start coming out of my head at the beginning. And I'm fine with that. I want to see how different things stay with me and coexist and intensify. And then thematics emerge by putting them all down, but I'm not too loyal to one concept early in the process. I'm very flexible. So this concept of scale players in motion is the one that stayed with me the entire time. And it's effectively looking at the part of the market cycle.
Aryeh Bourkoff:
I like to write the letter, talking to myself and my own goals. Like you have to practice what you preach. The company overall and its employees, the industry we focus on like these creative industries, the media industry, technology industry, the markets and hopefully has some message to the world. If I can have the same thought, apply to all those constituents at the same time and in a selfless way, then I've done my job. And so scale players in motion to me last year's theme was a work in progress. I very much felt like we were still trying to figure it out, always trying to figure it out. But scale players in motion means you've had this wave of consolidation. LionTree itself has participated in 500 billion dollars of transactions since we started, it's been a whirlwind run. It's still going, the markets are healthy.
Aryeh Bourkoff:
All markets are open. IPO markets, debt markets, M&A markets are all open. So what are we left with? All the disruption has led to these scale players, this fragmentation leading to consolidation. And you pretty much know the ones that are set. Facebook, Amazon, Comcast, Apple, AT&T, Disney. They're not likely to merge with each other. So you kind of know the players now. But they're not fully formed Viacom, CBS. I mean, that's not the be all, end all, even though we participate in that merger, there has to be more so they have to be in motion still.
Josh King:
So we talk about scale players in motion, and you've been watching these players for a long time. You've had a lot of the people that are responsible for them on your podcast. Like Sherry Redstone. We were talking about her earlier. But going back to sort of the beginning before LionTress's was formed, you were this highly regarded analyst across a variety of asset classes in this sector, in TMT. What drove you to set out this new path for advising on deals and how did your background differentiate from what other investment bankers are doing at the time?
Aryeh Bourkoff:
Well, I look at it as one career, even though I'm happy to take risk and learn new things along the way. And the reason I say it's one career is because I feel like from day one, I decided to build a specialty, which means at the beginning, I knew nothing and I was comfortable with that, but I have to start somewhere. But I mean, versus being a generalist, I wanted to be a specialist, meaning if I could start with these industries, media, technology, communications and so on, the consumer industries, the people I would meet, the companies I would know, the fundamentals I would learn would stay with me for the rest of my life. And I would just keep building over time.
Aryeh Bourkoff:
That knowledge would allow me then to take risk in other ways, I said, let's start with high yield research, really interesting learning then go to equity research, then go to investment banking, then go to management and then start from scratch as a company, focusing only on that and trying to build one for sustainability and durability. So the more expertise you have in one area and security you feel in one area, you should therefore have enough risk appetite to try new things. And for me, it was all about different products and learning how the whole system works, geographies, capital structure, deals, markets, et cetera. And then at the end of the day, it's about being commercial about things. I felt like research was interesting and it is interesting. But there are two ways to do research are speed. When you look at a piece of information that comes out, the first one is what you're going to read. The second one, not so interesting anymore.
Aryeh Bourkoff:
And the second way to do it is depth. So if you're going to be second, you may as well wait and have some in depth research that adds some value. And I found that the markets were moving very fast and I didn't really like the research by the minute I liked the research by thematics, building a position over time, thinking about long term investing. And that led me naturally to advice. And I remember one day when I was trying to think about what I want to do, I called the trading desk after we made a call. And I said, so we put a buy in this company stock, the stock's up, the volume's up, investors are making money, they're happy.
Aryeh Bourkoff:
And I called the traders on the trade desk at UBS and said, "How are we doing?" I said, "What do you mean?" I said, "Well, are we making money also?" And they said, "You think that we get paid for your ideas on the trading floor?" I said, "Yeah, isn't that the relationship we're supposed to have?" He says, "No, no, no, no. People trade with us based on execution and cost and speed. They don't trade based on your idea of one company." I said, so there's no real relationship between what I'm saying and what you're doing on the trading floor?" They said, "Not really." I said, "This is not a good dynamic." I said, "So maybe the best thing to do actually to go private, advise companies, not publish what I'm saying." And UBS was incredible to me because they allowed me to explore these thoughts and to try new things. And so I went to investment banking and I was able to advise companies privately about whether they should be doing over a long period of time.
Aryeh Bourkoff:
And I always related it back to stock price, even though I wasn't publishing research because at the end of the day, every company CEO cares about their stock price. Whether they say, they care about it at the moment or over the long term, it is their metric. And so most CEOs don't spend enough time understanding that metric and why stocks trade the way they do. And that was at the time, my expertise. So I said, let me focus on that. So I would go to CEOs and say, your stocks trading here, my research hat on says, it should trade much higher. Let's figure out how we get from here to there, which is what you're going to care about. And we'll do those things based on M&A and investments and the way you talk to your investors and your capital markets activity, et cetera. And so that set up a strategic conversation, which I really loved and still love about banking. That is really like a partnership with your clients.
Josh King:
We'll get into some of the unique ways in which you have built this partnership with your clients at LionTree and the business that you built that helps these clients complete their deals. But it's often cited that LionTree was modeled more like some of the tech companies that you've worked on versus what a traditional advisory firm looks like. You and I were talking about how we both read Steve Schwartzman's book, What it Takes in 2019, when it came out.
Aryeh Bourkoff:
I listened to it.
Josh King:
One of the big aspects of the book is, he's so successful, Lehman brothers, he and Pete Peterson basically are not allowed to kind of create the company they want to. And they basically walk out the door with their bags and set up in this office with like a secretary and a couple pieces of rented furniture and 30,000 square feet of other empty space. What was that moment when you said like, this is the way we want to model this company LionTree?
Aryeh Bourkoff:
Well, it was a thought process that wasn't decided on a dime and a lot of other boutiques that have emerged very successfully have been run by and are run by phenomenal bankers that have great relationships and want to stay in independent investment banking advice, just from a smaller, more nimble platform. That was part of our thought process. And I say our thought process was myself and my partner, Ehren Stenzler who ran the U.S. M&A execution business. We're not like each other at all, but in highly complimentary in the sense that he is a really strong execution banker, doing things that most people don't want to do in contract work, execution, negotiations, et cetera. So we were very complimentary in opening and closing deals. But I thought that we could build something beyond just independent advice that clearly is cherished. But once you're aligned with your clients, then you should be there holistically solving problems.
Aryeh Bourkoff:
So that could be IPO advisory and we do that. That could be lending to growth technology companies. We could look at investing alongside of our clients when we're invited in certain situations. So that's a real merchant bank. But I want it to be flexible. And that's why I mentioned about the technology comparison is being logic based, being flexible in the way you want to build and being fast about it. I know that we're not an incumbent right now. So we have to be looking around the corner, making sure we do things the right way that are structurally and foundationally sound. So hopefully future employees, future generations will benefit from the strong foundation of the company.
Aryeh Bourkoff:
We put a lot into legal, finance, technology as three pillars of investment in the infrastructure all the time. Because I will say to you, if I want to change our product from doing M&A deals to making Starbucks coffee, you should be able to pivot because our foundation is strong and our systems and controls are strong from day one. So I'm trying to really build something that has a long term dynamic. But as a lot of my friends said, stop with that grandiose promising the future. One good deal after another, and things will work out. And that's very much how we think about it. But again, I think this industry is so dynamic and ever changing that, having advice with real friendship and learning together and hopefully coming through and building these platforms together will build a firm and allow us to be part of it for a long time.
Josh King:
After the break Aryeh and I turn our attention to investing in the future and his outlook for 2020, that's right after this.
Speaker 3:
And now a word from Ron Delia, CEO of Amcor N-Y-S-E ticker A-M-C-R.
Speaker 7:
Today is a really big day for Amcor. We've been around for 160 years. After so much time, takes the passion and dedication of our people around the world and it takes resilience. And we have lots of that at Amcor. Well, our aspiration is to be the leading global packaging company. And that means winning for our customers, our people, our investors, and the environment. We have a big pledge around sustainability. We really hope to change the world as we look forward. Amcor, now listed on the New York Stock Exchange.
Josh King:
Welcome back, before the break Aryeh Bourkoff, founder and CEO of LionTree LLC and I were discussing his career and the formation of his company. We discussed earlier that you were here at the New York Stock Exchange to record this podcast with our president at NYSE president Stacy Cunningham. Why did you decide to launch Kindred Media?
Aryeh Bourkoff:
If our job, every single day is to understand the media industry, why not put our money where our mouth is, or why not walk the walk and not just talk the talk and experiment. So when we saw podcasting coming, we said, instead of just advising companies on podcast transactions, I mean, transactions are good, certainly the way we make a living. But really more interested in building and the relationship and the arc, not just the moment in time, why don't try one ourself. And people in journalism would always try to reach out and get to the firm and get to me when they could and say like, what deal are you working on? And of course I could never talk about that. I mean, I always say like, it's like asking Tom Brady while he is in the middle of a huddle. I'm sure you're a Patrons fan. Yeah?
Josh King:
Mm-hmm (affirmative).
Aryeh Bourkoff:
So Tom Brady, when he is in the huddle to walk over to the sidelines and say, here's the plan, I'm going to run. I would say, just talk to me after the game, when the deal's over, then ask away. So I always try to point people towards more of the arc of the story, where we came from, where we're going, not the moment in time, which I felt like it was all about just breaking news and our interest were not aligned at all because we have to be incredibly discreet and that's the way we operate. So I want to tell stories on the podcast and have CEOs help give us their story, as well as some insight about where we're going in the world as this industry complete changes over. And talking to Stacy is the same thing. Talking to Stacy is about, everyone's wondering, what is happening with the IPO markets?
Aryeh Bourkoff:
Is it open? Is it closed? What kind of companies can go public? Companies are listening to her thinking, should I go public now? Should I wait for later? What is her insight? She's the perfect person to illuminate those thoughts. I want to know about that narrative arc, that thesis, not about analyzing one company's IPO today, because I really want to elongate the storyline and it's media. And it's really interesting to hear. And I think people learn while they can also have a utility around the podcast, which I think is a great use of time for people.
Josh King:
Kindred Media recently partnered with Global Citizen to launch powering the movement. The podcast had its inaugural five episode season that featured the stories of the finalist for the Cisco Youth Leadership Award. Are the plans to continue to build out the offerings from Kindred Media? And are you exploring other partnership models, or is this just Aryeh's brainstorm about the various sort of media deals that he's fascinated by?
Aryeh Bourkoff:
Josh, it's very much not the Aryeh show or the Aryeh brainstorm. Kindred is built now to help other companies. So we will showcase what it could look like by having our own podcast and having other forms of media that we will build as a representation, what it could look like. But Kindred Media and our podcast, but all of our media properties and expertise are really designed to white label for others. So we love the Global Citizens partnership because we love what they're doing and obviously changing the world. If we could be part of empowering their media strategy, that's great. I would think of it more like an AWS model that Amazon has at a very early stage of helping other companies with their media strategies and doing it for them, but behind the scenes. And we may invest alongside of them as well, or just power their services. And that's most of it. So what you hear in kinder cast or what I do is just showing proof of concept at the end of the day. But we're building a business, we're building a media...
Josh King:
Which is sort of what Alex Bloomberg did with Gimlet from the very beginning too, right?
Aryeh Bourkoff:
That's right.
Josh King:
So is there a unified strategy between Kindred Media and LionTree's partnership with Music and Ocean Outdoor?
Aryeh Bourkoff:
Everything's integrated in a sense of understanding where the industry's going and then building products around it or investments around it. So LionTree is a private company that focuses on building deal flow around media and technology and communications companies and consumer industries around the world. Those deals could end up being mergers and acquisitions, which play into our emphasis, which our advisory business, or we could invest in companies as a minority alongside of our clients, or we can be building concentrated positions like we have in Ocean where we're one of the shareholders.
Aryeh Bourkoff:
I'm actually co-chair of the board of Ocean. It's a company listed on the London Stock Exchange and it's a digital outdoor advertising company. And we're a significant investor. Kindred Media is really about the companies that we want to really highlight or help with their media strategies. But it's the same industry. The concentrated point is, we focus on one industry. That industry happens to be a major part of the marketplace because tech takes us into FinTech and healthcare tech and insurance tech and payment. But it's really about understanding broadcast and technology and media and the consumer industries.
Josh King:
Ocean Outdoor was acquired by Ocelot Partners, which is a special purpose acquisition company, otherwise known as a spec. We know them well here at the New York Stock Exchange that LionTree started. And you and Stacy were talking about this a lot when you were talking to her for Kindred Cast. But do you see specs and direct listings as vehicles that will continue need to grow in usage and change how capital's access to the public markets?
Aryeh Bourkoff:
I love innovation and finance. Financial services is perhaps the most mature industry, certainly in our country, maybe the world. And a lot of people could say, there's nothing new under the sun. But that's not how it happened with the high yield bond business. It's not how it happens with direct listings. It's not how it happens with private financing's happening in a much more plentiful way or spec. So I like innovation in finance and certainly like ETFs is a good example of that as well. And I think we have to be really attuned to what's at the crest of the wave and what's around the corner in financial services, innovation. And I think that's going to completely change. AI is going to be a big part of it. So I think specs are here to stay but like Stacy said, discernment and quality has to rise to the surface.
Aryeh Bourkoff:
So not everyone can raise a spec. Once you have a spec, not everyone can do a deal. Once you have a deal, not everyone can execute. So doing it the right way is something that I think we're all learning and refining. And we're very fortunate to have had access to this back market in committed capital. We raised about 450 million dollars and we're putting it to work. And we used Ocelot to do the Ocean deal and I'm sure we'll do others in this way and in other ways. But I think we have to look carefully about what makes a company, a strong public company versus a private company. And private equity has a lot of capital out there, family offices have a lot of capital out there. Everyone has a lot of capital. So therefore what's a good public company. What's a good private company? And can you sustain that? And that's what we're trying to refine and perfect at the right levels.
Josh King:
Talking about some of your other deals Aryeh, what defines a strong public company? What are deals that the street is ready for? Our conversation has so far concentrated mostly on LionTree and your work in the media space. But you were talking to Stacy about this as well. LionTree partners was also tapped by Sir Richard Branson to help get his space business, additional funding. I want to hear a little clip.
Speaker 8:
Only 500 people have ever been to space. And that's including the Chinese, the Americans, the Russians, and we have the capability of putting hundreds of thousands of people in the space in the years to come. And that's ridiculously exciting. And so here we are on the floor of the New York Stock Exchange, launching the first spaceship company. And the resources we get from this are going to enable us to do wondrous things.
Josh King:
Ridiculously exciting, Aryeh. Virgin Galactic hired LionTree. Why was a speck the right option for the space exploration company?
Aryeh Bourkoff:
Well, Sir Richard Branson is quite the innovator and with brand expertise, as well. It's always an experience to work with him because it's not only about the product and the execution of it, but it's also about how you brand it. I think that what Stacy talked about earlier was the democratization and the existing democratization of the IPO markets that people can buy a share in stock. And while there are risk factors that are clear around space and space travel in particular, giving the general populace a chance to invest in that thesis is what I think what the public markets are about saying, here's the thematic, here's the thesis, here are the risk factors, here are the disclosures, but does everyone want to have a stake in this? It's not just for the few.
Aryeh Bourkoff:
And unlike other space companies or NASA where you can't invest in it right now, Virgin Galactic wanted to be a place that people could all have a share in the space theme. And it will go through trials and tribulations and ups and downs and hopefully all with safety and security as a priority. But at the end of the day, it's not just about the business, it's about looking at the trends and having a stake in the outcome with Richard Branson.
Josh King:
Space travel the way Branson defines it, the way that spaceport is designed and it feels, it's closer to entertainment than just typical transportation. Where does entertainment fit into the platform space, notably with the increased legalization of gambling and e-gaming?
Aryeh Bourkoff:
Well, first of all, space itself is an experience. So I...
Josh King:
Are you on the list?
Aryeh Bourkoff:
I'm on the list although Richard told me that I'm not yet fit enough to be there. So I have some work to do before I can join him on the space travel. But yeah, I mean, who wouldn't want that selfie, with the earth behind you?
Josh King:
Yeah. I've seen it.
Aryeh Bourkoff:
I mean, it'd be amazing for Instagram. I think I'd close my Instagram account after that picture. But I think doing it with respect to the environment, doing it with respect to carbon emissions and understanding exactly how it's supposed to happen. Ultimately this is not just a travel experience, but also an entertainment experience. It can imagine concerts happening from space that are broadcast here, even watching any launch is fascinating. Now they're in New Mexico, but I went when they were trialing in the Mojave desert and it is fascinating to watch, but he's always been that way.
Aryeh Bourkoff:
I think experiences overall is an important part of the media industry. So you could sit at home and you could watch television, great content. We could do podcasting, incredible content, but going to a concert, going to a museum, going to an event, having an experience is seared in your memory and unique and hard to replicate through technology. So I like experiences a lot as a business case, like companies like Live Nation and other experiences companies, but even private ones, Virgin Galactic, the public one very interesting trend I think it's going to continue.
Josh King:
I mean, you did a lightning round as you wrapped up the Kindred Cast with Stacy. So as we wrap up your Aryeh, I want to get your updated take on just a number quick topics that you discussed in the media and in your year end letter for 2019. You've highlighted this year as the start of a decade of the clash of the Titans. So quickly, what do you think so far has the upper hand and the near term, the established legacy brands or the disruptors?
Aryeh Bourkoff:
I think they're all disruptors. I think they all have an opportunity to win right now. I no longer think that the technology platforms in Silicon Valley are the defined winner. I think that companies that have brought themselves to a position of scale, let's say like a Disney can also win. And so I think that gap has narrowed and the playing field is not level by any stretch because certainly the Facebook's and Apple's and Amazon's world have customers around the globe that are easily accessible by any brand or content creator that's never been seen before.
Aryeh Bourkoff:
There's no middleman strategy, no gatekeeper model there. And maybe there has to be frankly, a little bit more regulation around that even self-regulation. But I think the media companies with the scale they have now are positioned to succeed and reach those customers directly. But I wouldn't count out the broadband players, the access players. We talk about Charter or Comcast. I mean, having access and having speeds and having spectrum access and having capacity and infrastructure support will also be critical. So I think everyone is in a position to now win. I think there are no structural impediments. It's now up to the CEOs and the boards and the investor appetite to see which ones will go faster and take some real risks.
Josh King:
I was reading an article in Wired the other day on the new startup from Jeffrey Katzenberg and Meg Whitman. He was desperate to hire Meg because eCommerce is so important to his new venture of these short bite size videos that are going to play on mobile. What role is eCommerce going to play in the digital economy space in the overall market?
Aryeh Bourkoff:
I'm so glad you asked that question because we try to look for things that are so easy to understand that you have to invest in them. Let's say, I told you a stock hit zero. You'd be buying, no risk. So things like that. So the fact that like the percentage of retail sales that come from eCommerce are still well below 50%, maybe I think around 20% last time I checked. That number will eclipse 50% in the foreseeable future in our lifetime, for sure. You can bank on it. And so I like those kinds of tailwind trends where it's easy to understand.
Aryeh Bourkoff:
And so then how do you invest in that? How do you play that? How do you advise companies around that? So Facebook has Facebook marketplaces. There are companies like QVC or Curate that are reaching the consumer, obviously Amazon, Shopify, how do you connect brand to the customers in a efficient way, without a wholesale model, but a retail eCommerce model? And that has to be worked on, it's a major theme. It's complicated because businesses are in transition, just like the music business was in transition, the TV business was in transition, the newspaper business was in transition, the eCommerce retail brand business is in transition. And there's only one huge player in Amazon. There will be others emerging.
Josh King:
I think I heard this on one of your other podcasts, there's still over a hundred streaming platforms. Do you expect that will reduce overtime due to M&A and churn?
Aryeh Bourkoff:
Absolutely. I mean, I think companies are here today, gone tomorrow. I mean, remember DirecTV now that was the fanfare a year ago. And others have eclipsed them. And so I think a lot of them and by the way, in favor of other strategies at AT&T like HBO Max. So I think that a lot of the screening platforms will churn away and there will be a handful of winners, both subscription services, like the Netflix and free services like the Pluto's of the world. I think you'll see both.
Josh King:
Looking at the economy as we begin this year, Aryeh a recent study by Deloitte found that 97% of CFOs forecast a slow down or a recession in 2020, you've talked earlier in our conversation about the market being healthy. Will that in itself potentially drive some recession risk?
Aryeh Bourkoff:
Well, I think there's a difference between recession, contraction and slow down. Slowing growth is inevitable. There's a gravitational pull towards the mean and slowing growth, I'm very comfortable with. I'm even comfortable with some level of contraction, the economy shrinks. If there's a recession, I mean, the average recession lasts less than 18 months. So hold your breath. If there's a recession, it'll be over. And we play into another cycle. I embrace those dynamics. Right now, though, interest rates, corporate taxation and inflation are at trough levels.
Aryeh Bourkoff:
Those are really interesting metrics to track if those stay where they are at low levels. I don't see the recession. I see cost of capital staying low, I see markets are open and business activity is strong, boardroom confidence is still very strong. Now what changes that slope on the way up of those metrics, risk factors, we can't foresee a political shock, things that we can't predict. So there's a heightened level of risk around those dynamics with a slow growth environment. But I think that's still a healthy business environment. And I think we'll pick our spots and have plenty to do. And we are busy and our pipeline is strong. But if there is a slow down and those things happen, we will recalibrate, we'll pivot and we'll revisit it. Hopefully we're playing through a cycle here.
Josh King:
You mentioned political shock. We are weeks away from the Iowa Caucus and the beginning of our presidential campaign cycle, where the votes actually are cast. And they matter, you're talking about these metrics, staying at low levels, which would auger for an incumbent being in a strong position heading into November. I want you to touch as we wrap up on why you've referred to this year's political climate as the direct to consumer presidential election and the ramifications you think that might have in the process.
Aryeh Bourkoff:
So much of everything we do has a media component. Politics is no exception. Political candidates are trying to transmit a message, that's media. That message has to be broadcast to the electorate, whether it's local or it's national or in between state by state. So that is a media strategy. The campaign managers of the political race have to be media ad spending experts right now. Where do you put dollars? Where's it efficient? What's the biggest return. What's the biggest bang for your buck? Do you get the votes? So there's no difference between selling ads against the mass audience and selling votes, getting votes against the mass audience. It's the same underlying plumbing and skillset. So reaching that consumer directly and having impact has to not only be policy driven and be logic based, but also has to be heartfelt and bringing together people in a movement that galvanizes the voter base, that's media, that's brand affinity.
Aryeh Bourkoff:
Do you like the Patriots? Do you like the Red Sox? That's media. You have a brand affinity for those sports teams and that probably works more than anything. Do have the same thing for the candidates? Maybe not yet. And so that's the panacea you're trying to get to. The markets like certainty. The closer we get to the election, there will be a heightened level of uncertainty around what the outcome's going to look like. But at the end of the day, even when we were all surprised, or a lot of people were surprised by Trump's victory last time, the market took a nose dive overnight and recovered. If you look at the countries like Argentina, when there was a surprise victory against Macri, the market took a nose dive and now recovered. So I think you ultimately go back to fundamentals. I try to look at fundamental metrics to drive investment decisions, future cash flow streams, big picture events around fundamentals, sometimes technical, but I think political moves are going to be factors that are not going to affect our deal flow.
Josh King:
And the Patriots won't be on the Super Bowl, but there will be a spot bought in purchased by media buyers from Michael Bloomberg and Donald Trump. So we will keep our eye on the ad meters and see which gets a better response from the viewership in the world's most watched television event.
Aryeh Bourkoff:
And at the very least, it's entertaining and it's reality television.
Josh King:
Thanks so much for joining us inside the ICE House.
Aryeh Bourkoff:
Thanks Josh. I appreciate it.
Josh King:
That's our conversation for this week. Our guest was Aryeh Bourkoff, founder and CEO of LionTree LLC and podcast host of Kindred Cast. If you like what you heard, please rate us on iTunes so other folks know where to find us. And if you've got a comment or a question, you'd like one of our experts to tackle on a future show, email us at [email protected] or tweet at us at Icehouse podcast. Our show is produced by Pete Ash with production assistance from Ken Able and Ian Wolf. I'm Josh King, your host signing off from the Library of the New York Stock Exchange. Thanks for listening. Talk to you next week.
Speaker 1:
Information contained in this podcast was obtained in part from publicly available sources and not independently verified. Neither ICE nor is affiliates, make any representations or warranties, express or implied as to the accuracy or completeness of the information and do not sponsor, approve or endorse any of the content hearing. All of which is presented solely for informational and educational purposes. Nothing here in constitution offered to sell a solicitation of an offer to buy any security or a recommendation of any security or trading practice. Some portions of the proceeding conversation may have been edited for the purpose of length or clarity.
