Musk’s SpaceX to Pay $17 Billion for EchoStar Spectrum

23:19Caroline Hyde:And then also been growing the team in a lot of other ways as well. Well, a lot of other ways. My understanding, Scott, is that two historic or either participating investors in this round have decided to join you full time. That's right. Who are they and why? Yeah, yeah. So we had Christian Lawless from Conversion Capital who came and joined us full time. And then Emily Cohen from NEO. So both of those were early investors in us, supported us all the way through and have made the decision to come join us full time, which we're extremely excited about. There's a lot to clarify and unpack here.

23:52Caroline Hyde:My understanding is that when you close the windsurf deal, revenues basically doubled overall. And enterprise, combined enterprise ARR is running at 30 percent just in that period. But you said something a minute ago. Well, we've been very disciplined. You founded this company in late 2023, correct? Yeah, end of 23, start of 24. And you've spent, burned, call it what you were, about$20 million in that period of time. That's right. Why do you need$400 million? Yeah, yeah. No, it's a great question. And to be clear, I think Devin was already growing exponentially up until this deal. Windsurf was growing exponentially itself up until this deal.

24:26Caroline Hyde:We got to bring the products together and the businesses together and do that. I think from our perspective, as the game gets bigger and bigger and bigger, to Caroline's point, It's very valuable to have the capital to be able to do much larger work in model training or to be able to grow and blitz scale our business much faster. You call it a game. The game gets bigger. And it is about mission focus right now, Scott. So many people have so many questions about the culture of building startups right here, right now. It does feel world changing. But Scott, I put it to you when you're talking about routinely being in the office through the weekend, doing some of your best work late at night, many of us literally living where we work.

25:05How do you keep people engaged? Sure, within your talent pool, you probably have to lose carers in some way. You have to lose those who have other physical and mental passions. But when you're asking people to develop the latest and greatest product that maybe replaces them themselves, how do you keep them grinding?

25:22Caroline Hyde:Yeah, yeah. You know, I think on the one hand, of course, I think there's all of the incentives and the benefits. And, you know, it's very important for everyone at the company to be an owner of the company and to hold equity in the company. I actually think the most important piece of it, to be honest, is, you know, for many of us on the team, of course, are programming nerds ourselves. And because of that, I think teaching an AI how to program is maybe the funnest thing that we could be working on and spending our time on. And the truth is a lot of it is very, very self-directed for us. The passion, Scott Wu.

25:51We love having you on to talk about it. And the fundraise, congratulations, co-founder and CEO of Cognition there.

26:02Caroline Hyde:Welcome back to Bloomberg Tech. I want to get back to that deal between Echo Star and SpaceX, who are buying Spectrum licenses from Echo Star. So the stock's up about 16 % in the session, right? I showed that two-day chart to show the jump. On August 26th, the stock had jumped almost 90 % because AT &T is also in the market to buy Spectrum licenses. This is a stock that's trading at all-time highs. We focus very much on the SpaceX portion at the start of the show, if you're just joining us, Caro. But for EchoStar, this is a company that's got itself out of a bit of trouble by doing this transaction.

26:37And the bond market signaling it too for EchoStar. But Ed, let's dig in more to Musk Inc. And the recent board proposed$1 trillion potential pay package being put to investors, an unprecedented incentive in corporate America, of course. We're going to bring in Professor Shane Goodwin. He is Executive Director of SMU Corporate Governance Initiative. You were brought in by Tesla's special committee to advise it on corporate governance matter, including, and I'm quoting from Tesla's proxy here, satisfaction of fiduciary duties under Texas law. Take us to Texas law, Shane. How is that different versus Delaware, particularly when you're thinking about more predictable corporate governance framework, as it said in the proxy?

27:18No, absolutely. First of all, thank you very much for having me. It's a delight to see you again. With respect to Texas law versus Delaware, the one thing I do want to make clear for everyone is this pay package, which is actually a pay for performance. It's not a pay for promises. And that's one of the things I want to make clear. There are a lot of headlines right now, but this package as it's designed today actually works in Texas clearly, but it works in really every other state, including Delaware, as everyone talks about the differences. We can get into some of the details, but it really is a pay for performance package and not a pay for promises.

27:56And some of those performances are, interestingly, around a million robots, a million robo-taxis. But actually, it's still about getting 20 million actual EVs on the road chain. How much is there a focus still in the bread and butter of what Tesla is, which is an EV maker? Well, that's what it is today. And obviously, as everyone knows, and something that both Elon and the rest of the company and the board have talked about, They're at a critical inflection point today, moving from a traditional EV manufacturer into a world that's with AI, robotics, energy transformation. And as that master plan for clearly demonstrated, this is about sustainable abundance.

28:36And this was the right time to actually make this decision today. This is about timing and responsibility. It's certainly not reckless to make a decision today to keep the leadership and vision of Elon. And that's exactly what the board and obviously the special committee determined.

28:54Caroline Hyde:Professor Goodwin, the board addressed Musk's political activity and wrote in the proxy it had secured assurances that that activity would wind down. Taking into account the shareholder initiated proposal to invest in XAI, the board appears prepared to allow Elon Musk to continue to have responsibility across a number of companies at the same time. How much was that discussed, the split focus as leader of a number of entities? No, it's a great question. Look, this is not a new topic. Obviously, everyone has known that Elon's had a lot of other ventures and interests. When I say interests, before he even came to Tesla, he was at SpaceX.

29:38So this is not new. What I can tell you, what I have observed myself, and this is something from being inside and watching it, the audit committee that has a related transaction oversight, as well as what the board and obviously the special committee thought through very extensively is, how do we harness everything that is great that Elon brings to the table? And then how can we actually work together as we move and transition Tesla from this EV manufacturer, which is a world class, and moving that now to an AI focused robotics and energy sustainable abundance company? And so this is thought about very extensively and it has actually been addressed throughout this whole process.

30:19Caroline Hyde:This committee, the board committee met with Musk 10 times. and in the course of the 300 pages, a negotiation plays out, right, where Musk is able to say, well, here are my terms. How typical, atypical is that, given that the big package is atypical? And what did you advise the board on allowing Musk to come back and say, here is what I want in return for what you want? Well, no, you're absolutely correct, but there is definitely a negotiation that goes between a board and a CEO on any of these topics. And what informs my view and my decision is it's not just today as the corporate executive director for our SMU's Corporate Governance Initiative.

31:05It was over 25 years of investment banking. I actually spent time in the boardrooms with these companies advising them on M &A transactions. Today, I'm also a board member. I'm also an investor, but more importantly, as wearing the hat as a professor and teacher, if you will, I actually teach on these topics all the time. And this is a very important topic that comes up as far as CEO compensation. How do you retain, motivate, and incentivize your management team to align with shareholder interests? And that's fundamental here. And that's exactly the process they undertook. What I can tell you is that they had discussions with Elon throughout the process, but any deliberations and any thoughtfulness that went in, including all the alternatives.

31:51Now, the alternatives were all detailed in the proxy. Those were all done within the special committee and then brought to the board. But it's a very typical process to have board members engage with their CEOs to understand what their vision is first. And that was very clear. We need to understand what the CEOs and management team's vision is. And then how do we align that to our shareholders? Interestingly, of course, on the board is Elon Musk, his brother, Kimball Musk, too. They recused themselves when it came to putting forward this proxy to the investor base. But the 2018 pay package, it was challenged, it was overturned because of so-called conflicts of interest.

32:31What safeguards have you in this time, Shane, to push back on any cynicism around it? Sure. And there are going to be some critics, to be sure. But this was actually thought about with an address, the 2018 Delaware considerations. This has a fully informed, disinterested special committee. Both Robin Denholm and Kathleen Wilson-Thompson were not only viewed as disinterested by the board when they formed the special committee, but McDermott, led by Wilson Chu and Joanna Lynn, actually conducted their own separate disinterested. And not only at the time of when this was occurred back in February, but everywhere through and up until today, and I've seen all the files and seen all the questionnaires, that is a very important point.

33:17The second point is that they acquired and hired engaged independent advisors. And what I mean by that are accounting firms, valuation firms, compensation companies, and then also in the case for me, a governance to discuss about the implications around that. So this was thought through within contemplation what happened. It It was a seven and a half month process. It did include, as you already talked about, Elon's vision, but he was excluded from all the deliberations.

33:49Caroline Hyde:Professor Goodwin, a question from our audience actually submitted to you, if I may. Across the operational and financial targets and requirements, why include the EBITDA goal? Were you involved in that? I wasn't necessarily involved with certainly picking out any of the operational targets. That was the special committee working directly with the company. There needs to be an alignment to be sure between what operational goals and what that will actually translate on financial performance. But what is clear is there are market capital targets all the way up to eight and a half trillion dollars.

34:28But also you have to meet operational targets as well. And obviously, we talked about that. That includes robotics, the Omnibus, and then also the target you mentioned about EBITDA. That's extremely critical to make sure there's an alignment between operational performance and also performance in the performance of the stock. Shane, you advise on corporate governance. You sit on boards. You're also a teacher, a lecturer, a professor. How extraordinary is this one key pay package offering when you teach about it? Well, I do think that the headlines obviously of a trillion catches the attention for sure.

35:08But what I would point out, though, is that maybe the headlines chase those numbers, but this plan chases results. And as I mentioned, there's no pay unless there's performance. So if there are no results, there are no votes and there's no payout. So what I would point people to is to say this trillion, I would focus on seven and a half trillion dollars of performance of generation that the shareholders are going to receive and obviously alignment for Elon Musk along the way and the rest of the management team as well.

35:41Caroline Hyde:Shane Goodwin, executive director at SMU Corporate Governance Initiative and an advisor to Tesla's board and the committee that did that compensation package. Thank you very much.

35:57Caroline Hyde:Shares of Roblox, basically flat now. They've been markedly higher after a big moment for the company. Analysts have been raising their price targets for the stock because Roblox just held its developers conference. And it really reinforced its growth prospects. It's a lot to say that Roblox's CEO, Dave Buzuki, is with us here in San Francisco. Roblox moments. Now, I don't know necessarily you put too much stock into the headline of what an analyst says, but there are analysts out there saying that this is potentially transformational for engagement. So let's start with Roblox moments. What is it and why so important?

36:32Yeah, so thank you. Coming off a great developer conference and coming off, you know, reiterating our audacious goal of getting 10 % of all gaming running on Roblox. Look, we're looking for ways that developers can share and people can find their amazing experiences. A lot of people go onto social media. Roblox Moments is right inside Roblox. It allows users to capture a great moment, like at the bottom of a roller coaster or when you have something really amazing happen. And turn that into a short little video that other people can watch. What's really exciting about Roblox Moments, if you really like what you're seeing, you can click on it and jump directly into a Roblox game.

37:13So it's 100 % Roblox. It's fun to watch. And you find great new stuff.

37:18Caroline Hyde:Dave, we've talked about this idea in the past. Is it a competition for eyeballs with the likes of TikTok? Or is it something different? You know, gamers, actually people playing the games, go to Twitch and YouTube. This goes back to the creator. It's slightly different. There's a really interesting angle to hear in that anyone on Roblox can make a Roblox moment, ultimately. And also a lot of the creators, whether we're playing miniature golf or something else, are going to have the capability to let you automatically take a clip of your favorite thing, like a hole in one. So we're hoping individual users on Roblox can make amazing moments.

37:54Other people can watch them and then find the miniature golf game. A developers conference is exactly about the creators, Dave. And you offer them these moments, you offer them new AI improvements, new tools, ultimately ways to thrive. The take rate for the content creators at the moment, Dave. Talk us through why you're recompensing them even more. Yeah, thank you. You know, long term, we've shared we want to grow bookings faster than our employee costs or our COGS or infra costs. And we want to take that remaining cash and as much as possible distribute it transparently directly to the creators.

38:29So arguably the top applause at our developer conference was for the first time in six years, we increased the dev X rate or the percent that our creators take home. Today, for every Robux they're earning, they're earning 8.5 % more than they used to. And as you correctly know, we introduced a pile of new AI capability that we can talk about as well. Yeah. What goes on behind that AI capability? How much are you having to think through, get the right talent in place, and what is it that it allows Roblox to really harness? Yeah, rolling the clock back, we became an AI shop over four years ago, and over the last four years have developed over 400 AI models.

39:12So text translation, safety, voice filtering, text filtering, all of that. What's really exciting is we have a vision not just of using AI for safety, civility or for creating games, but AI should be live inside of every experience. And so we were demoing live 3D experiences where people were creating vehicles on the fly by talking about them, where in the past it was very hard for many of us to create vehicles. So we would say for any form of creativity, fashion, vehicles, we're going to have more people creating in Roblox experiences.

39:48Caroline Hyde:Dave, when you bring all these people together in San Jose, what were the pieces of feedback you got from the developer community, good or bad, that either surprise you and you think, I've got to go and act on that now with the team? When people think about building a high-tech company and with us this really audacious goal, could we have 10 % of all the gaming running on Roblox, RPGs, auto racing, sports, all of that? Interestingly enough, the creators really want raw scale, raw performance, raw realism. They're looking, as we design this gaming platform in the cloud, can it be bigger? Can it be better?

40:25So in addition to the DevEx rate and the economics, some of the biggest applause was really around hardcore technical features that support ultimately photorealism and scale.

40:35Caroline Hyde:Part of that is that use, engagement, the data on engagement for August is looking strong. And that might carry through for the rest of the year. We've talked about this before, and it's worth repeating. You have had Friday nights and Saturday nights where the servers are melting. How are you dealing with that? Yeah, we like the servers to melt. That's obviously a good thing, not a bad thing. Last year, our peak concurrency around this time was 11 million people playing Roblox at the same time. Two weeks ago, there were over 45 million people playing Roblox at the same time. And this was a coordinated event.

41:12We like it. A lot of the creators of the top games all had events at the same time to try to melt our servers. What's beautiful about our architecture is in addition to our primary focus, like we build our own data centers, we have great cloud partners. And our cloud partners now can come online for two or three hours on a Saturday. And we can burst into this 45 million concurrency. So it's a really great problem to all these creators try to stress our system. Briefly, a tougher problem has been safety, Dave, and you've been leaning into that with AI, as you just articulated. Still about, what is it, 40 percent of your users are under 13s.

41:50You've been making changes, particularly about estimates of user ages and check-ins. Dave, how is that being received by developers and by countries like the Middle East in particular of late? I'd highlight we have a history of leaning in before law or legislation, for example. California age appropriate design code. We leaned in on that because we were already doing it. Last week, we announced a somewhat bold and audacious vision to lead the industry in using facial age estimation, ID estimation, and other tools to know the age of everyone approximately on our platform who's using communication, and also to use that to maybe adjust a bit who communicates with who.

42:31The key I'd like to highlight is this sits on top of everything else we do, which is filtering all text, filtering all voice, and also not allowing image sharing or video sharing on the platform. We think it's going to set a standard that other social media messaging and comms products will look into following. Dave Buzuki, love having you on. Thanks for talking us through it. Founder, CEO of Roblox. Appreciate the time. Now coming up, let's talk Apple. It's about to launch its new iPhone 17 Air tomorrow. Will it live up to the hype? That's next. This is Bloomberg Tech.

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45:35apple's biggest product launch of the year it's tomorrow the company which has fallen behind in the generative AI race, shall we say, will show off its new iPhone 17 for more on what we can expect from the most chief global consumer tech correspondent, Mark Gurman. Mark, you always have it before we told it tomorrow. What are you most excited about?

45:52Caroline Hyde:Yeah, I'm excited about the new iPhone 17 Pro line. Personally, I think that the new design on the back looks pretty cool. I think the camera upgrades are pretty substantial, probably the most substantial in the history of the product. And for Apple, that is what is going to drive sales is those new Pro bottles. They're going to heavily market and feature this new iPhone 17 Air, so to speak, which is this much slimmed down phone. It's about a third thinner than the iPhones of today. But I still think for Apple's revenue purposes, it's the Pro phones that are going to be the big driver here. Mark, I really appreciated how you set the scene for Air in your power on.

46:30Caroline Hyde:You compared it to the launch of Mac Air, right? My first MacBook was like 2010 MacBook Pro, at the time a big old chunky thing. At first, that was a difficult thing for Apple, and with time and innovation, things improved. Explain the pathway you see for the Air going forward. Well, it's the same as the MacBook Air pathway, right? It came out in 2008. It had some things that worked well. The screen was full-sized, the keyboard was full-sized, it was a nice product with a multi-touch trackpad, the first in the industry, but it was too expensive, it was too slow, and the battery life wasn't great.

47:08Caroline Hyde:The iPhone Air is going to be very similar. It's going to have a breakthrough design with its thinness. It's going to have great flagship features like a 6.6-inch screen with 120Hz refresh rate, but it's going to have limitations on its camera and its battery. Over time, you'll see the MacBook Air transition play out as the iPhone Air transition. So you'll see ultimately the pro phones get thinner, get lighter, get more processor heavy and get better cameras. And so this is a peak of the future. It's just your beta testing what's really to come here with something that ultimately will be a little bit subpar compared to Apple's other models.

47:45Many would say perhaps all of this so-called innovation, it really is innovative, but compare it to foldable phones and compare it to generative AI use cases at Google and competitors. How are you expecting this one to stack up?

47:59Caroline Hyde:Well, if you take two iPhone Airs side by side and you put some tape in the middle, maybe some glue, there's your foldable phone because that's basically what an extra foldable phone is going to be like, right? This is to prove out the concept of making a panel as thin as possible, slimming down the battery. And so this is, you know, Apple testing. You know, Apple has much higher volumes than any of these other companies that have foldable phones that we've been talking about, right? And so they kind of need to test these things in the wild. They need to test their manufacturing capabilities. they need to engineer these things earlier on to make sure when they do release the foldable next year, it's at that Apple quality level.

48:34Caroline Hyde:And Apple, at the end of the day, is a hardware company and they're doubling down on what they're good at and how they make their money. And so this is going to be primarily a hardware showcase. You're not going to see a whole lot of new AI features. They may refer to things as AI, but ultimately this is about the products. Bloomberg's Mark Gurman, thank you. And Bloomberg Tech will be live from Apple's event tomorrow. Tune in for some great conversations before, during, and after. That does it for this edition, though, of Bloomberg Tech, Caro. Yeah, we can catch up. Don't forget to check in on the podcast.

49:05You can find it on the terminal as well as online on Apple, Spotify, and iHeart. A big week to come. Don't miss out. This is Bloomberg Tech.

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