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Bloomberg Audio Studios Podcasts, Radio news Welcome
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to our Bloomberg Television and radio audiences around the world for an interview with Netflix co CEO Ted Sarandos. And Ted, good morning to you. The less than straightforward question that everyone has of course is what happens next? But, but I wanted to put it to you like this. Does Netflix have the balance sheet, the sort of financing flexibility and the will really to amend, improve, boost its bid for Warner Brothers Discoveries Studios and streaming business if needed?
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Let me tell you, we feel very good about the position we're in right now. So we've done, we've done this, this process opened up. Warner Brothers Discovery determined that within their strategic best interest to sell these assets. We entered into a negotiation, the very, very clear bidding process that they laid out for us, which we followed and won that bid. I think in the alternative B Sky has gone, you know, missed every deadline. They've been taking nine runs of this bid and they risk, you know, they're not seemed to, they just don't accept this outcome. So what we've done here is we've given Warner Brothers Discovery a seven day window to get some clarity about what Paramount is offering for this company. I believe that it's important to have that clarity. I think it's important and that the Warner Brothers Discovery shareholders deserve to have that certainty and clarity about this deal.
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Now your stock is down more than 30% since you announced this deal. So you feel good about it, your shareholders, it's a little less clear. I know that, I've heard you say that that is because of uncertainty, but it went down basically as soon as you went into this. So I'm just wondering, is there a point at which it goes down so much that you and your fellow board members have to reconsider if this is the right path?
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Look, as, remember we run this company from the beginning. For the long term, we think this deal will have a positive impact on the business for the long term. Remember what we're doing in buying these assets is we've been creating original programming on Netflix for about a decade. They've been making original film series for about 100 years. They have incredible IP and we just happen to have a consumer model that can better maximize the returns on that ip. So I think it's a very, it's a great long term out, you know, long term outcome. I think there has been some headwind in the stock. There's been some headwind in the sector. There's been some headwind from because of the trade, which I think is ironic because I think I will be an amazing creator tool to actually make the entertainment business bigger and better than ever. So I do think those things have got to play out. When I said they don't like uncertainty, there's, you know, there's concern about bidding wars and all those things. And we have always been an incredibly disciplined buyer year and we will continue to be one year.
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Ted, on those headwinds you mentioned, you know, there are a portion of the Netflix investor base and the Warner Brothers Discovery investor base that kind of see this as defensive by you. And look at growth, right, you know, engagement growth in the second half of last year, such as it was. What would you say to those people that this is response to, to that growth rate that you've experienced more recently as opposed to something proactive and strategic?
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I think that they're incorrect. They're reading it wrong. I'd say that we, if you look at our, the year we just came out of in 2025, grew revenue 16%, we grew operating income by 30%. And our engagement did go up, went up a couple of billion hours. And I feel like, you know, there's engagement which is important. You know, view hours is one component of engagement and it's certainly one component of the value of engagement. We're very confident you saw that in our 26 guide, that we're going to continue to operate this business well and that this model is very much works and that this Warner Brothers acquisition is an accelerate to that model and it also future proves that model, you know, for decades to come.
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Ted, I appreciate there's a process here and thank you, you know, kind of earlier for outlining it right through February 23rd. But before that, you know, the section of the investor base that basically thinks Netflix should walk away, look at the regulatory road ahead. They look at the integration risk and then like what Netflix is a big global technology company as opposed to being something sort of micro focused on entertainment, Hollywood, right? And so, so, so answer those, those investors, right? You know, why, why are they wrong that actually there is a longer list of reasons to walk away than stick with it at this juncture?
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Well, this, this deal offers great value to the Warner Brothers Discovery shareholders. It offers great long term value to Netflix. We have a, we have a normal regulatory path ahead. There's nothing uniquely challenged about that process. We middle of it with the doj, with the European regulators, with regulators all over around the world, and with state's Attorney General. This is a process that we're very confident that we're going to navigate. And in Fact, I'd say again, when you look at these deals that are out there, I think people would like the status quo. And we have a long history of running the business well and pivoting when it's time to and adding new business lines to the business that people get upset about sometimes and then when we do it successfully, they're thrilled. I think advertising probably is the most recent example. Lie could be a more recent example. Some of our life sporting events could be a more recent example of things that have been pivots in the business that have gone on to grow the business very well and people are very happy about it. People don't like change, they don't like any degree of uncertainty sometimes. And any time there's a new deal, there is regulatory scrutiny, there is execution risk, all of those things. But we are highly confident that we can, we're going to bring this deal close and that we're going to successfully integrate the business. I think about it as the reason why we're all talking about these deals so much. This week we granted the seven day window to get some clarity about the Paramount deal because Paramount has been out spreading a lot of misinformation to shareholders into the markets and the regulators in ways that have run this narrative. Run the narrative is state of confusion. We're trying to say we'll take seven days and get some clarity because what we believe is what the Warner Brothers discovery board agrees with us on as well is that our deal is a superior deal. We believe it's good for them, know it's good for us and we are excited about getting it done.
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When you talk about clarity and certainty, you know one of the aspects of the Paramount deal that they have stressed is better and I think some of the Warner Brothers shareholders seem to agree or at least entertain it is, you know, they're offering to buy the whole company. They will just take it out. $30 a share. Warner Brothers doesn't have to proceed with a spin beforehand. What is your argument for why your more complex deal is for all those shareholders than just getting the cash tomorrow?
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This deal is not complicated at all. Is 2775 at plus the value of Discovery Global. By the way, it's the deal that they want. It is the deal that they asked for. Those, these are the assets that were for sale though. The more complex thing is buying the whole company. They do that, then you're buying these European sports networks. As you know, sports rights in Europe are incredibly highly regulated as is the television landscape which they'd be stepping themselves into. So I would argue that our deal is quite simple. 2775 per share the value of Discovery Global and which I think is an incredible asset. And. And they do. And they do too. That's why that they set the offer up this way. That's why when we were bidding we bid for the assets that were for sale.
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If Discovery Global is, is a great asset, I'm just wondering have you guys talked about just buying the whole company and doing the spin yourself?
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No. As you know we're. The linear broadcast business is not something that we're interested in but others are. And I think when I look at the business, particularly those European networks are not in decline the way that some of the way they are in the US So it is not of our interest but it's I'm sure of interest of many buyers.
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Ted, you are competing in a, in a politically sensitive media deal. There is reporting and we are in a time where the Ellison's are and their relationship to the Trump administration has been discussed. It's also reported of course that you met with the President I think on November 24th. How are you weighing that and assessing that in this scenario that relationship between Paramount's leadership and this administration?
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Look, I have spoke to the President about the state of the entertainment industry. We've had multiple conversations about how do we protect American jobs, how do we keep the entertainment industry healthy. What are those headwinds? What are those things that we're working on to try to keep production up in the United States. We are investing $1 billion into a new state of the art production facility at the old Fort Monmouth military base in New Jersey. Obviously the President is very keenly interested in entertainment and he's very interested in American industry and American jobs. So those are the conversations that we've had. I don't know. I don't know why the Ellison intimate that they have some direct line to the Department of Justice for clear, for faster path of clearance but I doubt that they do. This is a process that is being run by the Department of Justice. The President has been very clear on that. We've been very clear on that. The Department of justice published in 2023 the guidelines for mergers that they are following right now. So that's what's happening here. This is a business deal, not a, not a political deal.
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You're joining us on Bloomberg Television and radio. We're speaking to Netflix's co CEO Ted Sarandos. And Ted, last night Bloomberg News reported that the Justice Department and its attorneys have made contact with movie theaters, the industry, to try and understand what either outcome would mean for the movie theater business. I know that, that you actually have discussed this a little theatrical releases, just your latest thinking on that and what your pitch is to people on seats in movie theaters if you were to close your proposed deal.
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Yeah, look, it's a very important thing to look at and I think why the DOJ is having those conversations, those are all laid out in the 2023 merger guidelines to better understand the landscape. They're going to talk to competitors and suppliers and to better understand the landscape, including how it impacts adjacent businesses like the theatrical business. Now, our pitch is very simple because it's the truth, which is we're going to keep Warner Brothers running pretty much like they are today, releasing their movies in theaters for the traditional 45 day windows. And in fact, it's even quite better for theaters because now that we're going to be in that business and own a theatrical distribution entity, we're going to take some of the Netflix films and put them through that as well. So it's very likely that you'll have even more outcome of high quality films for the theaters if this deal goes through. Now remember, Paramount has got this kind of fantasy proposal of somehow they're going to go from the half a dozen or so movies they distributed last year to 30 movies a year, which is about 10 movies more than the healthy studios are making now. I, I don't think that's likely, but what I know is possible is very likely is that we're going to continue to operate that business largely as it is today, starting in the theaters, running through traditional windows, hitting HBO max, to the pay TV output deal, the output deals around the world. That's going to continue and it's going to be good for the theaters because they're going to have more. And by the way, I've been talking to them more about creative things that we do together, like we did the Stranger Things finale, which had thousands and thousands of sold out shows all over the country, or the K pop demon Hunter Sing along, which you know, energized the theaters on an otherwise very slow week. So we're excited about working together with the theaters to make that business healthy again as well. And I think that what they really need is more good movies and we're going to provide them for them.
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Now, we both know that, you know, as many times as you've made this commitment on the theaters, it seems that there's a certain contingent of the population that just struggles to Believe it. And I'm wondering. My sense is, and I've heard that both theaters and some of the trade unions in Hollywood have asked for sort of formal commitments on some things like level of production. Theatrical releases are. You will have kind of put those commitments in writing. And if not, why not?
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Lucas, let's be clear there. We don't. This is. This deal does not represent any concentration risk at all. So the remedy, those two would typically be remedies for a situation like that. According to Nielsen, we have 9% of the business. We're going to add HBO to that. We're going to have 10% of the TV business, which is the primary driver of this deal and of our business business. In the theatrical business, it's highly competitive. There's a lot of output that's going to go through there. The reason I'm not going to put in right, I wouldn't want to do this deal only to put ourselves at some bizarre competitive disadvantage down the road. And I've earned some of the skepticism about the theater business because I've said things about the state of the theater business. But I said that in the context of a business that we were not in. And we, and today we're. We own Warner Brothers. We own a theatrical distribution entity. And we're going to want to continue to invest against the success that they've had. They just, Pam and Mike just opened their ninth number one film at the box office, nine in a row. That's the kind of winning that we want to do with, with Warner Brothers and the theater owners.
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You mentioned hbo.
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Sorry to go back to what you said about the trade unions as well. I think it's very important that I would like to have the trade unions to support this deal on behalf of their membership. Because what's going to happen in the alternative of this deal? I know there's some people who believe, you know, maybe if this deal doesn't happen, there'll be no sale of Warner Brothers. This sale is going to happen. It's going to be Netflix or it's going to be Paramount. And if it's Paramount, they've told everybody what they're going to do. They're going to have six. They've said $6 billion in cuts, but they've also told everyone who they're borrowing the money from that they're going to delever the company from six or seven times down to two times in 18 months, which means $16 billion in cuts. So that's what the trade unions who represent the people who make Movies, writers, directors, producers, the crews of, you know. I see. And the Teamsters. They're going to be working in a business that's going to be $16 billion smaller even than the 3 billion that Paramount has already cut out of its own company. So you're talking about an enormous contraction of the business. And the trade unions, I think, should come out and come out and support this deal explicitly on behalf of their membership to protect employment and jobs.
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Now, I'm curious. You brought up hbo. And one of the big regulatory questions around this, you know, antitrust law depends on will prices go up for consumers? Is this bad for consumers? Are you going to offer HBO on a standalone basis going forward? And will you offer it for less than it is offered today?
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We will continue to offer it as a standalone unit. 80% of HBO Max subscribers in the United States have a Netflix subscription today. Actually closer to 85%. So I think what that says is this is a very complimentary business and we'll be able to put those business together and give those consumers a pretty steep discount. So that we're excited to do. And that's why I think this will be pro consumer, because I think consumers have already said these are complementary businesses that they today pay a 100% premium
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for Netflix Co CEO Ted Sarandos. We're grateful for your time. We covered a lot of ground. And of course, Bloomberg Screen Times Managing editor Lucas Shaw also over in Los Angeles.