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Resilience isn't just about bouncing back, it's about being ready. And when the threat comes, you hold back the chaos. Learn more@cohesity.com Resilience with stays under $250 a night, Vrbo makes it easy to celebrate sweater weather. You could book a cabin, stay with leaf views for days, or a brownstone in a city where festivals are just a walk away.
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Or a lakeside home with a fire.
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Pit for cozy nights with friends. Or if you're not a sweater person, we can call it corduroy weather. More flexible and with stays under $250 a night, you can book a home that suits your exact needs. Book now@vrbo.com introducing the all new Adobe Acrobat Studio now with AI powered PDF spaces do more with PDFs than you ever thought possible. Need AI to turn 100 pages of market research into 5 insights with a click. Do that with Acrobat. Need templates for a sales proposal that'll close that deal. Do that with Acrobat. Need an AI specialist to tailor the tone of your market report to sound real smart in real time. Do that with the all new Adobe Acrobat Studio. Learn more@adobe.com Dothatwith Acrobat.
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Bloomberg Audio Studios Podcasts Radio News.
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Bloomberg Tech is live from coast to.
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Coast with Caroline Hyde in New York and Ed Ludlow in San Francisco.
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This is Bloomberg Tech. Coming up, Paramount making a hostile bid for Warner Brothers Discovery just days after the company agreed to a deal with Netflix.
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Plus, President Trump wants to limit state level regulation. He plans to approve an executive order this week aiming for one rule on artificial intelligence.
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And IBM is buying the data streaming platform Confluent for about $9.3 billion, one of its largest takeovers yet.
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Look at that share. Market reaction for Confluent. Let's check in on the broader markets though. Anticipation, anticipation of the macro perspective that is the Federal Reserve policymaking later this week. We're down by about a quarter of a percent, but so much is happening underneath the hood at the moment, Ed and you're going to dig into our story of the day, the week, maybe the year.
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Yep, Warner Brothers Discovery. This is the state of play this morning. Paramount Skydance comes in with a hostile bid at $30 per share for the entirety of Warner Brothers Discovery. At the end of last week, Netflix had come in with an offer of $27.75 a share, but that was largely for the streaming and studio businesses, with the plan that Warner Brothers Discovery, who entered into those talks with Netflix would divest and spin off some of the remaining legacy cable units. There is so much to discuss. The financing in both senses. Where is it coming from and what does the President of the United States have to say about it?
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There are so many angles to get into. Let's go to our key reporter on all of this, Bloomberg's entertainment reporter, Lucas Shaw. You had the entertainment coverage for this network and I'm interested. What's the standout for you? Because we are unfolding who's behind the money, what's behind the attitude to go hostile, take us there first.
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I guess the part that stands out.
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To me is that David Ellison is.
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Coming back and going hostile with the same bid that was just rejected. Rejected by the board. Rather than sweetening the offer, you know, Paramount Skydance has now made six different attempts at buying Warner Brothers Discovery.
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They've been rejected every single time.
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But they are adamant and have been for for days now that their offer is better than Netflix's that the board is, is not factoring in. Certain things are confused by the valuation on the cable networks, for example, which would be spun off in the Netflix scenario. And so they're, you know, they're not going down without a fight. But I still think that they will end up probably having to raise the offer.
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Lucas, over the weekend you reported in detail a meeting that took place between Netflix co CEO Ted Sarandos and the President of the United States. Then the president Sunday night said, and this is before the Paramount Skydance bid came in, that from an antitrust or market share perspective, this has got to be looked at with the same not apply to Paramount Skydance. It would.
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It just is a different type of market, I guess. Right. So the president's comments I thought were notable because he had not spoken out against the Netflix bid at all, despite the fact that the Paramount people were convinced that Trump was going to try to block it and was against it. And I would say his comments were sort of balanced. On the one hand, he praised Netflix and praised Ted Sarandos, but he did say that would need to be reviewed. You know, Netflix is the biggest player in Hollywood in streaming and so if we were to add on HBO and Warner Brothers, it would make it even stronger there. In Paramount's case, they'd be combining two movie studios. They'd be combining huge amounts of television networks. The respective share of either combined company in terms of TV viewing would be quite large, would be somewhat similar, and yet both, I think, would still be smaller than YouTube. So a lot of this, if we get to, you know, an antitrust case is going to depend on what market you are defining.
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Let's just think about the storyline that's capturing a lot of attention today is the money. And we're all about the money for these things. Lucas Tencent was involved previously. It looks as though Chinese money is now being put to one side, but Middle Eastern money coming to the fore and Jared Kushner's money, private equity at least, which is also backed by Middle Eastern money coming to the fore.
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Yes, the Middle Eastern money is probably the most interesting part of it because there had been a report, you know, at this point maybe a month ago in Variety, the Hollywood trade publication, saying that there were three prominent Middle Eastern sovereign wealth funds involved in the Paramount bid. Paramount initially didn't really engage, then later that day said that the report was inaccurate. And then it turns out the report looks like it was pretty accurate because yes, I had heard and they have since disclosed that you do have a lot of Middle Eastern money in this bid.
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And there had been Chinese money, which.
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Makes it even more interesting that know Paramount. One of Paramount's arguments is that they will have an easier time getting this deal approved. But Warner Brothers Discovery's perspective was, well, it's actually making our life more complicated if you have all of this foreign money because then CFIUS might have to look at it and approve it.
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Bloomberg's Lucas Shaw, who's led the team on this story every step of the way. Thank you so much. Let's continue the conversation with Brandon Katz, Greenlight Analytics Director of insights and Content strategy. Lucas did a really good job in explaining the differences in structure of the deals and also the different perspectives of each party. But I wondered if you'd help our audience understand what the difference is between a Netflix joined with Warner Brothers Discoveries streaming and studio business versus a Paramount Skydance taking the entire thing. What does that look like? You and Lucas have already done a great job, so I'll try to pitch in here. Really, WBD and Paramount, more redundancies, more overlap. They are both traditional TV and film companies with streaming services tacked on. Whereas Netflix obviously, as we know, famously or infamously, depending on your perspective, they are a streaming first at all cost company. So there's less overlap and far more new integration of potentially complementary or potentially conflicting businesses. Now, we have seen mega mergers of this nature in the past, but they have almost always been a like versus like company absorbing each other. We have not really seen a major, major streaming service take a company at the size of Warner Brothers Discovery just Yet Brandon, we're going later in the program to go deep on the antitrust considerations. There are antitrust considerations here, but let's say in either event Netflix comes out on top or Paramount Skydance comes out on top of how does that change the landscape of entertainment? What does it look like to have an entity of that size? Roughly 2/3 of US adults who subscribe to HBO Max also subscribe to Netflix, whereas about 40% of HBO Max subscribers also use Paramount plus according to Greenlight analytics data. So as of right now, now the clear raw subscription streaming upside obviously favors Paramount plus, which has about 80 million subscribers globally. So they are a solid growing streamer that's been on original content hot streak since late 2023, but clearly isn't remotely the same size as Netflix, Amazon or Disney plus. So if Netflix were to get wbd, they would suddenly be investing in a lot of new businesses and we don't know how they would play up Theatrical. They don't know, we don't know how they would handle wbd. TVs a massive external TV licensing business. We do know that Paramount and WB there's more of again overlap and redundancies. So we can safely say that that would probably be more predictable as to what the future would look like and it would certainly position Paramount to make that entrance into the top three contenders of media companies.
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Certainly David Ellis has been talking about getting in the position to produce more, more content in particular for the consumer. Brandon, just listen to what he told our own Lucas Shaw a little bit earlier in October at our Screen Time event.
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We have a good relationship with the, with the administration. And look, I think if you look to that, I do believe.
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Other things that have been rumored about right are very large scale players that would affect, that could potentially create monopolies obviously in the ecosystem. And again, I think when you look at the lens of consolidation for us, I'll keep going back to it. It's always how do you create long term value creation? How do you put yourself in a position to produce more content, not less? And how do you ultimately build something that is better for the consumer?
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Brandon, what serves the consumer best?
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What serves the consumer best overall is usually competition. So I think there is a large sect of industry analysts and professionals that would probably prefer Warner Brothers Discovery to remain as an independent company because it means more competition, it means more buyers on the market, it probably means less layoffs of the labor force. Having said that, that's unfortunately not the reality that we live in. So somebody is going to get Warner Brothers. So it is really deciding which ultimate partner is probably best for the industry. Now, if you combine Netflix and HBO Max, and If you combine Paramount plus and HBO Max, they are still significantly smaller than YouTube, which is currently about a third, third bigger than Netflix in the US So either way, there is still a lot of competition out there, depending on which industry you're pitting against one another.
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Let's talk about good old cable television, because that is where many would say there is perhaps value, and it depends on which side of the equation you think. At the moment, it feels as though Warner Brothers Discovery thought there was more value in spinning off that part of the business than the $30 coming from Paramount Skydance. How do you look at those valuations?
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Well, let's stick with the famous Warner Brothers property, Friends. Ross was a famous paleontologist in the show, which means he loved Fossils, which means he would love the cable network assets. They are rapidly declining. They are shrinking every day. And while they still spit out a decent amount of free cash flow, Wall street sees them as an albatross, an anchor. So they all these companies want to position themselves for long leashes from shareholders and Wall street and, and the cable nets just aren't part of that strategy.
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Niche analogy, but we're here for it. The most important question, seriously, was posed by Bloomberg Tech producer, piles of area. Just take this at face value. Seriously. Let's say either deal goes through and we don't know if it will, there's antitrust. Does that mean that we stop paying for multiple subscriptions and we can just pay for one subscription platform where all of our platforms are in one? Because that's the other side of it. Everyone has a dozen or more different subscriptions. And what's so funny is like the parties here, they're all contributors to that ecosystem.
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Yeah, this seems to be. Let's say Netflix gets it. I'm betting HBO will be available as a premium add on an upsell. You have to pay more for it. But what's interesting about that is it puts Netflix in closer competition and to Amazon Channels, which is an aggregator, a platform from which you can subscribe to other streaming services. That's the really big strategic question. Because if Netflix pulls this off, who's to say they won't start offering this to other niche or subscale streaming services that need the broad reach and distribution of Netflix? Because we've seen both YouTube and Amazon Primetime channels are massively beneficial for subscale streamers. And then those host companies get a huge cut of ad revenue. Subscription revenue and it becomes an entirely new self fulfilling business model all on its own.
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You are all about entertainment data at the moment. Our data is to look at share prices and Paramount goes higher today on the back of this news and Netflix sinks yet more. Do you think there is more value to be had longer term for the entire industry with one or the other?
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Brandon I think if Netflix said you know what, we're going to be complacent, we're not going to touch our bid and they didn't get it, they would still be the number one streaming subscription video service in the world and for the foreseeable future. And we've already seen through the last month that shareholders aren't totally convinced that ingesting, let's say non traditional business assets compared to their business model is the right way to go. Whereas Paramount is a little bit more comfortable and familiar with these, these businesses that it would be ingesting. So I think also because Paramount is trying to be a top three contender in a last man standing in the streaming wars, they probably have the most to gain by getting wb.
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Brandon Katz, all the energy of Greenlight Analytics. We appreciate it. Now coming up, President Trump, he's aiming to curb state rules. We'll discuss what that means for the future of the US Industry. Ed, what are you looking at?
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M And a Monday IBM is buying Confluent for $9.3 billion. Enterprise value of the deal, $11 billion including debt. I think of Confluent is like the plumbing for data, particularly in a world where these very large frontier models aren't relevant to lots of companies. IBM basically wants you to pipe your data into its Watson platform real time and that's what this deal represents. IBM a little higher, but confluent up 28%. This is Bloomberg Tech.
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Resilience isn't just about bouncing back. It's about being ready. It's how you show up every single day. Because every name in your system is a person who trusts you and every password is a door you're responsible for locking. And when the threat comes, and it always comes, you hold back the chaos. Learn more@cohesity.com resilience support for the show comes from public.com you're thoughtful about where your money goes. You've got your core holdings, some recurring crypto buys, maybe even a few strategic option plays on the side. The point is you're engaged with your investments and public gets that. That's why they built an investing platform for those who take it seriously. On public. You can put together a multi asset portfolio for the long haul. Stocks, bonds, options, crypto. It's all there plus an industry leading 3.6% APY high yield cash account. Switch to the platform built for those who take investing seriously. Go to public.com market and earn an uncapped 1% bonus when you transfer your portfolio. That's public.com market paid for by Public Investing. All investing involves the risk of loss including loss of principal. Brokerage services for U.S. listed registered securities, options and bonds in a self directed account are offered by Public Investing Inc. Member FINRA and SIPC Cryptotech trading provided by ZeroHash complete disclosures available at public.com disclosures introducing the all new Adobe Acrobat.
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Studio now With AI powered PDF spaces.
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Do more with PDFs than you ever thought possible. Need AI to turn 100 pages of market research into 5 insights with a click. Do that with Acrobat. Need templates for a sales proposal that'll close that deal. Do that with Acrobat. Need an AI specialist to tailor the tone of your market report to sound real smart in real time. Do that with the all new Adobe Acrobat Studio. Learn more at adobe.com/do that with Acrobat.
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President Trump saying he plans to approve an executive order this week establishing, quote, one rule on AI to limit state level policies regulating the technology. Bloomberg's Senior Tech Editor Mike Shepard has been across what we knew has been being talked about more and more an anxiety that there will be 50 rules for companies instead of just one federal rule. What sort of form could this fate take?
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Mike well, it's really unclear. We have seen circulating in recent weeks a draft version of a measure that the President might sign that would call for two things. It would allow the Justice Department to sue states over regulations at the state level that the federal government finds unconstitutional. It would also call for cutting funding to states that have regulations in place that the administration finds objectionable. It's unclear what those criteria exactly are. We did see in the action plan a call for reining in rules that might impede innovation. But those are all the specifics we have in hand at this moment. So we'll be waiting to see what emerges on the President's desk. We do know this is a priority for the administration, for the President, for his top adviser David Sachs, as well as the tech industry. We've heard from Jensen Huang, we have heard from Marc Andreessen, We've heard from OpenAI and Google that they really would like to rein in what they call a patchwork of state level rules. There are 38 states enacting almost 100 measures so far this year and it's becoming a bit much in their view.
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Chat My sense from what I'm hearing out of D.C. is that this EO will focus more on the why those state laws are bad rather than a proactive. Here's one great rule for everyone, but politically it's really interesting because it's not as if Republicans broadly are supporting the president in diluting or detracting from state powers. I think of Ron DeSantis, for example, his position, and this has been quite clear. So private industry of course would support that. But politically the president has to do some management here.
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Well, absolutely, Ed. And really regulating AI has been a politically tricky issue from the get go. And the reason is there are so many different points of view on artificial intelligence. There are a handful of members in Congress who are accelerationists who really want to speed the adoption of technology, setting aside whatever needs there might be for regulation. And then there are others who really want to slow it down. In the middle, you do have a large number of other lawmakers who are seeking to rein in specific areas. Some are worried more about the doomer issue, others are worried about privacy. Others still are worried about copyright. And so far we do not have anything comprehensive at the federal level and in the spirit that space abhors, a vacuum. This is why we are seeing at the state level, both in Republican states and Democratic states, legislators and governors moving in to try to impose some order on a system that they see as both economically significant but also potentially perilous to voters and consumers. And we are Hearing from Ron DeSantis of Florida, Sarah Huckabee Sanders in in Arkansas, and then even here in Washington, Marjorie Taylor Greene, a one time ally but now really at odds with President Donald Trump favoring state autonomy when it comes to regulating this new technology. So it'll be interesting to see how this plays out and whether they do more to articulate a vision for regulating artificial intelligence at the federal level as opposed to just saying why the state level rules at a on a patchwork basis are bad right now.
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Mike Shepherd, Breaking It down we thank you. Let's continue the conversation. We can head out to Sarah Olam, VP and Senior Fellow, the Technology Policy Institute. From your perspective, is it better to have technology policy from a state level on AI or federal?
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Well, if you look at all the introduced state laws, there are over a thousand apparently that are out there floating in addition to the ones that have been enacted. They're Just so diverse. There are like six or seven buckets of the type of state law, including disclosure mandates, algorithmic discrimination, notice and bias requirements. So you have this matrix of 50 states times six or seven buckets and that's a patchwork. What you see also is a race to the bottom. So the most conservative rule might rule them all. And so really it is a matter of time and effort for small and large companies to know what these policies policies are. The discussion mimics a lot of the privacy debates that we had 10 years ago and still do. But really it's, it's difficult for to see innovation move forward when you have all these laws.
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Sarah, the, the mechanism of an EO is not that surprising if you look at the prior initiatives of this White House. In November, a big push by the White House on Congress to include a federal moratorium on state laws in a particular piece of legislation. That effort not successful. Explain why that was important, please.
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Sure. So you're seeing this post today because four days ago apparently the state law moratorium was dropped from the NDAA defense spending bill. I think Representative Scalise mentioned that it wouldn't be included. There was a push in November to include it in the ndaa and that was after in July there was a push to include it in the, the spending bill, the BBB big beautiful bill. And so there has been discussion, a lot of buzz on the Hill how how to include this moratorium in legislation. But you know, Congress thought it's not the right vehicle to include a moratorium. And so then you see this eo, the draft proposal was floated three weeks ago. It's called eliminating state law Obstruction of National AI policy. You can read it. It includes a litigation task force, evaluation of state laws, restriction of funding, and also involves Commerce Department, the fcc, ftc, doj. Yeah, and so that was the draft. We don't know if all that was in is in the actual but they floated it for review.
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Sarah, I want to push it forward a little bit of what actually is necessary because it's all very well and good saying we don't want it from a state level, but many would harp back to what happened with social media, where ultimately the big companies were left to regulate themselves because no federal policy was ever enacted. Do you have optimism that there will be some rules of the road, some guardrails from a federal perspective, or will it just be pushed back on a state level?
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You know, it's hard to say about the harms of technology because yes, there are harms, but who can really know what will be the really emergent or difficult harms out of thousands of possibilities. You know, you don't want to stop all of them and all innovation. And so, you know, is government the right venue to discover that? Really, you see it through litigation. And in Europe they've taken the approach, well, let's do blanket regulation. And you know, that hasn't turned out very well. As you can see, people are pushing back against EU regulations right now. So it really is a matter of perspective. The Biden AI executive order was rolled back and that is a perspective that's more precautionary. And so the Trump EO is taking the other approach, saying we need light touch regulation. So I think, and compare that with China, I don't think we hear about regulation from for AI there.
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Right.
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And so that's the, that's the comparison.
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Sarah Lam, the Tech Policy Institute.
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Time now for talking tech. First up, IBM is buying the data streaming platform Confluent for about $9.3 billion, marking one of its largest takeovers. Yet it's a major bet on the kind of enterprise software that AI tools need to perform tasks in real time shows both companies you see been rising on the news. Plus, OpenAI says that its tools are saving workers an average of 40 to 60 minutes a day on professional tasks. It's according to a survey from the ChatGPT Maker Data Center. Science, engineering, communications roles among those saving the most time. Of course, it all comes amid skepticism that there is a lack maybe of economic benefits of AI.
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You know, ironically it was David Zaslav last year that said, you know, consolidation, the media business is important and the way we approach everything is first and foremost what's good for the talent community, what's good for our shareholders and value creation and what's good for basically storytelling at large.
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That was Paramount Skydance CEO David Ellison there at Bloomberg Screen Time event in October, foreshadowing consolidation in the industry. Fast Forward to Monday, December 8th. Paramount Skydance comes in with a hostile bid. $30 per share for Warner Brothers Discovery after Netflix entered into talks with Warner Brothers Discovery at the end of last week in a different kind of deal. That's what the shares are doing right now for the arbs out there. Warner Brothers discovery trading at 2735 cents a share, 36 cents a share below both the offer prices at this moment in time.
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Car arms arbitrage for those who don't parlay in that sort of lexicon every single day. But meanwhile, President Trump, he did weigh in on the Warner Brothers Discovery and Netflix deal. Here's what he had to say about Netflix CEO Ted Sarandos.
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But he's done one of the greatest jobs in the history of movies and other things. He's, and he's got a lot of interesting things happening aside from what you're talking about. But it is a big market share. There's no question it could be a.
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Problem discovering the co CEO discussing, well, the control that Netflix might ultimately have. Let's talk about that with Jennifer Reid from the antitrust team at Bloomberg Intelligence. So there we heard perhaps an admission from the White House that he's looking at how competition is going to play out with whoever owns Warner Brothers Discovery. At least the streaming in the studio side of it.
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Right? Exactly. You know, and at the end of the day, it depends on the Department of Justice and the analysis that they do this year long investigation that's very likely to take place no matter who ends up being the buyer and what their economists find out when they look at the market, what the documents from the companies look like when they're talking about who they think they compete with. And I think with the Netflix situation, it very much comes down to how the market is defined. But if the market is defined narrowly in the way I think it ultimately will, and the Department of Justice does tend to define markets narrowly in general, Netflix has a problem. The president is correct. It's a big market share.
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Jen. I think it would really help the tech audience understand the process a little bit. Is it rules based? So if there's an antitrust review on this, do they look at past precedents, do they look at a codified set of rules and say, okay, this either is or is not abusive market position?
- [28:26]
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It is absolutely rules based. There's a set of guidelines called the horizontal merger guidelines that the Department of Justice will look to that actually gives it basic mathematics to understand, at least spatially, whether a deal is anti competitive. And they start by defining a market and then summing the shares in that market. Now, oftentimes this market definition situation can be dispositive because the broader the market it filters down the shares, the combined.
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C
Share isn't as large as it is.
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In a narrower market, at least in this situation. And they go through a pretty intensive analysis to, to make these determinations. So it is, and they do look at precedent as you suggested. And it is rules based. But here's where I go with this. When the agencies are looking at deals, they are trying to predict the future. Right. And this is a gray area. There is no black and white, reasonable minds, intelligent minds can differ on what the impact of a deal may be. So they're doing their best to model out that impact. And what it means is that there's flexibility there, there's leeway, and they might believe there's a problem here, but they have to go to court and then they have to convince a judge that there's a problem here and maybe a judge would see it differently.
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Jennifer of Bloomberg Intelligence, I suspect you will be back on Bloomberg Tech to talk about this very deal. Thank you very much. Let's continue the conversation with Rich Greenfield, partner at LightShed Partners, general partner at LightShed Ventures. Jen had a lot of decent mathematics there, a mathematics and rules based approach to what happens in next. Simple question for you to start, Rich. What happens next?
- [29:59]
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You know, it is really anyone's guess. You know, you've now got this hostile offer, tender offer from the Ellison's and from Paramount. Obviously shareholders are going to have to, you know, really look at this. I mean, you've got, you know, the offers are very different, right, because one is for just the streaming and studios and you're going to end up with a resulting stub at equity, that is the cable network piece. And you know, depending on how that's valued, it could be anywhere from, you know, a buck and a half to four or five dollars like a share. And so it all depends on sort of how that trades ultimately. And do investors want to sort of bet on the value of that entity, own some Netflix equity as well as get 20 plus dollars? $23 of cash is. So this is not a simple equation. Obviously we know from Warner Brothers that they believe that the Netflix offer was superior. They think it was 31 or through or $32 a share in effective value. Will some investors want to take 30 in cash? There may be and I think that's going to be the question. But can they get enough of the shares to actually block the transaction? I think that's what essentially Paramount would now be hoping for, is that enough people tender their shares that they can stop Netflix and force them to abandon the offer.
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C
If I may, to recap, the Netflix offer was $27.75, but only for the streaming and studios bit, right? The Paramount Skydance $30 bid was for the entirety of it. If we put the deal making and the arbitrage to one side, which makes most sense based on the current state of the media and entertainment landscape.
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Look, we're at a point now in the entertainment landscape where the industry is going through Seismic change. You know, movie theater attendance is down 50% from before COVID You know, forget about box office, but actually, you know, sort of people attending movies in the US you're down nearly 50%. You know, you're seeing most of the major streaming companies out there with really scale back their ambitions. And that's Warner Brothers. That's, you know, if you look at what's happened with Peacock, none of them are as aggressive. Disney and Hulu have certainly reduced their overall aggressiveness in how much content they're making. Like everyone is realizing how streaming is so hard. And so the reality is consolidation is certainly necessary. And I don't think this is the last transaction we're going to see. I think you're going to actually see this set off. You know, there's going to be knock on effects from whoever ends up buying this. You're going to see other things happen. You know, is there a story to tell for both companies? Absolutely. I mean, there's no doubt in my mind that if you put Warner Brothers into Netflix, the ability to do far more with that library than has ever been done before, looking at that global platform and how they've able to sort of surface content. I mean, all of this content's been sitting on HBO Max and no one really watches it. That's what Netflix does really well is they get people to watch things throughout the library in a way that others cannot.
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C
Right.
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That algorithm is so powerful. Paramount buying it. Look, Paramount needs more scale. If Paramount doesn't buy this, my guess is they're going to go after something else in the space. Whether that's NBC Universal, whether that's Sony. Like, I don't think Paramount is going to sit still. They want to get bigger. Look, they may just spend a lot of money. I mean, Ellison family has a tremendous amount of capital. Will they just use that to fund far greater investment than they were previously in Paramount? That might be another angle here. I mean, we've always said Paramount doesn't have to have that because they have one of the wealthiest families in the world backing them.
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They've got more than the wealthiest family in the world. They've got Middle Eastern money helping them with this. It would transpire. Does that change the storytelling rich?
- [33:55]
A
Well, I think what's interesting is there is this perception on Wall street that this was just Larry Ellison, you know, writing a check to buy all of this. And what it actually turns out is that Larry's only writing a $12 billion check. He's backstopping a larger portion. But the actual Check he's writing is 12 billion. And three Middle east entities are actually investing 24 billion. I don't know if that played into, I mean, they say there's no CFIUS concerns. But you do wonder whether the largest sort of, you know, as a group, the Middle east being the single largest sort of equity contributor to this deal. I wonder if that played a role in concern around this transaction. You know, we'll see. It's funny how there's been so much sort of industry uproar around.
- [34:44]
Around Netflix buying Warner Brothers. I wonder, as people start to understand more of what's inside the Paramount bid, as you just said, Caroline, will we see more pushback on the Paramount bid? I don't know. I mean, I think, you know, all of these bids have, there certainly are issues. And look, from a, you know, if you think about sort of from an antitrust standpoint, Disney bought Fox. That seemed, you know, Disney was at the pinnacle height of the industry when they bought Fox, and that was approved during Trump 1. You know, it's hard to believe that this transaction ultimately gets blocked, either one of them gets blocked. I think obviously, the Netflix will probably take longer than the Paramount one, but I don't think there's any quick approval. A lot of states are going to be frustrated by, you know, both of these bids. Foreign countries are going to be frustrated. So I think there's a long regulatory review process, meaning over 12 months, maybe even 18 months for both of these companies.
- [35:37]
B
And YouTube gets brought into that. Rich More what we understand what a competitive threat that is.
- [35:43]
A
Look, there's three layers to this is streaming. A distinct market is streaming in linear tv. Like, there are people watching us right now, Carolyn, who, you know, are watching linear TV and have Bloomberg TV and have CNBC and all of these channels. Like, you know, it's hard to sort of believe that, you know, effects and, and, you know, ABC and CBS don't really compete with Netflix. And then you've obviously got the larger threat of like, well, you know, YouTube has Sunday Ticket. Like, where do you watch Sunday Ticket now? You watch it on YouTube. Is it. Can you really say that YouTube is not a competitor to Netflix? And so it gets very challenging to define what the market is. And I think you're going to see a real difficulty in the government, you know, trying to not just say what the market is, but actually back that up in court. I look forward to seeing how they actually try to prevent either of these two transactions.
- [36:37]
B
Rich Greenfield, it's always so good to check in with you. Of LightShed partners like Shed Ventures. We appreciate it. Coming up, we're going to be speaking about defense a little bit more. Roger Zika is going to be joining us. Ronald Reagan Institute about securing industries key to the US Economy. That's next. This is Bloomberg Tech.
- [37:00]
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JP Morgan plans to invest $10 billion of its own capital in the defense, aerospace, healthcare and energy sectors. The new Strategic Investment Group will be led by Berkshire Hathaway alum Todd Coombs and the group Strategic Advisors as You can see reads like a who's who of industries. The announcement comes just days after JP Morgan CEO Jamie Dimon spoke about strategic and defense issues at the Reagan National Defense Forum and said Europe was facing quote, a real problem. Listen to this.
- [39:37]
A
Europe has a problem. I think they accomplished an unbelievable thing, but it got bogged down. It takes 20, 27 nations, you know, to make a decision. They have some wonderful things, but they've gone from 90% of the GDP of America to 65.
- [39:51]
C
That's not because America did anything bad to them. It's their own bureaucracy, their own cause. I think the leadership, Mers, McCrone, Maloney.
- [39:58]
A
Stormer, I think they know. I just think politics is really, really hard.
- [40:02]
B
Sat next to him asking the question was luckily enough me who got to fly out to Simi Valley over the course, of course, of the weekend. And it was all regarding the security and resiliency initiative that JP Morgan has and why they're so focused on defense. Someone who's also over in Simi Valley at the Reagan National Defense Forum was Roger Zakhaim. He is the director of the Reagan Institute. You have so much rich data as to perhaps some of the nuances when it comes to Europe versus us. Why Jamie Dimon cares about defense right now is because it's geopolitically important, is economically important, and he's putting $1.5 trillion initiative for the next 10 years. Roger, what was it that you took away from the event in terms of money coming towards defense, defense tech in particular?
- [40:45]
A
Well, really, we're seeing this renewed dynamism in the national defense community. I mean, we started the Reagan National Defense Forum over a decade ago, and you saw over 80 plus corporate partners participating in the event. I would say probably 2/3 of those companies participating didn't exist five, six years ago. So we're seeing, because of all the innovations you guys cover in the commercial sector, it's also penetrating into our national defense community. And of course, those technological innovations don't just impact the United States, it's impacting geopolitics around the world. China, of course, is leveraging that. And that's a big driver of the competition between the People's Republic of China and the United States. And it's natural then that Jamie Dimon, the leading CEO in the United States, iconic bank in the United States, has something to say on the matter and is involving himself in the matter. And that's what, of course, you covered at the Defense Forum.
- [41:41]
B
Roger, what's really interesting is we hear yet more and more focus of the administration on policymaking that basically inspires innovation in artificial intelligence, but perhaps at the sake of guardrails. And we're talking here about perhaps an EO that might come this week that's going to look for states not to enact individual AI rules and leave it to federal rulemaking. Is that something you've seen borne out in the data that the defense tech community, but investors and policymakers think that's a good thing?
- [42:09]
A
Well, they want to use AI and we need to use AI in our defense platforms as a big conversation at the Defense Forum. And our national defense Survey, which is released just ahead of the survey, A three form, excuse me, earlier last week really captured how Americans are somewhat ambivalent about this. They don't know. They're concerned, should we have AI in our defense platforms? And there's almost a majority of America is just saying they're unsure. Our leaders, of course, know that it's entirely necessary. Of course, you have to have a person in the loop, a human in the loop involved. And we're not going to get there in a fashion we're comfortable with if we're regulating our way out of it. And I think that was the spirit of what you heard from our defense leaders, both on industry and from the Pentagon. And I think you're going to see that also out of the White House with this executive order.
- [42:56]
C
Roger, China is worth discussion. On October 10th, Caroline and I did the show live from Andrew's headquarters. And literally the moment the show started, the president posted on Truth Social about at that time a deterioration in his relationship with Xi Jinping. And the point that Andrew, as an example would make is we've been talking about China is a threat for some time. We're still bracing for China as a threat in the year 2027. And in your survey, respondents engaged on that point. Give us the data.
- [43:28]
A
Well, 79% view China as the adversary of the United States. You know, Russia's in there too, of course, Iran. But the country that the most Americans, as expressed by the respondents in our survey, they are concerned about, that they view as an enemy, as an adversary is the People's Republic of China. And they're right. And the Trump administration, its first term named the PRC as the leading challenge to our national security. Now, President Trump, of course, is engaging in dollar diplomacy. The national security strategy that came out last week emphasize how he believes economic cooperation with China will be one of the ingredients towards taking the United States so $40 trillion economy. But from a national defense standpoint, we're only going to get what Secretary Hexag talked about. We want to have strength as a driver towards engagement with China, but without confrontation. We're only going to get there if we are strong, if we're making these investments, if companies like Anduril are going to make the progress they promise with respect to autonomy and other new companies getting online, leveraging this new technology, of course, in part AI driven.
- [44:36]
C
Roger, I want to go back to Caroline's conversation with Jamie Dimon. If we could end that, please. There is support for this government taking stakes in strategic industries. But clearly the private sector and from a financing perspective, the banks think they have a role to play here. Is the situation just better now for private industry to do business with the government directly or co invest with them? Do you get that sense?
- [45:02]
A
Well, listen, certainly from the Reagan Institute perspective, it is better when our free market is driven by the private sector, not government. I think if you talk about companies from ander olds or new entrants or newer entrant all the way to the Boeings and Northrop Grumman's of the world, they're trading on the public markets, right? Certainly in the in the primes. And so government needs to leverage that technology. They need to go ahead and develop and drive budgets that have growth so those companies can continue to scale up. That is what's required to scale here. And when you talk about Jamie Dimon, right, and the banking sector, it can't just be VCs anymore. It can't just be the community. We need major banking institutions to get involved. And that's why Jamie Dimon's leadership was so essential and was great to have him on stage with you, Caroline.
- [45:50]
C
Roger Zakheim, director of the Reagan Institute. It's great to have you on Bloomberg Tech. We appreciate it. Now, coming up, let's get back to Paramount's hostile bid for Warner Brothers Discovery. There's a lot to talk about. The what happened next, the why and the deal as a whole. That's what the trading looks like for the names involved. This is Bloomberg Tech.
- [46:13]
Back to today's big story. Paramount making a hostile bid for Warner Brothers discovery, $30 per share just days after the company agreed a deal with Netflix. I want to get to Bloomberg Intelligence Media analyst Keith Orang. And Ethan, because when we spoke on Friday, you called it, the next thing will happen is a hostile bid from Paramount. Were there any surprises within the structure of Paramount's offer for you?
- [46:39]
A
Not really. But you know, when you compare it, obviously on the face of it, the Paramount offer definitely looks superior because it.
- [46:46]
C
Is a $30 bid.
- [46:47]
A
It is an all cash bid. But the two offers are actually so very different. You know, Paramount of course promising regulatory certainty a much speedier path to approval. But again, a lot of this is still TBD and we have to kind of wait and watch and see. Paramount kind of removing a lot of what they thought would potentially spark regulatory problems. You know, removing the OR with the Saudi money kind of getting rid of the governance issues so as to not trigger a CFIUS jurisdiction. But again, I don't know whether shareholders necessarily view this as a superior deal.
- [47:23]
C
Well, when a big piece of news and a big piece of M and A happens like this, our Bloomberg Terminal clients will know you publish a react and the headline of your react is Paramount Hostile Warner Bid Ops Ante may not be enough. Why do you feel it may not be enough, Geeta?
- [47:40]
A
Because on the face of it, the Netflix bid actually offers superior value for all all of Warner Brothers Discovery. So you have the studio and streaming unit valued at about $28 a share according to the Netflix bid. And then if you just kind of look at where other cable networks are trading because you will be left with a cable network stub business which is called Discovery Global we think, and I think the street also thinks that that should be worth about three and a half to $4 a share. Now Paramount in their presentation has valued that unit at about $1 per share and I think that is where majority of this Delta is coming in. And so I think they will kind of ultimately need to up their bid.
- [48:22]
C
What we're hearing in the markets is right now the state of play is that Paramount's not even heard back from Warner on that bid. Geeth Ranganathan of Bloomberg Intelligence, thank you so much. That does it for this edition of Bloomberg Tech. Let's recap where we're at. We have a Netflix Netflix bid for the streaming and studio business of Warner Brothers Discovery. We have a Paramount Skydance bid for all of Warner Brothers Discovery. You can listen to all those conversations in today's podcast, find it online on Apple, Spotify, Iheart, and of course on all the Bloomberg platforms. Big week ahead. This is Bloomberg Tech.
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