Friend Advising on Budgeting (1:24)

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JBL (1:29)

Hello, everyone. This is JBL here with my bulwark colleagues, Kathryn Rampel and Sonny Bunch. And there is big news in Hollywoodland, because Warner Brothers, the storied movie studio, has maybe been sold to Netflix, which, like 10 years ago, would have been really bad, and made Hollywood upset. And now has Hollywood sort of upset, but for other reasons, because Paramount and Larry Ellison and his son have maybe missed out on the deal. It's all very confusing. And, Sonny, can I just let you set up the story, the state of play, and then we can let Catherine go to town on it.

Sonny Bunch (2:14)

Yeah, the very short version here is that Paramount, Skydance wanted to buy Warner Brothers. They came in and they said, we're going to pay you $22 a share. And then it was $25. They made a series of private bids to Warner Brothers, all of which were rebuffed. And then there began an official bidding process. And Netflix was always kind of on the periphery of this. All the. All the industry watchers that I know of and listen to and talk to are like, Netflix is just trying to drive the price up. They're not actually interested. This is not their business. Owning a theatrical first movie studio is not their business. And so I think people were kind of surprised when it shook out this way, because the other thing to consider here is that it's not just a movie studio. Of course, there are also cable networks. There are parks, there are. There's all sorts of other elements to this. When Netflix came in with a deal that was worth more just for Warner Brothers studio than Warner Brothers and the cable companies, I. The sense is that Warner Brothers has kind of a fiduciary duty to take that. I think Catherine can handle the actual finances of this better. But the. But the. But the reason Hollywood is, like, both kind of freaking out and also kind of like, well, let's see what happens here is because Netflix has been spending tons and tons of money in Hollywood over the last decade and a half making new, original things, for lack of a nicer way to put it, they don't have to deal with all the Trump shenanigans that are going on with Paramount, Skydance. Everybody in Hollywood is very nervous about what the Ellisons are doing with Trump. And I think that that is a. That's a big part of this story.

JBL (3:48)

Yeah. And we're going to get to the politics of this in a minute because you can't. You can't escape the politics of it. Catherine, can you. Can you explain to us a little bit? Do we know how much of Warner Brothers is being sold? Do we know how Warner Brothers Discovery is being split here? Do we know. I mean, it's not a cash offer, right? Like, it's stock exchange.

Kathryn Rampel (4:11)

It sort of depends on what happens with all of this. It looked like all of this was resolved. As Sunny mentioned, there was a big bidding war where you had Paramount and Netflix and potentially some others interested in buying Warner Brothers Discovery, which was putting itself up for sale. And as of Friday, it looked like this was resolved, that Netflix had won the bidding war and they were going to take part of Warner Brothers Discovery, particularly the film assets, but they didn't want the part of it that includes linear cable and CNN for that matter. It looked like this was done. Paramount kind of threw a hissy fit and was mad that they had been rebuffed. They wanted to buy the Whole kit and caboodle, including cnn, you know, which maybe would fit in somehow with their own news gathering operations now that they own CBS and are making some big changes there. But they didn't win out today.

Kathryn Rampel (5:12)

There was a hostile takeover bid which does not usually work out, but we have to see how it plays out. And in today's hostile takeover bid, they have the backing of just coincidentally, the President's son in law. Oh, yes. So I know you, I know you said to leave the politics aside, but it is really difficult about this without getting into these strange alliances with various grifting Nepo babies who are involved.

JBL (5:43)

Well, the President's son in law is a big media guy because he himself wants, once ran the New York observer, so I can see why they would have gone to him to be a partner in this.

Kathryn Rampel (5:54)

It's his, it's his skill set. It's, it's his journalistic skill set, clearly. Yeah, that's what this is about.

Sonny Bunch (6:00)

It's a real legion of doom, by the way. This, this consortium that is backing this. It's because it's not just, you know, Kushner is involved. There's also the Saudi Arabian, you know, investment fund. Their, their sovereign wealth fund too is in, in into this for something like $24 billion $0.1, which is owned firm is also involved with that. Tencent has some dealings with Paramount, Skydance through other Skydance productions, which is kind of interesting in and of itself. So it's like it's not just Trump and Kushner, it's also the, the Saudis and the Chinese, which, you know, who would be better to own Superman than these. This, this group.

JBL (6:41)

Okay, there's so many things here. Now, we saw a report just minutes before we came on that both Netflix and Paramount had sought to hire Jason Miller to help represent themselves. I guess we just don't even pretend that the government isn't corrupt anymore.

Kathryn Rampel (6:58)

No. Well, and to be clear, we've mentioned. Sorry, moving on, we mentioned, well, we've mentioned Kushner's involvement. You mentioned Jason Miller, clearly a Trump whisperer of sorts. There is also the fact that David Ellison at Paramount Skydance is the son of Trump's bff or, you know, least BFF tier friend.

Kathryn Rampel (7:28)

Larry Ellison. So there is a lot of involvement here from Trump land. And that's part of the reason why Paramount thought that they had the leading edge. Like they've been trying to get these goodies from Warner Brothers for quite some time, have been failing and meanwhile are basically asking Trump and Trump's DOJ to put their thumb on the scale as a favor to Larry and David Ellison. And they've also, like, thrown in some other, you know, favors in that favor bank as well, including promising to distribute Rush Hour 4, which Trump and apparently no one else on earth wants. But I definitely saw that through the lens of they wanted Trump's help in getting this deal done. And what role would Trump play?

JBL (8:18)

Appointing Barry Weiss to run CBS News was done to make Donald Trump happy, Right? In fact, he, in his CBS interview, he talked about how much he approved of that hire. It's good for her. I'm glad that she, she can take that to herself with her fierce independence.

Sonny Bunch (8:34)

Catherine, can I, can I ask Catherine a question? Because this is something I, I don't, I don't know very well.

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Sonny Bunch (10:10)

Both Netflix and Paramount Skydance included a I think it was $5 billion.

Sonny Bunch (10:17)

Chunk of money if the, if the deal doesn't pass regulatory muster, which feels like I don't know enough about this world. Is that a normal thing or is that an unusual thing? Because that struck me as very weird.

Kathryn Rampel (10:30)

So there is often A breakup fee. That's what this is. Put in the language of a proposed merger that is expected to face some sort of antitrust scrutiny. This is an unusually big one and honestly, it would be a great deal for Warner Brothers. I don't know that they put themselves up for sale in the hopes that it would get blocked by some sort of antitrust authority and therefore they would just get to collect their payday and move on with their lives and put it towards their operating budget. I don't know that that was the case. Probably not. But if that was their strategy, it may be a very effective one. Because even without Trump's involvement in all of this, this size of a merger would likely face some antitrust hurdles. I just want to make that clear.

JBL (11:14)

Sure.

Kathryn Rampel (11:15)

These are two enormous. Well, all three of the parties we're talking about are enormous entities. And a merger involving Warner Brothers and either Paramount or Netflix would face antitrust scrutiny. And in fact, when it was Netflix that seemed to be the winner of this particular drama, you saw a lot of statements from like the Writers Guild, sag, AFTRA and other unions protesting that they didn't want these two parties to merge. Paramount with Warner Brothers would also present some major antitrust concerns. Now, again, that that would happen no matter what. The question is if Trump wants to put his thumb on the scale and block the merger for non consumer related concerns. So because he wants to, you know, hand this gift over to his friend Mr. Ellison, or because he wants to see Rush Hour 4 get made or whatever, you know, that actually puts the government's case in jeopardy. Like, the irony of all of this is that a merger of this size between Netflix and Warner Brothers would probably face hurdles no matter what. But the fact that Trump has publicly weighed in and said he wants to intervene would be a very useful argument for the merged entity to make in court and say, see, they're only trying to block this match made in heaven because Trump is weaponizing the government against us. And we know that this works, that, that kind of argument, you know, that this case is only being brought for political reasons, for, for retribution reasons. That argument actually worked before with some of the same entities here when AT&T merged with.

Kathryn Rampel (13:05)

Time Warner a few years back during the first Trump administration. Again, there were valid antitrust concerns there, you know, based on consumer welfare and all of that. But there were reports that Trump wanted to block it to punish cnn, which was owned by Time Warner, and that that helped in court. They actually won that case. They were able to merge and they defeated the government so you could imagine the same thing happening here.

JBL (13:30)

Catherine, how does the hostile takeover process proceed from here? Right. I mean, I guess the question is had the deal already been struck or was it. Was. Were the terms of the initial deal not yet finalized and so that's why they've gone hostile?

Kathryn Rampel (13:46)

Yeah, yeah. So they have to be finalized by the shareholders themselves. So the, the board can, can agree that this is the best possible deal we've chosen out of our many suitors, Netflix. But ultimately the shareholders have to approve of it because you could imagine that maybe the board is doing what's in their own best interests and not what, you know, they all get golden parachutes or whatever and not in the interest of shareholders. This is just a very standard thing.

JBL (14:14)

Sure.

Kathryn Rampel (14:15)

So I thought this was a done deal, but now that Paramount has come in and offered even more money, it may not be a done deal. And particularly since you have Donald Trump again publicly saying he's going to get involved. He said this on the red carpet last night.

JBL (14:31)

Should they be allowed to buy Warner Brothers?

Economist/Regulator (14:34)

Should they? Well, that's the question. They have a very big market share and when they have Warner Brothers, you know, that share goes up a lot. So I don't know. That's going to be for some economists to tell. And also, and I'll be involved in that decision too. They have a very big market share.

Sonny Bunch (14:49)

Did he make any guarantees to you.

JBL (14:51)

About the merger if they do merge?

Economist/Regulator (14:53)

No, no, not at all. He came up. He was in the Oval Office last week. I have a lot of respect for him. He's a great, he's a great person. But he's done one of the greatest jobs in the history of movies and other things. 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 about.

Sonny Bunch (15:14)

Could be a problem.

Kathryn Rampel (15:15)

Mr. President, that may be a red flag to shareholders because they're like, well, even if it's political and maybe the judge will throw it out ultimately because, you know, they'll be. Because the lawyers representing the merged entity or the trying to merge entity will say this is being done for political reasons. Even if all of that happens and they ultimately prevail, it will be a very long, drawn out process. And so they may say, to hell with it, like, let's choose the suitor that Donald Trump wants to, because we think that that's going to get through. I don't know. We'll have to say that was my question.

Sonny Bunch (15:49)

Right.

JBL (15:49)

Does the very fact of Trump saying he will do this, pressure Warner Brothers into going with Trump's preferred partner, well.

Kathryn Rampel (16:00)

He'S been hinting at that for a while. And the board still rejected Paramount's offer, which is why it's a hostile bid. And now it's left up to the, to the shareholders.

JBL (16:12)

Do we think this gets done anytime in the near term one way or the other? Could it, could it resolve quickly? Like, if Netflix pulls out? Can that, like if Netflix just says, to hell with this, I'm out.

Sonny Bunch (16:23)

Does that.

Kathryn Rampel (16:23)

If they do let it resolve? I mean, that would, that would certainly be one fewer hurdle for Paramount, which again, has been salivating over this for a while. And they have not only Donald Trump threatening various antitrust action against their competitor, but they have Jared Kushner involved, as we were discussing, and I guess, you know, some other leading lights from Trump land. So all of that should be working in Paramount's favor. Now, just as an aside, the very fact that Kushner is involved makes me think it is not a good deal for Paramount because Jared Kushner has not had the best instincts on profitable investments. Folks who are watching this can google 666 Fifth Avenue and see about his investment record there. So it may not be ultimately a good deal for shareholders for Paramount to buy Warner Brothers, given the folks who are involved to make it through. But, like, I don't know that it's going to work out. But that said, this may not be about profits for.

JBL (17:30)

Right, well, that's what I was going to ask. Right. I mean, you say this may not make sense in terms of, like, dollars, but there are in, in the Trump era, many business deals which don't really make sense if you're thinking about, like, value and return on investment in the near place. And I think of Elon Musk's purchase of Twitter, which was a financial disaster for everybody involved. All the people who are holding debt on that are, you know, eventually going to have to write it down. But it was very useful for Elon Musk's project of getting involved and partaking in ownership of the United States government for a short time and for all the things thereafter. It strikes me that that's what this play means for the Ellisons. No.

Kathryn Rampel (18:18)

Yeah, I think that's absolutely what it's about. It's not about getting a dollar figure return on the investment in Warner Brothers per se. It's about buying all of that influence with potentially CNN with, you know, CNN, coupled potentially with CBS controlling a lot more of the media Ecosystem which will help them ingratiate themselves to trump further and potentially further the interests, the financial interests of the other properties that they're all about. AI Exactly.

JBL (18:55)

That's great, Sonny. Not that anybody but us cares about this, but how bad is this for the cinematic arts? Is everything going to look like red one and red notice?

Sonny Bunch (19:06)

Yes.

JBL (19:06)

Right.

Sonny Bunch (19:06)

Well, everything looks like that.

JBL (19:08)

Put out Oppenheimer. Now we're going to get everything looks like it's shot on a handheld.

Sonny Bunch (19:15)

Yeah, no, I would say. Well, so it really just depends. It depends on so many different things. Right. The biggest question from my perspective as a lover of the movie theater experience is what happens to theaters here? And theaters are already in a very perilous state. The 1, 2, 3 punch of the rise of streaming, the COVID shutdowns and then the strikes like, have, have just like really hammered the theatrical ecosystem pretty badly. And knocking out 16% of the, of the box office take, which is what Warner Brothers represents, would be disastrous. It would lead to a bunch of multiplexes closing. You would see fewer screens. Fewer screens means fewer the theaters, which means fewer movies being made for theaters. It just creates a whole vicious cycle. It's bad. And I am not convinced that either of these options is good for stopping that. I mean, look, on the Netflix side of things, you have Netflix's natural aversion to theaters. Theoretically. Maybe the FCC can make them promise to do a universal style 17 day window with longer windows for bigger movies. I don't know. But I don't think Paramount's really the answer here either because as we saw with the 20th Century Fox Disney merger, that led to a massive reduction in the number of movies in theaters. Because why would you as a studio compete with yourself by putting more movies? Right? So what will end up happening if Paramount does buy Warner Brothers is that Paramount will put out Batman and Superman and the big IP plays for Warner Brothers, Harry Potter spinoffs, et cetera, et cetera. That, that is, that is not good for anyone. That's not good for anyone in the business. It's not good for the 150,000 people who work in movie theaters around, around the country. Right? Like that's, that is in and of itself bad. The, the other question here is what happens with hbo? HBO is the biggest and best of the, you know, kind of prestige type TV channels, cable streamers, et cetera. And I, I think that, you know, I think there's, I think a lot of people are worried about what happens with HBO if you, you send it to Netflix and it gets the standard netf, which is, you know, binge style releases and.

Sonny Bunch (21:30)

Content that you can watch while also scrolling through Instagram. Right? Like that's the, that's the Netflix model. Nobody wants that for hbo. Now I will say that Ted Sarandos is a. Ted Sarandos has often spoken very fondly of hbo. I think he respects what they do and would be hesitant to mess with that in any real way. And you know, I don't know, I hear a lot of people, folks like the entertainment strategy guy, good, good source on this sort of thing. He says, look, maybe this is an excuse for Netflix to change their whole strategy. They could, they could do more theatrical, they could do weekly releases, maybe, I don't know. But regardless, you know, the, the, the I, I have no faith in Paramount doing anything good with this either. It's just, it's a, it's a mess all around. And I, I, as Catherine mentioned that the best option for Warner Brothers might be just to pocket that $5 billion and use it to pay down their debt and keep doing what they've been doing.

JBL (22:29)

Great. Well, we're going to be in a place where we have consolidation and declining competition in a sector that is near and dear to American hearts. And that's the good option. The bad option is one of our, our beloved movie studios becomes part of a, a tool of the oligarchs who are aligned with Trump. Fantastic. Fantastic. Katherine, Sunny, thank you for being here to unpack this very niche boutique issue, everybody. If you want to hear stuff like this all the time, hit like, hit, subscribe, follow the channel. It really helps us when you hit the subscribe button actually. And we'd love to have you ride with us as we catalog all the terrible things that are happening in America on a daily basis. Good luck, America.

Kathryn Rampel (23:16)

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Sonny Bunch (23:33)

Hmm, it's gotta be when I'm really.

JBL (23:35)

Craving it and it's convenient.

Kathryn Rampel (23:37)

Could you be more specific when it's cravenient?

JBL (23:39)

Okay, like a freshly baked cookie made with real butter, available right down the street at am, pm Or a savory breakfast sandwich I can grab in just a second at am, pm.

Kathryn Rampel (23:47)

I'm seeing a pattern here.

JBL (23:49)

Well, yeah, we're talking about what I.

Kathryn Rampel (23:50)

Crave, which is anything from AM pm.

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What more could you want? Stop by AM PM where the snacks and drinks are perfectly craveable and convenient. That's Cravenians Ampm. Too much good stuff.

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