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Decoder with Nilay Patel
What’s next for Netflix and Paramount in the Warner Bros. battle
00:43:45
Channels host Peter Kafka interviews Bloomberg’s Lucas Shaw about the biggest story in entertainment.
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- [00:01]
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- [01:38]
Podcast Host (Nilay Patel)
Decoder is on holiday break. We've got a lot of fun stuff coming up in the new year, though, including a special Decoder live at CES. We'll be recording on Wednesday, January 7th at 12:30pm at Brooklyn bowl in Las Vegas. Stay tuned for more details, including how to RSVP for free tickets to the event. In the meantime, I wanted to share this great episode of the podcast channels, featuring two of the best media reports quarters in the business. Host Peter Kafka sat down with Bloomberg's Lucas Shaw to talk about the bidding war between Paramount, Skydance and Netflix over Warner Bros. Discovery. Who gets to buy Warner is one of the biggest stories in the entertainment industry today, and it shows no signs of resolving anytime soon. There's a whole lot of complex issues in this one the Trump administration and its weaponization of regulatory oversight, the Ellison family and their push to exert money and influence over the media business. And then, of course, what a deal like this might do to Hollywood. Regardless of which company wins in the end, there's almost no one better to talk about this than Peter and Lucas. I think you're really gonna like this episode. Okay, here's Channels on the fate of Warner Brothers Discovery. Enjoy.
- [02:44]
Peter Kafka
From the Vox Media podcast network, this is Channels with Peter Kafka. That's me. I'm also chief correspondent at Business Insider. And today, as promised, we are going deep into on Warner Bros. Discovery, Netflix, Paramount, and as promised, we are doing it with Bloomberg's Lucas Shaw, who has been the dominant reporter on this story. This sounds like deja vu. There is a reason for that. Less than two weeks ago, when Netflix shocked us by landing the Warner Bros. Deal, at least landing it temporarily, I had Lucas on for a quick emergency pod. As you know, the story is far from finished. Paramount and the Ellison family are still trying to buy Warner Bros. Discovery. So this one could go on for weeks or months. With that in mind, I had some practical questions for Lucas, like what happens if Warner Bros. Discovery formally turns down Paramount again? But also some big picture ones, like why exactly do Paramount and Netflix want to spend so much for essentially HBO and a movie TV studio? And what does this deal or potential deal tell us about the state of media in 2025 and beyond? It's good stuff, right? This is also a year end pod. So I talked to Lucas a bit about AI because we're legally required to talk about AI and we got some recommendations for your listening and viewing pleasure. This is a good one. Okay, here's me talking to Lucas Shaw. Lucas Shaw from Bloomberg. You're laughing because I'm bad at podcasting, but I'm glad to have you back on the show. We did an emergency pod when Netflix one. I'm putting scare quotes around the Warner Brothers deal.
- [04:28]
Lucas Shaw
Yeah, that was, that was two weeks ago.
- [04:30]
Peter Kafka
Two weeks ago, maybe let's call it two weeks ago. The intent was for this previously scheduled conversation be a look back at 2025 and a look ahead at 2026. We could do some of that. But honestly, the whole thing is Warner Brothers, Paramount, Netflix. It's the story of the year. I think it's the story of our careers, really. It's the rise of streaming. Right. Manifested. And it got it.
- [04:54]
Lucas Shaw
It's taking huge step back. Yeah, yeah.
- [04:57]
Peter Kafka
And displacing, you know, could potentially. Whatever. It's, it's, it's. We oversell these stories all the time. People try to tell you why this thing is momentous, but it really is momentous. Especially I think if Netflix does end up buying Warner Brothers. We are recording this on Monday. You guys will hear this on Wednesday. Things can change between now and then, but let's just start where the state of play is technically right. Paramount has just said, hey, we would like to buy Warner Brothers Discovery. Consider our bid. Warner Brothers Discovery. And they have not yet responded. We expect them to respond any day now. What do you think will happen?
- [05:38]
Lucas Shaw
Warner Bros. Discovery will say, thank you for this generous offer. We decline. We already declined this offer. The big question is whether they will say, we don't want this offer and please stop trying, go away, we are happy with our deal with Netflix, or we decline, but if you want to offer us even more money, we're open to having a conversation. Because at the moment they're not really supposed to be talking to other parties. There's kind of no shop provisions in their deals with Netflix, but they have the ability to open things back up where they can. You know, basically, until the shareholders of Warner Brothers bless a deal, someone else can, can come around and try to wow them. And I, I, I think it'd be pretty strange if they said go away. I think they'd be more than happy to use Paramount and Netflix to try to get another 3 to $5 a share for their shareholders.
- [06:34]
Peter Kafka
So basically what we were describing more, we were describing as a done deal when we talked a couple of weeks ago, but saying, you know, Warner Brothers has picked Netflix as their buyer. You're suggesting that they haven't fully picked them yet. Like someone could still come in would.
- [06:47]
Lucas Shaw
Be, I think they picked them, but they are never, the board is never going to turn away an even better offer. And if Paramount has, which has now made 6 offers to buy Warner Brothers Discovery, every single one of them rejected, if they make a seventh, that is even higher, the board would have a fiduciary responsibility to engage with it.
- [07:08]
Peter Kafka
And I'm going to ask you to just do some prognostication and it won't hold you responsible if you're wrong, because that's how the world works. Do we expect Paramount and then Netflix to then get in a ongoing bidding war where each goes back to Warner Brothers says, here's another dollar a share?
- [07:22]
Lucas Shaw
I think they both, Paramount has said that, that this isn't the last and final, which implies that or outright just says like we can, we can go higher. My understanding is that Netflix, in studying the deal and doing its models, has also created room to go higher. Whether they will is harder to guess. I would, I think they would because they seem very committed to this. And what one of the things that's interesting about this dynamic is you have two companies that are not or two entities that are not used to losing. Right. The Ellisons are used to getting their way. Netflix is used to getting their way and one of them has to lose here. The wrinkle for Netflix is that unlike Paramount Skydance, which is a fully controlled company, Netflix isn't. It's a proper public company. And so if shareholders really don't like this deal, which it seems like some of them are lukewarm on it, the share price of Netflix has been inching down. If Netflix adds $3, $5 to its, you'd imagine shareholders would be even less satisfied with it.
- [08:27]
Peter Kafka
This is messaging that I hear, I assume you hear from people, particularly in the Paramount sphere, saying, look how much Netflix shares have gone down since last fall. Netflix really doesn't. Netflix shareholders really don't want this deal. They've lost 100, $140 billion in value.
- [08:43]
Lucas Shaw
Not all of which is correct, related to this.
- [08:47]
Peter Kafka
So let's, let's play this out. So if Sumi. If for whatever reason, if Warner Brothers says, you know what, all things being equal, we want to stick with Netflix, sorry, Paramount.
- [08:58]
Lucas Shaw
Yep.
- [08:58]
Peter Kafka
Do we? What? Paramount could sue. They could, could go again directly to shareholders.
- [09:05]
Lucas Shaw
They could sue and say that this was an unfair process. That feels like a risky endeavor. You don't see a lot of those in M and A land, they could continue with going. Direct shareholders, at their current offer, $30 a share, they have been adamant that it is superior to the Netflix offer. And they have had enough dialogue. They're meeting with and talking to a lot of shareholders to try to get a sense for how supportive they are. From the conversations that, that people on my team at Bloomberg have had with shareholders, it feels like, you know, they'd all obviously like to see the number go up. I don't know that there is a clear preference for one versus the other. So that is also risky. The saf for, for the Allison, if they really want Warner Brothers would be to come back with more money.
- [09:56]
Peter Kafka
And then we have the, the Trump wild card, right? And we've gone back and forth for months and, and recently, last few days, intensely about what role will Donald Trump have in this. Right. He can't compel someone to buy Warner Brothers discovery. He's in theory not supposed to have an active role in this at all. He said, I'm going to have an active role. Many of us assumed ultimately that Paramount would win the deal because the Ellison's Larry Ellison has a deep connection with Donald Trump. Semaphore had a story where they were quoting an unnamed treasury executive saying, we're offended by this idea and this has backfired. How active do you think Donald Trump will be in this process, which could go on, in theory for. For many months. Right. He can order a. A review there. There will be a review, most likely anyway, through antitrust. So how much do you think Donald Trump is going to play? How big a role do you think.
- [10:51]
Lucas Shaw
He will play in the negotiations over who wins the current auction, bidding war, whatever? Almost none, I think. I mean, I think his name will be invoked a lot and he will get asked about it all the time, which means that he will comment on various things and people will try to.
- [11:06]
Peter Kafka
Which he loves.
- [11:06]
Lucas Shaw
Which he loves. And people will try to read into his comments. And he likes being at the center of attention. I mean, he just made the. The death of Rob Reiner about himself. And he likes making it appear as though he is the person who, you know, decides things. But I don't think that he exerts any real influence until someone has been selected. I think that the winner of this, you may, you may factor odds of regulatory approval into who you decide that you pick, but the company that wins Warner Brothers is going to be the company that offers the best deal. And then, and then, and then Donald Trump will you who he's currently having fun, sort of making it seem like both sides are going to owe him something. Right. He lauded Ted Sarandos, co C of Netflix. He talked about how Netflix was a great company and then said, but this will need to be reviewed. And he's been very effusive in his praise for the Ellisons while also saying, but we have to look at market share. So he's setting himself up to either way, demanding something of the winner.
- [12:11]
Peter Kafka
He's throwing out this idea that the CNN has to have new owners no matter how this deal goes down. If you took that at literal face value, it means that only the Paramount deal works because they're the ones who want to buy Warner Brothers against Donald Trump. Who knows what he will say tomorrow. But, you know, we all reference The Time Warner AT&T deal, which the first Trump administration tried to stop with a pretty conventional antitrust challenge. There was a lot of speculation that this was done at Donald Trump's behest. Lots of folks in the DOJ say it was a legitimate thing for us to talk about. We're in a different era of Trump dumb, where he just literally says to Pam Bondi, go ahead and pursue this. If she then did pursue a real antitrust challenge, does she have grounds to take one up?
- [13:00]
Lucas Shaw
Both of these deals relative to the AT&T time Warner would be kind of almost more traditional deals to have reviewed because you have competitors merging, creating greater consolidation and greater concentration of power within an industry. So I think while the. You're right that it's almost impossible to predict what the administration will do, and they don't seem to follow any of the traditional norms or rules for what they. What they review, what they don't, what they care about. I think in a traditional administration, either deal would get reviewed.
- [13:37]
Peter Kafka
And getting reviewed is different than suit.
- [13:39]
Lucas Shaw
To block, which is what happened with AT&T and Time Warner. And I don't. So I think there will be close scrutiny of either deal. You already have politicians on both sides of the aisle, at least in the case of the Netflix deal, saying that we'd want to scrutinize it. You have prominent industry organizations, unions and filmmakers speaking out and saying, we're worried about it. And so it's inevitable that there would be some examination. Whether they would sue to block it is much harder to predict. And the cases against each deal are a little bit different. Right. The case against Netflix is they're already the number one player in streaming. If they add Warner Brothers Discovery, they become unbeatable as well as sort of these ambiguous concerns about the movie theater business, which I don't think would generally matter in terms of antitrust with Paramount, there is like a little bit of, where's the money coming from? Does CFIUS need to review it? Which they say it doesn't because there's Middle Eastern money, there's Middle eastern money involved.
- [14:36]
Peter Kafka
24 billion.
- [14:36]
Lucas Shaw
Billion comes from three different sovereign wealth runs in three different countries. Saudis, Qataris, Emiratis, and an organization called CFIUS tends to review kind of foreign ownership of U.S. businesses. The Ellisons have tried to structure this deal in a way they say will not require CFIUS review because none of those entities will have any governance rights. Whether that's actually true, we'll see. And on top of that, Paramount and Warner Brothers Discovery, if you combine their TV network assets, they control a lot of what's on linear television. Obviously a declining business, but still incredibly influential. And both, you know, obviously both sides are saying the other one requires more scrutiny than themselves.
- [15:18]
Peter Kafka
So you're one of many people who says CFIUS review, which I think it's correct to say it, but I think it's a euphemism of saying, hey, it's kind of wild that $24 billion of Middle Eastern oil money. And again, it's not from companies in those countries, it's country's sovereign wealth force. It's from the countries direct extension of those countries. By the way, that $24 billion number is double what the Ellisons themselves plan on putting into this deal. And you would think from the right, from the left, from people who are just flat out against people from the Middle east and people who have real concerns about Crown Prince of Saudi Arabia. Had a Washington Post journalist murdered in 2018, you would think there'd be more outcry about that. I have been surprised there hasn't been or really much coverage of it at all.
- [16:11]
Lucas Shaw
Do you think there would be if they were the. If they had been the winning bidder, though?
- [16:15]
Podcast Host (Ad Reads)
I.
- [16:16]
Peter Kafka
Well, that's kind of one of the questions because I've been asking a bunch of folks this relates to another question which was I was a little shocked to see how strong the initial reaction against Netflix winning this was from Hollywood. And I kept thinking they're both of concern if you're in the business of making movies and television shows and you make your living in Hollywood. But I would think you'd be equally concerned about the Ellisons and the Saudis in particular owning this entity. And so why do you think that group people has not complained?
- [16:49]
Lucas Shaw
Well, I think the entertainment business would have pushed back on either deal if Paramount had won, which was the expectation for going into it. All of the noise that there's been about Netflix in movie theaters wouldn't really exist. Right. Because Netflix wouldn't have won or all the concerns about, oh my God, is Netflix gonna own all of Hollywood. People would be focused on aspects of Paramount's deal. They would be lamenting the loss of a movie studio. They would be probably talking about foreign ownership. There'd be a lot more discuss question of what are the Ellisons planning for CNN and what's going to happen with the news business. So I think the fact that Paramount didn't win at least yet is a big part of it. The other is just even though Netflix has spent so much money on programming over the years and Ted Sarandos has worked very hard to become kind of a leading figure in the industry and they are still treated by many as something of an outsider in the very.
- [18:00]
Peter Kafka
Outsider whose wreck community business is the other part of it.
- [18:03]
Lucas Shaw
Right. Well, that, and that's what I was going to say next is a lot of the changes over the last decade people blame on Netflix. Now, Netflix has obviously been a primary instigator of that. But rather than just say all of our studios fucked up, this Internet threat came about and none of Them responded very well. And so we ended up up in a situation where now the most powerful player is Netflix. They would rather just say, damn you, Netflix. You do things differently. We don't like you. And there are some things about the way Netflix has done business that you have written about, podcasted about all of that that are kind of legitimate gripes. And then some of it is just kind of people upset, I thought you.
- [18:46]
Peter Kafka
Were going to say. A big reason Hollywood can't complain about Middle Eastern money is they're all flying out to the desert looking for Middle Eastern money, including some very mainstream names. Some liberal, well known liberals are out there either doing deals or hoping to get deals made with Middle Eastern oil money.
- [19:05]
Lucas Shaw
I think that's true at the top level. I don't think that's true at the worker level. Right. But also the Middle east feels like a somewhat nebulous threat to some of them. I think it's not as tangible as like, I know what Netflix. If you're a writer or a producer, you are living day to day feeling how Netflix has affected your life.
- [19:29]
Peter Kafka
Right. If you're a grip, you know there's less work being done in town.
- [19:32]
Lucas Shaw
Right. And you, even if whether that's Netflix's fault or not, there is a part of you that is blaming them. If you have to worry about like Saudi Arabian influence on CNN or the death murder of Jamal Khashoggi, it, it doesn't feel like an immediate proximate threat. Most people are self interested, so they're thinking about. It's the same reason in any presidential election. It's like, can I afford my life week to week? If I feel good about my life, I vote one way and if I don't, I vote another.
- [20:00]
Peter Kafka
One more thing on the oil money. Warner Brothers Discovery has not said anything on the record about this. They have not produced and they will any day now. A filing that says, here's how we came about deciding to pick Netflix as the buyer instead of Paramount or Comcast. But Paramount in their filing has suggested, basically you read between the lines. It looks like Warner Brothers was at least concerned to some degree about the sources of financing. Is that it was, but it's unclear to me. Is it. Do you think that is because they're saying, well, we're uncomfortable with Middle east money or just that every time you come to us the deal is a little different or we have some other concerns?
- [20:41]
Lucas Shaw
All of the above from the conversations I've had with people involved in the deal, there was concern that the kind of the paperwork and the way the money worked seemed to change with each offer. There was concern about Middle Eastern money, if not ethically, that it would invite greater regulatory scrutiny that they didn't want. And then the, I guess the, the more conspiratorial argument would be that it was also a really good pretext for accepting the Netflix deal that they wanted more in the first place.
- [21:19]
Peter Kafka
We'll be right back, but first, a word from a sponsor.
- [21:25]
Podcast Host (Ad Reads)
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- [23:50]
Lucas Shaw
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- [23:52]
Peter Kafka
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- [23:56]
Podcast Host (Ad Reads)
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- [24:10]
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- [24:11]
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Peter Kafka
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Peter Kafka
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- [25:23]
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- [26:33]
Peter Kafka
And we're back. What prompts one of these two titans to tap out? Bow out. When do they say, all right, we cannot, it's a done deal?
- [26:41]
Lucas Shaw
I mean, it's too much money, too much hassle. I assume they've been in it for months now, so it can't just be we change our mind, right? It's gotta be. We have officially reached A price that we don't want to pay. And how, like if you think back to what happened where, you know, Disney agreed to buy most of the entertainment assets from Fox and then Comcast comes in and says, hey, wait a minute, we're going to come up over your offer so that the board has to really think about it, which then forced Disney to pay even more. Yep, we're in a very similar situation here. I mean, a little bit different in that there hadn't been sort of this. And you can correct me if I'm wrong, I don't remember there being sort of like a, you know, a public auction between multiple parties with that one.
- [27:28]
Peter Kafka
Nothing close to it.
- [27:29]
Lucas Shaw
Disney and Fox just said, we have a deal. And everyone went, holy crap. And then Comcast came in. But in this, it is similar in that Warner Brothers has agreed to a deal with Netflix. Paramount is not going away and it may get to a price where either side finally says, too rich for my blood, I don't want to do it. We haven't actually added to the offers yet, so we're not there yet. And it doesn't feel from the behaviors. Both Paramount and Netflix have really dug their heels in their. You know, Netflix issued, issued something this week that was essentially like a Q and A answering questions, which was presented as for our employees, but was clearly as much as anything for the public, they're real. You know, each side is very focused on combating the narratives that they think hurt their cases. But a lot of that is about kind of public perception. And I still say that this deal comes down to dollars and cents.
- [28:27]
Peter Kafka
Who needs this deal more?
- [28:29]
Lucas Shaw
Oh, Paramount, because. Because it's a smaller, it is a fundamentally weaker company. Right. David Ellison bought Paramount or merged it with his company Skydance, because that was his way of sort of getting in the big leagues. But he bought the smallest and weakest of the big Hollywood companies. Right? It's it' kind of last place or second to last place movie studio. It's kind of a third tier streaming service. It still makes pretty much all of its money from these cable networks that are slowly dying or rapidly dying. And so if you were trying to position that company for the future, look, he can take all the money that they're going to spend on this deal and just invest it in Paramount. That is the argument against these deals is like rather than dealing with two years of pain in the ass process, just buy a bunch of stuff, right? Go out and buy some ip, spend a bunch of shows.
- [29:25]
Peter Kafka
This is what Netflix would do when they when they didn't put on deals.
- [29:30]
Lucas Shaw
So Netflix is obviously in a much stronger position in terms of its stock price, in terms of how much money, in terms of where its streaming service is. However, I would say that the fact that Netflix is seriously going after this deal signals to longtime Netflix watchers that maybe the company is not on a secure footing as the public would be led to believe.
- [29:49]
Peter Kafka
Yeah, that's what you and I were talking about a couple weeks ago, is a strength or weakness. It can be some of both.
- [29:55]
Lucas Shaw
Right.
- [29:56]
Peter Kafka
I mean, you, I guess you could make the argument if you're on the Netflix side, like, look, we haven't done any of these deals before, but we never had the chance to buy hbo.
- [30:05]
Lucas Shaw
This is a one of a kind asset. We don't have to deal with the cable networks anymore. And, you know, the odds of anything like this coming up again are very slim because if David Ellison buys it, he's not getting rid of it. Universal is not going anywhere. Disney's not going anywhere. What else?
- [30:22]
Peter Kafka
All of Warner Brothers, Discovery, Netflix and Comcast only wanted to buy the studio and basically hbo. What, what is the most valuable asset there? Is it the movie studio or is it hbo, which is a very good streamer but not the most popular?
- [30:39]
Lucas Shaw
I don't know what the, the, which asset would be given like the, you know, the greatest valuation if it were to be traded on a standalone basis. But I think for both of the companies trying to buy it, that the studio film, yes. But even more importantly, the television studio is the most valuable asset because Warner Brothers, if you combine a film and TV studio, is either the number one studio or maybe the number two studio in Hollywood. It's television business. They make Ted Lasso for Apple and they make a bunch of hit shows already for Netflix and they produce for everyone and they own a deep catalog of friends and I believe Big Bang Theory and just a bunch of things that would be great in any streaming catalog. So that to me is the most valuable asset, the streaming service. And HBO's obviously also has a strong brand. Strong catalog I think is. Maybe as if valuable for Paramount because of how it can supercharge them in streaming. For Netflix, it's largely about catalog. It's almost as valuable as the Warner Brothers catalog, but I don't think quite as.
- [31:50]
Peter Kafka
And when this deal gets done, one way or another, we've been talking, you and I have been doing versions of this podcast for years saying, when's all the consolidation happening? When's all.
- [31:59]
Lucas Shaw
It's happening?
- [32:00]
Peter Kafka
It's happening. We will be left with some version. I mean, Comcast will still be here. Disney's around, like, is there more merging left to happen? Comcast had been getting out of the media business. Then it was signaling it wants to spend more money on media. Do they go buy something else? Their line, by the way, is sort of the Netflix line now. Well, the money that we weren't going to spend on buying this asset we can now put into programming. They don't quite say that, but that's sort of the suggestion.
- [32:27]
Lucas Shaw
And that they, you know, there was no way that they were going to come to the price that these two parties have come to. I mean, what happens next pro, might depend a little bit on who wins this. I think if Paramount wins, then there's less of an a knee jerk reaction from other players because you have two smaller, somewhat struggling entities combining and people will wait and see what David Ellison does. I think if Netflix gets it, it's a bigger problem. For it's one where Disney sits there and goes, oh, our big advantage on Netflix has always been that we are sitting on the greatest library of intellectual property and characters in the world. And now Netflix has something that's almost as good as ours, maybe better, depending on how you're valuing what you're looking at it. So. So it could provoke a response from them, but I don't really know. I mean, that's a year or two down the line.
- [33:28]
Peter Kafka
And also, can you even move the pieces around much more after this?
- [33:32]
Lucas Shaw
Well, I think it'd be different types of pieces, right? Like Comcast had that flirtation with electronic art. The video game company bought by Saudi Arabia instead bought by Saudi Arabia. Is there something like that out there? Does someone try to buy Take two Interactive, the Grand Theft Auto game studio, among others? Again, they're not that many, many huge companies.
- [33:54]
Peter Kafka
Do one of those get sold to a giant tech company?
- [33:57]
Lucas Shaw
Sure does. Does Comcast say, you know what, we'll sell NBCUniversal to go? I mean, I may. I don't think that deal's gonna happen, but we'll sell it to Google. Or does Disney finally do the thing that everyone's been wondering about, like, is Apple gonna buy Disney? But why do you think that?
- [34:13]
Peter Kafka
None of the traditional tech players, obviously Netflix is considered tech player, but none of the traditional tech companies that we know of made a real bid for these assets. We've been told forever that they wanted no part of a cable network, so that made sense. But if you could buy Warner Brothers Studio and hbo, that seems like the kind of thing a big tech company with interest in streaming would take a run at. That's certainly what David Zaslav was hoping and saying he wanted Amazon or Apple, someone like that to come in.
- [34:42]
Lucas Shaw
Apple and Amazon are the only ones that would make any plausible sense. Right? This is just not in the wheelhouse for a Google or a Meta or a Microsoft. There's nothing for them to do with it unless they wanted to fundamentally change their approach to streaming and entertainment. So Apple and Amazon are the ones who sort of play in the same pool as these others. I mean, Apple never does big deals and their entertainment business still feels like a flirtation. Not a flirtation, but like a nice little side project. Right. It's not like central to the Apple business. Entertainment has become a little more central for Amazon. They have invested real money, committed to long term sports rights. I don't know. They did the deal for mgm, which was like a half measure compared to this. I think it's been a mixed deal for them at best. They've gotten a little bit out of it, but it's not like been transformational for streaming. I believe for either company it would be the biggest deal that they've ever done. And how are you going to your shareholders and saying the biggest deal we need to do is in this business that is not our most important business. It's not our second most important business. It might not even be our third most important business.
- [35:53]
Peter Kafka
We'll be right back. But first, a word from a sponsor.
- [36:00]
Podcast Host (Ad Reads)
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- [36:57]
Peter Kafka
Zoe. This thing weighs a ton. Drew Ski, lift with your legs, man. Santa. Santa, did you get my letter? He's talking to you britches.
- [37:03]
Lucas Shaw
I'm not.
- [37:05]
Podcast Host (Ad Reads)
Of course he did. Right, Santa?
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Peter Kafka
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Lucas Shaw
Or give it as a gift.
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Podcast Host (Ad Reads)
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Peter Kafka
Nice. My side of the tree is slipping. The holidays are better.
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Lucas Shaw
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Peter Kafka
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Lucas Shaw
With 24 monthly bill credits for well.
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Peter Kafka
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Peter Kafka
With auto pay plus taxes and fees required.
- [37:52]
Podcast Host (Ad Reads)
Check out in 15 minutes or less per line. Visit t mobile.com support for this show comes from Amazon Ads. It's time for some fresh tech consumer insights. And Amazon Ads just released a study that's seriously challenging. What we thought we knew about electronics shoppers. Remember when we assumed everyone bought headphones out of necessity? Turns out, according to their study, only 54% do. The rest, they're impulse buying or chasing the latest drop. They also found out that 45% of gamers buy completely spontaneously. And despite all the digital options, they're reporting that 38% of games are still bought in physical stores. Not exactly what you'd expect in the age of downloads. For brands, this means rethinking their approach to reaching customers throughout the purchase journey. From building awareness with streaming TV ads, to driving consideration through display advertising, all the way to capturing those crucial purchase moments and more. Ready to rethink your Strategy? Head to advertising.Amazon.com to learn more. That's advertising.Amazon.com.
- [39:03]
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- [40:20]
Peter Kafka
And we're back. If we didn't start off this conversation talking about the fate of Warner Brothers, I'd say wow, it seems like a big year for AI in Hollywood. We've been hearing about this and maybe this is the year it's things are finally clicking in. Last week Disney and OpenAI did a deal. Disney is apparently writing a check for a billion dollars, which is surprising to me. I I thought they were just getting in kind equity because they don't have that much cash, but they're writing a billion dollar check to OpenAI. They're going to license some of the characters. Do you think that deal is meaningful or symbolic or both?
- [40:54]
Lucas Shaw
I think it's more symbolic than commercially meaningful right now. It is a huge deal that the kind of biggest most one of the most storied companies in Hollywood that is also one of the more risk averse companies, famously protective about their IP did a deal with kind of the big new player on the block in artificial intelligence. So I think for that it's a huge deal. It will usher in other companies trying to do similar deals whether it's with OpenAI or with Google or with someone else. How much what they've agreed to really matters. You know, getting a billion dollars worth of stock in OpenAI at the current valuation, you know, not that great. I mean if it becomes a multi trillion dollar company, it's a nice return for Disney, but it's not that significant. Allowing people use the Disney characters within the Sora app is probably the biggest the single. You know, it's the biggest deal. It'd be like Disney, it'd be like the companies that did licensing deals with YouTube in 2007, 8 what have you. We don't really know what popular like really popular AI video looks like yet. We don't know how important it will be to be able to include a character, although not their voice.
- [42:19]
Peter Kafka
And whether, frankly, whether users generating this stuff is meaningful. We all sort of have been trained to know that that is meaningful. But we don't really know if people.
- [42:28]
Lucas Shaw
Are going to want to watch. Well, if Sora is going to be the app or whether it's going to be the Google app, or it's going to be another app you don't even know about yet, or that is lesser known. So I think it's a little wait and see on how much it matters.
- [42:40]
Peter Kafka
When's the last time you used Sora?
- [42:42]
Lucas Shaw
I don't use it very often.
- [42:43]
Peter Kafka
Yeah, I think that's the answer. And then you wrote about sort of the AI's year in Hollywood and for Bloomberg Businessweek, you should check it out. There's people who are afraid of it, there's people who say this is inevitable. The other cleavage that I think is more practical for us is it seems like to me that it's quite clear that AI, like any kind of technology is going to be used to, in production. Right? To decrease costs, increase speed, whatever it is, all variations of that. And that seems inevitable. It might make you feel uneasy, but that's just how it's going to work. The other is, is AI going to fundamentally change what gets made and what we consume?
- [43:28]
Lucas Shaw
Is it, is it just better visual effects or is the movie, is the medium itself going to be different?
- [43:33]
Peter Kafka
Is the medium itself going to be different? Do we create entirely new kinds of work that, that supplant movies? That can always be the case when you talk to people in Hollywood who are excited or fearful of it. Which, which is the version that stir. I'm assuming the thing people get most emotional about is sort of AI just coming in and replacing huge swaths of the creative business.
- [43:57]
Lucas Shaw
Correct. Nobody is going to be if it just becomes a tool to make visual effects more efficient or better. Or you can use it, I mean, some of the ways it's already being used for like pre vis visualization so that you can more quickly create a model for what you think something could look like that's not a huge deal. But if suddenly what is a 90 day production is 30 days or you have certain jobs that get replaced, or you have an example that people come up with as a good thing is like, okay, rather than having to reshoot something and have people go back on set and all of that, you can just, just you've already captured them and you can, you know, do a reshoot with AI. That sounds efficient and great, but it Also does mean less work.
- [44:47]
Peter Kafka
You were going to pay those actors to come back on the set.
- [44:50]
Lucas Shaw
And you were not just the actors, but you. You talked about grip or sound people or costume people, Right. Like, there's the concern about what if, like, do we, are we going to have makeup artists still or is it just all going to be done digitally? So that's the part where people get, get anxious and we're still in a phase where people don't know.
- [45:10]
Peter Kafka
Right.
- [45:11]
Lucas Shaw
Like you had both the actors and writers in Hollywood went on strike in 2023 and AI wasn't the issue. But over the course of that strike, it became a bigger part of it. And at the time people really knew nothing.
- [45:23]
Peter Kafka
Right.
- [45:24]
Lucas Shaw
Now, you know a little more, but it's still not really clear, right?
- [45:28]
Peter Kafka
Because, like, there's this idea of like, hey, I was. We used to call them extras. Now we call them background acts actor in this production. And it turns out that I may have signed my rights away and I'm never going to get hired as an extra slash background actor again because they're just going to digitally reproduce me. That seems pretty plausible. Now, less plausible, you'd like to believe, less plausible is, is Harrison Ford's image in like this is going to be used without his consent. But he may, he may sell those rights for a lot of money and wouldn't complain about.
- [46:01]
Lucas Shaw
Yeah, I think that consent is the key word, right. Even when you're talking about background actors and I don't know the ins and outs of whatever deals they strike. But in theory, if they capture you for a movie, they should be able to continue to use whatever they capture for that movie. They should not be able to use you in all movies going forward without paying you. And I don't think if, if you are someone who is already famous, you are in the catbird seat, as they say, because, yeah, if you were to try to use Harrison Ford again without his permission, you'd get sued. It would look really bad publicly. It just wouldn't be worth the hassle.
- [46:44]
Peter Kafka
Right? But background, yeah, and we, and we, we, we talked about this a while back. I mean, when, whenever you go on stage and very often do a media hit, someone gives you some boilerplate language to, to sign. And if you look at the release, it says, says your likeness can be used in perpetuity around the world, blah, blah, blah, we'll never compensate you for it again. And at least in my case, I just don't think people are going to be repopulating their movies with my talking head.
- [47:10]
Lucas Shaw
Right.
- [47:10]
Peter Kafka
But I think I will probably look at those contracts a little more closely going forward.
- [47:13]
Lucas Shaw
Depends how long they are.
- [47:15]
Peter Kafka
How's your deal with Spotify on the Matt Bellany show?
- [47:18]
Lucas Shaw
My deal? It's non existent.
- [47:20]
Peter Kafka
That was my little inside joke. You were featured in the Matt Bellany profile in the New York Times. There was a cameo from you, a photo.
- [47:28]
Lucas Shaw
I was featured in photos life change.
- [47:31]
Peter Kafka
After being appearing in the New York Times print.
- [47:34]
Lucas Shaw
It did not. I heard from a lot of Just so we're clear, I get the New York Times print on Sunday, but primarily I heard from publicists and family, friends and relatives.
- [47:45]
Peter Kafka
65 and up fan, that's who listens to this podcast too in some cases. Lucas Shaw. It's the end of the year. Give me some awesome media you consumed this year that you think other people might want to read, listen to, watch. Doesn't have to be one of each. Whatever you like.
- [48:03]
Lucas Shaw
Yeah, I don't I the movies I've been struggling with because I've seen a lot of stuff that I've liked but nothing that like was clearly like. I went, I just went to see this Brazilian movie, the Secret Agent, which I really enjoyed and I would recommend people seeing but I keep waiting for a movie to like knock me away and say that was my favorite movie of the year. That has not happened yet. The last TV show that I watched, other than the guilty pleasure that is Landman that I would recommend is the Martin Scorsese docuseries on Apple. If you care about him or his movies, it's really great and it is not hagiography. It does not pull punches about the complicated person that he is or drug use or any of that. We've had a really good run of new music over the last few months. The new Lily Allen, the new Rosalia people are in love with this band Garden. I would recommend all those said like.
- [48:55]
Peter Kafka
A really middle aged guy like this band Geese. Yes. Did you see the clips of Cameron Winter, who's the Geese front man performing at Carnegie hall with Paul Thomas Anderson was filming him there.
- [49:07]
Lucas Shaw
He performed in la, I believe Sunday night. And I'm sad that I missed it. But yeah, those are all good things if you want something slightly less popular. One of the most fun shows I've been to this year was a British punk group called the Lambrini Girls. I've never really cared about punk music, but I've gotten a little into it this year so they're fun.
- [49:30]
Peter Kafka
Okay. Lucas Shaw, Semi old man.
- [49:33]
Lucas Shaw
Semi old man punk music a little bit.
- [49:35]
Peter Kafka
Lucas Shaw Great to see you again. Likewise. Thanks for coming on once again. Enjoy the rest of 2025. See you next year.
- [49:42]
Lucas Shaw
See you then.
- [49:43]
Peter Kafka
Thanks again to Lucas S.H. shaw, who's awesome. We'll have him on more often next year. How about that for a New Year's resolution? Thanks again to Charlotte Silver, who produces and edits this show. I'm delighted to work with her. She's great. Thanks to our sponsors. You know why we love our sponsors? They bring this show to you for free. And thanks to you guys. Literally, there is no point in making this thing unless you guys are listening and engaged and writing and talking and sharing this stuff. I'm very appreciative. Thanks a lot. We've got a couple cool bonus shows coming for you the next couple weeks. You'll see what those are when we drop them and I'll see you in January. Thanks.
- [50:26]
Podcast Host (Ad Reads)
Support for this show comes from Amazon Ads There's a lot of folksy wisdom out there regarding advertising truisms. Things that people like to say, say. But that's not the same thing as hard data. Luckily, Amazon Ads just released a study that challenges what we thought we knew about electronics shoppers. Remember when popular opinion assumed everyone bought headphones out of necessity? Turns out only 54% do the rest they're impulse buying or chasing the latest new product launch. For brands, this means rethinking their approach to reaching customers throughout their purchase journey, from building awareness to capturing those crucial purchase moments. Ready to rethink your Strategy? Head to advertising.Amazon.com to learn more. That's advertising.Amazon.com.
- [51:16]
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