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Netflix Wins Warner Bros. Discovery: IP, Antitrust, & Rivals 12/05/25
00:35:56
Netflix has reached a deal to buy Warner Brothers Discovery film and streaming assets, ending a dramatic bidding war between Paramount Skydance, Comcast, and Netflix. Andrew Ross Sorkin, Becky Quick, and Joe Kernen examine the terms, the break-up fees, the regulatory risks, and the math for shareholders with CNBC’s David Faber. Together, they consider whether Paramount Skydance owner David Ellison will pay the breakup fee and what players are willing to pay for key intellectual property. Entertainment journalist and Puck founding partner Matt Belloni offers his insight from sources inside Hollywood and warns, many creatives in the industry are not happy about the deal. David Faber - 10:41 Matt Belloni - 21:05 In this episode: Matt Belloni, @MattBelloni David Faber, @davidfaber Becky Quick, @BeckyQuick Joe Kernen, @JoeSquawk Andrew Ross Sorkin, @andrewrsorkin Cameron Costa, @CameronCostaNY
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- [00:00]
Andrew Ross Sorkin
And now a next level moment from ATT Business. Say you've sent out a gigantic shipment of pillows and they need to be.
- [00:06]
David Faber
There in time for International Sleep day.
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Andrew Ross Sorkin
You've got AT and T5G so you're fully confident, but the vendor isn't responding. And International Sleep Day is tomorrow. Luckily, AT&T 5G lets you deal with any issues with ease, so the pillows will get delivered and everyone can sleep soundly, especially you.
- [00:21]
David Faber
ATT 5G requires a compatible plan and.
- [00:24]
Andrew Ross Sorkin
Device coverage not available everywhere.
- [00:25]
David Faber
Learn more@att.com 5G Network.
- [00:30]
Andrew Ross Sorkin
At Capella University, learning the right skills could make a difference. That's why our business programs teach you relevant skills you can take from the course room to the workplace. A different future is closer than you think with Capella University. Learn more at capella. Edu. Bring in show music please.
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This is Squawkpod and I'm CNBC producer Cameron Costa. On today's episode. Netflix wins the bidding war for Warner Brothers Discovery, at least for now.
- [01:01]
Joe Kernan
How this huge deal will play and.
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Andrew Ross Sorkin
Pay out with CNBC's own reporting. Thanks to Andrew Ross Sorkin.
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Joe Kernan
My sources this morning are now saying that paramount had bid $30 and thanks.
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David Faber
To David Faber, it's an enormous premium that Netflix is willing to pay here, 85% of it in cash.
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Andrew Ross Sorkin
We're doing the transaction math for shareholders.
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Becky Quick
Do they value the enviable margins? Is it back to content is king.
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Andrew Ross Sorkin
The power of intellectual property? With a very plugged in Hollywood journalist Matt Bellamy. I don't think Netflix is buying Warners for the stock value. They've got that. What they need is to grow subscribers and to grow the overall audience.
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Joe Kernan
Plus Hollywood's reaction.
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Andrew Ross Sorkin
The industry is not excited about this. I mean my DMs and texts blew up last night with some pretty dour messages.
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Joe Kernan
And one of the biggest questions hanging.
- [02:01]
Andrew Ross Sorkin
Over it all, how Netflix and Warner Bros.
- [02:03]
Joe Kernan
Discovery might win over regulators. It's not just in the context of streaming itself, but to look at it in the context of time spent online, eyeballs and the like. It's Friday, December 5, 2025.
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Andrew Ross Sorkin
It's like an episode of Succession. Squawk Pod begins right now.
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David Faber
Stand Becky by in three, two, one.
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Becky Quick
Good morning, everybody. Welcome to Squawk Box right here on cnbc. I'm Becky Quick along with Joe Kernan.
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Joe Kernan
And Andrew Ross Sorkin making some headlines though right now. Here's the big news. Warner Brothers Discovery has reportedly entered now exclusive deal talks for sale of its movie studio and HBO Max streaming platform to Netflix. Reports say That a deal could come soon. CNBC was told another round of bids from the companies interested in Warner Brothers assets was due yesterday. Netflix, Paramount, Skydance and CBC parent company Comcast have been vying for all or in some cases parts of the business. And now Paramount recently questioned the company on how it was conducting its sales process. CNBC reported yesterday that Netflix was in the lead for Warner Brothers and it's believed to be have an 85% offer in cash appears to be higher. Unclear whether, you know, Paramount, Joe, put in a breakup fee that apparently is higher on the other end. So, you know, there's. And really the whole question, I don't know if it's the whole question, but a big part of the question is what does this regulatory environment really look like? You know, which deal would get approved and not just which deal would get fought. In most cases, both deals are going to get fought not just here in the United States, but likely in Europe and by states almost across the board. It's going to be.
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Matt Bellamy
Paramount keeps pointing out that Netflix got major problems in Europe, but there's going.
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Joe Kernan
To be problems for Paramount for, for all of them. And the question is, who can get through that gauntlet and what does that look like on the other side for shareholders?
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Matt Bellamy
Jaslov supposedly prefers Netflix, but I bet it's more money because Paramount is sticking to the notion that we can do this so we don't have to pay as much.
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Joe Kernan
Right? No, that's, that's part of the.
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Becky Quick
If they get it, it's also not the whole company. It's hard to, it's hard to compare the deals. Right. Because you're talking about part of the company versus the full company.
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Joe Kernan
In the Netflix case, it appears that it's a higher bid just for the streaming.
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Matt Bellamy
Streaming services.
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Joe Kernan
So then you get it's that plus. Plus. Whereas in the case of Paramount, it appears they have a lower bid for the entirety of the whole thing. It may only be off by a dollar or two. But that's, that's the game here. It's. How do you then decide from a regulatory perspective what's going to happen here? But I do think you may be right. Maybe David thinks about Netflix as a better. If you read some of the descriptions and you talk to some of the people around it, they talk about Netflix as a steward of these assets in a different way than they think of Paramount.
- [04:58]
Matt Bellamy
For example, Paramount knew that they had the administration on their side. It wouldn't matter what breakup fee they were offering because they know that they could almost have A wink and a nod to be able to get it done.
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Potentially.
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Becky Quick
But as Andrew points out, it's not just the. It's not just the Trump administration you got to get passed.
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Matt Bellamy
Right?
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Joe Kernan
Right. We've got some news.
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Matt Bellamy
That shares are halted. Warner Brothers Discovery shares are halted. So I don't know. I don't know. It could.
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Joe Kernan
I think you're here.
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Matt Bellamy
It's out.
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Joe Kernan
I think we've been waiting for it.
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Matt Bellamy
Press release is out.
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Joe Kernan
Press release is out.
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Matt Bellamy
And.
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Joe Kernan
And let's explain to the public what's happening here.
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Matt Bellamy
Not the biggest secret in the world that Netflix.
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Joe Kernan
Netflix is the winner.
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Matt Bellamy
Is the winner and the deal's done apparently at this point and the details will be forthcoming and.
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We'Ll see whether regulatory muster becomes a problem. I know that at least Warner Brothers is halted at this point. Figure Netflix probably is at this point. Let's see, following it will be after, obviously, the separation of, you know, some of the.
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Joe Kernan
You have, you have two deals going on here. So you have that one half. Netflix is going to be buying this.
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Matt Bellamy
27 business, 2775 a share.
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Joe Kernan
It says cash in stock for 2775. And most importantly, on the regulatory side of this deal, if you're looking, the breakup fee is $5.8 billion.
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Matt Bellamy
More than.
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Joe Kernan
So, you know, people have been discussing how regulators would think about this transaction.
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Matt Bellamy
Right. Equity value, 72 billion. Total enterprise value, $82.7 billion at this point.
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Joe Kernan
That's with the debt. Piece of it.
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Matt Bellamy
That's with the debt.
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Joe Kernan
Right.
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Matt Bellamy
It is one of the most storied Warner Brothers, one of the most storied studios and entities in. In Hollywood, obviously. And it culminates, I guess, with. With Zaslav able to deliver, I guess you would say, to shareholders at this point of Warner Brothers, a heck of a lot better than $12 or $11 a share.
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Joe Kernan
Give it. Given. Given where it had fallen to.
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Matt Bellamy
Given where it had fallen, the big.
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Joe Kernan
Question on the regulatory side is going to be, you know, the argument effectively here is that if you look at the Paramount transaction, that that would have effectively taken out a studio, Right. In this case, you're not taking out a studio. That's a big part of the argument. The other argument that Netflix is effectively going to have to make and Time Warner is going to have to make, or I should say Warner Brothers going to have to make effectively, is to argue that it's not just looking at the marketplace in the context of streaming itself, but to look at it in the context of time spent online eyeballs and the like. You're going to have to effectively include YouTube viewing and Amazon prime and so many others so that you're not just looking at the pay, the effectively the paid streaming business. What you're looking at there, I'm looking.
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Matt Bellamy
At the cash component is 23, 25, 23, 25, $4.50 in the shares of Netflix common stock. That comes up to 27.75. There's collars on the shares. There's, there's, you know, this is going.
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Joe Kernan
To be a complex, to be a complex deal. And by the way, this is going to be in the regulatory mix for a long time.
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Matt Bellamy
It could close in a year and a half. That's what I think they would hope that it's able to close. Does Zaslav run Warner Brothers, the studio?
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Joe Kernan
I'll try to look through this and find out. What I also don't know is, and look, this is where the next piece of this comes. Does Paramount try to go hostile? Is there some other element of this that could happen? I don't know. What do you think regulators do? Jason Kylar, who runs, or ran, I should say Hulu for a very long time, came out last night. I don't know if you saw the quote he said, if I was tasked with doing this, I cannot think of a more effective way to reduce competition in Hollywood than selling WBD to Netflix. So there's going to be a lot of consternation in Hollywood, by the way. There would have been consternation whether it was sold to Paramount or to Netflix. But clearly there's going to be lots of disagreement about, you know, who should be the owner effectively of this asset. But it does appear that Netflix is now going to be the owner, at least going to attempt to be the owner and that Warner Brothers Discoveries board has decided to take that bet and to take that bid.
- [09:24]
Becky Quick
Guys, it's probably worth taking a look at shares of Netflix just longer term on this because it's a market cap of about $438 billion. You know, it's the media company that has been the darling of the street. It's off its 52 week high, which was $134.12. 10322 is where it closed yesterday. But you're still talking about, if you look over the last five years or even the history of the stock that that was an, when it was sitting at those levels it has done very well, particularly relative to some of the other media companies. And you wonder what wrapping this in.
- [09:56]
Matt Bellamy
We should point out that they get $2 also approximately from the spin off of the linear business. So if you want to actually add in, it might actually that back in come to 29 to $30. In terms of what?
- [10:11]
Joe Kernan
Yeah, no, this is what look, David had said. David. David Zaslav. He said from the beginning he wanted $30 a share. And it looks, this is effectively arguably a $30 deal share if you, if you believe that the spinoff ultimately captures that.
- [10:25]
Matt Bellamy
The $2.
- [10:25]
Joe Kernan
The $2. Let's get Faber on the phone because he's calling in right now. Hey, David. Yeah, hey.
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David Faber
Hey, Andrew.
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Joe Kernan
Tell us what you know.
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David Faber
Well, you guys obviously have the terms, I guess at this point. And listen, I mean the price itself, you have to just step back for a second and consider because 2775, 2350 of it in cash and then the rest in stock that's going to be collared is quite a number. And remember, it's for the studio and streaming business. So in addition, because they reversed the split, there will be a remain co that will trade publicly called global networks made up of all the linear cable networks of Warner Brothers Discovery. That will also have a value. Maybe it's $2.50, maybe it's as much as four bucks. Put it all together and you do end up with a value of at least, let's call it over $30 a share. And don't forget, guys, for a stock that was trading at about 11 or 12 bucks before all this started. So it's an enormous premium that Netflix is willing to pay here. Much of it, as we said yesterday, As I reported, 85% of it in cash and as you were just talking though and has come up numerous times in my reporting, of course as well, is the question of antitrust and whether in fact this is going to be something that can get past the regulators and of course Donald Trump as well, given you are putting together the number one and number four streaming companies in the world. And that will continue to be a key question. There is a $5.8 billion reverse break fee, meaning that if Netflix is unable to get to the finish line, $5.8 billion will go to Warner Brothers Discovery. But many shareholders will argue that's not enough to compens what could be a very long process that could still end in them not owning the company. You just don't know. We'll have to wait and see. But a stunning outcome. Netflix clearly showing that it was very much determined to own this business. And again, guys, I'll defer to you as well and your thoughts. But you know, Netflix Pursuing this so aggressively, you wonder what of its shareholders will question whether in fact what it was seeing that made it want to go down this road, given its multiple to earnings, has been the envy of the media business for many years. Is it putting that multiple at risk?
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Joe Kernan
So, David, a couple of things. You know, as I was talking to folks around this transaction yesterday, you know, we've heard and there's been reporting that Ted Sarandis had been down to see the president and the White House, that they, that they felt, I don't know, some assurance that they could actually move ahead with this deal. In part, by the way, my understanding is because CNN and the linear channels are not part of this and that potentially that might allow, you know, or this administration might look more favorably on this deal because it's not thinking about some of those linear, linear businesses. I don't know if you think that's true and whether you think that the real impetus for this is that actually so much of the library programming that Warner Brothers has lives or has been sold to Netflix and they wouldn't have access to that in the future. And the idea that they could actually take down material costs, given that they would obviously now own hbo.
- [13:45]
David Faber
I think that's all true. I mean, I think your reporting on Sarandos and the president is important because again, that goes to that key question. And as we know, the president ends up being a key decision maker in so many of these kinds of things. There had been a perception, of course, that Paramount had a much easier path. And I said this many times. First of all, given they were paying a number for the entire company, and secondly, but not less important, that they had a very strong relationship was believed Larry Ellison with the president and therefore would have an easier go on the antitrust front when it comes to what Netflix gets here. You're absolutely right. The library is certainly one of the key things. They no longer measure this company in terms of subscriber growth. Right. It's simply time spent. How much time is our audience with us and with the ad business as well, an important component of their growth plan, that library is going to be key and franchises they're going to be able to bring over. And not to mention the HBO shows and things like Game of Thrones and everything else. I continue though, you know, but you've got to remember, Andrew, if they're no longer buying that programming, so to speak, they're keeping it for themselves. It's sort of a wash. And, you know, there will be a question as to whether or not that's really going to contribute to any real growth for the company. There may have been a significant threat of Paramount in particular had bought the company that they would no longer have access to certain programming. That obviously is very important. And as you guys well know, they don't own a lot of their own ip, which is something David Zaslav will tell you so many times. And that's a key consideration one would have to think for them as well.
- [15:19]
Matt Bellamy
Why didn't Netflix just buy this and Discovery a couple of years ago, basically getting everything but Discovery sort of right?
- [15:28]
David Faber
I don't know. Why didn't Paramount buy Joe like when they instead of, you know, or David Ellison and Larry Ellison. Why don't they just step up and try by this thing when it was eight bucks?
- [15:38]
Matt Bellamy
And who's going to pick over the.
- [15:41]
Becky Quick
Speaks to the changes assets? Yeah, that's a good question. One thing I think this does kind of speak to though is that constant fluctuation in what the market values. Do they market. Do they value the enviable margins that David was pointing out that Netflix has before or is it back to content is king and there's only so many of these, these content places to go around. It's probably noteworthy that Paramount Skydance shares, at least until just a moment ago, were off by even more than Netflix. The idea that they might miss out on this asset. So they're down by two and a third percent. That's not a concern about overpaying. That's reflected there. That's a concern about there's only so many of these assets to go around and you have to have that content and you have to get bigger. So I think it's that constant battle that we've seen play out over the last several years in the market over what the what investors are going to value at any given point.
- [16:32]
David Faber
You know, Becky as well, I mean, you're right. And I wonder whether this will usher another round of consolidation because to your point, Paramount was looking at the possibility of $6 billion in synergies from putting these businesses together. Those are huge. Obviously cost synergies and giving it the scale at its streaming company, Paramount plus to really compete globally. And so, you know, you have to wonder. They've done better than many had anticipated at least the last quarter in terms of where they came in on EBITDA versus of course the promise that was far above that some time back. But that said, you know, the opportunity here is or the miss is a significant one for Paramount. They competed very aggressively here. As you know, they started all this off. They made five bids, remember? Three of course before the auction began and then two more I think they were contemplating. I have to find out from reporting going as high as the high 20s, maybe even to 30 bucks a share, much of it financed with Larry Ellison's fortune. And yet the choice here apparently from Warner Brothers was to go with Netflix despite again what we will come back to numerous times being that risk in terms of what the regulatory front will look like for the company.
- [17:45]
Joe Kernan
Okay David, want to thank you for calling in with all of the latest.
- [17:52]
Tease will be next next on Squawk.
- [17:55]
Andrew Ross Sorkin
Pod, the streaming match of the day, month, decade, even lifetime. More on Netflix is next, but the deal isn't done yet. Will Paramount Skydance owner David Ellison give up so soon? Media watcher Matt Bellamy, founder of Puck joins us. This is a once in a lifetime opportunity to own a Hollywood movie studio. And if you the Ellison's entire game plan is to own Warner Brothers and Paramount and maybe a piece of TikTok. And that's the plan. Maybe it's worth paying that kind of fee to come in over the top. Plus comments from Netflix's co CEO Ted Sarandos.
- [18:35]
Joe Kernan
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It's a classic corporate power move, but the real power move having end to end visibility on your most critical shipments. FedEx the new power move.
- [19:05]
Andrew Ross Sorkin
This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab. Join host Keith Lansford for this information packed daily market Preview delivered in 10 minutes or less, including projected stock updates, monetary policy decisions and key results and statistics that may impact your trading. Download the latest episode and subscribe@schwab.com MarketUpdatePodcast or find Schwab Market Update wherever you get your podcasts. And now a next level moment from AT and T Business.
- [19:38]
Joe Kernan
Say you've sent out a gigantic shipment.
- [19:40]
Andrew Ross Sorkin
Of pillows and they need to be there in time for International Sleep day. You've got AT and T5G so you're fully confident, but the vendor isn't responding and International Sleep Day is tomorrow. Luckily, AT&T 5G lets you deal with any issues with ease, so the pillows will get delivered and everyone can sleep soundly, especially you.
- [19:57]
David Faber
AT&T5G requires a compatible plan and device coverage not available everywhere. Learn more@att.com 5G Network.
- [20:09]
Joe Kernan
This is Squawkpod up And Becky Q.
- [20:13]
Becky Quick
You're watching Squawk Box right here on cnbc. I'm Becky Quick along with Joe Kernan and Andrew Ross Sorkin. Our top story this morning, Netflix announcing that it has reached a deal to buy Warner Brothers film and streaming assets. The cash and stock deal is valued at 2775 per Warner Brothers share, although there are some other things that could go along with that, too, that could boost that price. Warner Brothers will spin out its TV networks, including TNT and cnn, into that remain co called Global Global Networks. That acquisition is expected to close after the separation takes place, which is now expected in the third quarter of next year.
- [20:48]
Matt Bellamy
Joe, very good. All right, let's bring in talk more about that. Matt Bellamy, founding partner at Puck. And I was talking about this earlier. Matt, thanks for joining us on Quick Notice. We got a lot of questions, obviously, but here's the quote that I had when what the letter Paramount sent basically sent it to Zaslav saying, look, you have abandoned the semblance and reality of a fair transaction process. Now it's done. And I mean, does that mean are they coming back?
- [21:21]
Andrew Ross Sorkin
They basically laid the groundwork there to claim that this was an unfair process. So maybe they'll sue. Maybe they'll go directly to the shareholders, say that this is not the best deal. We could have offered you something better. We were cleaner. We, we were going to take out the entire company. Now you've got to go through with this entire split and much more uncertain than what they were offering, they would argue, but they have not said what they're going to do yet. That's the big mystery today because.
- [21:52]
I.
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Matt Bellamy
Don'T want to say it's arrogance, but it's almost like they wanted everyone to just believe that they got the administration on their side. So they almost were it was almost like a sense of entitlement that, look, you need to talk to us at 24, even if other people at 30, because they're not, we can tell you, you know, wink and a nod, we can tell you it's not going to happen for you with our, you know, with our connections with the administration.
- [22:21]
Andrew Ross Sorkin
I mean, that was certainly the messaging that was going on. I mean, they basically said that we don't believe the others can close. And they may be right about that. I mean, this is going to be a very difficult regulatory process.
- [22:34]
Matt Bellamy
You're excited. I can see it for the next year and a half. You're like Ka Chang. You can't wait to watch this play out, right? Kind of too. It's unbelievable.
- [22:44]
Andrew Ross Sorkin
It will be especially when you inject the whole Trump of it all. I mean I would not be surprised if the President weighed in today on this transaction. I mean other Republicans have already been making noises about it. We saw Mike Lee, the antitrust committee member. He has already been saying he's going to look closely at this transaction. So there is messaging going on within the Republican Party about this transaction and we'll see now if they act upon it.
- [23:14]
Matt Bellamy
Do you know how much the President would like Barry Weiss to be.
- [23:20]
Overseeing cnn? I mean I would almost like to see that to be perfectly honest.
- [23:27]
Andrew Ross Sorkin
Yeah, I mean they certainly had a preference here and you know, we'll see what Trump's willing to do. He may just say, you know what I tried, we're walking away from this or the DOJ may come after this.
- [23:41]
Joe Kernan
So Matt, is there any chance in a million years somehow Paramount comes back and does something that we aren't thinking about right now?
- [23:50]
Andrew Ross Sorkin
Well, I mean they, they first of all they can go to the shareholders or we don't know what the termination fee is but they could go just say we're going to pay whatever it is and offer way more money.
- [24:02]
Joe Kernan
I mean we do $5.8 billion is the term.
- [24:05]
Andrew Ross Sorkin
We do.
- [24:06]
Joe Kernan
It's 5.8 billion reverse, reverse breakup fee of 5.8. I don't know if it specifically in the terms talk about that in the context of somebody else coming in or really just the regulators blocking it. But right now 5.8 is, is the figure that's been put out there.
- [24:21]
Andrew Ross Sorkin
That's pretty big. But this is a once in a lifetime opportunity to own a Hollywood movie studio. And if the Ellison's entire game plan is to own Warner Brothers and Paramount and maybe a piece of TikTok and that's the plan, maybe it's worth paying that kind of fee to come in over the top.
- [24:43]
Matt Bellamy
What about Comcast Com.
- [24:47]
Andrew Ross Sorkin
You know, it's interesting Comcast, I have not heard that much about what their offer was. There was a whole scenario sort of conspiracy that people were talking about how the real plan was for Netflix to buy Warner and then sell HBO to Comcast. And I have been told by sources that that is not the plan. So I don't know what Comcast, what.
- [25:11]
Joe Kernan
The role was here, what by the way on Comcast. I keep thinking potentially that now you might see them trying to make a move maybe with a Paramount. I don't know what you do about the cbs, NBC of it all but or maybe go as we Talked with Greenfield, go to Sony, go to somebody else. But it seems like if you're not going to, if you're not going to try to fight this, you know, in City hall effectively, if you're not going to try to fight the Netflix deal, you might put up one or two other deals against it at the same time. And then they all sail through at the same time.
- [25:44]
Andrew Ross Sorkin
Maybe. Although I think it would be tough to have CBS and NBC together there. And plus, I don't know that the Ellison's want partners on this. I mean, they seem to want to kind of go it alone and they have the wherewithal to do it. I think if Comcast had a partner, would be some kind of a big money partner, but maybe they'd go in with someone like Sony or something. I mean, you could see all kinds of scenarios here. Sort of a free fall. It's like an episode of. Of sort.
- [26:09]
Matt Bellamy
Succession Media is not a zero sum game. But we know what happened to Sherry Redstone. We know that Zaslav was looking at seven and a half dollars a share at one point and now he's getting 30. Comcast was a $65 stock. It's now at 27.
- [26:27]
I don't know what happened. Did it all flow into Netflix? And, and if so, if, if so, why do they want any of this stuff when all it's done is just drag down the valuation of everyone that's touched any of these legacy assets?
- [26:44]
Andrew Ross Sorkin
Yeah, I mean, I don't think Netflix is buying Warner's for the stock value. They've got that. They're the growth stock. What they need is to grow subscribers and to grow the overall audience. And they see the intellectual property and the library that Warner's offers as be pretty important.
- [27:04]
Matt Bellamy
They know, I mean, at this point, given everything. Zaslav is popping champagne corks and so are shareholders, are they not, at Warner Brothers, Even though. More Discovery even. Even though it's been a tough couple of years.
- [27:21]
Andrew Ross Sorkin
Yeah. I mean, I don't know if popping champagne is the thing. Zaslav for sure, I mean, he's going to get paid, he's going to get whatever he want. But, you know, this is the fourth transaction that this company has gone through in the past decade. And every time they do it, they cut jobs, people lose. You know, it's been very disruptive.
- [27:42]
Matt Bellamy
That doesn't even include Jerry. I mean, I go back even further and it's like, what? And that was what I said earlier. Too bad Netflix just. I mean, Discovery is like a middleman too Bad Netflix just didn't do this long time ago.
- [27:54]
Andrew Ross Sorkin
Yeah.
- [27:54]
Matt Bellamy
With AT&T if they were going to do it, but it would have cost more probably back then.
- [28:01]
Joe Kernan
Yeah.
- [28:02]
Andrew Ross Sorkin
Hopefully in 20 years. We're not talking about this like we do AOL Time Warner and then sometime.
- [28:07]
Matt Bellamy
We got to talk about, I mean not just us, but I mean we got Versent's got all these things and now we got all the stub of Warner Brothers. What happens to all. I think these are all really valuable little things. Who rolls all of those things up? Are they valuable?
- [28:22]
Andrew Ross Sorkin
Versant says they're not really interested in adding more TV networks. I don't know if that's true, but that's, that's what they're saying. They say they're happy with it. You know, we're not talking about what's going to happen to these Warner TV networks, but this is going to be. If they go through this split, a separate company and they're going to have to have a strategy and want to buy stuff and manage it. We'll see.
- [28:45]
Joe Kernan
What is the Hollywood creative community think about this and how they think about the permutations of these deals. I remember we talked a couple a couple of months ago about how you thought actually Hollywood was quite excited about what Paramount was doing because they were spending a lot of money on programming and it seemed like they were going to come in and do a lot of interesting things. Do you think the industry is going to look at this and say this is great. They're going to revolt. They're going to think that this is going to lower the number of new productions, it's going to change the economics of these deals and in different ways that that make it less attractive. More attractive. How do you see it now?
- [29:22]
Andrew Ross Sorkin
The industry is not excited about this. I mean in my DMs and text blew up last night with some pretty dour messages because any time you take out a buyer in the entertainment ecosystem, it results in fewer opportunities. Now Netflix would argue that they're going to be stronger and they're going to grow more and they're going to have more opportunities for talent to work on bigger and better projects. But the history of the business has shown that when you take out a buyer, you reduce opportunities and then it just comes down to kind of a pride thing. I mean, Warner Brothers was one of the original Hollywood Studios. It has 100 year legacy. Everything from Casablanca to Dirty Harry. You know, it is ingrained in the Hollywood system. And now you have this interloper that has come in from Silicon Valley and within 20 years it has completely transformed the business and now it's buying one of the preeminent Hollywood establishment studios. So there's what kids, what key demos.
- [30:24]
Matt Bellamy
And what young people are oh my God, I can't watch wait to watch Casablanca. This is a good point. Why is Netflix paying for legacy stuff when they really need to to try to compete with YouTube on user generated? How does this help them compete against user generated content and where all these young people aren't watching any of this stuff anymore?
- [30:46]
Andrew Ross Sorkin
That's true, but they are watching Ted Lasso and they're watching, you know, some of the newer stuff that Warner is doing. They're doing television and film and they're making it with the IP that they have generated for 100 years. So there's real value there and Netflix sees the data. You forget this, there are Warner Brothers movies that play on Netflix right now via licensing agreements and they see what kind of engagement those movies deliver. And the big IP driven blockbuster movies are almost always in the top 10 on Netflix. People go to these services and they watch these movies. It was true of cable television and it's true of streaming. The majority of the viewership comes from these library titles. And if Netflix can own that and not have to license it from all these other companies, that's the missing piece. They have volume, they don't have premium, they don't have library. That's what this gives them.
- [31:46]
Joe Kernan
Matt, I imagine we're going to be talking a lot more at a wild hour for you, so thank you for waking up early. We look forward, of course, to always reading your newsletter and we appreciate you.
- [31:56]
Andrew Ross Sorkin
Joining us coming out soon.
- [32:00]
Matt Bellamy
Netflix co CEO Ted Sarandos making comments on a conference call moments ago.
- [32:08]
David Faber
Our plan is to operate, to continue to operate the iconic Warner Brothers motion picture and television studios, including HBO and the theatrical film releasing.
- [32:21]
I'm grateful to David for agreeing to run the company until the transaction is complete. I know some of you are surprised that we're making this acquisition and I certainly understand why. Over the years we have been known to be builders, not buyers.
- [32:38]
We already have incredible shows and movies and a great business model and it's working for talent, it's working for consumers, and it's working for shareholders. But this is a rare opportunity. It's going to help us achieve our mission to entertain the world and to bring people together through great stories.
- [32:56]
Joe Kernan
My sources this morning are now saying that Paramount in the last go round, in the last 24 hours had bid $30 in my for the entirety of the business.
- [33:09]
Matt Bellamy
For the whole.
- [33:10]
Joe Kernan
For the whole business. Their breakup fee was $5 billion. So they had a lower breakup fee. But this is an interesting situation now because you start to think about what the board was considering in that moment. They were thinking, do you take $30 from Paramount plus the $5 billion breakup fee, cash? I believe so. Or do you take this transaction, which effectively puts you at, call it 27, $28 in guaranteed ish money, by the way, some of that stock, obviously. And so you don't know what that ultimately looks like.
- [33:46]
Matt Bellamy
The perception of much greater regulatory.
- [33:49]
Joe Kernan
Potentially greater regulatory, but also potentially, and this is where, I don't know where the board of Warner Brothers ultimately landed in terms of what the total they believe this transaction is worth. Arguably, I imagine they might believe this transaction is worth more than $30. Maybe it's worth 31 or $32. 34 if they believe that those, those linear channels. But there is this risk premium, Obviously between the $5 billion breakup fee, the $5.8 billion breakup fee and Donald Trump. And there's always the Trump factor. So President Trump, the wild card in terms of how that interplays with all of this?
- [34:24]
Matt Bellamy
No. Even as if I were a Warner Brothers shareholder, I mean, that would be.
- [34:31]
Information. I'd like to know what you just said. If we just can count on all that as absolute fact, it'd be like, well, what can you explain to me why this is better than. Than that?
- [34:42]
Joe Kernan
And I think that I imagine there's going to be lots of questions that are going to be asked by shareholders over the next several weeks about this.
- [34:48]
Matt Bellamy
Probably not over either.
- [34:49]
Joe Kernan
And then the question is, come back and do something else. I don't know.
- [34:53]
Matt Bellamy
32. It should be done. Cash.
- [34:57]
Joe Kernan
Well, that's the question. Does Paramount come back and go direct to the shareholders? And that's what they would have to do. But then the question is, do they? I don't know enough about the terms of how the breakup fee schedule works. If that breakup fee is just related to regulators or that breakup fee is also related to an interloper, if you will.
- [35:13]
Matt Bellamy
And then I can get my wish back.
- [35:15]
Becky Quick
Oh, that's a good question.
- [35:16]
Matt Bellamy
Very wise running cnn. Then I could get my way.
- [35:19]
Becky Quick
Yeah, I heard you saying that. It is interesting to watch Netflix reaction. Obviously, we're still in the premarket, but originally Netflix shares were only down by about one, one and a half percent. They are now down by about four and a third percent. Maybe as some of these questions come up, as people continue to Market hold this over. But you can probably anticipate there's going to be some volatility with these stocks as we wait to get more details, wait to see the reaction from other places and regulatory officials as well.
- [35:45]
Matt Bellamy
I. Stay tuned. Huh?
- [35:47]
Joe Kernan
Stay tuned. Soap Opera the World Turns as the. As the World Turns.
- [35:51]
Matt Bellamy
That was surprising to me.
- [35:52]
Joe Kernan
What you said, though, surprised me when.
- [35:55]
Matt Bellamy
I, when I still thought, because my, my argument was they thought, I just had finished saying it, that they were arrogant because they thought we can say we've got regulatory issues in our pocket. So 25 is better than 30 if it's 30 with no regulatory. If they can really claim that, that they got a much better chance of.
- [36:13]
Joe Kernan
Well, but then you have the five, eight, right? Five eight is more than five. And if you think that both of these deals are going to have regulatory scrutiny on it, no matter what, you got to think it's not just what the Trump administration. Administration, the federal, the federal government think it's about the states. It's by the way, about what Europe will think. There's so many different constituents here.
- [36:34]
Matt Bellamy
Total value is 80. You know what enterprise values like 80 billion. I don't think 800 million is that. You think that makes a difference. 5, 5, 8 versus 5.
- [36:44]
Joe Kernan
If you think you're going to be stuck anyway.
- [36:45]
Andrew Ross Sorkin
Maybe.
- [36:46]
Joe Kernan
If you think you're stuck anyway, but.
- [36:48]
Matt Bellamy
You'Re not stuck with, with. If you got the go ahead, you got the green light. If you got the weak.
- [36:54]
Joe Kernan
And that's the question whether you think you got the weak and the night.
- [36:56]
Matt Bellamy
I think that people can.
- [36:59]
Joe Kernan
But what about. You're going to have states go after this.
- [37:01]
Matt Bellamy
Yeah.
- [37:01]
Joe Kernan
And you're going to, as I said, this Netflix is even issues, even bigger problems.
- [37:06]
Matt Bellamy
Right.
- [37:07]
Joe Kernan
So nobody just saying. I don't. I think that all of these things are going to be in some kind of regulatory purgatory for some period of time. There will be lawsuits in invariably. And so yes, no matter what happens, if you're the board and you're thinking about, okay, I'm stuck for the next 12 months or 18 months anyway, which of these is the more valuable transaction.
- [37:32]
Andrew Ross Sorkin
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- [39:12]
That'S the podcast for today, a very busy Friday in the newsroom. Squawk Box is hosted by Joe Kernan, Becky Quick and Andrew Ross Sorkin weekday mornings on CNBC at 6 Eastern. To get the highlights from that TV.
- [39:26]
Joe Kernan
Show right into your ears, follow Squawkpod.
- [39:29]
Andrew Ross Sorkin
Wherever you're listening now and leave us a review and a rating. It helps.
- [39:33]
Joe Kernan
We'll meet you right back here on Monday.
- [39:35]
Andrew Ross Sorkin
Have a great weekend. We are clear.
- [39:39]
Joe Kernan
Thanks guys.
- [39:49]
Andrew Ross Sorkin
The world runs on energy and as demand increases, Sempra is rising to help meet the challenge. Through our Texas and California utilities, we're investing billions to help power these booming economies. We're building tomorrow's energy infrastructure today, modernizing one of North America's largest energy networks with next generation technology to power the everyday lives of nearly 40 million people. That's positive energy. Learn about Sempra's financial results at sempra. Com Investors.