Emergency Pod! Paramount Outbids Netflix and Wins Warner Bros.

Summary

Podcast Summary: The Town with Matthew Belloni

Episode: Emergency Pod! Paramount Outbids Netflix and Wins Warner Bros.

Date: February 27, 2026
Host: Matthew Belloni
Guest: Lucas Shaw (Bloomberg)

---

Overview

In this urgent, news-driven episode, Matthew Belloni is joined by media reporter Lucas Shaw to break down the shock result in the historic auction for Warner Bros.: Paramount, led by David and Larry Ellison, has outbid Netflix and secured a $111 billion deal for Warner Bros. and its assets. The pair unpack how this blockbuster media merger came together, why Netflix walked away from the deal, the political and financial forces at play, the potential fallout for Hollywood, and speculate on what comes next as regulators scrutinize the unprecedented consolidation.

---

Key Discussion Points & Insights

1. Paramount's Shocking Win and Netflix's Retreat

• How Paramount Beat Netflix

  • Paramount relentlessly increased its bid, ultimately offering $31/share, plus sweeteners and a personal financial backstop from Larry Ellison ([00:40], [05:33]).
  • The board deemed Paramount’s bid “superior," giving Netflix an opportunity to match. Instead, Netflix's CEOs walked away, saying it was no longer financially attractive ([01:44], [04:05]).
  • Paramount agreed to cover major breakup and regulatory risk fees ($2.8B for Netflix, $7B in regulatory risk), winning over a skeptical board and shareholders ([05:50]).

• Netflix's Calculus

  • Netflix's stock plunged throughout the bidding process, as shareholders disliked the prospect of such a massive acquisition ([06:49]).
  • Quote: “Netflix’s market cap over the course of this process went down by more than they were offering to pay for the assets from Paramount, which is pretty crazy.” — Lucas ([07:12])
  • Netflix's leadership remained disciplined, unwilling to overpay or risk further shareholder discontent ([07:53]).

• Shifts in Industry Opinion

  • Early skepticism shifted as Hollywood began to warm to Netflix’s stewardship, especially after Ted Sarandos’ “PR tour," but the political landscape remained complicated ([08:19]).

---

2. Political and Regulatory Factors

• Paramount’s Political Advantage

  • The Trump administration, Ellison's conservative connections, and a positive view within the current government played a significant role ([03:24], [10:33]).
  • Public and political narratives intertwined, with conservative support adding momentum to the Paramount deal.

• Regulatory Uncertainty

  • Significant concerns remain: California’s Attorney General and EU regulators signal intensive scrutiny over media consolidation ([12:15]).
  • Quote: "Rob Bonta, the AG of California, is already putting out statements: 'We are looking hard at this...'" — Matt ([12:16])

• Antitrust Concerns

  • This merger represents a “horizontal” mega-merger of direct competitors, usually a red flag, but the current administration seems unlikely to oppose ([13:01]).
  • The focus shifts to possible state-level or European pushback ([13:35]).

---

3. Potential Impact on Hollywood and the Industry

• Massive Expected Layoffs & Cuts

  • The merger will likely result in “catastrophic” job losses, department eliminations, and consolidation throughout Warner Bros., HBO, CNN, and more ([09:58], [10:33], [12:15]).
  • Quote: “…holy shit, this is catastrophic. Is my entire department going to be gone? What is going to happen to CNN? ...all of the apparatus that goes into making and marketing and distributing and exploiting movies, all those people are on the table now.” — Matt ([09:58])

• Legacy Brands at Risk

  • Uncertainty persists about the futures of HBO, CNN, various studio teams, and the famous Warner and Paramount backlots ([10:55], [11:07], [12:21]).
  • Speculation about selling valuable studio lots as real estate ([11:21], [32:11]).

• Structural Questions

  • How will streaming be combined (HBO Max + Paramount+)? Will major creative talent and units remain independent or be consolidated? ([15:21], [16:21])
  • Quote: “This is the shot. If you think ... bringing these services together will make you competitive with Netflix, you now have the resources.” — Lucas ([20:02])

• Debt and Ongoing Pressure

  • Combined company will have an estimated $70 billion in net debt ([20:52], [21:39]).
  • History of similar mega-mergers (Disney/Fox, Warner/Discovery) suggests promised investment inevitably shifts to cost-cutting.

---

4. Media, News, and Political Fallout

• Republican Cloud Over Ellisons

  • Creative talent may be wary of perceived political direction, but precedent suggests business carries on ([24:21]).
  • “People like Seth MacFarlane and Steve Levitan ... continued to make shows for Fox.” — Matt ([24:51])
  • The deal could impact recruitment at CBS News and CNN; expect substantial cuts and consolidation ([25:39], [26:06]).

• Strategic Options Post-Merger

  • Paramount might spin off or sell cable networks, but to date, no buyers have stepped forward ([27:14]).
  • Quote: “If they wanted ... they could spin off a bunch of the cable networks, or find a buyer for them.” — Lucas ([27:22])

---

5. Winners, Losers, and Final Hot Takes

• Winners

  • David Zaslav (former Warner Bros. CEO): Stock soared from $7 to $31 a share due to aggressive bidding ([29:44]).
  • Netflix: “They won by losing”—shareholders cheered their discipline and the $2B+ breakup fee ([30:49]).

• Losers

  • Employees of both companies, local economies (LA, NY, Atlanta), the broader creative community ([31:30], [31:35]).
  • “Classic. Good for the shareholders, not so good for the employees.” — Lucas ([31:51])

• Speculation: What Should Netflix Do with the Breakup Fee?

  • Buy the Paramount lot? (unlikely, Ellison would never sell to them)
  • Bid for the CBS NFL rights package to “jack up the rights again” and stress Paramount ([32:57], [33:08])
  • Buy or refurbish movie theaters for public goodwill (unlikely) ([33:39], [34:06]).

---

Notable Quotes & Memorable Moments

• On the shock and scale of the deal:

  “We are talking about $111 billion… The ramifications are absolutely Enormous here. And I don’t think people in Hollywood quite realize what is about to happen.” — Matt ([01:00])

• Lucas on Netflix’s retreat:

  “I was surprised by the speed with which Netflix retreated, but not the result itself… They had lost the war in public, the war of public opinion, and was frustrated by it and wanted to try to counter the narrative. And it was…too little, too late.” ([04:05])

• Matt on anticipated jobs impact:

  “Scared is a good moniker…this is catastrophic. Is my entire department going to be gone?” ([09:58])

• On the likely effect for creative leadership:

  “I think it'd be asinine to get rid of Casey [Bloys] and his creative team at HBO…and already the Paramount people are saying they’re not gonna do that. But again, it’s everybody else.” — Matt ([10:37])

• On regulatory risk:

  “I don't know, man. Rob Bonta, the Attorney General of California is already putting out statements… This is not over.” — Matt ([12:16])

• On the DEFCON scale if Netflix or Paramount won:

  “I think Paramount is like a two and Netflix would have been like a three or a four.” — Matt
  "I think that Paramount is a one and Netflix was a two. I think they're both very alarming to everyone." — Lucas
  ([34:37]–[34:56])

---

Important Timestamps

• 00:40 – The news: Paramount outbids Netflix for Warner Bros.
• 04:05 – Why Netflix retreated so quickly
• 05:33 – How Paramount “answered every problem” for the board
• 09:58 – Hollywood’s realization: “catastrophic” job losses loom
• 12:15 – Regulatory hurdles and antitrust questions
• 15:21 – The question of what the new mega-company will look like
• 20:52 – The $70B debt question
• 24:21 – Talent drain and the “Republican cloud” over Ellisons
• 29:44 – Winners and losers (Zaslav, Netflix, employees)
• 34:37 – DEFCON scale: how dire is this era of media consolidation?

---

Tone & Style

Belloni and Shaw’s tone is urgent, candid, and laced with industry insider knowledge. They balance skepticism about the promises of big media mergers with a clear-eyed assessment of the likely pain for workers and the city economies tied to Hollywood. The episode frequently references both recent and historical industry mega-deals, offering listeners a crash course in the cycles and consequences of media consolidation.

---

In summary:
Paramount’s aggressive bid and political savvy carried the day, but the fallout for Hollywood will be severe, with massive layoffs, ongoing regulatory challenges, a potential creative exodus, and questions over whether this megamerger will fulfill its grand promises—or just repeat history’s mistakes. The episode ends with both hosts conflicted: relief that Netflix didn’t overpay, but deep concern for the outlook for workers and the industry’s creative future.

Transcript

[A]

This episode is brought to you by Warner Brothers Pictures. Nominated for a record breaking 16 Academy Awards including Best Picture, Sinners is a wholly original, deeply personal story from writer director Ryan Coogler. A rich commentary on the black experience and the blues music it inspired, Sinners showcases the joy, pain, spirit and soul of a 1930s Mississippi community as an evil descends upon it. Critics are calling Sinners vibrantly filmed, every frame imbued with history, every and impeccably crafted, superbly acted, electrifying and glorious. Sinners for your awards consideration, This episode of the Town is presented by 20th Century Studios. Fire and Ash don't miss the movie Critics are raving is epic and exciting and gorgeous and heartbreaking and stands as one of the greatest films ever made. It's got incredible visuals and jaw dropping action and a cinematic achievement, Fire and Ash now playing in theaters and now nominated for the Academy Awards for Best Visual Effects and Best Costume Design. It is Friday, February 27th. It's official. We have a winner in the battle for Warner Bros. And it's Paramount. Quite a stunner. Not that the Ellisons ended up on top or that they ultimately agreed to a deal worth $111 billion. I've actually been predicting the Ellison since the beginning of the auction for Warner Brothers Studio and hbo, Max and CNN last fall, even after Netflix closed its $83 billion deal for the studio and streamer in December. But still, the way it went down? Pretty surprising. Earlier this week, Paramount finally raised its bid from $30 a share for the whole company to $31. Plus the Ellisons agreed to a bunch of additional sweeteners on top of the breakup fees and and Larry Ellison, one of the richest men in the world. He agreed to backstop the deal if it falls through. It was all enough for the Warner Brothers Discovery board to declare the Paramount bid quote superior, which then gave Netflix four days to submit a matching bid, which most of us expected them to do given how aggressive Netflix has been fighting for their deal. But nope. Ted Sarandos and Greg peters, the CO CEOs, they walked almost immediately. Ted was actually in D.C. courting the Justice Department when this all went down. We've always been disciplined, he wrote in a statement. At the price required to match Paramount Skydance's latest offer, the deal is no longer financially attractive. Of course, there was a political cloud hovering over all of this, especially Netflix's ability to close this deal amid antitrust scrutiny. We discussed that with Ted on the show last week. The Trump administration is pretty happy with how the Ellisons are managing Paramount and in particular, CBS News. And David Ellison was all smiles, doing the thumbnail thumbs up with Lindsey Graham at the State of the Union on Tuesday. So how did this happen? Was it just that Paramount was willing to dramatically overpay to the extent Netflix was not? After all, the Netflix shareholders didn't like this deal. The stock has been in decline ever since they started talking about buying Warner's. And it shot up when Paramount got the deal. Or was this preordained by Trump? And most importantly, what comes next? Regulators are still going to take a close look here. And David Zaslav, he said on a town hall this morning that this deal could not close still. And if it does, it will likely take six to 12 months. And then the aftermath. In all likelihood, two studios are about to get smashed together. That cannot be good for Hollywood in general. Pretty disastrous, actually. So today it's an emergency pod with our usual Monday guy, Lucas Shaw from Bloomberg. Paramount wins Warner Brothers. Now what? From the ringer and puck, I'm Matt Bellany, and this is the town. Okay, we are here. Emergency pod. Lucas is at home dealing with five other things. I am in Arizona, going to some spring training games, Dodgers Central. But we are convening here because finally we have a winner in the sweepstakes for Warner Brothers. And it's Paramount, just like I said it would be. Not quite how I thought it would go down. Lucas, I assume you were also surprised by this.

[B]

I was surprised by the story speed with which Netflix retreated, but not the more I thought about it, I wasn't. Because over the last week, there had been this sort of creeping feeling that. That Warner Brothers was going to go with Paramount and that Netflix. Like I thought. I thought that the whole Sarandos PR tour, to me, even though it was like, in theory, offensive, I interpreted it as a little defensive. And I started.

[A]

He saw where it was going.

[B]

Right. And we, we. They had lost the war in public, the war of public opinion, and was frustrated by it and wanted to try to counter the narrative. And it was. It ended up being too little, too late.

[A]

Um, yeah, I mean, well, there's the public narrative and then there's the political narrative, which I think was. Which are intertwined. Yeah, they are, of course. Uh, but, you know, listen, how long have we been talking about this being an era of consolidation in media to fight big tech? You know, Disney bought Fox, Amazon bought mgm, now Paramount is buying Warner Brothers. So, you know, big picture, this is not a huge surprise. This is happening. But the ramifications are absolutely Enormous here. And I don't think people in Hollywood quite realize what is about to happen. So we're going to go into a bunch of different topics. First, we're going to go into why this happened. So give me your sense of why this went south for Netflix, why Paramount beat this down and took this and essentially swiped it away from a closed deal.

[B]

I think there were. There are a bunch of factors. Look, Paramount was relentless. They kept coming, kept coming, kept coming. And they. They kind of bid by bid, answered different problems that the Warner Brothers board had.

[A]

Have Larry Ellison back this personally. Okay. He did have a breakup fee.

[B]

Yeah. I mean, they end up with a deal where they are going to have to pay Netflix $2.8 billion, go away. They have to commit $7 billion if this deal falls apart because regulatory scrutiny, all of that. Larry Ellison is largely backstopping a $111 billion deal. Paramount can't change the terms or back out if their business falls apart, if Warner Brothers business falls apart, because, remember, both these companies make basically all their money from cable networks that are shrinking every year. And so that really helped Paramount. And then there was the political pressure that they created where they kept talking about what a bad deal the Netflix kind of arrangement was. They. They got folks in Europe energized, they got attorneys general energized the Senate, people in the White House. And even though Netflix and Warner Brothers dismissed it all as noise, where it really, I think, had an impact was on Warner Brothers shareholders who started to say, wait, why are we doing this Netflix deal when Paramount's gonna buy the whole company and they're probably gonna get it approved? And then the wrinkle on the Netflix side is their shareholders didn't like the deal. And so at a certain point, that's

[A]

the big one there. I think. I think that pressure, if the. If the Netflix stock had started going up on the prospect of buying Warner Brothers, it's a different ballgame. But the Netflix stock was down, what, 30, 35%? And it kept going up every time the Paramount people would make a new deal because the shareholders were so hopeful that this wouldn't happen for Netflix. Like, that's gotta make an impact on them.

[B]

Yeah. I mean, Netflix's market cap over the course of this process went down by more than they were offering to pay for the assets from Paramount, which is pretty crazy.

[A]

And Ted argued throughout the process that they've done a lot of things that the shareholders didn't like, and this was all just uncertainty. And. And, you know, they. When people. When they added ads. People were upset. And. But I think this is different because this was a fundamental change of what the company had done for the entirety of its, of its existence. They just didn't do deals like this. And people were asking, like, why, why are you going about trying to buy this traditional media asset when you're kicking everybody's ass and streaming and are you

[B]

going to get caught in a bidding war which would have happened again this week, where you're going to spend too much money, you're going to take on all this debt? And if you're a shareholder, it also means, oh, you're not going to be doing buybacks anymore. That's not as lucrative for us. So, yeah, I think they, they ran into a real problem with their shareholders that the political situation only made even worse. And look, I think Netflix got really frustrated at the end that basically nobody, kind of nobody was on their side.

[A]

You know what, though? I think that the TED Press tour did start to convince people around town. They started to say, like, oh, you know, maybe they will keep Warner Brothers separate. Maybe they will commit to movie theaters. You know, maybe the alternative here of CBS and the Barry Weiss nonsense coming to CNN and all the cost cutting and the layoffs, maybe that's not what we should be rooting for here. I do. I felt like the tide was turning a little, at least within the Hollywood community. Certainly not on the political end.

[B]

I had felt that earlier, right where initially the deal gets announced and the Hollywood response was, oh, my God, this is horrible. How could we allow this to happen? And I felt like over the course of the next week or two, people started to think about it and they're like, well, if this is going to happen, maybe Netflix is actually better than Paramount and we don't love it. But like, you know, let's try to, basically, let's try to get what we can out of Netflix on theaters and all that. And ted, after initially slipping up on some of the messaging, became very consistent, said the same thing over and over again on theaters. You could not say it any more clearly than he did.

[A]

Yeah, I went bullet point by bullet point with him and literally got him to commit to things like marketing and, you know, all this stuff that he was, was happy to do.

[B]

You know, there was not a James Cameron who came out and said, I'm behind these people, like, we should go with this. But it's easier to pick holes at the deal that has been made, the Netflix deal, than pick holes in the deal. In the case of Paramount, that was a Theoretical deal. Right. We spent all this time arguing about movie theaters, which was one of the central concerns about the Netflix deal, and spent very little time arguing about the billions of dollars in cuts that Paramount is about to make. Because that deal wasn't on the table at the time.

[A]

Exactly. And now I think the realization hit people in town last night, because I'm sure your texts and emails are bl. Going up like mine. Like, holy shit, this is catastrophic. You know, is my entire department going to be gone? What is going to happen to cnn? What is going to happen to. Not. Not the creative team, necessarily at Warner Brothers? Maybe they'll keep them to pick the movies, but everybody else, all of the apparatus that goes into making and marketing and distributing and exploiting movies, all those people are on the table now.

[B]

Yes. I think my favorite was, I thought I'd be happy, but now I'm scared.

[A]

Yeah, I think scared is a good moniker. I mean, even also the HBO people. I mean, what's that gonna look like? I mean, maybe. Yeah, I think it'd be asinine to get rid of Casey Boyes and his creative team at hbo. And already the Paramount people are saying that they're not gonna do that. But again, it's everybody else.

[B]

Let's walk through that. Okay. Kasey is obligated, contractually, to report to the CEO of the company. So are they going to keep HBO separate and have Kasey report in to David. To David Ellison?

[A]

I would guess yes. And I don't believe he would ever report to Cindy Holland.

[B]

Not going to happen. So they will have Casey and Cindy running parallel organizations for parallel streaming services.

[A]

Yeah, why not? You do what you got to do to keep people.

[B]

That's not what's. That's not usually what you do. That's.

[A]

No, but it's also not usual that they have a president Jeff Shell that nobody reports to. So, I mean, it's all in how you want to set this up. I mean, this is all very early. There are many, many questions about this. And the overarching truth here is that there are going to be massive, massive cuts. I think the movie lots are on the table. Will Ellison sell off the Warner Brothers lot to, you know, develop it for condos? Will he sell the Paramount lot? Will he, you know, sell both of them? I mean, all of this is on the table. It's pretty catastrophic for the industry. In the short term, at least. You know, he's arguing that he's going to create a behemoth that can finally take on Netflix. And in the Long haul, it'll be a growth mode company. But that's going to, that's, that's a big, big ask. And it gets to this question, can this deal close?

[B]

Probably, right?

[A]

I don't know, man. You look, Rob Bonta, the Attorney General of California is already putting out statements saying this is not a done deal. We are looking hard at this. The other state attorneys general in liberal states are gonna go hard against this. The European regulators are gonna go hard against this. There was a report from TD Cowan this morning that said they are pretty confident that this can close. They cited the sprint deal from 2020, from 2019, where a lot of the attorney general opposed that and there were some concessions made and ultimately the Department of Justice signing off on it was dispositive. And they got that deal. It was a Sprint T Mobile deal. I really do think that this is going to be a challenge. This is not over.

[B]

The Paramount people don't agree with this. But by like normal antitrust measurements, the Paramount deal is actually like the one that would normally get blocked because it is horizontal merger combining a bunch of

[A]

duplicative assets, direct competitors.

[B]

But we haven't really seen the Trump administration come out and try to block any deals, which is why I don't think that this one would. I don't think the Netflix deal would have gotten blocked. I do think it would have wound up in court for a year or two. I don't think that this deal will get blocked.

[A]

I don't think the Department of Justice is the problem. I honestly do think that's where the politics comes into play.

[B]

You think they'll see either attorneys general

[A]

or Europe, basically, because, I mean, Elizabeth Warren and Cory Booker are already talking senators. I know they don't, but you could have said the same thing on the other side. And that nonsense hearing in D.C. with Ted Sarandos that did impact the public opinion on this. And this has now become something bigger than just a corporate deal, bigger than Hollywood, bigger than media. This is now something that like regular people know about. And if this is a cause celeb in the Democratic political apparatus, we've gotta protect cnn, we've gotta protect the media, we've gotta protect your data and all of this stuff that the Ellison family, Trump donors want to suck up and turn into this big media behemoth, this could be a problem for them.

[B]

I think you mentioned it. Rob Anta from California already said that they were gonna review this closely. Europe has generally expressed concerns about kind of media consolidation and kind of American hegemony. I think that Europe probably would have been more alarmed by Netflix than, than Paramount, other than the fact that Paramount is in fact buying a bunch of the European TV network assets, which makes it a little more complicated. But I think, gun to my head, I think it'll be a, I think it'll be a slog. I think they'll probably need to pay some of those, those tickers that they, that they, that they pledged for the, how long it goes.

[A]

And there are concessions that they can make. I mean, this is the same thing that was true on the Netflix side. I mean, Paramount could say we agreed that we won't do xyz and okay, that's enough for the California Attorney General. Okay, we will do xyz, that's enough for the New York Attorney General. Stuff like that.

[B]

We will continue to produce a lot of stuff in the U.S. oh, by the way, we will continue to sell many of our most popular shows to Netflix.

[A]

Right. Which I do think is gonna happen. I wanna go back to that question of the consolidation and really the power of the Ellison owned platform. Now let's assume this deal goes through. I don't think people really realize what this deal will create. I mean this is now a company that will have, with duplicates, they could have 219 million subscribers on streaming. They will have dozens of linear platforms and television networks. They will have cnn, they will have CBS News, they will have two of the original five, six movie studios. They will have pretty unprecedented amount of the traditional entertainment assets. Now take out Apple, Amazon, Netflix. This will be a pretty dominant platform. How do we think?

[B]

Well, and they'll account for more. They'll account between CBS and Paramount and Warner Brothers. They'll account for more production than any entity on the planet.

[A]

And how do we think Ellison is going to use this platform? Because his argument has always been that if we're allowed to do this deal, there will be synergies and there will be additive elements here that are going to, you know, make the linear business work for us and allow us to create this direct to consumer platform that is going to be best in class and better than Netflix. And you know, I still haven't fully bought into their argument for why this is better overall other than just a consolidation play. But then you think about it.

[B]

I mean, why, why would you. We've seen, I only say that because we've seen, seen these deals happen again and again and again. And we yet to have a successful example of one of these mega mergers that kind of had the intended effect and would be looked back upon as a positive.

[A]

We heard these same arguments for Warner

[B]

and Discovery and it's not that different from Disney Fox. Right. You know, Disney, Fox, what Disney bought from Fox was probably a little smaller than what Paramount is buying from Warner Brothers. But Disney a much larger company than Paramount.

[A]

Yeah. And Fox, the Fox network was not part of the Disney transaction. And Warner's doesn't have a linear or broadcast network as well, so that's one thing. But the power of these sports assets. The Ellisons now have football, ufc, golf, March Madness. They own all of March Madness now. Like they can deploy those assets across all of these platforms and, and potentially save those linear networks longer than would have been saved under the Warner regime. Because what if you start putting UFC on TBS or tnt, which I believe they can do. What if you start, you know, using this to. I just think that they, having all of this, having all of these different kind of levers of audience can prolong the linear business a little bit longer.

[B]

It's not the same as Discovery and Warner Brothers, but we keep having these media companies that because of the decline of cable are sort of worried about their future and believe that they're going to, you know, they will ultimately fail if they don't get bigger. And so you just keep having smaller companies swallowing and swallowing and swallowing. So yes, you know, Paramount is in a much stronger position having the assets of Warner Brothers Discovery under its hood than not. Right. Just having David Ellison's firepower. The Ellison's firepower behind Paramount may not have been enough. They have a bunch of cable networks that are just not going to get turned around. So it was really all about what they could do in streaming. I don't ultimately think that this is really about necessarily prolonging or strengthening linear. What linear gives the Ellison's is a bunch of cash flow.

[A]

They do need it to continue because the numbers on the declines are pretty scary.

[B]

They need it to continue because they need to use that cash flow to invest in streaming and to pay down their debt. Right. And so and the Warner Brothers Discovery networks are more profitable than the Paramount networks because David Zaslav doesn't spend a lot of money. It's a bunch of low cost reality programming for the most part.

[A]

Well, and the, the Paramount networks are just not as strong brands and they've been neglected for so long.

[B]

Well, they were, they just, yeah, they

[A]

were youth skewing to begin with like MTV and VH1 and like they just were in the worst possible position for a digital disruption.

[B]

I think the real question the most interesting question, at least from like, what does the combined company mean or do is like, we'd been hearing forever about, like, oh, these different streaming services. All they need to do is join forces and then they can keep up with Netflix, right? Like, people David Daslov is talking all about, we got a bundling HBO Max with Disney and Peacock and Paramount plus. And you just need to put it all together. Now we're going to see, right, a company is going to have HBO Max and Paramount plus and the same thing. They can choose to combine it and make it one. They can choose to sell it as a package deal. This is the shot. If you think that this is going to make you competitive with Netflix, you now have the resources. You have two studios, you have a lot of programming. You have hbo, you have a library. All this brand, go for it. Can you? Is that really what you needed in order to be a suitable rival to Netflix and YouTube and Amazon and Disney?

[A]

Yes. Not to mention the debt question, because I was looking at these numbers last night. My partner Puck, Bill Cohan and I did a back and forth last night on this. If you can read that at Puck, he went through the debt issue, and we're Talking about about $70 billion of net debt for this company. And that's an estimate. But the revenue and profit associated with this company does not support that level of debt, at least not in the short term. Are we just getting into another Warner Discovery situation here where the focus for the next five years is going to be on paying down this debt and doing whatever possible they can to loosen the reins of this debt?

[B]

That's going to be a huge part of it.

[A]

But doesn't that just equal cuts and layoffs rather than investment? David Ellison has been talking about how he's the one that's going to invest in this company and they are going to be able to put two and two together and make five. But the history of this Warner Discovery transaction tells us that that's not what happens. They just have to cut and cut and cut to pay down debt.

[B]

Well, this is why I said what I said earlier. The history of all these transactions is that they talk about how great it'll be for the industry, but then they just end up firing a bunch of people and cutting costs. Now, again, yes, David Ellison has said we're going to put 30 movies a year in theaters, we're going to invest more in production. We all would like to believe it. Right? We want that to be the case because it's what the industry could use the history of M and A suggests otherwise. You don't usually combine the same assets to spend more money. You do it to save money, especially if you have debt. And they've already talked about having billions of dollars in synergy. So yes, you're going to see thousands of people lose their jobs. And we'll see what the impact is on output, right? We'll see how many movies combined Warner Brothers and Paramount produce in three years. We'll see how many television shows combined their studios release. We'll see what the investment is in the streaming services. My assumption is that they'll be able to spread that programming across their networks and their streaming services and something that may be strategically very good for them but not lead to an increase in output.

[A]

This episode is brought to you by Neon Sentimental Value isn't just the must see film this season. It's the must feel film of the year. Nominated for nine Academy Awards, including Best Picture, Joakim Trier's story of love, family and reconciliation is being hailed by critics as an absolutely breathtaking piece of filmmaking. Starring Oscar nominees Renata Rheinsveh, Stellan Skarsgrd, Inge Abstader, Lilias and Elle Fanning, Sentimental Value is a modern masterpiece now playing in select theaters.

[C]

This message is a paid partnership with Apple Card One of the most useful things in my life lately has been my Apple Card. Great for game nights, vacations, just life in general. And applying was so easy and quick. You can apply, see your credit limit offer and if approved you can start using your card in minutes. Do it while watching a basketball game. You could start making purchases with Apple Pay before halftime even rolls around. I also love how I can get up to 3% daily cash back on every purchase. That's more daily cash to use for game tickets. I feel like I scored big time when I started using Apple Card. Apply in the Wallet app on your iPhone. Start using it right away with Apple Pay subject to credit approval. Apple Card issued by Goldman Sachs Bank USA Salt Lake City Branch terms and

[A]

more at applecard.com do we think Taylor Sheridan regrets bailing on Paramount for Universal?

[B]

No.

[A]

Could have had an HBO show.

[B]

Could have, I guess.

[A]

I don't think he regrets it, but will there be a talent drain? Listen, this the Republican cloud over the Ellisons now. I mean they went all in. There's that picture of David Ellison doing the thumbs up with Lindsey Graham that may come back to haunt him if he starts getting the impression that this is the new Fox and that some creators do not want to work for Fox?

[B]

Yeah. Although I don't know, I mean, Rupert Murdoch was pretty darn successful.

[A]

He was. And throughout his ownership of Fox News and the movie studio, it didn't really seem to hurt this creative output. People like Seth MacFarlane and Steve Levitan and you know, other creators who have spoken out against Fox News continued to make shows for Fox.

[B]

Yeah, and I also feel like it became, I mean, we're in a different era. It became more of an issue in the Trump era than it was in, say when George Bush was president or Barack Obama was president. You know, people didn't necessarily like the Murdoch's politics in Hollywood, but they held their nose and they worked with him. And look, Fox Television made a lot of great shows. The TV studio, the movie studio, they worked with top tier filmmakers.

[A]

Jim Cameron had no problem working for Murdoch.

[B]

I mean, Jim Cameron was the number one defender of David Ellison in this deal, at least from a Hollywood perspective.

[A]

Yeah, it's amazing. Now CNN people, that's another one. I mean, CBS News has already had problems recruiting people and I think that only gets worse. I mean, just the amount of cutting that is about to happen at CNN is going to be pretty extraordinary, I think.

[B]

Well, if you're one of those on air hosts at cnn, you're probably feeling the squeeze right now.

[A]

Oh, and forget that. I mean all these bureaus around the world that are duplicative with CBS News and cnn, like all of that is going to be combined.

[B]

How much do you think David Ellison thinks about the news business?

[A]

I think he thinks about the bottom line and where he can cut. And he looks at these two very expensive news operations and says, you know, it's going to get ridiculousness. Right. Like they're going to start treating CNN like the former Viacom people treated their cable networks. What can we cut to the absolute bone to continue to get our carriage fees and our advertising.

[B]

They just run Stanley Tucci 24 hours a day.

[A]

Exactly. That's what it's going to be. You run Stanley Tucci, you run town halls, you run, you know, the repeat of the nightly programs all night. Like it's just going to be cuts. And you know what, it's probably, I hate to say this, but it's probably in the short term the better business move because you just extract all the carriage fees and ads CNN has been

[B]

pretty lost from as a business.

[A]

Yeah. And the ratings are down so like it probably can't get much worse. So if you're not going to invest and you're not going to put in a strategy to try to take on MSNBC or Ms. Now and Fox, then what are you going to do there?

[B]

If they wanted to, this wouldn't. And they do this deal, they would now have the ability to do something that Paramount couldn't do, which is they could spin off a bunch of the

[A]

cable networks or find a buyer for them.

[B]

Yeah, either one just say we want.

[A]

They say that they're not going to do that. Although remember when they put it out there that they wanted people to pitch them ideas to reinvent MTV and those other networks. That hasn't happened yet.

[B]

Nobody has bought in yet.

[A]

No, there may be. I know there are people that. That have ideas and they have money, but we'll see if that ends up happening.

[B]

Allison has always been so loyal to his people where he's. We talked about hbo. We didn't really talk about the studios.

[A]

But whether Mike and Pam at Warner Brothers survive this.

[B]

You know Mike and Pam Channing.

[A]

Yeah. I don't think they're going to go in and just like outright fire everybody to start. I think every indication that I have had is that they're going to give people a chance and see if they can work with the new regime. I don't know whether these people will report into the Paramount studio team or whether they will be a separate entity like I think will happen with hbo. My guess is that they will have to report into the Paramount people and Warner's will become a division there. But I don't think all of a sudden, if you really want to increase the output of movies, I don't think it makes a lot of sense to get rid of the people who are producing and making those movies at Warner's. At least the creative executive, I think everybody else, business affairs, legal, marketing, all of that, I think that gets consolidated. But the creative teams I think will stay in the short term. Do you agree?

[B]

Depends on short. I mean this. We agree that this deal isn't going to even get approved until Paramount hopes by the fall. But let's say early next year, then they have to integrate. These things always tend to take a couple years. I think the real question is, okay, when they've actually gotten in there and started to move things around. Even when Richard Plepler, the head of HBO left after the AT&T deal, it took two or three years for that to happen.

[A]

Yeah, it's true. By the way, if the legislature turns blue this fall and we have a Democratic led House or Senate even, does that impact this? Does the hammer fall on all Trump aligned media?

[B]

Well, they Don't. Again, they don't have oversight.

[A]

They don't. But they have loud voices.

[B]

Right. But I think the loud voices mattered more when there was a competitive process. Right. When you could get shareholders to say, oh, like the sentiment is on the side of Paramount. We should go with that. If the deal. If the shareholders have approved the deal, those voices matter a little bit less.

[A]

Yeah. All right, final two questions. Who are the big winners here? As you know, this is a podcast that cares mostly about winners and losers. Not just that, but we care mostly about how much money David Zaslav makes in a year. So he's a winner. He's a big winner. The Warner stock was trading around $7 a share last fall. Then Paramount comes along. Zaslav needs to send Ellison some kind of a, you know, nice, nice looking Hawaiian couch for his lanai house or something, because this is all happening because the Paramount people emerged as aggressive buyers who wanted this at any cost. And then they got Netflix involved, and then that's all you need. So $7. Last fall, the initial Paramount offer was $19 a share. Nobody thought it could go to 30. Ten offers later, it closes at 31. So obviously, David Zaslav.

[B]

Okay, so if David Zaslav is the biggest winner in this, who do we think is the biggest loser?

[A]

Well, it's not Ted. It's not Ted Sarandos. I know. I mean, obviously he didn't get the asset, but he's getting all of these. This breakup fee. His shareholders loved the fact that he didn't get it.

[B]

The perception is that they won by losing, right?

[A]

Yeah.

[B]

Someone asked this morning if there was a reputational damage to Ted, and I said I didn't think so.

[A]

I don't think so either because he never said anything that was going to come back to haunt him. I don't think. Except for the theaters thing. I mean, I joked last night that it's gonna take a week or two for him to go back to trashing theaters, which may happen. But I don't think he said anything during this whole process that people are gonna be like, well, wow, we can't work with them anymore, or wow, this company is so weakened now that they're gonna. It's gonna be a downward spiral. Or can they compete with all these other competitors now as just a streaming company? I don't think he did anything. So I think that is still a winner here.

[B]

The losers are probably the employees. Right? Just because of how many more job cuts they.

[A]

And Hollywood in general, the Los Angeles economy, the economy of New York and Atlanta, where CNN is based, that's the biggest loser here. If I were a city leader in LA or New York, it would concern me that thousands of my constituents are about to lose their jobs.

[B]

Right. Classic. Good for the shareholders, not so good for the employees. Exactly.

[A]

And final question. What should Netflix use the $2 billion breakup fee to do? Craig's voting for the Saudis as the big winners, by the way, Craig's a big Saudi guy.

[B]

The Middle Eastern money, the Middle Eastern

[A]

money that Paramount has here, I mean,

[B]

they won't do it.

[A]

Netflix should buy the Paramount lot. Great idea, Craig. Great idea. I agree, because Ted has covered it a lot for a long time.

[B]

The problem with that one is there's no way David Ellison would sell it to him.

[A]

But I have from the beginning. I had heard that Larry thought of this whole deal as. As a real estate deal, you know, and that he would be able to get billions of dollars in selling these lots. I mean, there are historical designations, at least on the Paramount lot. I'm not sure about Warner's, but yeah, Ted has wanted this lot. They're already based in Hollywood. Netflix. So why not just sell him the Paramount lot and then move everyone to Warner's?

[B]

We can run through the fun things that Netflix could do but won't do. Like your colleague Eric Gardner's idea about investing in a news division to take on cnn. CBS will never happen, but would be interesting.

[A]

No, but it's fun to think about.

[B]

Yeah, I. One, it wouldn't be enough for the full deal, but just for. If they really wanted to do it, for shits and giggles, to get back to Paramount would be to go in and take the CBS NFL package.

[A]

Of course, that just stealing NFL from Paramount would be the ultimate fu. Just like, okay, guys, let's. This is the big time. You want to. You want to play with us?

[B]

You have the money for this? We're now going to, you know, we're now going to be able to outbid you for this because we can spend anything we want or jack up the rights again.

[A]

Jack them up to where, you know, Paramount has to double what it pays for NFL. You don't think that's going to happen? I think they're going to take the money, they're going to put it into their content.

[B]

They could buy a movie theater chain.

[A]

They could. I don't think that's going to happen. Ted Saranda is the defender of movie theaters now. Maybe take your money and buy it.

[B]

Look, someone we both know made a suggestion. I mean, this was when they were trying to win the deal. But if they wanted to, that Netflix should just commit to, like, investing $500 million in refurbishing movie theaters. And it would change the narrative around that.

[A]

But why would they do that?

[B]

I'm just passing along straight.

[A]

Yeah. That is the ultimate Hollywood wishful thinking. They should buy the Arc Light in la. That would win them so much.

[B]

Buying the Cinerama Dome. But they already have the Egyptian like, two blocks away.

[A]

So what? It's all for show anyways. It's not like they actually make money on the Egyptian. So just buy it and everyone would love you and have your premieres there. Can I ask a question to close us out here? Yeah, please. Craig, finish this off here. If Netflix got Warner Brothers, where was it on the DEFCON scale?

[B]

And what is it now that Paramount's going to get Warner Brothers? DEFCON 1 is the most dire and DEFCON 5 is the least dire.

[A]

I think Paramount is like a two and Netflix would have been like a three or a four.

[B]

No.

[A]

Do you disagree?

[B]

I think that Paramount is a one and Netflix was a two. I think they're both like, wow, Lucas

[A]

is more cynical than me.

[B]

I think they're both very alarming to everyone. Yeah. Okay. Especially because we've been through the Disney Fox of it all and we now have had like, five years to see what happens. Yep.

[A]

All right, maybe you're convincing me I should be more cynical. All right, Lucas, thanks for joining.

[B]

Thanks, Matt.

[D]

Toogood and co. Coffee creamers are made with farm fresh cream, real milk, and contain 3 grams of sugar per serving. That's 40% less than the 5 grams per serving in leading traditional coffee creamers for a rich, delicious experience. Whether you enjoy your coffee hot, cold, bold or frothy, two good coffee creamers make every sip a good one. Two good coffee creamers. Real goodness in every sip. Find them at your local Kroger in the creamer aisle.