Netflix CEO Ted Sarandos Makes the Case for Buying Warner Bros.

Summary

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Podcast Summary: The Town with Matthew Belloni

Episode: Netflix CEO Ted Sarandos Makes the Case for Buying Warner Bros.
Host: Matthew Belloni
Guest: Ted Sarandos, Co-CEO of Netflix
Date: February 18, 2026
Production: The Ringer

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Overview

This episode centers on Netflix’s $83B acquisition attempt of Warner Bros. and HBO Max, with Ted Sarandos (“the hype man for this deal”) explaining why Netflix’s bid is superior to the competing $30–31 per share offer from Paramount and the Ellison family. Against a tense, dynamic backdrop of shareholder discontent, board maneuvering, and regulatory scrutiny, Sarandos and Belloni dig into the strategic, financial, creative, and regulatory stakes for Hollywood’s future.

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Key Discussion Points & Insights

1. The War for Warner Bros.: The Bidding Situation

• Deal Status: Netflix had seemingly wrapped the deal for $27.75/share cash plus the value of Discovery Global (the TV unit left behind), but Paramount/Ellison family have been aggressively raising their offer for the whole company.
  • “The Ellisons have been trying to undo it, slowly sweetening their offer, rounding up Middle East money, and when the Warner's board kept rejecting them, they took it directly to shareholders.” (01:20)
• Seven-Day Extension: Warner Bros. board reopened negotiations for a week despite previously indicating support for Netflix, setting up a March 20 shareholder vote.
  • “It’s only for seven days and the Warner's board said it still supports Netflix and has set a March 20 date for its shareholder vote. Just wants to hear what the Ellison's best and final offer is…” (01:49)

2. Why Did Netflix Agree to the Seven-Day Extension?

• Clarifying for Shareholders: Sarandos asserts this extension is for shareholder clarity, not a sign of weakness.
  • “It’s giving the Warner Brothers discovery shareholders exactly what they deserve, which is clarity. The Paramount peace guy…have been out just flooding the zone with a bunch of false info...” (04:43)
  • “They had nine chances to bid. This is their ninth bid, Matt.” (05:10)
• Hostory of Well-Defined Process: Sarandos insists Netflix complied with all processes and won fairly.

3. Industry Anxiety and Market Impact

• Hollywood’s Dilemma: Belloni reiterates skepticism — neither outcome is loved: Netflix would become “by far the dominant player,” or Paramount would create more layoffs by combining legacy studios.
  • “Here you either have one company becoming by far the dominant player, arguably game over for the subscription streaming business, and then the other company is gonna combine two legacy studios and lay off thousands and thousands of people.” (07:02)
• Sarandos’ Rebuttal: Disagrees that Netflix would create a monopoly; frames market as extremely competitive, points to YouTube, linear TV, and fast-growing alternative platforms like Tubi.
  • “The entertainment landscape has never been more competitive.” (07:21)
  • “You could upload your movie to Tubi right now and start getting ad revenue…that business is growing faster than all of us…” (08:44)

4. Regulatory Concerns and Antitrust Scrutiny

• Both Deals Under the Microscope: Sarandos says all mega-mergers get tough scrutiny, and Netflix is deep in regulatory process in both the US and Europe.
  • “Any deal this size would have regulatory scrutiny. This is nothing unusual.” (12:37)
• Sarandos Position: This deal is “pro-consumer, pro-creator, pro-innovation, pro-growth.”
  • “Since we’ve been making our own original things…we’ve driven 150,000 jobs in the US on our productions. $250 billion of economic impact.” (13:35)
• Leveraged Buyout “LBO” Risks: Sarandos repeatedly calls out risks of the Paramount/Ellison bid, citing financial complexity, funding uncertainty, and difficulty integrating.
  • “What gets ignored, Matt, is how dangerous and risky LBOs are.” (14:13)
  • “Our deal is clean with reputable global banks…healthy balance sheet…continue to operate and grow.” (15:21-15:35)

5. Creative Marketplace & Talent Compensation

• Keeping Competition Alive: Sarandos promises Warner Bros. and HBO would operate separately, with both divisions competing for projects even when under the same parent.
  • “When you look at Wuthering Heights…I knew you were gonna go there…They had two choices, they had probably multiple choices. And they will continue to under this deal.” (10:33-10:56)
  • “I’m going to keep Warner Brothers film and television operating largely as it is today. Going to keep HBO running largely as it is today.” (09:38)
• No Change to Warner Bros. Compensation: Confirms he would not alter Warner’s backend participation for filmmakers.
  • “Not changing anything about the Warner Brothers model compensation for filmmakers at all.” (12:05)
• Box Office Reporting Promise: “We will not eliminate box office reporting on Warner Brothers movies.” (30:38)

6. Theatrical Windows & Marketing

• Windowing Commitment: Sarandos says Warner films would maintain the traditional 45-day exclusive theatrical window, followed by PVOD then HBO Max, and will feel “traditional.”
  • “It means 45 days of theatrical exclusivity…” (23:38)
  • “It’ll go from theaters to PVOD to HBO Max.” (23:52)
  • Balks at putting this in writing, arguing it’s not standard or necessary.
• Marketing Spend: Will do competitive marketing for releases, points to Netflix Super Bowl ad for ‘Cliff Booth’ and others; HBO will retain its own marketing budget.
  • “We’ll do competitive marketing spends…our members are on Netflix a couple hours a day, every day. So the best way to talk to our members…is probably on Netflix.” (26:33)
  • “I want [HBO] to continue to be what people fell in love with when they fell in love with HBO.” (28:34)

7. Strategic Motivation and Shareholder Skepticism

• Why Does Netflix “Need” Warner Bros.? Sarandos says Netflix doesn’t “need” Warner Bros., but sees it as an accelerant to its growth, combining Netflix’s tech and engagement with Warner’s legacy and IP.
  • “We don't. We do think that it's an accelerant to an already successful business model. It ensures our continued growth into the next century.” (18:55)
• Shareholder and Market Concerns: Belloni repeatedly presses on Netflix’s falling share price and investor doubts about a major pivot from building to buying.
  • “Why do your investors not like this deal?” (20:15)
  • Sarandos: “I do think the market doesn’t like uncertainty…People are skeptical…We deserve the skepticism, but every time we have pivoted the business…we’re pretty good at it when it’s time to.” (20:45; 21:36)
• Unwillingness to Bid Higher without Discipline: “We have always been very disciplined buyers…happy to see somebody else overpay for it, just like we do for every movie or TV show we do every day.” (33:14)

8. The Political & Regulatory Angle

• Politics and DOJ Concerns: Belloni calls out rumors that the Ellison/Paramount team has a regulatory edge via ties to Trump.
  • “Because Larry Ellison is a huge Trump donor and you have been aligned with Democrats.” (35:44)
  • Sarandos: “This is not a political deal. This is a business deal. The Department of Justice runs it…” (35:48)
• Sarandos' Direct Pitch to National Leadership: Repeatedly frames Netflix as a pillar of American job creation and economic growth.
  • “We’re building a billion dollars worth of production…in New Jersey to protect and create American jobs and keep that production on US soil.” (37:21)

9. Final Pitch: Why Hollywood Should Prefer Netflix

• “Growth vs. Cuts” Argument: Sarandos positions Netflix as the “growth” buyer versus Paramount’s “cutting” proposals.
  • “We have this…For the first time in a long time, Warner Brothers will be in the hands of a company with a great balance sheet…We’re not in the business of cutting. Or you can go the other route…they said they’re going to about $16 billion in cuts.” (40:00)
• Sarandos' Message to Industry Guilds: Urges actors, writers, directors, and industry unions to see Netflix as pro-growth, not pro-cut.
  • “I think this is important for an actor in the Screen Actors Guild…I think they should, on behalf of their memberships, endorse this deal as a path forward for their members.” (41:20)

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Notable Quotes & Memorable Moments

• On the relentless nature of the process:
  “They had nine chances to bid. This is their ninth bid, Matt.” (05:10, Sarandos)

• On Hollywood’s unease:
  “Here you either have one company becoming by far the dominant player, arguably game over for the subscription streaming business, and then the other company is gonna combine two legacy studios and lay off thousands and thousands of people.” (07:02, Belloni)

• On creative competition inside a merged company:
  “Of course we would go at it…It’s a very, very natural thing in the natural course of business.” (32:36, Sarandos)

• On theatrical windowing:
  “It means 45 days of theatrical exclusivity… it’ll go from theaters to PVOD to HBO Max.” (23:38 & 23:52, Sarandos)

• On shareholder worries and pivoting strategy:
  “We deserve the skepticism, but every time we have pivoted the business, which, by the way, we’re pretty good at pivoting the business when it’s time to…” (21:36, Sarandos)

• On long-term versus short-term thinking:
  “This is a long game that we’re in…as long as we keep focusing on the long term and not being afraid to do things that are a little painful in the short term to get to the long term outcome, that’s in the best interest of our shareholders.” (38:26, Sarandos)

• Final message to Hollywood:
  “This deal…is very important to have to the entire industry…you go with Netflix…we’re in the business of more. And if [the other] deal ever came to pass, that would be a devastating cut to this industry…could be existential.” (40:00-41:20, Sarandos)

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Segment Timestamps

• [02:04] – Sale process reopens, strategic context for the seven-day bidding window
• [04:43] – Sarandos defends the process and refutes claims of unfairness
• [07:02] – Discussion of industry fears and Hollywood’s “lesser of two evils” dilemma
• [09:38] – Sarandos explains intended structure for creative competition post-merger
• [12:37] – Regulatory scrutiny and Sarandos’ “pro-creator” rationale
• [14:13] – LBO and financial risk critique of Paramount bid
• [18:55] – Sarandos answers “why buy Warner Bros.?”
• [20:45] – Shareholder skepticism and internal debate
• [23:38] – The “45-day window” for theatrical releases and windowing specifics
• [30:38] – Box office reporting promise
• [32:36] – Will Warner and Netflix divisions compete on projects?
• [33:14] – “Disciplined buyers” and Netflix’s price strategy
• [35:44] – The Trump/Ellison angle and DOJ politics
• [37:21] – Netflix as a jobs engine, pitch to national economic interests
• [40:00] – Sarandos’ closing argument: growth vs. cuts

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Conclusion

With high stakes for Hollywood’s creative community, Sarandos champions Netflix’s bid as pro-growth and low-risk, both operationally and in regulatory terms. Belloni presses him on skepticism around monopoly fears, creative independence, the nature of “traditional” windowing, and the integrity of Netflix’s past promises. Sarandos’ tone is confident and at times confrontational, positioning Netflix as the healthier, more secure steward for Warner Bros. and casting doubt on Paramount/Ellison’s leveraged buyout approach. Despite lingering industry distrust, he repeats: “Netflix is in the business of more, not less,” pledging growth, continuity, and competitiveness for the future of film and TV.

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For further listening:

• Key Segments: Regulatory grilling ([12:37–16:30]), Theatrical windowing promise ([23:22–24:44]), Shareholder and Wall Street pressure ([20:15–21:51]), and Sarandos’ pitch to Hollywood unions ([40:00–41:20])

Transcript

[A]

This episode is brought to you by Warner Bros. Pictures. Nominated for 13 Academy Awards including Best Picture and Best Director. One Battle After Another is a timely masterpiece from writer director Paul Thomas Anderson.

[B]

Leonardo DiCaprio, in a career defining role.

[A]

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[B]

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[A]

It taps into the urgency of now and does it brilliantly enough to stand the test of time.

[B]

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[A]

One battle after another. For your awards consideration.

[B]

This episode of.

[A]

The Town is presented by the Walt Disney Animation Studios. Zootopia 2. Now nominated for the Academy Award for Best Animated Feature, the Hollywood reporter hails Zootopia 2 knocks it out of the park with its dazzling visuals, sophisticated humor and genuine emotion. For your consideration for Best Animated Feature.

[B]

It is Wednesday, February 18th if you listen to the Town or you work in the Town, you know who Ted Sarandos is. He's the co CEO of Netflix and arguably the most powerful person in the film and TV business, certainly in streaming these days. He's also playing the role of hype man of sorts. Hype man for his $83 billion acquisition of the Warner Brothers studio and HBO Max, the deal that Sarandos thought he had all sewn up back in December. But Paramount and the Ellison family have not gone away pretty much since the Netflix and Warner's deal was announced. The Ellisons have been trying to undo it, slowly sweetening their offer, rounding up Middle east money to help pay for it, and when the Warner's board kept rejecting them, they took it directly to shareholders. It's gotten to the point this week where the deal got so sweet that the Warner shareholders were getting antsier and Warner's and Netflix finally said enough's enough and they reopened the sale process. Pretty extraordinary move, but it's only for seven days and the Warner's board said it still supports Netflix and has set a March 20 date for its shareholder vote. Just wants to hear what the Ellison's best and final offer is and finally.

[A]

Put this to bed.

[B]

Remember, Netflix has agreed to pay $27.75 a share, all cash for the studio and streamer. Plus the shareholders get the value of Discovery Global, the TV unit that will be left over after this deal. The ellisons are offering $30 per share for the whole company, though Warner says a Paramount banker said they'd go even higher, to $31. Now they have those seven days to decide if they want to go even higher than that. Hence Ted the hype man who's now doing TV and appearing in front of Congress and telling anyone who will listen in town why the Netflix bid is way better than what Paramount is offering for Warners for consumers. And he argues for the industry that's been the focus on this show. So I'm happy to have Ted back today to explain what's going on with this deal and give us his argument a disclaimer. This show is produced by the Ringer which has a podcast deal with Netflix but this show is not on Netflix. We're also a little longer today but this topic obviously extremely important to the future of Hollywood. So I wanted the time to grill Ted on why he agreed to this seven day extension, whether he's sweating the government after that super awkward hearing in D.C. and ultimately why Netflix Warners is good or at least the least bad for Hollywood. From the Ringer and Puck, I'm Matt Bellany and this is the town. Okay. We are here with Ted Sarandos, the co CEO of Netflix returning champion to the town. Welcome back, Ted.

[C]

Oh, it's good to be here. I was been waiting for you to call me a returning champion.

[B]

I love it. All right, well I appreciate you coming on today because I have many, many questions. I think people around town have many questions for you. You are on this, I call you a hype man because you are now in the position of selling this deal that you already signed to the Warner shareholders. These Paramount guys will not go away. Pretty predictable that they would not go away. I think you and I both know David doesn't seem like the kind of guy who's just going to go quietly. They feel like you guys swooped in here, they had a whole plan. They, he was, you know, furiously texting David Zaslav like a scorned boyfriend trying to get in the, in the room and what are you doing to me now? You have this seven day period that you have agreed to and I want to know why you did this. Because the Paramount side would say this is an acknowledgment that you guys have rigged this deal from the beginning and that their deal is better for the shareholders. And now you're finally there's enough noise around it. Enough shareholders are telling you that it's good enough that you kind of have been forced into allowing this. I imagine you disagree.

[C]

I do disagree. And it's exactly the, the exact opposite of that. It's giving the Warner Brothers discovery shareholders exactly what they deserve, which is clarity, the Paramount peace guy. But they've been out just flooding the zone with a bunch of false information about the deal, about the regulatory process. You talked about the scorned, you know, person on the other side of the deal. It feels like just a lot of whining. There was. They had nine chances to bid. This is their ninth bid, Matt.

[B]

Oh, I counted ten, but it's okay.

[C]

If they make another one, it'll be 10. But I would say, look, the, the, the, this was a incredibly well defined process. The, the, there was a, there was a deadline, there was a criteria that the bids had to meet. Multiple companies bid on it, we won and we did it by following the rules of the of engagement and then.

[B]

But this is an unusual process. I mean typically you would not reopen the negotiation. While also Warner's has set a shareholder meeting for March. I mean you guys seem to have a coordinated press strategy here. Like it seems like this is you guys saying, okay, we need to go through the motions here and reopen this just so people feel okay with it. But, but we're not, we're not going to, you know, really engage that much.

[C]

Look, Matt, our deal is superior. That's why we won the bid. And the one. And the discovery board has been unbelievably diligent in tracking that down and sussing that out. Risk adjusting all the price of the deal. It brings the most value to Warner Brothers Discovery shareholders for sure. And they agree, they continue to endorse the deal. What came with that seven day window is a hard date for the shareholder meeting on, you know, on March 20th where they will vote on this. And, and the Warner Brothers Discovery board continues to endorse our deal over the Paramount deal or any other alternative deal. What I think it's lost in this, and this gives us the opportunity to talk a little bit more about it is, you know, not only do we meet the criteria of the bid, meaning bidding for the assets that were for sale and, but, but the other part of this, Matt, that's really important is I think along the way people kept thinking, oh, we just hope there's not a deal at all. So there was some fantasy happening.

[B]

The sentiment about that around Hollywood is rampant. And when people ask me, which one do you prefer? I do tell them I said neither is great. Here you either have one company becoming by far the dominant player, arguably game over for the subscription streaming business, and then the other company is gonna combine two legacy studios and lay off thousands and thousands of people.

[C]

Well, you're right with the second half of that statement. Okay, but am I not right about.

[B]

The first half first also?

[C]

No, you're not. Matt. Look, I think what I've been saying for a long time, this, this land, the entertainment landscape has never been more competitive.

[B]

You want YouTube in this equation.

[C]

But this is combined, number one fantasy to exclude YouTube. Matt.

[B]

Okay, let me just say what. Okay, I don't believe it is a fantasy. I think that YouTube is not a buyer of $20 billion worth of content.

[C]

Not NFL football.

[B]

The two things, two exceptions.

[C]

That's not the exception. No, those are the first steps. That's not the exception.

[B]

Okay, but if you are a creator and you have a show or a movie, you are not taking it to YouTube. You're going to combine the number one and number four subscription streamers. That's over 400 million subscribers. With the next biggest being about half as big. Doesn't that arguably kill competition?

[C]

How is it that we lose projects all the time in the marketplace? Remember that when I talk about a diverse marketplace, I'm talking about people can choose very freely between linear TV, which still is about 40% of TV engagement, and a sea of other entertainment choices that all have different. You know what's interesting about this time that we're living in right now, you can go out. I could count on one hand the number of times we've been in multiple bidder situations for projects.

[B]

Yeah. None of them with YouTube. Let's be honest.

[C]

That's not true at all. In fact, the Oscars was the most recent example of that.

[B]

But the Oscars is a unicorn. That is one thing.

[C]

In the Brazil. And the Brazil NFL game is another recent example of that. So when I look back at this, and I think. I think what's happening today that you could never do before, you could upload your movie to Tubi right now and start getting earning ad revenue from the viewing on Tubi right now, that that didn't exist five years ago. This is. And that business is growing faster than. Than all of us due to terms of the, you know, the fast video.

[B]

In terms of the audience. You keep focusing on this engagement thing. I just feel like there's no money without that.

[C]

There's no money without that.

[B]

I get it. But there is no money for creators without someone willing to front the money to pay for it. And if we look in the Penguin Random House case, the Justice Department did look at how the market for creative talent would be impacted by a merger. And I think if you're looking at this and you're looking at the SVOD market, subscription streaming, you've got to take a hard look at what Netflix would Be owning in this market.

[C]

But Matt, it is again, it is a very narrow and unrealistic. And it's not. Doesn't reflect how the consumers entertain, you know, use entertainment today. That's why I'm arguing that it is a very diverse marketplace. There are multiple bidders. There's multiple places to sell. There's. This does not remove one buyer from the market. One less project to go to a movie screen, one less day on a movie screen. I'm going to keep Warner Brothers film and television operating largely as it is today. Going to keep HBO running largely as it is today. Separate buyers who will continue to compete for projects. Remember, that's.

[B]

We're going to get into that. I mean, but. But look at what happened with Wuthering Heights. Perfect example.

[C]

I knew you were going to go there.

[B]

You guys bid aggressively on Wuthering Heights, offered almost twice as much money. The filmmaker chose to go with Warner Brothers for much less money because of the theatrical distribution. Would you allow your two divisions to go at it like that if you.

[C]

Own both 100% we go at it now, so of course we would.

[B]

But you don't go at it with two divisions you own.

[C]

When you look at Wuthering Heights, I knew that you'd go there because you've been talking a lot about it recently. I think you know people, what they miss about our movie deals. We don't not pay back end. We pay it up front and we guarantee it.

[B]

Okay, right.

[C]

No, but bother me out.

[B]

I get it.

[C]

Yeah.

[B]

But I guarantee you the, the Wuthering Heights filmmakers are going to end up with more money if that movie gets to 4 or $500 million.

[C]

I hope they're hugely successful in whatever choices they made. They had two choices. They had probably multiple choices. And they will continue to under this deal.

[B]

I mean, it's produced by mrc. Look how much more money they made on House of Cards than they made on Ozark. Perfect example. They owned House of Cards in many territories. They did not own Ozark. You guys had gotten your act together by then.

[C]

You're talking about arbitraging the market or so that's not the case. Those are simple single examples.

[B]

But it's about, it's about the talent, how much the talent participates in success.

[C]

But what I'm saying is that they are guaranteed success with us. So that model works.

[B]

I'm telling you, a certain modicum of success.

[C]

These things are highly negotiated and they're modeled in success. We don't model like, okay, if this movie fails, here's how much we'll pay you. We say no. If it's usually successful, here's how much you'd have made. And we're guaranteeing it. We discount it a little bit because we are accelerating it and guaranteeing it. But they are making this is a very competitive model. And by the way, when we finish this deal, we'll be in the theatrical business and we'll have more firsthand exposure to those models and probably just be just as happy to figure that out.

[B]

Well, that's actually my question. We don't have to debate backends or no backends, but will you keep the Warner's model where they do offer upside in success?

[C]

Not changing anything about the Warner Brothers model compensation for. For filmmakers at all?

[B]

Okay, so you went there. So let's go right into the regulatory stuff. You argue in your statement that, you know, Paramount is talking all about how they have a path to regulatory victory here. Netflix does not. The skepticism on in that Capitol Hill hearing was pretty loud on your deal. Why is it that you say that you guys have just as easy a path to regular regulatory approval as Paramount does?

[C]

Well, I'll start with the first big one, which is any deal this size would have regulatory scrutiny from the buyer, of the buyer and the seller, 100%. So keep in mind this is nothing unusual about that. The rules of regulatory, you know, are laid out in the 2023 merger guidelines. And what we're seeing today is those guidelines being played out in real time. We are deep in the process with the DOJ and the European regulators and regulators all around the world on this deal. We've got, we've done our. US And WBD have already done our HSR filings. Everything is moving along the way it's supposed to. And these deals should be scrutinized. It's very important to protect consumers and to protect the industry in the way that they do. We're, like I said, in the middle of a very normal process here. What I think is also important to understand is that this deal, what we, we have to make sure people understand is it is pro consumer, it is pro creator, it is pro innovation, it is pro growth. That's what I think is the. Is the real key is that, you know, we, since we've been making our own original things, right, we've driven 150,000 jobs in the US on our productions. That's not including day players and extras and all that, you know, $250 billion of economic impact. We film all over the United States. We filmed in all 50 states. So like 1200 locations, 1700 productions. So we are a growth engine and we've been growing every year and we forecast continued growth. So when I look at this and say there's, there's a lot of reasons why this deal is very good for, for the industry and for consumers. 100%.

[B]

No, I get that. And you went on CNBC and you talked all about this. Yeah.

[C]

But I think what gets ignored, Matt, is how dangerous and risky LBOs are.

[B]

That's leveraged buyout.

[C]

Now, we talk a lot about media mergers that didn't work because there's a lot of media mergers that don't work for sure. I think Disney and Fox might have been one that people would look at and say, hey, they used to make 30 movies, now they make 20. Is that winning? Well, no, but it's exactly what Paramount's offering.

[B]

They say they're going to keep 30 movies. 15 and 15. I don't, I think that seems to be lip service. The market for movies seems to be that major studios do make about 20, not 30 a year. It's very difficult, as you guys know, to pump out that many movies per year.

[C]

We know how hard it is every year.

[B]

Yes.

[C]

And I would tell you this, even though, I mean, beyond just the chance of what they're, how they're going to do when they run it, just start with the very idea that LBOs in general are very high risk. You know, this one is particularly risky. It has contingencies, personal guarantees, foreign investment people that could fall out at any point in these things. And these things are risk weighted when.

[B]

You look at these. But it has the world's fourth richest guy backstopping it. At least they say that.

[C]

I mean, if you remember the Twitter lawsuits, you know, to try to commit the richest guy to his deal. It's a lot of the same players involved here. So when I look at this and think, look at this is by contrast, our deal is clean with reputable global banks. We have a healthy balance sheet. We're committing to, you know, continue to operate and grow, you know, this, this company.

[B]

Yeah, but they're offering, they're offering all cash for the entirety of the company.

[C]

Yeah.

[B]

Which also less risky for the shareholders of Warner Discovery than what you're offering, which requires them to essentially take a flyer on this Discovery Global unit that may or may not be valued like Versant, may or may not be sinking or melting or whatever the metaphor. You are asking them to take a risk on that.

[C]

Yeah, well, Matt, I'm Telling you also, also buying the whole company means buying those European sports networks, which opens yourself up to a whole nother level of regulatory scrutiny. And because European sports rights are very heavily regulated and television and broadcast in and cable in across Europe is very heavily regulated. So buying the whole company, you're buying those, those assets and upsetting, you know, European broadcast as well.

[B]

They'd also be putting CNN under the same banner as CBS News and two.

[C]

Big news organizations folding two of the big, of the big five studios down to one. So I'd say, look, that we've seen why these things don't work. We've seen why LBOs don't work and we're addressing why media mergers haven't worked in the past. Because we do not own these assets already. We do not have a theatrical studio. We do not have anywhere near the production capacity and capability that Warner Brothers does. We do not have a third party television production unit. What we do share is HBO and Netflix. And what I'd say is that those are very complimentary businesses. This is very much a vertical merger. And I'd say if 80% of the members at HBO have a Netflix subscription, I think that's a very strong case that this is a complementary business and this is a vertical merger.

[B]

We will get to that. On the regulatory issue, has the typical DOJ investigation of you guys, has that broadened into a larger investigation of a potential monopoly? That, that is something that is going around now in these circles and you've sort of danced around that in other interviews. Have, are they taking a hard look at your general business?

[C]

I have not danced around it. I did tell you that everything that's going on right now with the DOJ investigation is laid out in the 2023 merger guidelines.

[B]

It's not going beyond that. It is not unusual, including talking to.

[C]

Competitors, including talking to suppliers. Understanding the broad landscape is very important to establish this. And by the way, there is no metric, there's no definition of the market that would put us at 50% plus of the market and certainly not 70% plus where normally a title two thing would, would come into play.

[B]

Well, in some of these European markets, you do have a pretty big. If you look at the market for subscription streaming as well as the market for creatives, you do, you do get up there. But, but it's a matter of semantics. I mean they have stats, you guys have stats. It's, it's sort of useless to compare them against each other.

[C]

Remember of all these years we've been so successful like is by Way of example, in the uk, um, adolescence is only the second time we've even broken into the top 50 of the UK. You know, broadcast, broadcast dominates television in the UK and that's pretty common around Europe.

[B]

It's so funny because you went on CNBC and you talked about how great a year you just had.

[C]

Yeah.

[B]

325 million subscribers. You grew revenue 16% operating income by 30%.

[C]

Notes.

[B]

I love this. I did. Why do you need Warner Brothers?

[C]

We don't. We do think that it's an accelerant to an already successful business model. It ensures our continued growth into the next century. With Netflix, it's that combination of their ip, the a decade of. You know, we've been doing it for about a decade. They've been doing it for about a century. So I think that putting those assets together and putting them to work to create more jobs, more, More series, more films.

[B]

I get the messaging. I get the messaging. But.

[C]

But you asked me the question. I'm telling you, that's what it's about. It's, it's. It accelerates an already successful business model. So to have more. Remember, our whole business model has always been about more, not less. So remember, you probably were among them saying they have too much on Netflix. There's too much to watch.

[B]

Well, I remember the days when I could see you at a party and ask you about a show and you, of course, had seen every episode because you saw every episode of every show that was on Netflix. Yeah. Now you probably don't even know half the shows that are on Netflix.

[C]

I would, I would impress you still today if you ask me those.

[B]

Okay.

[C]

But I will tell you though, that, Matt, it's like I said, that that has been our business model. And I think it's one. That one. It has worked. And it's. If you look at us, look at Netflix versus HBO by way of example, and you've got, basically, we are high engagement low churn. They are low engagement, high churn. So you put those assets together and you find a better spot for them to get more engagement on that high quality programming that they have. It's a big win for creators and for consumers. And those folks are all going to get a big discount, by the way.

[B]

I get what you're saying, but the reason I asked the question is because I think there's a sense that this pursuit of Warner's is because of some weakness in your business that maybe we don't know about. Whether you guys see growth plateauing, whether you see the future being all about IP because of what YouTube is doing and others because of these things. And that's why the share price is down by a third since October. Why do your investors not like this deal?

[C]

I think there's about a lot of segment headwinds and market headwinds too. And I do think the market doesn't like uncertainty. And that's why we want, we put this seven day clock on Paramount to bring closure to this thing because people do not like the uncertainty. I don't know if they do or don't like the deal, but it's definitely a departure from our, from our previous history, which has always been to build and never to buy.

[B]

You guys were sterling. Everybody loved your model. Everybody. And then you guys disrupted your own model here by saying, no, no, no, no, no. We need these other assets. We want to go into theatrical distribution even though we've been crapping on it for 15 years. We, we want to sell to outside parties even though we've talked about how everything should go on Netflix for 15 years. Like that's what I think the uncertainty is as you have changed your tune so dramatically in order to go after these assets. People are skeptical.

[C]

Yeah, Matt, I mean, we deserve the skepticism, but I'd say every time we have pivoted the business, which, by the way, we're pretty good at pivoting the business when it's time to.

[B]

Let's start talking about Quickster and it.

[C]

No, well, look, you can, because they turned out pretty good.

[B]

It did. Yes.

[C]

And I also think when you look at it right now and think, you know, a couple years ago we were not, we're not doing advertising. No, I get it. We were classically counter positioned against linear television and that's the way we did it. Now we get into it and now it's a huge growing business for us. And I think our investors, and you guys too, are glad we got into it. And I feel like we're going to do the same thing here, which is this gives us an opportunity. It's very rare to have an opportunity to expand the business into new ways and do it in a way and accelerate our core business in ways that are super complimentary to what we're doing and not distracting it. If we were spending startup resources on selling programming to third parties or putting movies in theaters, we couldn't have built Netflix into what it is today. But Netflix is what it is today. And we're able to do more of these things and take on the real expertise of theatrical distribution that Warner Brothers has. They Just opened their ninth number one film in a row. So when we're going to be.

[B]

They're going to win. Best picture is something I know you guys have really coveted over the years.

[C]

Look, we've had 10 nominees or so. Eleven, sorry, 11 nominees and eight years in a row we've been there. But I'm mostly proud of is like, you know, we're making great movies, but if we're going to get in the theatrical business, we want to win. And you know, nine number ones in a row is pretty sweet.

[B]

Let's get into that because I want to get very specific with you on the stuff that you've said about Warner Brothers because as you know, I've been critical of the whole windowing question. Windowing is absolutely key to, to the future of the movie business and you.

[C]

I'm not, I'm not, by the way. This is not, I'm not doing any coded talk with you though, when I talk about it. This is when I say it's going to be traditional. It's going to look like it did last year and the year before that.

[B]

Let's get you on the record here.

[C]

I'm on the record.

[B]

45 days, you said. We will honor the 45 day window. Does that mean 45 days to HBO Max? Does that mean 45 days to transactional purchases, then premium video on demand, then something like 90 days, 20 to HBO Max? What does it mean?

[C]

It means 45 days of theatrical exclusivity, which has been the issue that people have been mostly pushing for, which I think has the most impact.

[B]

But the theaters are skeptical of this because they don't want it to go directly to HBO Max or Netflix.

[C]

It will go, it'll go from theaters to pvod to HBO Max with a.

[B]

Transactional element in there.

[C]

That's the PVOD window.

[A]

Yeah.

[B]

No, meaning, meaning downloads.

[C]

That's the Peabody window.

[B]

Yeah. Meaning you can own it rather than rent.

[C]

Yes, but look at. And again, we've not ironed out what that is going to be. But, but the core thing that is important is it's, it'll feel traditional in terms of how many days in the theaters and how long to, to get the HBO Max or hbo, whatever the time.

[B]

Would you agree to put that in writing and guarantee it if it's a condition of this deal?

[C]

No, because we'd say a. Because we're don't, we don't present any concentration risk in this deal. We're 9% of the business growing to 10% of the business. So there is no remedy to do that. But I will tell you that there's no, no, none of my competitors will have that in writing or committed to anybody. We're buying a business model and we're going to continue to invest in it and grow it, not to kill it.

[B]

There's a feeling that you're gonna say whatever you need to say now and commit to it for two to three years in order to make everyone in Hollywood feel okay. And then you will backtrack and when we're talking in five years, it will be okay. Batman and Superman go to theaters. Everything else goes to theaters.

[C]

What has been that, what has been that in the past where you made a commitment to, to do something with the town and haven't delivered on it? We've got a 25 year track record of delivering on that.

[B]

Yeah, but, but you yourself said the morning after the deal that the business evolves. You are consumer first. And overall I could see you saying, well listen, we tried it and it didn't work. Or this is better for the business and overall for our customers. I mean, when you first started doing series, I remember everyone was shocked when you started canceling shows after two or three seasons because that was not what the traditional television.

[C]

But we never promised we'd keep on shows that people didn't watch. That was not a broken promise.

[B]

I get it. But, but it was, it was different because the value proposition for shows was less on Netflix than it was on traditional ad supported tv. You didn't need, you didn't need seven seasons.

[C]

Yeah, I agree. But not infinitely. Not infinitely. It's a business model. Matt too. So we do look at the reason why, you know, anytime there's a television cancellation, there's an outcry because people love this stuff. I love what we do. So. And I'd say every time we do it, it's a hard business decision. But if we don't keep the shows on the people watch and take the ones on the people don't relative to the cost of them, we won't have a business. We won't be able to put on new shows for them.

[B]

Okay, so you're not committed. You won't put anything in writing. What about committing right now to robust?

[C]

Remember I sworn under oath, that is as close to a blood oath as you're going to get.

[B]

Okay.

[C]

I swore to Josh Hawley that I was going to do this.

[B]

That's true. I know we all. And I'm not going to ask you whether on stolen land right now. All right, so what about committing to Robust marketing spends for these releases.

[C]

Yeah, I mean, we'll do competitive marketing spends. I would point out to you, like our super bowl spot for Cliff Booth, David Fincher's new movie was the kind of the talk of the super bowl, which I'm super proud of. But again, the other thing to keep in mind is our members are on Netflix a couple hours a day, every day. So the best way to talk to our members about something coming to wherever is probably on Netflix.

[B]

Yeah. But the best way to create franchise value is to advertise products to people who are not on the service. And that has been seen over and over again.

[C]

And not just correctly advertise to them as well. But I'm pointing out the other part of it, too, which is part of this campaign, is not. It's not all traditional television marketing spends that you're talking about. But we're thrilled to do the clipboost spot in the Super Bowl. If we had something that was going to be in that conversation and could drive in that conversation, we were thrilled to do it.

[B]

That also applies to hbo. HBO is HBO in part because not only do they make great shows, they tell people about them, they market them and create events around their shows. And Netflix doesn't really do that. Outside of the awards race, would you commit to keeping the HBO advertising spend?

[C]

I think Marian Lee, I think our cmo, Marian Lee would beg to differ. She has a very serious ad budget and a very serious ad campaign.

[B]

Most of you yourself has said that the platform itself is the best market.

[C]

It is. It is. It does. But it doesn't mean we don't do other marketing. Obviously, we're in the zeitgeist and in the conversation so often because of the combination of the things that we do for our shows, then awards is certainly one beat of that. But so is the marketing spend that we're doing around the world for the content when we break it. You know, strange, you saw stranger things. Just the amount of advertising, partner advertising that went on. It felt Barbie like, you know, totally.

[B]

I agree. That's. That's one show for your, your new shows. You're not doing what HBO does for the chair company or I love L A or some of their smaller shows.

[C]

Which is two very small examples, but I know what you mean.

[B]

Yeah, but they don't make as much and it feels special when they do. And I think that that's, that's a challenge when you guys take over or if you take over hbo.

[C]

All right, what about again, when I tell you we're doing it largely as they did, they will have their own marketing budget. I want them to continue to be what people fell in love with when they fell in love with hbo. And I do think that one of the challenges they've had over the last couple of years is trying to be jammed into becoming a general entertainment brand, which they really aren't. And I think that's why they wrestle with the naming mechanics. You know, is it hbo, HBO now hbo Go hbo. Max.

[A]

Max.

[B]

It's HBO Max as of.

[C]

And I've said from the beginning, when they're serious about this business, they're just going to go by HBO.

[B]

To just hbo.

[C]

I'm not. I'm not made no plans of any of that.

[A]

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[B]

What about box office reporting? A number of producers have reached out to me and said if Netflix eliminates box office reporting on Warner's movies, that would be problematic for the industry because.

[C]

It is a check under oath to you. We will not eliminate box office reporting on Warner Brothers movies.

[B]

That's good to hear. There's this other thing about the competition. You know, obviously Netflix makes premium shows the same kinds of shows that HBO makes. They compete for Emmys. They do all those things. But don't you think that long term competing against yourself in a category doesn't make sense. Why not just let HBO be the premium brand and Netflix will be, for lack of a better word, the CBS of streaming, where, yeah, they have good shows, but they're not. They're not breaking any ground.

[C]

I think that competition is the reason why HBO is as good as they are and that Netflix is as good, as good as we are. It is that, you know, people have different sensibilities. They're all looking for something slightly different. So I think when people are bringing out the shows, competing for them is an element of getting them right and getting passionately engaged in it. Because you went through that process. And I, and I do it internally here at Netflix today. Bella and her teams, they compete for the same project sometimes, or the family team will pass on it and the comedy team will pick it up. It's unheard of around the town, but we do it all the time, so. And I remember, I think I've seen many times where HBO is bidding against CNN for a documentary at Sundance. Happens all the time. And I think it actually is in a premium quality brand. That competition is what keeps everybody really sharp. And that's why I'm going to keep that. That's that multiple pasta. Yes. That people always kind of laughed about inside of Netflix. But I always think that one of the things is, if you're trying to say no, this is a very easy business to say no. And people really mostly try to figure out, just, Just say no and be done with this. What I'm trying to figure out is how do you get to. Yes, and you get that by having multiple people at the table who see something in a project that somebody else didn't.

[B]

So you're saying something like the Bride, which is coming out from Warner Brothers, that was a Netflix project that ultimately went into turnaround because of the cost. And Warner stepped up and said, we will make this. You're going to allow that to happen?

[C]

Of course. It's a very, very natural thing in the natural course of business.

[B]

All right, so let's get back to this deal structure and where we are here because I think there's some confusion. I know you're not going to tell me how high you guys are willing to go on the price. But at least one of the analysts has said that he's been urging. He's been urging Paramount to bail out because they believe that Netflix would go at least 10% more. It's rich Greenfield. He says that that would be $33 per share for Paramount. Are you willing to raise your bid in our History.

[C]

We have always been very disciplined buyers. We're really good at measuring the value.

[B]

Except when it comes to the Russos or Zack Snyder, but we won't get into that.

[C]

They were based on the potential for the. For engagement.

[B]

Yes.

[C]

And so. And in those models, we've been. We've walked away many times when we needed to. And I don't think you should expect us to behave any, any differently here, which is we, we think we're in. We're in the range of where this deal has to be and if we're going to stay into it, and we are willing to make sure to make that we're paying the right amount and happy to see somebody else overpay for it, just like we do for every movie or every TV show we do every day.

[B]

There's this theory that David Zaslav at Warners has known this the whole time and that, you know, I know you know him well and that he did this deal with you. But this, the theory is that this has been an elaborate play to ratchet up the cost of the asset as much as possible. They knew the Ellison would not go away. I hate this term. But you guys are now pregnant with the deal and you're feeling pressure to not walk away. And now all of a sudden it's a bidding war and the numbers are going to get even crazier than they are now.

[C]

Besides taking our offer to all cash, we're at the same place we started and I think, I think we're in the right range for this deal. So I think what this Seven Days is going to do, Matt, is give Paramount and Warner Brothers the opportunity to help their shareholders understand what Paramount is and is not offering. What risk have been taken off the table and what risk remain, both regulatory and close risk. So I think that they've got. They have to figure that out. Our offer is very simple. I've heard people talk about our deals being so, so complicated. It's unbelievably simple. Shareholders are going to get 2775 per share for this deal, plus the value of.

[B]

That's the part that's complicated. We have no idea what it's worth.

[C]

It's no more complicated than that. And our financing is simple. The deal is simple. The value is simple. The valuation is simple. And I think what we. The reason we wanted to enter into, into this period of time to let them clarify it, because I want their shareholders to understand what they're voting for on March 20th if they go with us. It's a very simple deal. It's very closeable. It has a clear regulatory path. And if you go with them, there's an enormous closure risk, let alone even bigger regulatory risk. So it's all those things have to be risk adjusted. And I think our current bid reflects that.

[B]

You're not afraid of the Trump relationship with them.

[C]

I don't understand why people would intimate that they have got some inside track into the federal government.

[B]

Because Larry Ellison is a huge Trump donor and you have been aligned with Democrats.

[C]

This is not a political deal. This is a business deal. And the Department of Justice runs it. And there's very, and it's very clear how to run it. Published in 2023, the merger guidelines. And you follow those merger guidelines. I'm very confident that we are in no risk of consolidating the business in any meaningful way or creating any kind of monopoly that be anywhere near the kind of 50% plus monopoly definitions that you talked about earlier.

[B]

See, I don't know if that's the right argument. If I were you, I'd be making the argument that, yeah, Larry Ellison and Trump might be buddies, but that actually hurts them overseas. And there may be people in the UK and the EU that want to stick it to Donald Trump by sticking it to the Ellison.

[C]

I'm making a business decision here. We talk about this. And I would tell you that I, when I talk to the president about this deal, I've got to talk to him about this business. The only thing we talk about is how to keep jobs in America, how to keep the production industry healthy. He wants to know what happened in California. Why is all the production, you know, scattering around? And that's the, that's the conversation we have when we talk. We're not talking about doing anybody any favors or anything else. We're talking about protecting American industry and growing American industry and growing production in.

[B]

The US what does Trump watch on Netflix?

[C]

I don't think he watches a lot on. I don't think he watches a lot of news. It seems like, yeah, yeah.

[B]

If you guys need, maybe if you put Sean Hannity on Netflix, he would start watching.

[C]

But I look at, I've been, I've been happy with my conversations with him and his focus on, on business. You know, I think over the years, Matt, no one ever thinks about the entertainment industry as a business. They never talk to one. They say I do.

[B]

It's my entire podcast.

[C]

But I'm saying if we, we go to New Jersey and build a factory to build a billion dollars worth of cars, you know, everyone in the world would be talking about the economic impact and the president would be there for a ribbon cutting and everything. We're building a billion dollars worth of production, a state of the art production facility in New Jersey to protect and create American jobs and keep that production on U.S. soil. And I think what's great about that is, you know, it's really great. It's lifting the local economy there tremendously already and it's going to lift the US Economy as well. And I think that's an important factor in all this. So there's. You shouldn't be surprised that the president's interested in it.

[B]

At what point do you have to listen to the shareholders of your company who are pretty clearly speaking that they.

[A]

Don'T like this uncertainty?

[B]

Have you heard from big shareholders that say, listen, man, what's going on here? Why are you doing this? Why are you taking this pristine brand with a pristine model and exposing it to the government up your butt? And all of these people criticizing you on Capitol Hill and potentially bogging this down for years in litigation with the Justice Department?

[C]

I think our shareholders, like our board, knows that we look out for the long term best interests of Netflix. This is a long game that we're in. So I don't, I think you can look at our charts. You know, we're up and down a lot, you know, but it's always. Trajectory is up and down, but up and to the right. And I think as long as we keep focusing on the long term and not being afraid to do things that are a little painful in the short term to get to the long term outcome, that that's in the best interest of our shareholders.

[B]

And they, and that messaging works. They seem to back down when you.

[C]

Say that we're not engaging every day with our shareholders on it.

[B]

So.

[C]

But we're. But they understand that. They understand the story they're buying into.

[B]

Yeah, but my point is, was this.

[C]

We've been long term players all along.

[B]

True. Remember, was this day about face? Was that due to shareholder pressure on your part?

[C]

Absolutely. It was just part of bidding strategy. When I looked, when I looked out at all the confusion and you know, the kind of misinformation that Paramount is like. You know, they've spent so much time and energy and, and money on the Hill, you know, flooding the. The Zone with all this.

[B]

Well, you guys are doing this crazy.

[C]

You guys are nowhere near, Matt, nowhere near what that's what they're doing. And, and it's, and what we're doing is saying the truth and what they're.

[B]

Doing is, listen, you can put together numbers that show you guys what are a dominant force around the world, both in buying content and in distributing it to subscribers that pay money. That is a fact. So it's hard to deny that you guys are not a dominant force in subscription streaming the world.

[C]

This isn't that narrow. That's all there is. I mean, there's no more else to that.

[B]

What's the one thing you want to communicate to Hollywood about this deal? Lots of people are skeptical about this. Not saying they're picking one side or the other, but they're very skeptical.

[C]

But I would like to relay to the town and yes, how's that, how's that for a play on words, is that this deal, the outcome of this deal is very important to have to the entire industry. A, you, you go with Netflix. And we, we, we continue to grow. We have this. For the first time in a long time, Warner Brothers will be in the hands of a company with a great balance sheet that's going to invest in its continued growth. We're not in the business of cutting. Or you can go the other route, which is Paramount, which they said they're going to about $16 billion in cuts. Do what?

[B]

You said that. I don't know where you get that number.

[C]

I'll tell you.

[B]

They've said 6 billion.

[C]

I know they said 6, but I can count. If you take a 7 times levered business and get it, take it down to two to three times levered, you have to cut $16 billion out of the business. And that's what they're saying to do in a very short time frame. So they remember They've already taken 3 billion out of Paramount. So again, this is, this is the cutting, cutting, cutting, where Netflix is growing, growing, growing. And I think this is important for an actor in the Screen Actors Guild. I think it's important for a director at the dga, for a writer at the wga, for Iatse and Teamster Cruise, for producers in the Producers Guild to understand that we're in the business of more. And if that deal ever came to pass, that would be a devastating cut to this industry. That after a strike, after a pandemic, after, you know, you know, the profit squeezes that were going on for the last five years, it could be existential. So I think it's very important that they not only get involved in this conversation, but I think they should, on behalf of their memberships, endorse this deal as a path forward for their members.

[B]

I doubt that's going to happen. But I'm asking.

[C]

I'm asking on the other side, the.

[B]

Only downside is you create a streaming behemoth with more than 400 million subscribers. Subscribers who.

[C]

Who has grown who has grown the entertainment business enormously in the last decade.

[B]

All right. Well, I appreciate you coming on and letting me grill you. I'm sure I'll see you at some terrible award show coming up.

[C]

I'll scroll away in the corner with you. Have a drink.

[B]

Yes. Okay.

[A]

Talk to you later.

[B]

All right. That's the show for day no call sheet today. I want to thank my guest, Ted Sarandos, our producer Craig Horbeck, artist Jesse Lopez and Jon Jones. And I want to thank you. We'll see one more time this week.