← The Town with Matthew Belloni
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- [00:00]
A
Foreign. This episode is presented by AMC Network. A new chapter in Anne Rice's immortal universe begins with AMC's the Vampire Lestat. Get a backstage pass to the iconic frontman who Pace Magazine calls a Bowie inspired rocker that will have fans screaming. Don't miss the legendary vampire Lestat de Liancourt in his own electrifying rock saga. Watch the Vampire Lestat Sundays only on AMC and AMC. Learn more@amcplus.com this episode is brought to you by Accenture when your advertising operations fall out of sync, campaigns slow down, insights get buried and opportunities get missed. That's why Spotify and Accenture are working together to reinvent the rhythm of ad sales, using automation, analytics and smarter workflows to simplify campaign delivery and access better data across the business. The result? Less time spent on operations, more time connecting brands with the moments and fandoms that matter most. To learn more, check out Accenture.com Spotify it is Monday, July 20th Paramount lawyers were in federal court in Oakland on Friday for their first public defense of the $110 billion takeover. Warner Brothers discovery if you didn't follow along the judge in the case, Araceli Martinez Algin, she's deciding whether to temporarily block the merger from closing on behalf of California and 11 other states. The judge heard from both sides, with the state attorney arguing that the deal illegally constrains three specific wide release movies in theaters, the so called blockbuster releases of films and the distribution of television cable networks. They argued that the combined company's large share would undermine competition and harm consumers, making it presumptively illegal. Jeffrey Kessler, the high profile Paramount lawyer, he was quick to point out that blockbusters come from more than just the five major studios these days. He specifically cited Project Hail Mary from Amazon and F1 from Apple, though he did have to be reminded that F1 was actually distributed theatrically by Warner Brothers. He also said that Paramount would delay the closing of the deal until September if the judge promised to rule on whether she will grant a preliminary injunction against it by by early September. Remember, Paramount owes hundreds of millions of dollars to Warner shareholders for every quarter beyond September that this deal is delayed. A decision is coming on the tro before July 22, she said. That's Wednesday. So in the meantime, since I had the attorney general Rob Bonta on the show last week to press the state's case, I invited Paramount's chief legal officer Makan Delrahim on the show today to argue his Delrahim isn't just the top lawyer at the studio, he he's also an antitrust expert and he served as an assistant attorney general for the Department of Justice's antitrust division during Donald Trump's first term. He's got the ear of David Ellison. So today we really get into it in a respectful way, of course, especially on what the company is willing to concede to settle this matter. Today it's Paramount's defense of the warnermount deal, why the state's case should fail and what they're willing to do to make it go away from the ringer and Puck. I'm Matt Bellany and this is the. All right. We are here with Macon Delrahim, the chief legal officer of Paramount Skydance and a first time guest on the Town. Welcome, Macon.
- [03:25]
B
Thanks for having me, Matt.
- [03:26]
A
Okay, so we had Rob Bonta on last week and today we have you on for the Paramount perspective on the antitrust litigation. First of all, you were at the hearing. We are taping this on Friday afternoon. You were there this morning. How do you think it went?
- [03:43]
B
I think it went well, pretty much as we had expected for a TRO hearing. I think the judge is engaged. I was there yesterday as well for the private case preliminary injunction hearing where
- [03:55]
A
she denied the preliminary injunction in the related consumer action over Paramount plus.
- [04:00]
B
Correct. She denied that, which was the right decision. And you know, and we presented our position, they presented their position and she's expected to rule, she said, before July 22. So let's see how it goes.
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A
Rob Bonta explained the rationale for the lawsuit. He went through the three points, the three antitrust issues, the markets that he says make this merger illegal. I want to get into your rebuttal there and then we'll get into some of the other issues. Give me first and foremost what you think the winning argument is on each of these markets, the market for wide release movies, the market for blockbuster movies and the market for cable television channel distribution.
- [04:51]
B
Sure. Look, respect Attorney General Bonta as well as all the other attorneys generals think they're doing the right job. But look, fundamentally this complaint is just flawed from the very first step, which is the market definition. And as you know, antitrust law and merger policy is largely based on you look at the competitive effects, you look at what a merger's effect is based on a particular market. So they did the best they could. They gerrymandered into the, you know, into the situation to try to come up with 27% and 30% market shares to try to claim that somehow we'll have market power. But let me just start with that I mean, you know, when you're dealing with movies, they're talking about five studios going to four. That literally has to assume that MGM and Amazon do not exist. Right. You have to stick your head in the sand.
- [05:51]
A
No, and I said that to him and he says, we're not concerned with the streaming market. We are concerned with the market for wide release movies.
- [05:59]
B
This has nothing to do with streaming. Project Hail Mary is a theatrical film
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A
and they have 15 movies this year. I understand that.
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B
And you also have to assume, I mean literally, I think Attorney General Bonta probably got into the DeLorean and went back 30 years. In a world where Amazon, MGM didn't exist and didn't release movies. Where Michael Jackson movie didn't just cross over a billion dollars at box office and Lionsgate doesn't exist in the world.
- [06:24]
A
Yeah, well that was distributed internationally by Universal, but I get your point.
- [06:28]
B
But domestically they distributed in the US market and they're alleging the US geographic market. A24. What about all those movies? I mean, look, there's a lot of competition. When the states tried to block Sprint T Mobile, that was four competitors going to three with huge barriers to entry. You can't start the Matt Bellany cell phone towers. Right, Right. You need spectrum, you need towers, you need all this movie theaters. Here we have at least seven or eight movie theater movie distributors. And it falls on its face. In a world where you have to assume Amazon is not releasing 15 theatrical films and making 25 films, Lionsgate doesn't exist. So immediately that falls. So they don't get the presumption.
- [07:18]
A
Well, your guy cited Apple and fell into a trap there. You need to talk to Jeffrey Kessler. He made a mistake, he said, because that was released by Warner Brothers F1.
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B
Well, no, but, but they, Apple is investing as far as making the movies. They are. It was distributed over there by. Yeah.
- [07:36]
A
The better argument is that all of these companies could get out of theatrical distribution if they wanted to. Apple is choosing not to put their movies in wide release right now. But, but they could, they could. And Universal could decide tomorrow that they're getting out of the theatrical business as well. So that to me is the better argument.
- [07:56]
B
You're 100% right. And, and the other one is Netflix just announced Narnia doing a wide release. The app. They could easily jump in there. They made a decision. So when you're looking at antitrust, it's who can enter into that market? Who has the ability and capabilities to do so? All these companies do. They don't even have the capability. They can do it, and they are doing it. So immediately that market fails, then you go to the other market.
- [08:23]
A
Well, wait, wait, wait. But Bonta, just on that point, Bonta told CNN this morning that it's really not about past, present or future. The law is indifferent to where markets are going. Are they shrinking? Are they growing? That's what he says in response to this, on both the blockbuster claim and on the claim about television distribution, which we'll get to. But do you agree with that? I assume you don't.
- [08:49]
B
No, no, no. These are dynamic markets. You have to take a look at that. You know, one year you have blockbusters, another year you don't. One year, you know, one of the DC Comics movies is a huge blockbuster, another year it's Supergirl.
- [09:01]
A
But their argument is that there's basically five companies that do these kinds of movies that are in this market and in the mix. And if you are Joe Blow, Jerry Bruckheimer, producer, and you have the kind of movie that is a wide release, $200 million global movie, there are basically five, six, maybe seven, if you include Apple for his movies, companies that will
- [09:23]
B
do that kind of movie, and immediately that fails. So you first get to the market share. So once you include those other ones, you include Project Hail Mary, you include Michael Jackson, you include, you know, Back Room and a few others, then it just starts falling apart on itself. Then we could get into cable because that just assumes streaming.
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A
Let's do that. So you think that fails for both markets, for both the wide release and for the blockbuster markets? It's the same argument, a hundred percent.
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B
And they're like anticipated Blockbuster, you know. Yeah, it's just we will show that and experts show that, and the numbers show that they don't need to take our. That's what they're afraid of. I think that's why they don't want an evidentiary hearing for a preliminary injunction. They just want to do it on the papers. Because once you get actual experts and witnesses in there, their whole argument falls apart.
- [10:16]
A
Yeah. Who are your experts going to be? You're going to haul Mike Hopkins in there to testify about his 15 movies a year at Amazon that are going to theaters. I mean, look, he doesn't want you to win. He wants you guys to get blocked. He doesn't want a competitor.
- [10:27]
B
I don't. I don't know about that. But look, at the end of the day, it's facts, right? You don't even need him to testify. You just show what has been released. But no, look, Our. Our economic experts, you know, they've already put in their expert testimony report and all of that. So then you get into the cable business.
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A
Yeah.
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B
You again, have to jump into that, DeLorean, to go back and presume that streaming didn't happen and Netflix doesn't exist and, you know, Hulu doesn't exist and all of this other stuff.
- [10:58]
A
Yeah, but again, I asked Bonta about this, and he says, I'm not litigating the streaming market. I'm litigating the television distribution market. And it's back to his quote, exactly. It doesn't matter where the markets are going. It matters where they are. And there is still a robust market. Paramount, as you would freely acknowledge, makes most of its money currently off of cable television distribution. Do you not agree with that?
- [11:21]
B
It's in a secular decline year by year. It's decreasing by 10%. Consumer viewership is down. When you look at the latest Nielsen ratings, actual basic cable is down to approximately 20 to 22%. Whereas people watch. When I come to my house. Again, you don't need an MIT economics expert. You walk into your house, I walk into my house, my kids are watching either Netflix or YouTube on the television. Right. And I'm the guy who comes in and watches either news or sports. But that is. You can't say they don't compete with each other. They are, because that's not what is going on when you have your cable.
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A
Well, but how far does it go? Do you consider. I mean, this gets to the whole Netflix argument. They're competing with sleep, they're competing with Facebook, they're competing with Google. Do you consider Google and Facebook to be part of this market for people watching?
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B
You don't need to go there to take our argument. I mean, Google's YouTube certainly is in that market. But you don't need to go to like, you know, Google Search or Facebook or TikTok. Like Netflix was arguing.
- [12:24]
A
You don't. So you would define the market only how. So you would include YouTube.
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B
You would include YouTube? Yeah, absolutely.
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A
Even though it's free and they're talking about paid services.
- [12:36]
B
YouTube TV is a paid service, but YouTube itself is. It is. What are you watching in that format? But yeah, not.
- [12:44]
A
Not TikTok, but YouTube TV is a cable distributor competitor. I'm talking about defining the market. You're going to be asked to define the market that this judge should accept as the market that Paramount competes in for television distribution. Who would you include in that market?
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B
Certainly all the streaming services. And you would have to include YouTube, as well as a streaming service, you would have to include, you know, the fast channels. Those are when you turn on your television and you watch a programming. That's what you would look at. You know, I don't know how many. I don't know if you're a cable subscriber. I'm still a cable subscriber. I'm not a full cord cutter. How many texts a day do you get with your subscription? You get Peacock for free. You get Fox Digital free. You get, you know, Paramount Plus. So who do you think is distributing those? Those are just channels. And that's what's going on in the market. Why is it going down 10%? And also, as Jeffrey explained today in the court, you don't have the market power when you are harmed more by not licensing than that cable operator. Who has the leverage? Who can outwithstand that?
- [13:54]
A
But it's still a business. And if I was them, I would say, yeah, they're minimizing this. But ask them where their profit comes from. Ask them what is keeping that company's lights on right now. And it's cable distribution fees from the channels you say are dying.
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B
I mean, all you have to do is look at what Warner Brothers Discovery was doing. They split up the company because it was in secular decline to spin off the cable assets. What did Comcast just do with Versant?
- [14:21]
A
Yeah, but that's a market thing. That's like what the market cares about. It's not what Bonta says. The people at home who just want to come home and watch ridiculousness on
- [14:30]
B
their mtv, they could watch that on their streaming service. They could watch that. So it's just. No, no, look, look, they. Again, it's kind of cute in the sense that they had to twist themselves.
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A
Okay, you say that. I don't say that, but.
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B
No, no, but it gets to 27% max. They don't even meet like a 30% market share, which is what at least the current Supreme Court law is.
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A
Yeah, you keep citing this, but let's just say that you're citing the Philadelphia case, which says that a. A merger that would create 30% or more of a market is presumptively anti competitive or illegal. That's Philadelphia National Bank.
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B
Approximately. Yeah. It's a structural presumption. So the Supreme Court read a presumption of illegality into a statute that doesn't exist. No, look, we're bound by it as a lower court, Supreme Court, certainly. This is a 1963 law that says there's this presumption of illegality. Let me give you an analogy. You have a crack house. They say you're presumed to be guilty if you're within 100 yards of it. And it's up to you to turn it over. You can't just write that into a statute. Not in today's Supreme Court. And so that is going to be interesting.
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A
All right, well, I'll leave the crack house. I'll leave the crack house analogies to you. But I.
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B
That's really what it is.
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A
Okay, but do you want to overturn that, is what you're saying? Potentially not.
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B
Well, no, I want to. I want to get our merger closed.
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A
No, I understand.
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B
If we have to. Look, if that, if, if they're relying on that, which they are. That's the only thing they're relying on, this presumption of illegality, which, by the way, you know, under the, you know, the laws, you know, whatever. Baker Hughes burn shifting. We already have the evidence to shift that over. Even if you help that presumption that there's no market power, there's no lessening of competition, even if you get to that number.
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A
Right. So you don't necessarily have to.
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B
You don't have to.
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A
But if, but you're a Trump guy. That. When you were working for Trump, did you. Did you want to overturn that?
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B
No, that was, I'll tell you, for three and a half years when I was head of the antitrust division, I was terrified that somebody was going to take the biggest tool for merger enforcement away by challenging that. Because you've never had that. You know, people work these things out. Look, this is not like some merger that's just gone through. This has been around for seven, eight months. Every regulatory agency around the world has examined it, issued opinions.
- [16:58]
A
Well, not yet the uk. The UK has not signed off yet as we are speaking.
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B
No, they've all examined it. They haven't approved it yet. It's a matter of weeks. What? They're looking at it. Look at Australia's Competition Authority. Look at Brazil. Look at Canada. These guys have written opinions. Look at the South Korea. Look at South Africa. Every single one of them have issued their clearances. And here, our home state in the state and our Justice Department has also cleared it. And our state is suing to block it, despite the whole global analysis and approval. That's gotta be the 13th chime of the clock. Now, we respect the legal process and we're gonna go through it. We'll respond. And we offered to, you know, stipulate to 28 days of the TRO, which is the max you can get, have an orderly resolution. But look, it makes you wonder what are they doing with such a gerrymandered case? This is not a case.
- [17:56]
A
Well, there's a lot of people who really want this to be blocked. And if you look at the complaint on its face, they are stating anti competitive activities in markets that they have defined. I agree with you that the question will be whether those markets are legit. But they're making the case. It's not, it's not out of the question. And you never know what this judge is going to do. I want to get into a little of the procedure. So.
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B
Sure.
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A
So let's say this is granted. I mean, both sides here think that this judge will put a halt at least temporarily on this merger so they can figure this out.
- [18:29]
B
You guys see that we would, we would give it. She doesn't even need to get to it.
- [18:34]
A
But you guys want a very quick preliminary injunction hearing. And how likely are you to get that? Because the state obviously wants to drag this out as long as they can to get leverage because you guys have to pay this $650 million a quarter ticking fee. So what's your best argument for why this needs to go now? And don't say that it's because you guys have to pay $650 million because you signed that deal. You negotiated the terms. I don't understand why the court or anybody should care whether a delay causes you financial harm.
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B
Well, I mean, every merger you sign an accord, you have a penalty you have to pay.
- [19:14]
A
No, but you agreed to the ticking fee and you made it so attractive to Warner Brothers to, you know, you were so confident that this would get approved that you put that in there. Why should a judge care if this goes on longer than you guys want and you have to pay a little bit of money now?
- [19:31]
B
This is. So let me just tell you how the law actually works. It is. I mean, a bond against a improvidently granted injunction is required under the law. And you have to calculate the damages. They point, you know, in their briefings, they point to Tegna Nextar merger where the judge ended up issuing a bond. They did it 10,000 because they came up, they'd already closed the merger, by the way. They came up with, you know, their damages being, you know, credit expenses and things. Ours is an actual damage. It goes away from the company. It doesn't go inside the company we use down the road.
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A
But I'm just saying it's a damage that you yourself created by getting into this arrangement, you didn't have to do that.
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B
Every merger, when you have a penalty, it doesn't matter. When you put it is negotiated by parties. So this argument comes up. It doesn't matter. It's still a calculated cost based on an improvidently granted injunction. So that's what you would have to go through. So we'll see about that. But here, look. As a California taxpayer, I would hate my attorney general to be wasting my taxpayer money on something like this where it shouldn't. There's no law. This is the weaponization of antitrust law if I've ever seen one. And this is wrong for the exact reasons I mentioned. The market definitions don't make sense just because you can sue in court. I mean, I could sue that, you know, you have punched me. It makes no sense that you should do so. And here, this merger is pro competitive. They should not want to do that.
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A
Oh, okay. I've heard all the arguments. I've heard the pro competition. I've heard that. I've heard that many times. I know your press release.
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B
No, no, no. But. But that's. That's why they shouldn't be delaying this.
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A
Okay, so. But if it is delayed, let's say it drags into the fall and next year, do you have what I have been told is a document on your desk with the concessions you guys are willing to make to settle this matter? Both behavioral. We won't fire X amount of people. We will produce X amount of productions in California. We. We will agree in writing to release 30 movies a year wide with marketing plans for the next five to 10 years. Both those and what Vonta says he wants, which are the structural remedies, selling off, spinning off assets. What are you willing to do?
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B
So let me first say you do remedies when you have harm, when you have a proof of illegality. Okay, one, there isn't.
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A
You also do them to settle before you get to that determination.
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B
Of course, you. Whenever you have, you know, leverage on one side or that you're negotiating, we want to get out. So we said we would. Of course. It's on my desk. It's on the Attorney General's desk. I was shocked when he said upon filing that it was only in the press that he learned about it. He got it two months ago. He got it two months ago.
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A
You got what? He got what? He got a list of things you're willing to concede.
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B
Absolutely. What?
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A
So read from it. What are you willing to concede?
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B
No, these are settlement discussions.
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A
He's out there saying that he's never seen any settlement. So tell us what's in it.
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B
I would be shocked. And by the way, we gave it later, once we learned that it hadn't been disclosed to the other state AGs. We gave it to the other state AGs.
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A
So, okay, so every reporter out there listening to this conversation, call your sources at the state AG's office around the country and report on what Paramount is willing to offer. I'm going to do the same.
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B
You could totally do that. But out of respect for the AGs and the legal process, we have offered that this is, you know, if the issue is 30 films, 45 day window, 90. By the way, we're already doing the 45 day window voluntarily.
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A
Voluntarily. There's no. Like he says, there is no guarantee. And I've said that too. I like David. I think he's a trustworthy guy. I do not trust him for a second when it comes to that.
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B
We've offered to make it enforceable with them.
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A
Okay.
- [23:39]
B
No response. Crickets. For two months. You know why? Because they just wanted to bring a lawsuit. That's fine. But. But they should settle this thing if they, if they really want an enforceable commitment. Now, we've. We didn't need a consent decree or a government telling us. When David bought Paramount, Paramount had released eight films. Where did it go? Up to 15. It'll probably go to 16, 17 next year.
- [24:06]
A
And Warner's has been languishing.
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B
Well, Warner's does. And so we said it'll be 15 and 15. But here's. Why not. Because the government's gonna be telling us to do so. You know, it is. Because it's in our economic interest to do so. We need to do that today into the streaming.
- [24:23]
A
Absolutely, but not forever. And we don't know in two years you have some flops. I don't want to litigate that again.
- [24:29]
B
No, no, but here's. This is really important. Here's. Why is that? Why do we need to constantly be fueling this? Because the streaming business, the consumer now has the power. In the old days, you cancel your cable when you're not happy with something. Say, I don't want to spend that money today. You will just press a button and shut down your subscription if you're not happy. If we're not feeding them, that churn is going to go up. So we have every incentive. Why would we go out and spend $7.7 billion on UFC? It's to get customers in. We lowered the price. You don't have to pay 80 bucks. Every pay per view. The consumer is getting it for it totally for, you know, basically one year subscription fee gets you one pay per view. You get every single UFC plus every other show we have.
- [25:16]
A
Yes, I know. It's a deal for masochists everywhere. This episode is brought to you by Accenture. When your advertising operations fall out of sync, campaigns slow down, insights get buried and opportunities get missed. That's why Spotify and Accenture are working together to reinvent the rhythm of ad sales using automation, analytics and smarter workflows to simplify campaign delivery and access better data across the business. The result? Less time spent on operations, more time connecting brands with the moments and fandoms that matter most. To learn more, check out Accenture.com Spotify this episode is brought to you by LinkedIn Ads. Ever invest in something that seemed incredible at first but didn't live up to the hype? Marketers know that feeling. They optimize for the numbers that look great, impressions reach and reacts. But when they don't show revenue, well, that's a not so great conversation with the CFO. LinkedIn has a word for that. Bull spend. Instead, why not invest in what looks good to your CFO? LinkedIn Ads generates the highest roas of all major ad networks. Reach the right buyers with LinkedIn ads you can target by company, industry, job title and more. So cut the bull. Spend advertise on LinkedIn, the network that works for you. Spend spend $250 on your first campaign on LinkedIn ads and get a $250 credit for the next one. Just go to LinkedIn.com thetown that's LinkedIn.com thetown. Terms and conditions apply. This episode is brought to you by Holiday Inn by IHG Everyone knows Holiday Inn, right? Or they think they do because though they have the same name, they've got a whole new energy. They kept the global icon status and upgraded pretty much everything else. We're talking modern rooms with real reset mode vibes. Spaces that feel like your living room, just a little more low key chic and dining done right from breakfast to dinner and drinks. Whether you're traveling for work or getting away for a minute, it's comfort that hits different. So yeah, Holiday Inn. It's a new day and a new stay. Book your next day@holidayin.com I want to get to the other stuff. Are you willing to sell cnn?
- [27:28]
B
I don't think. First of all, we've said we've been open to all legitimate discussions. What is the harm of cnn, what is the overlap? Where's the antitrust harm? I think if the states are using their state power to try to control speech by who owns it, that's a serious First Amendment violation that nobody should be for, especially the creative community.
- [27:52]
A
They would argue that Donald Trump has pretty openly said that we, meaning some mysterious we, him and somebody are going to make CNN better. So he thinks, whether true or not, that this transaction helps him in putting CNN into your hands.
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B
I heard the interview between the president and Jake Tapper. He asked him, would you be on. He said, yeah, I'll come on to you because we want to make you better. Has nothing to do with a merger.
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A
Well, he said we discussed. Okay, all right, but you get my points. The politics is stinky on both sides
- [28:25]
B
here, but it's got nothing to do with antitrust. That's what I'm saying.
- [28:28]
A
But Bonta says that CNN is not enough. He says he wants cnn, but he
- [28:31]
B
don't have to take my word for it.
- [28:32]
A
He says, But Bonta says he wants CNN sold, but only if it's part of a larger remedy that includes maybe a spinoff of all of the cable networks.
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B
Because if he actually said cnn, it would expose it. He's already said it on your interview, I think News Network.
- [28:50]
A
No, it was. No, he has not said it publicly. I have reported that he would like CNN sold. He has publicly denied that.
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B
But you know what? Their ringleader is Norm Eisen, who has taken credit for this lawsuit both here and delaying, you know, some UK approval. And Norm Eisen, you know, you don't have to take my word for it. Look at his email that he sent to his own sponsors and supporters that how he takes credit for this and talking about this is about cnn. Yeah, this is terrible. It's terrible. It's a. For somebody who would die for the First Amendment, I am actually shaken by this type of an effort.
- [29:29]
A
Well, a lot of people feel the same on the other side as well. So I agree the politics stuff is kind of boring to me because I know it's going on and I see it transparently. It is unfortunate, but that's where we are. And if it came to spinning off the television, cable networks, you guys could have a business with CBS and the streamer. You don't need the cable networks. You could come up with some deal. I know they throw off a lot of cash and that it does power the entire transaction as you guys have drawn it up. But you could probably get a lot of money in this separate company. For this the same way that Comcast has done spinning off its cable network. So would you consider that if there's
- [30:07]
B
antitrust harm is proven with that? I still fail to see it. When they talk about basic cable in antitrust, they have to be substitutes with each other. Right. Like broadcast stations are substitute each other. Basic cable is not. MTV does not compete with tnt. CNN does not compete with Nickelodeon.
- [30:29]
A
They're all going for the same limited carriage fees.
- [30:33]
B
But. But it's not about the carriage fees. It's about where that demand is. If you have two different products that are complements with each other, it's actually efficiency enhancing. They have to be substitutes for them to come together for you to have a competitive effect. And that's what he misses. And these. No, no, that's just.
- [30:52]
A
I guess. But it does give you. It gives you outsized negotiation power. If all of a sudden you own the 30 cable channels that have brands that people know about.
- [31:01]
B
I can tell you that is every year it's going down.
- [31:04]
A
I agree.
- [31:05]
B
There's experts. Because we can't. If we stop that licensing, we don't get that money immediately. Whereas the cable operator still gets its subscription fees.
- [31:15]
A
Until those consumers go away, it is going down. I know the leverage.
- [31:20]
B
The leverage is not the same.
- [31:22]
A
It's. The analogy is like a merger. If the two biggest makers of film projectors merged, like okay, digital film projection is the future. Those are always going to exist. Christopher Nolan loves seeing his films displayed on film, but it's not the future. That's probably the better argument for some for you guys to make. But it does give you some pretty big market power negotiating with these cable providers.
- [31:51]
B
We get no increased market power to do this. I could tell you this. And experts will show that for exactly that reason.
- [31:58]
A
I'd like to see that expert report.
- [32:00]
B
These are compliments. These are not substitutes for each other.
- [32:03]
A
All that matters is the NFL. And none of those channels have the NFL. CBS is the one that matters. Which is why I've always thought that if you guys were willing to get rid of cnn, it would have to be for a big price because it delivers a lot of profit to the bottom line. But the carriage battles are going to be won with cbs, including the retrans fees with the retransabilities.
- [32:27]
B
And we already own cbs. We're not getting any more market power. Yeah, that's got nothing to do.
- [32:32]
A
No, I know, but that's what I'm saying. You don't need necessarily CNN if you have CBS and all the sports Warner
- [32:40]
B
Brothers does not have the NFL. There's no combination of any way. So again, this is not. And it's in a market where it continues to be declining. We're not going to have the market power. If anything, we'll be creating the efficiencies by being able to transition those into streaming channels. So the consumer ultimately has that ability to have those. And so. And they'll have it much easier because they don't have to. If you have CNN on your Paramount plus app, you will be able to watch it anywhere. And you know, look, I'm a beneficiaries. I love watching 60 Minutes and 60 Minutes overtime and, you know, I don't know where the heck it is on a channel, but I can watch it anytime on my Paramount plus. And it's fantastic.
- [33:23]
A
Yeah. So just to recap, you are willing to enter into behavioral remedies in writing, like your 30 movies a year and other things. Are you willing to commit to a certain amount of production in California? Are you willing to commit to a certain number of jobs retained?
- [33:41]
B
Like, look nothing. I think I would just say, look nothing. Ultimately, obviously, this will be David's decision, but as far as when you're negotiating these types of things, nothing's off the table. It has to be legitimately tied to an antitrust violation.
- [33:55]
A
Yeah, but I'm just saying, because Bonta says he is not interested in behavioral remedies that are not enforceable. And he also says he wants structural remedies. So I just want to make sure that. That I'm getting the correct response from you on that.
- [34:09]
B
He has never offered, he has won. He never gave us what until this lawsuit, what the competitive harm he was asking. He kept on saying, bring us structural remedies in public. And it's. You know what it's like. It's like saying, hey, you're being investigated and I need you to bring a plea agreement to me. What am I being charged with? Is it bank fraud? Is it securities fraud? Is it rape? Is it murder? I'm not going to tell you. Just bring me a ring me a plea agreement, because that's what I want. It makes. No, this is not the way you do law enforcement. With all due respect to the Attorney General.
- [34:42]
A
All right, can you commit right now that this moving out of California thing is silly and you guys won't do it?
- [34:50]
B
Look, I love competition. I love it when states are competing. How much. How much production has moved to New Jersey and New York? How much has gone to Georgia and Illinois and Louisiana? It's fantastic. When states compete and we want California to compete with tax incentives to keep, to make it, make it profitable to be here. How much production has moved to the
- [35:15]
A
uk yeah, but that's production. There is a robust market trying to lure these company, these shoots to different states. Nobody is saying come set up your hundred person corporate headquarters here until now. And they're doing it because you guys have complained loudly about the regulatory state and in California. So are you considering moving to Tennessee or elsewhere?
- [35:39]
B
Look, we haven't talked about that. It is safe to say that multiple states have reached out to us to invite us to talk to them about going there. That's a statement of fact. You've read about it. But ultimately, obviously these are big decisions. David has grown up here.
- [35:57]
A
But you're a voice in David's ear.
- [35:59]
B
He wants to be in California. We've committed to be in California. We're one of the few companies was actually moved our headquarters to California last year. You know, Paramount used to be New York. It's in California. There's a commitment made in California. I can tell you David for the last nine months has made multiple trips. You know, we haven't been out there advertising it about, you know, going to Washington, using his capital, using his time to get federal tax incentives to expand production in the United States and in California.
- [36:32]
A
Yeah, I saw that that news broke conveniently the same day you were sued.
- [36:37]
B
I mean it's, we were literally on the plane going to Washington when we get sued by our home state. What does that tell you?
- [36:44]
A
I get it. But I thought it was a convenient media placement that, you know, bad guy David Ellison is trying to save the entire film industry via incentives.
- [36:53]
B
These meetings, there have been multiple meetings. The meeting with the chairman was set up two months before. You don't make up that you don't make that kind of a meeting with 14 members of Congress, you know, in a day or two.
- [37:03]
A
I get it. All right. Everyone in town wants to know how this is going to end.
- [37:08]
B
Oh, this is going to end with this merger closing period. When probably by, you know, I don't know, hopefully by the end of September. Otherwise my taxpayer, you know, state and as a taxpayer, they're going to be paying a huge amount of damages, which would be really unfortunate to cause the damages, cause the consumer harm and have to pay for delaying this in this way.
- [37:31]
A
Presuming there will be a hearing on the preliminary injunction and evidence will be exchanged and experts will be presented. That takes time and it's probably not going to happen in the dog days. Of summer. So if this happens in September, October, we're looking at November, December at the earliest. Right.
- [37:51]
B
Well, the judge, the judge would have to rule, I believe, you know, because the max temporary restraining order, again we stipulated to that is 28 days. So it has to be an injunction in place, which means the judge, again, we have also stipulated that we're not going to jam her. We would be open to doing that. But, you know, you probably need no more than three days of a hearing on the preliminary injunction.
- [38:14]
A
Oh, you think so?
- [38:16]
B
Yeah, I don't think you need more than that. Why do you need. This is not a full blown trial. Again, this is a preliminary injunction.
- [38:22]
A
No, but you do have to show that they have a. They have to show they have a likelihood of prevailing at trial on the merits.
- [38:30]
B
Well, they have to show four factors, but yeah, that's a major one that they would have to prove. Remember, the burden is on the government to prove that they would prevail on the merits as well as, you know, who's getting harmed more, us or them. Yeah.
- [38:46]
A
If the preliminary injunction is denied, you guys close. And assuming that the UK issues are resolved because there's some question as to a possible delay there as well, what's the status currently?
- [38:59]
B
Well, the status is, you know, the, the, you know, we anticipate the CMA to rule sometime in August 7th, and then we, you know, the Secretary of Culture has of course issued her, you know, she's thinking it's kind of minded to.
- [39:14]
A
But she's being replaced. Right. Because there's a new government.
- [39:16]
B
I don't know. I don't know. I think we'll find out sometime Monday because the new Prime Minister was just seated and so she, you know, I think she'll, she'll stay in the Cabinet, probably. That would be my end. So we anticipate she'll remain there. But, you know, look, we've had constructive engagement with them. I don't anticipate. Their issue is media plurality with the news and all of that. And we don't think there's an issue. We own Channel 5 there. We're not buying a new news asset. There are big issues, probably who's going to be continuing to produce that? Are we going to change that? I think we respect that and we've had engagements. We don't anticipate that. To delay the merger closing.
- [39:57]
A
So no injunction. The merger closes in September. Likely injunction. Where does that leave us? You either go to trial next year or you settle.
- [40:08]
B
Well, no, no, no. If there's an injunction, we'll have to take a look at what the injunction is based on. And we'll have to take a look. You know, we presumably will have appeal rights.
- [40:17]
A
Okay, so you'll appeal and then the 9th Circuit will have to figure out this whole case. And you probably feel more confident.
- [40:25]
B
To be honest with you, I don't think it's going to get there. This judge is a very smart judge. Look at the way she handles the courtroom. She is rules based. And I don't think she's going to end up ruling on a preliminary injunction. I think, you know, TRO makes sense. Give it some time to think. Again, this is like two days after a case was filed and the briefings were done. And so, you know, you have to take a look at what is going on there. I think once she looks at basic facts again, you don't need an MIT degree to know about these movies and the market I talked about. And then I don't think she issues an injunction. That's, you know, the states will have their say.
- [41:05]
A
Am I correct that you didn't think that the AG would sue?
- [41:08]
B
No. We always had the contingency that the AG possibly could sue. I was hopeful that he wouldn't, but once he stopped engaging and wouldn't even respond to our settlement offer, I assumed he was going to sue because he felt politically, he had to. He was getting a lot of pressure by his base.
- [41:24]
A
Yeah, no, I've said that it was politically untenable for him to not sue. I've said that.
- [41:29]
B
So, well. Well, unless. Unless you say no, I got to do the right thing.
- [41:34]
A
Well, those are your words, not mine. So the WGA suit, they have a separate lawsuit where they talk a lot more about the job losses and the market for writers and the, you know, consolidation of buyers for scripted content. What's the procedure going forward on that one? Is that going to be consolidated here so it'll all be one big procedure, or is that going to be separate?
- [41:58]
B
Well, the judge's ruling so far said all three will be separate and each party does not get to participate in the other matter. So we'll see where it goes.
- [42:07]
A
So give me your response to the wga. I mean, we all know massive job losses are coming from this deal. We all know that this is going to further constrain the market for scripted content, at least in the short term. And then potentially, under your theory, you'll be a competitor to Netflix and be able to buy more. But are they wrong for freaking out about this?
- [42:29]
B
Yes, I think they're wrong. Because when you look at the market, you're spending more money. You create a new competitor in here, you're going to have multiple scale buyers. So it's going to be us competing. Look at, again, you don't have to take my word for it. Look at the Duffer Brothers, right? We competed with Netflix. They're now coming on to us. Look at ufc. They get more. When you have competition, they'll make more. And two, you have to make more content.
- [42:55]
A
Look at all the people you've lured from Warner Brothers to make movies for you. And look at all the people that Warner says lured from you who. Well, you brought over the Boulder Light producers. Those guys from Warner Brothers came to Paramount.
- [43:08]
B
There's going to be all. I mean, look, it's only going to create more competition where this is going. Look, the alternative was going to be Warner was going to split into two companies, which they were going to in June, and they would have been sold to Netflix or somebody else. You know, certainly Netflix was the one who had it, but I don't think so. I think this is. The facts will show that for the creative community there will be more work and there's going to be higher pay because of competition, not the reverse. This is not like the old industries where you are buying a competitor to reduce your output so you can increase prices. You can't do that. You have to increase output in this market because you got to be constantly giving it. And, and by the way, audio, visual, movies, TVs is different than music. How many times do you listen to Stairway to Heaven or, you know, Metallica or whatever you listen to throughout your life? A gazillion times. How many times are you going to watch a movie or a TV show? You know, unless it's the, you know, the Godfather. It's a whole different.
- [44:10]
A
When you're out pitching a show or a movie, Warner's and Paramount as separate buyers can create a market. And you're not going to let Warner's bid against Paramount if they're owned by the same company.
- [44:22]
B
Well, it's got nothing to do with that. The question is, are there enough competitors there where that those two will have that? So, yeah, I get it.
- [44:31]
A
I appreciate you coming on the show. Thanks for, thanks for your time.
- [44:34]
B
Thanks so much, Matt. Really appreciate it. Thanks for having me.
- [44:36]
A
Okay, that's the show for today. I want to thank my guest, Makan Delrahim, producer Craig Horbeck, our editor Jesse Lopez and Stefano Sanchez. And I want to thank you. We'll be back tomorrow with Lucas and then one more time after that.
- [44:51]
C
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