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Speaker 1: Bloomberg Audio, Studios, podcasts, radio news.

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Speaker 2: Welcome to our Bloomberg television and radio audiences around the

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Speaker 2: world for an interview with Netflix co CEO Ted Sarandos

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Speaker 2: and Ted good morning to you. The less than straightforward

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Speaker 2: question that everyone has, of course, is what happens next?

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Speaker 2: But I wanted to put it to you like this,

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Speaker 2: Does Netflix have the balance sheet, the sort of financing

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Speaker 2: flexibility and the will really to amend, improve boost its

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Speaker 2: bid for Warner Brothers Discoveries, Studios and streaming business if needed.

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Speaker 3: Let me tell you, we feel very good about the

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Speaker 3: position we're in right now. So we've done this process,

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Speaker 3: opened up Warner Brothers Discovery that's determined that within their

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Speaker 3: strategic best interest to sell these assets. We entered into

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Speaker 3: a negotiation with a very very clear bidding process that

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Speaker 3: they laid out for us.

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Speaker 4: Which we followed and won that bid.

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Speaker 3: I think in the alternative, the guy has gone, you know,

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Speaker 3: I missed every deadline.

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Speaker 4: They've been taking nine runs of this bid and they was,

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Speaker 4: you know, they're not home accept this outcome.

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Speaker 3: So what we've done here is given Warner Brothers Discovery

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Speaker 3: a seven day window to get some clarity about what

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Speaker 3: paramount is offering for this company.

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Speaker 4: I believe that it's important to have that clarity. I

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Speaker 4: think it's important that being warned.

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Speaker 3: The Discovery shareholders deserve to have that certainty and clarity

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Speaker 3: about this deal.

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Speaker 1: Now, your stock is down more than thirty percent since

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Speaker 1: you announced the steel, so you feel good about it,

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Speaker 1: your shareholders, it's a little less clear. I know that

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Speaker 1: I've heard you say that that is because of uncertainty,

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Speaker 1: but it went down basically as soon as you went

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Speaker 1: into this. So I'm just wondering, is there a point

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Speaker 1: at which it goes down so much that that you

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Speaker 1: and your fellow board members have to reconsider if this

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Speaker 1: is the right path.

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Speaker 3: Okase, Remember we run this from the beginning for the

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Speaker 3: long term, but we think this deal will have a

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Speaker 3: positive impact on the business for the long term. Remember

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Speaker 3: what we're doing in buying these assets is we've been

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Speaker 3: creating original programming on necessaries for about a decade.

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Speaker 4: Clown they've been making original film the theories for about

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Speaker 4: one hundred year.

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Speaker 3: They have incredible IP and we just happen to have

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Speaker 3: a consumer model that can better maximize the returns on

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Speaker 3: that IP.

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Speaker 4: So I think it's a very.

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Speaker 3: It's a great long term out long term outcome.

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Speaker 4: I think there has been some headwind in the stock.

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Speaker 3: There's been some headwind wind in the sector, and there's

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Speaker 3: been some headwind from because of the AI trade, which

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Speaker 3: I think is ironic because I think AI will be

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Speaker 3: an amazing creator tool to actually make the entertainment business

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Speaker 3: figger and better than ever.

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Speaker 4: So I do think those things have got to play out.

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Speaker 3: When I said they don't like uncertainty, there's you know,

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Speaker 3: there's concern about bidding wars and all those things. And

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Speaker 3: we have always been an incredibly disciplined blast buyer and

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Speaker 3: we will continue to be one.

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Speaker 2: Year ted on those headways you mentioned. You know that

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Speaker 2: there are a portion of the Netflix investor base and

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Speaker 2: the Warner Brothers Discovery investments that kind of see this

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Speaker 2: as defensive by you and look at growth, right, you know,

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Speaker 2: engagement growth in the second half of last year such

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Speaker 2: as it was. What would you say to those people

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Speaker 2: that this is response to that growth rate that you've

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Speaker 2: experienced more recently as opposed to something proactive and strategic.

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Speaker 4: I think that they're incorrect, They're reading it wrong.

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Speaker 3: I'd say that we if you look at our of

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Speaker 3: the year we just came out of in twenty twenty five,

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Speaker 3: we grew revenue sixteen percent, we grew operating income by

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Speaker 3: thirty percent, and our engagement did go on went up

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Speaker 3: a couple of big hours. And I feel like, you know,

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Speaker 3: there's engagement, which is important. New hours is one component

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Speaker 3: of engagement, and there's certainly one component of the value

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Speaker 3: of engagement.

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Speaker 4: We're very confident you saw that in our twenty six guide.

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Speaker 3: Then we're going to continue to operate this business as well,

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Speaker 3: and that this model is very much worse, and that

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Speaker 3: this Warner Brother's acquisition is an accelerate to that model,

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Speaker 3: and it also future proves that model, you know, for

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Speaker 3: decades to come.

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Speaker 5: Ted.

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Speaker 2: I appreciate there's a process here, and thank you you know,

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Speaker 2: kind of earlier for outlining it right through February twenty third.

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Speaker 2: But before that, you know, the section of the investor

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Speaker 2: base that basically thinks Netflix should walk away, look at

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Speaker 2: the regulatory road ahead, they look at the integration risk,

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Speaker 2: and then like, what Netflix is a big global technology

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Speaker 2: company as opposed to being something sort of micro focused

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Speaker 2: on Hollywood, right, And so so answer those those investors, right,

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Speaker 2: you know, why why are they wrong that actually there

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Speaker 2: is a longer list of reasons to walk away then

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Speaker 2: stick with it at this juncture.

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Speaker 3: Well, this this deal offers great value to the Warner

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Speaker 3: Bold Discovery shareholders.

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Speaker 4: It offers great long term value to Netflix A. We

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Speaker 4: have a normal regulatory path ahead.

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Speaker 3: There's nothing uniquely challenged about that process. We're about in

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Speaker 3: the middle of it with the DOJ, with the European regulation,

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Speaker 3: with regulators all over the around the world, and with

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Speaker 3: state's attorney general. This is a process that we're very

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Speaker 3: confident that we're going to navigate. And in fact, I'd

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Speaker 3: say again, when you look at the deals that are

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Speaker 3: out there, I think people would like the status quo.

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Speaker 3: And we have a long history of running the business

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Speaker 3: well and pivoting when it's time to and adding new

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Speaker 3: business lines to the business that we both get up

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Speaker 3: doun about sometimes and then when we do it successfully,

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Speaker 3: they're thrilled. I think advertising probably is the most recent example.

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Speaker 3: Live could be a more recent example. Some of our

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Speaker 3: life sporting events could be a more recent example of

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Speaker 3: things that have been fitted in the business that have

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Speaker 3: gone on to grow the business very well and people

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Speaker 3: very happy about it.

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Speaker 4: People don't like change.

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Speaker 3: They don't like any degree of uncertainty sometimes and anytime

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Speaker 3: there's a new deal, there is regulatory screwpment, there is

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Speaker 3: execution risk, all of those things. But we are highly

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Speaker 3: confident that we're going to reach this feel closed and

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Speaker 3: then we're going to see scessfully integrate to the business

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Speaker 3: about it as.

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Speaker 4: The reason why we're all talking about these deals.

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Speaker 3: So this week we've granted a seven day window to

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Speaker 3: get some clarity about the Paramount deal because paramunt has

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Speaker 3: been out spreading a lot of this information to shareholders

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Speaker 3: into the markets and regulators in ways that have run

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Speaker 3: the scenarirative.

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Speaker 4: Run the narrative just grew us some sulf that we

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Speaker 4: confuse you.

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Speaker 3: We're trying to say, well, take seven days and get

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Speaker 3: some clarity because what we believe is in what the

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Speaker 3: Warner Brothers Discovery board agrees with us on as well,

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Speaker 3: is that our deal is a superior deal. You believe

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Speaker 3: it's good for them, No, it's good for us, and

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Speaker 3: we are excited about getting it done.

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Speaker 1: When you talk about kind of clarity and certainty, you know,

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Speaker 1: one of the aspects of the Paramount deal that they

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Speaker 1: have stressed is better and I think some of the

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Speaker 1: Warner Brothers shareholders seem to agree or at least entertain

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Speaker 1: it is you know, they're offering to buy the whole company.

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Speaker 1: They will just take it out thirty dollars a share.

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Speaker 1: Warner Brothers doesn't have to proceed with a spin beforehand.

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Speaker 1: What is your argument for why your more complex deal

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Speaker 1: is better for all those shareholders than just getting the

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Speaker 1: cash tomorrow?

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Speaker 4: This deal is not complicated at all.

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Speaker 3: Is twenty seven to seventy five at plus the value

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Speaker 3: of Discovery Global.

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Speaker 4: By the way, it's the deal that they want.

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Speaker 3: It is the deal that they asked for those These

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Speaker 3: are the assets thatwork for sale.

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Speaker 4: So the more complex thing is buying the whole company.

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Speaker 4: Do you do that? Then you're buying these European sports networks.

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Speaker 3: As you know, sports rights in Europe are incredibly highly regulated,

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Speaker 3: as is the television landscape, which may be stepping themselves into.

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Speaker 3: So I would argue that our deal is quite simple,

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Speaker 3: twenty seven to seventy five for share plus the value

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Speaker 3: of Discovery Global, and which I think is an incredible asset.

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Speaker 3: And they do too. That's why that they set the

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Speaker 3: offer up this way. That's why we were bidding. We

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Speaker 3: bid for the assets that we're for sale.

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Speaker 1: If Discovery Global is a great asset, I'm just wondering,

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Speaker 1: have you guys talked about just buying the whole company.

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Speaker 5: And doing the spin yourself, as.

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Speaker 3: You know, were the linear broadcast business is not lothing

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Speaker 3: that we're interested in, but others are.

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Speaker 4: And I think when I.

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Speaker 3: Look at the business, particularly those European networks are not

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Speaker 3: in decline the.

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Speaker 4: Way that some of the way they are in the US.

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Speaker 4: So it is not of our interest, but it's I'm

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Speaker 4: sure of interest in Many buyers.

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Speaker 2: Said you are competing in a politically sensitive media deal.

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Speaker 2: There is reporting, and we are in a time where

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Speaker 2: the Ellisons are in their relationship to the Trump administration

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Speaker 2: has been discussed. It's also reported, of course that you

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Speaker 2: met with the President I think on November twenty fourth.

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Speaker 2: How are you weighing that and assessing that in this scenario,

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Speaker 2: that relationship between Paramount's leadership and this administration.

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Speaker 3: Look, I have spoke to the President about the state

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Speaker 3: of the entertainment industry. We've had multiple conversations about how

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Speaker 3: do we protect American jobs, how do we keep the

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Speaker 3: entertainment industry and helps you?

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Speaker 4: What are those said?

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Speaker 3: What are those that we're working on to try to

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Speaker 3: keep production up in the United States. We are built

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Speaker 3: investing of billion dollars into a new state of the

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Speaker 3: art production facility at the old for Momba Military base

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Speaker 3: in New Jersey. Obviously, the President is very keenly interested

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Speaker 3: in entertainment, and he's very interested in American industry and

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Speaker 3: American jobs.

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Speaker 4: But those are the conversations that we've had. I don't

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Speaker 4: know why.

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Speaker 3: The Ellisons intimate that they have some direct line to

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Speaker 3: the Department of Justice for a faster path.

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Speaker 4: Of clearance, but I doubt that they do.

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Speaker 3: This is a process that is being run by the

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Speaker 3: Department of Justice. The President has been very clear on that.

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Speaker 3: We've been very clear on that. The Department of Justice

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Speaker 3: published in twenty twenty three the guidelines for mergers that

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Speaker 3: they are following right now.

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Speaker 4: So that's what's happening here. This is a business deal,

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Speaker 4: not a political deal.

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Speaker 2: You're joining us on Blueberg Television and Radio. We're speaking

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Speaker 2: to Netflix's co CEO Ted Sarandos and Ted last night,

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Speaker 2: Bloomberg News reported that the Justice Department and its attorneys

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Speaker 2: have made contact with movie theaters the industry to try

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Speaker 2: and understand what either outcome would mean for the movie

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Speaker 2: theater business. I know that you actually have discussed this

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Speaker 2: a little theatrical releases, but just your latest thinking on

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Speaker 2: that and what your pitch is to people on seats

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Speaker 2: in movie theaters if you were to close your proposed deal.

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Speaker 6: Yeah, Look, it's a very important thing to look at,

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Speaker 6: and I think why the DOJ is having those conversations.

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Speaker 6: Those are all laid out in the twenty twenty three

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Speaker 6: merger guidelines to better understand the landscape. They're going to

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Speaker 6: talk to competitors and suppliers and to better understand the landscape,

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Speaker 6: including how it impacts adjacent businesses like the theatrical business.

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Speaker 4: Now, our pitch is very simple.

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Speaker 6: Because it's the truth, which is we're going to keep

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Speaker 6: Warner Brothers running pretty much like they are today, releasing

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Speaker 6: their movies in theaters for the traditional forty five day windows.

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Speaker 6: And in fact, it's even quite better for theaters because

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Speaker 6: now that we're going to be in that business and

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Speaker 6: own a theatrical distribution entity, we're going to take some

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Speaker 6: of the Netflix films and put them through that as well.

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Speaker 6: So it's very likely that you'll have even more outcome

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Speaker 6: of high quality films for the theaters if this deal

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Speaker 6: goes through. Now, remember paramunt has got this kind of

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Speaker 6: fantasy proposal of somehow they're going to go from the

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Speaker 6: half a dozen or so movies they distributed last year

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Speaker 6: to thirty movies a year, which is about ten movies

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Speaker 6: more than the healthy studios are making now. I don't

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Speaker 6: think that's likely. But what I know is is very

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Speaker 6: likely is that we're going to continue to operate that

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Speaker 6: business largely as it is today, starting in the theaters,

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Speaker 6: running through traditional windows, hitting HBO Max to the pay

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Speaker 6: TV output deal, the output deals around the world. That's

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Speaker 6: going to continue, and it's going to be good for

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Speaker 6: the theaters because they're going to have more And by

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Speaker 6: the way, I've been talking to them more about creative

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Speaker 6: things that we do together, like we did the Stranger

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Speaker 6: Things finale, which had thousands and thousands of sold out

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Speaker 6: shows all over the country, or the the K Pop

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Speaker 6: Demon Hunter sing along, which you know, energize the theaters

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Speaker 6: on an otherwise very slow week. So we're excited about

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Speaker 6: working together with the theaters to make that business.

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Speaker 4: Healthy again as well.

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Speaker 6: And I think that what they really need is more

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Speaker 6: good movies. And we're going to provide them for them.

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Speaker 5: Now we both know that.

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Speaker 1: You know, as many times as you've made this commitment

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Speaker 1: on the theaters, it seems that there's a certain contingent

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Speaker 1: of the population that just struggles to believe it.

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Speaker 5: And I'm wondering my senses.

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Speaker 1: And I've heard that both theaters and some of the

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Speaker 1: trade unions in Hollywood have asked for sort of formal

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Speaker 1: commitments on some things like level of.

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Speaker 5: Production theatrical releases.

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Speaker 1: Are you willing to kind of put those commitments in

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Speaker 1: writing and if not, why not.

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Speaker 4: Lucas, Let's speak clear there.

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Speaker 6: We don't this is this deal does not represent any

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Speaker 6: concentration risk at all. So the remedy those two would

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Speaker 6: typically be remedies for a situation like that. According to Nielsen,

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Speaker 6: we have nine percent of the business.

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Speaker 4: We're going to add HBO to that. We're going to

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Speaker 4: have ten.

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Speaker 6: Percent of the TV business, which is the primary driver

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Speaker 6: of this deal, out of our business. In the theatrical business,

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Speaker 6: it's highly competitive. There's a lot of output that's going

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Speaker 6: to go through there. The reason I'm not going to

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Speaker 6: put in right and I wouldn't want to do this

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Speaker 6: deal only to put ourselves in some bizarre competitive disadvantage

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Speaker 6: down the road. And I've earned some of the skepticism

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Speaker 6: about the theater business because I've said things about the

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Speaker 6: state of the theater business. But I said that in

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Speaker 6: the context of a business that we were not in,

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Speaker 6: and we and today we own Warner Brothers, we own

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Speaker 6: a theatrical distribution entity, and we're going to want to

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Speaker 6: continue to invest against the success that they've had. They

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Speaker 6: just Pam and Mike just opened their ninth number one

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Speaker 6: film at the box office, at nine in a row.

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Speaker 6: That's the kind of winning that we want to do

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Speaker 6: with Warner Brothers and the theater owners.

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Speaker 5: You mentioned HBO, and sorry.

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Speaker 4: If I go back to what you said about the

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Speaker 4: trade unions as well.

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Speaker 6: I think it's very important that I would like to

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Speaker 6: have the trade unions to support this deal on behalf

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Speaker 6: of their membership, because what's going to happen in the

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Speaker 6: alternative of this deal. I know there's some people who believe,

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Speaker 6: you know, maybe if this deal doesn't happen, there'll be

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Speaker 6: no sale of Warner Brothers. This sale is going to happen.

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Speaker 6: It's going to be Netflix or it's going to be Paramount.

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Speaker 6: And if it's Paramount. They've told everybody what they're going

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Speaker 6: to do. They're going to have six they've said six

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Speaker 6: billion dollars in cuts. But they've also told everyone who

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Speaker 6: they're borrowing the money from that they're going to delever

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Speaker 6: the company from six or seven times down to two

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Speaker 6: times in eighteen months, which means sixteen billion dollars in cuts.

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Speaker 6: So that's what the trade unions who represent the people

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Speaker 6: who make movies, writers, directors, producers, the crews of you know, IATSI,

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Speaker 6: and the teamsters, they're going to be working in a

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Speaker 6: business that's going to be sixteen billion dollars smaller even

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Speaker 6: than the three billion that Paramount is already cut out

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Speaker 6: of its own company. So you're talking about an enormous

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Speaker 6: contraction of the business, and the trade unions I think

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Speaker 6: should come out and support this deal explicitly on behalf

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Speaker 6: of their membership to protect employment and jobs.

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Speaker 1: Now I'm curious brought up HBO and one of the

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Speaker 1: big kind of regulatory questions around this, you know, anti trust,

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Speaker 1: A lot depends on will prices go up for consumers?

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Speaker 5: Is this bad for consumers?

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Speaker 1: Are you going to offer HBO on a standalone basis

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Speaker 1: going forward, and will you offer it for less than

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Speaker 1: it is offered today.

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Speaker 6: We will continue to offer it as a standalone unit.

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Speaker 6: Eighty percent of HBO Max subscribers in the United States

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Speaker 6: have a Netflix subscription today, actually closer to eighty five percent.

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Speaker 6: So I think what that says is this is a

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Speaker 6: very complimentary business, and we'll be able to put those

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Speaker 6: business together and give those consumers a pretty steep discount,

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Speaker 6: so that we're excited to do. And that's why I

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Speaker 6: think this will be pro consumer, because I think consumers

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Speaker 6: have already said these are complementary businesses that they today

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Speaker 6: pay a one hundred percent premium for.

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Speaker 2: Netflix co CEO Ted Sarandos, We're grateful for your time.

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Speaker 2: We covered a lot of ground, and of course, Bloomberg

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Speaker 2: screen Times Managing editor Lucas Shaw also over in Los

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Speaker 2: Angeles