Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Bloomberg Tech is alive
Speaker 1: from coast to coast with Caroline Hyde in New York
Speaker 1: and Vla low in sentrances.
Speaker 2: Go, this is Bloomberg Tech coming up. Paramount making a
Speaker 2: hostile bid for Warner Brothers Discovery, just days after the
Speaker 2: company agreed to a deal with Netflix.
Speaker 3: Plus, President Trump wants to limit state level AI regulation.
Speaker 3: He plans to approve an executive order this week aiming
Speaker 3: for one rule on artificial intelligence.
Speaker 2: And IBM is buying the data streaming platform Confluent for
Speaker 2: about nine point three billion dollars, one of its largest takeovers.
Speaker 3: Yeah, look at that share market reaction for Confluence.
Speaker 4: Let's check in on the broader market.
Speaker 3: So anticipation, anticipation of the macro perspective that is the
Speaker 3: Federal Reserve policy making later this week. We're down by
Speaker 3: about a quarter of a percent, But so much is
Speaker 3: happening underneath the hood at the moment, ed and you're
Speaker 3: going to dig into our story of the day of
Speaker 3: the week, maybe the year.
Speaker 2: Yep, Warner Brothers Discovery. This is the state of play
Speaker 2: this morning. Paramount Skuydowance comes in with a hostile bid
Speaker 2: at thirty dollars per share for the entirety of Warner
Speaker 2: Brothers Discovery. At the end of last week. Netflix had
Speaker 2: come in with an offer of twenty seven dollars seventy
Speaker 2: five cents a share, but that was largely for the
Speaker 2: streaming and studio businesses, with the plan that Warner Brothers Discovery,
Speaker 2: who entered into those talks with Netflix, would divest and
Speaker 2: spin off some of the remaining legacy cable units. There
Speaker 2: is so much to discuss in this, the financing in
Speaker 2: both senses, where's it coming from, and what does the
Speaker 2: President of the United States have to say about it?
Speaker 3: Character There are so many angles to get into. Let's
Speaker 3: go to our key reporter on all of this, Bluebogs
Speaker 3: Entertainment reporter Lucas. Sure, you head the entertainment coverage for
Speaker 3: this network.
Speaker 4: And I'm interested. What's the standout for you?
Speaker 3: Because we are unfolding who's behind the money, what's behind
Speaker 3: the attitude to go so hostile?
Speaker 5: Take us there first, I guess the part that stands
Speaker 5: out to me is that David Ellison is coming back
Speaker 5: and going hostile with the same bid that was just
Speaker 5: rejected by the board.
Speaker 6: Rather than sweetening the offer.
Speaker 5: You know, paramounts Guidance has now made six different attempts
Speaker 5: at buying Warner Brothers Discovery. They've been rejected every single time.
Speaker 5: But they are adamant and have been for days now,
Speaker 5: that their offer is better than Netflix's, that the board
Speaker 5: is not factoring in certain things that are confused by
Speaker 5: the valuation on the cable networks, for example, which would
Speaker 5: be spun off in the Netflix scenario.
Speaker 6: And so they're you know, they're not going.
Speaker 5: Down without a fight, but I still think that they
Speaker 5: will end up probably having to raise the offer.
Speaker 6: Lucas.
Speaker 2: Over the weekend you reported in detail a meeting that
Speaker 2: took place between Netflix co CEO Ted Sarandos and the
Speaker 2: President of the United States. Then the President Sunday Night said,
Speaker 2: and this is before the Paramount Skuydance bid came in,
Speaker 2: that from an antitrust or market share perspective, this has
Speaker 2: got to be looked at. Would the same not apply
Speaker 2: to Paramount Skydance.
Speaker 6: It would. It just is a different type of market
Speaker 6: I guess right.
Speaker 5: So the President's comments I thought were notable because he
Speaker 5: had not spoken out against the Netflix bid at all,
Speaker 5: despite the fact that the Paramount people were convinced that
Speaker 5: Trump was going to try to block it and was
Speaker 5: against it, And I would say his comments were sort
Speaker 5: of balanced. On the one hand, he praised Netflix and
Speaker 5: praised Ted Sarandos, but he did say that it would
Speaker 5: need to be reviewed. You know, Netflix is the biggest
Speaker 5: player in Hollywood in streaming, and so if we're to
Speaker 5: add on HBO and Warner Brothers, who would make it
Speaker 5: even stronger there. In Paramount's case, they'd be combining two
Speaker 5: movie studios. They'd be combining huge amounts of television networks.
Speaker 6: The respective share of either.
Speaker 5: Combined company in terms of TV viewing would be quite large,
Speaker 5: would be somewhat similar, and yet both I think would
Speaker 5: still be smaller than YouTube.
Speaker 6: So a lot of this, if.
Speaker 5: We get to you know, I trust case is going
Speaker 5: to depend on what market you are defining.
Speaker 3: Let's just think about the storyline that's capturing a lot
Speaker 3: of attention today is the money.
Speaker 4: And we're all about the money for these things.
Speaker 3: Lucas was involved previously. It looks as though Chinese money
Speaker 3: is now being put to one side, but Middle Eastern
Speaker 3: money coming to the fall, and Jared Kushner's money private
Speaker 3: equity at least which is also about by Middle Eastern
Speaker 3: money coming to the fall.
Speaker 5: Yes, the Middle Eastern money is probably the most interesting
Speaker 5: part of it because there had been a report, you know,
Speaker 5: at this point, maybe a month ago in variety of
Speaker 5: the Holly Trade publication saying that there were three prominent
Speaker 5: Middle Eastern sovereign wealth funds involved in the Paramount bid.
Speaker 5: Paramount initially didn't really engage, then later that day said
Speaker 5: that the report was inaccurate, And then it turns out
Speaker 5: the report looks like it was pretty accurate, because yes,
Speaker 5: I had heard and that they have since disclosed that
Speaker 5: you do have a lot of Middle Eastern money in
Speaker 5: this bid, and there had been Chinese money, which makes
Speaker 5: it even more interesting that, you know, Paramount's one of
Speaker 5: Paramount's arguments is that they will have an easier time
Speaker 5: getting this deal approved. But Warner Brothers Discoveries perspective was, well,
Speaker 5: it's actually making our life more complicated if you have
Speaker 5: all of this foreign money, because then Siphius might have
Speaker 5: to look at it and approve it.
Speaker 2: Bloombo's Lucas Shaw, who's led the team on this story
Speaker 2: every step of the way, thank you so much. Let's
Speaker 2: continue the conversation with Brandon Katz, Greenlight Analytics Director of
Speaker 2: Insights and Content Strategy. Lucas did a really good job
Speaker 2: in explaining the differences in structure of the deals and
Speaker 2: also the different perspectives of each party. But I wondered
Speaker 2: if you'd help our audience understand what the differences between
Speaker 2: a Netflix joined with Warner Brothers Discoveries, streaming and studio
Speaker 2: business versus a paramount s guidance taking the entire thing?
Speaker 4: What does that look like?
Speaker 7: You and Lucas have already done a great job, so
Speaker 7: I'll try to pitch in here. Really WBD in paramount
Speaker 7: more redundancies, more overlap. They are both traditional TV and
Speaker 7: film companies with streaming services tacked on, whereas Netflix, obviously,
Speaker 7: as we know famously or infamously depending on your perspective,
Speaker 7: they are a streaming first, at all costs company, so
Speaker 7: there's less overlap and far more new integration of potentially
Speaker 7: complementary or potentially conflicting businesses. Now, we have seen mega
Speaker 7: mergers of this nature in the past, but they have
Speaker 7: almost always been a like versus like company absorbing each other.
Speaker 7: We have not really seen a major major streaming service
Speaker 7: take a company at the size of Warner Brothers Discovery just.
Speaker 2: Yet, Brendan, We're going later in the programs go deep
Speaker 2: on the anti trust considerations. There are anti trust considerations here.
Speaker 2: But let's say in either event Netflix comes out on
Speaker 2: top or Paramount Skuidance comes out on top. How does
Speaker 2: that change the landscape of entertainment? What does it look
Speaker 2: like to have an entity of that size.
Speaker 7: Roughly two thirds of US adults who subscribe to HBO
Speaker 7: Max also subscribe to Netflix, whereas about forty percent of
Speaker 7: HBO Mac subscribers also use Paramount Plus, according to Greenlight
Speaker 7: Analytics data. So as of right now, the clear raw
Speaker 7: subscription streaming upside obviously favors Paramount Plus, which has about
Speaker 7: eighty million subscribers globally.
Speaker 8: So they are a solid growing.
Speaker 7: Streamer that's been on original content hot Streak since late
Speaker 7: twenty twenty three, but clearly isn't remotely the same size
Speaker 7: as Netflix, Amazon or Disney Plus. So if Netflix were
Speaker 7: to get WBD, they would suddenly be investing in a
Speaker 7: lot of new businesses, and we don't know how they
Speaker 7: would play up theatrical they know, we don't know how
Speaker 7: they would handle wbdtv's massive external TV licensing business. We
Speaker 7: do know that Paramount and WB there's more of again
Speaker 7: overlap and redundancies, so we can safely say that that
Speaker 7: would probably be more predictable as to what the future
Speaker 7: would look like, and it would certainly position Paramount to
Speaker 7: make that entrance into the top three content of media companies.
Speaker 3: Certainly, David Ellis has been talking about getting in the
Speaker 3: position to produce more more content, in particular for the
Speaker 3: consumer brand and just listen to what he told our
Speaker 3: own Lucas Shore a little bit earlier in October at
Speaker 3: our stream time event.
Speaker 9: We have a good relationship with the administration. And look,
Speaker 9: I think if you look to that, I do believe
Speaker 9: other things that have been rumored about right are very
Speaker 9: large scale players that would affect that could potentially create
Speaker 9: monopolies obviously in the ecosystem. And again I think when
Speaker 9: you look at the lens of consolidation for us, I'll
Speaker 9: keep going back to it, it's always how do you
Speaker 9: create long term value creation, how do you put yourself
Speaker 9: in the position to produce more content, not less, and
Speaker 9: how do you ultimately build something that is better for
Speaker 9: the consumer?
Speaker 4: Brandon, What serves the consumer best.
Speaker 7: What serves the consumer best overall is usually competition. So
Speaker 7: I think there is a large sect of industry analysts
Speaker 7: and professionals that would probably prefer Warner Brothers Discovery to
Speaker 7: remain as an independent company because it means more competition,
Speaker 7: it means more buyers on the market, It probably means
Speaker 7: less layoffs of the labor force. Having said that, that's
Speaker 7: unfortunately not the reality that we live in. So somebody
Speaker 7: is going to get Warner Brothers. So it is really
Speaker 7: deciding which ultimate partner is probably best for the industry.
Speaker 7: And now, if you combine Netflix and HBO Max, and
Speaker 7: if you can't combine Paramount Plus and HBO Max, they
Speaker 7: are still significantly smaller than YouTube, which is currently about
Speaker 7: a third bigger than Netflix in the US. So either way,
Speaker 7: there are still a lot of competition out there, depending
Speaker 7: on which industry you're putting against one another.
Speaker 4: Let's talk about good old cable television, because that.
Speaker 3: Is where many would say there is perhaps value, and it.
Speaker 4: Depends on which side of the equation you think.
Speaker 3: At the moment, it feels as though Warner Brothers Discovery
Speaker 3: and thought there was more value in spinning off that
Speaker 3: part of the business than the thirty dollars coming from
Speaker 3: paramounts guidance.
Speaker 4: How do you look at those valuations.
Speaker 7: Well, let's stick with a famous Warner Brothers property friends.
Speaker 7: Ross was a famous paleontologist in the shell, which means
Speaker 7: he loved fossils, which means he would love the cable
Speaker 7: network assets. They are rapidly declining. They are shrinking every day,
Speaker 7: and while they still spin out a decent amount of
Speaker 7: free cash flow, Wall Street sees them as an albatross
Speaker 7: an anchor. So they all these companies want to position
Speaker 7: themselves for long leashes from shareholders and Wall Street and
Speaker 7: the cable nets just aren't part of that strategy.
Speaker 2: Niche analogy, but we're here for it. The most important question, seriously,
Speaker 2: was posed by Bloomberg Tech producer PILESIVERI just take this
Speaker 2: at face value.
Speaker 6: Seriously.
Speaker 2: Let's say iver deal goes through and we don't know
Speaker 2: if it will there's antitrust. Does that mean that we
Speaker 2: stop paying for multiple subscriptions and we can just pay
Speaker 2: for one subscription where all of our platforms are in one.
Speaker 2: Because that's the other side of it. Everyone has a
Speaker 2: dozen or more different subscriptions. And what's so funny is
Speaker 2: like the parties here. They're all contributors that ecosystem.
Speaker 7: Yeah, this seems to be let's say Netflix gets it.
Speaker 7: I'm betting HBO will be available as a premium add
Speaker 7: on and upsell you have to pay more for it.
Speaker 7: But what's interesting about that is it puts Netflix in
Speaker 7: closer competition to Amazon Channels, which is an aggregator, a
Speaker 7: platform from which you can subscribe to other streaming services.
Speaker 7: That's the really big strategic question because if Netflix pulls
Speaker 7: this off, who's to say there won't start offering this
Speaker 7: to other niche or subscale streaming services that need the
Speaker 7: broad reach and distribution of Netflix. Because we've seen both
Speaker 7: YouTube and Amazon primetime channels are massively beneficial for subscale streamers,
Speaker 7: and then those host companies get a huge cut of
Speaker 7: ad revenue, subscription revenue, and it becomes an entirely new,
Speaker 7: self fulfilling business model all on its own.
Speaker 4: You are all about entertainment data.
Speaker 3: The moment our data is to look at share prices
Speaker 3: and paramount goes higher today on the back of this
Speaker 3: news and Netflix sinks yet more. Do you think there
Speaker 3: is more value to be had longer term for the
Speaker 3: entire industry with one or the other, Brandon.
Speaker 7: I think if Netflix said, you know what, we're going
Speaker 7: to be complacent, We're not going to touch our bid
Speaker 7: and they didn't get it, they would still be the
Speaker 7: number one streaming subscription video service in the world and
Speaker 7: for the foreseeable future. And we've already seen through the
Speaker 7: last month that shareholders aren't totally convinced that ingesting let's say,
Speaker 7: non traditional business assets compared to their business model is
Speaker 7: the right way to go, whereas Paramount is a little
Speaker 7: bit more comfortable and familiar with these businesses that it
Speaker 7: would be ingesting. So I think also because Paramount is
Speaker 7: trying to be a top three contender and a last
Speaker 7: man standing in the streaming wars, they probably have the
Speaker 7: most to gain by getting w.
Speaker 3: BA Brandon Katz or the energy of Green Night Analytics,
Speaker 3: we appreciate it.
Speaker 4: Coming up, President Trump, he's aiming to cub state AI rules.
Speaker 3: We'll discuss what that means for the future of the
Speaker 3: USAI industry.
Speaker 10: ED.
Speaker 4: What are you looking at M and a Monday.
Speaker 2: IBM is buying Confluent for nine point three billion dollars
Speaker 2: enterprise value of the deal eleven billion dollars including debt.
Speaker 2: I think if Confluent as like the plumbing for data,
Speaker 2: particularly in a world where these very large frontier models
Speaker 2: aren't relevant to lots of companies. IBM basically wants you
Speaker 2: to pipe your data into its Watson platform real time,
Speaker 2: and that's what this deal represents. IBM a little higher
Speaker 2: but confluent up twenty eight percent.
Speaker 6: This is Bloomberg Tech.
Speaker 3: President Trump saying he plans to approve an executive order
Speaker 3: this week establishing quote one rule on AI to limit
Speaker 3: state level policies regulating the technology.
Speaker 4: Bloomag Senior Tech editor Mike Shepard has been.
Speaker 3: Across what we knew has been being talked about more
Speaker 3: and more, and anxiety that there will be fifty rules
Speaker 3: for AI companies instead of just one federal rule.
Speaker 4: What sort of form could fate take, Mike.
Speaker 6: Well, it's really unclear.
Speaker 10: We have seen circulating in recent weeks a draft version
Speaker 10: of a measure that the President might sign that would
Speaker 10: call for two things. It would allow the Justice Department
Speaker 10: to sue states over regulations at the state level that
Speaker 10: the federal government finds unconstitutional.
Speaker 6: It would also call for cutting.
Speaker 10: Funding to states that have regulations in place that the
Speaker 10: administration finds objectionable.
Speaker 6: It's unclear what those.
Speaker 8: Criteria exactly are.
Speaker 10: We did see an AI action plan, a call for
Speaker 10: reigning in rules that might impede innovation, but those are
Speaker 10: all the specifics we have in hand at this moment,
Speaker 10: so we'll be waiting to see what emerges on the
Speaker 10: President's desk. We do know this as a priority for
Speaker 10: the administration, for the President and for his top AI advisor,
Speaker 10: David Sachs, as well as the tech industry. We've heard
Speaker 10: from Jensen Wog, we have heard from Mark and Dreeson.
Speaker 10: We've heard from Open AI and Google that they really
Speaker 10: would like to rein in what they call a hatchwork
Speaker 10: of state level rules. There are thirty eight states enacting
Speaker 10: almost one hundred measures so far this year, and it's
Speaker 10: becoming a bit much in their view.
Speaker 2: Chet My sense from what I'm hearing out of DC
Speaker 2: is that THISEO will focus more on the why those
Speaker 2: state laws are bad, rather than a proactive here's one
Speaker 2: great rule for everyone. But politically, it's really interesting because
Speaker 2: it's not as if Republicans broadly are supporting the president
Speaker 2: in diluting or detracting from state powers. I think of Rondacentis,
Speaker 2: for example, his position and this has been quite clear.
Speaker 2: So private industry of course would support that, but politically
Speaker 2: the president has to do some management here well.
Speaker 10: Absolutely ed and really regulating AI has been a politically
Speaker 10: tricky issue from the get go, and the reason is
Speaker 10: there are so many different points of view on artificial intelligence.
Speaker 10: There are a handful of members in Congress who are accelerations,
Speaker 10: who really want to speed the adoption of technology, setting
Speaker 10: aside whatever needs there might be for regulation, and then
Speaker 10: there are others who really want to slow it down.
Speaker 10: There in the middle, you do have a large number
Speaker 10: of other lawmakers who are seeking to rein in specific areas.
Speaker 10: Some are worried more about the DUMA issue, others worried
Speaker 10: about privacy, others still are worried about copyright. And so
Speaker 10: far we do not have anything comprehensive at the federal level,
Speaker 10: and in the spirit that space a whors a vacuum.
Speaker 10: This is why we are seeing at the state level,
Speaker 10: both in Republican states and democratic states, legislators and governors
Speaker 10: moving in to try to impose some order in a
Speaker 10: system that they see as both economically significant but also
Speaker 10: potentially perilous to voters and consumers. And we are hearing
Speaker 10: from Ron DeSantis of Florida, Sarah Huckabee Sanders in Arkansas,
Speaker 10: and then even here in Washington, Marjorie Taylor Green, a
Speaker 10: one time ally but now really at President Donald Trump
Speaker 10: favoring state autonomy when it comes to regulating this new technology.
Speaker 10: So it'll be interesting to see how this plays out
Speaker 10: and whether they do more to articulate a vision for
Speaker 10: regulating artificial intelligence at the federal level as opposed to
Speaker 10: just saying why the state level rules on a patchwork
Speaker 10: basis are bad.
Speaker 3: Right now, Mike Sheperd breaking it down, We thank you.
Speaker 4: Let's continue the conversation.
Speaker 3: We can head out to Sarah Olam VP and senior
Speaker 3: fellow the Technology Policy Institute. From your perspective, is it
Speaker 3: better to have technology policy from a state level on
Speaker 3: AI or federal.
Speaker 11: Well, if you look at all the introduced state laws,
Speaker 11: they're over one thousand apparently that are out there floating
Speaker 11: in addition to the ones that have been enacted. They're
Speaker 11: just so diverse. There are like six or seven buckets
Speaker 11: of the type of state law, including disclosure mandates, algorithmic
Speaker 11: discrimination notice, and bias requirements. So you have this matrix
Speaker 11: of fifty states times six or seven bus, and that's
Speaker 11: a patchwork. What you see also is race to the bottom.
Speaker 11: So the most conservative rule might rule them all. And
Speaker 11: so really it is a matter of time and effort
Speaker 11: for small and large companies to know what these policies are.
Speaker 11: The discussion mimics a lot of the privacy debates that
Speaker 11: we had ten years ago and still do. But really
Speaker 11: it's difficult to see innovation move forward when you have
Speaker 11: all these seat laws.
Speaker 2: Sarah, the mechanism of an EO is not that surprising
Speaker 2: if you look at the prior initiatives of this White House.
Speaker 2: In November, a big push by the White House on
Speaker 2: Congress to include a federal moratorium on state AI laws
Speaker 2: in a particular piece of legislation.
Speaker 6: That effort not successful.
Speaker 2: Explain why that was important, please sure.
Speaker 11: So you're seeing this post today because four days ago,
Speaker 11: apparently the state law moratorium was dropped from the NDAA
Speaker 11: Defense Spending Bill. I think Representative Scalise mentioned that it
Speaker 11: wouldn't be included. There was a push in November to
Speaker 11: include it in the NDAA, and that was after in
Speaker 11: July there was a push to include it in the
Speaker 11: the spending bill, the bb B Big Beautiful Bill, and
Speaker 11: so there has been discussion, a lot of buzz on
Speaker 11: the hill how how to include this moratorium in legislation,
Speaker 11: but you know, Congress thought it's not the right vehicle
Speaker 11: to include a moratorium. And so then you see this EO.
Speaker 11: The draft proposal was floated three weeks ago. It's called
Speaker 11: Eliminating State Law Obstruction of National AI Policy. You can
Speaker 11: read it. It includes a litigation task force, evaluation of
Speaker 11: state laws, restriction of funding, and also involves Commerce Department,
Speaker 11: the FCC, FTC, DOJ. Yeah, and so that was the draft.
Speaker 11: We don't know if all that was in is in
Speaker 11: the actual but they floated it for review.
Speaker 3: Sarah, I want to push it forward a little bit
Speaker 3: of what actually is necessary, because it's all very well
Speaker 3: and good saying we don't want it from a state level,
Speaker 3: but many would harp back to what happened with social media,
Speaker 3: where ultimately the big companies were left to regulate themselves
Speaker 3: because no federal policy was ever enacted.
Speaker 4: Do you have optimism that there will.
Speaker 3: Be some rules of the road, some guardrails from a
Speaker 3: federal perspective, or will it just be pushed back on
Speaker 3: a state level.
Speaker 11: You know, it's hard to say. About the harms of technology,
Speaker 11: because yes, there are harms, but who can really know
Speaker 11: what will be the really emergent or difficult harms out
Speaker 11: of thousands of possibilities. You know, you don't want to
Speaker 11: stop all of them in all innovation, and so you know,
Speaker 11: is government the right venue to discover that? Really? You
Speaker 11: see it through litigation. And in Europe they've taken the approach, well,
Speaker 11: let's do blanket regulation, and you know that hasn't turned
Speaker 11: out very well. As you can see, people are pushing
Speaker 11: back against EU regulations right now. So it really is
Speaker 11: a matter of perspective. The biden Ai Executive Order was
Speaker 11: rolled back and that is a perspective that's more precautionary.
Speaker 11: And so the Trump EO is taking the other approach,
Speaker 11: saying we need light touch regulation. So I think and
Speaker 11: compare that with China. I don't think we hear about
Speaker 11: regulation from for AI there, right, And so that's the
Speaker 11: that's the comparison.
Speaker 2: Sarah Olamb, the Tech Policy Institute.
Speaker 3: Time now for talking tech First Up IBM is buying
Speaker 3: the data streaming platform Confluent fro about nine point three
Speaker 3: billion dollars, marking one of.
Speaker 4: Its largest takeovers.
Speaker 3: It's a major bet on the kind of enterprise software
Speaker 3: that AI tools need to perform tasks in real time,
Speaker 3: which as both companies you see you've been rising on
Speaker 3: the news. US Open Ai says that it stols a
Speaker 3: saving work as an average of forty to sixty.
Speaker 4: Minutes a day on professional tasks. It's according to a.
Speaker 3: Survey from the Chatchep team maker data science, engineering communications
Speaker 3: roles among those saving the most time. Of course, it
Speaker 3: all comes amid skepticism that there is a lack maybe
Speaker 3: of economic benefits of AI.
Speaker 9: You know, ironically, it was David Zaslov last year that said,
Speaker 9: you know, consolidation the media business is important, and the
Speaker 9: way we approach everything is first and foremost what's good
Speaker 9: for the talent community, what's good for our shareholders in
Speaker 9: value creation, and what's good for basically storytelling at large.
Speaker 2: That was Paramount Skuyde at CEO David Ellison there at
Speaker 2: Bloomboat's screen Time event in October full shadow consolidation.
Speaker 6: In the industry.
Speaker 2: Fast forward to Monday, December eighth, Paramount Skuidence comes in
Speaker 2: with a hostile bid thirty dollars per share for Warner
Speaker 2: Brothers Discovery after Netflix entered into talks with Warner Brothers
Speaker 2: Discovery at the end of last week in a different
Speaker 2: kind of deal. That's what the shares are doing right
Speaker 2: now for the arms out there, Warner Brothers Discovery trading
Speaker 2: at twenty seven thirty five cents to share thirty six
Speaker 2: center shared below. Both the offer prices at this moment
Speaker 2: in time.
Speaker 3: Carac arms arbitrage for those who don't parlay in that
Speaker 3: sort of lexicon every single day. But meanwhile, President Trump,
Speaker 3: he did way in on the Warner Brothers Discovery and
Speaker 3: Netflix deal. Here's what he had to say about Netflix
Speaker 3: CEO ted surround us and he's.
Speaker 8: Done one of the greatest jobs in the history of movies.
Speaker 6: And other things.
Speaker 12: And he's got a lot of interesting things happening aside
Speaker 12: from what you're talking about.
Speaker 8: But it is a big market share, there's no question,
Speaker 8: though there.
Speaker 3: Could be a problem discovering the co CEO discussing well
Speaker 3: the country that Netflix might ultimately have. Let's talk about
Speaker 3: that with Jennifer Ree from the anti trust team at
Speaker 3: Briomberg Intelligence. So there we heard perhaps an admission from
Speaker 3: the White House that he's looking at how competition is
Speaker 3: going to play out with whoever owns Warner Brothers Discovery
Speaker 3: at least the streaming and the studio side of it.
Speaker 13: Right exactly, you know. And at the end of the day,
Speaker 13: it depends on the Department of Justice and the analysis
Speaker 13: that they do this year long investigation that's very likely
Speaker 13: to take place no matter who ends up being the buyer,
Speaker 13: and what their economists find out when they look at
Speaker 13: the market, what the documents from the companies look like
Speaker 13: when they're talking about who they think they compete with.
Speaker 13: And I think with the Netflix situation, it very much
Speaker 13: comes down to how the market is defined. But if
Speaker 13: the market is defined narrowly in the way I think
Speaker 13: it ultimately will and the Department of Justice does tend
Speaker 13: to define markets narrowly. In general, Netflix has a problem.
Speaker 13: The President is correct, it's a big market share.
Speaker 2: Jen I think it would really help them in the
Speaker 2: tech audience understand the process a little bit.
Speaker 8: Is it rules based?
Speaker 2: So if there's an antitrust review on this, do they
Speaker 2: look at past precedents? Do they look at a codified
Speaker 2: set of rules and say, Okay, this either is or
Speaker 2: is not abuse of market position?
Speaker 4: It is absolutely rules based.
Speaker 13: There's a set of guidelines called the horizontal merger guidelines
Speaker 13: that the Department of Justice will look to that actually
Speaker 13: gives it basic mathematics to understand, at least facially whether
Speaker 13: it deals anti competitive. And they start by defining a
Speaker 13: market and then summing the shares in that market. Now,
Speaker 13: oftentimes this market definition situation can be dispositive because the
Speaker 13: broader the market, it filters down the shares. The combined
Speaker 13: share isn't as large as it is in a narrower market,
Speaker 13: at least in this situation. And they go through a
Speaker 13: pretty intensive analysis to make these determinations. So it is
Speaker 13: and they do look at precedent as you suggested, and
Speaker 13: it is rules base. But here's where I go with this.
Speaker 13: When the agencies are looking at deals, they are trying
Speaker 13: to predict the future, right, and this is a gray area.
Speaker 4: There is no black and white.
Speaker 13: Reasonable minds, intelligent minds can differ on what the impact
Speaker 13: of a deal may be. So they're doing their best
Speaker 13: to model out that impact. And what it means is
Speaker 13: that there's flexibility there, there's leeway, and they might believe
Speaker 13: there's a problem here, but they have to go to
Speaker 13: court and then they have to convince a judge that
Speaker 13: there's a problem here and maybe a judge would.
Speaker 4: See it differently.
Speaker 2: Jennifery of Bloomberg Intelligence, I suspect you will be back
Speaker 2: on Bloomberg Tech to talk about this very deal. Thank
Speaker 2: you very much. Let's continue a conversation with Rich Greenfield,
Speaker 2: partner at Lightshed Partners, General partner at lightshad Ventures. Jen
Speaker 2: had a lot of decent mathematics there, a mathematics and
Speaker 2: rules based approach to what happens next? Simple question for
Speaker 2: you to start, Rich, what happens next?
Speaker 8: You know, it is really anyone's guess.
Speaker 14: You know, you've now got this hostile offer tender offer
Speaker 14: from the Ellison's and from Paramount.
Speaker 8: Obviously sheralders are going to have to, you know, really
Speaker 8: look at this.
Speaker 14: I mean you've got you know, the offers are very different,
Speaker 14: right because one is for just the streaming and studios,
Speaker 14: and you're going to end up with a resulting stub
Speaker 14: equity that is the cable network piece. And you know,
Speaker 14: depending on how that's valued, it could be anywhere from
Speaker 14: you know, a buck and a half to four or
Speaker 14: five dollars like a share, and so it all depends
Speaker 14: on sort of how that trades ultimately, and do investors
Speaker 14: want to sort of bet on the value of that
Speaker 14: entity own some Netflix equity as well as get twenty
Speaker 14: you know, plus dollars twenty three dollars of cash.
Speaker 8: Is so this is not a simple equation.
Speaker 14: Obviously, we know from Warner Brothers that they believe that
Speaker 14: the Netflix offer was superior. They think it was thirty
Speaker 14: one or three or thirty two dollars a share in
Speaker 14: effective value. Will some investors want to take thirty in cash?
Speaker 14: There may be, and I think that's going to be
Speaker 14: the question. But can they get enough of the shares
Speaker 14: to actually block the transaction? I think that's what essentially
Speaker 14: Paramount would now be hoping for, is that enough people
Speaker 14: tender their shares that they can stop Netflix and force
Speaker 14: them to abandon the offer.
Speaker 2: If I made to recap the Netflix offers twenty seven
Speaker 2: dollars seventy five cents, but only for the streaming and
Speaker 2: studios bit right, the Paramount skuideance thirty dollars bid was
Speaker 2: for the entirety of it. If we put the deal
Speaker 2: making and the arbitrage to one side, which makes most
Speaker 2: sense based on the current state of the media and
Speaker 2: entertainment landscape.
Speaker 14: Look, we're in a point now in the entertainment landscape
Speaker 14: where the industry is going through seismic change. You know,
Speaker 14: movie theater attendance is down fifty percent from before COVID.
Speaker 14: You know, forget about box office, but actually, you know,
Speaker 14: sort of people attending movies in the US, you're down
Speaker 14: nearly fifty percent. You know, you're seeing most of the
Speaker 14: major streaming companies out there really scale back their ambitions.
Speaker 14: And that's Warner Brothers, that's you know, if you look
Speaker 14: at what's happened with Peacock, none of them are as aggressive.
Speaker 14: Disney and Hulu have certainly reduced their overall aggressiveness in
Speaker 14: how much content they're making. Like everyone is realizing how
Speaker 14: streaming is so hard, and so the reality is consolidation
Speaker 14: is certainly necessary. And I don't think this is the
Speaker 14: last transaction we're going to see. I think you're going
Speaker 14: to actually see this set off. You know, there's gonna
Speaker 14: be a knock on effects from whoever ends up buying this.
Speaker 14: You're going to see other things happen. You know, is
Speaker 14: there a story to tell for both companies?
Speaker 8: Absolutely?
Speaker 14: I mean there's no doubt in my mind that if
Speaker 14: you you know, put Warner brothers into Netflix, the ability
Speaker 14: to do far more with that library than has ever
Speaker 14: been done before. Looking at that global platform, and how
Speaker 14: they've able to sort of surface content.
Speaker 8: I mean, all of this content's been sitting on HBO
Speaker 8: Max and no one really watches it.
Speaker 14: That's what Netflix does really well, is they get people
Speaker 14: to watch things throughout the library in the way that
Speaker 14: others cannot. Right, that algorithm is so powerful Paramount buying it.
Speaker 8: Look, Paramount needs more scale.
Speaker 14: If Paramount doesn't buy this, guess is they're going to
Speaker 14: go after something else in the space, whether that's NBC Universal,
Speaker 14: whether that's Sony. Like, I don't think Paramount is going
Speaker 14: to sit still. They want to get bigger. Look, they
Speaker 14: may just spend a lot of money. I mean, Ellison
Speaker 14: family has a tremendous amount of capital. Will they just
Speaker 14: use that to fund far greater investment than they were
Speaker 14: previously in Paramount?
Speaker 8: That might be another angle here.
Speaker 14: I Mean we've always said Paramount doesn't have to have
Speaker 14: that because they have one of the wealthiest families in
Speaker 14: the world backing them.
Speaker 3: They've got more than the wealthiest family in the world.
Speaker 3: They've got Middle Eastern money helping them with this. That
Speaker 3: would transpired. Does that change the storytelling?
Speaker 8: Rich Well, I.
Speaker 14: Think what's interesting is there is this perception on Wall
Speaker 14: Street that this was just Larry Ellison, you know, writing
Speaker 14: a check to buy all of this, And what it
Speaker 14: actually turns out is that Larry's only writing a twelve
Speaker 14: billion dollar check. He's backstopping a larger portion, but the
Speaker 14: actual check he's writing his twelve billion, and three Middle
Speaker 14: East entities are actually investing twenty four billion.
Speaker 8: I don't know if that played into him.
Speaker 14: And they say there's no scifius concerns, but you do
Speaker 14: wonder whether the largest sort of you know, as a group,
Speaker 14: the Middle East being the single largest sort of equity
Speaker 14: contributor to this deal. I wonder if that played a
Speaker 14: role in concern around this transaction.
Speaker 8: You know, we'll see.
Speaker 14: It's funny how there's been so much sort of industry
Speaker 14: uproar around.
Speaker 8: Around Netflix buying Warner Brothers.
Speaker 14: I wonder as people start to understand more of what's
Speaker 14: inside the paramount bid is you just said, Carolyn, will
Speaker 14: we see more pushback on the Paramount But I don't know.
Speaker 14: I mean, I think you know, all of these bids
Speaker 14: have there certainly are issues and look from a you know,
Speaker 14: if you think about sort of from an anti trust standpoint,
Speaker 14: Disney bought Fox. That seemed you know, Disney was at
Speaker 14: the pinnacle height of the industry when they bought Fox,
Speaker 14: and that was approved during Trump one. You know, it's
Speaker 14: hard to believe that this transaction ultimate gets blocked, either
Speaker 14: one of them gets blocked. I think obviously the Netflix
Speaker 14: will probably take longer than the paramount one, but I
Speaker 14: don't think there's any quick approval. A lot of states
Speaker 14: are going to be frustrated by you know, both of
Speaker 14: these bids.
Speaker 8: Foreign countries are going to be frustrated.
Speaker 14: So I think there's a long regulatory review process, meaning
Speaker 14: over twelve months, maybe even eighteen months for both of
Speaker 14: these companies.
Speaker 3: And YouTube gets brought into that rich more, will we
Speaker 3: understand what a competitive threat that is.
Speaker 14: Look, there's three layers of this. Is streaming A distinct
Speaker 14: market is streaming in linear TV. Like there are people
Speaker 14: watching us right now, Carolyn, who you know are watching
Speaker 14: linear TV and have Bloomberg TV and have CNBC and
Speaker 14: all of these channels, Like you know, it's hard to
Speaker 14: sort of believe that you know, FX and and you know,
Speaker 14: ABC and CBS don't really compete with Netflix. And then
Speaker 14: you've obviously got the larger thread of like, well, you
Speaker 14: know YouTube has Sunday Ticket, Like where do you watch
Speaker 14: Sunday Ticket?
Speaker 2: Now?
Speaker 8: You watch it on YouTube? Is it?
Speaker 14: Can you really say that YouTube is not a competitor
Speaker 14: to Netflix? And so it gets very challenging to define
Speaker 14: what the market is. And I think you're going to
Speaker 14: see a real difficulty in the government, you know, trying
Speaker 14: to not just say.
Speaker 8: What the market is, but actually back that up in court.
Speaker 14: I look forward to seeing how they actually try to
Speaker 14: prevent either of these two transactions.
Speaker 3: Rich Greenfield is always so good to check in with
Speaker 3: you of like Shared partners Light Shared Ventures.
Speaker 4: You appreciate it.
Speaker 3: Coming up, we're going to be speaking about defense a
Speaker 3: little bit more.
Speaker 4: Roger Zikeen is going to be joining US.
Speaker 3: Ronald Reagan Institute about securing industries key to the US economy.
Speaker 4: That's next, This is blue Bag Tech.
Speaker 6: JP.
Speaker 2: Morgan plans to invest ten billion dollars of its own
Speaker 2: capital in the defense, aerospace, healthcare, and energy sectors. The
Speaker 2: new strategic investment group will be led by both Halfway
Speaker 2: Todd Coombs and the group's strategic advisors. As you can
Speaker 2: see reads like a who's who of industries. The announcement
Speaker 2: comes to stays up to JP Morgan's CEO, Jamie Diamond,
Speaker 2: spoke about strategic and defense issues at the Reagan National
Speaker 2: Defense Forum and said Europe was facing quote, a real problem.
Speaker 6: Listen to this.
Speaker 12: Europe has a problem. I think they accomplished an unbelievable thing,
Speaker 12: but it got bogged down. It takes twenty seven nations,
Speaker 12: you know, to make a decision. They have some wonderful things,
Speaker 12: but they've gone from ninety percent of the GDP of
Speaker 12: America to sixty five. That's not because America did anything
Speaker 12: bad to them. It's their own bureaucracy, their own costs.
Speaker 12: I think the leadership Merz, McCrone, Maloney, Stormer, I think
Speaker 12: they know. I just think politics is really, really hard.
Speaker 4: Sat next to him asking the question.
Speaker 3: Was luckily enough me who got to fly out to
Speaker 3: Simi Valley over the course of the weekend, and it
Speaker 3: was all regarding the security and resiliency initiative that JP
Speaker 3: Morgan has and why they're so focused on defense. Someone
Speaker 3: who's also over in Simi Valley at the Reagan National
Speaker 3: Defense Forum was Roger Zachheim.
Speaker 4: Here's the director of the Reagan Institute.
Speaker 3: You have so much rich data as perhaps some of
Speaker 3: the nuances when it comes to Europe versus US. Why
Speaker 3: Jamie Diamond cares about defense right now is because it's
Speaker 3: geopolitically important, is economically important, and he's putting one point
Speaker 3: five trillion dollars initiative for the next ten years. Roger,
Speaker 3: what was it that you took away from the event
Speaker 3: in terms of money coming towards defense defense tech in particular.
Speaker 15: Well, really, we're seeing this for new dynamism in the
Speaker 15: national defense community. I mean, we started the Reagan National
Speaker 15: Defense Forum over a decade ago, and you saw over
Speaker 15: eighty plus corporate partners participating the event.
Speaker 6: I would say probably two thirds of.
Speaker 15: Those companies participating didn't exist five six years ago. So
Speaker 15: we're seeing because of all the innovations you guys cover
Speaker 15: in the commercial sector, it's also penetrating into our national
Speaker 15: defense community. And of course those technological innovations don't just
Speaker 15: impact the United States, it's impacting geopolos around the world. China,
Speaker 15: of course, is leveraging that and that's a big driver
Speaker 15: of the competition between the People's Republic of China and
Speaker 15: the United States. And it's natural then that Jamie Diamond,
Speaker 15: the leading CEO in the United States Iconic Bank in
Speaker 15: the United States, has something to say on the matter
Speaker 15: and is involving himself in the matter. And that's what,
Speaker 15: of course you covered at the Defense Form Roger.
Speaker 3: What's really interesting is we hear yet more and more
Speaker 3: focus of the administration on policy making. They're basically inspires
Speaker 3: innovation in artificial intelligence, but perhaps at the fas sake
Speaker 3: of guardrails. And we're talking here about perhaps an EO
Speaker 3: that might come this week that's going to look for
Speaker 3: states not to enact individual AI rules and leave it
Speaker 3: to federal rule making. Is that something you've seen born
Speaker 3: out in the data that the defense tech community, but
Speaker 3: investors and policy makers think that's a good thing.
Speaker 15: Well, they want to use AI, and we need to
Speaker 15: use AI in our defense platforms. As a big conversation
Speaker 15: at the Defense Forum and our national which is released
Speaker 15: just ahead of the survey a form excuse me earlier
Speaker 15: last week, really captured how Americans are someone ambivalent about this,
Speaker 15: They don't know, they're concerned should we have AI in
Speaker 15: our defense platforms? And there's almost a majority of Americas
Speaker 15: just saying they're unsure. Our leaders, of course, know that
Speaker 15: it's entirely necessary. Of course, you have to have a
Speaker 15: person in the loop, a human the loop involved, and
Speaker 15: we're not going to get there in a fashion we're
Speaker 15: comfortable with if we're regulating our.
Speaker 8: Way out of it.
Speaker 15: And I think that was the spirit of what you
Speaker 15: heard from our defense leaders, both on industry and from
Speaker 15: the Pentagon, and I think you're going to see that
Speaker 15: also out of the White House with this executive order.
Speaker 2: Roger China is worth discussion. On October tenth, Caroline and
Speaker 2: I did the show live from Anderill's headquarters, and literally
Speaker 2: the moment the show started, the President posted on truth
Speaker 2: Social about at that time a deterioration in his relationship
Speaker 2: with Jijingpin. And the point that Anderil is an example,
Speaker 2: would make is we've been talking about China as a
Speaker 2: threat for some time. We're still bracing for China as
Speaker 2: a threat in the year twenty twenty seven. And in
Speaker 2: your survey, respondents engaged on that point give us the data.
Speaker 15: Well, seventy nine percent view China as the adversary of
Speaker 15: the United States. You know, rushes in there too, of course, Iran,
Speaker 15: but the country that the most Americans, as expressed by
Speaker 15: the respondents and our survey, are concerned about that they
Speaker 15: view as an enemy as an adversary is the People's
Speaker 15: Republic of China. And they're right, and the Trump administration
Speaker 15: is first term named the PRC as the leading challenge
Speaker 15: to our national security.
Speaker 6: Now.
Speaker 15: President Trump, of course is engaging in dollar diplomacy. The
Speaker 15: National Security strategy that came out last week emphasize how
Speaker 15: he believes economic cooperation with China will be one of
Speaker 15: the ingredients. Tours take the United States a forty trillion
Speaker 15: dollar economy. But from a national defense standpoint, we're only
Speaker 15: going to get what sector Hesech talked about. We want
Speaker 15: to have strength as a driver towards engagement with China,
Speaker 15: but without confrontation. We're only going to get there if
Speaker 15: we are strong, if we're making these investments, if companies
Speaker 15: like Androil are going to make the progress they promise
Speaker 15: with respect to autonomy and other new companies getting online
Speaker 15: leveraging this new technology. Of course, in part AI driven.
Speaker 2: Roger, I want to go back to Caroline's conversation with
Speaker 2: Jamie Diamond. If we could end there, please, there is
Speaker 2: support for this government taking stakes and strategic industries. But
Speaker 2: clearly the private sector and from a financing perspective, the
Speaker 2: banks think they have a role to play here. Is
Speaker 2: the situation just better now for private industry to do
Speaker 2: business with the government directly or co invest with them.
Speaker 2: Do you get that sense?
Speaker 15: Well, listen, certainly from the Reagan Institute perspective, it is
Speaker 15: better when our free market is driven by the private
Speaker 15: sector and not government. I think if you talk about
Speaker 15: companies from Anderalds or new entrants or newer entrant all
Speaker 15: the way to the Boeings and north through Grummans of
Speaker 15: the world reading on the public markets right certainly in
Speaker 15: the in the primes and so government needs to leverage
Speaker 15: that technology. They need to go ahead and develop and
Speaker 15: drive budgets that have growth so those companies can continue
Speaker 15: to scale up. That is what's required to scale here.
Speaker 15: And we talk about Jamie Diamond, right and the banking sector.
Speaker 15: It can't just be vcs anymore. It can't just be
Speaker 15: the pe community. We need major banking institutions to get involved.
Speaker 15: And that's why Jamie Diamond's leadership was so essential and
Speaker 15: was great to have him on stage with you.
Speaker 2: Carolina Roger's that Kim, director of the Reagan Institute. It's
Speaker 2: great to have you on Bloomberg Tech. We appreciate it.
Speaker 2: Now coming up, let's get back to Paramount's hostile bid
Speaker 2: for Warner Brothers Discovery. There's a lot to talk about.
Speaker 2: What happened next, the why, and the deal as a whole.
Speaker 2: That's what the trading looks like for the names involved.
Speaker 2: This is Bloomberg Tech. Back to today's big story, Paramount
Speaker 2: making a hostile bid for Warner Brothers to Discovery thirty
Speaker 2: dollars per share just stays off. The company agreed a
Speaker 2: deal with Netflix. I want to get to Bloomberg Intelligence
Speaker 2: media analyst Keith rang and Ethan because when we spoke
Speaker 2: on Friday, you called it the next thing will happen
Speaker 2: is a hostile bid from Paramount. Were there any surprises
Speaker 2: within the structure of Paramount's offer for you, Not.
Speaker 16: Really, but you know, when you compare it, obviously, on
Speaker 16: the face of it, the Paramount offer definitely looks superior
Speaker 16: because it is a thirty dollars bid, it is an
Speaker 16: all cash bid. But the two offers are actually so
Speaker 16: very different.
Speaker 3: You know.
Speaker 16: Paramount, of course promising regulatory certainty a much speedier path
Speaker 16: to approval. But again, a lot of this is still
Speaker 16: TBD ed. We have to kind of wait and watch
Speaker 16: and see Paramount kind of removing a lot of what
Speaker 16: they thought would potentially spark regulatory problems, you know, removing
Speaker 16: the or with the Saudi money, kind of getting rid
Speaker 16: of the governance issues so as to not trigger a
Speaker 16: sifious jurisdiction. But again I don't know whether shareholders necessarily
Speaker 16: view this as a superior deal.
Speaker 2: Well, when a big piece of news and a big
Speaker 2: piece of MNA happens like this, our Bloomberg terminal clients
Speaker 2: will know. You publish a REACT and the headline of
Speaker 2: your react is Paramount hostile. Warner bid ups and te
Speaker 2: may not be enough. Why do you feel it may
Speaker 2: not be enough?
Speaker 16: Keeper, Because on the face of it, the Netflix bid
Speaker 16: actually offers superior value for all of Warner Brothers Discovery.
Speaker 16: So you have the studio and streaming unit valued at
Speaker 16: about twenty eight dollars a share according to the Netflix bid.
Speaker 16: And then if you just kind of look at where
Speaker 16: other cable networks are trading, because you will be left
Speaker 16: with a cable network stub business, which is called Discovery Global.
Speaker 16: We think and I think the street also thinks that
Speaker 16: that should be worth about three and a half to
Speaker 16: four dollars a share. Now, Paramount in their presentation has
Speaker 16: valued that unit at about one dollar per share, and
Speaker 16: I think that is where majority of the delta is
Speaker 16: coming in, and so I think they will kind of
Speaker 16: ultimately need to up their bid.
Speaker 2: What we're hearing in the markets is right now, the
Speaker 2: state of play is that Paramount's not even heard back
Speaker 2: from Warner on their bid. Keith Rang and Na from
Speaker 2: the Bloomberg Intelligence, thank you so much. That does it
Speaker 2: for this edition of Bloomberg Tech. Let's recap where we're at.
Speaker 6: We have a.
Speaker 2: Netflix bid for the streaming and studio business, and Warner
Speaker 2: Brothers Discovery. We have a Paramount Skuidance bid for all
Speaker 2: of Warner Brothers Discovery. You can listen to all those
Speaker 2: conversations in today's podcast. Find it online on Apple, Spotify, iHeart,
Speaker 2: and of course on all the Bloomberg platforms. Big Wig ahead,
Speaker 2: This is Bloomberg Tech.