1 00:00:02,520 --> 00:00:07,000 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. 2 00:00:07,800 --> 00:00:09,960 Speaker 2: Joining us now is Andy Nussbaum, Co Chair of the 3 00:00:10,039 --> 00:00:13,000 Speaker 2: Executive Committee at Walktell Lipton. He is the main legal 4 00:00:13,039 --> 00:00:15,960 Speaker 2: advisor to Warner Brothers. Also Mark Boydman. He's the head 5 00:00:15,960 --> 00:00:19,599 Speaker 2: of Media and Entertainment and Partners at Solomon Partners, and 6 00:00:19,640 --> 00:00:24,120 Speaker 2: of course Bloomberg Deals Media Reporter specializing deals reporter specializing 7 00:00:24,120 --> 00:00:26,120 Speaker 2: in Media. I should say, Michelle Davis, thank you all 8 00:00:26,160 --> 00:00:29,320 Speaker 2: so much for joining today. Andy, I'd love to kick 9 00:00:29,360 --> 00:00:31,840 Speaker 2: it off with you in a very simple and perhaps 10 00:00:31,840 --> 00:00:36,000 Speaker 2: complicated answer, why is Netflix the preferred partner for this deal? 11 00:00:36,680 --> 00:00:40,159 Speaker 3: The Netflix transaction is the result of a very extensive 12 00:00:40,200 --> 00:00:43,600 Speaker 3: process that this board really undertook in twenty twenty two 13 00:00:43,680 --> 00:00:47,960 Speaker 3: after we acquired WarnerMedia, to get the value out of 14 00:00:48,000 --> 00:00:51,680 Speaker 3: those assets, to delever the company, to make the operations 15 00:00:51,680 --> 00:00:55,280 Speaker 3: more effective and robust, and then looked at separating the businesses. 16 00:00:55,480 --> 00:00:57,280 Speaker 3: And then it turned out not only did we have 17 00:00:57,320 --> 00:01:00,600 Speaker 3: the possibility to separate the two businesses, but also a 18 00:01:00,640 --> 00:01:02,680 Speaker 3: lot of people were interested in buying one or the 19 00:01:02,720 --> 00:01:05,440 Speaker 3: other or both, and so as a result of a 20 00:01:05,560 --> 00:01:10,440 Speaker 3: very large public process, very robust, competitive the Netflix transaction 21 00:01:10,560 --> 00:01:12,720 Speaker 3: came out on top, and we do believe that that 22 00:01:12,840 --> 00:01:15,360 Speaker 3: is by far the superior transaction for our shareholders. 23 00:01:15,400 --> 00:01:16,920 Speaker 2: Mark, let me bring you in on this because you 24 00:01:16,920 --> 00:01:19,200 Speaker 2: are a veteran of this industry. You have long worked 25 00:01:19,200 --> 00:01:21,800 Speaker 2: with media companies tracked media deals. What are the sort 26 00:01:21,840 --> 00:01:24,280 Speaker 2: of considerations one should have and what is a very 27 00:01:24,360 --> 00:01:25,040 Speaker 2: large transaction? 28 00:01:25,440 --> 00:01:28,679 Speaker 4: Sure, Danny, it all comes down to speed, certainty, and 29 00:01:28,760 --> 00:01:32,520 Speaker 4: what Netflix does offer is speed and certainty. They're moving ahead, 30 00:01:32,800 --> 00:01:35,160 Speaker 4: they have the cash, they have the balance sheet. I 31 00:01:35,160 --> 00:01:37,560 Speaker 4: think what you see as other bidders who don't provide 32 00:01:37,600 --> 00:01:39,560 Speaker 4: that certainty and shareholders. At the end of the day, 33 00:01:39,560 --> 00:01:41,319 Speaker 4: Wall Street loves certainty. 34 00:01:41,520 --> 00:01:43,880 Speaker 1: And Andy, we know that Warner Brothers shareholders are going 35 00:01:43,920 --> 00:01:45,560 Speaker 1: to get a chance to vote on this deal in 36 00:01:45,600 --> 00:01:47,920 Speaker 1: the coming weeks. What have you been hearing from shareholders 37 00:01:47,960 --> 00:01:50,520 Speaker 1: so far about how they're viewing the Netflix deal? Obviously, 38 00:01:50,600 --> 00:01:52,760 Speaker 1: paramounts also trying to break the steal up. 39 00:01:53,360 --> 00:01:57,120 Speaker 3: So the Netflix deal, which is really two deals, the 40 00:01:57,160 --> 00:01:59,560 Speaker 3: twenty seven to seventy five in cash that our shareholders 41 00:01:59,560 --> 00:02:03,120 Speaker 3: would receive when that transaction closes, plus the spun off 42 00:02:03,160 --> 00:02:07,560 Speaker 3: Discovery Global, a linear network business. As a new public company. 43 00:02:08,200 --> 00:02:13,680 Speaker 3: We have tremendously happy shareholders. The Netflix transaction on its 44 00:02:13,680 --> 00:02:16,200 Speaker 3: own reflects a more than one hundred and twenty percent 45 00:02:16,280 --> 00:02:19,920 Speaker 3: increase in the value of the company since last September, 46 00:02:20,240 --> 00:02:22,120 Speaker 3: and if you look over a two year period, more 47 00:02:22,160 --> 00:02:24,120 Speaker 3: than a two hundred percent return to shareholder. So our 48 00:02:24,120 --> 00:02:27,359 Speaker 3: shareholders are thrilled, the board is pleased. It's a great 49 00:02:27,360 --> 00:02:30,160 Speaker 3: strategic fit, and it's tremendous value for our shareholders. 50 00:02:30,240 --> 00:02:33,160 Speaker 2: Might those shareholders be more thrilled if you get a 51 00:02:33,200 --> 00:02:36,800 Speaker 2: suiteened offer from paramounts guidance? If they pony up thirty 52 00:02:36,800 --> 00:02:39,200 Speaker 2: four dollars, would that complicate things? 53 00:02:40,520 --> 00:02:43,560 Speaker 3: If we receive a revised proposal from a paramount, we 54 00:02:43,639 --> 00:02:47,040 Speaker 3: will do what we have done for months, which is 55 00:02:47,040 --> 00:02:49,480 Speaker 3: we will consider it on its terms, on the merits, 56 00:02:49,840 --> 00:02:52,400 Speaker 3: not based on what they say they will do or 57 00:02:52,440 --> 00:02:54,240 Speaker 3: may do in the media, but what they actually are 58 00:02:54,280 --> 00:02:56,840 Speaker 3: willing to commit to in a legal document. 59 00:02:57,080 --> 00:02:59,320 Speaker 1: And to that point, I mean, Mark, put yourself in 60 00:02:59,440 --> 00:03:02,320 Speaker 1: the paramount boards shoes. I mean, if you're a paramount 61 00:03:02,320 --> 00:03:04,680 Speaker 1: and you've been saying for weeks now that your offer 62 00:03:04,760 --> 00:03:06,600 Speaker 1: wasn't best and final, what are you waiting for? What 63 00:03:06,639 --> 00:03:08,320 Speaker 1: do you think they're waiting for? What's their next move 64 00:03:08,360 --> 00:03:08,720 Speaker 1: going to be. 65 00:03:09,280 --> 00:03:11,679 Speaker 4: Yeah, I think it comes down to the certainty. They 66 00:03:11,760 --> 00:03:15,520 Speaker 4: have a team that's evaluating whether to raise this. But 67 00:03:15,720 --> 00:03:18,000 Speaker 4: is it about price or is it about certainty? And 68 00:03:18,040 --> 00:03:20,200 Speaker 4: it comes down to financing, Right, You've got Netflix that 69 00:03:20,280 --> 00:03:22,880 Speaker 4: has a balance sheet, They've got the cash. You have 70 00:03:22,960 --> 00:03:25,440 Speaker 4: Paramount that has to structured finance the deal, and so 71 00:03:25,520 --> 00:03:28,400 Speaker 4: they're also limited by the financing markets. And again it 72 00:03:28,440 --> 00:03:29,359 Speaker 4: comes down to certainty. 73 00:03:30,120 --> 00:03:31,799 Speaker 3: And I would agree with that. By the way, I think, 74 00:03:31,880 --> 00:03:36,880 Speaker 3: you know, value uncertainty are separate but entirely related. It's 75 00:03:37,200 --> 00:03:39,680 Speaker 3: excellent to sign up a deal, but it's critical to 76 00:03:39,720 --> 00:03:42,160 Speaker 3: close the transaction. And we have a tremendously high degree 77 00:03:42,160 --> 00:03:44,920 Speaker 3: of confidence that the Netflix transaction will close. 78 00:03:45,120 --> 00:03:49,240 Speaker 2: What about regulatory certainty? I mean, we saw that Senate 79 00:03:49,320 --> 00:03:52,000 Speaker 2: hearing yesterday. It feels like both sides, Andy are coming 80 00:03:52,000 --> 00:03:54,560 Speaker 2: at this. From the Democratic side, it's too bigo will 81 00:03:54,560 --> 00:03:57,760 Speaker 2: create a behemoth. From the Republican side, Netflix is woke 82 00:03:57,880 --> 00:03:59,760 Speaker 2: or whatever term you want to use. Donald Trump worried 83 00:03:59,760 --> 00:04:03,520 Speaker 2: about CNN. It does feel like this in particular has 84 00:04:03,520 --> 00:04:06,120 Speaker 2: become a political hot button issue. 85 00:04:06,320 --> 00:04:09,200 Speaker 3: I've been doing this sort of business for a long 86 00:04:09,280 --> 00:04:11,080 Speaker 3: time and you know, when you're playing in the big 87 00:04:11,160 --> 00:04:12,960 Speaker 3: leagues like this, you have to expect that you're going 88 00:04:13,000 --> 00:04:15,120 Speaker 3: to go through a public process that people are going 89 00:04:15,160 --> 00:04:17,599 Speaker 3: to stake out their points of view. We've spent a 90 00:04:17,600 --> 00:04:20,400 Speaker 3: significant amount of time with Netflix working on the regulatory 91 00:04:20,440 --> 00:04:23,640 Speaker 3: profile the transaction. This is a deal that's positive for 92 00:04:23,720 --> 00:04:26,440 Speaker 3: consumers in terms of choice, this is a deal that's 93 00:04:26,480 --> 00:04:29,920 Speaker 3: positive for creators in terms of investment in content and 94 00:04:29,960 --> 00:04:33,200 Speaker 3: theatrical release. With forty five day windows, this is something 95 00:04:33,240 --> 00:04:35,919 Speaker 3: that's great for the entertainment industry. It's great for jobs 96 00:04:35,920 --> 00:04:37,760 Speaker 3: in America. So we do have a high degree of 97 00:04:37,800 --> 00:04:39,560 Speaker 3: confidence that the transactions will clear. 98 00:04:40,160 --> 00:04:43,880 Speaker 1: And more on that regulatory point. Obviously, Paramount is speeding 99 00:04:43,960 --> 00:04:46,120 Speaker 1: ahead trying to get its own regulatory approvals for a 100 00:04:46,160 --> 00:04:49,000 Speaker 1: deal that's not yet signed. Does it matter if they 101 00:04:49,040 --> 00:04:52,280 Speaker 1: get certain approvals before Netflix? Does that play into I 102 00:04:52,279 --> 00:04:54,200 Speaker 1: guess how shareholders view it at the end of the day. 103 00:04:54,920 --> 00:04:57,280 Speaker 3: Well, as I said earlier, we're having a very great 104 00:04:57,320 --> 00:05:00,000 Speaker 3: and open dialogue with our shareholders, so we think before 105 00:05:00,120 --> 00:05:03,200 Speaker 3: for the vote, they will well understand the full regulatory landscape. 106 00:05:03,200 --> 00:05:04,599 Speaker 3: At the end of the day, you need all the 107 00:05:04,640 --> 00:05:07,440 Speaker 3: approvals to close that you might be a little bit 108 00:05:07,760 --> 00:05:11,480 Speaker 3: ahead on one versus another isn't particularly relevant. I also think, 109 00:05:11,839 --> 00:05:15,240 Speaker 3: as it's been proven in the past, that even if 110 00:05:15,279 --> 00:05:19,160 Speaker 3: a paramount gets beyond this waiting period under the HSR 111 00:05:19,279 --> 00:05:22,200 Speaker 3: rules until the deal closes, which is at least nine 112 00:05:22,200 --> 00:05:25,160 Speaker 3: to twelve months away, the DOJ has the ability and 113 00:05:25,200 --> 00:05:30,000 Speaker 3: in the past has challenged transactions. We think paramount knows that. 114 00:05:30,360 --> 00:05:33,880 Speaker 3: We know that, And as one of their lawyers, who 115 00:05:33,920 --> 00:05:37,000 Speaker 3: previously worked in the government said, any well advised client 116 00:05:37,120 --> 00:05:40,000 Speaker 3: knows that the waiting period expiring does not mean your 117 00:05:40,000 --> 00:05:41,279 Speaker 3: transaction has been cleared. 118 00:05:41,360 --> 00:05:43,040 Speaker 2: Mark, I'd just love to get your thoughts on this. 119 00:05:43,200 --> 00:05:45,120 Speaker 4: I was just going to say, it depends also on 120 00:05:45,160 --> 00:05:47,280 Speaker 4: what happens. You got a shareholder vote coming up. If 121 00:05:47,279 --> 00:05:50,120 Speaker 4: the vote goes the wrong way, clearly the deal is 122 00:05:50,160 --> 00:05:52,080 Speaker 4: not going to happen. But why would the vote go 123 00:05:52,120 --> 00:05:54,719 Speaker 4: the wrong way? Only if people are worried that the 124 00:05:54,760 --> 00:05:58,680 Speaker 4: certainty is evaporating because of potential big changes to the 125 00:05:58,680 --> 00:06:01,960 Speaker 4: deal or a block transaction. Unclear where that's going to 126 00:06:02,000 --> 00:06:04,359 Speaker 4: shake out. But if there's even a hint that the 127 00:06:04,360 --> 00:06:07,719 Speaker 4: transaction could be blocked, the certainty component starts to evaporate. 128 00:06:07,800 --> 00:06:09,520 Speaker 2: Well, what do you make yourself and like even the 129 00:06:09,520 --> 00:06:12,960 Speaker 2: President himself has involved, has been involved in this deal, 130 00:06:13,240 --> 00:06:14,440 Speaker 2: how does that change the contours? 131 00:06:14,480 --> 00:06:16,599 Speaker 4: I mean, the arguments are you look at something like 132 00:06:16,720 --> 00:06:21,679 Speaker 4: a YouTube or Instagram reaching billions of people. The combined HBO, 133 00:06:21,760 --> 00:06:25,480 Speaker 4: Max and Discovery together with Netflix is three hundred and 134 00:06:25,520 --> 00:06:28,440 Speaker 4: fifty million subscribers. That's our estimates. So three hundred and 135 00:06:28,440 --> 00:06:31,680 Speaker 4: fifty million versus over a billion in YouTube, Instagram, all 136 00:06:31,720 --> 00:06:34,120 Speaker 4: these companies that compete. And so the point that was 137 00:06:34,160 --> 00:06:36,920 Speaker 4: made yesterday and the hearing, this is not just about 138 00:06:37,200 --> 00:06:41,240 Speaker 4: streaming content. It's a much bigger universe of competition. The 139 00:06:41,279 --> 00:06:44,320 Speaker 4: consumer needs to make sure that they've got choice. But 140 00:06:44,440 --> 00:06:46,560 Speaker 4: the argument that Netflix is making is there's a lot 141 00:06:46,600 --> 00:06:48,920 Speaker 4: of choice out there. So we'll see what happens. It's 142 00:06:48,920 --> 00:06:51,880 Speaker 4: an evolving process, but certainly it's not a slam dunk. 143 00:06:52,200 --> 00:06:54,520 Speaker 4: But I would certainly say, you know, it's also not 144 00:06:54,760 --> 00:06:56,360 Speaker 4: that the deal is going to fall apart either. I 145 00:06:56,360 --> 00:06:58,839 Speaker 4: think what ultimately happens is maybe there's some small changes 146 00:06:59,120 --> 00:07:02,080 Speaker 4: that needs to be made to make sure that the 147 00:07:02,120 --> 00:07:04,039 Speaker 4: regulatory environment is safe and comfortable. 148 00:07:04,279 --> 00:07:05,839 Speaker 1: And that seems to be a lot of what the 149 00:07:05,920 --> 00:07:08,680 Speaker 1: discussion has focused on is how is how our regulator 150 00:07:08,720 --> 00:07:10,240 Speaker 1: is going to define the market. Is it going to 151 00:07:10,240 --> 00:07:12,440 Speaker 1: be narrow or is it going to be broad? Does 152 00:07:12,760 --> 00:07:16,080 Speaker 1: streaming and your attention to streaming compete with sleep? As 153 00:07:16,160 --> 00:07:20,040 Speaker 1: you know, an argument the argument of the but so 154 00:07:20,240 --> 00:07:22,680 Speaker 1: just zooming out a little bit. No matter what happens here, 155 00:07:22,680 --> 00:07:25,520 Speaker 1: assuming there is a deal with Netflix or a Paramount, 156 00:07:25,800 --> 00:07:28,320 Speaker 1: it's going to reshape the media industry. What does that mean? 157 00:07:28,360 --> 00:07:31,000 Speaker 1: Mark for those that aren't part of this, like Comcast 158 00:07:31,080 --> 00:07:33,920 Speaker 1: obviously try to jump in here. The are on the sidelines. 159 00:07:34,040 --> 00:07:36,200 Speaker 1: Now what happens to them and what happens to Paramount 160 00:07:36,200 --> 00:07:38,200 Speaker 1: if they don't do this deal? Right? 161 00:07:38,280 --> 00:07:40,440 Speaker 4: I mean, everybody, this is a chess game and everybody 162 00:07:40,440 --> 00:07:42,600 Speaker 4: needs to watch where the pieces go. It's an evolving 163 00:07:42,680 --> 00:07:44,640 Speaker 4: landscape and they don't want to be left when the 164 00:07:44,680 --> 00:07:47,320 Speaker 4: music stops and be have no chair. So I think 165 00:07:47,360 --> 00:07:49,040 Speaker 4: what has to happen is you need to look at 166 00:07:49,080 --> 00:07:51,400 Speaker 4: the landscape and say what should we be doing next. 167 00:07:51,680 --> 00:07:53,960 Speaker 4: There are a ton of potential buyers who could come 168 00:07:54,000 --> 00:07:57,040 Speaker 4: in here, who are building media empires that would love 169 00:07:57,080 --> 00:07:59,400 Speaker 4: to own some of these independent companies or companies that 170 00:07:59,400 --> 00:08:00,880 Speaker 4: haven't been acquire Andy. 171 00:08:00,760 --> 00:08:03,400 Speaker 2: Just literally thirty seconds left. Is this just one of 172 00:08:03,440 --> 00:08:04,760 Speaker 2: many more media deals to come? 173 00:08:05,000 --> 00:08:07,000 Speaker 3: Well, one of the interesting pieces of this deal is 174 00:08:07,040 --> 00:08:10,000 Speaker 3: that you know, we'll see what the future for Discovery 175 00:08:10,000 --> 00:08:12,480 Speaker 3: Global is after we do the spinoff, which will deliver 176 00:08:12,600 --> 00:08:15,600 Speaker 3: value on day one, but we'll probably deliver substantial value 177 00:08:15,600 --> 00:08:18,440 Speaker 3: in the future depending on what comes to your point 178 00:08:18,760 --> 00:08:20,680 Speaker 3: and the other answer your question is yes. I mean, 179 00:08:20,720 --> 00:08:22,880 Speaker 3: it's just a tremendously exciting time to be an m 180 00:08:22,920 --> 00:08:24,800 Speaker 3: and a advisor in this space. There is so much 181 00:08:24,840 --> 00:08:27,840 Speaker 3: going on, and it's quite creative, and it's ambitious and 182 00:08:27,880 --> 00:08:30,680 Speaker 3: it's strategic. So it's everything you want to deal that. 183 00:08:31,200 --> 00:08:32,679 Speaker 2: I'm going to like clip that and play it as 184 00:08:32,679 --> 00:08:34,559 Speaker 2: a promo for the Deal Show and why everyone should 185 00:08:34,559 --> 00:08:36,199 Speaker 2: watch and why both of you should come back. Thank 186 00:08:36,240 --> 00:08:38,840 Speaker 2: you both so much for joining us. That is today's 187 00:08:38,840 --> 00:08:42,319 Speaker 2: investment Committee. Andy Neasbomb, Co chair of Executive Committee at 188 00:08:42,320 --> 00:08:45,600 Speaker 2: walkteil Aton, the main legal advisor to Warner Brothers. Mark Boydman, 189 00:08:45,640 --> 00:08:48,160 Speaker 2: Head of Media and Entertainment and Partners at and partner 190 00:08:48,160 --> 00:08:48,960 Speaker 2: at Solmon Partners.