00:00Joining us right now to talk a little bit more about this is David Joyce, Seaport Research
00:03Partner, Senior Analyst. And David, I mean, ultimately, when you take a look at where
00:08David Ellison is nudging this company, and I was looking through the shareholder letter,
00:11he kind of does sort of chart a path for at least what content looks like, more importantly.
00:16And I'm curious if you think that content strategy translates into actual revenue growth.
00:23Well, I think they do have to populate their services, especially Paramount Plus,
00:28with more theatrical and episodic content. So that's really the vision, is you have to
00:34build it and hopefully they will come. That was part of the strategy for paying up for UFC rights
00:39and making that part of the Paramount Plus without having to pay for a pay-per-view pay-through.
00:47So I think the commentary about trying to accelerate the content production is something
00:54that should be well-received by the industry, even though on the other side of that,
00:58you do have a lot of headcount reduction as part of their synergies. But you do have to
01:04differentiate with content. You need more scale in the content because the scale side of the
01:09question mark on will this work is really what's driving the overall industry consolidation thing.
01:17And when they talk about the potential cost savings, they point out that some of those cost savings are
01:21going to be actually reinvested back into the business, including more than $1.5 billion
01:26next year into their DTC properties like UFC, Paramount Plus, Originals, et cetera, et cetera.
01:33David, I am curious about sort of where you want Ellison to sort of push this company,
01:39because I know there's still a lot of talk about whether they do make a meaningful bid for Warner
01:43Brothers Discovery or at least a bid that would actually be accepted by Zasloff.
01:46But the idea here that is this more of a content play or do you think that they can
01:50sort of achieve what they need to do with what they already have?
01:55I think this is a content play, but it's one that's going to evolve with new distribution
02:01outlets as they emerge. And that's the whole idea behind David Ellison being tech savvy and tied in
02:08with the technology side of what can facilitate future entertainments. So they do need to drive
02:16up the amount of content they have, but they also have to be flexible in how they go about producing
02:21it and embrace new distribution methods. So I think that this is the first step in David's
02:29opportunity to reinvent the company is redeploying the cost savings into more content and into
02:36embracing the new and future distribution models. Well, when it comes specifically to Warner Brothers
02:42and whether or not Paramount acquires that company, we know that Netflix, Comcast, for example, also
02:48reported to have some interest here in Warner Brothers. And with that being said, I mean, does
02:54Paramount have the firepower, so to speak, if we were to enter into a potential bidding war? And do you
03:00think that that's something that they should enter into at all?
03:04A few concepts are involved in answering that question. One is on the regulatory front. And this would
03:14not be, I think, problematic from, you know, an antitrust standpoint in terms of combining a couple of
03:21studios. If you looked at putting Comcast Universal together with Warner Brothers, the studio, that might be
03:28need too big from a regulator's point of view. But Paramount and Warner Brothers, because Paramount's been a
03:35smaller studio, would probably not be problematic. Also, with the continuing decline in the cable
03:41networks business with cord cutting, putting the Warner Brothers Turner networks together with
03:46Paramount's also, I don't think, would be problematic because there are so many voices, so many outlets for
03:52people to access content. So I think that thinking of the potential deal structure, Paramount could be a
04:00one-stop shop for a Warner Brothers discovery board to simplify everything, to put both aspects together.
04:08Whereas a Comcast deal could involve some separate assets. Netflix is also, you said, they just are
04:15interested in the studios and streaming side. So the question for the Warner Brothers board is, what do we do
04:20with the cable networks in that instance? So I think that strategically, and from a regulatory
04:26perspective, Paramount might have an upper hand. Financially, they could, but that could really rely on what
04:33David's father, Larry, decides to do. Could he take some of his Oracle shares and margin it? And that'd be a way
04:40that he keeps his control in Oracle and then can use that cash as part of the compensation for Warner's deal.
04:47So I think that they could keep up with some of the other parties in terms of the financial firepower
04:53in doing such a deal. All right, David, really appreciate your time. You take a look at Paramount
04:58shares up about 2.4% right now. That is David Joyce. He is Seaport Research Partners Senior Analyst.
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