Warner Bros. Fight Hinges on Value of Shrinking Cable Assets

Bloomberg

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00:00The Netflix offer and the Paramount offer, they're not apples to apples because Paramount's offer includes the cable networks.

00:09Just give us the details there.

00:11Yeah, that's totally correct.

00:12So they're different numbers and they're different assets.

00:15Paramount wants the whole company.

00:17They want all of Warner Brothers Discovery, including those cable channels like CNN.

00:21Which would mean CNN would live alongside CBS, which would be this bizarro world that has never existed before but could exist in the future.

00:28Exactly.

00:28Netflix, they just want streaming in studios.

00:31Which makes sense because they don't have those assets right now.

00:35So it would be really outside of their core competency to bring in live TV.

00:40That's right.

00:41Yeah.

00:41And if Netflix takes it, we'll see the spinoff of Discovery Global.

00:46Those would be those cable networks.

00:48Okay.

00:48So then it raises the question of what ends up happening to those spinoffs and how are they valued?

00:52Yeah.

00:53So that's the huge question here that shareholders, the board, that's what they're looking at.

00:57And weighing these two offers.

00:59They're trying to determine which one is superior.

01:01And the value of those cable networks, that's a key factor in that.

01:05And Paramount is arguing that those cable networks are low, maybe around a dollar per share.

01:10And, you know, the lower that they wanted, the sweeter their deal looks.

01:15Yeah, exactly.

01:15I think we're kicking around $4 billion with our own internal Bloomberg Intelligence folks.

01:22Having said that, I think, you know, Hannah, you want to take a step back.

01:25Go back 10 years, 20 years.

01:26Who would have thunk, right, that the cable industry would be facing such troubles or declining audiences?

01:33But here we are.

01:34I mean, viewers have a lot of options.

01:37It's true.

01:37Yeah.

01:38And it's very interesting to see this consolidation play out.

01:41You know, you would maybe see two news organizations living alongside each other.

01:46You know, these struggling cable networks housed under one entity if Paramount gets it.

01:50So it'll be very interesting to see how this plays out.

01:52Well, you think about NBC or something, right, they moved into a business news channel.

01:57They have MSNBC or used to have MSNBC.

01:59Not anymore.

02:00But I'm saying the idea of Paramount having kind of a traditional network and then another cable network,

02:06some have thought, you know, they have some digital, I think, you know, offerings,

02:10but it doesn't necessarily make, it's not crazy.

02:14Yeah.

02:14I mean, and I think we have to remember here that, you know, the most valuable IP is that movie and studio stuff.

02:20We know Paramount is leaning really hard.

02:22Feeding the beast, the content.

02:22Feeding the beast.

02:23Yes.

02:24And David Ellison really wants to build out that Paramount Plus streaming service.

02:27But I think Carol brings up a really good point, and that's when this is what she was flicking at,

02:31this idea that, you know, even traditional media companies that have long had these storied cable assets,

02:37they're now trying to figure out what the future of those are.

02:40So you have, you know, CNBC and the company, or the network formerly known as MSNBC, now MSNOW,

02:46being spun off into this separate publicly traded entity that Comcast has ownership of called Versant.

02:52And, you know, they're trying to figure out, okay, how are we going to value that?

02:55Yeah.

02:55And it'll be interesting to see, you know, Versant is supposed to start trading in the new year.

03:00And that value, I mean, who knows?

03:02We'll see if that could play into what's happening with these negotiations.

03:05Good point.

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