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00:00The less than straightforward question that everyone has, of course, is what happens next.
00:03But I wanted to put it to you like this. Does Netflix have the balance sheet, the sort of financing
00:10flexibility and the will, really, to amend, improve, boost its bid for Warner Brothers Discovery's studios and streaming business if
00:20needed?
00:22Let me tell you, we feel very good about the position we're in right now.
00:26So we've done this process opened up. Warner Brothers Discovery determined that it was in their strategic best interest to
00:35sell these assets.
00:36We entered into a negotiation. It was a very, very clear bidding process that they laid out for us, which
00:44we followed and won that bid.
00:46I think in the alternative, this guy has gone, you know, missed every deadline.
00:52They've been taking nine runs of this bid and they risk, you know, they're not seem to accept this outcome.
00:58So what we've done here is we've given Warner Brothers Discovery a seven day window to get some clarity about
01:05what Paramount is offering for this company.
01:07I believe that it's important to have that clarity. I think it's important that the Warner Brothers Discovery shareholders deserve
01:14to have that certainty and clarity about this deal.
01:19Now, your stock is down more than 30 percent since you announced this deal.
01:24So you feel good about it, your shareholders. It's a little less clear.
01:27I know that I've heard you say that that is because of uncertainty, but it went down basically as soon
01:32as you went into this.
01:33So I'm just wondering, is there a point at which it goes down so much that you and your fellow
01:38board members have to reconsider if this is the right path?
01:41Look, as we remember, we run this company from the beginning to the long term.
01:45We think this deal will have a positive impact on the business for the long term.
01:50Remember, what we're doing in buying these assets is we've been creating original programming on Netflix for about a decade.
01:57They've been making original film series for about 100 years.
02:00They have incredible IP. And we just happen to have a consumer model that can better maximize the returns on
02:07that IP.
02:08So I think it's a very it's a great long term out, you know, long term outcome.
02:12I think there has been some headwind in the stock.
02:15There's been some headwind in the sector.
02:17And there's been some headwind because of the AI trade, which I think is ironic because I think AI will
02:23be an amazing creator tool to actually make the entertainment business bigger and better than ever.
02:28So I do think those things have got to play out.
02:31When I said they don't like uncertainty, there's, you know, there's concern about bidding wars and all those things.
02:36And we have always been an incredibly disciplined last buyer.
02:40And we will continue to be one here.
02:42Ted, on those headwinds you mentioned, you know, there are a portion of the Netflix investor base and the Warner
02:47Brothers Discovery
02:49invest base that kind of see this as defensive by you and look at growth, right?
02:54You know, engagement growth in the second half of last year, such as it was.
02:58And what would you say to those people that this is response to to that growth rate that you've experienced
03:05more recently,
03:06as opposed to something proactive and strategic?
03:10I think that they're incorrect.
03:11They're reading it wrong.
03:12I'd say that we if you look at the year we just came out of in 2025, we grew revenue
03:1716 percent.
03:18We grew operating income by 30 percent.
03:20And our engagement did go up.
03:22Went up a couple of billion hours.
03:23And I feel like, you know, there's engagement, which is an important view hours is one component of engagement.
03:28And it's certainly one component of the value of engagement.
03:31We're very confident.
03:32You saw that in our 26th guide that we're going to continue to operate this business well.
03:37And that this model is very much worse.
03:40And that this Warner Brothers acquisition is an accelerant to that model.
03:43And it also future proofs that model, you know, for decades to come.
03:49Ted, I appreciate there's a process here.
03:51And thank you, you know, kind of earlier for outlining it right through February 23rd.
03:55But before that, you know, the section of the investor base that basically thinks Netflix should walk away, look at
04:02the regulatory road ahead.
04:04They look at the integration risk.
04:06And then like what Netflix is, a big global technology company, as opposed to being something sort of micro focused
04:12on Hollywood.
04:15Right.
04:15Right. And so answer those investors, right?
04:19You know, why are they wrong that actually there is a longer list of reasons to walk away than stick
04:25with it at this juncture?
04:26Yeah. Well, this this deal offers great value to the Warner Brothers Discovery shareholders.
04:31It offers great long term value to Netflix.
04:33We have a we have a normal regulatory path ahead.
04:37There's nothing uniquely challenged about that process.
04:39We are about in the middle of it with the DOJ, with the European regulators, with regulators all over the
04:45around the world and with state's attorney general.
04:48This is a process that we're very confident that we're going to navigate.
04:52And in fact, I'd say, again, when you look at the deals that are out there, I think people would
04:56like the status quo.
04:58And we have a long history of running the business well and pivoting when it's time to and adding new
05:04business lines to the business that we both get upset about sometimes.
05:08And then when we do it successfully, they're thrilled.
05:10I think advertising probably is the most recent example.
05:13Live could be a more recent example.
05:16Some of our life's 40 events could be a more recent example of things that have been pivots in the
05:21business that have gone on to grow the business very well.
05:24And people are very happy about it.
05:25People don't like change.
05:27They don't like any degree of uncertainty sometimes.
05:29And any time there's a new deal, there is regulatory scrutiny.
05:33There is execution risk, all of those things.
05:35But we are highly confident that we can we're going to bring this deal close and that we're going to
05:41successfully integrate the business.
05:42And I think about it as the reason why we're all talking about these deals so much is this week.
05:48We've granted the seven-day window to get some clarity about the Paramount deal because Paramount has been out spreading
05:54a lot of misinformation to shareholders,
05:56into the markets, into regulators, in ways that have run the narrative to a state of confusion.
06:03We're trying to say, well, take seven days and get some clarity.
06:06Because what we believe is, and what the Warner Brothers Discovery Board agrees with us on as well, is that
06:12our deal is a superior deal.
06:14We believe it's good for them.
06:15We know it's good for us.
06:16And we are excited about getting it done.
06:20When you talk about clarity and certainty, you know, one of the aspects of the Paramount deal that they have
06:25stressed is better.
06:26And I think some of the Warner Brothers shareholders seem to agree or at least entertain it is, you know,
06:31they're offering to buy the whole company.
06:32They will just take it out, $30 a share.
06:35Warner Brothers doesn't have to proceed with a spin beforehand.
06:38What is your argument for why your more complex deal is better for all those shareholders than just getting the
06:44cash tomorrow?
06:45This deal is not complicated at all.
06:48It is $27.75 plus the value of Discovery Global.
06:53By the way, it's the deal that they want.
06:55It is the deal that they asked for.
06:57These are the assets that were for sale.
07:00So the more complex thing is buying the whole company.
07:03When you do that, then you're buying these European sports networks.
07:07As you know, sports rights in Europe are incredibly highly regulated, as is the television landscape, which they be stepping
07:13themselves into.
07:14So I would argue that our deal is quite simple.
07:16$27.75 per share plus the value of Discovery Global, which I think is an incredible asset.
07:23And they do, too.
07:24That's why they set the offer up this way.
07:27That's why when we were bidding, we bid for the assets that were for sale.
07:32If Discovery Global is a great asset, I'm just wondering, have you guys talked about just buying the whole company
07:38and doing the spin yourself?
07:40No.
07:40Well, as you know, the linear broadcast business is not something that we're interested in, but others are.
07:46And I think when I look at the business, particularly those European networks are not in decline the way that
07:52some of the way they are in the U.S.
07:54So it is not of our interest, but it's, I'm sure, of interest of many buyers.
08:00Ted, you are competing in a politically sensitive media deal.
08:05There is reporting, and we are in a time where the Ellisons and their relationship to the Trump administration has
08:14been discussed.
08:15It's also reported, of course, that you met with the president, I think, on November 24th.
08:20How are you weighing that and assessing that in this scenario, that relationship between Paramount's leadership and this administration?
08:31Look, I have spoke to the president about the state of the entertainment industry.
08:35We've had multiple conversations about how do we protect American jobs?
08:39How do we keep the entertainment industry healthy?
08:41What are those headwinds?
08:42What are those things that we're working on to try to keep production up in the United States?
08:48We are investing a billion dollars into a new state-of-the-art production facility at the old Fort Mombath
08:54military base in New Jersey.
08:56Obviously, the president is very keenly interested in entertainment, and he's very interested in American industry and American jobs.
09:03So those are the conversations that we've had.
09:05I don't know why the Ellisons intimate that they have some direct lying to the Department of Justice for a
09:12faster path of clearance.
09:14But I doubt that they do.
09:16This is a process that is being run by the Department of Justice.
09:19The president has been very clear on that.
09:21We've been very clear on that.
09:22The Department of Justice published in 2023 the guidelines for mergers that they are following right now.
09:29So that's what's happening here.
09:30This is a business deal, not a political deal.
09:34You're joining us on Bloomberg Television and Radio.
09:36We're speaking to Netflix's co-CEO, Ted Sarandos.
09:39And, Ted, last night, Bloomberg News reported that the Justice Department and its attorneys have made contact with movie theaters,
09:47the industry, to try and understand what either outcome would mean for the movie theater business.
09:54I know that you actually have discussed this a little, theatrical releases, but just your latest thinking on that and
10:03what your pitch is to people on seats in movie theaters if you were to close your proposed deal.
10:11Yeah, look, it's a very important thing to look at.
10:13And I think why the DOJ is having those conversations, those are all laid out in the 2023 merger guidelines.
10:20To better understand the landscape, they're going to talk to competitors and suppliers and to better understand the landscape, including
10:26how it impacts adjacent businesses like the theatrical business.
10:30Now, our pitch is very simple because it's the truth, which is we're going to keep Warner Brothers running pretty
10:36much like they are today, releasing their movies in theaters for the traditional 45-day windows.
10:41And, in fact, it's even quite better for theaters because now that we're going to be in that business and
10:46own a theatrical distribution entity, we're going to take some of the Netflix films and put them through that as
10:51well.
10:52So it's very likely that you'll have even more outcome of high-quality films for the theaters if this deal
10:58goes through.
10:58Now, remember, Paramount has got this kind of fantasy proposal of somehow they're going to go from the half a
11:05dozen or so movies they distributed last year to 30 movies a year, which is about 10 movies more than
11:10the healthy studios are making now.
11:12I don't think that's likely, but what I know is very likely is that we're going to continue to operate
11:18that business largely as it is today, starting in the theaters, running through traditional windows, hitting HBO Max to the
11:26pay TV output deal, the output deals around the world.
11:29That's going to continue, and it's going to be good for the theaters because they're going to have more.
11:33And, by the way, I've been talking to them more about creative things that we do together, like we did
11:37the Stranger Things finale, which had thousands and thousands of sold-out shows all over the country, or the K
11:44-pop Demon Hunter sing-along, which energized the theaters on an otherwise very slow week.
11:49So we're excited about working together with the theaters to make that business healthy again as well.
11:53And I think that what they really need is more good movies, and we're going to provide them for them.
11:59Now, we both know that, you know, as many times as you've made this commitment on the theaters, it seems
12:04that there's a certain contingent of the population that just struggles to believe it.
12:08And I'm wondering, my sense is, and I've heard that both theaters and some of the trade unions in Hollywood
12:14have asked for sort of formal commitments on some things like level of production, theatrical releases.
12:20Are you willing to kind of put those commitments in writing?
12:24And if not, why not?
12:27Lucas, let's be clear, this deal does not represent any concentration risk at all.
12:33So those two would typically be remedies for a situation like that.
12:38According to Nielsen, we have 9% of the business.
12:41We're going to add HBO to that, and we're going to have 10% of the TV business, which is
12:44the primary driver of this deal and of our business.
12:47In the theatrical business, it's highly competitive.
12:50There's a lot of output that's going to go through there.
12:52The reason I'm not going to put it in writing, I wouldn't want to do this deal only to put
12:55ourselves at some bizarre competitive disadvantage down the road.
12:59And I've earned some of the skepticism about the theater business because I've said things about the state of the
13:04theater business.
13:05But I said that in the context of a business that we were not in.
13:09And today, we own Warner Brothers.
13:12We own a theatrical distribution entity, and we're going to want to continue to invest against the success that they've
13:18had.
13:19Pam and Mike just opened their ninth number one film at the box office, nine in a row.
13:23That's the kind of winning that we want to do with Warner Brothers and the theater owners.
13:28You mentioned HBO.
13:30Sorry, if I could go back to what you said about the trade unions as well.
13:34I think it's very important that I would like to have the trade unions to support this deal on behalf
13:39of their membership.
13:40Because what's going to happen in the alternative of this deal, I know there's some people who believe, you know,
13:45maybe if this deal doesn't happen, there'll be no sale of Warner Brothers.
13:48This sale is going to happen.
13:50It's going to be Netflix or it's going to be Paramount.
13:52And if it's Paramount, they've told everybody what they're going to do.
13:56They're going to have six.
13:57They've said six billion dollars in cuts.
13:59But they've also told everyone who they're borrowing the money from that they're going to delever the company from six
14:04or seven times down to two times in 18 months, which means 16 billion dollars in cuts.
14:11So that's what the trade unions who represent the people who make movies, writers, directors, producers, the crews of, you
14:19know, IATSE and the Teamsters.
14:21They're going to be working in a business that's going to be 16 billion dollars smaller, even than the three
14:26billion that Paramount has already cut out of its own company.
14:29So you're talking about an enormous contraction of the business.
14:32And the trade unions, I think, should come out and come out and support this deal explicitly on behalf of
14:38their membership to protect employment and jobs.
14:42Now, I'm curious.
14:43You brought up HBO and one of the big regulatory questions around this, you know, antitrust law depends on will
14:49prices go up for consumers?
14:51Is this bad for consumers?
14:52Are you going to offer HBO on a standalone basis going forward?
14:57And will you offer it for less than it is offered today?
15:00We will continue to offer it as a standalone unit.
15:04Eighty percent of HBO Max subscribers in the United States have a Netflix subscription today, actually closer to 85 percent.
15:10So I think what that says is this is a very complementary business.
15:14And we'll be able to put those businesses together and give those consumers a pretty steep discount.
15:18So that we're excited to do.
15:20And that's why I think this will be pro-consumer, because I think consumers have already said these are complementary
15:25businesses that they today pay a 100 percent premium for.
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