00:00Given the current scenario where there's a waiver until Monday for Warner Brothers to discourage to speak to Paramount, has
00:07Netflix got the means and the will to improve its bid if it needs to? And that wasn't really answered.
00:14Well, I think you've got to step back. You know, I think what one of the things that were one
00:18of the points that I think Lucas sort of ignored in asking Ted, you know, he was talking about isn't
00:24the bid for the whole company simpler?
00:26And the answer is obviously bidding for one whole company is obviously simpler.
00:31But what he's missing is the Warner board and what really started this entire process was a desire to split
00:39the company, right, to separate the studio streaming assets from the linear TV business.
00:50That was considered mission critical. And I think, you know, the challenge now is Netflix, by buying only the streaming
00:57and studio, is not preventing Warner Brothers from affecting the split this summer.
01:03Paramount is. They want to stop the split. They need the cash flow from those, you know, they're dying, but,
01:10you know, those high free cash flow cable network assets to finance this.
01:16And so they're trying to stop the split. But the Warner board wants to split because, God forbid, Trump changes
01:22his mind.
01:22Like we've seen Tegna, Nexstar, like you have certainly seen Trump change his mind.
01:26If for any reason Trump or even a foreign regulator blocks the Paramount Warner Brothers deal, you would not have
01:34split the company and you'd be in 2027.
01:36And I think that is there's a lot more value, sort of an intangible, but a real value to that
01:42split that I think there's been a tremendous amount of just ignoring in what I've read in sort of the
01:48press about this.
01:49And so I think that piece is really important. But to answer your very specific question, I do think if
01:54Netflix had a raise by five to 10 percent their bid, I think they would.
01:58And so I think the only way Paramount wins is with a knockout bid, something in the 35 to 40
02:04range, probably 36, 37.
02:06I doubt Netflix chases that high.
02:09On the network's linear TV piece, I think we asked him later on why, you know, and Mr. Rando's answer
02:15is pretty simple.
02:16We're not in that business. But he'd already said those are the assets for sale.
02:19What we did talk about was the movie business, theaters, right?
02:22And Bloomberg had reported that the DOJ is talking to that industry to assess what they think will happen.
02:28And, you know, the simple argument Mr. Rando's makes is that Warner Brothers has not just been making the IP
02:34for 100 years.
02:35Their distribution at theaters is excellent. That would be an advantage to Netflix. Do you see that?
02:41Look, Netflix is not in the theatrical distribution business.
02:45I think they certainly have recognized that theatrical can add a marketing power to some of their content.
02:53You look at how they put Stranger Things in movie theaters.
02:57You know, they put K-pop Demon Hunters a couple of times in movie theaters.
03:01So, you know, they actually released a lot of movies with, you know, shorter windows.
03:05But there was a lot of movies, I think probably 20 movies released in theaters last year by Netflix.
03:09And so, you know, I don't think there's a wholesale aversion.
03:12Do they believe that the movie business needs to change?
03:16I think they do. I mean, look, movie theater attendance.
03:19Forget about this whole Netflix discussion for a second.
03:22Movie theater box office in the last 12 months is 25 percent below where it was pre-pandemic.
03:31And that's just box office.
03:33Actual butts in seats. Attendance is down 50 percent from pre-pandemic.
03:39So the bottom line is the theater business is in a very, very dark, troubled place.
03:45The reality is you need people that are investing in the entertainment business.
03:50And, you know, the reality is Netflix has certainly shown a history of investing very aggressively in content all around
03:57the world.
03:58You know, look, we'll see.
04:00Paramount says they're going to make 30 movies.
04:02But Disney also said they were going to keep Fox as a fully independent studio and cost cutting eventually drove
04:08that production right back down.
04:10And so there's very few incremental movies from Disney today.
04:13And so I don't know.
04:14I'm sort of skeptical that anyone would ever try to actually make 30 movies because you can't make 10 or
04:1915 movies profitably, let alone 30.
04:22Paramount has until Monday to to do something right.
04:26Right. Because right now, really, that's sort of a red herring to go with that.
04:30So go with that. Not really.
04:31So what happens next?
04:33Well, we don't really know.
04:34I mean, look, the board has a fiduciary.
04:36If you're the board of Warner Brothers, you have fiduciary responsibility up until the vote.
04:42Right. Like so if Paramount came in the night before with a knockout bid, thirty five dollars or thirty eight
04:48dollars, all cash debt guaranteed by the Ellison.
04:51So you don't have to worry about solvency and closing and all of that, you know, the board would I
04:56think would have to listen.
04:58So, like, sure, they are definitely trying to force a best and final out of Paramount, who's been asking to
05:04talk to the board for quite, you know, probably for a couple of months now.
05:08But my point just being that even if it doesn't happen on Monday, it theoretically could happen later.
05:15Time is obviously running out.
05:16You know, you're down to, you know, effectively four weeks from today, there's going to be a shareholder vote.
05:21And I think without a meaningful increase from Paramount, Netflix is going to win that vote.
05:27To your mind, Rich, we just have 30 seconds, but which is most logical?
05:31Remind us where you stand.
05:34Unless if I was Paramount, I would not dramatically raise my bid.
05:39They really believe that regulatory wise will fail.
05:42I would play that out.
05:43I think overpaying if you're Paramount and over levering does not make sense.
05:47I'd rather lose and invest on my own, sort of the way Netflix did for a decade, than overpay.
05:54And so I hope Paramount doesn't do something, quote unquote, price stupid.
05:58But we'll see over the next few weeks.
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