00:00Much of the talk about David Ellis' deal by Warner Brothers has been mostly focused on the impact to the
00:05creative community around Hollywood.
00:07But there's a far different aspect of the deal that Wall Street investors care about, and it's the math behind
00:12the deal.
00:13Most notably, Skydance's almost $80 billion in debt, virtually an unheard of amount for a major Hollywood studio to carry.
00:22Put it in perspective, four years ago when Warner Brothers and Discovery merged, that deal carried around $43 billion in
00:28debt.
00:28Some of that will come in the form of $6 billion in cost-cutting, which will involve laying off some
00:33amount of employees,
00:34although Ellison has promised that layoffs will not be a major way that they will cut costs.
00:39They're not expected to be cash flow positive until 2028 at the earliest,
00:43which essentially means that after the next year and a half, they're going to be spending more money than they're
00:47making.
00:48Now, they have until 2028 and 2029 to hit certain financial targets,
00:52which will come in the form of reducing the amount of debt it has relative to how much money it's
00:57making.
00:58If it doesn't hit those targets, then they will be liable to their lenders to cover what the difference is.
01:04Now, many people expect that some of that or all of that will come from Larry Ellison,
01:09who's worth around $180 billion, though most of his net worth is tied up in Oracle stock.
01:14Either way, the next three years will be a very tricky financial tightrope for David Ellison to walk.
