Chapter 1: What is the main topic discussed in this episode?
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Bloomberg Tech is live from coast to coast with Caroline Hyde in New York and Ed Ludlow in San Francisco.
This is Bloomberg Tech coming up, a historic media shakeup as Netflix agrees to buy Warner Brothers Discovery. Details on the $72 billion cash and stock deal throughout the hour.
Plus, continued clash between the US and the EU on free speech as the European Union finds Elon Musk's X platform $140 million.
and HPE's outlook disappoints on slower AI server deals. We speak to the CEO. Let's get right to it. Netflix buying Warner Brothers Discovery. The value of the deal, $72 billion. Warner Brothers Discovery shareholders set to receive $27.75 per share in cash and stock. The value of the deal, or value of Warner Brothers, almost $83 billion when you take into account debt. This is gonna go on
for a while. The expectation is it could close within 18 months. A lot of questions, Caro, on the why and also about the price when you consider the bidding war that was going on for this name.
And this is for streaming. This is for studios only. Earlier today, Ted Sarandos spoke on a conference call, Ed, about this deal. Here's what he had to say. I know some of you are surprised that we're making this acquisition, and I certainly understand why. Over the years, we have been known to be builders, not buyers.
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Chapter 2: What is Netflix's agreement to buy Warner Bros. Discovery about?
So the process is, assuming that this all continues as planned, Warner Brothers Discovery will spin off its cable networks, the CNN, TNT, TBSs of the world, sometime third quarter next year. They will then proceed with closing the sale of the rest of the business, which is the Warner Brothers Studio and HBO, HBO Max streaming to Netflix.
They expect that transaction will close in the next 12 to 18 months. So let's say sometime in 27. And then there will obviously be regulatory approval and all that, which could also drag on for some time. Depends on when that enters the equation. In terms of the value and all that, yes, Paramount offered $30 a share. Netflix was just shy of $28.
But you have to remember that because Netflix is only buying two thirds of the company, there is a value that is being applied to the business that will be spun off that you add on top of the Netflix bid. So a lot of whether the Netflix bid was more or less than paramount depends on the value you assign to those cable networks.
You know, people who are really skeptical and certainly folks I spoke with in the Paramount orbit are like those cable networks are worth nothing, maybe a dollar a share, maybe two. You know, Warner Brothers may argue it's worth four or five dollars a share, in which case the Netflix offer is actually higher.
Bloomberg's Lucas Shaw, who leads all of our coverage of this industry at Bloomberg with the key details you need to know. Thank you very much. Let's get more on the deal and the potential resulting media landscape shakeup with John Klein, Hang Media co-founder.
John, with respect, a veteran of the media industry in this country, former president of CNN, a serial founder of media companies, modern-day media companies. Lucas talked about what happens next and the expectation, I believe you share this view, is that this will go on for many months. There will be challenges along the way in the antitrust context.
This is going to be a saga that plays out longer than Game of Thrones did. Because, you know, not only do you have shareholder issues, your questions potentially, but you've already got the creative community in Hollywood rising up. The Directors Guild wants to sit down with Netflix. The theater owners are worried that Netflix is going to severely reduce movies released in theaters.
Overall, it reduces competition for producers and writers radically. And then, of course, the biggest factor is going to be the political aspect. Not only does
David Ellison's dad, Larry Ellison, who has funded the Paramount takeover, have a close relationship with Donald Trump, who I think had been licking his chops at the idea of combining CNN with CBS News, which is already trying to veer a little more to the right. But you have you have that in play.
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Chapter 3: What are the financial details of the $72 billion deal?
I mean, that's an extraordinary, of course, unwind value that they're offering, saying if this doesn't get through the regulators, we will hand you five billion Warner Brothers discovery more than. But, John, I want to go back to how Netflix is already trying to front run this. They're already saying these are complementary strengths and assets.
They're already saying there's going to be more choice, greater value. for the consumer because you're going to get bundling and maybe a cheaper offering. They're saying this is a stronger entertainment industry because they're actually going to be leaning into theatrical releases. Do you buy any of that? Oh, I buy some of it.
We just don't know how much more consumers are going to have to pay for this new and improved, bigger, better than ever, one big, beautiful streaming company. And so we'll have to see that. But bottom line, there are going to be fewer buyers for creative product.
Also left begging in this, though, and I think it's really worth talking about, especially on a tech-focused show, Netflix's biggest problem is not market share versus Amazon or Disney Plus or what have you. The bigger problem is YouTube. YouTube commands far more viewing time, almost double the viewing time. that Netflix does right now.
And Netflix has been busy trying to poach YouTube creators. But what's really happening in the entertainment industry as a whole is this flood of creator content. And this deal does nothing to address that. They could have spent far less money and bought a creator studio that could very well have a much larger impact moving forward than gaining some really great titles.
I mean, the IP of Harry Potter and Friends, that alone is worth a lot of money to them.
So what you're debating here is value, right? This is where Warner Brothers Discovery is trading. I'm just making a sort of mechanical observation. The share price is around $25 a share. Guys, give me Warner Brothers Discovery for a sec, please. The Netflix offer is $27.75 a share, which Lucas explained gets you basically two-thirds of the business. You seem to be questioning the value.
The shares aren't even trading anymore. at a kind of level that reflects two-thirds of the business. I'm trying to do the math here on whether this is a deal that the market is saying, yeah, we think this is a fair value, a good value.
I don't think the market has grasped the tidal wave that is being unleashed, even as we speak, and is only going to grow thanks to AI, which puts more tools into the hands of more creators. And so I think there's going to be a reckoning at some point, not this week, not maybe this year, over the next 12 months, but that's what's happening in the entertainment industry.
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Chapter 4: What will happen to Warner Bros. Discovery's cable networks?
We thank you. Time now for Talking Tech. First up, one of China's leading AI chip makers, MoreThreads, jumped 425% in its Shanghai trading debut. The startup drew strong investor interest in its IPO, with the retail portion oversubscribed by 2,750 times. Now, MoreThreads joins CameraCon, Huawei, and Racing to fill a market void after Nvidia was, of course, forced to exit China.
Plus, SoftBank, well, it's said to be in talks to acquire Digital Bridge, a PE firm with heavy investments in assets like data centers, according to sources. Now, the potential deal builds on SoftBank's efforts to take advantage of an AI-driven boom in digital infrastructure. A transaction could come together in a matter of weeks.
And BlackRock's iShares Bitcoin Trust recorded its longest streak of weekly withdrawals since its debut back in January 2024. Investors yanked more than $2.7 billion from the ETF over the five weeks to November the 28th. The ETF is now on pace for a sixth straight week of net outflows.
Our top story, Netflix buying a big chunk of Warner Brothers Discovery. This is what shares look like right now. This is a $72 billion cash and stock deal where Warner Brothers Discovery shareholders get $27.75 per share. I say a chunk because Warner
Warner Brothers Discovery will spin off cable networks, think CNN, think TNT, into a separate company before the transaction closes and goes through. But it means that Netflix, this kind of modern day streaming giant, is getting one of the oldest studios and developers of content in Hollywood. There is a lot of consideration around this deal.
All I'll say, Caro, is that the parties have done some interesting things here as part of the bidding war. Meanwhile, in Washington, The proposed deal already facing some backlash. Democratic Senator Elizabeth Warren issuing a statement calling for the DOJ to enforce anti-monopoly laws, saying the Netflix Warner proposal is, quote, a nightmare.
Let's bring in Bloomberg's Michael Shepard from Washington, D.C. There's the congressional review, and the Democrats will have some view on this, of course. But then it's probably more important to say, what is the White House view of this? What are policymakers' view on this?
Well, the policymakers are really being egged on by Congress and not just by Elizabeth Warren. We're seeing Republicans, including California's Darrell Issa, get into the act. And he is flagging his concerns on the consumer side. And really, it would fall to the Justice Department to conduct this review.
Our expectation is that the agency's antitrust division will give this transaction the wire brush treatment. It will not go through the review process very easily. The biggest concern, Ed, really is around the streaming question. Of course, Warner Brothers has its storied movie studios and deep library of film and other productions.
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