Bloomberg’s Caroline Hyde and Ed Ludlow discuss Paramount Skydance’s $30 per share bid for Warner Bros. Discovery that comes just days after the company agreed to a deal with Netflix. Plus, President Trump wants to limit state-level AI regulation with an executive order aiming for "one rule" on artificial intelligence, and IBM is buying data-streaming platform Confluent for about $9.3 billion in one of its largest takeovers yet.See omnystudio.com/listener for privacy information.
Chapter 1: What is the main topic discussed in this episode?
Hello and welcome. This is The Michelle Hussein Show. I'm Michelle Hussein. I speak with people like Elon Musk. I think I've done enough. And Shonda Rhimes. That's so cute. This will be a place where every weekend you can count on one essential conversation to help make sense of the world.
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You certainly ask interesting questions.
Bloomberg Audio Studios. Podcasts. Radio. News. 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. Paramount making a hostile bid for Warner Brothers Discovery just days after the company agreed to a deal with Netflix.
Plus, President Trump wants to limit state-level AI regulation. He plans to approve an executive order this week aiming for one rule on artificial intelligence.
And IBM is buying the data streaming platform Confluent for about $9.3 billion, one of its largest takeovers yet. Look at that share market reaction for Confluent. Let's check in on the broader markets, though. Anticipation, anticipation of the macro perspective that is the Federal Reserve policymaking later this week.
We're down by about a quarter of a percent, but so much is happening underneath the hood at the moment, Ed, and you're going to dig into our story of the day, the week, maybe the year. Yep, Warner Brothers Discovery. This is the state of play. This morning, Paramount Skydance comes in with a hostile bid at $30 per share for the entirety of Warner Brothers Discovery.
At the end of last week, Netflix had come in with an offer of $27.75 a share, but that was largely for the streaming and studio businesses with the plan that Warner Brothers Discovery, who entered into those talks with Netflix, would divest and spin off some of the remaining legacy cable units. There is so much to discuss in this. The financing in both senses. Where is it coming from?
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Chapter 2: What is the significance of Paramount's hostile bid for Warner Bros. Discovery?
But he did say, that would need to be reviewed. Netflix is the biggest player in Hollywood in streaming, and so if we were to add on HBO and Warner Brothers, it would make it even stronger there. In Paramount's case, they'd be combining two movie studios, they'd be combining huge amounts of television networks.
The respective share of either combined company in terms of TV viewing would be quite large, would be somewhat similar, And yet both, I think, would still be smaller than YouTube. So a lot of this, if we get to an antitrust case, is going to depend on what market you are defining. Let's just think about the storyline that's capturing a lot of attention today is the money.
And we're all about the money for these things. Lucas, Tencent was involved previously. It looks as though Chinese money is now being put to one side, but Middle Eastern money coming to the fore and Jared Kushner's money, private equity at least, which is also backed by Middle Eastern money coming to the fore.
Yes, the Middle Eastern money is probably the most interesting part of it because there had been a report, you know, at this point, maybe a month ago in Variety, the Hollywood trade publication, saying that there were three prominent Middle Eastern sovereign wealth funds involved in the Paramount bid.
Paramount initially didn't really engage, then later that day said that the report was inaccurate, and then it turns out the report looks like it was pretty accurate.
Because yes, I had heard and they have since disclosed that you do have a lot of Middle Eastern money in this bid, and there had been Chinese money, which makes it even more interesting that one of Paramount's arguments is that they will have an easier time getting this deal approved
But Warner Brothers Discovery's perspective was, well, it's actually making our life more complicated if you have all of this foreign money, because then CFIUS might have to look at it and approve it. Bloomberg's Lucas Shaw, who's led the team on this story every step of the way. Thank you so much.
Let's continue the conversation with Brandon Katz, Greenlight Analytics Director of Insights and Content Strategy. Lucas did a really good job in explaining the differences in structure of the deals and also the different perspectives of each party.
But I wondered if you'd help our audience understand what the difference is between a Netflix joined with Warner Brothers Discovery's streaming and studio business versus a Paramount Skydance taking the entire thing. What does that look like? You and Lucas have already done a great job, so I'll try to pitch in here. Really WBD and Paramount, more redundancies, more overlap.
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Chapter 3: How does President Trump's executive order aim to regulate AI?
Now, we have seen mega mergers of this nature in the past, but they have almost always been a like versus like company absorbing each other. We have not really seen a major, major streaming service take a company at the size of Warner Brothers Discovery just yet. Brendan, we're going later in the program to go deep on the antitrust considerations. There are antitrust considerations here.
But let's say in either event, Netflix comes out on top or Paramount Skydance comes out on top. How does that change the landscape of entertainment? What does it look like to have an entity of that size? Roughly two-thirds of U.S. adults who subscribe to HBO Max also subscribe to Netflix, whereas about 40% of HBO Max subscribers also use Paramount+, according to Greenlight Analytics data.
So as of right now, the clear raw subscription streaming upside obviously favors Paramount+, which has about 80 million subscribers globally. globally. So they are a solid, growing streamer that's been on original content hot streak since late 2023, but clearly isn't remotely the same size as Netflix, Amazon, or Disney+. So if Netflix were to get WBD,
they would suddenly be investing in a lot of new businesses. And we don't know how they would play up theatrical. We don't know how they would handle WBD TV's massive external TV licensing business. We do know that Paramount and WB, there's more of, again, overlap and redundancies. So we can safely say that that would probably be more predictable as to what the future would look like.
And it would certainly position Paramount to make that entrance into the top three contenders of media companies.
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Chapter 4: How have past offers for Warner Bros. Discovery influenced current bids?
Certainly, David Ellis has been talking about getting in the position to produce more, more content, in particular for the consumer. Brandon, just listen to what he told our own Lucas Shaw a little bit earlier in October at our Screen Time event. We have a good relationship with the administration. And look, I think if you look to that, I do believe...
Other things that have been rumored about, right, are very large-scale players that could potentially create monopolies, obviously, in the ecosystem. And again, I think when you look at the lens of consolidation, for us, I'll keep going back to it, it's always how do you create long-term value creation? How do you put yourself in the position to produce more content, not less?
And how do you ultimately build something that is better for the consumer? Brandon, what serves the consumer best? What serves the consumer best overall is usually competition. So I think there is a large sect of industry analysts and professionals that would probably prefer Warner Brothers Discovery to remain as an independent company because it means more competition.
It means more buyers on the market. It probably means less layoffs of the labor force. Having said that, that's unfortunately not the reality that we live in. So somebody is going to get Warner Brothers. So it is really deciding which ultimate partner is probably best for the industry.
Now, if you combine Netflix and HBO Max and if you combine Paramount Plus and HBO Max, they are still significantly smaller than YouTube, which is currently about a third bigger than Netflix in the U.S. So either way, there is still a lot of competition out there depending on which industry you're pitting against, Warner. another.
Let's talk about good old cable television, because that is where many would say there is perhaps value. And it depends on which side of the equation you think. At the moment, it feels as though Warner Brothers Discovery thought there was more value in spinning off that part of the business than the $30 coming from Paramount Skydance. How do you look at those valuations?
Well, let's stick with the famous Warner Brothers property friends. Ross was a famous paleontologist in the show, which means he loved fossils, which means he would love the cable network assets. They are rapidly declining. They are shrinking every day. And while they still spit out a decent amount of free cash flow, Wall Street sees them as an albatross, an anchor.
So they all these companies want to position themselves for long leashes from shareholders and Wall Street. And the cable nets just aren't part of that strategy. Niche analogy, but we're here for it. The most important question seriously was posed by Bloomberg tech producer, Paul Zaveri. Just take this at face value seriously.
Let's say either deal goes through and we don't know if it will, there's antitrust. Does that mean that we stop paying for multiple subscriptions and we can just pay for one subscription where all of our platforms are in one? Because that's the other side of it. Everyone has a dozen or more different subscriptions.
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Chapter 5: What factors are affecting the valuation of Warner Bros. Discovery's assets?
Bloomberg senior tech editor Mike Shepard has been across what we knew has been being talked about more and more. Anxiety that there will be 50 rules for AI companies instead of just one federal rule. What sort of form could this take, Mike? Well, it's really unclear.
We have seen circulating in recent weeks a draft version of a measure that the president might sign that would call for two things. It would allow the Justice Department to sue states over regulations at the state level that the federal government finds unconstitutional. It would also call for cutting funding to states that have regulations in place that the administration finds objectionable.
It's unclear what those criteria exactly are. We did see in the AI action plan a call for reining in rules that might impede innovation. But those are all the specifics we have in hand at this moment. So we'll be waiting to see what emerges on the president's desk.
We do know this is a priority for the administration, for the president, for his top AI advisor, David Sachs, as well as the tech industry. We've heard from Jensen Wang. We have heard from Mark Andreessen. We've heard from OpenAI and Google that they really would like to rein in what they call a patchwork of state level rules.
There are 38 states enacting almost 100 measures so far this year, and it's becoming a bit much in their view. Shep, my sense from what I'm hearing out of DC is that this EO will focus more on the why those state laws are bad rather than proactive. Here's one great rule for everyone. But politically, it's really interesting because it's not as if Republicans broadly are supporting the president.
in diluting or detracting from state powers. I think of Ron DeSantis, for example, his position on this has been quite clear. So private industry, of course, would support that. But politically, the president has to do some management here. Well, absolutely, Ed. And really, regulating AI has been a politically tricky issue from the get-go.
And the reason is there are so many different points of view on artificial intelligence. There are a handful of members in Congress who are accelerations, who really want to speed the adoption of technology, setting aside whatever needs there might be for regulation. And then there are others who really want to slow it down. They're in the middle.
You do have a large number of other lawmakers who are seeking to rein in specific areas. Some are worried more about the Doomer issue. Others are worried about privacy. Others still are worried about copyright. And so far, we do not have anything comprehensive at the federal level.
And in the spirit that space abhors a vacuum, this is why we are seeing at the state level, both in Republican states and Democratic states, legislators and governors moving in to try to impose some order on a system that they see as both economically significant, but also potentially perilous to voters and consumers.
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Chapter 6: What are the potential antitrust implications of the Paramount and Netflix bids?
Amanda Mull, who writes our Business Week Buying Power column. Very few companies who go viral are like totally prepared for what that means.
And Zoe Tillman, senior legal reporter. Courts are not supposed to decide elections. Courts are not really supposed to play a big role in choosing our elected leaders. It's for the voters to decide.
Follow The Big Take podcast on the iHeartRadio app, Apple Podcasts, or wherever you listen. JP Morgan plans to invest $10 billion of its own capital in the defense, aerospace, healthcare, and energy sectors. The new strategic investment group will be led by Berkshire Hathaway alum Todd Coombs. And the group's strategic advisors, as you can see, reads like a who's who of industries.
The announcement comes just days after JP Morgan CEO Jamie Dimon spoke about strategic and defense issues at the Reagan National Defense Forum and said Europe was facing, quote, a real problem. Listen to this.
Europe has a problem. I think they accomplished an unbelievable thing, but it got bogged down. It takes 27 nations to make a decision. They have some wonderful things, but they've gone from 90% of the GDP of America to 65. That's not because America did anything bad to them. It's their own bureaucracy, their own cause. I think the leadership, Merz, Macron, Maloney, Stormer, I think they know.
I just think politics is really, really hard.
Sat next to him, asking the question, was luckily enough me who got to fly out to Simi Valley over the course of the weekend. And it was all regarding the Security and Resiliency Initiative that JPMorgan has and why they're so focused on defense. Someone who's also over in Simi Valley at the Reagan National Defense Forum was Roger Zachheim. He is the director of the Reagan Institute.
You have so much rich data as to perhaps some of the nuances when it comes to Europe versus US. Why Jamie Dimon cares about defense right now is because it's geopolitically important, it's economically important, and he's putting $1.5 trillion initiative for the next 10 years, Roger.
What was it that you took away from the event in terms of money coming towards defence, defence tech in particular? Well, really, we're seeing this renewed dynamism in the national defense community. I mean, we started the Reagan National Defense Forum over a decade ago, and you saw over 80 plus corporate partners participating in the event.
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