Chapter 1: What recent acquisition did Netflix announce regarding Warner Bros.?
On Friday, there was big news in Hollywood. One media juggernaut, Netflix, announced it was buying another giant, Warner Bros. Discovery, for $72 billion.
The streaming giant will acquire Warner Brothers Film Studio and streaming service HBO Max. This is a deal that could reshape Hollywood. Comprising some of Hollywood's most prized movies and shows.
Look, this has seismic effects on the entire entertainment landscape.
Chapter 2: How did Paramount Skydance respond to Netflix's acquisition of Warner Bros.?
But Netflix isn't the only company that's been courting Warner. Over the past few weeks, another massive entertainment company, Paramount Skydance, has also been in hot pursuit. And this morning, it went public with a hostile counteroffer.
Paramount launching a hostile takeover bid for Warner Brothers Discovery just days after Netflix announced an $83 billion deal to purchase the studio.
Paramount, it's not done. Paramount has upped its bid now for Warner Brothers. It is now offering all cash at $30 a share, a bid that it says is superior to Netflix's bid
This morning, I got on a call with my colleague Joe Flint, who's been covering every twist and turn.
And now it's kicked into Fifth Gear this morning. Fifth Gear was right around 6 a.m. my time, Los Angeles time, when Paramount officially launched their hostile takeover for Warner Brothers Discovery.
It's a heavyweight showdown between Netflix and Paramount over one of Hollywood's most storied companies. And no matter what happens, the business of Hollywood is about to change.
I'm sorry if there's a Paramount conference call in six minutes to talk about their hostile bid.
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Chapter 3: What factors led to Warner Bros. becoming a takeover target?
I'm guessing you probably need to be on that call.
I need to be on that.
Should we just get back on the phone when this call is finished?
Yeah, that'd be great. Appreciate it. It's part of your drama.
Exactly. This is going to be one of the cliffhangers. Welcome to The Journal, our show about money, business, and power. I'm Ryan Knudson. It's Monday, December 8th. Coming up on the show, the showdown over Warner Brothers.
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Chapter 4: Who is behind Paramount's bid for Warner Bros. and why now?
The company that's being acquired, Warner Bros. Discovery, is itself the product of a giant merger just a few years ago. In 2022, Discovery Networks, which owned a small streaming service and a bunch of cable channels, combined with Warner Media, which owned the Warner Bros. movie studio and HBO.
When I got Joe back on the phone about an hour later, I asked him about the original vision for Warner Bros. Discovery.
Chapter 5: How did David Zaslav respond to Paramount's unsolicited bids?
And the idea was that they'd have this supercharged streamer of the best of HBO, the best of Discovery. You'd have CNN in there, and then you'd still own these movie and TV studios, and it would be the ultimate Hollywood giant.
But instead of becoming the ultimate Hollywood giant, Warner Bros. Discovery stumbled. Joe says its CEO, David Zaslav, actually took on a lot of headaches. Its cable business was challenged by cord cutting, and building a streaming business was expensive.
Chapter 6: What was Netflix's appeal in acquiring Warner Bros. assets?
The company was saddled with heavy debt and its stock price was in decline for much of its existence. So how did Warner Discovery become a takeover target?
Warner decided earlier this year to break itself into two separate companies. They were going to put the streaming and studios into one standalone company and then the cable networks such as CNN into another publicly traded company. The cable networks were seen as a drag on the Warner stock.
So they thought that if they split the company apart, you'd have this one company that would have the movie studios and TV studios and HBO Max, all these sexy properties. And then the other company would have, you know, what is still a good cash business, but seen as a melting ice cube in the cable network universe.
So they did that, and there was always an anticipation that doing that, when it was all done, there might be some interest from big players in buying those Hollywood entertainment assets.
But before Zaslav could split the company up, Paramount decided to pounce. And earlier this year, it put in several unsolicited bids to buy Warner. And not just one part, but the whole thing. So introduce us to Paramount. Who's behind this company and why does Paramount suddenly decide to make an unsolicited bid for Warner?
Paramount was recently acquired by David Ellison and his Skydance Media Group. Now, Ellison had, in the back of his mind, had the idea of getting Paramount and then going after Warner.
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Chapter 7: What are the implications of the merger for Hollywood's future?
So once he got Paramount, you know, he started to turn his eye immediately to Warner. So the idea of combining Paramount and Warner and you've got this tremendous library and the real potential to build a streaming service that could rival Netflix, that was what was appealing to Ellison.
I feel like this is like nesting dolls. It's just like there's one merger inside of another merger inside of another merger that's now trying to, you know, go inside another giant merger.
Yes, a lot of consolidation, a lot of mergers. Paramount decided we don't want to wait a couple years and face a potential bidding war. So we're going to try to buy the whole company right now.
Joe says Paramount thought that by moving early, it could have a clean shot at a takeover. So Paramount makes these unsolicited bids for Warner Brothers Discovery. How did David Zaslav at Warner Brothers respond to those bids?
Well, from my own reporting, I don't think they were necessarily thrilled by unsolicited kind of aggressive bids that they also felt were lowball offers.
But the challenge is once you've had a certain number of offers and they've become public, we're all writing about them, as a company, you're kind of forced to at least address it and perhaps do what they did, which was open up a process to begin an auction.
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Chapter 8: What will be the impact on consumers if Netflix succeeds in acquiring Warner Bros.?
The auction, which was primarily over those sexy parts, HBO Max and the movie studios, drew bids from Comcast and Netflix. So what was the appeal for Netflix to own Warner Brothers?
So even though Netflix is kind of steered clear of big mergers, big deals, they always say we're a builder, not a buyer. An asset like Warner Brothers that has a lot of classic IP, superhero franchises, great old TV shows, a lot of content that Netflix already knows works on its platform because they've aired a lot of those shows and movies there. So they know this is good stuff.
The deal stunned Hollywood because many assumed that Paramount had the upper hand. But Netflix's bid won out. Its $72 billion offer was just for part of the company, only HBO Max and the movie studios, and it doesn't include the cable channels like CNN. Netflix has said it would continue Warner Bros. operations, including selling shows to other networks, as Warner has done in the past.
It also plans to continue releasing Warner films and theaters. Paramount, meanwhile, isn't giving up. It wrote a letter to Zaslav last week, saying the company had, quote, embarked on a myopic process with a predetermined outcome that favors a single bidder. Warner wrote in response on Thursday that it fully and robustly complies with its fiduciary obligations and will continue to do so.
Earlier today, Paramount announced that hostile takeover bid, which was for $77.9 billion, not including debt, for the whole company. How big of a fight does Warner Brothers and Netflix have on its hands?
Yeah, we're in Squid Game territory right now. They're taking it to shareholders. And so now this will get uglier between Netflix and Warner and Paramount. You know, we'll see how it all plays out.
After the break, we hear about what Joe heard on that phone call.
Hello, everyone. Thank you all for joining us today, especially on such short notice.
Okay, so let's go back to this phone call that just happened earlier this morning that you had to step out for. What did Paramount say?
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