Warner Bros. Rejects Latest Paramount Bid

Key Takeaways

There's a lot in the sort of structure of the deal that that uh the Warner Brothers Discovery Board points out. A lot of it has to do with the debt load of the Paramount deal. There's something interesting in it that that I wanted to pick out which is we don't agree how valuable cable networks are. So the street and the investors would say actually they're much more valuable than you're giving them credit for. Paramount Sky Dance would say in our $30 a share offer we don't think they're valuable. Therefore, the $30 a share offer is a great premium cuz we want the whole thing. How do we value those networks? >> Uh gosh, it was another great question. I mean, it really is a difficult thing to to manage at this moment. We're talking about a really big shift in the ecosystem, right? We've had these traditional channels around broadcast, cable that have been almost cash cows for these businesses for a long time. Uh then the shift of streaming and the ability to build those businesses with lower margins, right? But now we're seeing with price increases, advertising dollars moving in that it's actually of of great value and now a huge shift into this creator economy and thinking about short form content. Um, and then you have to evaluate that those assets against the those big shifts in the ecosystem. Um, they still have value. They still spin off cash. They still can be the home for reach and advertising. Uh, but the real value has shifted. The advertising dollars have shifted in a new direction. >> Paul, I'm going to remind our audience of the state of play because in a deal like this, you get some fatigue. But Netflix is basically saying we want the streaming business and the studios. We'll spin out the legacy networks. Paramount Sky Dance wants the whole enchilada. In your mind, which result would make most sense for the consumer, you know, and what they would actually use those platforms for? >> Sure. Well, listen, I think that there's absolute value for the consumer and for the shareholders, most certainly in a Netflix Warner Brothers combination, right? You have superior storytelling capabilities coming from the HBO Max and and the Warner Legacy and their in their entire library coupled with what is superior tech. Netflix has led the industry in personalization in driving new features, right, and and algorithms? Um, that combination is certainly unique. Now, does that mean that's the best consumer? I don't know. Does the storytelling capabilities that are combined with Paramount uh coupled with Warner deliver more value into the ecosystem in general and for consumers overall who get great enjoyment out of those stories? That's a that's a difficult equation to value, but I can most certainly see there's value in the greatest tech and greatest storytellers coming together. >> What perhaps there isn't value for for consumers right now is three companies getting caught up in a lot of admin and fighting and regulatory discussions rather than focusing on the business and innovating. How much is that a risk? This I think this is the biggest risk of any big transaction in MA M&A activity right the focus becomes how do these companies potentially come together everybody internally thinks about what is my role in this transition and no one's focused on the fact that they're competing with an ecosystem that is evolving around them right we saw that social media platforms are taking over not only viewership but total ad dollars this year uh there is a huge shift into the creator economy and if you're just focused on how do we put these two companies together versus the competition that is outp pacing you with Tik Tok and YouTube and others. You're going to be beh further behind by the time you complete this transaction. >> And we haven't even discussed AI yet. And you think about the big deal that was announced between Sora, so Disney and Open AI at the tail end of last year. What is my viewing experience going to be like going forward? When I turn on Disney Plus, what does it look like as a screen? >> So I think this is going to be the biggest piece of innovation we see in 2026. So AI for the last year has been about doing discrete projects. How do I create a vertical video? how do I think about uh leveraging it to help improve uh the uh algorithm? But what we really got to be focusing on today, right, is how do we think about the entire ecosystem? I'm playing in multiple universes. What is that consumer experience like? I believe this year instead of when you download the app and you you hit a wall it says pay now, you'll see in the future people pushing short form content as a way to discover, as a way to engage consumers, a new way to to engage a conversation. That data from there begins to inform how I get a cold start. So, how do I when I first go into that experience? How is it customized for me? Right? How do I ensure that I'm going to be able to retain that consumer? Then all those interactions over time also become part of this greater ecosystem that says now I know what to serve you, uh how to engage you, how to retain you, and how to reach you on other platforms. And that's really when we begin to think about the value of what AI can deliver when it's managed as an ecosystem. We've uh we've talked a lot about chips and robots and uh consumer gadgets. I think it would be really helpful to give your kind of media and entertainment experience of what it's been like at CES. Very conscious a lot of the advertisers are here very conscious that actually the mode in which you consume that content is on display. What has it been like for you? Yes. For us um as as discussed a little bit earlier, it used to be very discreet investments that we were seeing across the AI spectrum. I think today people are thinking about how do I look at AI as foundational to the way I operate with my technology and with my consumers and that's the big shift I think in the mindset and now they're coming to us and looking for solutions that scale at huge enterprise across multiple ecosystems that's been the big shift for us. >> We probably should have done this at the start which I apologize but just what is quickplay? Yeah, give us the quick play sum. >> Absolutely. So we are a company that basically builds out white label OTT services so over the top television services all the backend everything from ingest to the time it ends up on your device and where we have pivoted right is how to actually enable that through AI how do you leverage those AI tools to ensure not only can I create short form out of long form respond to social signals that are happening in the universe to be able to say hey there's a conversation happening around Bad Bunny appearing on SNL how do we participate in that conversation with our content to drive new engagement to drive new retention strategies to drive new acquisition strategies.