Paramount Sweetens Its Hostile Bid for Warner Bros. [4:16]

Streaming, like cable before it, and broadcast before that, is consolidating in a market that's topping out, if it hasn't already topped out. The WB produced a lot of popular shows and sold them to existing distribution channels, and their library is considerable (Friends, Drew Carey Show, most or maybe all the Chuck Lorre shows), but the library is mostly old, and subscriptions tend to not be worth the money in this day and age.

The entire internet was built on claims of how everything should be free, which btw is what broadcast TV used to be. And they handled ad interruptions much better than the algorithms do on streaming's big players. Maybe not Netflix, I've never subscribed to that, or really spent any time viewing it.

My guess remains that the eventual winner of this gunfight will turn out to be the loser, paying too much for a declining asset. If the shareholders turn down the current deal -- and you know the WB-D board must be getting a huge bunch of golden parachutes -- the two bidders may wind up sitting down and figuring out how to split WB-D down the middle.

Then the Eurotrash regime will start to intercourse up the deal. It seems likely that the Ellison family's more conservative views and Zero's involvement with Netflix are the only factors some will even take into account.

Transcript
Paramount is trying to sweeten its Warner Brothers bid. The media giant is saying it will cover a $2,800,000,000 termination fee that Warner Bros would pay Netflix if it terminates an already agreed-upon deal. Bloomberg's Lucas Shaw, who leads the screen time team, is with us. This was interesting, right? Because the headlines are here, and it's a sweetener, an improvement on their deal. But, actually, the specifics are very interesting. They're not just boosting the offer price. Go into detail. Explain how we unpick this.

Yeah. So they are addressing, and they being Paramount, two of the concerns that Warner Brothers has had about their deal. One is this question of the breakup fee. Right? So Warner Brothers has been debating between two main offers: Netflix and Paramount. They picked Netflix, but if they walk away from Netflix to re-engage with Paramount, they have to pay Netflix a bunch of money. Paramount is now offering to cover that, and Warner Brothers had been very worried about it because they said that one of the reasons that the deals weren't equivalent was that Paramount wasn't covering Warner Brothers' downside on that, which would have come out of the money that they get. The other thing here is Warner Brothers has been really concerned about their ability to refinance their debt going forward. Paramount has now, or David Allison, both first in swallowing Paramount and now trying to swallow Warner Brothers, has a history of trying to impose really onerous covenants on what the company he's acquiring can do, which would have limited Warner Brothers in that respect. And now Paramount is saying, basically, we'll cover you on whatever costs are related to that debt financing. To your point, they still haven't actually raised the $30 a share offer. This does increase the total net value of the bid, and so we're waiting to see what the Warner Brothers board has to say about it.

What credence do investors give at the moment, Lucas, to this would pass through regulators more easily? This whole ticking fee, the idea that if it goes past the quarter expected, they'd get a chunk of change in return if it's delayed. I mean, that really just speaks to the bravado here.

Yeah. Well, Paramount has been adamant all along that it stands a better chance of getting its deal approved, which on its face makes some sense. Netflix is a much larger company, a more powerful company. It's the number one player in streaming. Netflix, of course, has countered that they're very confident in getting their deal approved and raised issues with Paramount's offer because Paramount plus Warner Brothers Discovery combined would account for, technically, a larger share of television viewing than Netflix would under the deal. But both sides are trying to plead their case. Paramount, obviously, is sort of coming from behind here, and what they are trying to do is inject enough doubt in the minds of shareholders that they will not vote for the Netflix deal next month.

Lucas, both sides are trying to plead their case. There's been a lot of recent reporting from us on what's also happening kind of in the background. There's obviously been an interest from Washington, D.C. What else do we need to know about how this is going from a regulatory perspective or at least interest from the government as well?

I don't know, right? We've had Paramount shareholders or we've had kind of Paramount and David Allison lobbying people in D.C. and Europe. We've had Netflix going ahead of the Senate last week. President Trump had said he'll be involved, then he said he's not involved. What we do know, just as a kind of basic set of facts, is that the DOJ is looking into both cases and has yet to say whether or not it's going to challenge either of them.

In terms of timing, is there anything pressuring? Is there any date, any number, any time frame that we look to for the next?

Yeah. The next big one is the shareholder vote, really. We're expecting Warner Brothers to arrange a vote of its shareholders sometime probably in mid to late March, kind of at the latest early April. That's something of a deadline for Paramount because they need to convince a bunch of shareholders before then to change their mind. Otherwise, they're really up to the whims of regulators because if it gets to shareholders and shareholders do approve that Netflix deal, there's not much Paramount can do besides hope that the government in the U.S. or Europe blocks the deal.

We appreciate you on the story.

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