In the increasingly risk-averse business of Hollywood, the best way to get a film greenlit is propose a rehash of something that’s been done before—a superhero sequel, perhaps, or a mash-up of two hit movies, like Elf meets The Godfather.
Maybe that’s why Hollywood’s latest all-consuming mega-drama—the war to take over Warner Bros. Discovery—has the media world hanging on every plot twist. It all rings so familiar, sort of like One Battle After Another meets Everything Everywhere All at Once. The fight between Netflix and Paramount Skydance to take over this grand old Hollywood name is both the latest chapter in a one-battle-after-another forever war and a massive everything-everywhere, all-hands-on-deck swirl.
I was struck by the former point while finishing up Barry Diller’s super-interesting memoir, Who Knew (makes a great holiday gift, according to Bill Gates), in which he recounts similar epic battles in which he engaged, most notably his struggle with Sumner Redstone to take over Paramount.
“It’s got similarities in some ways,” Diller says to me on the phone from Florida, noting the continued, inevitable consolidation of the business. “It’s going to be an auction. That’s what Paramount was with Viacom and QVC at the time—it’s just the numbers here are much greater, more blockbuster.” (Recall that Diller himself through his company IAC recently considered making a bid for Paramount but chose not to go up against David Ellison, as it would be “unwise to get in an auction with someone who has a pretty much unlimited balance sheet.”)
Just to level set: As of now WBD has accepted Netflix’s part-stock, part-cash offer for the movie studio and its streaming business (which includes HBO) of $27.50 per share, while Paramount is making an all-cash tender offer to WBD’s shareholders of $30 for the entire company, including its cable assets, such as CNN and TBS.
Diller isn’t the only mogul/billionaire with a deep-seated interest in how this battle royal plays out. Like some sort of celestial black hole swallowing up any and all nearby interstellar material, this takeover battle has sucked in an unprecedented cast of A-listers from the four power centers of America—Washington, Wall Street, Silicon Valley, and Hollywood—and beyond (never mind legions of directors, bankers, lawyers, flacks, and underlings).
Start with the principals David Zaslav, CEO of WBD; the Ellisons (père et fils), of Oracle and Paramount, respectively; Ted Sarandos and Reed Hastings of Netflix; and Gerry Cardinale, CEO of RedBird Capital (co-starring Jeff Zucker). And don’t thinkComcast’stop brass, Brian Roberts and Mike Cavanagh, who dropped out of the bidding, aren’t still keeping abreast.
After that you have major Middle Eastern sovereign-wealth funds (Saudi Arabia’s PIF, Qatar’s QIA, Abu Dhabi’s L’imad), helping to bankroll Paramount’s latest offer, along with Jared Kushner’s Affinity Partners, and, of course, President Donald Trump—interested in what happens to CNN—is at the very least a keen observer, and at the very most a party who will have a say in the outcome.
Then there are debt commitments from Bank of America, Citigroup, and Apollo Global Management. Given the size and sensitivity of this deal, rest assured Brian Moynihan, Jane Fraser, and Marc Rowan are in the loop as well.
After that you have interested parties like Shari Redstone, who recently sold her controlling interest in Paramount; Jeff Bewkes, former CEO of Time Warner, who famously and dismissively referred to Netflix as “the Albanian army”; and Bob Iger of Walt Disney—who just plunked down a $1 billion investment in OpenAI this past week, nervously watching.
Then there’s John Stankey, CEO of AT&T, whose company, you may recall, owned Warners Bros. before spinning it off to Zaslav in April 2022. What does he think about what’s going down? “Not surprised,” Stankey said this week at the WSJ Leadership Institute CEO Council Summit in Washington. “When we made the decision to divest the asset, we felt there was no question there was going to be consolidation of media. If people were going to compete with what Netflix had built, they were going to have to have a different asset base to do that…. [I was] fully expecting there would probably be a follow-on to get the kind of scale that it needed. I wouldn’t say that four years ago I believed it was necessarily going to be this particular outcome, but that there would be a transaction. I held on to all my stock in the company during this period of time waiting for this day.”
At the time of the WBD spinoff, Stankey owned some 900,000 shares of AT&T. Using the exchange ratio of 0.241917 shares of WBD for each share of T, that would give him nearly 218,000 shares of WBD. If it winds up going with the Netflix offer of $30 a share, that would be worth about $6.5 million. (It’s worth noting that while WBD’s stock is up 20.7% since the spinoff, the S&P 500 is up 62.4%.)
So what will happen? Cardinale of RedBird, who is David Ellison’s partner in Paramount Skydance, has no doubt. “Our offer is better,” he told me. “I put $2 billion dollars into Paramount and am committing another $2 billion for the WBD deal. I’m betting my firm on it.”
Still, given that Trump has an interest in the deal—even though it’s one that appears to favor Paramount—handicapping the outcome is a fool’s errand. Trump and Zaslav may have different agendas, which for now, at least, look to be at odds with each other. The president seems to be intent on seeing through regime change at CNN. That is a more clear shot with Paramount owning WBD lock, stock, and barrel, rather than in the Netflix deal, where CNN—along with TNT, TBS, and the Discovery Channel—would be spun off into a separate publicly traded company called Discovery Global.
What about Zaslav? First, note that this battle is in a sense David (Ellison) versus David (Zaslav)—though they more closely resemble Goliaths—as Zaslav has been reluctant to turn over his baby to Skydance and Paramount, where he would become co-CEO with David Ellison. On the other hand, Ted Sarandos, the sometimes-lampooned in Hollywood (even by himself—see episode eight of Seth Rogen’s The Studio) co-CEO of Netflix, seems to have ingratiated himself with Zas.
“Zaslav cares about the outcome that delivers him big money and where he’s still a big macher with the house in Beverly Hills,” says a senior executive who is extremely well acquainted with Warner Bros. Discovery. While no role for Zaslav in a post-Netflix acquisition has been announced or publicly promised, here’s what Paramount lawyers wrote in a letter to Zaslav last week:
“Paramount has a credible basis to believe that the sales process has been tainted by management conflicts, including certain members of management’s potential personal interests in post-transaction roles and compensation as a result of the economic incentives embedded in recent amendments to employment arrangements.”
Read between them lines!
Both Netflix and Paramount face massive breakup fees: $5.8 billion to WBD from Netflix if the streaming giant backs out, $5 billion paid by Paramount to WBD if it wins but doesn’t get regulatory clearance, and $2.8 billion from WBD to Netflix if it ends up going with Paramount (which Paramount would essentially cover). Whew! Got that? “Even in today’s heady atmosphere of some giddy dealmaking, those are still really big numbers,” says Jeffrey Sonnenfeld, a professor at the Yale School of Management.
All that’s as of now. Don’t be surprised if Paramount and Skydance look to sweeten their offer more to Zaslav’s liking, or for Netflix to put out a more explicit plan for CNN. Either one of those moves could tip the balance.
There is another way out, coming from that next-media world of prediction markets, which is in itself worth noting. Polymarket recently had Paramount with a 48% chance of winning WBD, versus Netflix with 36%. That prompted a wag at Ramp Capital to note that “if I were Netflix, I would just bet on Paramount then drop out and double my money.”
How’s that for a post-Hollywood ending?
Comments