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  Good afternoon from Los Angeles, and thank you to Yoshinobu Yamamoto. After two years of chronicling David Ellison’s pursuit of Paramount, we are going to spend the next several months (if not longer) writing about his pursuit of Warner Bros. Discovery. I spoke with my colleague David Gura, host of The Big Take podcast, about what that deal would look like. If you have any intel, you can reach me at lshaw31@bloomberg.net or via Signal. And if you don’t subscribe to this newsletter, fix that. Five things you need to know
David Zaslav would like you to make him an offerEarly last week, Warner Bros. Discovery CEO David Zaslav addressed more than a hundred of his senior leaders. The company had just announced a strategic review that could end in the sale of all or part of the business. Warner Bros. unofficially has been for sale for some time, but Zaslav has brought on bankers and lawyers in response to the entreaties of Paramount Skydance, the media company led by David Ellison. The Ellison family has made three different offers to merge with Warner Bros., increasing the price from about $19 a share to $23.50 a share, or almost $60 billion. Zaslav doesn’t want to do the deal — at least not at that price — and fears the Ellisons will sway shareholders to their side. So, nearly three years after the creation of Warner Bros. Discovery – an unsuccessful stretch that led to this precarious moment — Zaslav is trying to reclaim control over his company and his narrative. The 65-year-old media mogul projected confidence on the call. Apple and Amazon are interested, Zaslav told staff. And, if you read the press, you’d know that Netflix and Comcast are as well. Whether any of those companies will actually bid for all or part of Warner Bros. is still unclear. But the company will now open its books to any interested parties, hoping to find another buyer or force the Ellisons to offer considerably more. Zaslav is looking for a dance partner who will allow him to remain a key figure. Ellison, aware that Zaslav isn’t ready to retire, offered to retain him as co-CEO and co-chairman. But these are empty titles at a company where Ellison (and his father Larry) are clearly in control. This is not the first time Warner Bros. has been for sale, nor the first time it’s tried to fight off an approach. The company, formerly known as Time Warner, spurned a takeover attempt from Rupert Murdoch back in 2014, when Murdoch was trying to position his company for competition with Netflix. Time Warner CEO Jeff Bewkes and his board didn’t want to do the deal, but they sold the company to AT&T a couple years later, delivering a huge windfall to shareholders that also precipitated a decade of chaos at the home of Warner Bros. and HBO. AT&T gave up on its Hollywood dreams after just a few years, merging its entertainment division with Discovery and creating the current incarnation of the company. That merger hasn’t worked out either — as evidenced by a 75% drop in Warner Bros. shares through June of last year. But it accomplished a major goal for Zaslav. Discovery, which owned a bunch of TV networks like the Discovery Channel and HGTV, was doomed as a standalone company – an undersized, undercapitalized media minnow sitting on assets in decline. The merger with Warner pushed those problems down the road. Now Zaslav finds himself once again dwarfed by larger competitors, only this time he’s sitting on more desirable assets: Warner Bros. owns the biggest TV studio in the world and HBO, long coveted by everyone from Apple to Netflix. While most people expect Warner Bros. to change hands once again, Zaslav isn’t as desperate to sell as former Paramount owner Shari Redstone, whose family fortune was melting away. If the Warner Bros. CEO isn’t blown away by any offers, he can go ahead with plans to split the company in two. The contendersFor all of Zaslav’s confidence, executives at Warner Bros. aren’t sure Apple or Amazon will take a real run at the company. Entertainment is a marketing expense for those companies, which make most of their money from consumer electronics, e-commerce and cloud computing. Like every other major technology company, they are more concerned with winning at AI than the Oscars. Apple services boss Eddy Cue has told people he would at least like to look. Amazon media boss Mike Hopkins is going to take a look as well. But Apple has generally eschewed major M&A, and it’s hard to imagine CEO Tim Cook explaining to shareholders why his company’s biggest deal ever is for a shrinking media company that would provide a marginal lift to its core business. Amazon, at least, has already made a major investment in media. Executives at Warner Bros. see Netflix and Comcast as more likely bidders. Comcast has obvious reasons to do a deal. Like Paramount, it could combine two studios and streaming services. Comcast’s Peacock, Paramount+ and HBO Max are all third-tier services that would benefit from more desirable programming and a larger subscriber base. Comcast already has a deal with Warner Bros. for the Harry Potter rides at its Universal theme parks and could integrate DC Comics and other franchises into its businesses. Comcast has expressed no interest in the Warner Bros. cable TV networks and would face real regulatory concerns given the Trump administration’s antipathy toward its major shareholders, the Roberts family, and the company’s MSNBC cable network. (Comcast is one of the donors to Trump’s new White House ballroom.) There would also be regulatory hurdles in Europe for many companies given Warner Bros.′ TV assets there. Is Netflix ready to buy something?Netflix presents the most interesting situation of them all. The company has never done a big deal. Bankers love to toss its name out there, but co-founder and Chairman Reed Hastings has always been averse to major deals. He built his previous software company through acquisitions and vowed not to repeat that mistake. While Netflix looks at potential deals, it doesn’t pursue them. It built up its own studio while watching rivals waste time and resources on failed mergers and integrations. This time feels a little different. Hastings is spending more time on a ski resort than Netflix, and co-CEO Ted Sarandos has told friends he is interested in Warner Bros. While Sarandos doesn’t want cable networks, he has described the company’s assets as an opportunity. He would love to own its intellectual property, including HBO’s. (It would be ironic if Netflix, which once modeled itself after HBO, bought the company and essentially shut down its network.) Sarandos’ co-CEO Greg Peters has been less outwardly enthusiastic. He told me a couple weeks ago that these kinds of big mergers typically don’t work. He reiterated that position on the company’s earnings call this past week.  Greg Peters, co-chief executive officer of Netflix, during the Bloomberg Screentime event in Los Angeles in October. Photographer: Kyle Grillot/Bloomberg These comments suggest Sarandos and Peters aren’t entirely on the same page. But two things can be true. These big deals don’t work and the company will still explore this deal. It’s also possible Sarandos is just driving up the price for his new friend Zaslav. Most analysts agree a purchase of Warner Bros. makes no sense for Netflix. Why spend $75 billion on a company (and assume $34 billion in debt) to shut down or sell much of what it owns, as analyst Rich Greenfield of LightShed Partners wrote in a note. You’d be paying a huge premium just for access to some intellectual property. Even so, this is the first time I can remember Netflix was willing to acknowledge that it is considering a deal of this size, which is an important milestone for the company. If you are keeping score at home, Ellison remains the only active bidder for all of Warner Bros. But several more interested parties are going to take a look over the next few weeks. This process is going to take awhile. The best of Screentime (and other stuff)
BTS comeback tour sparks a bidding warBTS is planning its first global tour since 2019. The South Korean supergroup temporarily disbanded as its members undertook their mandatory military service. With that done, BTS has been working on a new album over the past few months with Hybe Co. The album, the group’s first since 2020, will be released early next year. It will tee up the group’s biggest tour ever. BTS plans to perform about 65 dates all over the world, according to people familiar with the matter. We have the scoop on the tour here. The return of BTS will be fascinating to watch. Most huge acts aimed at young viewers lose their momentum if they disappear. The fans move on to the latest obsession. But BTS is both one of the most popular and influential acts of this century, and many of its memebrs have sustained fan interets by releasing solo projects. The group brought Korean pop to the mainstream and was the top act in the world in 2020 and 2021, according to the International Federation of the Phonographic Industry. Concert promoters are convinced BTS is going to be huge. Live Nation Entertainment and AEG have been competing for the right to promote the tour. While Live Nation handled BTS’ most recent tours, Hybe initially promised the global deal to AEG. The two were also talking about Hybe buying a minority stake in AEG’s Coachella music festival, one of the world’s largest. But Live Nation holds some key dates at major venues in New York and Chicago, which complicated the planning. After Scooter Braun left his post as the head of Hybe’s US business, management changed direction and awarded most of the dates to Live Nation. AEG will still promote many of the act’s international dates, namely in Europe. TV is just sports and newsNielsen has started releasing weekly data on the most-watched programs on linear TV, complementing its releases for streaming. Sports and news accounted for 19 of the 20 most-watched programs on TV last week, led by football, baseball and ABC’s World News Tonight. The only entertainment show to crack the top 20 was CBS’ Tracker. Broadcasting and cable lost about 4% of their audience to streaming in September, compared with a year ago. YouTube and the Roku Channel accounted for most of the increase. The No. 1 tour in the world is…My Chemical Romance. The emo rock band is grossing $8.2 million a night, per Pollstar. The group hasn’t played as many shows as The Weeknd, who may have the top tour in terms of total sales. The telecom promo warsThe three main US phone companies — T-Mobile, AT&T and Verizon — are locked in a price war, gaining customers by offering promotions that cut into revenue. Both T-Mobile and AT&T reported strong customer additions in the third quarter, but they also both reported sales that fell short of expectations. Deals, deals, deals
Weekly playlistNew seasons of The Diplomat and Nobody Wants This during the World Series is cruel. (They did comfort me after the Dodgers lost game one.) I am slowly working my way through new albums from Brandi Carlile and Lily Allen. More thoughts on those next week. More from BloombergGet Tech In Depth and more Bloomberg Tech newsletters in your inbox:
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