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David Ellison just can’t get any respect. The son of Oracle founder Larry Ellison and CEO of Paramount Skydance is going nowhere in his efforts to buy Warner Bros. Discovery, owner of HBO Max, Warner Bros. Studio and a bunch of cable channels including CNN. Ellison has a very persuasive argument that his $30 a share offer—$108 billion in total—is better for WBD shareholders than what Netflix is offering for just part of the company, as he pointed out today. So far his arguments haven’t swayed WBD’s board, which has agreed to sell to Netflix. Ellison might want to consider that he’d be better off losing this one.
After all, if Ellison got his wish, he’d increase Paramount’s exposure to what is fast becoming the dregs of Hollywood: the steadily shrinking cable channel business. Paramount’s TV media segment, which includes cable and broadcast channels, suffered a 12% revenue drop in the third quarter. WBD’s cable channels similarly saw their revenue drop 12.6% in the first nine months of last year. NBCUniversal, meanwhile, late last year reported that revenue from a group of its cable channels—including CNBC, USA and SyFy—would shrink 6% in 2025 and between 3% and 7% in 2026. NBCUniversal spun out those channels into a new company called Versant last Friday and investors have so far turned their noses up at it. Since Versant stock started trading on Monday, it has fallen 25%.
So why on earth would Ellison want to load up Paramount with more of this kind of deadweight? After all, he would also be taking on $54 billion in debt to buy WBD, while his father Larry has personally guaranteed $40 billion in equity contributions for the buyout. While combining the Paramount and WBD cable channels would allow for some cost cutting, it’s not going to stem the steady decline in channel revenue, resulting from cord cutting as TV viewers shift to streaming. You could argue, therefore, that Versant’s dismal stock performance means Paramount should lower its offer for WBD, on the grounds that the market value of cable channels is clearly less than we all realized.
Imagine what will happen, then, if Netflix ends up winning WBD. Before the Netflix purchase closes, WBD plans to spin out its cable channels into a new public company, to be called Discovery Global. If we apply Versant’s multiple of 2025 earnings before interest, taxes, depreciation and amortization—calculated from the stock’s closing price on Thursday—to Discovery, it would be worth around $22 billion, which is only about $3.3 billion more than the debt WBD appears to be planning to put on Discovery’s balance sheet. In other words, Discovery Global would have very little equity value. Paramount thinks Discovery will be worth even less than that: It said today that the entity will have zero equity value, based on estimates of Discovery Global’s 2026 earnings. Paramount’s conclusion may well be right. Either way, Discovery Global’s equity won’t be worth much.
Paramount also pointed out that WBD could increase Discovery’s equity value by shifting less debt onto Discovery’s balance sheet, but if it did that, Netflix would end up paying less for WBD’s equity. There’s no way around the reality that the cable channels are a millstone around the neck of whoever takes them on. Does Ellison really want to carry that weight?
Strava’s Better Path
Fitness app Strava looks to be going public! At least, that’s according to our scoop today that it has filed confidentially for an IPO and hired Goldman Sachs to run the listing. Strava isn’t a big company—its revenue was less than $500 million last year—although its top line grew more than 50% last year.
Given that growth rate, Strava would likely trade at around six times forward revenue, judging from where language-learning app Duolingo is trading, according to S&P Global Market Intelligence. (We think Duolingo is a good comparison, given its size and the fact that it is growing at roughly 40% a year.) That suggests Strava would be worth around $3 billion. At that size, it’s likely to languish in the stock market, as many institutional investors prefer to focus on bigger companies.
Maybe instead of going public, Strava should sell…to OpenAI. As we reported on Wednesday, OpenAI is launching a health hub on ChatGPT. Strava would be a perfect way to kick-start that enterprise. How about it, Sam?
In Other News
• Snowflake is buying app monitoring startup Observe, it announced.
• Microsoft is adding a buy button to its Copilot chatbot, the company said Thursday, making it the latest AI app to allow users to make purchases without leaving the chatbot window. The company said shoppers will be able to purchase from retailers including Urban Outfitters and Etsy.
Today on The Information’s TITV
Check out our latest episode of TITV in which we unpack OpenAI’s healthcare play with the co-founders of the DOC health conference.
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