Paramount Ups Battle for Warner Bros. With Hostile Bid

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2:53A deal we thought was agreed. Left and right. Yeah, very much so. And a deal I thought was agreed to. And then we got a hostile offer coming in today. And we've got the White House's commander in chief, Matt, definitely watching. I mean, the target is Warner Brothers Discovery. Yeah, it's interesting that President Trump said there may be too much market share here, which by itself, you know, between Netflix and HBO Max isn't a surprise. But then he said he's going to be personally involved in whether or not this gets through regulation. So I think that should be a bit of a concern for Ted Sarandos, who has tried to do everything right, I guess, of late.

3:32But really, Netflix is viewed as this globalist kind of left leaning, dare I say, woke, you know, company and entity. and it wants to take over this asset that Donald Trump sued to block Time Warner, AT &T, you know, this deal in 2017. So way back when, right? Like, remember that. All right, so let's get to it because we've got our own Felix Gillette, Bloomberg News Media and Entertainment Editor. You know, he's the author of It's Not TV, The Spectacular Rise, Revolution, and Future of HBO. He's right here in our New York studio and then out there at our Bloomberg Intelligence headquarters in Princeton, New Jersey, Bloomberg Intelligence Senior Media Analyst, Gita Ranganathan, this is such a cool roundtable.

4:14So let's start, Felix, with you. The details. We got the hostile takeover bid from Paramount. It does top Netflix's offer. I thought this was a done deal. Not necessarily. Actually, it does not top Netflix's offer because in the Netflix offer, they're spinning off the cable assets. So they're not getting the CNN that Trump probably wouldn't want them to have. They're both saying that they have the higher offer, and it depends on how you value those cable networks. Is there a deal that's better that's preferred, Felix? Let's start with you and one more likely to get regulatory clearance. I mean, they're both saying that they both, you know, they're pointing the finger at the other saying, oh, that will never get regulatory approval.

4:52You know, Paramount is saying essentially that, yeah, Netflix has over 300 million paying subscribers. If you combine them with HBO Max, you're going to have over 400 million. It's too much concentrated power in the streaming competition. they have a lot more so that's netflix's argument is that it's not just the competition isn't just between streaming networks at this point it's competing for people's attention in the living room which includes things like youtube tiktok and in that world they don't control that much attention share which is a fun argument but i mean if this were just a technocratic doj decision they try to take the narrowest view possible so they're not going to include youtube and tiktok Even if, Carol, you spend a lot of time consuming content on those things.

5:36Yeah, but so do I. In fact, I often choose it over Netflix, Prime and HBO. But that's not how the DOJ traditionally views these kind of things. So, Geeta, how do they view it? And what's more likely to get done? What makes more sense? Or listen, we're going to be talking about this in the new year. Yeah, it's it's really anybody's guess right now, Carol. So traditionally, yes, they have taken the most narrowest definition possible. But I think the government also realizes that this whole video marketplace is rapidly changing. I mean, Netflix has been the biggest disruptor of the video marketplace to begin with.

6:12You know, it's streaming disrupted traditional TV. Now, what Netflix is worried about, and this is how a lot of investors are kind of viewing this deal, is does Netflix actually think that they can be disrupted by short form entertainment? And that's exactly the point that, you know, Felix was bringing up. do we have to broaden the market? And, you know, people will argue, yes, we do. Because if you kind of look at just share of online video viewing, Netflix and HBO Max combined actually have a lower viewing share than the dominant force, which is YouTube. I got my math, by the way, from you this morning, Geetha.

6:50So Geetha pointed out that the Netflix bid is$27.75, plus you had about four dollars which you'll get for the spin-off of the cable assets it gets you to basically 32 that's a little bit above paramount but geetha if if warner brothers discovery because david zasloff wants to get as much money as he can right if they somehow uh get broken up with um by you know the ftc or the doj or whatever and they get the 5.8 billion from um from netflix and then do the paramount deal which it seems like president trump would be much more in favor of does that end up giving them more money than anything else?

7:30It absolutely does. And, you know, this whole bidding war, I mean, the one person who's really enjoying this, I think, should be David Zaslav and, you know, the Warner Brothers Discovery Board. I mean, we started we started, Matt, at twelve dollars. You know, that was, you know, on September 12th. And this is where we've ended up. I think the big worry today, and especially as you kind of see the Netflix stock trading, is that is Netflix really going to be forced to come in with$30 a share? Because you just kind of look at the optics of the deal. Paramount seemingly having the better offer, although the deals are different.

8:06But, you know, just for a first look, it looks like they do have the better offer. So I think investors are really concerned right now about whether Netflix will have to bid up. And that's an even better situation for David Zaslav. So he's laughing, you know, all the way to the bank here. By the way, at the screen time event, Carol, you and Tim were out in California, right? You want to go there? Yeah, because I thought you guys did great coverage and Lucas had a fantastic event. And David Ellison gave an answer to the question about his family's closeness to President Trump. We have a good relationship with the administration.

8:39And look, I think if you look to that, I do believe other things that have been rumored about, right, are very large-scale players that could potentially create monopolies, obviously, in the ecosystem. And again, I think when you look at the lens of consolidation for us, I'll keep going back to it, it's always how do you create long-term value creation? How do you put yourself in a position to produce more content, not less? And how do you ultimately build something that is better for the consumer? All right, so that is Paramount Skydance CEO David Ellison. He talked about at Bloomberg Screen Time, that was back in October.

9:12So Felix, come on back in here. I mean, is we also have affinity partners, the private equity firm led by Jared Kushner, who is, of course, the son in law of the president, you know, part of Paramount's hostile takeover bid for Warner Brothers. So do they have an advantage? It seems like a lot of things merging that they might have an advantage. They have an advantage and having the president's son in law as part of his bid is usually a pretty good sign. But at the same time, we see that, you know, today Trump came out on Truth Social and, you know, complained about the Ellison's management of CBS News in 60 Minutes because of the interview where he was criticized on the most recent episode.

9:51So these things can be somewhat fickle. And let's not forget that Paramount has, you know, sort of antitrust issues also. So, you know, if the deal went through with Paramount, that's two Hollywood studios that would be combined. Yeah. Two streaming services, not as big as Netflix. Granted, you'd have multiple news outlets, CNN and CBS. So they have their plenty of overlap and in some ways have more overlap than Netflix and Warner Brothers. Felix, can I ask you, though, about I mean, you cover the entertainment industry, right? I was talking today to Michael Wolff. He of MTV previously and now Activate.

10:26And he says that the content creators or the creative community, let's say, is much more in favor of the Paramount bid because when you listen to David Ellison's full interview with Lucas Shaw, they seem really focused on creating good, original, you know, solid content, like not having AI make sequels of marketing products. So is that true that the, you know, that Hollywood wants Paramount to buy it? I think David Elson has been out there making that pitch. We really support the creative community. Look at all these concerns already. He and his sister have grown up watching all the movies. Yeah, it's expensive.

11:06Mr. Top Gun, he loves the movies. It's also expensive, though, unless it does really well. They're so rich, though. And, you know, you have people like James Cameron coming out recently and expressing concern about Netflix, you know, saying that basically if you look at Netflix's history, they've been very, you know, hostile to the notion of long theatrical releases, that this would be kind of the deathbed for Hollywood and movie theaters. So, yeah, Ellison's the man who brought us Avatar that uses a lot of technology. I'm just saying, but go ahead. But, you know, saying, hey, this is you want to see this on the big screen.

11:38You need 100 days in theaters exclusivity for this to be worthwhile. And, you know, you're kind of a sucker. You believe Netflix is really going to do that in the long term. Their business is providing entertainment for people. It's a pretty convincing argument. It's interesting stuff. Hey, Geeta, save 40 seconds for you to wrap up. So I don't know, does this go to, I don't even, are we in a third round? Are we, I mean, Comcast is out, right? So like Comcast is out, yeah. So what's the timeline we're looking at here? 10 days. So the tender offer expires in 20 days. The Warner Brothers Discovery Board has 10 days to respond to Paramount to see how they want to proceed with this whole tender offer.

12:21but they have confirmed receipt of this unsolicited tender from the Paramount Skydance people. Am I remiss to ask, does David Zauslav have a job after it with a really good pay package? He doesn't need one. He's going to be so rich. All right. Stay with us. More from Bloomberg Businessweek Daily coming up after this.

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15:42Really, the Fed decisions at the top of your mind? They're going to cut. I do. I saved you three days. Oh, my God. All right. But we're going to get. All right. Just put him aside for a second. Let's bring in Kevin Gordon. He's head of macro research and strategy at Schwab's Center for Financial Research. It's like, I don't know, keeping cats in control here. Kevin is here right in studio. Kevin, though, is the cut already priced in? And is it all about kind of what we get in terms of the summary of economic projections and whatever commentary we might get for the new year? Well, yes, I think if you look at the word function on the terminal and then compare that to pricing for December, actually relative to the equity market, if you look at it over the past month, both of those have been neck and neck.

16:25So I would say it's fully priced in the sense that every time the probability of a cut has increased sharply, the market's done well and vice versa. I think beyond that, one of the reasons I think that we're probably not going to see as many cuts next year is because the inflation backdrop, and we're putting out our outlook at some point later today, but I think that the inflation backdrop is going to be a little bit trickier in the sense that there's probably some upside inflation risk from tariffs that are expected to stay high, which have already put upward pressure on goods prices, but also fiscal stimulus coming from the big, beautiful bill.

16:58And I think still a, even if it's a wobbly, but still relatively resilient labor market that keeps people spending on a month to month basis. If you add all of that together and put it into an equation, I still think you have upside inflation risk. Plus, from a personnel standpoint for the Fed, you have to keep in mind that two voting members rolling onto the committee, onto the voting committee, are the heads of the Cleveland and the Dallas Feds. And they've been leading much more hawkish recently. It's Beth Hammock and it's Lori Logan. So I think that needs to be taken into consideration when you think about, especially the emphasis that has been now pushed on individual member commentary.

17:31That hasn't been the case up until maybe the past couple of months where we've been paying so much attention to what each individual member has been saying. Now there's much more focus on that. So I think for those reasons, you probably don't get as many cuts next year as maybe some people have been expecting. I think there's a narrative around that. What do you think, Matt? I mean, we're looking at, with the work function, getting down to a terminal rate of 3 % even, basically, right? Between three and three and a quarter right now. So that's moved up a little bit. And as we hear so much about the economic growth that we're expecting next year, is we hear so much about the stimulus we're going to get from one big, beautiful bill.

18:07I just wonder if it's going to be hard to even go that low because inflation, if you look at CPI, it's going the wrong direction and it's 50 percent over the Fed's target. Yeah, we're averaging closer to three percent. That seems to be more like the floor, even if you don't go because it's not our expectation that you go back to anything akin to 2022 or 2023. I mean, getting close to, you know, eight, nine percent on CPI, barring some major shock is just really not in the cards. But we've been there. So this only 3 % still hurts? Well, but exactly. Because prices haven't gone down, right? And you're now four and a half years of the Fed being above its target.

18:44I think at some point that has to come into the equation and it'll matter in terms of how they set policy. So really, I mean, this is just them getting closer to neutral, what they think of as neutral. If it happens to be the case that inflation pressure is re-accelerating and they're maybe too close to neutral, then you can maybe start talking about a hike. I think it's still a little early for that. But you just have to keep in mind that they've been now so far above their inflation target for so long. And labor has essentially been at target almost the entire time. I mean, 4.4 percent for an unemployment rate.

19:12Yes, it's risen over the past year, but it's been, number one, gradual and number two, consistent with a fully employed labor market. Thirty seconds. So what does this mean for the equity markets? I mean, if if there's earnings, if there's an economy that's growing, if the labor market doesn't fall apart? Well, the earnings picture just by itself. I mean, if you if you look at every sector so far, there's expectations that you're going to get pretty solid earnings growth for all 11 gig sectors in the S &P. Only three are expected to have earnings growth that is slower in 2026 relative to 25. So that in and of itself just shows you that it's not just a couple of sectors or even a couple of industries that are carrying the market higher from an earnings standpoint.

19:48It really has broadened out. So we think that from an index perspective, maybe it's not as great because if you don't have the mega caps contributing mostly to the gains, then the index performance might not look great. But you could have relatively healthy breadth under the surface and participation that could mean for maybe a better year for equal weighted relative to cap weight. Thanks for coming by. Thanks for having me. You're listening to the Bloomberg Business Week Daily Podcast. Catch us live weekday afternoons from 2 to 5 Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app.

20:19Or watch us live on YouTube. Well, changes afoot at Berkshire at JPMorgan Chase, there's kind of a connection between the two. We want to get to what you need to know. And with us is Srinatharajan, Bloomberg News Chief Wall Street Correspondent right here in studio, along with Bloomberg News U.S. insurance reporter Alex Rajbandari. First up, I want to talk about Berkshire Hathaway. So, Alex, talk to us about these leadership changes that are going on. It is like the company getting itself ready for what happens post Warren Buffett. I mean, he's already announced his retirement, right? But once he's kind of officially off the leadership at the company.

20:56So what we know is Greg Abel is taking over next year in January. And this morning they announced a slew of new appointments and some departures as well. The big one and the one that everybody's talking about that we're going to talk about today is Todd Combs, who was one of the two stock pickers for Buffett, along with Ted Weschler. and they were managing with Buffett this mammoth 280 billion stock portfolio. So he's gone. He was also the CEO of Geico. He's been doing a good job there, and analysts have been praising the turnaround at Geico that's been struggling in recent years but gaining grounds in the past quarters.

21:31But that leaves a question mark as to what's going to happen to the stock portfolio and who's going to manage it because Buffett no longer in the picture, still as chairman, but not at the helm. That means Abel's going to do it with Weschler, but that's just two people for a big portfolio. And that's a big topic for Buffett watchers and Berkshire fans and investors because they look at where the investments are going. Is it fair to use the term exodus or even worse, brain drain? If Warren Buffett's leaving and I didn't get the top job, I'm out. So this morning hasn't been only about departures.

22:06There's only been some appointments of people that were not in the light so far, but have been elevated to bigger roles. So that's important to point out. But yes, what you say, this raised the question as to how many people we want to work with Abel going forward. And there was an analyst this morning who put out a note right after the appointments to say that he expected more turnover going forward because it doesn't have the same cachet to work for Abel than to work for Buffett. Before we get to the JP Morgan, why did Combs leave Berkshire? How long was he there? A while? He had been there for more than a decade.

22:39It's not been said exactly why he's leaving, but he had deep ties with JP Morgan. So that might be an explanation. Also, I'm sure they wanted him. I mean, as you say, he was in charge of a massive portfolio. That guy must have been sought after on Wall Street. But just to touch on what's happened at Berkshire, it's so weird if you put up the shares versus the S &P. From April, the S &P takes back off again, right? Obviously, we had the Liberation Day dip. From April, Berkshire Hathaway shares just come down. It's a mirror image of what the S &P has done. What is the concern about Berkshire Hathaway?

23:15Is it that Warren Buffett's finally leaving? Is this key man risk? Well, there was talk when he announced he was retiring that there could be a Buffett premium that would evaporate. That could be supporting that thesis. There's also a lot of other questions. You know, I've reported on the earnings in recent quarters and the softening of the economy in general. I was going to say they play big time into the economy. Right, exactly. And so not to say that the concerns for the economy are translating directly into the concerns for Berkshire. Right. But there's been some softening of the top line growth and analysts have been, you know, voicing some concerns about that for the future.

23:50The company has had a very rare sale rating from an analyst recently because of all the headways coming the way. So, yeah. It's a big change. Yeah, for a company so identified, obviously, with its founder. All right. So Todd Combs leaving Berkshire after a decade. Let's bring in Shreet Nadarajan because JPMorgan has hired him. Talk to us. There was a relationship there already. There were ties. Tell us about what this news is about. What does this do for JPMorgan? Why is it happening? Well, Jamie Dimon has been spending a lot of time talking about this national security initiative. You know, having heard Jamie Dimon over the years, especially in the last 12 to 18 months, He has been talking about the geopolitical risk.