Netflix, Comcast and Paramount Make Bids for Warner Bros

0:01Bloomberg Audio Studios Podcast Radio News. you're listening to the bloomberg intelligence podcast catch us live weekdays at 10 a.m eastern on apple carplay and android auto with the bloomberg business app listen on demand wherever you get your podcasts or watch us live on youtube mna uh media mna uh pending big big deal warner brothers discovery it's in discussions and accepted bids from paramount skydance uh from Netflix, maybe even Comcast. Now, I guess we wait and see what happens. But this is when this deal crosses the tape, it's going to be a big deal. It's going to have an enterprise value of north of 90 billion dollars.

0:45I can't wait for them to make a limited TV series about this process. Yes, exactly. Right. Yeah, exactly. Right. Coming to Netflix on soon. Geetha Ranganathan, she covers the media space for Bloomberg Intelligence as the media analyst there. Geetha, what's the latest on Warner Brothers Discovery? I guess the question now is the The bids have been accepted. What are next steps? Yeah, next steps, Paul, is that these were just first round bids. They're non-binding bids. You know, as far as the news reports go, it looks like all three companies that were in the race, Paramount Skydance for all of Warner Brothers and then Netflix and Comcast for just the studio and streaming assets have all placed their bids.

1:25This is going to be a very long drawn process. So we're going to have multiple rounds. You know, we've had some conflicting reports, actually, on what Paramount Skydance was offering. There was something earlier this week that suggested they were offering something north of$28 per share. They came out, refuted that report, and the latest reports seem to suggest that it might be, it's definitely going to be something much lower than that, probably something above$25, but still below$27. But let's remember, David Zaslav has publicly said that he wants something north of$30 per share. So this is going to play out for quite a while, I think.

2:05Yeah, that is a pretty big gap between what David Zaslav wants and what the reporting indicates Paramount Skydance is likely to pay. So if this is going to be a long, drawn out process, does that benefit Warner Brothers Discovery or these bidders? Who comes out ahead in that kind of scenario? Yeah, I mean, the long drawn out processes is really not good, I think, for Warner Brothers Discovery. But having said that, let's remember that they do have another plan B in place. And the plan B is that they are going to go ahead and split their company into two parts. So you have the TV networks business and the streaming and studio business.

2:41And the good news for them is that the studio turnaround, which was kind of in progress, is now really kind of taking shape. we're seeing some really tangible you know growth come out of both streaming as well as studio and so worst comes to worst if nothing you know materializes from all of these bids and from all of the sale chatter and buzz they are still on track to separate their businesses and who knows maybe that would be the better path for them going forward so all is not lost even if you know these bids don't work out keitha i know you've done the work what do you think the entire company's worth So, Paul, you know, it all, again, depends here on who's making the bid for what parts of the business they're making.

3:22But so as we kind of look at it right now, I don't think David Zaslav is far off when he says he wants$30 per share for all of the company. We think majority of that value will actually rest with the studio and streaming network. So we when we kind of crunch the numbers, we get$25 to$28 just for the studio and the streaming business. But at the end of the day, Paul, it all comes down to synergies. So if you look at combining the entire corporation, all of Warner Brothers Discovery with all of Paramount, for instance, and they both have substantial linear network exposure. They both have studios.

3:59They both have streaming assets. You know, we're looking like something like at about four or five billion dollars in synergies, which then adds to the deal value also. Stay with us. More from Bloomberg Intelligence coming up after this.

4:16You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. A column that I read this week really resonated because it hits upon three key themes that we're seeing across the markets. retail earnings, tech forward companies, and people worried about losing their jobs in this AI era. Beth Cowett is a Bloomberg Opinion columnist, and she's written a story about Walmart and its masterclass in reputation rehab. But it really rests on this idea that Walmart invested in its workforce, in its treatment of workers at a time when it was being criticized for not treating its workers well.

4:59And this has paid off in many ways. Beth joins us now in our Bloomberg Interactive Brokers Studio. So Beth, just take us back a couple of years to when Walmart decided that it was going to spend on its workforce. It was going to invest money into the workforce. And investors did not like hearing that. Yeah. I mean, it's hard to think about this now, but a decade ago, Walmart was one of the most reviled companies in America, right? It was being criticized for paying its employees low wages, for wiping out mom and pop retailers, for basically creating a culture of disposable consumerism. So it really was getting hit from a lot of different angles.

5:33And rather than just ignore the bad press or hire an army of PR people, it decided to do something about it. And Doug McMillan decided we're going to invest in our people. And$2.7 billion over a couple of years. And we now know this really paid off. So, I mean, for Doug McMillan, I mean, to me, after reading your article, This could be one of his, as he's stepping down, could be one of his lasting legacies. I really think so. I think that, you know, he's been at the company now more than a decade. I think this will be among the most enduring things that he has done. I think this, I'm not sure that the company would be in the place it's at today if he had not really addressed this.

6:13And let's be clear about what exactly he did with that$2.7 million. Pay increases, there was training, and really just attracting a better quality worker. Yeah, and the way he did this was, right, it was pay increases. But more than anything else, it was creating not low-paying jobs, but a career, right? There was now a path for people who started at Walmart to move up the ranks. And that was really important, right, to attracting more ambitious employees, to getting them to stay. And I think that that shifted the whole culture of the company. So what's the company saying about AI? Because there's a lot of angst just in the overall economy about what the impact AI will have upon jobs.

6:57One could look at big box stores as an industry that might be at risk because they do employ so many people. What does Walmart say? Walmart's taken a very different approach, I think, than some other big employers. And it has embraced AI. Let's be clear. Like there's AI is embedded throughout the company, but it has not used AI to have some of these mass layoffs that we justify some of these mass layoffs that we've seen at other companies. And I think part of that is this this history, like it knows how important these entry level workers are and that they they need a path. They need this workforce to sort of grow the company.

7:34So it said AI will change every job. It knows that, but it is trying to get every worker through to the other side. So whether that's retraining, finding new rules for them. So it's just a very different outlook, I think, than what we're hearing from others. And you've noted as well that the last 10 years at Walmart has led to tremendous return for shareholders. But also it's become a case study at Harvard Business School on how an experiment on paying your workers more or investing your workers can pay off. Absolutely. I mean, we you mentioned this at the beginning, but Wall Street hated this plant.

8:12I mean, the company lost tremendous value, tremendous value when when they announced it. And now, you know, we we have the receipts a decade later. And the I think the market cap has tripled. The stock has returned more than 400 percent. So they really took a gamble on this and stuck with it. And it really it has it has paid off for them. I mean, every time I look at the DES screen for on the Bloomberg Terminal for Walmart, I'm just blown away by the fact that they have 2.1 million employees. What's the retention of those employees? I'm wondering if there's like, I would think in the warehouses, it might be really, really high.

8:48I'm not sure about the stores. How is retention? Sure. So they've actually increased retention by 10 % since 2015 when they started this plan. And another thing is that some of the more management level roles, 75 % of those are hired from within. So this pipeline is really critical for them. And so that's why I think that they are so focused on creating a place where people stay. That's that's key. And you only have to look at the outgoing CEO and the end CEO, right? Both Doug McMillan and John Ferner, the successor, are Walmart lifers. They started off as hourly workers there. Right. They know the importance of that and having worked their way up.

9:26That needs to be something that continues there. Is this something that you think the new CEO is as committed to as the prior CEO? I would think so, because he has the same background. I mean, I think he knows the importance of emerging technologies. He's really focused on that. But I think because of his history and he's worked very closely with Macmillan for a long time. So they must be aligned on this. Stay with us. More from Bloomberg Intelligence coming up after this.

9:58You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube. Jody Laurie joins us here in our Bloomberg Interactive Broker Studio in the big town. How about that? Jody, we love your coverage. You covered the from the credit perspective, all the fun industries like hotels, like cruise ships and all that kind of stuff. I know you guys put out a survey talking about how people are spending their vacation money. What'd you learn?

10:34So we do the survey every half a year. And so we just got the results out for the most recent one that we ran last week. And what's interesting is that we're seeing more people planning on keeping their budgets the same. But what's more interesting is that if costs exceed budgets, fewer people than last year said they'd increase their budget. And that's on the back of them knowing that inflation is a much higher risk for them for their portfolio. So in other words, people are making room for time off, but they're going to have to scrimp more in order to make it happen because their money is not going to take them as far as it used to.

11:12Correct. And Scarlett, I mean, I think to piggyback on that, if you look, the eating out anticipation of spending is higher this year than last year. And I think that's less a reflection of people wanting to eat out, but more that they're expecting eating out is going to be more expensive. And so even though we're seeing people want to spend on paid activities and experiences, which could bode well for the cruise lines and the theme parks, at the end of the day, when costs exceed budgets, more people this year over last year are planning on cutting and looking at free options. So going to the free museums, going to low cost options.

11:49Well, now that the government is open, D.C. is an option once again. How about in terms of destination, maybe staying closer to home, maybe not going quite as far internationally? Yes. And staying closer to home is very, very much key. If we see the data, the international trend is to Canada. Canada bumped up to the second spot. So we saw that in the mid-year and it was pretty curious for us, particularly because when you look at it the opposite way. and we did this a few months ago, Canada is not coming to the U.S. They don't want to come to the U.S. It's too expensive for them. They don't really like the current government situation.

12:28And on top of it, I think they're scared about crossing the border and what it means for immigration. So we're seeing Canadians not come to the U.S. and we're seeing a lot of companies comment on that. But we are seeing a lot of Americans go to Canada. And I am curious how much, and this is going to come in further reports, how much of the Canada move is a reflection of the World Cup next year? There's a lot of people going to Vancouver, for instance, for the World Cup. I'll actually be there during the World Cup, but not going to the World Cup. Why? There's like a billion people are going to be there.

12:58We might be doing a very family-friendly cruise to Alaska. Nice. It just works out that that's around the same time as the World Cup. It was bad timing. It was bad timing. All right. Talk to me. When I go to Aruba, we go to all-inclusive. how come i didn't know about this all-inclusive thing when i had four little kids i mean were they were they a thing back then i don't know but i mean i would get the bill which would be five inches thick with like smoothies and chicken fingers and all that kind of crap that they'd eat throughout the day four kids man if i had if i knew about the all-inclusive that would have been a savior for me um what are people doing when they are they willing to still pay up for travel because i still hear people going to europe and stuff like that i mean they're not going to Poughkeepsie.

13:41They're going to Paris and things. Yeah. I mean, Japan is certainly a popular destination. Strong dollar there. Yeah. Very much increased. Italy has increased. We're seeing among the upper income level, you know, Portugal and Spain as popular destinations. And I think probably what's even more interesting is onboard spending for cruises is still continuing to have momentum at the moment. I think where we're watching is when that onboard spending shifts and then the cruise lines, for example, don't get that gravy for cash flow. And to your point, Paul, I mean, even though you have something called all inclusives, even though you have the cruise lines that they all are considered these package deal, what every company is doing, and we're talking the rental car companies, you know, Avis is doing this to obviously the airlines, is they're all doing these premium products, these, you know, you do different tiers of products.

14:30So the add-on, so you can get the base level, which is really the skeleton package, but anyone from cruise lines to theme parks to some extent to the all-inclusives, the airlines, to the rental car companies are all segmenting to give the lower income consumer the ability to say that they traveled and the higher income consumer the ability to travel luxury. And in terms of the add-ons, what are these add-ons? Are they things that they used to offer for free and now charge you for? For some of it, it is. So a good example I have is anecdotally, I know that some of the cruise lines that used to not charge to get people into the center of a city, say in Europe, you're on a European cruise.

15:10They used to get that for free. Now they say, no, you have to be a part of one of our expeditions, one of our excursions in order to get that for free. Otherwise, we charge you$20 to get into the center of town in Czechoslovakia, and not Czechoslovakia, Czech Republic. Stay with us. More from Bloomberg Intelligence coming up after this.

15:32you're listening to the bloomberg intelligence podcast catch us live weekdays at 10 a.m eastern on apple carplay and android auto with the bloomberg business app listen on demand wherever you get your podcasts or watch us live on youtube obviously the theme this week one of the themes has been nvidia and its strong earnings ai fight has been really a driving theme for this overall market for going on three years now. And investors have been looking for derivative ways to play that theme. And one of that has been, how do you get power all these data centers out there? And that leads you to utilities.

16:07And that leads you to our next guest, Calvin Butler, CEO of Exelon. It is a publicly traded company. EXC is the ticker. The stock's up about 1 % today, up about 22 % year to date. So certainly performing well with the other utility stocks. Calvin, thank you so much for joining us here um again when i look at your industry you guys are critical to the rollout of ai because we got to power this stuff these data centers how do you guys view it yeah paul thank you for having me and exactly how you said it we're critical to the development and of ai data centers and large load quantum and we take that responsibility very serious and from a standpoint of building that infrastructure, protecting that grid, it's going to be the backbone of all this.

16:57We always say that the energy sector is 5 % of the GDP, but we power the next 95. And we take that very seriously. You take it seriously. So walk us through some of the plans you're making, how you're preparing for this transition, for this increase in demand. Yeah, thank you, Scarlett. What we have done, we've done a few things, is one, understanding for your listeners, Exelon. We are truly a transmission and distribution company. Proud to have six utilities operating the electric gas side through the pipes and wires. So having said that, being the backbone of that, we're encouraging those data centers and large developers to come into the states in which we operate.

17:41And we put together a comprehensive plan to get them online up and running sooner rather than later. Speed is everything for them. And so what it takes is a coordinated effort. And we've worked very hard to move upstream to get them online so they can do what they do, which is on the technology side. Now, as we do that, we have to keep in mind, first and foremost, the affordability factor for all of our communities. And that's where we're working with them to identify sites that are more ready to put their equipment and their technology in place. We had a couple of governor races recently in New Jersey and in Virginia, and affordability was one of the big issues.

18:26And in New Jersey, the governor-elect, who actually won one of her number one issues, was bringing down electric utility bills. So this is an issue, i.e. we got to fund, we got to, I guess, create and develop these data centers, but we got to do it in a way that it doesn't cause everybody's power bills to go up. How do you think about that transition? Paul, you're absolutely right. It was a race in both New Jersey and Virginia, an issue, and we believe it's going to be an issue in the 2026 elections because affordability, pocketbook issues are going to be key. So let me tell you what we're doing from Exelon perspective.

19:05We are protecting our residential customers. You know, we serve almost 11 million customers. So as important as it is for data center development, it's more important for me to protect the other customers in this process. So we've come up with what we consider a rather innovative solution in creating a tariff, a transmission security agreement. So what that does is we require a letter of credit or a cash deposit from these large developers speculating or identifying what their 10 year revenue projections or cost projections coming back to our utility is. And any time that they do not meet 80 percent of that load projections or cash projections, we draw down from that deposit.

19:50And what it does, it protects the other customers on the system for the investments that we're making. So we're being very intentional about protecting the other users on the system because when it's done right, it should reduce the cost for everyone. But when it's done haphazardly or piecemeal, it can have ramifications that everyone else is impacted. But what you're seeing, not just from the capital investment, you're seeing the supply costs go up. Supply costs are going up because of the increased demand. And we have inadequate generation on the system to do that. You use New Jersey as an example.

20:30Let me give you a real example of what happened to New Jersey customers last year. New Jersey customers, average residential customers bill rose$38,$34. I'm sorry,$34. $38 was due to supply. Because they were reconciling our bill, our bill, our cost, the demand, the transmission and distribution part went down$4. But the bill still went up$34. That's how important it is to get this supply stack right to help lower all customers' bills. Calvin, let me ask you about nuclear, because this week the government announced it plans to buy and own up to 10 large new nuclear reactors that could be paid for using Japan's pledge to fund$550 billion of investments in the U.S.

21:18Of course, this is part of a push to meet surging demand for electricity, and nuclear is increasingly seen as a solution to this need. What's your take? I think it's critical. I truly believe in a all of the above approach and that nuclear base load generation is going to be critical to us meeting this effort. As you know, again, we've always taken an approach that every electron matters to help on affordability. And that's why it's so critical. I use an example, the Crane Center that's coming back online in Pennsylvania. That's critical because it's new generation coming back online. Microsoft is paying for it.

22:00And that billion dollar loan is exactly what we need to encourage reopening of these former facilities to get more electrons back on. And that was one of the best operating nuclear plants prior to its shuttering. This is the Bloomberg Intelligence Podcast, available on Apple, Spotify and anywhere else you get your podcasts. Listen live each weekday, 10 a.m. to noon Eastern on Bloomberg.com, the iHeartRadio app, TuneIn, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg Terminal.