Paramount to Settle Lawsuits Against WBD Deal

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1:44Scarlet Fu:Bloomberg Audio Studios. Podcasts, 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. We want to get to one of the big company news stories this morning, and that is Paramount Skydance reaching a settlement, according to people familiar with the matter, with California and other states suing to block its proposed acquisition of Warner Brothers Discovery. That means we need to bring in Geetha Ranganathan, our media analyst here at Bloomberg Intelligence, to cover this.

2:24Scarlet Fu:She's been covering this story from the beginning. Geetha, this sounds like this was the one thing we're waiting for. What are you hearing in terms of how solid this potential compromise is? Hey, Scarlett. Yeah, I think it's pretty solid just from, you know, whatever we've been hearing over the weekend. So we've kind of gone from, you know, is this deal ever going to close to kind of broader promises to now some concessions that seem really, really reasonable from a paramount standpoint. And I say that because one of the things that, you know, I think investors were really fearful about with this merger and the potential settlement was whether they would have to divest assets, especially whether they would have to divest the cable networks, which would have been really problematic because it would directly have affected their synergy target.

3:16And they have a really ambitious synergy target of$6 billion. So it looks like they don't have to do anything on that front. They do, however, have to promise to theatrically release 30 films from both studios every year, failing which there will be a penalty. They also have to make an investment in the California production and also maintain the two studio operations so they can't dispose of any of the studios. But all of that seems to be something that David Ellison will be, I think, happy to live with as long as he can get this deal closed by that September 30th date and avoid those very, very expensive ticking fees.

3:53Paramount stock is up about eight and a half percent today. Warner Brothers Discovery up about 10 percent. So the market's happy about that. all right, Geetha, I think this is a little bit of be careful what you wish for. They're going to get their deal done. Now they've got to operate this thing. What are the key challenges, do you think, for this combined company going forward? Yeah, the biggest challenge there, Paul, is definitely going to be the leverage, the debt. So we're looking at about$80 billion of debt. It's going to be about six and a half times levered. So it's really, really going to come down, as you just pointed out, execution about getting those synergies and trying to drive this to three times leverage within a few years after closing.

4:34That's a tall order, given that you have two businesses that are in secular decline, which are the TV businesses. Yes, they can extract some synergies, but you're doing that at the cost of those businesses bleeding further. And then remember, the studios is really a very, very up and down business. And you've always said this, ball. It's like it's such a hit and hit or miss business. It's not predictable at all. So you just look at the two combined studios last year, they had about a 30 percent share of the domestic box office this year, year to date, they're only at about 10 percent. So, you know, it's it's again, it's going to be a tough slog on that on that front.

5:08Streaming is definitely a bright spot for both companies. But again, we're seeing even streaming leaders really struggle. You look at the likes of Netflix and, you know, every day we see some engagement data that comes out that doesn't look so optimistic, really struggling against the likes of YouTube and some of the other social media platforms. So whichever way you kind of slice or dice it, this is really going to be a tough road ahead for Paramount's guidance.

5:33Scarlet Fu:Yeah, the company Paramount has promised merger synergies of six billion. So that means a lot of cost cuts, probably job eliminations. And you mentioned all the challenges operationally. if they're going to grow their way out of this debt, what part of the business has the best prospects for growth? Definitely streaming, I think, has the best prospects. Remember, this is at its heart, David Ellison and the whole Oracle backing at its heart is a technology operation. So I think one of the things that the market and investors are kind of banking on is the use of technology in the media operations, whether that's for content creation, content production, eliminating a lot of those post-production costs.

6:17I mean, they do have a seat at the table when it comes to AI. And so it's going to come down to how well they can kind of leverage some of the edge that they have there and implement those across their media operations. But I think definitely one of the business units that everybody is going to be looking at very closely is going to be the streaming side and how much, you know, how fast they can go profitability, even though 70 % Scarlett off the combined company, 70 % of EBITDA will still be from the secularly challenged TV businesses. 30 seconds left here, Geetha. What's the Wall Street's view of David Ellison?

6:51He's kind of a new entity to Wall Street. Has there been enough time for the street to get a sense of, is this the management and management team that can execute this deal? I think they can, Paul. And actually, whatever we've seen so far, he's actually been pretty impressive because he's more than delivered on the synergy targets for the Skydance acquisition. Remember, this was this is Paramount Skydance. They just executed that transaction. And so far, he's actually more than delivered what he had promised. So let's see. Stay with us.

7:25Scarlet Fu:More from Bloomberg Intelligence coming up after this. Some people treat ChatGPT like some kind of smart search engine. And some use it to get work done. ChatGPT Work is a new way of working in ChatGPT that can take action across your apps and files, stay with a project for hours if needed, and turn a goal into finished work. It's designed to help you move from a chaotic starting point to a reviewable first version. So all the source materials, briefs, and scattered information that you have to grind through to turn into something useful can just become something useful. Put ChatGPT to work on your most ambitious ideas and projects.

8:05Scarlet Fu:Get started at ChatGPT.com by selecting Work Mode, available on Plus and Pro plans. Hey, this is James from Raiders of the Lost podcast. We've learned over and over on our show, while talking to people in entertainment, that success comes when you bet on yourself. How many times have we talked to an actor who took a big risk with a challenging role because they believed they could pull it off? Well, it's a lot easier to take those risks when you've got the practical stuff covered. And that's what Geico does so well. Imagine an actor driving to set to film the scene that's going to win them an Oscar.

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10:13Scarlet Fu: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. Edward Price joins us here, non-resident senior fellow at NYU, joining us here in studio. Ed, I've been getting the sneaky feeling that with President Trump in New York for a couple of days, with the United Nations General Assembly here this week, we've got leaders from Iran coming, which is very rare. They were granted some visas. We've got President Zelensky here.

10:47For some reason, it's just me. I'm getting this feeling that we might have some announcements this week on maybe Ukraine, maybe Iran, maybe President Trump is feeling the pressure with midterms coming up, with diesel at 650. Am I just kind of whistling in the dark here? Do you think there's possibly some movement here on some of these key global issues? I don't think you're whistling in the dark. There might be some rhetorical movement. And I definitely think that Trump is desperate. I mean, diesel at 650 at my local gas station is wild. I mean, that's fritzing everybody's brain that voted for him.

11:21But I use the word rhetorical because I'm not sure that he is in control of events anymore. Zelensky seems more in control of his war than does Trump. Likewise, Xi seems like he's in a good position versus Putin. So I think Trump and Putin, both of them are desperate. And whatever the announcements, I mean, who knows what they're worth?

11:40Scarlet Fu:So if you say Trump is desperate, he's heading into this summit with Xi Jinping in a more desperate position than China. China. What kind of prepackaged announcement do you think we'll get versus what actually will be happening between these two gentlemen? Well, what's actually happening between these two gentlemen is great power politics. And Xi Jinping is on the rise. And Donald Trump represents a, I hate to say it, it's painful, declining power. If we look at measures such as the dollar in the next 20 years. So what's actually happening between them is that Xi Jinping is telling Trump what's what, frankly.

12:15I imagine that happens with Putin and Trump behind closed doors. What we'll see, you know, for the likes of us will be some handshaking, the usual stuff, right? Everyone will be smiling and there'll be maybe an agreement on XYZ soybean site. It's all, but it's all nonsense, right? So we are in a period of undeclared great power war. Russia is losing its war. I think we're just about winning our wars, albeit that's a controversial opinion and China's watching and waiting to see when it's winning our words you mean the Iran war I'm not sure that we're winning the Iran war that we described we wanted to fight but I think as I say before and I get in trouble for this in a counterfactual where we didn't fight Iran and where we didn't back Israel and in a counterfactual where Ukraine lost its war to Russia that universe I think is the universe that we would have lost World War III right off the bat so I think we're somewhere in the middle because we are reacting to these undeclared we sometimes times call it hybrid war.

13:08The West is doing things. It's just a shame that we are led by someone who doesn't really know what they're doing. So given that midterms, how do you think these are going to play out here? Do you think President Trump cares about the midterms? Because one could argue some of his key policies are not supportive of the Republican Party, that being tariffs, that being starting a war in the middle of the oil, you know, global oil patch. Those things aren't they generally don't poll very well well president trump has never had policies per se he's never had a thought-out programmatic piece of paper where you can as a consumer of politics as a voter go and look at it and say yes or no what he's done is systematically attacked our constitutional government systematically attacked our alliances and tried to undermine his own country on the world stage and i think that the voters are beginning to realize this it's a shame that it took diesel, of all things, to really get through to people because there were any number of clues that President Trump was not a conventional politician offering us what we wanted.

14:11But no, I don't think there's anything that he can say at this point that they're going to bring people back on board if they're losing their farms, literally losing the farm.

14:19Scarlet Fu:Meantime, our allies are looking the other way and trying to form alliances with other countries. I'm thinking about Canada and the overtures it's made to the European Union. Is that a good thing? I think the European Union made the overture to Canada now. I think they saw the opportunity to maybe checkmate Trump. The associate member. Yes, yes, which makes me as a Britisher rather jealous because I used to have an Italian passport. Look, I think that's a good development. I think Mark Carney is an absolute player. He's really giving the world an example of what democratic leadership looks like in contrast to Trump.

14:56The European Union itself doesn't have a presidency, right? So my interpretation is they've been looking around for an executive function. Germany doesn't want to do it for obvious reasons. And now they're like, oh, there's this very interesting Canadian guy that seems to be able to address large groups of people. So maybe we'll make him the honorary president of the European Union. Do you think the European Union, other than Germany, is prepared to make the investments that they initially talked about, whether it's in defense or in infrastructure? Again, people feel pretty confident that Germany is moving in the right direction.

15:27How about the rest of Europe? um well i i'm not sure that places like spain or italy uh ever had much of a military tradition and i don't think it matters i'm getting rude i just i don't think that they um maybe since the 16th century spain hasn't really been a military player it doesn't really matter if poland and germany rearm properly and if france extends its nuclear umbrella and if my country the uk gets back to proper defense spending and a bit more of a a bullish attitude in the world we could roll Russia in a conventional war. I don't worry about that at all. So if Germany does the right thing, which it is, we'll be solid.

16:03I think the problem is the window, because it takes time to rearm. And Germany's talking about 2039, I think, at the point they'll be ready. I mean, guys, let's, you know, let's match now. Yeah, exactly. In that time, what does Putin do here? I mean, is he bogged down in Ukraine? Is he, what do you think the next moves are there? Because I don't think people feel very good about what what he could do going forward so putin likes to think of himself as like a wolf right as this kind of lone wolf like stalking the european plane i think of him as a rabid groundhog at this point i'm serious like he is cornered he's unwell he's clearly losing that war with ukraine uh and zelensky if anything is holding back i mean zelensky must have more uh cards to play right to return to that phrase um and putin must realize even in his delusions that that war is lost.

16:57So if he wants to fight a new war called me versus NATO, maybe a sprinkling of tactical nukes or something, I mean, let's bring a military expert into your show and ask him if that's possible. This war, he's losing.

17:10Scarlet Fu:Stay with us. More from Bloomberg Intelligence coming up after this. Some people treat ChatGPT like some kind of smart search engine, And some use it to get work done. ChatGPT Work is a new way of working in ChatGPT that can take action across your apps and files, stay with a project for hours if needed, and turn a goal into finished work. It's designed to help you move from a chaotic starting point to a reviewable first version. So all the source materials, briefs, and scattered information that you have to grind through to turn into something useful can just become something useful. Put ChatGPT to work on your most ambitious ideas and projects.

17:51Scarlet Fu:Get started at ChatGPT.com by selecting Work Mode, available on Plus and Pro plans. Hey, this is James from Raiders of the Lost podcast. We've learned over and over on our show, while talking to people in entertainment, that success comes when you bet on yourself. How many times have we talked to an actor who took a big risk with a challenging role because they believed they could pull it off? Well, it's a lot easier to take those risks when you've got the practical stuff covered. And that's what Geico does so well. Imagine an actor driving to set to film the scene that's going to win them an Oscar.

18:26They're focusing on the scene, not on dealing with managing an insurance claim. Because Geico is handling that. And they don't even expect a shout out in the acceptance speech. Geico provides peace of mind and they'll do the same for you. Maybe it's not an Oscar winning performance. Maybe it's building a career, starting the business you've dreamed about, or just taking care of your family. Whatever you're betting on, GEICO will make sure you're covered. Learn more at GEICO.com. You already know how AI is changing how everyday work gets done, how much ground you can cover, and how fast a team can scale.

19:02To stay ahead, you need the tools that give you a competitive advantage built for this new era. Welcome to Agentic Revenue. Adio is the CRM for this world. It meets you where you work. compounds every customer signal into context, then acts on it across your pipeline to let you move it on match speed and scale. With agents and automations for every job in revenue, Adio orchestrates your work around the clock. Built to handle the scale of your workloads, extensible with API and MCP, and with the infrastructure to keep up with your most ambitious agents. Loved by high-growth startups like Granola, Modal, and Etched, Adio runs the work behind every win.

19:38That's Adio, the agentic CRM, the intelligent system that never sleeps. Picks up leads at 2 a.m., catches renewals before they slip, hands you the answer before you ask. Try Adio free at adio.com slash iHeart. That's adio.com slash iHeart.

19:58Scarlet Fu: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. NatGas is where you've got to spend a lot of time as well because if you're going to have all these data centers all over the country, you've got to power these things up and electrify them, and you do it a lot with NatGas. And we have a lot of it, too. We have a lot of NatGas because we frack it down in the oil patch. That's your second gig, I know. Exactly.

20:31I'm thinking about Henry Eaton. He does this stuff for a living. U.S. Natural Gas Market Analyst for BNEF. The BNEF folks are the folks here at Bloomberg. They analyze the energy evolution taking place. They have all the data. I mean, the best data out there as it relates to the global energy business. It comes smart analysts up on us to make sense of it. Henry, thanks for joining us here. Talk to us about the demand for natural gas these days. Kind of the good news is we have supply of it. But talk to us about the demand. Yeah. So the demand side is super interesting. There are two key drivers that we see through the next five to ten years.

21:07that is data centers, as you mentioned, are expected to consume a lot of natural gas, as well as LNG exports. We export a lot of our energy overseas, and that has only ramped up over the past few years, and will continue to ramp up over the next five to ten.

21:24Scarlet Fu:So it's a long-term bullish story. When it comes to data centers, how difficult or easy is it to get that NatGas to where these data centers are? Yeah, the gas story in the U.S. is a very regional one. So it depends where the data centers are being deployed. As you mentioned, we have plentiful natural gas reserves here in the U.S. A lot of that is in Texas, in the Permian, in West Texas. There's also production in the Northeast, in Appalachia. One of the major problems that we see, or challenges I should say, is building the pipeline capacity to get that gas to where it is. We have it under the ground.

22:09It's a question of getting there. Building pipeline capacity in the northeast, for example, is extremely difficult, much more difficult than in, say, West Texas. The other option is to use price as a balancing mechanism and have that price unlock more expensive supply that we see in the Hainesville Basin, which is in eastern Texas and western Louisiana. So on the demand side, data centers, we need more energy. Isn't that gas enough to fuel these things, do you think? Or is it just one source of energy that you think that will be needed to fund these data centers or fuel up these data centers? I think you'll see a combination of a lot of different fuels.

22:52I think the characteristics of not gas make it advantageous to do so. A gas plant can ramp up and down quickly like a data center needs. And I'd say one of the challenges to powering all this natural gas is getting the gas turbine capacity. We've seen that that has been a challenge. Order books at a lot of the large manufacturers are full. And a gas turbine ordered today, we don't see coming online by 2031 at the earliest. So it's about five to six years to secure a new capacity. All right. So that'll be a challenge.