Warner Bros. Rejects Latest Paramount Bid, Favoring Netflix

0:00Hello, I'm Stephen Carroll. I'm in Brussels where many of Europe's biggest decisions get made. And I'm Caroline Hepker in London with the hosts of the Bloomberg Daybreak Europe podcast. We're up early every weekday keeping an eye on what's happening across Europe and around the world. We do it early so the news is fresh, not recycled and so you know what actually matters as the day gets going. From Brussels, I'm following the politics, policy and the people shaping the European Union right now. And from London, I'm looking at what all that means for markets, money and the wider economy. We've got reporters across Europe and around the globe feeding in as stories break.

0:37So whether it's geopolitics, energy, tech or markets, you're hearing it while it happens. It's smart, calm and to the point. And it fits into your morning. You can find new episodes of the Bloomberg Daybreak Europe podcast by 7am in Dublin or 8am in Brussels, Berlin and Paris. On Apple, Spotify, YouTube or wherever you get your podcasts.

1:02Bloomberg 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. All right. The media M &A trade that just won't go away. Warner Brothers Discovery says an amended takeover offer from Paramount Skydance is inferior to its deal with Netflix and urges shareholders not to tender their shares. I don't know what's going on here, people, but our next guest does. Geetha Ranganathan, she is the media analyst for Bloomberg Intelligence here.

1:45Actually, Geetha, I thought we'd have something done by now. I mean, these offers are pretty clear. The values seem kind of similar to me. What do you think is going on here? Yeah, so this time what Warner Brothers is saying, in addition to the fact that the offer is actually inadequate, this is what they said the very first time when they rejected this$30 bid from Paramount. You know, they obviously wanted the personal guarantee from Larry Ellison, which they got. They wanted, you know, Paramount to raise its termination fee to$5.8 billion to match Netflix. That also they got. But now they're saying that they actually really do need, you know, a sweetened bid.

2:24So they cite a number there. They say that if they had to terminate their agreement with Netflix, they will also incur, you know, obviously they have to pay the termination fee. Plus there's going to be significant financing costs. So all of that comes out to about one dollars, one dollar and 80 cents, close to 179 or 180 a share. So they obviously need to be compensated for that. So basically, I think, you know, they do need a sweetened offer. And the big thing that they highlight this time around is the amount of debt. So they actually call this a leveraged buyout, probably the biggest one in the history of M &A.

3:02And so say that, you know, it just presents too many risks and too many uncertainties and is definitely inferior to the Netflix offer. Right. The conclusion that it has drawn and what it's recommending to shareholders remains the same, which is go with Netflix's, the Netflix bid. Having said that, what does it mean that Warner Brothers Discovery wrote this letter to shareholders? Do we get the sense that shareholders are tendering shares to Paramount? Not so. So from what we've heard, you know, when it was last reported, Scarlett, about 500 ,000 shares were tendered at that$30 price. Remember, we have about two point six billion.

3:41So we're really very, very long ways off. So, you know, I think shareholders definitely expect the price to go up. They do, you know, think that there is going to be a bidding war. The number out there on the street is that David Zaslav is looking for$34 as, you know, the final offer at which he will sign his company away to Paramount. I'm not sure whether, you know, Paramount is actually going to raise their offer, but that is really the number that he's looking for. And we know him. He's he's really a master craftsman when it comes to to getting the best deal for his company. So, again, it's a wait and watch.

4:18We used to call that the final, final offer. This is our final, final. We're not we're not getting around. So final that we need to say twice. Exactly. Geetha, we have not heard really too much from Netflix, have we? So all that Netflix said today, Paul, was after, you know, Warner Brothers Discovery put out that letter was, you know, they said, yes, we continue to, you know, work with Warner Brothers. We filed. We're working with the antitrust authorities. You know, we're working with the regulators and we hope to get the deal done. So everything kind of proceeding as expected from from the Netflix management team.

4:51You mentioned thirty four dollars a share is what David Zaslav is really eyeing. Is there any reason to think Netflix will raise its offer? Netflix needs to raise its offer, Scarlett, only if Paramount comes back with a sweetened bid. And we do think that they actually will raise their offer. They really believe, even though the market price reaction obviously has been very negative to this whole Netflix deal, just kind of given that it really kind of complicates a very clean narrative. I think Netflix really believes that they're doing this in the long, they're playing the long game here. You know, this is a great collection of assets.

5:27Again, it's not just the cost of doing the deal. It's the cost of not doing the deal. And they obviously do not want to strengthen their competitors. They believe this is a great collection of assets that gives them tremendous value over many, many years to come. So I absolutely think they will raise the price. But the first move has to be from Paramount. Geetha, part of the Warner Brothers discovery plan before this offer was it was to spin out their cable networks. And that's exactly what Comcast did several days ago, spinning out its cable networks. The company, new company is called Versant Media, VSNT.

5:58That thing is traded off about 25 percent just in the last few days. Man, what does that tell you about the cable network business and maybe how it might affect these bids? Yeah, it's really bleak. And so this actually strengthens the case for Paramount. This is exactly what they were saying. They were saying, let's buy this whole thing because you don't know where this, you know, the global networks business or the TV networks is going to actually trade. And here we go. Versant is actually just proving their point. So does not really bode well for Warner Brothers. But again, I think still Warner Brothers will continue to have the upper hand because, again, they can argue that their cable networks, again, a slightly different business, much larger in scale compared to the Werson properties, has an international footprint.

6:41But again, the writing is on the wall, Paul, as you've said many times. I mean, the TV network business is bleeding, not a slow death anymore. This is really happening fast and furious. Stay with us. More from Bloomberg Intelligence coming up after this.

6:59you'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 nvidia ceo jensen wong says the artificial intelligence industry always needs more energy on the sidelines of the annual consumer tech event CES, Jensen Wang, and Siemens CEO Roland Bush spoke exclusively with Bloomberg's Ed Ludlow on their AI partnership. From Hopper to Blackwell, we increased energy efficiency by 10x. From Blackwell to Rubin, we increased energy efficiency again by 10x.

7:43And that translates directly to our customers' revenues. Because in the case of an AI factory, whatever factory size you have, you're limited by the power. All right. That was Jensen Wong. He is head of NVIDIA and Siemens CEO Roland Bush, speaking exclusively with Bloomberg's Ed Lalo of their AI partnership out at the Consumer Electronics Show in Las Vegas. Let's get the latest reporting from Vegas. Caroline, hi, joins us. She's out there. She's the B-Tech co-anchor for Bloomberg News. Caroline, it just seems like, you know, you listen to Mr. Wong, Mr. Bush, the need for AI and the spending on AI shows no real signs of slowing yet.

8:26Is that the vibe you're getting out there?

8:30That is very much the vibe we're getting. We heard from Lisa Su yesterday as well, CEO of AMD, saying in the next few years, you're going to have to 100x the amount of compute that we currently have. Has stocks still falling today, I might add? And so many people may be manufacturing in this extraordinary scale, which we'd like me to see the compute needs still ramp up. And it's having a marked effect on certain companies stocks that I'm sure you were covering yesterday and into today. Sandisk, it is up 1000 % from its lows back in April, but it's up almost 50 % in the first few trading days of the year.

9:02This is all about a shortage in memory, memory storage. We are seeing still the fact that we're worrying about energy, as Jensen says, we're worrying about memory, as you're seeing impacting Samsung stock as well. We had a Samsung executive on the network yesterday saying, look, we're going to have to see a hike in prices because supply is just so tight. And yet still people question whether we're in some sort of bubble. But all I'm hearing is the infrastructure just needs to get ever bigger. And we kind of need to get on board with that. Yeah. Speaking of memory chip makers, Micron, the biggest U.S.

9:31memory chip maker, jumping 240 percent last year and up about 10 percent yesterday. So just an example of that. So, Caroline, the Consumer Electronics Show, Paul and I were reminiscing how once upon a time it met big screen TVs and other gadgets that companies dreamt up, but consumers may or may not want to sign on for. Is that still what's happening at the CES, or has it turned into a high level discussion on chips and AI? I think they're managing to walk both sides. We're still seeing those big unveils and discussions coming from NVIDIA CEO, from AMD CEO, from Qualcomm CEO. They're talking about what's inside these electronics or what's inside the compute that is needed to foster these electronics.

10:17But then you have Samsung, which is very much on the AI trade with its chips, but also unveiling the latest, greatest Samsung frame or the latest TV that has, you can see all around the curvature of it or the fact that they are still trying to think about how your home is going to be connected, how your television is discussing with your oven as to whether or not the food is cooked and you get in between messaging between the two. I mean, there are companies that still continue to unveil. They're also the ludicrous. I mean, there's lollipops that play music as you eat them. There's little toys.

10:46Everything that seems to be about AI and about companionship is something that just seems to involve some sort of cuddly toy that talks to you. But apparently cute is the way in which we're going to go forward. But there are the vacuum cleaners. There's the massage chairs. It still very much has this idea of pushing the innovation forward. And the main thing, guys, I cannot walk without seeing a humanoid robot of some sort. So we're going to have some big interviews a little bit later. We've got Boston Robotics, for example, coming on the show. And that's really Boston Dynamics, in fact, which has a huge new unveil of its latest humanoid.

11:18Stay with us. More from Bloomberg Intelligence coming up after this.

11:36or watch us live on YouTube. Well, there have been lots of big games in the lead up to the Super Bowl. And of course, there will continue to be as we head in that direction. So let's bring in Brian Eggers. He covers everything for us from the gaming companies to the lodging companies to the cruise ship companies, senior gaming and lodging analysts here at Bloomberg Intelligence. And Brian, you and your team have done some work on how DraftKings is positioning itself for the NFL playoffs. Yeah, so DraftKings and FanDuel among other things, recently rolled out these prediction market apps, which are separate from their sportsbooks.

12:11And this is really to compete more head on against Kalshi and Robinhood and other of these financial firms that offer these event contracts in a number of states. How big is it? I'm hearing more and more about this prediction market. How big is this thing? I mean, this is potentially really large. I don't have numbers in front of me. But the key thing is that Kalshi and Robinhood are trying to do this in all 50 states. There are about a dozen states that have either told them cease and desist because they effectively are engaging in illegal sports betting, according to the states, or a couple of states have warned DraftKings, FanDuel, don't do the same thing if you've got a sportsbook license.

12:46So what DraftKings and FanDuel did was try to go into states with this product where they don't operate sportsbooks. They can do prediction markets on politics or entertainment events in any state, but the real issue is with respect to sports, that's where they limit themselves. Let me ask you a dumb question. Maybe we don't know the answer to this yet. Who is the target audience for a sports prediction market versus a sports contract and in prediction market setting versus, you know, just a regular parlay or simple bet? in a sports book. I mean, so regardless of the type of person, in terms of the type of area or territory, think about the fact that you've got mobile sports books in almost 30 states, 30 some odd states, DraftKings, FanDuel, and 25 of them.

13:30Other states, big states like Texas and California, that don't have legal sports books and sports betting, that's a logical market for Kalshi and for Robinhood to go in there and say, you can do these prediction markets and engage in that even though sports betting isn't active and legal in the state. That's really the big opportunity. So what would a Texas and a Florida say about that? Right. So without going through every state, there are about a dozen states that have either specifically told Kalshi and Polymark or Robinhood cease and desist, don't do this. A few others have issued letters warning DraftKings and FanDuel do not offer a sports prediction market in a state where you've got a sports vet license.

14:09So what FanDuel and DraftKings did is, you know, 17 states for DraftKings, Five for FanDuel. They're offering this product in states where they don't have sports books and where sports betting isn't, quote, legal. Who regulates the sports markets? So it's very confusing because the sports books are regulated by state gaming regulatory authorities. The prediction markets are regulated by the CFTC. So it's state versus federal. And that's been the argument of Kalshi that we're a financial futures contract. We're not sports betting. We are federally regulated. The states have pushed back and said, know this is a form of effectively analyzing sports betting and ultimately i think this heads to the supreme court that's certainly the view of elliot stein or a litigation analyst so what do the casino companies say these days what do they say does that impact their sports book and their sports betting and on the margin to the extent that mgm and caesars have mobile products it's very possible to look into this type of product as well again in those states where sports betting isn't legal.

15:09So everyone's going to think about it. And the real other wrinkle is Texas and California, once they realize we may not have sports betting, well, we have effectively sports bettors. If you believe that's what prediction markets are, we might as well legalize it. And so there's a whole bunch of ramifications to this. What about Native American tribes in states like California, in Connecticut? Where do they fit it? In California, although sports betting isn't legal in California, the tribes have themselves challenged and through legally the likes of Kalshi and Robin Hood. I don't remember which one.

15:45So, you know, to the extent that tribes have opportunities to operate sports books, which effectively Florida has a seminal tribe operating Hard Rock betting site, even though Giraffe Kings and Duel are not involved. So the tribes very much will care to the extent that this is effectively a competing product as consumers might perceive it. So is betting just going crazy, the total dollar amount. I see kids, high school kids, having conversations in detail, showing a level of expertise, which really blows me away. Kids, high school kids. And I don't know. It just doesn't feel right. It's surprising and it also gets very problematic when you have college kids, college games, college players.

16:30But yeah, there's a big national draw to this. And I think the real, I don't think DraftKings and Fiend they'll get as affected as some might fear in states where they've got a sports book, but in states where they can't operate a sports book, but Kaushik and Robinhood and Polymarket, others are offering prediction markets. That's where I think they see risk as well as opportunity. Brian, what about the sports leagues, the NFL, the NBA, the NHL, the MLB? How do they fit into all this? I mean, are they going all in with the prediction markets? Well, I think so they're watching, obviously, with interest.

17:07I mean, the major principles in terms of where this heads are state regulators versus federal regulators, states issuing, in some cases, cease and desist orders. And ultimately, because there's a lot of ongoing court cases, many on appeal, the Supreme Court is the logical destination for the legality of this. I mean, that's months, maybe years away. Depends on the urgency. I know Elliott Stein believes that could happen potentially as early is 2026 that there's a decision, but we don't know. But ultimately, I think this, it needs to be clarified and resolved as to who has jurisdiction here. It is crazy.

17:42The amount, I mean, just a few years ago, I mean, you wouldn't even have thought this, but now you get sports teams in Vegas. Yeah. I mean, yeah. And I think my way to start this is the leading up to the presidential election. There was a lot of activity on what it's a policy and polling market about who we win the election. And that kind of kicked off a lot of popular interest in this, which means that's when they became involved in sports prediction markets actively a year ago.

18:28Looking at a story here today, Alaska Airlines ordering Boeing company aircraft, including 105 narrow-body 737 MAX 10 models and five 787 wide-body aircraft. So good day for Boeing. The stock's up about eight-tenths of 1%. The stock's up about 34 % over the trailing 12 months. George Ferguson joins us here, Senior Aerospace Defense and Airlines Analyst for Bloomberg Intelligence. um george a is this a this seems like a nice day a good order for boeing how are they doing that in the marketplace yeah i think it's a it was a nice kickoff to the year as far as orders look through we've tracked them through november of last year we get to see december order and deliveries from boeing or airbus but through november of last year boeing was beating airbus in the order game for the year.

19:20And so, you know, we had sort of expected this. There were some core customers, I think, that were probably sitting on the sideline watching to see if Boeing was going to get its troubles behind it before it placed orders. And so we saw a bit of a bounce back last year in 2025 as Boeing sort of pulled in a bunch of those orders. I think if you're an airline, you know, and you're sort of fleet planning, when you have backlogs that are 10 years large, for the most important airplanes for the narrowbodies, you kind of got to be sort of in the order mode, you know, every year or so many years, sort of topping up orders to make sure that you have airplanes coming regularly as either you're expanding or things leaving your fleet.

20:03So good to see Alaska do it. Again, we think Boeing, a lot of Boeing customers caught up last year. This year, probably a decent order year as well as that catch-up continues for Boeing. And this was a core customer for Boeing. Alaska has been a core Boeing flyer. They recently bought Hawaiian. They added a bunch of Airbus aircraft to its fleet. Not a lot, but a bunch of them, a handful of them, actually more than a handful, 20s or 30s. And I think another indicator that they've kept the Alaska Airlines as a core customer, and I would see them kind of going to a more pure Boeing fleet in the future as they ease out some of those Airbus aircraft.

20:43It seems like a big order for Alaska. Does this signal any change in strategy or what's going on there? Well, I think it's pretty interesting, right? Alaska, their 787-10, they think dash 10s ultimately when they buy them, but the biggest 787, they've got an order for five of them. Alaska traditionally had been just a narrow body, kind of U.S., but really West Coast focused airline. Since they bought Hawaii and they've added international routes, clearly they added Hawaii. Hawaiian had routes into Asia where there's a fair amount of demand for Hawaii. Alaska looks to be trying to grow into a global airline.

21:22They've got European service now too. So this is, I think, a continuation of that push by Alaska to be what it wants to be when it grows up, I guess, which is going to be maybe another one of the big U.S. full-service carriers. Is there room, George, do you think, for another U.S. full-service carrier? I think if you do it well, there probably is, right? I think, look, you got Southwest coming as well. Southwest is adding premium seating. They're already pretty large in the U.S. They don't have much international, but Southwest is definitely a force to be reckoned with. But they're leaving the old world where they were very much a pure fleet and they could control costs well, going again into the sort of premium and making their operations more complex.

22:10Alaska kind of coming the other way. They already have premium, now trying to go global. I mean, I think going back to Alaska, they've got to figure out what they want to be when they grow up because I don't think they can survive just as a largely West Coast airline. I think Hawaiian was the beginning of that expansion strategy, which included long haul. These following orders, I think, reinforced to me that's the direction they're going. They're going for a global airline. It's going to take a while to get there, but that's what they're going for. Would regulators ever allow the combination of Alaskan Southwest, for example?

22:49you know that's to me i think anytime you get some of the big carriers involved in buying somebody like um i think it gets difficult i think it's gonna i think it would be hard i think it would be hard i think alaska'd have to look at something maybe smaller or you know southwest i think it would be difficult to do an acquisition maybe a very small acquisition but if alaska's getting together with somebody i think it's kind of jet blue and down what do you think here uh just in In 2026, air traffic, air travel. How do you think that's going to shape up this year? Yeah, so we see a lot of additions to premium carriers, and we see carriers adding premium seats that weren't traditionally premium carriers.

23:29So to us, it feels like premium could be under a bit of pressure as we get into the new year or 2026 here, because it looks like a lot of people go in that direction. That's where the earnings have been driven lately. Loyalty programs, super important. Basic economy world looks like it's starting to right size. Things could get better, but it'll take a little time, I think. 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.

24:09You can also watch us live every weekday on YouTube and always on the Bloomberg Terminal.