Warner Bros. Revenue Misses Estimates Amid Plans for Sale

0:00Today's show is brought to you by Vanguard. To all the financial advisors listening, let's talk bonds for a minute. Capturing value and fixed income is not easy. Bond markets are massive, murky, and let's be real, lots of firms throw a couple flashy funds your way and call it a day. But not Vanguard. At Vanguard, institutional quality isn't a tagline. It's a commitment to your clients. We're talking top-grade products across the board of over 80 bond funds, actively managed by a 200-person global squad of sector specialists, analysts, and traders. These folks live and breathe fixed income. So if you're looking to give your clients consistent results year in and year out, go see the record for yourself at vanguard.com slash audio.

0:41That's vanguard.com slash audio. All investing and subject to risk, Vanguard Marketing Corporation Distributor. Donald Trump is rewriting the Washington rulebook and reshaping the global economy. If you're trying to connect the dots behind the headlines, Bloomberg's Trumponomics podcast is here to help. I'm Stephanie Flanders, Head of Government and Economics at Bloomberg. Every week, I'll bring you a smart, focused conversation with reporters and experts from Washington, Wall Street and beyond. Listen to new episodes every Wednesday and follow Trumponomics wherever you listen.

1:20Bloomberg 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. There's a lot going on in media, or we keep hearing that there's going to be a lot going on in media because some companies are up for sale and other companies are looking to buy. But we haven't gotten any actual bids just yet. Geetha Ranganathan is our U.S. media analyst here at Bloomberg Intelligence. And Geetha, we've been looking at Warner Brothers because it has announced plans to split itself up to extract more value.

2:03David Zaslav, the CEO, we know is a dealmaker. Yet it just came out with results that showed revenue in the third quarter dropped 6 % from a year ago. What does this mean for its plan to sell itself? So fundamentals, Scarlett, really don't matter all that much at this point, especially. Yes, the TV networks business, as we know now for many, many quarters, has been severely challenged. We saw a 20 % slump in TV advertising. We saw a 20 % decline in TV EBITDA. This was kind of well expected. And this really speaks to why they need to separate themselves, why they need to separate the low growth or rather the no growth TV assets from the part of the business that's actually growing, which is studio and streaming.

2:50That part of the business actually posted really good numbers. We saw the studio. Warner Brothers has actually been having a very, very successful run at the box office this year. They have about a 27 % share of domestic box office. And we've seen that kind of translate into really strong EBITDA numbers. And so we saw studio and streaming actually put up really, really good numbers. And that, again, speaks to why so many different parties, including a Netflix, including a Comcast, are interested in going after those studio and streaming assets. So right now, again, fundamentals don't matter that much.

3:23It's really all about the M &A. And I'm actually surprised, Geetha, that maybe we haven't had some more news on the M &A front because we've seen, you know, the M &A environment is very, very active. The market's very receptive to M &A here. We have a willing seller in terms of David Zaslav and the board of directors here. How do you think this is going to play out? Is something to make a bid for the entire company? or just maybe the good pieces for it? We're having all possible permutations and combinations here, Paul. So we know that Paramount Skydance is actually interested in all of the company, including the TV networks.

3:58They've already made three bids. The highest one was for$23.50 per share for Warner Brothers Discovery, all of it. That was turned down. So they obviously have to come up with a much better offer. Now, the other bidders, and the two that are most often mentioned are Netflix and Comcast. They are the ones that are only interested in the studio and streaming assets. No interest at all in the TV linear network business. We know that Netflix has started looking into the books of Warner Brothers Discovery. This doesn't necessarily mean that they have to come out with a bid. I mean, remember, Zaslav is, as you just mentioned, he's a very, very tough negotiator.

4:37He's a dealmaker. He is going to make sure that they really get paid well for the streaming and studio assets if they sell that. And we expect, you know, a price tag somewhere in the ballpark of about 75 to 80 billion. So, you know, whoever makes a big bid has to cough up a huge chunk of change for this asset. So we keep talking about how it's Netflix, Comcast and Paramount Skydance. Could there be another bidder that emerges from the shadows? Absolutely. I mean, you can never rule out big tech. You know, Amazon obviously has shown some interest in the past. They bought the MGM studio. We're not necessarily sure whether they've actually taken a look at the Warner Brothers assets.

5:15But again, Scarlett, as you kind of think about the whole media landscape and you kind of think about the various assets out there, this is kind of a once in a lifetime, kind of a generational opportunity for anybody who wants to get big in media to really go after Warner. I mean, they have some of the best IP out there. They have a streaming business that has performed really well. HBO Max is a name that resonates across the globe. So, you know, anybody and everybody should really be taking a look at this asset. So I wouldn't be surprised if we have some kind of a dark horse better here. OK, speaking of media companies with names, brands that really resonate, Disney's ESPN dropped Penn National as its sports betting partner and has picked up DraftKings.

5:58Why didn't it just do that the first time around? Yeah, that's a great question. So if you remember, actually, two, three years ago, they were in talks with DraftKings. I think it ultimately came down to price. I think they got a much better deal with Penn, which was paying them something like about$2 billion over 10 years. The thing is that they were really a late mover. You know, by the time ESPN Bet came to the market with Penn, DraftKings and FanDuel had already kind of really consolidated their share in the market. They have about a 70 percent share of the sports betting market. Penn had a lot of problems.

6:31You know, yes, they kind of got the product out there. They have just about maybe a 3 % share. They just haven't been able to kind of convert users. The user experience hasn't been good. So I think, you know, ESPN did make a good decision in dropping them and going back to DraftKings. Mickey Mouse and sports betting. I never thought I'd see that. I know, right? Yeah. Well, once upon a time, they were like, we're not getting into any of that. You're exactly right. Hey, Keith, I see our good friends at Comcast, speaking of Comcast, they have plans to split their cable networks apart from their broadband and cable TV businesses.

7:06And they're going to call this lovely company Versant. Go figure. But I understand they're going to have an investor day, December 4th. So it sounds like Comcast is moving forward on this split here. Give us a sense of what do you think Versant will look like? And when do you think that split's going to happen? The split's going to happen before year end falls. And they've got all the pieces moving here. This is really all of the cable networks other than Bravo. And, you know, so we have the USA Network, we have Golf, Syfy, all of these networks that they're kind of splitting out. Again, the problem with the cable network business is that it is severely challenged, more so than the broadcast business, which is why they're still keeping NBC broadcast.

7:46They're keeping the Peacock streaming platform. It's just these cable networks that have been severely challenged. You know, as we kind of model out advertising affiliate fees and EBITDA, we're kind of looking for, you know, mid single digit EBITDA decline. But it still does throw out a good amount of cash. So we're, you know, as we kind of look at it, it's about two and a half, two point six billion dollars in cash. So, again, still a decent business. Geetha, why is Bravo so valuable then to Comcast? Because they have a lot of content and nonfiction content that they put from Bravo to Peacock.

8:19and they didn't necessarily, it doesn't, yeah, cheap to make, and it doesn't necessarily fit with the rest of the portfolio. So I wanted to hold on to that. Cheap to make. I think that's a theme here, Paul. I know, I know. But, and it's also about sports as well, you know, and the sports is still working for these networks and mostly the broadcasters. Well, they all paid up a ton. Yep. So it's the only employment viewing. Exactly, exactly right. Is Warner Brothers Discovery still thinking about a split here, Geetha, 30 seconds?

8:45It's anybody's guess, Paul, But right now, if they don't get the price that they want, which we think is upwards of$30 a share for the entire company, I think they will go ahead with the split. And I think Zaslav is willing to wait this out. And we'll see that split happen sometime in the middle of 2026. Stay with us. More from Bloomberg Intelligence coming up after this. Today's show is brought to you by Vanguard. To all the financial advisors listening, let's talk bonds for a minute. Capturing value and fixed income is not easy. Bond markets are massive, murky, and let's be real, lots of firms throw a couple flashy funds your way and call it a day.

9:23But not Vanguard. At Vanguard, institutional quality isn't a tagline. It's a commitment to your clients. We're talking top-grade products across the board of over 80 bond funds, actively managed by a 200-person global squad of sector specialists, analysts, and traders. These folks live and breathe fixed income. So if you're looking to give your clients consistent results year in and year out, go see the record for yourself at vanguard.com slash audio. That's vanguard.com slash audio. All investing is subject to risk, Vanguard Marketing Corporation Distributor.

10:12early 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. So 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.

10:50On Apple, Spotify, YouTube or wherever you get your podcasts.

10:58You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10am 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, let's talk a little technology because we've got technology earnings all over the place. Mandeep Singh joins us here, research head of Bloomberg Intelligence on Tech Stories. Uber, Lyft, they reported some numbers. DoorDash repeated. Are people, talk to us about that segment of the economy, the ride sharing, the outsourcing, the third party delivery.

11:33Are people still spending money on that stuff? They are. And all these companies, I mean, Uber reported over 20 % growth. DoorDash reported 25 % top line growth. Even though the stock reaction was negative, that was primarily because they plan to spend more money next year on building their tech stack. I think what the playbook here is to expand in more geographies, as well as branch out into other areas of last mile delivery. And in the case of DoorDash, they're experimenting with delivering food without a career, human person involved, and also expanding into restaurant point of sale devices.

12:21I mean, they're developing technology where you can pay using a DoorDash hardware and point of sale device. So clearly there is a lot that these companies are doing beyond, you know, the original business that they have. You know, having, you know, when you spend time in England and you go pay for a meal, the card never leaves your presence. They just tap it on some machine and boom, boom, boom, boom. Here they take it, they put it in a little folder, they take it away for five minutes. And that's what you pay 20 % for. You don't know where it's going. And that's why I'm surprised we're so behind here in the US about that point of payment.

12:53We've always been kind of behind though. Yes. You know, that's been our calling card. The way to think about it is there are so many legacy systems that anytime you have new technology, even everyone is talking about AI agents and whatnot, it has to sit on top of a lot of legacy technology. And like the promise of AI is it can rewrite a lot of that legacy code and migrate into the modern technology. But we have yet to come across real proof points of that. So when you were talking, Mandip, I noticed that you talked a lot about how these companies are spending, they're investing. And I'm curious about the reception that gets from investors because initially in the big AI buildup, everyone was excited about these plans, but now more and more everyone's like, oh, I'm not so sure that's a great idea that you're spending so much, whether it's on AI or whether it's on new products and internal platform like it is with DoorDash.

13:42Why do you think investors are now more skeptical about this idea of companies spending? Well, just because we've seen Uber and all these companies really struggle with free cashflow initially. I mean, in the Zerp era, these companies burned a lot of cash Now they have gotten to a point where the business model does generate, you know, seven to eight billion dollars in free cash flow for Uber. And even for DoorDash, it's 20 percent EBITDA margin. So the fact that they're talking about spending again, it makes you think, OK, if you're an investor, you waited all this while for these companies to get mature and, you know, start delivering on cash.

14:20And now they're talking about another investment cycle. And that's where, you know, in the case of Uber, it's their hand is forced by Waymo launching on 10 cities and really expanding and potentially Tesla. I think in the case of DoorDash, they feel, you know, making acquisitions will help them expand their geographic footprint. And then obviously they want to expand their tech stack to more areas. Most important, do you arbitrage Lyft versus Uber? I don't these days simply because I think what Uber has done well is they know my preferences, especially when it comes to business travel. And their frequency and their ability to reduce wait times is far beyond anyone else in terms of giving me a ride wherever I am and shrinking that wait time.

15:11I think that's very important when you compare it to autonomous driving. Like I could go to San Francisco and get a Waymo, but then I have to wait for five minutes, whereas I get an Uber in less than a minute. So that's where if you really care about your time, you still go for Uber. Yeah, I use Lyft because I have a Chase card and I get a$10 a month credit. Yeah, loyalty points is another aspect, yeah. Stay with us. More from Bloomberg Intelligence coming up after this. This is Special Agent Regal, Special Agent Bradley Hall. The time is approximately 11.15 a.m. About to start consensual telephone call with Dr.

15:54Daiwa Zhang. China's Ministry of State Security is one of the most mysterious and powerful spy agencies in the world. But in 2017, the FBI got inside.

16:20I've never seen that much evidence in my entire career, and I don't think we'll ever see that much evidence again. I now have several terabytes of an MSS officer, no doubt, no question, of his life. and that's a unicorn. This is a story of the inner workings of the MSS and how one man's ambition and mistakes opened its vault of secrets. Listen to The Sixth Bureau from Bloomberg Podcasts starting on February 13th on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts.

16:59You'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. Let's talk a little bit about companies that are affected not just by tariffs, but by a consumer that perhaps is somewhat weakened, a little bit more cautious given the softness in the job market. Let's bring in Poonam Goyal. She's our senior U.S. e-commerce and retail analyst to talk a little bit about Under Armour, whose shares are down about 5 % in late morning trading.

17:35Kapunam, when it comes to Under Armour, how much of the struggles that this company is experiencing is due to things like tariffs, which is beyond its control, versus an overall product selection and a consumer whose taste might have shifted? Sure, I think it's a combination of both. When you look at the top line, it's really self-inflicted, right? They're trading out of off price. They're trying to drive more full price sales. They're really revamping their whole message, trying to resonate better with consumers. So that's why we continue to see weakness there. They need to drive more product innovation.

18:08But then when it comes to margins, it's a little bit of both. Tariffs are impacting them. In fact, more than some of our other companies who have been largely able to offset these headwinds, they are not able to. And that's sending gross margins down about 200 basis points for their fiscal year. So I think about that, you know, athletic market, Pumam, it just feels super uber competitive to me. Is this a place where Under Armour can win vis-a-vis the Nikes of the world, the Adidas? us? Yeah, look, I think the market is growing in competitiveness. You're absolutely right. It feels like every company right now in the athleisure space is on a reset mode.

18:47When you think of Nike, they're under reset. Puma's under reset. Under Armour's under reset, right? So they're all going after the same customer, but in a different way. Nike, clearly the giant in the room. They have the dollars to invest in brand marketing and endorsements so they can continue to step harder on innovation. When it comes to Under Armour, I think we've heard the story so many times now, Paul. I mean, I've heard their turnaround and seen it go up and then away every couple of years. So will this be the time they get it right? It's really hard to tell because right now they've controlled their inventories, which is a good thing.

19:28They're down 6%. They're down more than the sales decline. But the innovation ebbs and flows. So will it stick? Will the consumer stay committed and loyal to Under Armour? I don't think the consumer is loyal to anything today. That's a really good point. They're loyal to price. Price first is what they're loyal to and deals. Poonam, Under Armour also announced a new executive, a new CFO for the company. Reza Talaghani will be taking over starting in February. Does this raise concerns about not leadership so much, but in terms of strategy for the company? Because as you mentioned, it feels like Under Armour has been in turnaround mode for a long time.

20:08It doesn't concern me about the strategy. He was a CFO in his prior role as well with another company. I think the leadership is really identified by the CEO, Kevin Plank, in this example. And he has a plan to lead this turnaround. And the plan is pretty basic. It's not anything new. It's returning back to product, customer innovation, and going back to full price selling to maintain brand health. That is retail 101 playbook for any brand, and he's just going back to the roots. So I think the strategy is right. It's whether the customer will respond and whether they will drive enough innovation, but innovation with performance.

20:47I think that's what you need from an athletic wear brand, and that's where they need to focus. Poonam, how's the holiday shopping season shaping up? What are the expectations? The expectations are for, at least for online, you know, we think online will continue to gain share over the holiday season. We do see strength. I mean, I cover Amazon as well, and I think Amazon's going to have a great holiday season. In terms of the broader retail, I think what you'll see, again, is a bifurcation in trends. The retailers that push the pedal on price and have the product the consumers desire will take share, but then those in the middle still stand to fall behind.

21:22And that's been the case for many years now. It hasn't changed. 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.

21:52I'm Carol Masser. And I'm Tim Stenevec, inviting you to join us for the Bloomberg Business Week Daily Podcast. Now, every day we are bringing you reporting from the magazine that helps global leaders stay ahead. We've got insight on the people, the companies and trends that are shaping today's complex economy. That's right, Tim. We're all over global business, finance, tech news, all as it is happening in real time. And we've got complete coverage of the U.S. market close. Gotta say, basically, if it impacts financial markets, if it impacts companies, if it's impacting trends and narratives that are out there, we are on it.

22:22We also have a lot of fun doing it. Bloomberg Business Week also brings you the analysis behind the headlines through conversations with our expert guests. And we are doing this all live each weekday. And then we bring you the best analysis in our daily podcast. Search for Bloomberg Business Week on YouTube, Apple, Spotify, or anywhere else you listen. Check it out on your way home from work to catch up on the conversations that you miss during the business day. And on the weekend, check it out for a complete wrap-up of your business week. That's the Bloomberg Business Week daily podcast. I'm Carol Masser.

22:50And I'm Tim Stanovic. Subscribe today wherever you get your podcasts.