Lucas Shaw on Warner Bros' Limbo, Netflix's Anxiety, and Hollywood’s Sort-of Comeback

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1:02Peter Kafka:From the Vox Media Podcast Network, this is Channels with Peter Kafka. That is me. I'm also chief correspondent at Business Insider. Today we are talking about big media, big, big names like Paramount, Netflix, Comcast, and where they're all headed. So we are breaking out the big gun that is Bloomberg's Lucas Shaw, who does dynamite coverage of all these companies. On the docket, what is going to happen with a Paramount Warner Brothers deal? Or more specifically, the trial that now pits Larry and David Ellison against California's Attorney General, who wants to stop the deal. What's going on at Netflix, which wanted to buy Warner Brothers, didn't, and now has Wall Street demanding that it show growth it may not be able to deliver.

1:49Peter Kafka:And last, what's up with Comcast, which used to be a big media player, still is as we're speaking, but is effectively getting out of the media business. What does that tell us about Comcast and about media? This is a nutrient-dense conversation. I think it's also a pretty lively one. If you listen carefully, you may hear previews of future Lucas Shaw columns. Anyway, listen up. Tell me what you think. Here's me talking to Lucas Shaw.

2:16Peter Kafka:Lucas Shaw, King of All Media. What is your official title of Bloomberg, Lucas? Managing Editor of Media and Entertainment and author of the Screen Time Newsletter is usually what I go with. Okay, that's very boring. I'm going back with King of All Media. Welcome back to the show, Lucas. It's astonishing, but I haven't had you on since late December of 2025. That's just rude. Do you remember who was going to buy Warner Brothers Discovery in December 2025? That was, I think, still in the Netflix era, right? Yes. Yes. And everyone was freaking out about Netflix buying Warner Brothers Discovery. Now, now.

2:50Now everyone's freaking out about Paramount buying Warner Brothers Discovery.

2:53Peter Kafka:Yeah. Well, I want to talk to you about who's actually freaking out later. But I was worried this podcast would be overtaken by events. I think we're okay now. We're recording on Monday. This will come out Wednesday. There's been news in the Warner Brothers Paramount saga. Aga, give us the top line of where things stand today. The deal is on hold. Paramount agreed, well, Paramount and Warner Brothers Discovery, but really Paramount and the Ellison family agreed to pause their acquisition of Warner Brothers Discovery until the middle of next year, unless the court case that is now imminent gets resolved before then.

3:34And we're waiting to figure out when this antitrust trial, which was filed by a number of states will begin. The states are saying kind of sometime next year, Paramount would like it to happen later this year. And we don't know exactly when they're going to make that determination.

3:52Peter Kafka:So the deal was paused. A deal that, by the way, was supposed to be done in the next month or two? Yep. Yep. So I want to walk through just sort of practical realities of this. So there's going to be a trial, depending on how that trial works out, there might be appeals, right? The Ellisons are saying, well, we're going to close this deal now next summer, regardless with how the trial goes. Is there a version where this thing gets held up even longer than next summer? It's possible. The argument for Paramount and the Ellisons for just kind of for delaying and saying, let's get on with the trial is they're trying to accelerate the process.

4:37And they say at least that they are confident that they will win the trial on the merits. And so if that happens, then maybe they can get this done by December or February or whenever the trial is, and they can go on their merry way. Now, of course, if they lose that trial, they would then have to make a calculation as to whether one, do they want to appeal, which you assume that they do because of all the effort they're putting in to get this deal done. If they do appeal, what are the odds that they win? And yes, do they then go ahead with closing the deal anyways with everybody having to accept that there is still a possibility that a court would unwind it?

5:16Peter Kafka:If the states lose the deal, do you think they would go ahead and appeal as well? Or do you think this is sort of a one and done from them? I guess it's possible that they would appeal, but I would find it less likely than... I think the states are probably less dug in on making this not happen than the Ellisons are in making it happen. So we'll get into how dug in the Ellisons are. What are the odds that this gets settled before there's a verdict? Do you think at some point the Ellisons just say, look, we'll give you something. It's more than we wanted to give you. And then the states say, okay, this, this deal can go through.

5:53Well, people thought that they would likely find some settlement before this trial started, right? That was sort of the prevailing wisdom was that the states were, were, you know, fighting the deal because the Trump DOJ was not, and that, you know, they were unlikely to win or actually block the deal, but that they could garner some concessions. And I think there was a perception that at least in the case of California, that the Attorney General Rob Bonta was doing this for political reasons, because he is up for reelection. You know, the last month, or I would say has really kind of been has damaged the conventional wisdom, a lot of people myself included, who were kind of looking at this one way, I think have realized that maybe they underestimated the kind of the forces fighting against the deal.

6:49Peter Kafka:So you're part of the group, and I was in it too, that thought, well, the Ellison's are going to get this done one way or another through some combination of brute force and maybe political favors, something they want it, they are willing to spend an enormous amount of money. They were willing to outbid Netflix, a much larger, much wealthier company, they spent months fighting that deal, where at the time it sort of seemed like they were, they just had spoiled grapes, but no, they were, they just sort of, they ended up playing a very canny political game, applying a lot of pressure on both Netflix and Warner Brothers to eventually get it.

7:22And yes, I, while I thought that the states were going to fight against the deal, I and most others assumed that eventually the Ellisons would prevail, which of course they may still. In terms of what they could offer, one of the reasons why a settlement may prove difficult, and of course, this is all posturing and bargaining, so maybe it's easier than we think, is that the Ellisons have been offering what are known as behavioral remedies, where they will promise to make, you know, there's a lot of discussion about how many movies you're going to make? Is this bad for the movie business? And David Ellison is saying, we're going to make 30 movies a year, both Paramount and Warner Brothers are going to make 15 each.

8:00And the states are saying, you know, behavioral remedies don't really work. There's not enough teeth in them. You know, there were behavioral remedies in the Live Nation Ticketmaster merger and Live Nation and, you know, it didn't work, which is why the states ended up pursuing a suit to try to break up Live Nation and Ticketmaster, which is something that is still pending. They want what's known as structural remedies, the states do, which would mean, you know, Paramount and Warner Brothers agreeing to sell things or divest things as part of this deal. Now, there are things that there are assets that Paramount and Warner Brothers could divest and it wouldn't really hurt Warner.

8:34I don't think it would hurt the combined company that much, but they have not shown a willingness to get rid of things.

8:40Peter Kafka:And the core, the core thing that theoretically, I think the States would want is some unwinding of the deal to put two studios together. That seems to be the core of their argument. And it seems to be the core of why the Ellisons want to buy Warner Brothers. It doesn't seem like those two things can coexist. I, so I don't actually agree with, well, I agree with part of what you said. So the state's, the state's two primary lines of attack against this deal are studios and networks, right? It's that you'd be combining these two out of storied Hollywood studios, Warner Brothers and Paramount, and they don't pay a lot of attention to the television side.

9:20It's mostly about excessive concentration in films because those two companies would have about 30 % of the market. You combine them and Disney and suddenly you're north of 50 and that's bad. The other is cable networks where they're two of the largest owner of cable networks in the US and you combine them and suddenly they would have, I don't remember the exact numbers, but an unfair advantage or an unfair percentage of the cable network market. Nobody's doing this deal because of cable networks, right? They do generate still the majority of the profits and cash flow, but it's a dying business.

9:53Yes, they're doing it partially for the studios, but I would argue that they are doing it for ultimately for the streaming business. Because if you are these companies sitting on fallen cable networks, your life raft is supposed to be streaming. And these are two companies that have sort of mid tier streaming services, third tier streaming services, think about it however you want, right? HBO Max and Paramount Plus are much, much smaller than Netflix and Amazon and Disney. And you can get what you want in streaming without having both of the studios. Obviously having all the Warner Brothers assets helps.

10:30My favorite version of this, because these companies went at it, is that you actually, they say, okay, you know what, you don't, the problem with the Netflix deal is that Netflix was going to get too much power in streaming. And what Netflix really wanted was the studio. The power with the Paramount deal is that they'd have too much power in the studio. And what they really need is a streaming answer. Just sell Warner Brothers to Netflix as part of the deal because it solves it gives netflix what they want it gives paramount what they want and then paramount like h they still get hbo and all that stuff and i get that they don't get the ip and this is a total pie in the sky idea ellison's never going to do it but i think it would it would

11:06Peter Kafka:work i like that you're adding investment banker to your to your portfolio here um they're they're this is going to cost uh the ellison's there's this ticking fee and theoretically this could be hundreds of millions of dollars that are going to have to pay on top. Billions if it keeps going. Does that matter to the Ellisons? They'd rather pay less than more, but Larry Ellison is the richest man in the world. Yeah. I have a look. Those questions are, does this matter to the Ellisons? Questions are always hard for us to answer because it is really sort of dependent upon Larry and then David. And neither one of them is speaking to many people, frankly, about what matters to them.

11:48I think even the David-Larry dynamic is one that people don't fully understand.

11:54Peter Kafka:Let's spell it out. David runs the company. David runs the company. Larry is the eighth richest man in the world who was bankrolling his son's acquisitions of Paramount and then theoretically Warner Brothers Discover. Correct. Neither one of these deals would have been possible without Larry's money, but Larry is not taking day-to-day interest in what is happening at Paramount. Oracle stock, which is the source of Larry Ellison's wealth, is down by half in the last, basically since they announced this bid for Warner Brothers Discovery. Larry Ellison is still the eighth richest man in the world, even after that drop.

12:28Peter Kafka:Is there any thought that Oracle's relative weakness changes his appetite for this deal? Not that I've heard. I mean, look, there is the if you are Larry Ellison or one of his advisors, you have to go to that sort of worst case scenario. I guess what happens if this like our other financing falls apart? They get tired of waiting for this. You know, a bunch of their financing comes from the Middle East, obviously not a particularly stable place right now. I don't want to be left on the hook for 100 billion dollars. Like, yes, I have all the money in the world, but I am not actually trying to devote it to this deal.

13:06Peter Kafka:This was one of the back and forth when Warner Brothers was reluctantly selling itself to, or maybe not reluctantly, but selling itself to Paramount. They insisted that Larry Ellison backstop that deal. He was never going to pay for the whole thing, like you just said. The Saudis and et cetera are going to kick in money. He's going to syndicate it. But in theory, he is responsible for the entire purchase. Everybody goes away. Larry Ellison is backstopping it. It was the argument that the Warner Brothers folks made when they had to explain why they were picking Netflix over Paramount. One of the reasons was that they were unsure of the Paramount financing.

13:41I think if you're going after a deal of this scale, having to pay an extra billion or two, especially when they made clear during the kind of the bidding war with Netflix, that they would pay more, is not a concern. You know, the only way it becomes a concern is, I don't know, maybe if it becomes a two-year saga and suddenly, you know, you're adding not just hundreds of millions, but billions to the deal, it becomes more of a concern. But at that point, I don't think it's just the ticking fee that's your worry.

14:11Peter Kafka:Speaking of worries and theoretical worries and politics, November elections likely will see Democrats take the House. The Senate seems like a toss up, something like that. Does that concern the Paramount folks that you would have Democrats and having some power in Congress and the ability to theoretically haul them up for hearings and do investigations? Yes, but a small one.

15:05Now, it will be annoying going forward, especially given, you know, there is a belief that David Ellison and the current leadership of Paramount has, you know, made changes to CBS News that have made them more friendly to the Trump administration. And they're going to get CNN as part of this deal.

15:25Peter Kafka:And so Donald Trump keeps saying that out loud. Yeah, there will be a lot of scrutiny of whatever happens with the news organizations. But that is separate, I think, from the deal itself. Um, since we're in the realm of, of theoreticals, um, I read a report a couple of weeks ago that said that, that Paramount was going to, uh, move. It was very unclear whether it was their studio or some of their executives or what they're going to move to a different state if, if California sued them. So California has sued them. Right. As have other states, but. Is Paramount leaving California? No, I, the whole notion of Paramount and the Ellisons decamping to another state, say Tennessee, which I think has raised its hand, makes no sense.

16:07David Ellison lives in Southern California, really likes living in Southern California, perhaps more importantly, or just as important, their whole argument for the deal and their rebuttal to people who are worried about jobs and consolidation and all that has been, we're going to hire more, we're going to spend more, hire more. It's good for the economy. This is good for California.

16:29Peter Kafka:And if you don't give it to us. We're going to punish California. I found to be a very difficult pitch. I kept asking Paramount if they wanted to say that on the record, they have not take that for what it's worth. Yeah. I'm sure that there are people who are, you know, Larry's advisors and even, you know, some of David's advisors who have talked about it. But actually doing it would seem counterproductive. Netflix had this deal, freaked everybody out. The folks at Netflix, I think, are the only people in Hollywood who are willing to say out loud that they don't like the the paramount warner brothers deal i think that's kind of obvious why they're the only one saying it why no one else will say other than a couple unions but yeah yep yeah anyone with power yes i guess any executive with power all says it'll be whoever wins is good because no one wants to upset their colleagues or potential buyers or partners um what do you think netflix makes of this do you think they are spinning up a hey maybe the asset becomes available again in nine months or a year?

17:27Peter Kafka:Do we hang around the hoop? Or do we assume it's never coming to us and we have to move forward accordingly? I think for now, they're just sitting there with a big bucket of popcorn. Look, is it possible that Netflix would, if this deal falls apart, would Netflix look at it again or look at the assets that they were going to buy again? Sure. And they even, Ted Sarandos, the co-CEO, even told me at the time, I think, you know, I interviewed him not long after the deal fell apart. And he's like, maybe this will come around again. But their investors hated the deal. Their stock price has only continued to go down since then, in part because their performance has not disabused investors of their concerns.

18:06So I just think the threshold to reengaging on any deal like that would be really high. And also, if we're being honest about what's happening with Paramount and the Ellisons, unless there's some dramatic change of heart for David Ellison, he's not given up on this deal very easily. And so we're talking about something that is in two or three years. And who knows where the heck Netflix is at that point.

18:26Peter Kafka:We'll be right back with Bloomberg's Lucas Shaw. But first, a word from a sponsor.

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19:13Peter Kafka:And we're back. Let's talk more about Netflix. Like you alluded to, one of the concerns Wall Street has had is, hey, if Netflix, which has never done any large scale M &A, is willing to spend$83 billion on a studio and a streamer, that maybe seems like Netflix doesn't feel great about its growth prospects. It is trying to buy growth. And so that deal has gone away. The concerns have not gone away. You stirred up some shit a few weeks ago. You had a story talking about how difficult Netflix is finding new hits to come up with. And just as worrisome that their second seasons of hit shows are seeing a steep drop off.

19:50Peter Kafka:Why did that story create a problem for Netflix? Why do you think it created a problem for Netflix? I think that it, well, one, I think there are a lot of people who are looking for Netflix to fail, right? It has been this remarkably successful company that came, the rare outsider that sort of came into Hollywood said, we think we have a better way of doing this and was in fact correct and sort of changed the whole business, right? One of the reasons why we've seen this parade of big media mergers is because Netflix and in a different way, YouTube sort of changed the paradigm of entertainment.

20:26Peter Kafka:And so Netflix is used as the reason why these companies have to merge when they're telling antitrust people that not to worry about this because Netflix is much bigger. and that sort of upheaval that they caused engendered a lot of resentment towards them. I also think, so that's one. Two is what you were already talking about, which is, you know, there are these concerns about Netflix because, oh, they must go after Warner Brothers because they need it. There's a problem in the underlying business. And so anything in the underlying business and anything like that that suggests a problem in the underlying business, there's confirmation bias.

20:59And then I also just think that there's, like among customers and people and sort of in particular, like members of the media, there's a belief that some of the ways that Netflix does things are kind of bad. And so anytime there's a report that, you know, things aren't working, it becomes an opportunity for everyone to sort of re-litigate all of these things.

21:24Peter Kafka:And to restate their priors. Oh, if they got rid of binge viewing, that'd be better. And these are often said by people who have a vested interest in Netflix rolling out shows once a week so they can podcast about it. But I do look, there is there are very real questions around Netflix right now just because they got they're so big. At a certain point, you're such a mature business. Like, what is the question, the animating question for me, the last kind of ever since this, this deal fell apart is okay. So what's next for Netflix, they can say that it's just we're going to stay the course, and things are good and there's a lot of growth ahead in streaming.