Why Netflix Refused a $110B Deal (And Why It Was GENIUS)

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3:02Rashad Bilal:Let's go into this Netflix Warner Brothers situation. What's your thoughts?

3:08Rashad Bilal:I think it's really fascinating going back to the debt conversation. I don't know what the parameters were, but my first thought was as a executive is I'm happy. I would be happy to not have to service a 90 billion dollar debt bill like just hypothetically if the debt was two percent what does that payment look like there's a lot of conversation about if Netflix should have forced their way into a bid but sometimes the best investment is the one that costs so much that is going to be a burden or a headed to you um and also too i know larry personally guaranteed the debt but i want to ask you guys being the media moguls that you are is this investment in linear tv worth it you i i get the the swath of companies being bundled together this reminds me of the big short when you're having credit default swaps put together in a bucket it's like a media index fund they put together but in linear their television is that worth what they paid for it so i i think it's a win for netflix but i want to get you guys perspective on the media side should they have paid this much and was netflix

4:24Troy Millings:smart to stay out of this deal um a couple things i think what was that wednesday he tried to came over to my house i said look i typed up this this piece you know about netflix and Warner Brothers, I think they might walk away from the deal today. I was just like, I just had, I just, you know, the way things were working, the four days, you know, David Ellison being at the State of the Union, Tess Aranus being at the White House the next day. I'm just like. You're threatening Susan Rice if you guys get the deal. It just felt like all those things were happening. And then, you know, it reminded me of the conversation we've been having all 2025 about Larry Ellison and the fact that he is one of the wealthiest people in the world that doesn't have a quote-unquote form of media.

5:13Troy Millings:They've all done it, right? Like Zuckerberg has it. Jeff. Bezos has it. Obviously Elon has it. And here is Larry Ellison without any form of media. Yes, he's known for software, obviously, in Oracle. I think he was willing to pay whatever it took to get this. In fact, that's why they made the bid so ridiculous that Netflix said, you know what? Sometimes walking away is the best deal. And so they got CBS and they got CNN, right? Inside this deal amongst other properties for sure. But I'm just talking from the media standpoint. You got Fox and now you got CBS and you got CNN now controlled by supporters of the current administration, which is interesting.

5:58Troy Millings:And I think that was Larry Ellison's goal the whole time. For Netflix, though, why I thought this would be a good opportunity for them was that, okay, you were on the hook for$72 billion, and now that goes back to the company. In addition to that, you get$2.8 billion from walking away. So now you got$75 billion back into the company. What does that do? Well, how long is it going to take Warner Brothers and Skydance Paramount to become profitable from this deal? You want to talk about debt? How long is it going to take -

6:31Rashad Bilal:Once again, remind people how much they pay for it.

6:33Troy Millings:A hundred and ten billion. I don't - They bought it at$32 a share, all types of incentives. How long do you think it's going to take for them to become profitable, right? Netflix goes back into regularly scheduled programming. Now they have actually more money to now go out and pursue live sports to stay further ahead in the streaming space. I thought it was a great opportunity for them to say, all right, let's walk away. Let's continue what we were doing. We were going down the right path. Let's keep going. If you watch, since they announced this merger, they've been down 23%. They've been hit hard.

7:05Troy Millings:Obviously, they had to split. This is a good opportunity for them. Sometimes walking away is the best thing you can do. I like this for Netflix.

7:13Rashad Bilal:Netflix stock is up$21 this week. So what's the trajectory for Netflix stock? I think they've gotten beaten up unfairly. The number one thing that investors love is certainty. So now that you know that this chess piece isn't on the table, I think it's back to regularly scheduled programming. Also, too, for Netflix, Trump said he was going to come after a member of the board. You don't want any political combatants coming after your company. So now you're out of the clear right you survived unlike el mincho from this corporate battle um they did a great job going back to capex spending of not overspending and also too like you said they have capital now if if they start to make a creators fund or pay creators more at netflix which is one of the weaknesses of their alliance i think they can get some great headwinds um i think we should can see them to continue to rally and i think them and meta are the two companies i'm looking to see how quickly they rally to then give us an indication of where the stock market is going to go netflix and meta are my two canaries in the coal mine for 26 to see how this market shakes out but shawty for you like do you think this is a great investment on paramount like if you had 160 laying around right would you pay 110 for the swath of companies that paramount got and that deal like i went and looked i'm like there are no hit shows on none of them broadcasts they have

8:55Troy Millings:don't do that to hbo man definitely

8:59Rashad Bilal:it's definitely outdated but i also think that it's interesting i sort of um i forget exactly what he was his title but he was he was a high-ranking executive of netflix in the uk like high like president something like that and he was saying that talking about youtube and he was just saying how YouTube has such an unfair advantage because like NBC and he was saying like the BBC but like CBS all of these shows they put their content on YouTube for free. Yep so he was like he was like how can we compete how can we compete when network television is putting their content on YouTube for free can't pay it on the back end through AdSense but YouTube is not paying for their content.

9:40Rashad Bilal:They would never put their content on Netflix for free. Netflix has to license$100 million deals to get old shows, reruns. For a two-week run rate. Even sports. So it's like, yeah, to answer your question, I don't think that was a good idea for them to pay that much for that suite. But I think then Netflix has other problems outside of that. not just YouTube, but just other forms of streaming that is coming up and short form content and different things that nature is like, you know, they're spending a lot of money. This podcast thing, I have suspicions that it's not working. That's just my, that's just my suspicions.

10:23Rashad Bilal:I don't know if it's true or not. But. That's from the beginning and I. How much money you gonna throw at Floyd and Mike Tyson? It's like, you're doing a lot of spending. And.

10:35Troy Millings:Are they going to have those on Netflix?

10:37Rashad Bilal:Yeah. All of them? Well, the Mike Tyson and Floyd one. Yeah, yeah, yeah. I think, yeah, Pacquiao too. Pacquiao? Pacquiao too. So it's like, I don't know. I don't know if this model is really sustainable long term.

10:48Troy Millings:I think they're so far ahead. The difference between the free content, the Paramounts of the world, the Comcast of the world, that's like the network linear. They have, obviously, shows that are meant for streaming. ABC Disney would be an example of that, right? Like, right now, if you don't have Hulu, how do you watch Paradise? you can't, right? You got to wait, right? So like they'll make specific things. I think what Netflix has done is had original content that people have loved and come to adore. And they've done it. Like every year we think like, oh, that's it. They can't have another one.

11:19Troy Millings:And it's another one, right? It's a stranger thing, right? And then it's Wednesday, right? Like they've been pretty good with that. I think now, I don't know if it's original content now. I think they take the Apple model where it's like, yeah, we could bring new products to the table or we can get new regions. That's always been my thing with Netflix. How do we become more of an international brand where it can be serviced other places? Disney has been able to do that a little bit, right? If you talk about some other countries, how does Netflix get into that space? Because in terms of streaming, outside of YouTube, they're number one.

11:57Troy Millings:Disney would be number two. And then I don't even know. You can flip a coin on who number three is now, that Paramount. and all that is mixed together. But those are the two clear favorites. I think the international play for them is there. And they have the capital. So it'll be interesting to see what they do. I think it crosses back over 100. I wouldn't be surprised to see that 115.

12:16Rashad Bilal:Yeah, at some point, I think it'll get to like 110, 111. But for my investors, whenever you hear capital being spent, first thought has to be, how are they going to 5X or 11X this? Rashad, to your point, Netflix has to figure out a business model where you're paying zero for the content and it's high produced. So you keep the same standards and you have to incentivize creators. Bring me a hit show that is shot well, lit well, edited everything that you need and we'll pay you on a performance model. Because how much longer can you continue to pour out 20 to 40 million for a show for the retention rate for them to be?

13:02Rashad Bilal:like I don't hear nobody talking about Stranger Things. I heard shit about Vecna or Will or like where's the video game? There's no back end model and it sucks just from a cost basis to put all this money into a product and people burn through it through three days. And you could, yeah, you could watch the show in four days. That's why they got podcasts because it's low cost and it's something that you could, it's sustainable for, for years, weekly.

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