The bidding war for Warner Brothers Discovery begins

0:02Good morning from the Financial Times. Today is Thursday, November 20th, and this is your FT News briefing. NVIDIA released another splashy earnings report, and the bidding war for Warner Brothers Discovery officially kicks off today. Plus, critics say that China's growth numbers don't quite add up. We'll explain why. I'm Mark Filippino, and here's the news you need to start your day.

0:33news about the ai sector has been pretty gloomy lately but big tech investors saw a ray of sunshine yesterday nvidia reported that sales of its chips grew even faster than wall street expected last quarter and its revenue forecast for the current quarter was well above estimates nvidia shares were higher in after-hours trading. They were down 11 % from their peak in early November before the earnings report came out. NVIDIA's results are a bellwether for the health of the AI sector. That's because it's advanced chips power important models like ChatGPT. The earnings report could help soothe investor worries about massive valuations of big US tech groups and all the money those companies are spending on chips and data centers.

1:23For the fourth time since September, Paramount's chief executive David Ellison is making a bid to buy Warner Brothers Discovery. But this time, he has some competition. And this bidding war has been described as Paramount's to lose. Here to tell us more is the FT's James Fontanella-Khan, our U.S. finance editor. Hey, James. Hi, Mark. James, can you tell us a little bit about David Ellison's backstory when it comes to bidding for Warner Brothers Discovery? Well, I think we need to take a step back and remind our listeners that David Ellison acquired Paramount not long ago. With the ink barely dry on that deal, he immediately started preparing a bid for Warner to kind of create one of the most powerful Hollywood entertainment and sport media companies.

2:14And that's where we are at the moment. He thought he didn't have any competition to start with. Essentially, he put it in play and others came knocking because it's a once-in-a-generation opportunity to buy a famed movie studio and more. Yeah, and more includes HBO, which is, you know, nothing to sniff at. This competition you're talking about, James, who else is out there at the moment? Well, in addition to Paramount, you have Comcast, which is a kind of more traditional rival of Warner. And then, more surprisingly, you have Netflix. Now, nobody really expected Netflix to be there. The streaming giant has never really done any mega M &A.

3:00And nobody thought they'd be interested in owning some of the other assets that are currently in the Warner stable, particularly its cable and its kind of news business. And in fact, there is a vibrant debate inside of Netflix over whether they should even be in the mix. A lot of people think they're just participating in the deal because, again, it's a rare opportunity to look a little closer into the business of Arrival. James, do bids have to get in today? Bids will start trickling in. And then what we should expect is a little back and forth with Warner examining the offers. And then it'll go back to the various parties involved and see who wants to counter bid.

3:46And that's how the bidding process will go on for at least a couple of weeks. You know, I mentioned earlier that this is Ellison's and Paramount's bid to lose. Why is that the case? Well, first and foremost, he was the first one to kind of come out in the open to kind of express interest in this asset. He has the capital. His dad is Larry Ellison. They own Oracle, the family. They are flush with cash. In addition to that, they've been talking to additional backers, including in the Middle East. So from a regulatory perspective, probably faces the least amount of opposition. And finally, these days, every deal has to go through Washington, D.C.

4:35We can say that Larry Ellison is a good friend of U.S. President Donald Trump. And he would probably be happy to know the Ellisons control CBS and CNN, who have a, let's say, history with the current U.S. president. Now, James, you had described this potential deal between Warner Brothers Discovery and Paramount as historic. What impact could this ultimately have on the business of Hollywood? I mean, this is going to be cataclysmic for Hollywood. For starters, you know, you're seeing what's going on at Paramount. There's already been quite a few job cuts as part of a broader restructuring that Ellison is imposing at Paramount.

5:17And you can only expect if you bring two big companies together, there'll be more job cuts. On the flip side, though, from an investor perspective, if Ellison does emerge on top, you will have a much larger, more robust player in that space that can precisely compete with Netflix, who can compete with Amazon, who can compete with Google. Because let's remember, Google owns YouTube, which is a huge player when it comes to media and entertainment. A lot at stake here. James Fontanella-Chan is the FT's U.S. finance editor. Thanks, James. Thank you.

6:00UK inflation fell to 3.6 % in October. That's down from 3.8 % a month earlier. And this has raised expectations that the Bank of England will cut interest rates next month. Traders are betting on a quarter point rate cut in December. The data comes just a week ahead of the UK's autumn budget. Chancellor Rachel Reeves is expected to raise taxes as the country's economy continues to struggle. It grew just a tenth of a percent last quarter.

6:34For decades, China's growth rates were the envy of the world, although its official statistics were considered somewhat unreliable. Now, a loss of momentum caused by trade tensions with the U.S. and a property slowdown have made questions about the data more urgent. People are trying to work out what's going on in one of the world's most important economies. I'm joined now by Thomas Hale, the FT Shanghai correspondent, to discuss this. Hi, Tom. Hi, thanks for having me. So what are the main problems with China's official economic data? I think the biggest problem right now is that the type of GDP data that other major economies publish every quarter, which involves a breakdown loosely of investment consumption and net exports.

7:17We are not getting that quarterly data in China, and it makes analyzing the economy within a given year more difficult than it would be elsewhere. But really, just stepping back over the decades of China's economic transition, China retains a target-driven economic system. It sets targets for GDP growth. So we've seen concerns over local officials reporting inflated data. And there is evidence that the National Bureau of Statistics has made adjustments, downwards adjustments, to the data it receives from local governments because of that issue. Now, can you give us an example of where the data falls short?

7:59Yes. So in other major economies, we would be getting quarterly GDP data on investment. In In China, we're not getting this. And instead, China produces its own monthly investment data called fixed asset investment. And analysts rely very heavily on this data to interpret what's going on with investment in China. Now, currently, that data is showing a very steep decline, but we are not seeing a comparable impact on overall GDP in China. So this poses a real puzzle to analysts as to how we can interpret this fall in China's unique fixed asset investment data and how its GDP growth will ultimately reflect that investment decline.

8:45Let's go back a little bit, Tom. How has China's approach to data evolved in recent decades since, you know, it started opening up its economy in the 1990s? China adopted GDP as a kind of international standard in as late as 1993. And obviously, there was a monumental practical challenge, and there was a lot of collaboration with the West on that front. And what we've really seen is a decline in that engagement. And so right now, we have a lot less visibility than we would have 10, 15 years ago. The other major challenge is that certain data that was available in the past has been discontinued by the National Bureau of Statistics.

9:26For example, before 2018, we had breakdowns of fixed asset investment by different sectors in terms of the amount of investment. And from 2018 onwards, we no longer have that. Now, Time, you got at this a little bit earlier, but how else does China's data differ from other major economies? Although China has transitioned from a planned economy decades ago, there are certain elements that appear to linger. One of them is that China's data focuses very much on hard production data, the kind of countable data that would have played a big role prior to its opening up as well. So I think the data China is producing is differing somewhat from the kind of data you would get in the US and the UK, where the economies are much more focused on services.

10:15targets might make more sense on hard production data or on investment, which might be seen as more easily measurable than something like consumption of services. So I think there are definitely relationships between the way an economy is structured and the way economy is run and the type of data which arises from that economy. And so given everything that we've discussed, is there any chance that China might ever be more transparent with its economic data? If we zoom out and think about the development of China's economy, China's economy is in many ways unrecognizable to the economy that it had in the 1980s.

10:53We do see a much more services-based economy. If China continues to develop in that direction, there might be a case to be made that the way it approaches its data, the way it approaches its statistics will ultimately change. Tom Hale is the FT Shanghai correspondent. Thanks, Tom. Thank you.

11:17Before we go, we told you earlier this week that even though the U.S. government has reopened, it still has a hole in its economic data. The FT's Miles McCormick told us that while federal employees were furloughed, they couldn't collect all the usual data to compile inflation and jobs reports for the month of October, which are key metrics the Federal Reserve will use when it meets next to decide on interest rates. It will still be flying blind to some extent. It's unlikely to have October information for inflation on the labor market, and it may or may not have information for the month of November.

11:53And Miles was right. The Bureau of Labor Statistics said yesterday it won't publish the October jobs report in full, but it is set to release all of September's data today. We'll see how the Fed handles all this when it meets next month. The central bank reported minutes from the last meeting yesterday. It showed members were split over a rate cut in December. You can read more on all these stories for free when you click the links in our show notes. This has been your daily FT News Briefing. Check back tomorrow for the latest business news.

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