David Ellison’s Media Takeover Just Got Greenlit

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1:51Money market matters. If money is evil, then that building is hell. The show goes on! The folks in there have watched the show, show! Welcome to Prof G Markets. I'm Ed Elson. It is September 22nd. Let's check in on yesterday's market vitals. The major indices all rose as oil prices fell and optimism grew ahead of talks between Xi Jinping and Trump. The Nasdaq hit its first record since June. Oil posted its longest losing streak since June. That also sent treasury yields down. And finally, AMD hit an all-time high and became the seventh chip stock to reach a trillion dollar market cap as renewed excitement around AI demand lifted semiconductor stocks.

2:37Okay, what else is happening? The Paramount Warner Brothers Discovery saga may finally be coming to an end. It has now been over a year since Paramount made its first bid for Warner Brothers Discovery, but a lawsuit filed jointly by 12 state attorneys general has been holding up the transaction. Today, that lawsuit was settled. Despite the wishes of the state AGs that brought the suit, Paramount will not have to sell off any of its cable assets. Instead, the company has reportedly agreed that it won't leave California, committing to keep its studio lots in place and put one and a half billion dollars into local production.

3:14Paramount will also need to set up independent in editorial boards for its news properties. Paramount stock popped 7 % on the news, but end of the day down 3%. Warner Brothers Discovery stock increased 11%. So for latest on this never-ending Paramount WBD deal, we are speaking with Rohan Goswami, business reporter at Semaphore. Rohan, thank you for joining us on ProfG Markets. It looks as though this is finally going through. You predicted that it would go through on this show. Seems like you're going to be right. What do you make of what's happened here? I'm terribly sad that we're going to have to find a new reason for us to hang out.

3:55But I'm happy that my prediction was vindicated. Look, this is an unmitigated victory for David Ellison. And it's being seen as such on the left, which, of course, fought really aggressively to stop this, and on the right. And I think, actually the fact that Paramount's stock is down, 3 % is a reflection that, yes, the states have secured in the short term some guarantees that will take away some of the synergies that Ellison and Co. had been hoping for. But if you look at what the states actually got, as you pointed out, nothing structural. The most onerous thing they're going to have to deal with is a$30 million penalty if they come up short of the 30-film production guarantee that they've agreed to with the states.

4:34Now, of course, you and I both know that$30 million is not really that much on a per-film basis. Most films are way more expensive than that, so it actually may be cheaper for Paramount to break its promises around that. Now, what is noteworthy, and I think what a lot of attorneys general cared about, were those editorial protections around CNN and CBS. Of course, that was a big concern in the media, in the United States, about whether Ellison, right, whose family is known to be close to the president, would exercise a degree of influence over CNN or CBS, right, the way that Barry Weiss has certainly been seen to be doing at the latter.

5:08I'm very surprised that they got such a good deal here because it seemed that actually the lawsuit, that there was a lot of leverage that was not working in Paramount's favor. And I spoke with a lot of people and they thought that actually this might kill the deal, especially because of this ticking fee, which starts October 1st, where basically Paramount would have owed Warner Brothers shareholders a ticking fee of 25 cents a share per quarter that every quarter of the deal stays open. And the sense that I got from a lot of people when I spoke to people about this was they're just going to drag this out.

5:42They're going to make sure that they don't settle. And that way it might put this deal to bed, essentially, or to kill it. But that didn't happen at all. It seems that they've settled way earlier than anyone expected. I guess, what happened? Why were the attorneys general down with this? Something dramatically shifted. I would assume within Bonta's camp, but among the AGs over the last week, because you're absolutely right. Every conversation I had with folks in and around this deal, there was not a sense of optimism in the preceding two, three, four weeks. There was a sense that the judge was looking at the state's arguments quite favorably.

6:20Now, of course, Paramount had one point eight billion reasons to settle. The states, as you point out, did not. Now, the only thing I've been able to figure out so far, and this has been widely reported, but when we first broke that Paramount was considering leaving L.A. if the suit didn't go their way, there was a lot of consternation and disbelief, I think, among folks that that would actually happen. And the weeks since then have shown that Ellison and Paramount were quite serious about that. And so you saw a number of elected politicians get involved with this. Obviously, Gavin Newsom, we've reported and other outlets have reported, did step into this fight to basically tell Rob Bonta, that's the California AG, to tell Bonta, hey, you've got to find a way to make sure these guys don't leave because that would be billions in lost revenue, whether that's tax revenue or salary.

7:06So you saw Newsom get involved. You saw Javier Becerra, who is the presumptive or is the Democratic nominee and the presumptive next governor of California. You saw him get involved saying he thinks a deal should be struck. You saw Karen Bass, the mayor of L.A. Of course, that city stands to lose the most, what Paramount have left, get involved, telling her constituents and telling effectively Bonta, you cannot kill this deal. We need these companies to remain in L.A. Now, it was a political win for these attorneys general to be seen to be standing up to what was, some might say, an embodiment of this administration, right, given the intense financial and political ties between the Ellison family and the president of the United States.

7:44But that political calculus met an economic reality, which is that Paramount and Warner Brothers are simply too big and too important to California's economy for there to ever have any real prospect, any realistic prospect of the state risking them leaving. And of course, Bonta was underwriting this whole thing. California and New York were picking up the lion's share of the costs here, which gave them outsized sway in deciding to come and settle. But of course, much more reporting to be done to exactly figure out why Bonta, who was leading this charge shifted so dramatically over the last few weeks.

8:16I think it would be fair to say then that David Ellison won. No, 100 percent. He got everything he wanted. I mean, this question of leaving California wasn't even on anyone's mind, basically until you reported it. And it seems like that was a very key piece of what happened here. I guess all they have is some level of guarantee that there will be some editorial independence over some of these news networks, but certainly nothing about the fact that this is going to be, I mean, a massive conglomerate. Certainly doesn't seem to be much of an antitrust element to this. But very interesting, given what happened over the weekend, which is that President Trump banned three news outlets from the White House, MSNOW, Politico, and CNN.

9:02And of course, CNN is owned by Warner Brothers Discovery. It will now be owned by David Ellison. To what extent did that drama or does that drama have any impact on this deal? Is it relevant? It is relevant in as far as that CNN is the most visible extension of what will soon be Ellison's empire. Even though ratings have declined, it is not the juggernaut that it once was because it commands the attention of the president. It therefore commands the attention of the public and of the press. Now, as a reporter, from a First Amendment perspective, it is obviously quite distressing to see the president target three outlets.

9:40And it has been quite heartening to see news organizations, you could argue on both sides of the aisle, taking a very principled stand. I'm talking about the broadcast networks, of course, in saying that, no, this is not acceptable. We will not allow any one of our colleagues or our peers to be boxed out of the White House. When it comes to this deal, however, I don't think that what happened over the weekend had a tremendous amount of weight in the actual settlement talks. It may have given, for example, Connecticut Attorney General William Tong, who was very aggressive in seeking editorial protections.

10:09It may have given them more ammunition. But the reality is that in five years, Ellison can run this business as he sees fit. President Trump will not be in office, but Ellison's ideology certainly won't have changed. He will be appointing and helping to appoint the very editorial board that's going to oversee this. So when I say it's a win for Ellison, it is unmitigatedly a win for Ellison. You know, the closest analog was when Rupert Jones bought Dow Jones, the parent of the Wall Street Journal. And there, the Bancroft family, which had controlled the Wall Street Journal for generations, put into place what at the time were seen as very strict editorial safeguards, including a board that would oversee the appointment of senior editors at the journal.

10:47Now, of course, it's Rupert and it's the reality of business that that management board, that independent board, hasn't really done much inside of the journal. I still think it exists. but these sorts of structures are kind of paper tigers. They don't really do anything because at the end of the day, there are any number of ways that a smart businessman, and David Ellison has shown himself to be a very smart businessman, there are any number of ways that you can wiggle in and out of them. But I would say just on a high-level note, a lot of people doubted Ellison, myself included. He has now twice bested his opponents, first Netflix and then the States, something which does bode well from a business perspective about his ownership of combined Paramount Warner Brothers.

11:26the concern now given what happened over the weekend with trump essentially banning cnn from the white house because he doesn't like the way that they're reporting i just reporting and just covering what's actually happening the concern will be that i guess david ellison will move in more of a fox newsy direction or move into a more of a pro-trump direction in order to get cnn back into the white house and that might be the editorial direction and i of course that is what a lot of people are so worried about when it comes to this deal. Is there anything about this deal that should put those concerns to rest?

12:05Or would you say that this is, I mean, I guess my question is, how unmitigated of a win is it in terms of David Ellison and his editorial control over these properties? Ellison is, based on the conversations I've had with folks who know him well and who have been advising on this deal, is, I think, genuinely mostly focused on turning around a business that has already been encumbered with a huge amount of debt that he is adding more debt to. And so any decision that reduces the cash generative potential of CNN, which does, I think, throw off five to six hundred million dollars worth of EBIT annually still, would be monumentally stupid.

12:46Ellison is not going to want to do anything that undermines the business value of the assets that he bought. So I do think the business realities actually protect CNN as is a fiercely principled and largely independent newsroom with, of course, a lot of editorial and opinion people who irritate the president and who frustrate the president, but which do incredible reporting day in and day out. Elson has no business reason to meddle with that. Now, absolutely, I could see a world and it is his right as the owner of a business where if there are more there are issues that he personally feels strongly about, Israel being the chief and most important one to him, where you could see a world where he intervenes or steps in.

13:25But in terms of actually diminishing the value of that asset, I don't realistically see him doing that, not in the short term. Longer term, five, ten years from now, it's anyone's guess. But he's got to keep this ship together. Underplaying, diminishing CNN, from a business perspective, doesn't make a lot of sense. Just to wrap up here, we always ask for your prediction on this thing. It's your previous prediction was that, I asked you, will this go through? You said, yes, it will go through. What happens next, in your view? Well, the expectation is the transaction closes. And I would think that you would see Ellison, who, remember, we've talked about this, has been a Democratic donor historically, make personnel moves at CNN, potentially at CBS, certainly on the studio side, to send a message to Hollywood, we're not the big bad devil, we want to do business with you, He does love film.

14:13And also to the American public that these fears that you have about the foxification of CNN may not be necessarily warranted. Whether that's putting Barry Weiss in a sort of a more tight fiefdom around CBS, beefing up editorial talent, I do think we're going to see a lot of personnel and talent moves designed to sort of show the world where Paramount wants to go next. That's what I think is next once this deal closes. Rohan Goswami is business reporter at Semaphore. Rohan, thank you so much. Always appreciate it. Ed, always a pleasure.

14:45After the break, a look at the housing market. And for even more markets insights, you can subscribe to my weekly newsletter, simply put, at edwardelson.substack.com.

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17:16We're back with ProfG Markets. The U.S. housing market is the most frozen it's been in decades. After weeks of climbing, mortgage rates rose above 7 % last week for the first time in more than a year. Meanwhile, pending home sales have fallen to their lowest level in nearly three years. And the average home now costs more than seven times the average household's income. With the Fed signaling another rate hike this year, the outlook for prospective home buyers shows no signs of improving. So to help us understand what is going on in the housing market, we are speaking with Conor Sen, founder and CEO of Peachtree Creek Investments and author of the Housing Frame Substack.

17:57Connor, thank you for joining us. We wanted to check in on the housing market this week because I feel like I keep on seeing negative news. I mean, prices continue to go up, continue to see that sales are actually falling. It seems to be more and more entrenched. And then, of course, we have interest rates rising as well. What is going on in the housing market? You pay a lot of attention to this. What are the main signals you're seeing? So I'd say the housing market this year has really become a story of bifurcation, where at the high end, and particularly in a place like San Francisco, the market's kind of trading more on the stock market than interest rates.

18:34And so if you're looking at the one, $2 million in up price range, it doesn't really matter where mortgage rates go because there are so few homes for sale and so much wealth out there that it's really more of a function of the NASDAQ than mortgage rates. But for entry-level buyers, kind of middle America, that's where mortgage rates are really biting. And we've seen a noticeably a downtick in activity since July. And so I think the question is how we reconcile these two dynamics where you can have parts of the market that are strong and parts that are still soft and interest rates don't really balance it out in any way.

19:05It sounds like the story of the entire economy. Are we seeing the prices? Clearly, I would assume that prices are rising on the high end. Are prices rising on the low end too? They are not. And that's because the difference between the cost of renting and owning, particularly for the kinds of people who are relying on their incomes and mortgage rates for buying, has just gotten really wide because rents have fallen throughout much of the southern parts of the U.S. where so many apartments were built over the past several years. And then meanwhile, 7 % mortgage rates make it so hard for people to afford the monthly payment.

19:38So you see people are hiding out in the rental market, so to speak, and that's leading rents to slowly start to rise after a few years of softness. Talk a little bit about what higher interest rates will mean for the housing market. Of course, we've seen mortgage rates rising, and you say that'll have more of an impact, especially on lower-income Americans. How has this interest rate environment changed this housing market? I think everyone was coming into the year hoping that the Fed would be cutting rates, not raising them this year. And we saw briefly mortgage rates hit 6 % in late February, right before the onset of the conflict in Iran.

20:13So there was hope that that would continue. And so I think the past couple months has really led people to pull back, reflect, and try to figure out what it means for next year, because we are heading into the slowest time of the year for housing. And so I think the question both for buyers and sellers alike are, do you try to get deals done before the winter or do you hold out until next spring? And that's probably a function of where you sit and whether you have to sell. There are very few people who have to buy a home in September because schools have already started. So I think something I'll be watching for through the end of the year is do sellers get more motivated to sell knowing that the prospects of offers over the next several months are pretty low.

20:47Are you surprised by what's happened this year in the housing market? I mean, I feel like every year I'm waiting for prices to come down. And everyone seems to be waiting around and thinking, okay, this is an extremely expensive market. And perhaps they're waiting for their opportunity to buy or their opportunity maybe to sell. I can't tell which dynamics are driving the activity here. But are you surprised by how it continues to be an increasingly unaffordable housing market in America? I think the surprise to me this year has really been more on the real economy side. And then housing has kind of borne the brunt of that in that I was coming to the year thinking that the unemployment rate had risen three years in a row.

21:28And there were still signs of hiring softness coming into January. And so I thought, realistically, the unemployment rate would end the year 4.5%, 4.7%, something like that. But I think in large part due to the broadening out of the AI boom, we've seen the labor market pick up as well. And so now the unemployment rate's down to 4.1%. We see stock markets basically at all-time highs. And interest rates and inflation and mortgage rates and housing are kind of the other side of that. You can't have a strong labor market and an AI boom plus supply shocks like tariffs and oil without interest rates and inflation being a part of that as well.

22:05So I think you have this dynamic where affordability is poor, interest rates are high, but also there's a lot of wealth and low unemployment. And so I think housing sort of bouncing back and forth among all those factors. What would you recommend to people who are looking to buy a house right now, but they can't afford it? Or maybe it would be on the expensive side if they were to buy a house right now. I mean, is this a market that people should be participating in? Or do you think that it's a little too expensive? What would you say to someone who's thinking about this right now? I'd say it really depends on where in the country they are and what kind of buyer they are.

22:45Again, if you're at the high end of the market, one that's really dominated more by financial wealth, I would say that I wouldn't expect prices to go down almost regardless of where mortgage rates go unless stocks crash. So you should probably just think, is there a house in a neighborhood that I really want to live in? And do I have the wealth to afford that? And it's really a function of that rather than any kind of market call. And then in the Northeast part of the country, in Chicago, inventory there still remains very low. And so I don't think you're going to see prices fall just because there's no supply.

23:13But it's really in the southern markets where there is a lot of inventory, where I think it gets more interesting because, again, rents are quite affordable in places like Austin and Nashville and Charlotte. And homes still remain quite unaffordable, even though nominal prices have fallen just because mortgage rates are high. So there, I think it's more a question of, do you have a school district you need to be in? It's probably cheaper to rent, so maybe it's worth waiting until spring to see how that goes. That, I think, is more of a judgment call and depends on your circumstances. What have the southern states gotten right about housing to make it more affordable for the people who live there?

23:45What have they done at a policy level, at an economic level, to make housing less expensive? It's a lower dense part of the country, and it's much easier to build. And so when interest rates were very low and rent growth was booming, it was much more easy for builders to build a lot. And builders are in these markets as well. There are some markets that builders aren't really in. So they were fortunate to get a lot of supply when times were good. And then sort of bad news for developers and landlords that all that supply did lead to lower prices and lower rents. But now buyers and renters reap the benefit of that in those local economies because they have become, certainly on a relative basis, much more affordable than places on the West Coast and the Northeast.